Rents are peaking!

[NYY1]

Singapore property market is not really a market meant for investment properties, the govt activity discourages people from buying properties solely for the purpose of renting it out. Even private properties, due to ABSD etc the dynamics is such that people don't buy property with the intention of capital appreciation or rental income. They buy it for self stay or there are some very very rich foreigners who buy properties just to park their wealth.

This means that whatever properties are out there in the market for renting are actually what I would call "Inadvertent rental units". Which means these units were not bought buy the landlords for the purpose of renting them out. They just happen to be eligible, kind of like a lottery effect, because of various reasons, like the owners decided to move overseas, owner decided to move to their kids house as they became too old, or just owners in the past were able to upgrade from HDB to condo and we're allowed to keep their HDB, which is not allowed anymore.

So in this scenario, the rents are even less dependent on interest rates. I am surprised, nobody talks about this concept of "Inadvertent rental unit" which is actually a big risk, because Singapore depends on expats and there is really no proper planning for expat housing. So far, market dynamics have been quite favourable to renting, inspite of this lack of planning. But not sure if it is a reliable strategy to depend on market dynamics of inadvertent rental units.

Well, on second thoughts I am not really surprised, because nobody really cares here about foreigners, whether it is their housing or schooling. Advantages of being a rich country in a poor neighborhood.

Whether it makes a lot of sense or not, there are still people buying units with financing to rent out. The lower cost providers (old basis or no/little debt) will still price off of the most expensive supplier (the low-cost oil producer doesn't sell the barrels any cheaper). Also, interest rates going up have made buying/owning more expensive. All else the same, that means more demand for renting (although most foreigners don't have (much of) a choice and some local people will still prefer to own).

I think in the past it was possible to accumulate rental units and supply the market segment you are talking about. Whether that gets squeezed going forward or rental rates stay elevated to justify the additional costs of multiple units remains to be seen.

[Wd40]

Singapore property market is not really a market meant for investment properties, the govt activity discourages people from buying properties solely for the purpose of renting it out. Even private properties, due to ABSD etc the dynamics is such that people don't buy property with the intention of capital appreciation or rental income. They buy it for self stay or there are some very very rich foreigners who buy properties just to park their wealth.

This means that whatever properties are out there in the market for renting are actually what I would call "Inadvertent rental units". Which means these units were not bought buy the landlords for the purpose of renting them out. They just happen to be eligible, kind of like a lottery effect, because of various reasons, like the owners decided to move overseas, owner decided to move to their kids house as they became too old, or just owners in the past were able to upgrade from HDB to condo and we're allowed to keep their HDB, which is not allowed anymore.

So in this scenario, the rents are even less dependent on interest rates. I am surprised, nobody talks about this concept of "Inadvertent rental unit" which is actually a big risk, because Singapore depends on expats and there is really no proper planning for expat housing. So far, market dynamics have been quite favourable to renting, inspite of this lack of planning. But not sure if it is a reliable strategy to depend on market dynamics of inadvertent rental units.

Well, on second thoughts I am not really surprised, because nobody really cares here about foreigners, whether it is their housing or schooling. Advantages of being a rich country in a poor neighborhood.

Whether it makes a lot of sense or not, there are still people buying units with financing to rent out. The lower cost providers (old basis or no/little debt) will still price off of the most expensive supplier (the low-cost oil producer doesn't sell the barrels any cheaper). Also, interest rates going up have made buying/owning more expensive. All else the same, that means more demand for renting (although most foreigners don't have (much of) a choice and some local people will still prefer to own).

I think in the past it was possible to accumulate rental units and supply the market segment you are talking about. Whether that gets squeezed going forward or rental rates stay elevated to justify the additional costs of multiple units remains to be seen.

I dont think any locals prefer to rent a full house, the way we foreigners rent. Locals stay with their parents, when they are single and they time their whole wedding and life around their BTO approval. As you said foreigners have no choice and the locals know this. The locals think foreigners deserve to pay this as a "tax" for being allowed to stay in their country. So with this kind of mentality, I dont think any local would like to pay this "tax" themselves.

I interact in the HWZ forum and they are shocked that I still continue to rent and continue to make my landlord rich. Their stance is no matter what the ABSD is I should have bought a condo in Singapore than paying rent.

[NYY1]

I dont think any locals prefer to rent a full house, the way we foreigners rent. Locals stay with their parents, when they are single and they time their whole wedding and life around their BTO approval. As you said foreigners have no choice and the locals know this. The locals think foreigners deserve to pay this as a "tax" for being allowed to stay in their country. So with this kind of mentality, I dont think any local would like to pay this "tax" themselves.

I interact in the HWZ forum and they are shocked that I still continue to rent and continue to make my landlord rich. Their stance is no matter what the ABSD is I should have bought a condo in Singapore than paying rent.

A lot of people don't account for the opportunity cost of the downpayment/BSD/monthly installments.

If possible, I think there are some advantages to owning multiple properties as you age, although it's not clear this will always be a better strategy ex-post. Being a landlord is also a pain.

[the observer]

I dont think any locals prefer to rent a full house, the way we foreigners rent. Locals stay with their parents, when they are single and they time their whole wedding and life around their BTO approval. As you said foreigners have no choice and the locals know this. The locals think foreigners deserve to pay this as a "tax" for being allowed to stay in their country. So with this kind of mentality, I dont think any local would like to pay this "tax" themselves.

I interact in the HWZ forum and they are shocked that I still continue to rent and continue to make my landlord rich. Their stance is no matter what the ABSD is I should have bought a condo in Singapore than paying rent.

A lot of people don't account for the opportunity cost of the downpayment/BSD/monthly installments.

If possible, I think there are some advantages to owning multiple properties as you age, although it's not clear this will always be a better strategy ex-post. Being a landlord is also a pain.

I think it has very much to do with the locals' mindset, ingrained by the former PM.



https://www.pmo.gov.sg/Newsroom/speech- ... -five-year

Points 2 and 3.

[malcontent]

I dont think any locals prefer to rent a full house, the way we foreigners rent. Locals stay with their parents, when they are single and they time their whole wedding and life around their BTO approval. As you said foreigners have no choice and the locals know this. The locals think foreigners deserve to pay this as a "tax" for being allowed to stay in their country. So with this kind of mentality, I dont think any local would like to pay this "tax" themselves.

I interact in the HWZ forum and they are shocked that I still continue to rent and continue to make my landlord rich. Their stance is no matter what the ABSD is I should have bought a condo in Singapore than paying rent.

A lot of people don't account for the opportunity cost of the downpayment/BSD/monthly installments.

If possible, I think there are some advantages to owning multiple properties as you age, although it's not clear this will always be a better strategy ex-post. Being a landlord is also a pain.

Yes, earlier this year I sold the home I had been renting to my brother in the US for the last 15 years, and this is despite very attractive double-digit yield (even in the absolute worst case scenario after paying fees+10% of the rent to an agent). It took me a few months to come to the decision, but it is exactly the point you mention — it’s a pain to be a landlord.

Besides, when I look over the past 15 years renting to by brother plus the gain on the house value, my net ROI was roughly 6% per annum, all in. My investment in the S&P500 over that same 15 year period easily beat that, and was hassle free. I know it’s not a fair comparison, but I just want easy.

The only question now is, what do I do with the empty lot that I bought next to that house? It’s a small 6,000 sqft lot that I bought for $8k and it is just sitting there. It is buildable and has utility hook ups. The only maintenance is mowing grass in the warmer months, and the neighbor has been doing it for free.

[NYY1]

Yes, earlier this year I sold the home I had been renting to my brother in the US for the last 15 years, and this is despite very attractive double-digit yield (even in the absolute worst case scenario after paying fees+10% of the rent to an agent). It took me a few months to come to the decision, but it is exactly the point you mention — it’s a pain to be a landlord.

Besides, when I look over the past 15 years renting to by brother plus the gain on the house value, my net ROI was roughly 6% per annum, all in. My investment in the S&P500 over that same 15 year period easily beat that, and was hassle free. I know it’s not a fair comparison, but I just want easy.

The only question now is, what do I do with the empty lot that I bought next to that house? It’s a small 6,000 sqft lot that I bought for $8k and it is just sitting there. It is buildable and has utility hook ups. The only maintenance is mowing grass in the warmer months, and the neighbor has been doing it for free.

I would think about the following:

#1. Will you ever use the lot personally? Yes or reasonably possible are a lot different from no or extremely unlikely.

#2. Even if it has the potential to have nice returns going forward, will the absolute dollars make a difference to you?

#3. Any possibility this thing can have a negative value to you?

We only have so much time (in a day or left on this planet). Do things that either move the needle or matter to us for other reasons. Otherwise, hassle free and easy is a good option.

[malcontent]

Good advice. For #2 & #3 it’s an easy no. For #1 it’s a maybe. I could build “something” on the property. Perhaps a storage unit to keep my future boat in? Or to keep stuff from my parent’s home after they pass. I could also build a small summer house to stay in when we visit. That is about all that I can think of.

[raptor_from_vietnam]

I think the locals still see property rental as a viable invesment. The ABSD has no effect because they (husband and wife) can each own a property, hence avoiding the 2nd property ABSD.
On another note, I think Singaporeans over-consumed housing, in the sense that they keep buying more and more properties. I dont think the population would grow much anymore (birth rate alr so low, and they hate foreigners coming over). So future demand would be low in my opinion. Furthermore, most Singapore properties are not freehold. Once they reach 60 year mark, good luck trying to sell them. In the long run I think the SP500 is a more worthy investment.

[Wd40]

I think the locals still see property rental as a viable invesment. The ABSD has no effect because they (husband and wife) can each own a property, hence avoiding the 2nd property ABSD.
On another note, I think Singaporeans over-consumed housing, in the sense that they keep buying more and more properties. I dont think the population would grow much anymore (birth rate alr so low, and they hate foreigners coming over). So future demand would be low in my opinion. Furthermore, most Singapore properties are not freehold. Once they reach 60 year mark, good luck trying to sell them. In the long run I think the SP500 is a more worthy investment.

This is good news if they keep buying condos thinking they will appreciate, meanwhile renting them out to expats. Keeps rents in check. I have a feeling there will again be a construction glut, as the covid related demand spike will get misinterpreted as genuine demand. I see so many new constructions going on right now. Even malls are being torn down to build condos.

[therat]

I think the locals still see property rental as a viable invesment. The ABSD has no effect because they (husband and wife) can each own a property, hence avoiding the 2nd property ABSD.
On another note, I think Singaporeans over-consumed housing, in the sense that they keep buying more and more properties. I dont think the population would grow much anymore (birth rate alr so low, and they hate foreigners coming over). So future demand would be low in my opinion. Furthermore, most Singapore properties are not freehold. Once they reach 60 year mark, good luck trying to sell them. In the long run I think the SP500 is a more worthy investment.

this statement "The ABSD has no effect because they (husband and wife) can each own a property, hence avoiding the 2nd property ABSD. " not true.
It only provided the husband or wife are rich enough that can get a bank loan by own self.

If the couple 1st property is HDB, it is even not possible.

[Pal]

ABSD is making it really cumbersome for genuine owners to upgrade or even downgrade. Many home owners I know have to sell first then buy else will need to pay for the ABSD upfront and claim for remission later. This in turn is causing owners to sell first, rent for some time then buy.

This artificial rental demand is also causing rental market inflation and when the buy / sell slows due the higher interest rates, it will affect the rental market too.

[Wd40]

Thanks bro for giving me the material and information to deal with this,
In no way will i accept another 30% hike when the rent till october 2022 for the same space was 2350$
This shows the greed or maybe the delusion of these home owners / agents.
, let me see how it goes .

I am curious what happened with your rental situation?

[malcontent]

This is where couples should think ahead, putting a property under only one name might really help them out in the future. We did this (shortly before ABSD was introduced) with my wife to avoid US taxes. We never would have guessed that ABSD would end up being so much scarier than US taxes. Today, we wouldn’t hesitate to put it in my name and enjoy 0% ABSD under the FTA, and welcome any US taxes — cheap by comparison!

[Pal]

Lucky you to have the privilege to be exempted for ABSD for the first property. For those who is unaware, Nationals and Permanent Residents of Iceland, Liechtenstein, Norway, Switzerland and the United States of America are treated as Singapore Citizen when they purchase a property in Singapore.

Do you think the 60% ABSD for foreigners are too harsh? Another reason why rental remains high due to foreigners not buying like before.

[NYY1]

ABSD is making it really cumbersome for genuine owners to upgrade or even downgrade. Many home owners I know have to sell first then buy else will need to pay for the ABSD upfront and claim for remission later. This in turn is causing owners to sell first, rent for some time then buy.

This artificial rental demand is also causing rental market inflation and when the buy / sell slows due the higher interest rates, it will affect the rental market too.

I believe once the OTP you issued to a buyer is exercised, you (the seller) can purchase another property without including the pending sale in your property count. You will need to find/execute on another unit quickly, and realistically you will need a sale and extension (lease from new owner) or temporary housing (especially if reno work is required).

So for a resale purchase, I think there are some workarounds. For the new developments, particularly the new launches with TOP further out into the future, this won't be possible.