Who can afford a $5000 - 6000 flat??

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audiojunky
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Who can afford a $5000 - 6000 flat??

Post by audiojunky » Mon, 10 Sep 2007 10:57 pm

I was browsing through the condos for rent and the average price seems to be $5000+ for relatively newer condos. My question is, who on earth can afford these, except for those lucky few who've come here on a great expat package, or whose companies take care of the rent???

I'm thinking that 8 - 10K per month is considered a really good salary in Singapore, right? So even if you make say 9K / month (on average), and pay rent of say 5.5K - you're spending 60% of your salary just in rent. Is this really the case?? Is this what kinda rent folks are paying?

I'm just psyched at how much I'll have to shelve out the next time I move apartments!

Obviously this situation is artificially inflated and cannot be sustained - but I cannot imagine being stuck with a 2 yr agreement on a flat for $5 - 6K!!! ](*,) ](*,) ](*,) ](*,) ](*,)

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Makan24-7
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Post by Makan24-7 » Tue, 11 Sep 2007 1:08 am

Apart from those on expats packages:
1. Bankers (includes those in sales, trading, private equity, asset management, hedge funds)
2. Consultants (associate level and above) with companies like McKinsey, BCG, Bain
3. Those hired into MNCs from their NA/EMEA HQs into permanent senior mgmt positions in Asia.

All the people (about 20 of them) I know in 1-3 above (and not having expat packages) make more than S$15k easily per month, most are married in their late-20s to mid-30s and have combined incomes of more than S$30k per month. That said, most are not renewing their leases and buying instead.

You also have a lot of landlords who are filthy rich and it doesn't matter to them whether they rent out their properties or not. They put it up for rent/sale and if there are people who bite, it's good, otherwise, they're in no rush to rent/sell

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Post by Arizona » Tue, 11 Sep 2007 5:19 am

I'm staying in an apartment that, in my professional opinion, is over valued.

Yes it is in the heart of 'town' and everything is just about a wink away but still, for the same amount I could actually get a beach house over looking the Pacific Ocean and a helicopter at my disposal, somewhere I used to live.

I'm not bitching though cos it ain't me paying for this real estate.

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Post by Superglide » Tue, 11 Sep 2007 9:27 am

Makan24-7 wrote:Apart from those on expats packages:
1. Bankers (includes those in sales, trading, private equity, asset management, hedge funds)
2. Consultants (associate level and above) with companies like McKinsey, BCG, Bain
3. Those hired into MNCs from their NA/EMEA HQs into permanent senior mgmt positions in Asia.

All the people (about 20 of them) I know in 1-3 above (and not having expat packages) make more than S$15k easily per month, most are married in their late-20s to mid-30s and have combined incomes of more than S$30k per month. That said, most are not renewing their leases and buying instead.

You also have a lot of landlords who are filthy rich and it doesn't matter to them whether they rent out their properties or not. They put it up for rent/sale and if there are people who bite, it's good, otherwise, they're in no rush to rent/sell
All very interesting,

but what is the percentage of people you are mentioning?

Maybe 3 to 5% of the population.

Lots of words with little or no meaning.

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Post by huggybear » Tue, 11 Sep 2007 9:38 am

Arizona wrote:I'm staying in an apartment that, in my professional opinion, is over valued.

Yes it is in the heart of 'town' and everything is just about a wink away but still, for the same amount I could actually get a beach house over looking the Pacific Ocean and a helicopter at my disposal, somewhere I used to live.

I'm not bitching though cos it ain't me paying for this real estate.
Tijuana? Podunk town in washington state with a house that has no running water, plumbing or sewage?

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Post by Makan24-7 » Tue, 11 Sep 2007 12:23 pm

Superglide:
Let's not even take 3-5%. Let's be ultra conservative and assume it's 0.5% of the working population that fall into categories 1-3 and assume that the working population from ages 20-65, that makes like say 60% of the population of Singapore ~4.5M.

So make that 0.005 x 0.60 x 4,500,000 = 13500 people in categories 1-3. Let's be ultra conservative that only 10% of them are active in the rental market. So that takes us down to 1350 people. Add that to the 2000+ expats in Singapore of whom let's say 50% are in the rental market given the 2 year rental cycles(so that makes it 1000), that takes the demand to about 2500. A demand for 2500+ luxury apartments at any given time is a LOT.

So now let's look at supply. If you look in the print media and even on Singapore Expats listings for luxury apartments, the supply isn't even close to 2500 units at any one time. A few hundred is more like it. Couple that with my last statement in a situation where lot of landlords who are filthy rich and it doesn't matter to them whether they rent out their properties or not, and in no rush to rent/sell, you actually have a scarcity situation therefore causing it to be a landlord's market and hence the high rents.

You can get even more conservative with your numbers and perform sensitivity analysis on this but you'll find that it still is a landlord's market in every sense.

In a nutshell, your assumption of 3-5% of the population supports my argument.

By the way, your statement "Lots of words with little or no meaning" is uncalled for.

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Post by Superglide » Tue, 11 Sep 2007 12:51 pm

Makan24-7 wrote:By the way, your statement "Lots of words with little or no meaning" is uncalled for.
You're right, I apologize.

As for the rest, you probably answered the original question, "who can afford a flat for 5 - 6K".

My mistake...

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Post by audiojunky » Tue, 11 Sep 2007 1:55 pm

Makan24-7 - good analysis! I bet you're a consultant with Bain, McK or BCG, am I right?

Well, I know a bunch of folks in #2 and #3 who actually don't make $15K / month, but that's another thing.

So if only say 2-3% of folks in Singapore can afford apartments in that range, what do the rest do - especially if you're looking for a condo now? From what I've seen, there is virtually nothing below $4K. My apt which was going for around $2K 6 months ago, is going for around $3.5 and it is 15 years old!!

Oh and if there are any folks in categories 1-3 and hiring in your company, please do let me know :wink:

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Post by Arizona » Tue, 11 Sep 2007 3:01 pm

huggybear wrote:
Arizona wrote:I'm staying in an apartment that, in my professional opinion, is over valued.

Yes it is in the heart of 'town' and everything is just about a wink away but still, for the same amount I could actually get a beach house over looking the Pacific Ocean and a helicopter at my disposal, somewhere I used to live.

I'm not bitching though cos it ain't me paying for this real estate.
Tijuana? Podunk town in washington state with a house that has no running water, plumbing or sewage?
On the money.

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Post by Makan24-7 » Tue, 11 Sep 2007 3:39 pm

Superglide - No apology necessary. No offence taken. Just be wary coz loose statements may set others with a shorter fuse or a hair trigger off :)

Audiojunky - I used to be one of them but that was a lifetime ago. Decided I couldn't take the 60-80 hr work weeks and the 80-100% travel. I actually fall in the middle between the 2000+ expats and the 3rd category.

I really don't know wat to tell you either coz assuming I stay in SG beyond March 2009, I'll be in the same boat (unless the property market tanks and crashes). I can't fathom paying 6k on rents, I might as well buy and pay a 6k mortgage.

On consulting salaries, they DO discriminate by the school you graduated from and the channels which you were recruited. Most senior associates/project leaders should be earning around that amount anyway.

Arizona - Tijuana? Damn, I'm sorry.... Hahaha, just kidding, it's not that bad... Actually Tijuana/San Diego reminds me of JB/Singapore ...

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Rental analysis

Post by remersonh » Tue, 11 Sep 2007 5:38 pm

Makan,

The analysis works out fine until you get to one aspect. You assert that 2500 units is a LOT for the market. 2 problems with the assertion.

First. The typical 25 floor 4 unit/floor condo is 100 units per building. (about the size of one tower in Bayshore park ... which has 6 or so towers if I'm not too far off...) That means that only 25 buildings in the market have to be up for rent. 2500 units is NOT particularly a lot in a market this size.

Second, those 2500 units have to rented out over a 12 month period. Meaning 210 units rented per month ... (that's like 20 agents worth of work. How many agents would you say are out there?)

I would say that there are 200+ units over $5K for rent in today's newspaper ... not to mention Singaporeexpats.com, other web portals, the combined listings of all the agents serving expats.

And Audiojunky ... I've never been a consultant. I've been stuck cleaning up the mess that consultants leave behind when the omit crucial factors in their analysis. (No offense personally Makan.)

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Post by sprite » Tue, 11 Sep 2007 5:53 pm

I can understand the frustration felt by audiojunky, but the market will create a supply to fill the demand, so the answer must be 'lots of people'.

Keep in mind that asking for S$6K isn't *getting* S$6K and also, they are saying rents are back up to their previous '94 levels, so rents this high are nothing new. Also, the real highend stuff goes for 3 or 4 times that anyhow :o How many people do you know with a budget of S$25K :???:

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Post by Makan24-7 » Tue, 11 Sep 2007 5:57 pm

Remersonh: None taken.

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Post by Makan24-7 » Tue, 11 Sep 2007 6:03 pm

Sigh, the 2nd part of my post didn't show up for some reason.

Anyway, my analysis estimates that there is a demand for 2500 units of luxury apartments based on the people that fall into categories 1-3 and the expat community that needs to be filled based on conservative estimates. I'm not saying that there are only 2500 units of luxury apartments on the market.

On the supply side, you already observed that there are only about 200 units on the market on any given day (I said in the hundreds). You have to also factor in the fact that there are plenty of landlords who can afford to sit on their properties and not rent/sell immediately.

So with a demand of 2500 units and a supply of about 200, that demand will only be filled over a 12 month period, so a scarcity situation exists. That's what my analysis is meant to show and you have helped me prove this too.

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Post by Makan24-7 » Tue, 11 Sep 2007 6:17 pm

Sprite: 25k? Errm, I hate to say this but I know 4 people with such budgets. Those with 10k budgets and above? Err, well, let's say it's much more than a handful.

Haha I'm NOT one of them, ok? So don't take it out on me.

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