Buying vs Renting

Discuss about where to live, renting a property, tenancy issues, property trend and property investment in Singapore.
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Post by stiwi » Mon, 21 Oct 2013 9:57 pm

I think the idea about investing here is rational regardless if you fall in love with this country or not. The way everything is organized, clearly laid out on government websites and the fact that an agent can take care of your investment being your representative it means you don't even have to live in Singapore to keep that property rented out and being looked for.

The biggest drawback is in fact 15% ABSD + 3% mandatory for all. With 20% downpayment + 18% ABSD it makes things worse, especially that stamp duty has to be paid within 2 weeks from signing purchase agreement.

I think it makes sense to become PR, in this case ABSD applicable is 5% + 3% but you can also use your CPF for mortgage payments AFAIK.

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Post by Wd40 » Mon, 21 Oct 2013 10:09 pm

JR8 wrote:
Wd40 wrote:ABSD for non-exempt foreigners is now 15%. If I were an American I would jump and buy a property just to make use of that 15% arbitrage. OP is American so he is exempt.
[Squint] I don't see any arbitrage here. Do you mean 'opportunity to not have to pay a tax?' If so why does that alone motivate you to buy, when 95% [?] of the buyers already don't pay this tax?
Yes. 95% of the buyers are lapping up condos like there is no tomorrow and the rest are being prohibited(in a way) to buy. Considering the way people are buying up and the talk is that there will only be a mild correction of 5-10% in the prices. 15% of ABSD is a big saving compared to this possibility of this mild correction that people are talking about. Everything else being equal and compared to the scenario where you do have to pay the 15% ABSD.

I mean if you pay the 15% ABSD then the property price is down 13% right away from your perspective compared to a local who bought it.

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Post by JR8 » Mon, 21 Oct 2013 10:19 pm

PNGMK wrote: 1. It's the very big elephant in the room no one will talk about officially.
2. The leases we're talking about are state land leases, not private owner to tenant.
3. The govt here has been pretty insistent it will not renew leases on some leases coming up - however when faced with huge numbers of leases expiring around 2050 onwards I imagine the tune will have to change or perhaps as you hint there may be a mass enbloc repurchase started.
4. When I first moved here 20 years ago I looked at place (and old pre-HDB lease hold - was it called SPD or something?)... it had 65 years left and the bank told me not to touch it as after 60 years it would be impossible to remortgage - I believe this has changed - some of the Jalan Bahagia and Stirling Road places are around the 40 year mark and are still being able to be mortgaged from what I can tell.
5. There are also some curious 'peony' or peppercorn leases expiring this decade and next - highly valuable land that was leased on fixed amounts that didn't have indexing built in!
2: Yep I noted that.
4: Interesting, maybe on 'repayment' [interest + capital] mortgages, so at the end of the mortgage term, the entire debt is cleared, and no security is required ... ?
5: I think I have one place on a ground rent of 'a peppercorn, if demanded'. Effectively it's symbolic, you pay nothing, but legally it frames up a bunch of legal obligations. It's an old lease, from before developers saw ground rent as an income source. That's changed now, as the law permits lease extension and en-bloc buying out of freehold (UK). The costs for the premium of either of the previous, are in part derived from the ground rent, so these days developers try and ramp up the ground rent to the MAX, for if and when down the track the leaseholders application to extend or enfranchise hits the door-mat. It can be evil; I've seen lovely flats carved out of a period house, done as a whole some years earlier, where all the leaseholders have bought without really understanding £x000 of ground rent (that's ground rent, the service charges were equally as inflated) a year means no one will buy it. That particular flat was retirees wishing to sell up and trade-down to the country... no chance, 'cowboy freeholder'.

p.s. It is almost standard back home for me to have leases with say ground rent on a standard 125 year leasehold to be:
£50 for the first 25 years
£75 for the next 25 years
...
£150 for the final 25 years

It's hard to believe it even tracks inflation. I had one place where the ground rent was something like £5 a year. But as suggested earlier, Ground Rent is more of a 'token agreement' to create a legal set of 2-way obligations, even 'a peppercorn if demanded' puts it in place.

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Post by PNGMK » Mon, 21 Oct 2013 10:35 pm

JR8 wrote:
PNGMK wrote: 1. It's the very big elephant in the room no one will talk about officially.
2. The leases we're talking about are state land leases, not private owner to tenant.
3. The govt here has been pretty insistent it will not renew leases on some leases coming up - however when faced with huge numbers of leases expiring around 2050 onwards I imagine the tune will have to change or perhaps as you hint there may be a mass enbloc repurchase started.
4. When I first moved here 20 years ago I looked at place (and old pre-HDB lease hold - was it called SPD or something?)... it had 65 years left and the bank told me not to touch it as after 60 years it would be impossible to remortgage - I believe this has changed - some of the Jalan Bahagia and Stirling Road places are around the 40 year mark and are still being able to be mortgaged from what I can tell.
5. There are also some curious 'peony' or peppercorn leases expiring this decade and next - highly valuable land that was leased on fixed amounts that didn't have indexing built in!
2: Yep I noted that.
4: Interesting, maybe on 'repayment' [interest + capital] mortgages, so at the end of the mortgage term, the entire debt is cleared, and no security is required ... ?
5: I think I have one place on a ground rent of 'a peppercorn, if demanded'. Effectively it's symbolic, you pay nothing, but legally it frames up a bunch of legal obligations. It's an old lease, from before developers saw ground rent as an income source. That's changed now, as the law permits lease extension and en-bloc buying out of freehold (UK). The costs for the premium of either of the previous, are in part derived from the ground rent, so these days developers try and ramp up the ground rent to the MAX, for if and when down the track the leaseholders application to extend or enfranchise hits the door-mat. It can be evil; I've seen lovely flats carved out of a period house, done as a whole some years earlier, where all the leaseholders have bought without really understanding £x000 of ground rent (that's ground rent, the service charges were equally as inflated) a year means no one will buy it. That particular flat was retirees wishing to sell up and trade-down to the country... no chance, 'cowboy freeholder'.

p.s. It is almost standard back home for me to have leases with say ground rent on a standard 125 year leasehold to be:
£50 for the first 25 years
£75 for the next 25 years
...
£150 for the final 25 years

It's hard to believe it even tracks inflation. I had one place where the ground rent was something like £5 a year. But as suggested earlier, Ground Rent is more of a 'token agreement' to create a legal set of 2-way obligations, even 'a peppercorn if demanded' puts it in place.
There's no doubt the lease arrangement here originally was intended (to me) to be a renewable lease arrangement - some of the leases were only 30 years long for example. However the demand on land has made that simply impossible for the government to support in practice even though I think they could do so if they wanted (but the PAP is notorious for it's land grabs in the 60s). The 999 year lease arrangement to me is not 'as good as freehold' for similar reasons - the 999 year leased properties are usually in areas that look like they might be resumed for development (or road expansion for example) -the govt by using the leasehold system does not have to pay the same level of compensation as they do when they make a compulsory purchase of freehold land (i.e. they pay a market rate for freehold - for a leasehold they pay back 999-X years of lease plus compensation for the buildings only!) .

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Post by JR8 » Mon, 21 Oct 2013 11:04 pm

Interesting points you make there.

I'm just struck how by how one of the main life-goals in this country is to own your own home, which for most is HDB. But by the time you die, most of them are worthless* (and the government has had your money for 50+ years, AND gets the property back.).

Hard for me to get my head around that.



* I'm talking of buying a place when say 25, and what it's worth at say age 80. The fact you move matters not, your original home is essentially worthless.

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Post by sundaymorningstaple » Mon, 21 Oct 2013 11:27 pm

Long before that happens, the gahment will exercise its right to reclaim the housing and offer relocation to new housing at a very affordable (comparatively speaking) rate (possible even trade). They acquired my SiL's flat about 7 or 8 years ago and tore them down for redevelopment paying them somewhere near valuation at that time and then gave them a sizable discount on new flats recently constructed nearby. So their ancient tiny flat was virtually traded even up for a new flat of comparable size after any grants available were taken into account. I would imagine the gahment has already realized that it's an upcoming problem and will used revamped zoning laws to construct higher density estates of 15-40 stories instead of the old 4 to 15 story units of yore.
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by JR8 » Mon, 21 Oct 2013 11:38 pm

sundaymorningstaple wrote:Long before that happens, the gahment will exercise its right to reclaim the housing
Heh?

It's their land, but your housing/property (hence ground rent).

But you can't issue a 100 year lease and force is to be surrendered after say 50.

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Post by sundaymorningstaple » Mon, 21 Oct 2013 11:54 pm

Sure they can. They do it all the time. You can hold them up for a while and dispute the valuation and sometimes gain more suitable terms, but you will eventually be relocated. You are not in the UK, US or Aus. Therefore they use their own laws.
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by JR8 » Tue, 22 Oct 2013 12:04 am

Just wow. Apparently not :shock:

Why do people go nuts to buy HDB here? ... it sounds legally/structurally an absolute lifetime long gamble/minefield. Oh hang on, why, do so many people, of the 'affluent and geographically mobile' wish to leave SG?

'Singapore, my home too'. Yes well until the government take it back off you.


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Post by PrimroseHill » Tue, 22 Oct 2013 1:35 pm

sundaymorningstaple wrote:Sure they can. They do it all the time. You can hold them up for a while and dispute the valuation and sometimes gain more suitable terms, but you will eventually be relocated. You are not in the UK, US or Aus. Therefore they use their own laws.
This is my views ok, so don't shoot me. I think that the perceived idea that it can, they can do whatever they want but they won't.

Your 99years lease, by the time it TOPs, 7/8years has elapsed and you are stuck with a 90ish years left. You take out a mortgage 25-30years and usually it is locked in rates for 2/3/5years. Before you know it, it is nearer to 80ish years. Banks when evaluating your mortgage requirements will tailor their risks vs your loan needs. The banks will either not lend you the total amount that you require or it will charge you a higher interest rate.
A few more years have past, you are now older nearing your pensionable age and guess what! Your lease is up or nearly up, so you do what most sensible people do - sell up, however, most sellers here in SG still demand a premium for their homes despite the 20ish years left. Or the other choice is to negiotate with the landowner as a block to purchase another 99years. Now that's going to cost a pretty penny.

Look at Peace Mansion and this block by Orchard. It had tried en bloc once if not twice and en bloc post fc isn't what it is anymore.

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Post by sundaymorningstaple » Tue, 22 Oct 2013 2:24 pm

I'm talking specifically about HDB flats, not condos. Private housing is a different kettle of fish that isn't going to be protected by the gahment like their own housing projects are where 80% of the native population lives. Maybe our wires got switched but I though we were talking about the HDB market. I was just recounting what I've personally seen thus far in the 30 odd years I've been here and how my Sister in Law's old flat was reacquired before the lease was up and how the entire estate was shifted to a new built estate only a Km or two away. I reckon the private housing is something that is caveat emptor situation.

Then there is always eminent domain.......

http://thefirm.moneycontrol.com/story_p ... ono=715697
Alice Christudason
Department of Real Estate
National University of Singapore

"Initially when we were part of the Strait Settlements we have been using the Land Acquisition Act borrowed from the Indian Land Acquisition Act. Subsequently when we became part of Malaysia-the Federation of Malaysia-Singapore was part of Malaysia at that time and it is interesting to know that there were provisions within the constitution which provided for adequate compensation. Now what I must highlight here is that upon gaining full independence in 1965 this particular provision about 'adequate compensation' is no longer there and one of the most dire criticisms of Singapore's Land Acquisition provisions is that compensation used to be backdated to a retrospective date. In other words, if a piece of land was being acquired it was not the current market value that was being paid as compensation rather it was pegged at a retrospective statutory date. Now all this changed in February, 2007 when the law was amended. So as things stand today, post-2007, current market value is given as compensation. But having said that it is also important to point out that most of the development had taken place during the years when compensation was paid at a retrospective date."

Since then the Singapore government has upped compensation to aggrieved landowners by providing them with housing subsidies, ex-gratia payments, relocation expenses, legal expenses and priority in the housing queue for public housing.
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by JR8 » Tue, 22 Oct 2013 3:02 pm

sundaymorningstaple wrote:I'm talking specifically about HDB flats,
Don't know about others, but so was I.

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Post by sundaymorningstaple » Tue, 22 Oct 2013 3:09 pm

It sounded like PrimroseHill was talking about condos which is why I made sure there wasn't any confusion. We did that the other day! ;-)
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by PrimroseHill » Thu, 24 Oct 2013 10:50 am

sundaymorningstaple wrote:It sounded like PrimroseHill was talking about condos which is why I made sure there wasn't any confusion. We did that the other day! ;-)
My bad :D I thought both private condos and HDB leasehold properties operate on the same levels. Thought all leasholds are the same.

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Post by PNGMK » Thu, 24 Oct 2013 12:24 pm

I'm not sure what the legal difference is between HDB 99 year leases and a private condo 99 year lease EXCEPT in who owns the building - I believe HDB own the building and the tenants are effectively leasing their apartment like a strata title.

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