rent vs buy

[GQ_AUSSIE]

Dear Forum experts,

so I will be relocating to Singapore very soon. The key question in my mind is that of accomodation.

Once my wife joins, I will need to rent a larger space or buy. Hypothetically, if one has saved c$200kSGD for a deposit on a $1m apt, may I ask the following questions:
1) What is your view of the Singapore property market? is it a good time to buy? (i dont want the views of property agents please ) If not what signals should I monitor to time (as best i can) the property market?
2) What are your suggestions for property purchases in the city fringe areas?(lavender, bugis etc) I am not planning to buy a car so it has to be close to an MRT and walking distance to at least an NTUC. I also dont mind established / older properties and am seeking at least a 2 bedder >750sqft, ideally freehold if possible. Before the forum tells me to look at ..sg, I have already done that but would like some idependent thoughts from senior guys in this forum.
3) As a corrollary, what developments are good rental prospects for say $3k Singapore a month and can do short term, say 6mth leases.

Many thanks

[Wd40]

Regarding property prices, everyone will have their own view and its difficult to take a call on where they will head.

But what you can do, is take into account the additional overhead charges like taxes, stamp duties, ABSD for foreigners, SSD, lawyers fees, agent fees etc and I think all that included will be a good 20-25% over and above the property price.

Once you have that figure and assuming that property price atleast remains flat, you can then figure out whether its worth buying or renting depending on how long you want to stay here. Do let us know your findings, it would help others as well.

[PNGMK]

Don't buy unless;

1. You intend to stay for at least 5 years (to recoup the purchase and sales costs in rent savings).
2. You can weather a downfall (which can take 15 years, if ever, to correct - it was only in the last two years that some properties bought in the mid 90's finally got back to their mid 90's prices I believe).
3 You can wait at least one to four years to sell - the market is actually quite illiquid in some areas and I've heard stories of apartments being listed for 4+ years (while rented) with not even a viewer.

I personally think the market is really, really high. I hope it won't crash but Singapore is like a tiny ship full of rats, once a correction starts all the rats jump over board.

I bought because I have SC children and worse case I can always leave it to them or let them live in it if the market plummets.

[PrimroseHill]

PNGMK & WD40, gave some sound advice. My personal view is that it is a medium to long term view on properties here. Take a 5-10years view vs rental. Also some basic calculations - what happens if interest rates goes up to 5%? Also in terms of buying there are other factors to consider - central core region or outside the central core region, freehold vs leasehold, space vs location or do you have the ability for both, types of property in the event that at a latter date you have to rent it out rather than selling it- so the target market. Well these are some of the issues we considered before buying.

In terms of rats, sinking ships etc, I believe that SG is small enough the govt will plow in and meddle in the event of hyper inflation, hyper deflation, SG economic crash and rats all abandoning ships.

We bought here in SG, as we took the abovementioned view and took a punt and I am still hoping that in 10-12years time I will win the bet

[PNGMK]

PNGMK & WD40, gave some sound advice. My personal view is that it is a medium to long term view on properties here. Take a 5-10years view vs rental. Also some basic calculations - what happens if interest rates goes up to 5%? Also in terms of buying there are other factors to consider - central core region or outside the central core region, freehold vs leasehold, space vs location or do you have the ability for both, types of property in the event that at a latter date you have to rent it out rather than selling it- so the target market. Well these are some of the issues we considered before buying.

In terms of rats, sinking ships etc, I believe that SG is small enough the govt will plow in and meddle in the event of hyper inflation, hyper deflation, SG economic crash and rats all abandoning ships.

We bought here in SG, as we took the abovementioned view and took a punt and I am still hoping that in 10-12years time I will win the bet

Re PRH's view on intervention - the only intervention that the gahmen has done before (in market crash times) is to

1. Reduce deposit requirement to 10%
2. Reduce land sales to developers.

This time they have a few more weapons - they can remove the various taxes/duties that they have put in place in the last 5 years + and order the Monetary Authority to remove the barriers erected around mortgages in the last year. The Gahmen will not intervene and buy up wholesale apartments (with the exception of HDB but they own those in a way anyways) - that's not their model and they've never expressed any view like that in the 20+ years I've been here. If a crash comes, it comes.

[Beeroclock]

Interest rates are the key signal. While around 1pct property will not fall as owners can easily hold. However it's hard to go up much too with all the cooling measures. We have also bought a few years ago and happy with the decision. Saving cash versus previous rental and also a large chunk of bank repayment is on principal creating equity. Timing to watch is 2015-16 when US might finally start restoring interest rates. Agree with previous advice, do your sums based on 3pct and even 5pct to test, and be prepared to take a long term view if you opt to buy.

[Beeroclock]

Forgot to add: Re crash scenario I feel unlikely as any major falls should see the govt unwind cooling measures which will bring back demand and stabilize. So a modest correction is possible especially if/when rates rise in a year it two, but any major crash should be short lived. I hear lots of people whinge that prices here are ridiculous and waiting for the big crash to buy, but these tend to be forever renting and eventually give up on buying. Most people I know who bought don't seem to regret.

[GQ_AUSSIE]

Thank you all for your sound advice. I do agree that the Singapore market is highly volatile due to it being a pure market economy wholly controlled by the many levers at the Govt's control. I personally think that that biggest signal is interest rates and by extension, the level of disposable income to service debt ( though this is correlated with the employment market).
Acccordingly:
1) What are your views on the strength of the local economy?
2) What are your views on the employment rate and wages growth?
3) What are your views on the exchange rate Aud/Singapore and US /Singapore?
4) Do you think the Govt can simply turn on the migration tap and allow more wealthy PRCs and Indos to buy more properties? Do these foreigners still have the financial wherewithal?

I think a correction is overdue. Propertiy prices at circa double digit multiples of annual average Singapore income is extremely high. Nonwithstanding that, the Govt cannot let prices drop too far as many households have a large proportion of their financial wealth tied up in bricks and mortar. If so they will not perform well at the next GE .

Your thoughts are appreciated.

[PNGMK]

Thank you all for your sound advice. I do agree that the Singapore market is highly volatile due to it being a pure market economy wholly controlled by the many levers at the Govt's control. I personally think that that biggest signal is interest rates and by extension, the level of disposable income to service debt ( though this is correlated with the employment market).
Acccordingly:
1) What are your views on the strength of the local economy?
2) What are your views on the employment rate and wages growth?
3) What are your views on the exchange rate Aud/Singapore and US /Singapore?
4) Do you think the Govt can simply turn on the migration tap and allow more wealthy PRCs and Indos to buy more properties? Do these foreigners still have the financial wherewithal?

I think a correction is overdue. Propertiy prices at circa double digit multiples of annual average Singapore income is extremely high. Nonwithstanding that, the Govt cannot let prices drop too far as many households have a large proportion of their financial wealth tied up in bricks and mortar. If so they will not perform well at the next GE .

Your thoughts are appreciated.

1. No great.
2. Not linked to housing issues because Singapore has a two layer housing system - the HDB houses something like 90% of Singaporeans and is becoming closed off completely to foreginers.
3. That's more a question of the AUD/USD and the commodity pricing than the AUD/SGD.
4. They could but they don't need to, you can buy private here without being resident and yes, those people have plenty of money and are always looking for places to park it.

Re Interest rate discussion - that's not as big a lever as it is in Australia - there are larger macro issues that drive the market in my experience.

[JR8]

How long are you expecting to be in SG for?

[GQ_AUSSIE]

How long are you expecting to be in SG for?

Am expecting to be here for the med-long haul. By that I mean 3-5 years in the first tranche then see how.

[JR8]

http://www.amazon.co.uk/Art-War-Restore ... art+of+war

Fight your battles on territory with which you're familiar.

Don't turn up here as a stranger, and expect to vie and win against half of China.

If there is any opportunity, it's in and for the likes of the latter scalping the day-dreaming former.

[FaeLLe]

http://www.amazon.co.uk/Art-War-Restored-Giles-Translation/dp/0981162614/ref=sr_1_1?s=books&ie=UTF8&qid=1383449930&sr=1-1&keywords=art+of+war

Good book, meaning to read this for a while so went ahead and bought it on Play Store now

[JR8]

Good idea, it taught me a lot about if, when, and how to 'fight battles.