To buy or not to buy?

[carteki]

WIMH - nice points

On the plus side of purchasing:
- you don't need to deal with greedy landlords and unscrupulous agents
- you're somewhat protected by rental increases
- potential capital growth
- you don't need to move every 2 years
- it might tip the balance on a PR application

On the minus side:
- what happens when interest rates rise?
- as another poster asked - will the SG govt allow the bottom to fall out the market? I don't know the answer from that one. There is some evidence from downturn 2004 where a number of people lost money on their property investments (but probably those were investment properties)
- how much cash do you have to survive a down turn? Remember that as a foreigner if your job goes, you go and probably so do the rental yields or what you could sell it for.

Do you buy now or wait for prices to correct?
- will they correct? don't know,

But the important thing is if you buy to make sure that you have cash to survive the downsides. Don't buy at the top end of the market and also purchase somewhere where you'll be happy to stay for a good couple of years and has good rental potential - near schools, shops, transport etc.

my 2c worth

[InTheBlue]

All, good advice all round here so thanks for your responses.

I'm going to stay out of Sing property for a while or at least until I go PR.

Going to keep an eye out for bargains in Europe with the state of the 'PIGS' there.

Got to be more opportunity in Spain even if it will be a long term investment.

[Seasoul]

I would think it makes sense to buy a condo if you can afford it rather than rent it for 2y or more. And looking at the rental prices right now, it's a no brainer that if you have the money you should buy instead of renting.


Just a question about this :

Loan to property value has gone to 70% for Expats especially if you own a property in another country!

I didn't know that. How would they know if you own a property in another country ?? Can someone confirm that now regardless of your citizenship, you will not get for private property a loan exceeding 80% of the property's value ? Spoke to a friend recently who told me his bank is offering to cover 90% , and he is not a PR. (foreigner)

[InTheBlue]

Since I wrote that I have found out that the norm is 80% LTV for first property in Singapore and 70% for second unless you have mortgaged a foreign property in Singapore when you will only get 70%.

90%? Please tell me what bank as that makes cash flow a lot easier!

[Seasoul]

Oh ok that makes sense, thanks for clarifiying that up
The friend who said he was offered 90% loan is overseas - we can't wait to grab him when he comes back

[teck21]

Oh goody, more measures announced today.

[InTheBlue]

Seasoul, let us know when he gets back please!

[u4ria]

I've had a lot of conflicting opinions about buying a condo in Singapore.

Buying property should be based on mathematics and not opinions. My opinion anyway

For example: If you are a PR paying rent of $2k a month and planning to stay for 5 years, your $120k housing outlay is enough for a 20% downpayment on a $600k HDB. If you sell when you leave, even if the market falls by 20% the amount you lose is the rent you would have paid anyway. It's unlikely that the market will fall 20% unless you're in the prime luxury speculative end of the spectrum. The downside is therefore relatively low compared to the potential upside.

This is a good point but you have not taken into account the costs of servicing the loan and other costs to maintain the property.

[Steve-R]

What is with the rule that you cannot buy an HDB if you own property overseas? I would be forced to take a big loss on my U.S. property in order to buy here. I prefer to keep it rented out and hold out with the hope of an eventual market rebound.

I hate wasting money on overpriced rent. I would love to use my CPF to pay the mortgage and leave the money I would have wasted on rent for something else.


Steve

[teck21]

Steve, rule is you can't own property anywhere in the world. Not sure how they intencd to enforce though, if they do.

Or more likely than not, they will do what they always do: no one lodges a complaint, they turn the other way.

[InTheBlue]

I understand that there is also a rule that you have to buy a certain size and value of HDB dependant on your salary. Is that correct?

[sundaymorningstaple]

The income cap are for Singaporeans buying new flats from HDB (Only eligible to PR's if one spouse is a Citizen).

If buying a resale flat from the open market, not subject to income caps UNLESS taking the mortgage loan from HDB.

[Wind In My Hair]

I've had a lot of conflicting opinions about buying a condo in Singapore.

Buying property should be based on mathematics and not opinions. My opinion anyway

For example: If you are a PR paying rent of $2k a month and planning to stay for 5 years, your $120k housing outlay is enough for a 20% downpayment on a $600k HDB. If you sell when you leave, even if the market falls by 20% the amount you lose is the rent you would have paid anyway. It's unlikely that the market will fall 20% unless you're in the prime luxury speculative end of the spectrum. The downside is therefore relatively low compared to the potential upside.

This is a good point but you have not taken into account the costs of servicing the loan and other costs to maintain the property.

True. Working out all the numbers takes an entire spreadsheet which includes both one-off and recurring costs, cashflow between income and expenses, and a few columns reflecting how costs will change as interest rates fluctuate, to see at which point your disposable income is insufficient and you have to bail...

... which is why it is much easier to make decisions based on opinions rather than numbers, and also why many people lose money on property

[Steve-R]

Buying property should be based on mathematics and not opinions. My opinion anyway

For example: If you are a PR paying rent of $2k a month and planning to stay for 5 years, your $120k housing outlay is enough for a 20% downpayment on a $600k HDB. If you sell when you leave, even if the market falls by 20% the amount you lose is the rent you would have paid anyway. It's unlikely that the market will fall 20% unless you're in the prime luxury speculative end of the spectrum. The downside is therefore relatively low compared to the potential upside.

This is a good point but you have not taken into account the costs of servicing the loan and other costs to maintain the property.

True. Working out all the numbers takes an entire spreadsheet which includes both one-off and recurring costs, cashflow between income and expenses, and a few columns reflecting how costs will change as interest rates fluctuate, to see at which point your disposable income is insufficient and you have to bail...

... which is why it is much easier to make decisions based on opinions rather than numbers, and also why many people lose money on property

Your calculation also assumes a 0% interest loan.

Your monthly mortgage will still be around $2k per month. Out of that $2k payment over half will go towards interest. So in the end after 5 yrs if your property drops 10% it will be the same as if you continued to rent. Take into account 2% agent fee when you sell plus other fees, taxes, insurance, furnishings, and maintenance/renovation costs it might be the same as renting even if you sell for the same price you paid.

That being said, I would still buy since CPF can be used towards the mortgage giving you more money in your pocket each month. Also if the housing market does keep going up then you will definitely be better off than renting.

Anyways, I doubt you can rent a $600k hdb for only $2k per month. A $2k mortgage can get you much more than $2k rent can.

[Wind In My Hair]

Working out all the numbers takes an entire spreadsheet which includes both one-off and recurring costs, cashflow between income and expenses, and a few columns reflecting how costs will change as interest rates fluctuate

Your calculation also assumes a 0% interest loan.

Did you read my post at all?