Singapore Expats

Just saw this article: https://www.msn.com/en-sg/news/other/as ... r-AA1eSNW0

I definitely see a lot more houses available now, compared to even a month ago. I think it makes sense to play a bit of poker with the agents. The word is already out that rents have peaked, although the agents are going to try to fool you that the demand is still crazy. All you have to do is push back and tell them you have already seen a cheaper unit and hold out. Rents are going to come off. Dont get pressured into locking in peak rates. Negotiate and see as many units as you can and have backups and then negotiate lower again.

Hopefully it also means that mortgages are peaking.

Edit - I just read the article... Nothing about mortgages

smoulder wrote: ↑

Mon, 21 Aug 2023 8:11 am

Hopefully it also means that mortgages are peaking.

Edit - I just read the article... Nothing about mortgages

Rents are affected more by demand and supply. If supply is more than demand then it is even possible that rental yield is lower than mortgage rates, like in Malaysia, China, India etc

Last couple of years owners had a free hand to just increase rents as much as they could imagine. But I don't think it is sustainable at all.

Mortgage rates going up and some overleveraged property owners getting hit is part of the design to cool property prices. We just need to see how it plays out.

Interest rates have pushed up both rental rates and mortgage rates. Likely, rental rates will not go back to pre-COVID rates with interest rates where they are. But in the extreme, the above is correct; if literally no demand then rental rates could fall below the implied monthly interest cost (in this case, values would also likely get hit - not saying this is going to happen).

Construction delays were a one-time issue that squeezed the market and this is starting to unwind. Some of the other factors are likely longer-lasting in nature, and the net impact remains to be seen. The EP landscape may have also pushed demand a bit towards the more expensive locations as well.

Like I mentioned earlier, I saw older buildings unable to push rates higher earlier this year. It's hard to say that the rates went down (maybe they are down from one or two peak transactions), but landlords seem to be accepting of where demand is at.

Mortgage rates going up are not a local phenomenon. Interest rates are through the roof all over the world.

Yes I agree in facts rents also have seem to come down a bit especially on the higher end ones ie: $10k up. Saw this pattern on URA rental transactions. There seems to be quite a lot of vacancy too.

abbby wrote: ↑

Mon, 21 Aug 2023 10:58 am

Yes I agree in facts rents also have seem to come down a bit especially on the higher end ones ie: $10k up. Saw this pattern on URA rental transactions. There seems to be quite a lot of vacancy too.

It does make sense though, at a certain point people aren't going to overpay even if they can afford it.

Singapore is not like other property markets where you buy property to rent them out. The economics never make sense. This justification that mortgage rates went up so I increase rent is preposterous. Most people who are renting out their houses, they are doing it due to some loophole like they go and stay with their parents, they stay in JB etc.

So there is no markets as such over here to buy investment properties just to rent them out.

Wd40 wrote: ↑

Mon, 21 Aug 2023 11:19 am

Singapore is not like other property markets where you buy property to rent them out. The economics never make sense. This justification that mortgage rates went up so I increase rent is preposterous. Most people who are renting out their houses, they are doing it due to some loophole like they go and stay with their parents, they stay in JB etc.

So there is no markets as such over here to buy investment properties just to rent them out.

definitely the case for HDB, which is 80% of us. For private, there are some who have "spare" properties for rental, but the ones I know of are also pooling resources (adult children + parents stay together). Then there's the odd asset rich local (or child of savvy property buyer in years gone by) who have multiple private properties for rent (incl some commercial like shophouse). This is what I've observed anecdotally, and all are SCs or PRs (from MY), so often 2 generations or more here. No idea what expats buy.

I rented here for the first 10 years or so, and it was a renters market — if you added up just the mortgage interest, maintenance fees and property taxes — it was more than the rent, so it made sense to rent. Then everything changed, rents skyrocketed and it no longer made sense to rent. Had we known that was coming, we would have bought earlier — but better late than never. Mortgage rates have now become an issue… but the mortgage interest, maintenance fees and property taxes are still far lower than the rent would be on this place. The outstanding loan to market value is currently 0.32, so I am thankful for all those years of low interest rates and the appreciation in value — even the value has averaged a meager 3% increase per annum, that does not consider the leveraged aspect.

malcontent wrote: ↑

Mon, 21 Aug 2023 10:20 pm

I rented here for the first 10 years or so, and it was a renters market — if you added up just the mortgage interest, maintenance fees and property taxes — it was more than the rent, so it made sense to rent. Then everything changed, rents skyrocketed and it no longer made sense to rent. Had we known that was coming, we would have bought earlier — but better late than never. Mortgage rates have now become an issue… but the mortgage interest, maintenance fees and property taxes are still far lower than the rent would be on this place. The outstanding loan to market value is currently 0.32, so I am thankful for all those years of low interest rates and the appreciation in value — even the value has averaged a meager 3% increase per annum, that does not consider the leveraged aspect.

On a fully financed property, rent vs. interest/fees/taxes are usually much closer together. The advantage to buying is that after a decade plus the rent will usually go up and you have built equity. But this doesn't consider the opportunity cost of the down payment and all the monthly principal payments. See what the down payment, BSD, and all the monthly principal payments would be worth had they been invested in S27. You would also need to make some adjustment for the difference paid in rent - the above mentioned costs.

But that's the real calculation. Often, I find that people overestimate the value of leverage. It's great in the initial years, but over time it's not even close to a 4x multiplier (assuming 75% financing).

Of course, there are other pros and cons to both renting and owning. For one, buying allows you to both invest in and enjoy living in a particular property. Often, if you only spent the above mentioned costs on rent, you would need to live in a cheaper location. So even if one set of numbers is lower than the other, there may have been additional utility associated with one of them.

Anyways, the cost of holding property has gone up over the last couple of years. Everyone can decide whether they think this is a factor driving housing costs (both owned and rented) or not.

NYY1 wrote: ↑

Tue, 22 Aug 2023 10:34 am

malcontent wrote: ↑

Mon, 21 Aug 2023 10:20 pm

I rented here for the first 10 years or so, and it was a renters market — if you added up just the mortgage interest, maintenance fees and property taxes — it was more than the rent, so it made sense to rent. Then everything changed, rents skyrocketed and it no longer made sense to rent. Had we known that was coming, we would have bought earlier — but better late than never. Mortgage rates have now become an issue… but the mortgage interest, maintenance fees and property taxes are still far lower than the rent would be on this place. The outstanding loan to market value is currently 0.32, so I am thankful for all those years of low interest rates and the appreciation in value — even the value has averaged a meager 3% increase per annum, that does not consider the leveraged aspect.

On a fully financed property, rent vs. interest/fees/taxes are usually much closer together. The advantage to buying is that after a decade plus the rent will usually go up and you have built equity. But this doesn't consider the opportunity cost of the down payment and all the monthly principal payments. See what the down payment, BSD, and all the monthly principal payments would be worth had they been invested in S27. You would also need to make some adjustment for the difference paid in rent - the above mentioned costs.

But that's the real calculation. Often, I find that people overestimate the value of leverage. It's great in the initial years, but over time it's not even close to a 4x multiplier (assuming 75% financing).

Of course, there are other pros and cons to both renting and owning. For one, buying allows you to both invest in and enjoy living in a particular property. Often, if you only spent the above mentioned costs on rent, you would need to live in a cheaper location. So even if one set of numbers is lower than the other, there may have been additional utility associated with one of them.

Anyways, the cost of holding property has gone up over the last couple of years. Everyone can decide whether they think this is a factor driving housing costs (both owned and rented) or not.

Very well put. In terms of advantage of renting, we usually outgrow the property in about 5 years. Either we feel bored of it and would like to try something new or life events happen. Job changes, school changes. Renting gives you the flexibility to move around. Financially also we don't spend a lot to do up a rented property, but when we buy we somehow like to do it up nicely and keep spending on furniture etc. Renting feels a bit of no strings attached especially in a place if you don't have residency, you don't want to make any attachments with property etc.

So for expats I just feel renting is the best.

It's a no brainer I feel - expats are better off renting.

Wd40 wrote: ↑

Tue, 22 Aug 2023 12:00 pm

Very well put. In terms of advantage of renting, we usually outgrow the property in about 5 years. Either we feel bored of it and would like to try something new or life events happen. Job changes, school changes. Renting gives you the flexibility to move around. Financially also we don't spend a lot to do up a rented property, but when we buy we somehow like to do it up nicely and keep spending on furniture etc. Renting feels a bit of no strings attached especially in a place if you don't have residency, you don't want to make any attachments with property etc.

So for expats I just feel renting is the best.

It's not just expats. On some days, people here say property is a low returning asset, inferior to other options. On another day, somehow being a property owner magically became so much more attractive.

Here's some simple math. A dollar put in a property a decade plus ago at 3.5% is worth ~$1.5 today. With 75% initial debt, your equity went from $0.25 to $0.75. The US stock market from a decade plus ago is up 3x - 4x, so your downpayment saved went from $0.25 to $0.75-$1.00 range. In this example, all of the principal payments reduced debt with zero return. Alternatively, all of the forgone principal payments could have earned something, likely doubling on average.

I think during any period under 10 years you can get wild swings in either of these markets that makes your decision look good or terrible. Over 20-30 years (length of a mortgage), the numbers are likely to be a lot closer together than most people think (even after paying more for rent in the second or third decade). In one case, you have a liquid portfolio that can be used to consume anything anywhere. In the other case, you own an aging property that is getting harder to sell (granted, some locations are better than others and freehold land will always retain some value here).

That being said, there are other pros to owning a home and most people will do so in their primary/long-term place of residence.