Posted on May 3, 2020May 18, 2020 by Rick Fok

Which is better? To engage an Exclusive agent or Multiple agents?

Many sellers and buyers still prefer to engage the services of a property agent although they can DIY, buy or sell property on their own. This is because many are unfamiliar with the procedures in a property transaction and it can sometimes be complicated and it is also very time consuming.

which is better? Exclusive or Multiple agents

The most important thing before appointing your property agent is to check with CEA, Council for Estates Agencies to see if the agent is registered with the council. It is illegal for anyone to carry out real estate work without a valid licence.

The other important factors to confirm before you appoint the agent include

1. Commission – You can first discuss the scope of work with your agent and agree on a fair commission rate that commensurate with the amount of work needed. You have to spell out how much commission will you be giving to the agent. This can be done via whatsapp or other forms of writing.

2. Exclusive or non exclusive – You have to decide if you want an exclusive or non-exclusive arrangement. It would be best to inform your agent of the arrangement.

3. Responsibilities of your agents – It is important that you understand the responsibilities of your agents when you engage them.

4. Conflict of interest situations – There can be possible areas for conflict of interest such as selling the property to agent’s family members, or the agent may be getting some fees from other parties for pushing the unit to them.

5. Important documents – Instead of verbal agreement, put everything that is discuss and agreed upon with your agent in writing. This can be documented in the esate agency agreement CEA form. Another form, called Customer’s Particulars Form is also compulsory, it is a government measures to prevent money laundering and to counter terrorism financing in Singapore.

Using Multiple Agents

Many sellers think that having multiple agents is better, they thought it means higher chance to promote the property and the property will be sold faster.

But it does have many disadvantages.

1.Worse if you have to open the door each time and makes you extremely busy with the schedule, because in case of multiple agents they do not screen the prospect, and will bring anyone to view unit regardless of how potential is the client. Also chances are very high that some of the booking schedules are duplicated by the same prospect arranging with different agents, making you waste trips to open doors.

2. When unit is sold by multiple agents, there will be a scenario where every agent will try to use a different photo and may vary the price to attract customer. This sends out the wrong message to the buyer. Besides confusing the buyer, it will create a impression that the seller is desperate and may likely accept a lower price. It may likely lower the selling price of your property, as buyers will always refer to the lowest price advertised. It is like a scream of desperation, and this isn’t the message that sellers want to convey.

3. Having many agents posting the same unit for sale, may scare off buyers. Buyers will be asking why are there so many agents trying to sell the same house, is there some underlying issues that they are not aware of.”

4. With multiple agents, the agent will bring to seller the first offer they receive, which might not be the best offer, and this is because they want to get the offer to the seller fast before another agent does.

5. Many sellers are not aware of the binding nature of accepting an offer to purchase. This can open the seller up to legal action in the case where multiple agents are marketing one property should the seller accept two offers from two different agents.

6. Opening up your house for viewing do carry risk. The seller has to ensure that all valuables are secure and kept away. By having multiple agents the risk is higher because not all agents will accompany the buyers to walk around the house, and some agents might not even turn up and ask buyers to view on their own.

Seller must remember that all buyers are not loyal to their agents, and all agents are actually tapping into the same pool of buyers, and using the same marketing portal like PROPERTYGURU or 99.co to source for buyers. This means having multiple agents do not mean you will get more potential buyers.

In any sale, you want the buyers to compete to buy unit not the agents competing to get buyers. The agents are not the person who will buy unit, it is the buyers.

What sellers don’t realise is that most agents will spend more effort and focus their time on sole exclusives and less time and focus on open jobs with multiple agents.

This is because agents don’t want to spend too much time, money and effort in selling, only to lose the deal to another agent. Agents only earn on commission so they will focus their resources on the most likely outcome, i.e. exclusive deals.

Most agents in “non exclusive” agreements will not do extras, as they view it as indirectly benefiting their competitors who is selling the same property.

Use 1 agent on exclusive arrangement

Selecting an exclusive agreement with one agent will give you the optimum chance of selling your home for the best price in the shortest time without the need to deal with so many different agents, and having so many risks.

When the agent is a sole representative, he is likely to be in a stronger position to negotiate with other agents (co-broke) or parties in the transaction.

Usually an exclusive rights agreement is valid for 3 months, after which the seller is free to approach another agent to market the property.

So if you prefer to use someone who is more motivated, and devoted to spend time and resource on your property, then giving exclusive right to an agent is the way to go.

In Singapore, the Council of Estate Agencies (CEA) provides a form, to allow a seller to engage an agent on an exclusive basis. This form Exclusive Estate Agency Agreement authorise only the agent or agency in question to introduce buyers or tenants for your property over a certain period.

And during the validity period, you are required to pay the exclusive agent a commission if you enter into any agreement for the sale of your property. The Agreement also states you are not to engage any other property agents while the contract is still in effect.

If no suitable buyer is found by the end of contract, the seller may choose to renew the Exclusive Estate Agency Agreement.

Advantages of Exclusive Agent

Having an exclusive agent means that you only need to deal with one person instead of multiple agents. And having one person gives you these advantages

Dedication – The exclusive agent is more dedicated to promote your property because they know they are the only one who can earn the commission from the sale of your property. No need to fear commission may be hijack by other agents.

Better marketing – A dedicated agent will likely put in better pictures, stage the property in the best position to be sold with more quality furniture or props. Will use more sophisticated marketing tools like videos, which could attract more and higher quality buyers. In some exclusive Agreement, the seller may specify frequency of advertisements and type of ads as a term of contract.

Easier coordination – Less troublesome and less time consuming than having to deal with multiple agents

No duplicate listing of your property on the same marketing portal.– All agents use the same marketing portal eg. PropertyGuru, 99.co , so the reach to buyer is the same if you use one agent instead of many agents

Better control over the price – Seller can monitor the selling price of one agent easier than to watch out over multiple agents. When you hire too many agents, it is more difficult to control asking price, and seller will run a greater danger with many agents pressuring you to lower your asking price with many lower price offers.

Most exclusive agents tend to be more committed to selling your property because there is a written certainty of collecting their commission once the deal is closed. And they would pump in additional marketing efforts to make the property stand out from other listings so that you can secure a serious buyer.

Disadvantage of having one exclusive agent

1. You are locked in with one agent for better or for worse

2. You need to pay the agent’s commission even if you sell the property through any other means

3. When you sign an Exclusive Estate Agency Agreement, you’ll also have to pay your appointed agent commission if you sell your property to someone referred by the said agent within three months AFTER the validity period expires.

CONCLUSIONS :

After listing out the pro and cons of both exclusive and multiple agents, we think you have a better idea which is better for you.

Generally, if you are a new to selling, you might want to consider exclusive agent who will guide you through the sale process due to your lack of experience.

But if you are a seasoned property seller, you may still prefer to use multiple agents to get more exposure to your property. As you do not need expertise advice from the agent on how to advertise your property.

Will you consider giving your agent exclusive rights to market the property?

Based on above points, it may point to a confirmation to use exclusive agent, but we still need to consider the most important point. That is to find someone who is a good agent and it is someone that you trust.

At the end, this agent must be willing to put time and effort to market your property. Nowadays, most realtor company has establish internal links to help agents.

Although you sign an exclusive deal with an agent, there will be a system that enable a team to support the agent in his marketing efforts and even connect prospective buyer to your property.

Eg. In OrangeTee, we have fellow team mates to help you, plus an application call LINK UP to allow fellow OT colleagues to jointly market the property. In this way, the effects of Exclusive agency agreement is greatly amplified.

In the event that you do not have a good agent to work with on exclusive basis and want to use multiple agents. You should be prudent and selective in the number of agents allowed to market your property and from there find one which is most trustworthy, to use as an exclusive agent.

If you are still unsure about what to do, you may want to contact me, RICK, for a casual disussion and I could assist you in the process.

Schedule time with me

Article by Rick Fok

Rick Fok is a realtor with OrangeTee & Tie Pte Ltd. He has been in this real estate business for 9 years. He is very focus in helping his clients rent properties and he does help many customers to buy new projects according to their needs. His interest include sports such as running and soccer besides just real estate work. He loves to connect with people to discuss properties related issues and gets enormous satisfaction in helping them fulfill their needs. If you have any queries on this topic or other , please do give Rick a call and we can discuss this over a cup of coffee.

Is HDB still affordable or is it getting too expensive?

Public housing has played an important role in holding Singapore’s society together.

Based on 2018 survey, more than 78.7 per cent of resident households live in HDB flats.

Built-To-Order (BTO) provides new public housing units at concessionary prices to eligible households. BTO helps to fulfill the needs of low and middle income households. Or those whose household income does not exceed $14,000, it was raised from $12,000 in Sep 2019.

For Executive Condominium, the income ceiling is also raised from S$14,000 to S$16,000.

RESALE APPLICATIONS REGISTERED - HDB IS GETTING EXPENSIVE. WHAT CAN I BUY ?

HDB MARKET OVERVIEW

According to URA reports, the number of resale applications in 1^st quarter of 2020 dipped slightly (about 7%) against the last 3 quarters. This means there are fewer resale transactions in 1^st quarter.

But the resale property index recorded no change in 1^st quarter and last quarter of 2019. It stayed at 131.5

RESALE PRICE INDEX - HDB IS GETTING EXPENSIVE. WHAT CAN I BUY ?

Resale HDB transactions has been trending up since beginning of 2019, also partly because of the new HDB guidelines.

Revised income ceiling for BTO application
Enhanced Housing Grant EHG.

Ensuring housing remains affordable has been a key priority for the Singapore Government. By implementing many rules, they regulate the demand and supply of HDB flats. Although HDB is getting more expensive relatively, the government hopes to keep new flats affordable.

NEW INCOME CEILING

The income ceiling restriction is effective in filtering off those who do not qualify, and it can allow more targeted household to enjoy this public housing subsidies.

The income ceiling for HDB has been raised from $12,000 to $14,000 in Sep 2019.

This income ceiling revision benefitted the Sandwiched group most, because previously they can only buy EC and is kept out of the more affordable BTO market.

This policy of income ceiling has been applied since 1964 to ensure public housing eligibility is broadbased and adjustments has been made periodically to reflect the changing market conditions.

Another interesting research by the Department of Statistics, URA Realis and HDB resale data. It show the price-to-annual income ratio of buyers of new or resale HDB.

The chart shows a healthy level of affordability. To buy a new BTO or resale, a household need to save 4 years of income including CPF contributions. And to buy a private non landed property , the buyer needs to save for 7 years.

Enhanced CPF Housing Grant

The affordability of HDB is further boosted by the new grant, Enhanced Housing Grant EHG.

Previously, grants are given through Additional CPF Houing Grants AHG and Special Housing Grants SHF, and it is given to help families make partial payments in their purchase of new flats.

These two grants are now replaced by a new Enhanced CPF Housing Grant EHG. This grant is linked to the income of first time applicants families and they range from $5,000 to $80,000.

The Enhanced CPF Housing Grant or EHG can be used for both new or resale HDB flats, and it places no restrictions on the buyers choice of flat types or its location. Under Enhanced CPF Housing Grant, families can get up to S$80,000 in grants when they buy a new BTO, and up to S$160,000 in all grants when they buy a resale flat in the open market

To qualify, your income ceiling is cap at $9,000, this is higher than the ceiling cap of AHG ($5000 ) or SHG ($8500). And SHG has restriction to the flat type of 4Room or smaller in non matured estates.

The new rule ensure that Singaporeans can live comfortably in their homes that can last them for life. Hence, the new rule states that flat buyers can only get the full EHG grant if the flat lease can cover them and their spouses to the age of 95.

A graphic on the new Enhanced CPF Housing Grant. - HDB IS GETTING EXPENSIVE. WHAT CAN I BUY ?

BUILD TO ORDER BTO MARKET

From the supply side, BTO flats comes with concessionary pricing schemes , it is subsidized by the government. The amount of subsidies varies and depends on what flat type, this is to ensure smaller flats buyers will get more subsidies.

Also, the government has delink the prices of BTO with HDB resale flats in 2011, Now, HDB sets new BTO flat prices based on a simple cost plus basis.

This is an effort to stabilise the BTO price against the effects of price volatility in the resale market.

By doing the supply and demand curbs, HDB aims to keep BTO flat prices affordable.

National Development Minister Lawrence Wong said more BTO flats will be built in 2020 to meet higher demand of public housing.

There will be between 16,000 and 17,000 Build-to-Order (BTO) flats in 2020, much more than the 14,600 in 2019.

BTO NEW LAUNCH IN MAY - HDB IS GETTING EXPENSIVE. WHAT CAN I BUY ?

BTO NEW LAUNCH AUGUST - HDB IS GETTING EXPENSIVE. WHAT CAN I BUY ?

Even with this new BTO units available in the market, it may not dampen the resale HDB market as the government policies have help it, and new private properties have been increasing lately. Among the buyers, many of them are HDB upgraders and they will likely sell their HDB to recover the ABSD paid outfront.

Hence, the overall HDB market is still well controlled and regulated.

And property prices of BTO or Resale HDB is well managed and make affordable to all via grants and supply.

RESALE HDB MARKET

The number of HDB resale flats changing hands increased by 2.7% to 23,714 units in 2019 as compared to 23,099 flat units in 2018.

The cumulative effects of various new policies such as greater flexibility in using CPF to buy older flats, enhanced CPF housing grants, and increased income ceiling, have all proved effective to overcome the concerns around lease depreciation and economic conditions.

With HDB resale flats, you might get more housing grants than a BTO.

Eg. If you buy a HDB 4Room BTO in Woodlands it is $212,000 or in Toa Payoh $350,000 ( Feb BTO prices ). But if you buy a resale in Sembawang , $306,000 ( HDB resale Apr 2020),

If you are both SC , First Time Applicants earning combine income $7000
You get $50,000 from Family Grant
EHG, $7000 income gives you a grant of $25,000
Proximity Grant if you buy near parents, gives you a grant of $30,000
That makes your resale as good as BTO prices. ($306k – 105k= $201k, is better than BTO $212k)

RPI - HDB IS GETTING EXPENSIVE. WHAT CAN I BUY ?

For 2020, the resale prices started higher, it saw HDB resale prices

increase by 0.5% in January 2020 over December 2019.
increase by 0.7% in February 2020 over January 2020
decrease by 0.3% in March 2020 over February 2020

The Housing Board resale market started this year on a promising note with more HDB flats changed hands in January compared with December.

Overall, there were 1,920 HDB resale flats sold in Jan, which translates into a 3.3 per cent increase over December,
Fewer HDB resale flats changed hands in February as compared with January, and prices also increased by 0.7 per cent. In total , there were 1,668 HDB resale flats sold in February 2020, it was 13.1 per cent fewer than in January.
In March 2020, Housing Board resale prices fell by 0.3 per cent amid the Covid-19 outbreak. But according SRX research, more resale flats were transacted in March, with a 16.8 per cent higher than February. In total, there were 1,948 HDB resale flats sold in March 2020.

With new LTV rules restricting loan to 75% of price of private property, this 25% cash input can mean a lot to the prospective buyers. But if they buy resale HDB, they can use HDB concessionary loans which can finance 90% of the flat price with remaining 10% using either cash or CPF or both.

This reduce amounts of cash means a lot, and it may push them to seek for a resale HDB instead of condo , especially if they have tried repeatedly to apply balloting for BTO.

We expect this lower cash outlay advantage will continue to attract many first time buyers, and upgraders thus keeping demand for HDB resale flats from falling.

HDB will continue to look expensive especially with so many media news of high price transactions. Million dollar HDB transaction will continue and in fact may increase as many newly built HDB in matured estates are approaching the 5 year MOP.

Million dollar Pinnacle — Million Dollar Property – Pinnacle @ Duxton

A record number of HDB resale flats were sold above $1 million for the whole of 2018, in total there were 71 units that were sold above $1 million dollars. This is indeed an significant jump from just 2 units in 2014 and 46 units in 2017.

The most expensive resale flat in Dec 2019 was a four-room flat at The Pinnacle @ Duxton, which was sold for $1.06 million.
The most expensive resale flat that changed hands in January 2020 was an executive apartment unit in Lorong 2 Toa Payoh, which sold for $1.025 million.
The most expensive resale flat sold in February 2020 was a five-room type unit in Commonwealth Drive, it was sold for $1.1 million.
The most expensive resale flat done in March 2020 was a five-room type unit at The Pinnacle@Duxton, it was sold for $1.2 million.

CONCLUSION :

HDB is still a much controlled and regulated form of public housing.

Prices of HDB price is always monitored and managed by the Government through various policies or rules implemented.

HDB will still continue to be affordable ( although it may have risen quite a fair bit ) . It is measured against our income level and hence should still be affordable and within the reach of most Singaporeans.

To know more about whether you can qualify for HDB grants or what type of HDB resale property suits you, do contact Rick Fok, at 91092177 for a casual discussion.

Schedule time with me

Article by Rick Fok

Rick Fok is a realtor with OrangeTee & Tie Pte Ltd. He has been in this real estate business for 10 years. He is very focus in helping his clients rent properties and he does help many customers to buy new projects according to their needs. His interest include sports such as running and soccer besides just real estate work. He loves to connect with people to discuss properties related issues and gets enormous satisfaction in helping them fulfill their needs. If you have any queries on this topic or other , please do give Rick a call and he can meet and discuss this over a cup of coffee.

HOW MUCH DOES IT COST TO UPGRADE FROM HDB TO CONDO ?

It is the dream of so many Singaporeans to own a condo.

Maybe it is to upgrade their social class or to enjoy the facilities provided in a condo, or to be in the plans of future capital gain, these motives have encouraged many to join in the process of upgrading from a HDB to a condo.

To start, maybe you have saved for a long time, and is now ready to buy a condo. But do you know how much it cost to upgrade from HDB to condo?

Before we look at cost, we must decide on which way you want to take to buy a condo
1) Sell off your HDB first, then buy a condo. This way is clean, it means you will remain as owner of 1 property, and get better LTV.

2) Buy a condo first, then decide on whether to sell or keep HDB. This means you become a second property owner. Your LTV will be reduced and you are also subjected to ABSD.

You must be adequately well financed with CASH, if you choose the second option.

Also do get Approval in Principle from a bank, to find out how much you can borrow before you sign the option to buy a new property.

For cost, we first look at down payment when you book a condo. This absolute amount of 5% must be paid in cash. For the remaining you may consider a bank loan. The current law states that you can only get a maximum (LTV) loan to value of 75% if you are borrowing for your first housing loan.

via GIPHY

Which means, you must have 25% in cash or CPF, or a combination of both, to pay the purchase price.
• 1st 5% booking in cash
• 2nd 15% to be paid when you exercise the Sales & Purchase agreement
• 3rd 5% is to be paid during progressive payment stage 1, after piling is completed.

Example : If you are buying a 3 bedroom unit in OCR for $1,500,000

• LTV 75% = $1,125,000, the max amount you can borrow from bank
• Remaining $375,000, you may use $300,000 from CPF and balance $75,000 in cash.

Do note that this example is based on 1st housing loan. That means you have to pay off all existing loan from your current HDB, before you start to buy a condo. If not, you will only be able to get a LTV of 45% for second property.

Which means you need to have 55% in cash or CPF, or for a $1.5mil property you need to have $825,000, this could be tall order for some.

By the way, all deposits must be from savings , you cannot take a loan to pay for deposits under MAS guidelines notice 632.

STAMP DUTIES

Besides setting aside the cash for the initial 25% of property price, you must also have cash to pay stamp duties.

There are 2 stamp duties involved

1) Buyer stamp duties. Buyer Stamp Duty is a tax paid on documents signed when you buy a property in Singapore. Buyer Stamp Duty is computed based on the purchase price or market value of the property (whichever is the higher amount). From 20 Feb 2018, the rate is revised to 4% for property above $1 million. So for your $1.5 million property the tax would be $44,600.

Calculated as below:
a. $180,000 x 1% = $1,800
b. $180,000 x 2% = $3,600
c. $640,000 x 3% = $19,200
d. $500,000 x 4% = $20,000

2) Additional Buyer Stamp Duties is also computed based on the purchase price or the market value of the property (whichever is the higher amount).

The ABSD liability or rates is dependent on profile of the buyer as at the date of purchase of the residential property:
• Is the buyer a company entity or an individual
• What is the residency status of the buyer
• The number of residential properties owned by the buyer

In this case, if the buyer did not clear or pay off his existing HDB loans, then he will be classified as second property owner which means ABSD of 12% applies.

For a $1.5 million property the ABSD would be $180,000. You may get reimbursement for the ABSD if you sell your flat within six months of purchasing the condo.

You need to pay this ABSD in cash first, within 2 weeks of exercising the sale and purchase agreement. Hence you must set aside this cash when you purchase a condo before selling your HDB.

Other Costs involved.

There are some other costs involved after paying all the taxes.

If you are buying a resale condo, then you need to pay for the valuation of your property, estimated at $500. There is no valuation costs if you are buying a new launch condo, as the bank will accept the developers valuation.

Legal fees or conveyancing fees is applicable for purchase of property. It may range from $2,500 to $3,000. It can be paid with CPF, depending on law firm. You need not use the law firm chosen by bank if you can get a better deal from another law firm.

Ongoing Fees and monthly instalments and Property Tax

All condo owners must pay condo maintenance fees, collected by the MCST of the condo. This is higher than HDB cost, most mass market condos charge around $350 per month, but some higher end condos can charge $700 to $1000 for maintenance.

This maintenance fee is normally collected quarterly, so as an owner, you may get a bill of $1,200 for a quarter and this must be paid in a month. (there’s an interest rate charge for late payment).

Monthly instalments or loan repayment, can be quite high each month.
This instalment can be paid by a combination of CPF and CASH.

So in our example , assuming you get the 75% LTV, for a 25 year loan, your monthly instalment would be $4,768

Property tax is calculated based on the Annual Value (AV) of your condo unit. This AV value is assessed by the Inland Revenue Authority of Singapore (IRAS), it is the estimated amount of rental income your condo could have generated in a year.

You can use the IRAS calculator to determine your property tax.

In this example , your 3bed, $1,500,000 property would get an AV of $48,000, then the calculated property tax will be
• Owner occupied unit would be $1,600 or $133 / month
• Rented out unit would be $5,220 or $435 / month

Lastly, you may also want to renovate the condo, especially if you buy a resale condo instead of a brand new launch condo.

Typically, most renovation jobs would be from $30k to $60K. and most interior décor designers will take the $30,000 cap for renovation loans when they quote jobs. We assume you take a $30k loan for the renovation, the interest rate is usually in the range of 3% over a 5 year loan tenure. Monthly repayment would be $575 per month.

You have to manage all these cash outlay, and weigh into the cost of upgrading from HDB to condo.

The total cost outlay for purchasing this condo of $1,500,000 would be

Booking deposit, 5% $75,000
Exercise , 15% $225,000
Progressive 5% $75,000
BSD $44,600
ABSD $180,000 ( can be refunded if sold HDB in 6 months )
Valuation $500
Legal fees $3000
Mthly maintenance $350
Mthly instalment $4768
Mthly property tax $133
Renovation loan $575

TOTAL $608,926 in CASH and CPF

CONCLUSION :

So, we have saved up for a long time and ready to buy a condo, and we have analysed and broke down the likely cost to be incurred if we are to upgrade to a condo.

As mentioned above, we have to check our financial condition if we are selling the HDB first or keeping the HDB for investment or for resale later.

Once we decided on whether to keep the HDB, we have to calculate the affordability of buying a condo based on second property status.

With the additional money needed to pay ABSD and need for more money to pay cash outfront since LTV is limited to 45%.
This will affect our calculations on affordability and loan eligibility and whether there is sufficient money to pay for this unit.

And most importantly of all, you have to decide on what type of private condo do you prefer.

A new launch condo or a resale condo, because it does affect your financial position and whether we buy a resale or a new launch condo, the timeline of our purchase varies alittle as shown in the chart above.

For more information or to learn more about the procedures to upgrade from HDB to condo, please contact Rick Fok 91092177 for a discussion.

Schedule time with me

Article by Rick Fok

WHEN SHOULD I SELL MY EC

Executive condo was first introduced in Singapore, as a hybrid of public and private property.

It is catered to the sandwiched class whose income is not more than $16,000 (started from $12k to $14k then to $16k).

EC are physically very similar to condo, they are designed and built by private developers and it provides similar facilities like swimming pool, gym, tennis courts, clubhouse, etc. But EC are priced very much lower than private condos, they are usually cheaper by around 20% range.

If you have purchase a EC in the past, you will be asking the question “When should I sell my EC”.

Technically, all EC owners can sell their EC the moment it reaches the MOP Minimum Occupation period of 5 years, from the TOP date. Their expected property paper gain should be more than $200,000, but this is just a paper gain if you don’t sell it and convert it into real profits.

AVERAGE PRICE (PSF) OF NEW EXECUTIVE CONDOS. (Source : Squarefoot Singapore)

Average psf price of EC - When should I sell my EC ?

An example : If Peter , owner of an EC in Twin Waterfalls would have made at least 24% paper gain

Holding a property for a long time - When should I sell my EC ?

Executive condominiums (ECs) are always in hot demand, according to records many resale EC have already or almost attained their MOP.

list of new resale ec -When should I sell my EC ?

ECs that have attained their MOP of 5 years, can now be rented out as a whole unit and also can be resold to anyone except foreigners.

Many owners who want to upgrade or to realise their paper gain , will sell their EC after MOP. At the same time, usually there is also a big pool of buyers waiting for resale ECs, since new launch EC are few and usually higher price.

MOP 5 years - When should I sell my EC ?

These new potential buyers are also eyeing the potential when these EC reach 10 years MOP, meaning it could be sold in open market to anyone, usually also means higher capital appreciation.

With this large pool of sellers and prospective buyers of EC, we can be sure EC will be top in resale condo transactions.So if you ask when to sell your EC, this could be a good time too.

It is a good time to strategise and consider these options before acting.

CHOOSE A RIGHT STRATEGY

1) Decoupling or Part Purchase, this is done to free up one partner name to purchase another property for investment. Can be a new launch condo or a resale condo. This is recommended if you don’t intend to sell in the near future

2) Sell EC and buy another private property in a better location or buy a bigger unit with more rooms.

3) Sell EC and then downgrade to a HDB resale flat, with this option you will free up lots of cash, ideal if you are planning on retirement.

4) Sell EC and then buy another 2 condo, one under each name. You can reserve the bigger unit for own stay and use the smaller unit for investment rental income. Choose this option if you have fairly high income, (around $10k), a really comfortable budget for mortgage and at least 20 year investment horizon.

As most buyers of resale property are looking for relatively younger condo, your EC after MOP is only 5 years old, it is very attractive to homebuyers, and it may fetch a better price.

Because you made the right move in owning a EC, you can ride this wave and you can sell and cash out at the most optimum price at the youngest property age.

But first you may need to ask yourself why you should sell right after MOP instead of waiting until full privatisation at the 10th year mark.

Is it herd instinct of following others, do not let others influence you to cash out.
Are you afraid of future profits, that you may not achieve it due to COVID or other economic issues.
Are you considering other investment property opportunities, (like sell 1 buy 2) after selling the EC

If you are selling your EC now, you have to consider these important factors

Are there many neighbouring units selling in your EC project?

Generally, if your EC project is a large development, then there is a high chance many will want to sell when their EC reaches MOP, and cash out.

Usually in such case, at the initial stage buyers will have ample choices to select and urgent sellers will likely sell cheaper to offload the unit. And after a period of 6 months or more, stabilisation will settle and the sellers subsequently will get better prices as competition thins.

What is the current supply situation of newly TOP (Temporary Occupation Permit) condominiums in your area?

For private properties , they don’t need to fulfil MOP, owners can sell their property upon TOP of the project. Therefore you need to monitor the supply of newly TOP condos in your area as it will mean increasing the competition pool. Buyers will have more choices.

The ideal situation for you , as a MOP EC seller, is to have a neighbourhood of old condos as well as a neighbourhood of HDB BTO flats that also just MOP five years.

As HDB BTO upgraders will be looking at private condo or ECs to upgrade, this will add to demand for your resale EC , especially so as it is near or in their familiar area.

Case in point:
Many Yishun BTO flats in Yishun Greenwalk and Adora Green has reached MOP and many have upgraded to private homes, and The Canopy EC in Yishun is also sought by these buyers.

Eg. Tampines Trilliant at Tampines Ave 7, total 670 units
Many EC resale owners are asking for $1,250,000 for their 3 bedroom.
Surrounding HDB in Tampines St 71 , which is around Trilliant have seen a surge in selling too, with 4Rm transact at $450k and 5Rm at $550k

Are there significant infrastructure growth plans in your neighbourhood?

With the help of URA Masterplan, you will be able to know what are the plans around your neighbourhood.

With news such as new MRT stations, new shopping malls, or new HDB BTO nearby, it will make it easier for you to market your EC. This will also help to improve your profit margin and safeguard you against any potential downside.

So, if you know that MRT takes 2 years more to complete, it might be a better bet to wait for it to complete before you sell and it would mean better selling price and better margins.

Are you in a downturn, do you need to improve your finance?

Generally, in down markets, you should only sell if you’re in urgent trouble (e.g. job loss) or to capitalise on getting funds to finance your purchase of another property at a discount.

ECs generally do not correct as much as private property as the fundamental reason for holding EC is for owner stay. So there is really no hurry to sell your EC, unless you want to upgrade and buy a better unit at large discounts.

For example:
In a downturn, when prices are correcting, usually the bigger or more expensive property will correct more, as investors are likely to bail out.

Eg. If market is correcting at 20%

So if you are holding to a EC worth about $1.25 million , you might want to sell to take advantage of a sale of a bigger unit worth $2 million but is going at $1.6 mil now.
When a recovery returns, you will benefit more with this new property than holding on to your existing EC through the crisis.

CONCLUSION :

In conclusion, we must view MOP of EC from many angles.

It is not a magic number to say you have to sell it after 5 years MOP.
This should not be the case, we should sell the EC only based on many other reasons as discussed above. It should be base on both market fundamentals and your objective to sell.

It must be clear and well thought process , with all the family needs and priorities being taken care of.

If you are buying another private property, (either new launch condo or resale condo) after you sell your EC, then it is easy.

But if you intend to buy another government subsidized unit, you have to wait out for another 30 months after selling your EC before you can submit a new application to buy any of the following.

A new flat from HDB.
An apartment under the Design, Build and Sell Scheme (DBSS) from developers.
Another EC from developers.
If you have any further queries on how or when to sell your Executive Condo, you could reach me at mobile 91092177 or simply email me at rickfoknh@gmail.com.

I would be most delighted to share with you more. Thank you.

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Article contributed by Rick Fok

IS YOUR HDB AN ASSET

This is the most common question in the head of all HDB owners. Is my HDB worth anything in the future? Is my HDB an asset for future earnings? We all like to treat our HDB as a asset. But unfortunately, HDB has an expiry date, HDB are all based on 99 years lease.

And as the HDB becomes older, the remaining years till 99, will become lesser.

Your HDB value will get worse each year as the 99-year leasehold shortens. And the longer you stay in your HDB , the remaining value will diminish. To make things worse, when the remaining leasehold of your HDB is fewer than 60 years, it becomes harder to sell. Because CPF usage is restricted further and bank loans are tightened for purchasers buying properties will less than 60years of Lease remaining.

And with restrictions on PR to stay in Singapore for 3 years before they can qualify to buy a HDB, this will dampen the demand for resale properties too.

According to the HDB resale price index, we have seen a decline in HDB resale prices since 2014.

HDB RESALE PRICE INDEX

Based on the latest HDB flash report, the Housing Board resale prices were flat in the first three months of 2020, as compared with the last quarter of 2019.

The resale prices for 1^st quarter was flat, 131.5 after two consecutive quarters of increase in 2019, with 4^th quarter reported 131.4 and 3^rd quarter reported 130.9.

The HDB has offered many new BTO flats last year, 4571 units in Nov 2019 and 3373 units in September 2019.

And in upcoming May, HDB will offer about 3,700 Build-To-Order (BTO) flats in Choa Chu Kang, Pasir Ris, Tampines and Tengah.

In August 2020, HDB will offer another 4,100 BTO flats in matured towns Ang Mo Kio, Bishan, Geylang, Tampines and non matured town Woodlands.

With so many BTOs, buyers will have many choices to select and may not look for resale HDB, thus may cause a drop in demand for HDB resale.

With all these in mind, it is not good to treat your HDB as an asset or an investment.

For it to become an investment , the HDB property must be

Able to generate positive cashflow, or pay us money in form of rentals
Able to generate Capital Appreciation or growth in value when we resell the unit
Provides us leverage for value, eg. Mortgage equity

Generally, many have used properties as a financial asset to hedge against inflation and to track growth in the country. When a county performs well economically, usually the properties prices will move along with it.

Many fast developing nations, like HK, S Korea, and Singapore have benefited from this growth. But moving forward, future growth is not so fast, and we cannot expect such growth rates as before and hence we will not see similar price gains in properties.

Hence it is no longer possible to buy a resale HDB and expect a sizeable profit in the near future.

Recently, there has been a lot of noise about HDB flat reverting to zero value and return to government at the end of their 99 year lease.

Based on theory, it is true the HDB units will revert back to HDB when their lease expires. We are still waiting for official reply from the government , will there be a lease renewal policy or will it offer rehousing policy to those whose units expires. This uncertainty has to be resolved by government to put the HDB buyers at ease.

And there are a growing number of old HDB flats with mounting depreciating values, where owners are holding to properties which are near the halfway mark of their 99 year lease.

The long held ideology that HDB is not just homes but appreciating assets was implanted in us during the campaign of asset building with HDB by the Government.

But today this is not true, old HDB flats are driving many to think otherwise.

Although HDB is a necessary asset, because we need a place to stay. If we don’t buy a HDB we have to rent a place and either way, it is money spent, so it may as well be spent on your own HDB.

So, all homebuyers has to view HDB as homes and not as investments.

Because of this viewpoint, the Government will not allow ageing flats to be ignored. The government is committed to maintain and upkeep all HDB regardless of age through HIP or MUP programs. The Government will not allow general degradation of HDB.

As such the Government has recently introduce some measures to encourage buyers to buy old HDB properties.

Included in this measure are new enhanced housing grants (grants up to $80,000) for first time buyers and raising income ceiling for all eligible HDB buyers (new cap $14,000).

Starting from May 2019, Home buyers can draw more from their Central Provident Ordinary accounts to buy old HDB flats, provided the property’s remaining lease covers the youngest buyer till the age of 95.

HDB buyers will also be entitled to Housing Board loan of 90 per cent (maximum loan) of the property price and max CPF usage of 100% valuation.

This new move by the Government is a new shift to focus on whether the property can be a home to the owner for life, instead of focus on its remaining lease. This move will ensure that the HDB home buyer will have a roof over their heads in their old age.

Because old HDB property flat price depreciates over time, it is advisable to get one with more remaining years, because when add to your age, it must be able to cover the youngest buyer till 95 years.

REDUCING HDB TENURE AFFECTS PRICE - Is your HDB an asset?

Buying an old HDB flat with the view that it will fall into SERS is not correct thinking. Because there is no guarantee that SERS is happening to all old properties. Our Singapore minister has already said that SERS, Selective EnBloc Redevelopment Scheme, is not a guarantee issue. In fact only 4% of all HDB built are selected for SERS , said Mr Lawrence Wong, Minister for National Development.

With all these in mind, HDB may not be an investment or an asset.

Because an asset is one that will put money into your bank, it will generate income for you.

PROPERTY WEALTH PLANNING

So, it is best to consider Property Wealth Planning (PWP) strategies to maximise and deploy their funds to work for them. So what is PWP and how does it work ? It is basically unlocking your dormant capital and convert it into active capital or income generating capital.

PROPERTY WEALTH PLANNING

One way is to sell your existing HDB and use the sales proceeds to buy 2 condo, one for own stay and another for rental investment. It can be from new launch condo sale or from resale condo.

Example : If John Teo (35yrs) and his wife (32 yrs) has a HDB 5 room

He could sell it

House value at $620,000

Outstanding loan $200,000

Sales Proceeds : $620k – $200k = $420,000

Assuming return CPF $260,000

Net Cash $160,000

Current HDB instalment $1,815 per month (Borrow $400,000 @ 2.6% over 25 yrs)

John allocates his sales proceeds money into 2 properties.

His monthly instalments is easily covered with his rental income and his CPF contributions

It is a very good time now to sell the property despite the COVID 19 situation.

Property prices have been gradually increasing month on month.

private non landed pricess - Is your HDB an asset

New home sales has been doing very well since beginning of year. In Jan, there were 618 units sale and in Feb 2020, new home sales jump 57.3% or 975 units.

Even IMF has reported that they expect a sharp rebound to follow after the corona virus pandemic.

CONCLUSION:

HDB is not really an asset to make money, although there may be capital gain if you have bought your HDB more than 10 years ago.

HDB is merely for home stay. But it can be monetized after 5 years MOP.

You can then use the sales proceeds to buy condo for your own stay.

When you sell your HDB, you are required to return to CPF, the accrued interest for the amount that was withdrawn for housing. So if you decide to delay in selling your HDB, means you stay longer and you incur more accrued interest.

With reduced appreciation of HDB and the increasing accrued interest, it would mean you will receive less cash proceeds upon selling.

Hence it will be a good time to convert your HDB asset into a real income asset. With good Property Wealth Planning, you could be a owner of 2 new condos, do call me , Rick at 9109 2177 for a discussion.

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Article by Rick Fok

Is it better to buy an EC than a condo ?

What is an Executive Condominium (EC) ? Executive Condo is a hybrid of public and private apartment. It has both the attractive price of public housing and the superior comfort of private condominiums combined together.

EC are physically very similar to condos , it has all the facilities similar to a mass market condo. So is it better to buy an EC than a condo since it is so similar ?

EXECUTIVE condominiums (ECs) was first introduced to cater to the aspirations of the sandwiched” class. This group whose household incomes have exceeded the ceiling for public housing ($14,000), but are not yet able to stretch to afford a private condominium, are being served by this new EC segment.

The EC has become an increasing choice for many Singaporeans of this sandwich class. But for some people whose finances can allow a choice between an executive condominium and a private one, then the choice decision is much tougher.

WHO CAN BUY A EXECUTIVE CONDOMINIUM, WHAT IS THE QUALIFICATIONS ?

Not everyone can buy a EC, as it comes with many restrictions, this is necessary to ensure that only the sandwiched class is able to afford better housing.

To qualify for an executive condominium , you must meet these conditions

You need to meet the HDB Eligibility Scheme such as Public Scheme, Fiancee Scheme, Orphans Scheme or Joint Singles scheme.
Your total household income must not exceed $16,000
You must be at least 21 years old and is a Singaporean citizen, or with at least one co-applicant being a Singapore citizen
You do not owned any private property both locally or overseas, or you have not disposed of your private property within the last 30 months.
You have only bought 1 of new HDB/DBSS/EC before, and received 1 CPF Housing Grant thus far
You must meet the Minimum Occupation Period (MOP) of your current flat/EC unit.
EC buyers are also subject to the Mortgage Servicing Ratio (MSR). MSR is implemented to prevent EC buyers from taking on loans that may put them in risky financial situations. The MSR cap for purchase of EC is set at 30 per cent of a borrower’s gross monthly income.

Executive condominiums is a hybrid that has the same physical attributes of a private condominium, there will be swimming pool, gym, outdoor area, tennis courts and security and other facilities.

Executive condominiums are state subsidized and were designed for home ownership instead of being investment instrument.

The buyer must stay in the unit for at least five years before it can be sold to Singaporeans or PR only. And after 10 years, the unit can be sold to anyone, just like any other private condominium. This minimum occupation period is implemented to prevent any property speculation or selling quickly to reap profits.

Benefits of owning a EC , and why it is better to own a EC

Executive condominium are designed and built by private developers , just like private condominium. It is designed with quality facilities and security, giving all residents a luxurious and quality lifestyle.

EC are built on GLS government land sales specially reserved for EC. This is sold to private developers at a lower price, which translates into cheaper selling price to the EC buyer.

For all first-timer applicants, you are eligible to receive housing grants of up to $30,000.

ultimate guide to CPF housing grant for executive condominiums.
Is it better to buy an EC than a condo

Executive Condo unit can be resold as private condo, after 5 years MOP, to Singaporean and PR and after 10 years it can be sold to anyone.

EC will generally get a higher capital appreciation in future, because they are sold like private properties although they are bought as subsidized units with grants. And a larger pool of potential buyers to tap on after the privatization of the EC.

Executive Condo also can be rented out like any other private condo. It has facilities like a condo , and it can give relatively good rental yield.

What is a Private Property

A private property can be landed or non landed condominium. It can be either brand new launch condo or resale condo. A condominium is a form of private housing which is co-owned by many strata owners. A condo has many common facilities such as swimming pool, tennis courts, gym, spa, park, and outdoor area commonly shared by all strata owners.

Main difference of private condominium vs executive condo are :

Private property purchase do not enjoy any form of housing grants
Private property are usually more expensive than EC or HDB
Private property projects are only paid with progressive payment plans
Private property can be bought solely for investment with no need for MOP or owner occupation.
Private property has no restrictions on foreign ownership , all can buy private property.
Home financing is regulated by TDSR, all mortgage finance must apply TDSR 60%

A condominium purchase will require a significant cash outlay from Buyer.

5 per cent for the option to purchase
15 per cent in cash or CPF when you exercise your sale and purchase agreement
5 percent for progressive payment, if your maximum loan is 75 per cent.
4 percent Buyer stamp duty
Lawyer legal fees.

As the cash component is quite high, only those who are financially stable will consider private property purchase. Others who are tight cashflow may consider EC instead.

One major factor attracting many buyers to EC is the price. EC are price relatively cheaper than private condo because of the many criteria imposed by HDB on EC purchases. Price could be as much as 20% lower. And to add to this, EC Buyers can get a grant from HDB, if they are first time applicants to EC, this makes buying EC more affordable.

ECs can be a better investment choice compared to private condominiums, as they are usually sold for around the same price as private apartments in the resale market even though EC are purchase with grants (subsidized housing).

EC are treated as HDB property for 10 years. During this period, it is subjected to the same restrictions eg. Minimum occupancy period of five years, and restrictions on who can buy EC.

Because of cheaper land cost and construction cost, Executive Condo or EC have been priced lower than private properties. But recently, the narrowing gap between prices of the new ECs and OCR mass market condos is making this price difference less attractive.

Is it better to buy an EC than a condo
Median Unit Price PSF for new EC

The latest new EC launch, Piermont Grand and OLA, has seen prices come quite close to that of some new projects in the OCR during the first half of last year. New projects such as Riverfront Residences Sengkang, Parc Botannia Sengkang, and Treasure Tampines have all seen psf price at around $1250 to $1300. This narrowing price gap between new EC projects and OCR condos, has affected many HDB owners who are looking to upgrade.

Pricing of EC
Is it better to buy an EC than a condo

ECs has become a rare commodity, as the supply of EC have being reduced in recent years. And because of limited land availability, the prices also have been driven up.

Recently, the potential supply of ECs is not able to meet the demand of buyers, because there were only four new EC projects in the pipeline.

In 2019, there was only Piermont Grand, 820 units (Sumang Walk)
In 2020, there were 3 EC . Parc Canberra, 450 units (Canberra Link), OLA, 550 units (Sengkang), Parc Central, 695 units (Tampines Ave 10)

This dwindling supply of EC has driven up prices to historical highs.

The government’s take on releasing more land for EC construction is a major factor that is affecting prices of new ECs. As you can see from the charts , new ECs are quite limited in supply.

Is it better to buy an EC than a condo.
Supply pipeline for new EC

While New housing measures, such as Enhance CPF housing grants are expected to make public housing more affordable and accessible for Singaporeans. The affluent buyers with significant cash savings will buy private condominium as the market has stabilised and it does not have MOP restrictions.

Conclusion :

While all upcoming EC developments are expected to be priced higher, they are still excellent value, because of their location and potential for growth.

Piermont Grand at Sumang Walk and OLA at Anchorvale Crescent sites will both benefit from the Punggol Digital District, a government initiative to transform the business and urban landscape of Singapore. This is a big initiative involving Digital businesses, top academia and the high-tech lifestyle, it is a key growth cluster in the North East Region, expected to create 28,000 new jobs.

Parc Canberra, The Canberra Link development is near Canberra MRT station and Woodlands Regional Centre. Parc Central, the EC at Tampines Avenue 10 will benefit from the upcoming Changi Terminal 5 development as well as the established Tampines Regional Centre.

ECs are still good value buys and a good option for the sandwich class and HDB upgraders.

From a pure investment angle, the private condo proved to be the better buy, because the EC regulations forbid the renting out of entire unit in the first 5 years MOP, and hence you cannot offset monthly mortgage payments with rental income. But if rental restrictions are change, then EC may outperform private condo.

Although the gap is narrowing, there is still a significant price gap between EC and private condo. And EC still provide an affordable option for HDB upgraders who want a higher standard of lifestyle. As EC is for own occupation, achieving a good resale capital appreciation after privatization is good for investment.

For more information , do leave me comments or make a e-appointment to discuss this in greater detail. Thank you

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Article by Rick Fok

SELL HDB AND BUY TWO CONDO. HOW IS THIS POSSIBLE ?

It is the common goal of many HDB owners to upgrade to condominium. Their main reasoning is that condo comes with facilities and they can enjoy and upgrade their lifestyle. When approached by client to do this, I will first check on their financial feasibility and sometimes may even advise them to sell HDB and buy 2 condo instead.

How does sell HDB and buy 2 condo work ? Well, it is to sell your HDB and use the proceeds for down payments for 2 new condos. Under this “sell one & buy two” strategy, the seller is urged to sell the HDB to capitalize on capital appreciation and use proceeds to buy 2 condo units (1 big and 1 small condo).

The name of one spouse is used for the big condo for family occupation and the other spouse name is used for the smaller investment property which is to be rented out.

Sell HDB to buy 2 new condos

By using the 2 individual names to buy 2 condos, we have avoided the issue of ABSD for the second property. By the power of leverage, we can sell one property and borrow enough money to buy two condos. This 2 purchases are done by using a combination of cash and CPF monies.

Assuming the mortgage on the investment property is partially funded by CPF monies, while the rental income covers the balance, there is the possibility of positive cash flow. This will give passive income to the seller.

By adopting this strategy to sell HDB and buy 2 condos, you will gain the following.

1. You save thousands for not paying ABSD

If you buy a new launch condo and keep your existing HDB, or buy 2 condos with both names you have to pay 12% Additional Buyer Stamp Duty (ABSD). Eg. If you buy a $1 million investment property you have to pay $120,000 tax.

That is equal to 4 years or 48 months of rental income if you will to rent HDB out for $2500. It is better to use this money to pay as downpayment for your 2nd condo under a different name.

2. It works against Inflation

Real Estate is the best choice against inflation. It is not just the increase of the resale value of the property over time, but the property can be used to generate rental income.

However, if you own only HDB flat, it is merely for own stay, but not used to hedge against inflation. While if you buy 2, you can have one for own stay and another for rental income.

Rising Inflation - SELL HDB AND BUY 2 CONDO

3. HDB Flat is Aging, and lose value

It is good to sell HDB especially if the property is already old. Because for the purchase of any residential property less than 60 years remaining lease, the maximum amount of CPF that can be used is capped at a percentage.

You cannot use their CPF fully, you will need to pay part of it by cash. That’s why those older flats couldn’t fetch a good price despite having a superb location and even well maintained.

4. Widening gap in price index: HDB vs Private properties

Private property index has gone up sharply in recent quarters but the HDB resale index has continued downwards.

With condo price going higher and HDB price going lower, it is good time to sell HDB and buy condo. This will give you more future value to your new condo acquisition.

5. Flexibility to swap between your 2 Condo based on Your Own Needs. Enjoy the Condo Facilities and Lifestyle

You see, when you own 2 properties, you can stay one and rent out one. You have to stay in the bigger one while your children are still young. So you choose to stay in the 3 bedders and rent out the 1 bedder.

But when your children grow up and form their own family in the future, you will have 2 vacant bedrooms. That’s the time you may consider to move to the 1 bedder and rent out the 3 bedders. This will be when you can really retire comfortably.

Before we embark on this strategy we must understand the concept of it.

Concept 1: Understand the amount of monies entering your CPF accounts

If you are working on a monthly salary, you will receive CPF contributions from 2 areas:

20% from employee (you)
17% from employer

These monies are then split and put into your:

Ordinary Account
Special Account
Medisave Account

How it is split will be dependent on your age .

These monies are sitting quietly in your CPF accounts, earning the 2.5% interest in your CPF Ordinary Account, subject to CPF Board’s terms and conditions.

Is it a better way to utilize these CPF monies and invest in properties where they can work harder to earn returns

Concept #2: “Freeing up” the CPF monies to channel into your 2 new properties

The concept of selling your HDB flat will free up more CPF monies for you to channel into your 2 new properties.

It is interesting that people often forget how much money they have paid into their HDB flat since they first bought it. It could be a substantial amount, maybe hundreds of thousands.

Especially if your flats have appreciated in value, it will “free up and unlock” more funds than what you originally put in.

For those flats that didn’t appreciate, it may result in a negative sale where you might not be able to get any money from a sale.

That is why you need to get expert advice on a detailed financial calculation

Concept #3: HDB Flat Valuation

The HDB flat valuation is important as it determines the selling price and eventual cash proceeds. This is usually done by buyer of HDB flat to get HDB loan.

The value of the flat can be estimated from similar transactions that has occurred within the same block or nearby vicinity.

With this valuation, you will be able to get enough cash proceeds to buy 2 properties

Amount of CPF monies available from husband and wife
Amount of investable liquid cash available

If all is well, you should have more than enough to proceed to purchase 2 properties under 2 different people’s name.

Property A will be under the husband’s name.

Property B will be under the wife’s name.

One of the properties will be the matrimonial home while the other is rented out for passive income.

How does “sell one buy two” work?

It mainly works through the power of leverage. To be more precise, it means you need to “sell one and borrow enough money to buy two”.

Disadvantages of this scheme

With job security at stake amid slowing economy, MAS warns of risks involved.

Amid a slowing global economy, being laid off is a possibility and the property’s value depreciating are real possibilities. Both these scenarios will cripple the couple’s ability to service two mortgages at the same time. Property purchases are significant and long-term commitments, the investor or buyer need to be aware of the risks involved.

In order for this strategy to work, both buyers must continue to work to have sufficient income to service their individual property loans. Should one spouse lose their job, it could place strain on the family to service two mortgages at the same time.

In any property purchase, there is a need for substantial upfront cash, the buyer has to consider whether they have sufficient savings to pay for all the relevant stamp duties and cash down payments before making property purchases.”

Another potential issue as pointed out by Propnex’s Mr Ismail, is that “Property investments are illiquid. You can’t cash out tomorrow. In the event of a downturn, you may not be able to find a tenant.”

That is very true, you cannot cash out immediately, and because of uncertainties in the global economy you may not be able to find a tenant to help pay the mortgage of your investment property.

So it is best that buyers do not plough all their savings or cash reserves into the investment property purchase, but instead do maintain cash reserves amounting to at least one year’s worth of mortgage instalments as a safety buffer.

By selling your HDB and buying 2 condos, you have to remember that condo purchase do include the following

When you’re buying a private property, you have to take a bank loan.

With economic uncertainties, bank interest rates fluctuate, so make sure you can service the loan when they go up.

Unlike an HDB loan, bank loan rates fluctuate. They’re now hovering around two per cent per annum, but historically, the average is around four per cent. And since they’ve been at historical lows for around a decade, there’s little room to move except to go up

2. Two people sharing a mortgage is a much smaller burden than each one taking on their own loan.

When you buy 2 properties with the cash proceeds from selling your HDB, you have to take 2 loans for buying 2 new properties.

The sum of these 2 loan mortgage quantum can be quite high and may take out huge chunk of your family combine income..

For Hubby – Buy a 3 Bedroom condo for own stay

Assume purchase at $1,500,000. At 2 % per annum, a mortgage loan 75% is $1,125,000
Assume loan tenure of 25 years, mortgage is about $4,763 per month.

For Wife – Buy investment shoebox unit for rental

Assume purchase at $800,000, At 2% per annum, mortgage loan 75% is $600,000
Assume loan tenure of 25 years, mortgage is about $2,540 per month.

You must be prepared to pay $2,500 plus maintenance fees (est $300 ) whenever your unit is untenanted.

Conclusion

Is the concept of selling your HDB to buy 2 condos a good idea?

In short, “sell one buy two” can work, but only for those who have done very well for themselves since the time they first bought their flat (or maybe they sold their flat for a million dollars).

With private property prices increasing at a faster rate than wage growth, property experts are saying that the affordability gap for private homes could further widen for Singaporeans.

While median asking prices of private property have risen by 12 per cent in the last three years, monthly wages have increased only by 7 to 8 per cent over that period based on Ministry of Manpower figures.

Hence it may be a good idea to capitalise on selling your HDB and buying into private properties when you can afford. Perhaps, you should take this route of “Sell HDB to buy 2 private properties” only if you have a really comfortable budget for mortgage and at least 20 year investment horizon.

Though the strategy is not a new one, many buyers are now keen to go for this strategy or to find out more about it given the double-digit ABSD if you buy a second property. I must say again that this strategy is not for everyone. “You have to be financially stable. Both (spouses) have to have fairly high income,” to service the loans, and it must be done with a perspective that property ownership is for the long-term.

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Article by Rick Fok

Buying a new launch condo or a resale property. Which is a better property for investment.

Buying a condo is always one of the biggest investment decision facing the buyer.

Whether you are buying a shiny new launch condo or a well maintained resale condo, the onus is on the buyer. Is the buyer a first time landlord or a seasoned investor.

For those who are seeking a property to rent out, the buyer will be looking at many other criteria instead of just beauty. The investor will look at more numbers such as age, price , ROI, rental yield, or potential upside before deciding on a unit.

In the real estate market, the market is very dynamic, the prices of resale property is always up for negotiations while prices of new launch property is fixed by the developer according to market conditions.

Why choose a resale condo as an investment property?

Many investors prefer to start investing with a resale condo. This is because resale route does provide a few big advantages:

Immediate rental of unit is possible. I guess this is the most common reason for choosing a resale condo for investment purposes. As a new launch might take two to three years before it is ready to be able to rent out, whereas tenants can move into a resale unit immediately

Also, there is a high chance for resale property to sell with tenancy. (that is the resale condo is already tenanted) , this will reduce the time loss in finding tenants.

Most investors want to avoid paying the mortgage, this can be achieved by having sufficient rental income to cover mortgage repayments. As such, it is not surprising that some investors will choose resale units for investment.

If you intend to rent your condo out, buying a resale condo makes sense because you will be able to rent the finished property out as soon as you buy it, and pay for the mortgage with your rental.

There is also the added benefit of using specialized leasing agents who help in renting out units.

A) RENTAL INCOME CHECK. To an investor, It is relatively easy to predict the rental income of a resale unit. You can look at what the current (or past) tenants have been paying, or check out the URA website for Rental contracts of private residential properties.

By checking the website you can even look at rental income in the neighbourhood. Then you can compare the actual rental rates, for your specific unit or other unit sizes. This can help you ascertain the estimated vacancy rate.

To invest in Resale Condo, the choice is simpler because the end-product is standing in front of you You can see and touch the resale unit.

B. BIGGER UNITS . Most buyers opt for resale unit because older properties are bigger in size, and layout is usually more spacious. This is particularly important if the inlaw or parents are staying with you, the need for bigger room size matters and space between rooms is desirable to give space.

The set back for resale unit is that you may not be able to get units of your choice, such as unit numbers or unit facing or floor levels. More patience or prudence is needed in resale unit selection.

For Resale Condo, there is a great chance of haggling for some great deals, especially in cases where the owner is in a hurry to sell, whether because of relocation or job loss.

C. DEFECTS . With resale units, you would have done your due diligence and have inspected the physical condition of the property before committing to a purchase. You should know what defects needs to be repaired, and have a contractor to quote renovation cost and time frame.

As for new launches, this comes with a defects-free period, but it may not compensate you as repairs or rectification works takes time and it might delay your plans in finding a tenant.

Furthermore, there is a risk that some defects are not possible to rectify and it become lasting problems. For example, if the garbage chute for the condo block is poorly designed (causing choking and foul smells), that may be a permanent issue that will affect rentability and resale value.

These sort of surprises are more easily avoided in a resale investment unit, provided you inspect the condo thoroughly before you buy.

Finally, with resale units, it is you buy what you see. So you can gauge issues such as traffic noise, leakage or pest problems, or poor neighbours. But for new launch , these sorts of issues are hard to predict, because they do not physically exist yet.

Why choose a new launch for investment?

There are many pros and cons in buying a new launch condo . Of course the main factor against buying new property is the time line. It usually takes 3 to 4 years before the property is available for vacant possession. This may hinder some investors choice if they cannot afford the waiting time or they prefer immediate rental returns.

The main reasons for choosing a new launch include:

1. First Mover Advantage. Potential upsides are good due to the changing landscape of the area. If you purchase a new launch and the area surrounding it is still under development, there is potential for the property value to grow when the development and construction is completed. Resales in that area would then be of a premium level compared to initial stage.

2. Newer facilities and features . One main appeal of a new launch condo is that everything is new. No need to worry about worn down by use in case of resale units. This newness does have an impact on rentability. Many tenants prefer a new condo where everything is new and clean. Newer condos also have more features that older ones do not. For example, smart homes technology which allow the resident to control elements of the house. For new properties, it has a warranty period, guaranteed by developers to rectify any defects.This usually last for 12 months, after obtaining the TOP. Resale apartments do not have this advantage, and for resale you get what you see.

3. Different payment methods. New launches offer different payment methods as compared to resale condo. The most common methods is Progressive Payments, this is a form of payment for properties that are still under construction. For buyers who do not have sufficient cash this method is good because you pay only a percentage of the total cost, 5% deposit and 15% on exercising deal. Thereafter the amount can be settled by mortgage payments if you are buying 1^st property. This means a lower entry point when it comes to investing.

4. Discounts. Usually for new launch condo, developers will offer some discounts such as Star Buy units, early bird discounts, absorb stamp duties and other promotional discount to attract buyers. You don’t get this from resale units. And most importantly, buyers do not have to pay any agents commission for the purchase of new launch units, it is all borne by developers, that is a huge savings to buyers.

5. Lower maintenance costs. For resale unit or older condo, the maintenance costs tend to be higher. This maintenance cost is higher for both within unit and communal areas. Within your unit, older resale condos may have issues such as choked plumbing, yellowing walls, damp ceilings, spoilt water heaters, all these require repairs.

New launch condos do not have these problems; and it is protected by warranty from developers over a one-year defects-free period. Outside your unit, there is the issue of monthly maintenance costs.

Wider range of unit choices . With resale condos, you can only select those units that are on sale. With new launches, you typically choose your unit (subject to ballot). By being able to choose unit means you can select units that you know are easier to rent out, eg. units with a better facing, better unit number, better floor level

Alternatively, you could also look at Ready-to-move-in properties from developers. These are new units that are not yet sold upon the project’s completion. These are usually a few remaining units available, and they are ready to move in when the ownership paperwork is completed. Compared to new projects or sub-sale units, ready-to-move-in properties is less available as most projects are sold out by the time they are TOP.

Conclusion :

So, which is a better investment property. Buying a resale property or a new launch condo?

Here’s some more reasons in favour of new launch condos.

• Budget: New launch condos can be bought at the developer’s price, cutting out the agent’s commission in the process. This saves you a lot of money since the developer foots the agent’s bill.

• Facilities: New launch condos have more facilities and better varieties to offer as compared to resale properties. Also, for resale properties, the common areas tend to be a little worn out and dated.

However, if you are not willing to wait for new launch properties to be constructed and want to have a rental unit right away, then pick a resale condo as a new property always carry uncertainties in timelines and project delays.

As mentioned before resale units are less risky. You can see actual unit and the current rental rates for a resale unit, and physically inspect the property. That there is also a transaction history for you to check helps you reasonably estimate capital appreciation and rental yield. Hence this is suitable for new landlords who are not used to rental calculations.

As for new launches, it is slightly more suited to seasoned investors, because it carries more risk and future projections of rental income.

You need to estimate the unit’s probable rental yield, appreciation and overall appeal. You must possess a certain level of acumen, and a good ability to read the location before the property is built.

And for new launch, you are paying the mortgage even before you have a tenant, so any mistake in investing in a new launch unit will be much more expensive.

Schedule time with me

Article contributed by Rick Fok

www.newlaunchsales.com

Do you keep or sell your HDB , when you upgrade to a condominium.

Many of the Singaporeans will start out with buying a HDB flat as their first home property.

And when they upgrade to a private condominium in the future, they are faced with this impending question, to keep or to sell their first matrimonial home.

Before anyone can answer this, we have to look at how it work out financially for the couple and reasons to why they intend to keep the property.

What is your objective in buying this second property, is it to earn rental income from either the HDB or the condo. If it is for investment, will the rental income be able to service the mortgage loan? Will it have a drastic impact on your finance, if you are unable to find a tenant.

If you intend to rent out the HDB and move into the condo, the important factor to consider is to consider the potential income versus the additional expenditure incurred (ABSD).

Eg. To rent out existing HDB at $2,500 per month or $30,000 per annum.

Assuming the new private condominium 3 Bedroom unit is priced at $1,500,000, then the ABSD 12% is $180,000, if we divide it by $30,000, it will need 6 years rental income to recover the ABSD costs incurred.

The key important factor to consider whether to keep the HDB and pay ABSD, will be “is it worthwhile to forgo 6 years rental income to keep this HDB flat”.

Value of ABSD - Do you keep or sell your HDB

Besides calculating the potential rental yield, you must also consider the potential capital appreciation, and determine the probable Return On Investment (ROI). This should then be compared to other investment options, such as bonds or equities to decide whether an additional property asset is beneficial to your investment portfolio.

You should have a strategy in place for the second property

strategy - Do you keep or sell your HDB — YOUR STRATEGY

How long you will hold on to it (does buyer intend to sell for a profit after five years, or to hold on to it and collect rent for 30 years?)
When and how you will cut any losses (if the property becomes a liability due to low rental income, how long will buyer hold on to property before selling it off?)
What is your expected capital gain after holding on for 5 years. (what’s a “good price” at which you aim to sell the property?)

Most importantly, If you think about buying a new condominium while still owning a HDB flat, you may want to consider the following financial obligations.

Fulfilling your Minimum Occupancy Period. – The law states that you are required to physically occupy your flat for Five (5) years before you can sell it on the open market. It excludes any period where you do not occupy the flat, such as when the whole flat is rented out or when there has been an infringement of the flat lease. You cannot concurrently own a HDB and buy a private property during the first 5 years of your stay in the HDB flat you’ve bought. For Singaporean, after you have purchased your new condominium, you may choose to keep your HDB, but for Singapore PR, you must dispose of your HDB flats within 6 months of buying the private property.

Additional Buyer Stamp Duty (ABSD) – If you are a Singapore citizen, you will incur an additional buyer stamp duty of 12% on your second private property purchase. This is on top of the normal Buyer Stamp Duty of 3 or 4 %.

Total Debt Servicing Ratio (TDSR) – From June 2013, the government introduce TDSR, to encourage home buyers to borrow within their means. It was part of the cooling measures to prevent borrowers from being over-extended with their home loans. The current rate for TDSR is at 60% of your gross monthly income. It means you cannot use more than 60% of your income to service your total loans ( that includes car loans, home loans, and credit card expenditure). So if you are buying a second private property, you have to consider how TDSR will affect your borrowing and whether you have sufficient funds if you decide not to sell your existing HDB.

Loan to Value (LTV) bank loans ratio – The new rules on LTV limit determines the maximum amount an individual can borrow from a financial institution (FI) for a housing loan.

The maximum housing loan borrowers can take depends on their age, loan duration and property type, and whether they have existing housing loans. Joint borrowers are assessed using an income-weighted average age.

The maximum loan tenure for housing loans is capped at:
- 30 years for HDB flats.
- 35 years for non-HDB properties.

LTV refers to the loan amount as a percentage of the property’s value. For example if the buyer borrows $750,000 to purchase a $1 million property, then LTV is 75%

As mentioned earlier, The LTV limits for individuals change depending on the number of outstanding/existing housing loans a borrower has.

Effective from 6 July 2018

We will apply the lower LTV limit (eg. 55% for None Outstanding Loan) if the loan tenure exceeds 30 years (or 25 years for HDB flats), or the loan period extends beyond the borrower’s age of 65 years.

So, bearing this in mind, the buyer has to consider his LTV if he decides to keep the existing HDB when he buys a new condominium. If the existing HDB still has outstanding loan, then his new loan will be set at LTV 45%, or he has to set aside 55% in cash & CPF to buy the new private property. And it is subjected to a max of 30 years loan tenure or cap at age 65 years old for the borrower. So, the age of the buyer must also be considered if you are to buy an additional private property.

This is because the monthly mortgage and loan tenure for the property is calculated based on age. It is either they have fewer years to pay off the loan or they will have to borrow less or pay more per month based on their age.

Example :

To summarize, if the buyer is a Singapore Citizen, and is considering owning both the existing HDB and a new private condominium, the biggest challenge to buyer is likely to come from the financial angle.

The buyer has to cater to the LTV, ABSD, and TDSR restrictions, the total amount needed to finance a second property will be a hefty sum.

With regards to use of CPF , if you buy a condo before selling your HDB , it is considered as a second property. As such you can withdraw up to a maximum of 100% of the condominium valuation limit from your CPF Ordinary Account.

And you will need to set aside your CPF Basic Retirement Sum of at least $88,000 before you can use the excess CPF money in your Ordinary Account to purchase your new condo. This is applied even if you are below 55 years old.

Therefore you will need to have plenty of hard cash on hand, it will definitely bite of a huge chunk from the savings.

Do note that property tax is payable on both properties. That is the one that you live in as well as the one that is rented out based on Annual value of the property. The tax rates range from 10 to 20% depending on the annual value of the property. So if you are renting out the condo, at $4,000/month, your property tax will be around $5,500/year.

Conclusion:

The ultimate question to ask before deciding to keep the HDB or to sell the HDB before you upgrade to a condominium is

Can you afford to keep the HDB you own as an investment to earn rental income
Do you need to sell the HDB flat to get funds to buy the new condo

As I have explained earlier, financial affordability is crucial and it does affect the decision. You need to have lots of hard cash, if you intend to keep your HDB.

Eg. To buy a $1.5 million private condo. You will need to have more than $1 million in cash & CPF

LTV 45%, so you need 55% cash & CPF or $825,000
Plus money for ABSD , another $180,000, and BSD $60,000
Your minimum cash upfront at booking will be 25 percent

Keeping the HDB will not earn you high rental income based on current market conditions. The rental income is not enough to pay off your new mortgage amount.

It can only go towards offsetting the ABSD expenses that you have incurred.

And rental does bring along some tenancy issues and maintenance costs.

Lastly, there is another option, that is to upgrade to an executive condominium, then you will have to sell off your existing HDB under the HDB regulations. An EC will give you similar lifestyle as a condo and you must sell off your HDB thus saving you the hassle of deciding what to do.

Schedule time with me

Article contributed by Rick Fok

www.newlaunchsales.com

1) Connectivity And Accessibility

While there’s no MRT station at the moment, residents in the East Coast can look forward to nine MRT stations on the upcoming Thomson-East Coast Line (TEL) which is due to open in stages from 2019 until 2024.

Already, residential projects in the area are observed to be reaping the benefits from these new MRT lines. For instance, new projects that saw the highest sales transaction volumes in district 15 from 1Q2018 and 1Q2019 are all located within walking distance from the nearest MRT station.

They include: Seaside Residences (397m from Siglap MRT), Amber Park (268m from Tanjong Katong MRT), and Amber 45 (509m from Marine Parade MRT).

The trend is also seen in the secondary market. For instance, condo projects that had some of the highest resale transactions within the same time period were: Water Place, Sanctuary Green and Pebble Bay – all of which are located less than 400m from the Tanjong Rhu MRT station along the TEL.

2) Proximity To Popular Amenities

Due to its proximity to the East Coast Park, areas located within district 15 are packed with opportunities for exciting outdoor activities and water sports.

The East Coast Park is the largest outdoor recreation park in Singapore, with the stretch of coastline offering some of the most sought-after waterfront facing properties on the island.

The district also boasts an abundance of amenities in the area, including malls like 112 Katong Shopping Centre and Parkway Parade. Various eateries and restaurants offering multicultural cuisine can also be found around the East Coast Park.

Aside from being located close to various popular amenities, the area’s proximity to the Central Business District (CBD) and Changi Airport also makes homes near the East Coast Park some of the most coveted on the island.

3) Availability Of Various Schools In The Area

In recent years, homes in the East Coast have gained appeal amongst growing families, largely due to its proximity to landmark parks and green spaces, as well as with a new MRT line planned for the region.

The availability of schools for every stage ranging from preschools to tertiary institutions in the East Coast adds to the area’s popularity. They include primary schools like Ngee Ann Primary School, CHIJ Katong Primary and Tao Nan School.

Meanwhile, secondary schools in the area include Victoria School, St Patrick’s School and CHIJ Katong Convent, among many others.

It goes without saying that parents wanting to enroll their kids in any of these primary or secondary schools will have the benefit of proximity. The distance also cuts down on travel time quite significantly, providing a more pleasant overall living experience for both parents and their kids.

Content taken from
Fiona Ho, Digital Content Manager at PropertyGuru, wrote this story

Posted on April 9, 2017June 29, 2020 by Rick Fok

The Glades Condo

The Glades has TOP and is Ready for Occupation.

Units selling fast, and not many units are left.

Actual Units are available for Viewing.

1 Bedroom 22 Units left
3 Bedroom 5 Units left
4 Bedroom last 4 units
Penthouse = 9 units with only 2 units with sea view
Dual Key units , last few available
Last 47 Choice Units!

https://www.theedgeproperty.com.sg/content/9-new-condos-best-transport-connectivity?utm_source=Newsletter&utm_medium=Email&utm_campaign=9%20new%20condos%20with%20best%20transport%20connectivity

Posted on April 2, 2017June 29, 2020 by Rick Fok

Published by MAS , Media Release on 10 March 2017

Singapore, 10 March 2017… The Government has continued to review conditions in the residential property market. It has determined that the current set of property market measures remain necessary to promote a sustainable residential property market and financial prudence among households. However, we will make calibrated adjustments to the Seller’s Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR) framework, with effect from 11 March 2017.

Additional Buyer’s Stamp Duties (ABSD) and Loan to Value (LTV) Limits

2. Transaction volumes in the private residential property market remain healthy. There is firm demand for private housing, in part because of current low interest rates and continued income growth. While the growth in outstanding housing loans has moderated, it is prudent for households to further build up their financial buffers to protect against future interest rate increases or any losses in income. The Government is therefore retaining the current ABSD rates and LTV limits.

Seller’s Stamp Duties (SSD)

3. The SSD is currently payable by those who sell a residential property within 4 years of purchase, at rates of between 4% and 16% of the property’s value¹. The number of property sales within the 4-year window has fallen significantly over the years since this measure was introduced. The Government will therefore revise the SSD as follows:

a) Impose SSD on holding periods of up to 3 years, down from the current 4 years; and
b) Lower the SSD rate by four percentage points for each tier. The new SSD rates will range from 4% (for properties sold in the third year) to 12% (for those sold within the first year).

4. The new SSD rates will apply to all residential property purchased on and after 11 March 2017. Details of the revised SSD rates are in the Annex.

Total Debt Servicing Ratio (TDSR)

5. The TDSR framework aims to encourage prudent borrowing by households and strengthen credit underwriting standards by financial institutions. Under this framework, property loans extended by a financial institution should not exceed a TDSR threshold of 60%.

6. However, some borrowers have given feedback that the TDSR framework has limited their flexibility to monetise their properties in their retirement years, i.e. to borrow against the value of their properties to obtain additional cash. MAS will therefore relax the rules to meet such needs. We will no longer apply the TDSR framework to mortgage equity withdrawal loans with LTV ratios of 50% and below.

Stamp Duties on Transfer of Equity Interest in Entities whose Primary Tangible Assets Are Residential Properties in Singapore

7. The 2nd Minister for Finance will be introducing legislative changes in Parliament today aimed at treating transactions in residential properties on the same basis irrespective of whether the properties are transacted directly or through a transfer of equity interest in an entity holding residential properties. The intent is not to impact the ordinary buying and selling of shares in such entities by retail investors, where the entities are listed on the Singapore Stock Exchange. However, significant owners of residential property-holding entities or PHEs2 will be subject to the usual stamp duties when they transfer equity interest in such entities, similar to what would happen if they were to buy or sell the properties directly.

8. The Stamp Duties (Amendment) Bill will be tabled in Parliament today to give effect to this policy intent. Further details of this measure are in the Bill.0

Posted on March 22, 2017September 1, 2020 by Rick Fok

Published by The Business Times , Lee Meixian, on 25 Feb 2016

Are ECs a better long-term investment than condos?

Thursday, February 25, 2016 – 05:50

LEE MEIXIAN

PRICES of executive condominiums (ECs) do catch up with private condos after the initial five-year minimum occupation period (MOP), and even more so when they are fully privatised 10 years after purchase.

A study by OrangeTee has found that the average price gap between new condos and ECs starts at around 20 per cent, due to the sales restrictions that apply to ECs, as well as their lower land and construction costs.

But upon fulfilling the MOP and at privatisation, the discount narrows to 9 per cent and 5 per cent respectively.

At the end of the MOP, ECs can be sold in the open market to Singaporeans and permanent residents; upon privatisation, ECs can be sold to foreigners.

This is not to say that buying an EC is a sure-profit investment, as history shows that much still depends on the initial purchase price.

By matching caveats at 21 EC projects already privatised and analysing their profits made at the end of five and 10 years, the study found that 13 projects made a loss after five years, mostly because they were bought at the boom period before the Asian financial crisis. The remaining eight projects managed gains of over 20 per cent.

But at privatisation, all the EC projects became profitable. How much money owners made depended on the ECs’ locational attributes and surrounding supply at the time of sale.

“Based on historical data, first-hand owners of currently privatised ECs are sitting on considerable gains,” the report said.

The report also alluded to a trend that The Business Times had highlighted in an article in January – that increased vacancy rates may be a sign that buyers are starting to treat ECs as an investment product, as young-couple EC buyers continue to live with their parents after marriage while waiting for EC prices to re-calibrate over time before they sell.

OrangeTee said this trend is plausible. But its study found something even more surprising. Comparing between buying an EC and a private condo and holding each for 10 years, the report said that the EC could in fact be the better long-term investment due to their higher internal rates of return over 10 years.

This is because of their subsidies and lower prices compared to private condos. Also from year six onwards, entire EC units are allowed to be rented out, and their rentals tend to be on a par with private condos’. This helps to significantly defray their holding costs.

The hypothetical study assumed a 1,100-square-foot EC home bought for S$875,000, and a comparable condo for S$1.09 million.

The hypothetical couple has a household income of S$14,000, with a not very financially prudent loan-to-value of 80 per cent for 25 years at a fixed rate of 2.5 per cent per annum.

Rents for both units are fixed at S$3,000 per month. To simplify matters, other costs such as stamp duties, maintenance fees, and taxes were not considered.

At the end of just five years, the private condo proved to be the better buy, because the EC was not able to offset its monthly mortgage payments with rental income, as regulations forbid renting out the whole unit. This dampened its otherwise stellar capital appreciation.

But once rental restrictions are lifted, the EC quickly outperformed the condo.

Asked if the findings, which support an investment case for ECs, mean that the partly state-subsidised housing designed for the “sandwiched class” home buyer has become irrelevant, OrangeTee’s research analyst Celine Chan said no.

“(This is) given the significant price gap between ECs and private condos. ECs provide an affordable option to HDB upgraders or first timers who aspire to achieve a higher standard of living. Though some may plausibly be buying ECs for investment, majority are buying them for their own occupation,” she said.

She co-authored the report with OrangeTee’s senior manager Wong Xian Yang.

Read the full research report at BTInvest (http://www.btinvest.com.sg/property)

Posted on September 16, 2015September 1, 2020 by Rick Fok

7 Reasons Why Property Prices Won’t Recover Soon

July 20, 2015
By Property Soul (guest contributor)

There was a recent article in the Straits Times with the headline “Time to review property cooling
measures”. The argument is that as: i. Private home prices are down ii. HDB flat prices have dropped iii.
Oversupply has worsened iv. Rents have weakened v. Interest rates have risen vi. The real estate industry has shed jobs, it may be time for the government to review the cooling measures.
Many people fail to see that the government can only do so much to cool or stimulate the property
market. After all, it is an open market and there are many factors that can lead to the continual boom or
downturn of the market, such as supply and demand, the economic outlook, market confidence, etc.
I am re-reading James Rickards’s book The Death of Money: The Coming Collapse of the International
9/8/2015 7 Reasons Why Property Prices Won’t Recover Soon
Monetary System. Below are some new inspirations from this interesting read.

1. Regime Uncertainty
When the Singapore government finally decides to withdraw the cooling measures, it may do little to
help restore fallen prices.
Remember those government measures taken to stimulate the property market back in year 2005? The
loan-to-value limit was raised to 90%. But not many buyers were interested.
The “regime uncertainty” theory from Charles Kindleberger explains the reason behind the lack of
investment during the Great Depression:
“… even when market prices have declined sufficiently to attract investors back into the economy,
investors may still refrain because unsteady public policy makes it impossible to calculate returns with
any degree of accuracy … the added uncertainty caused by activist government policy ostensibly
designed to improve conditions that typically makes matters worse.”
From midJune, stocks in China tumbled 30 percent from their seven year high. Then the Chinese
government and Chinese brokerages suddenly announced drastic measures to revive the stock market.
The intervention might have saved the market from the brink of collapse and demonstrated how powerful and cash rich the government is (and compared with China’s $3 trillion reserves the money spent is just peanuts). However, the whole incident exposes the vulnerability of the fundamentals and further undermines the market confidence of the investors.
After all, who needs government to step in if a market is healthy enough to recover on its own?

2. Market Oversupply
With 24,800 vacant private homes, an additional 22,000 to be completed this year, and another 21,000 to be ready next year, what kind of population growth do we need in Singapore to absorb the surplus?
Like what Rickards says: “In the end, if you build it, they may not come, and a hard landing will follow.”

3. Wealth Effect
Rickards points out the fact that two asset classes – stocks and housing – represent the wealth of most
people (which is certainly the case in Singapore). When prices of stocks and properties go up, people
“feel richer and more prosperous and are willing to save less and spend more.”
It is a chicken and egg situation: Low borrowing rates and easy money make properties look affordable,
attracting Singaporeans to put more money in properties, thus driving property prices to new highs.
The same happens in reverse on the way down.
4. Wealth Inequality
The wealth effect only benefits the “haves”, not the “don’t haves”.
Wealth becomes heavily concentrated in the privileged class who own properties, or businesses who own a stake in the industry (property developers, real estate agencies, banks, brokers, etc.).
9/8/2015 7 Reasons Why Property Prices Won’t Recover Soon
http://www.propwise.sg/0

Which is better? To engage an Exclusive agent or Multiple agents?

Using Multiple Agents

Use 1 agent on exclusive arrangement

Advantages of Exclusive Agent

Disadvantage of having one exclusive agent

CONCLUSIONS :

Other Articles to read

Is HDB still affordable or is it getting too expensive?

HDB MARKET OVERVIEW

NEW INCOME CEILING

Enhanced CPF Housing Grant

BUILD TO ORDER BTO MARKET

RESALE HDB MARKET

CONCLUSION :

Other Articles to read

HOW MUCH DOES IT COST TO UPGRADE FROM HDB TO CONDO ?

STAMP DUTIES

Other Costs involved.

Ongoing Fees and monthly instalments and Property Tax

CONCLUSION :

Other Articles to read

WHEN SHOULD I SELL MY EC

CONCLUSION :

Other Articles to read

IS YOUR HDB AN ASSET

PROPERTY WEALTH PLANNING

CONCLUSION:

Other Articles to read

Is it better to buy an EC than a condo ?

WHO CAN BUY A EXECUTIVE CONDOMINIUM, WHAT IS THE QUALIFICATIONS ?

Benefits of owning a EC , and why it is better to own a EC

What is a Private Property

Conclusion :

Other Articles to read

SELL HDB AND BUY TWO CONDO. HOW IS THIS POSSIBLE ?

Sell HDB to buy 2 new condos

1. You save thousands for not paying ABSD

2. It works against Inflation

3. HDB Flat is Aging, and lose value

4. Widening gap in price index: HDB vs Private properties

5. Flexibility to swap between your 2 Condo based on Your Own Needs. Enjoy the Condo Facilities and Lifestyle

Concept 1: Understand the amount of monies entering your CPF accounts

Concept #2: “Freeing up” the CPF monies to channel into your 2 new properties

Concept #3: HDB Flat Valuation

How does “sell one buy two” work?

Disadvantages of this scheme

Other Articles to read

Buying a new launch condo or a resale property. Which is a better property for investment.

Conclusion :

Other Articles to read

Do you keep or sell your HDB , when you upgrade to a condominium.

Conclusion:

Other Articles to read

1) Connectivity And Accessibility

2) Proximity To Popular Amenities

3) Availability Of Various Schools In The Area

The Glades Condo

Are ECs a better long-term investment than condos?

7 Reasons Why Property Prices Won’t Recover Soon