How about paying $1M for HDB flat?

I’m pretty sure you are no stranger to hearing that HDB flats today are being sold at over a million dollars even it is noted that the resale market today for HDB flats has generally stabilized (since 2016).
In fact, these million dollar homes are usually DBSS flats.

They are the Design, Build and Sell Scheme flats that were introduced by the Housing & Development Board (HDB) back in 2005 offer greater choice and wider variety to meet the housing aspirations of higher income flat buyers for better design and finishes. This Design, Build and Sell Scheme was however suspended in 2011 because projects that were launched by these developers were thought to be seemingly over-priced.

Natura Loft at Bishan

So what’s so special about this DBSS HDB Flats?

In general, DBSS flats are no different to HDB flat, the owners will be required to complete a Minimum Occupation Period (MOP) too! The interesting thing is that these DBSS projects have been attracting really good buying interest in recent times. There have been record-breaking transactions and the sales volumes speak for itself. I supposed most buyers are attracted to their locations – both City View and Natura Loft are located in key areas such as Bendemeer and Bishan – offering excellent convenience and connectivity.

The high prices of DBSS flats are mainly paid for units with excellent, exceptional attributes. For Natura Loft, it is very well located in Bishan where 5-room flats are commonly sold at above $850,000. Moreover, the higher the unit is located, the higher is the transacted price.

The DBSS scheme was suspended in 2011, due to seemingly over-pricing in new projects launched by developers. However, it seems DBSS flats which have cleared the Minimum Occupation Period (MOP) have been attracting good buying interest in the resale market. How should we view such record high transactions of selected DBSS flats in the HDB resale market and what do these price trends say about DBSS flats in general?

How should we justify the high number of transactions?

It is not all bad buying these DBSS apartments. In fact, most buyers won’t fall short of benefits. It is seen as there is higher land value for these DBSS sites because of its location in mature estates and the requirement for the government to acquire older centrally located flats in order to redevelop them either through en-bloc or SERs.

There are also savvy buyers of flats in mature estates (e.g Tiong Bahru, Redhill, Bishan) that take consideration of the long term in living in these areas. Take for example, some people who buy from the HDB resale market take cues from the Selective En-Bloc Redevelopment (SERS) scheme by HDB and it seems that these people that purchase these flats, feel that eventually centrally located flats have more potential to be replaced them with a brand new HDB flat many years down the road when their flat becomes old and the the lease shortened. Highline Residences at Tiong Bahru is a private residential condominium that sits in a mature estate – even at those prices, there’s still pretty decent demand! See also: New condo launches of 2017

Ultimately, it is fine to pay more than $1 mil for a 99-year HDB flat but it has to be very much substantiated by its central locality or the project’s special attributes. In terms of price appreciation, for buyers who purchased recently the flat at above $1 mil, it is a likely scenario to resell the unit with a 8 percent price appreciation (factoring interim fluctuating market conditions), assuming they choose to resell after ten years.

Govt raises development charges on Singapore property

Amidst better buying sentiments in the local property market, the Ministry of National Development (MND) has announced increment the of development charges (often known as DC Rates) for the different sectors f the real estate in Singapore. These development charges for levied by the government for the purpose of enhancing the use of selected land parcels or even building bigger developments on it.

When interviewed, many industry analysts were not surprised by the increment in the rates. According the Ministry of National Development, the development charges for selected uses such as landed residential, place of worship or civic and community institution and other use groups – will remain unchanged.

On average, the development charges for commercial uses were raised by 1.3%, with the largest increase of 29% for areas like Raffles Quay, Shenton Way and Marina Bay Financial District. I personally think that this was because of the recent interest in commercial real estate at Central Boulevard in Marina Bay which saw the record $2.57 billion bid for a white site or mixed-use site.

Perumal Road site tender in Jan 2017

For the private residential segment, condominium development charges saw an increase of an average of 4%, with the highest increase of 17% for areas such as the Jalan Besar, Serangoon Road, Balestier Road and Bendemeer Road. This is also very likely because of the the recent land bid which saw the site at Perumal Road and another at 1177 Serangoon Road going for premiums over their initial value right, with many saying that SL Capital’s Sturdee Residences will now see upside potential.

Besides, the surprise for the hotel and hospital, was that the development charges for them were also increased by 2.6% on average with the steepest rise of 19 per cent in several suburban locations, including Punggol and Lornie Road – All these given that there were no hotel transaction in the over the last six months.

So everything up, nothing down?

For the industrial uses, the development charges were cut over 3.7% on average – with the largest drop seen in areas like Tampines Road, Boon Lay and Tuas. Mr Desmond Sim, head of CBRE Research for Singapore and South-east Asia – “(It is) in line with the market conditions… Industrial prices and the occupier market have been facing pressure”

The revised rates are said to be effective from 1 March 2017 to 31 August 2017.

Lets look at property investments in 2017

We want to talk about the property market in 2017 and especially if this is the year to start looking property investments again.

Ever since the introduction of Total Debt Servicing Ratio (TDSR) back in 2014, the thought of investing properties in Singapore, for most of us, vanished. Comparing this to the year 2010, there was a huge shift in the market sentiment. Between 2010 to the first half of 2013, the buying sentiment was intense, especially given the opportunity low interest rates provides. The property market in Singapore has now gone the what the analysts called “soft-landing especially in private residential segment in the last 36 months.

Unit at Sturdee Residences

With the Urban Redevelopment Authority (URA) recent release of the pricing statistics for the private residential segment, we have noticed the prices of these private homes were lower on average (for the year 2016) compared to the peak back in Q3 2013 by over 11 percent. With this, we are expecting the stability on the prices of the these private residential properties this year. In fact, you should see less incentives (or you might call it, sweetener) being given by developers unless the project is close to its deadline on ABSD or for the current owners who lack the financial power to hold on.

What kind of properties to expect.

At Moneytalk, we expect private residential units that less than 600 square foot to make the headlines this year. In fact, these units have been very popular with the buyers over the last 5 years. However, in the market today, we are seeing intense pressure in their rental and resale value. On the resale aspect, it has been on a downward trend recently with most owners of such units feeling the pinch because they have not been able to rent it out (without losses) or able to sell it because of the weak demand. On the rental aspect, these so-called “shoe-box” residential homes, usually sized between 500 to 600 square foot, more than often ask for rents similar to the typical 4-bedroom HDB Apartments.

These so called shoe-box in the suburbs are facing even higher pressure because tenants who usually goes to the suburb are in there for the space and typically would not pay to lease a shoe box apartment. Needless to say, these are the type of units that has seen significant price dip compared to the rest of the segment.

Given the price pressure faced by these owners now, we think that there is an opportunity ahead. For home investors, it is an absolute must-see (especially in the resale market) because we expect to see more owners willing to negotiate and perhaps lower their selling prices. To start off, you can first look out for upcoming auctions on these properties or find showflats of new condominium launches that have been in the market for awhile – usually these have units remaining that are expected to obtain temporary occupation permit (TOP) in 2017 or 2018.

Retrenchment & Financial Matters

I was retrenched from my job around 3 months ago. It was not an easy experience for me as I went from a daily work routine to a sudden lifestyle of having nothing to do at all. It took a toll on me mentally I guess as our work and occupation forms part of our identity and losing our jobs is akin to having our identity being taken away partially.

Thankfully, I found a new job rather quickly in less than 3 months time and I had a few job offers, of which I settled on a job with a pay increase. I do count myself as really fortunate given the poor economic outlook and job market presently.

Given that losing our job means that the our monthly salary will cease and I believe that the main source of income for the majority of us comes from our salary, this will create financial stress during this time of unemployment. Retrenchment is without doubt, a harrowing experience and I have gained a few financial insights with regards to this experience.

1. Have some savings in the event of adverse risks such as retrenchment

6 months of savings is commonly advocated by financial advisers to cover for the risk of retrenchment. I had some sufficient savings which would be enough to last me for a year of expense. This is really important as knowing that I had sufficient savings, I was not hard-pressed to take on a job quickly even if the job does not pay well or does not interest me. Retrenchment is not uncommon these days given that economic cycles are getting shorter and it is important that you have savings to back you up.

2. Lower your housing consumption

A couple of years ago, I made the decision to opt for a 4 room HDB BTO flat in a non-mature estate, knowing that in the event which either my other half or I would like to stop working for a while, we can do so knowing that our monthly housing loan payment can be covered by just one of our individual CPF account. Fast forward to today, this seems like a prudent move given that at the point of my retrenchment, we had enough in our CPF accounts to cover for the monthly housing loan payment even if I were to stop working for a few years. That being said, I would like to stay in a mature estate due to the proximity to town and no lack of established amenities but I guess my pragmatism got the better of me.

3. Own your career development

For the majority of us, our main source of income usually comes from our employment before we are financially free. As such, it is important to grow and to protect this source of income by taking charge of our career development. During this period of unemployment, I engaged the services of a career coach and what he advised really struck me. He told me that retrenchment is not uncommon these days and it is important to develop yourself and have transferable and multi-faceted skill-sets that can transcend industries so that it will be easier to look for a new job if the industry that you are in is not doing well. Before I was retrenched, I was already taking courses and certifications to expand my skill-sets to switch industries and this really helped me in my job search during my period of retrenchment as I was able to secure job offers in various different industries.

4. Have a war-chest ready that is separate from your savings

I believe I have been preaching for a long time on my blog that it is important to set aside a sum of funds to take advantage of any market opportunities during any economic downturn. Unfortunately, it is also during a economic downturn which we face the highest risk of losing our jobs. If we are not prepared in setting a sum of money to cover our expenses if we are retrenched and in the process of looking for jobs and set aside another sum of money to purchase assets such as stocks, it will be difficult for us to grow our net worth and take another step towards financial freedom. I guess this is how the rich gets richer since their income does not come from their employment and they are able to capitalize on market opportunities during economic downturns.

5. Materialism does not make our lives more fulfilling

This retrenchment really drives home the message in my mind that we do not need a lot in life to be contented and fulfilled. During the period of retrenchment, there was a natural instinct for me to cut back on our expenses and I took this time to re-look at my spending. In my opinion, having more material goods such as clothing, shoes, watches etc. will not make us our lives any more happier. These days, I make a conscious effort to reduce waste in my life such as using water which was used to wash rice to water the plants, repair my pants by sewing any tears, switching off lights when not in use and electrical appliances on standby modes, cook more often and try new recipes to make use of leftovers instead of throwing it away, make a conscious effort to see if I can avoid buying new items by re-using or modifying existing items which I have owned.

Overall, getting retrenched was not an easy experience but I have gained some interesting and valuable insights. In addition, this has also strengthened my resolve to be financially free as soon as possible as I may not be so fortunate to find a job so soon if I am retrenched again in the next economic downturn a couple of years down the road. Coincidentally, I received the biggest amount of dividends to date from my stocks portfolio on the month which I was retrenched and this has certainly add to my resolve.

 

Using Fund Characteristics Of STI ETF As A Purchase Decision

It has been 4 years since I wrote my last post. A lot of information is now available on easily online as compared to a few years ago when I first wrote about the STI ETF.

Some information is now available on the website of the SPDR Straits Times Index ETF.

I do get questions from time to time on when is a good time to purchase the STI ETF. You can click on this link to access the official website for the SPDR STI ETF.

On the website, you can refer to some information on this ETF under the fund characteristics section.

The price/earnings ratio or in short, the P/E ratio can be used a gauge to decide if the ETF is cheap enough for entry. The P/E ratio is taken from the selling price of the item divided by its earnings. In this case, since the STI ETF is tracking the Straits Times Index (STI), this can be taken to mean that it is the ratio of the total market price or capitalization of the companies that consists of the STI to the total earnings of these companies.

We are looking for a ratio as low as possible since this essentially means that the lower the P/E ratio, the lesser the number of years it takes for the earnings to pay back the purchase price.

If you do a search on STI P/E chart, you can easily glean information online such as the charts below.

At its current P/E ratio of 13.36, it looks like it is below the long term average although it is not as low as the global financial crisis during 2008 though I would probably term that as a rare event.

The wait that will prove to be worthed the wait

The last time I actually wrote something on this site was a couple of months ago. The reason why I have stopped writing for such a long time is that there is really nothing interesting out there in the market for me to write about as there is nothing which I can capitalize on.

Bonds in particular, the Singapore Government Bonds and Treasury Bills are still near their historical yield level which makes any purchase unattractive.

Stocks are neither here or there. It is at a price level which is not undervalued enough (at least for me) to purchase them. But it is also not ridiculously overpriced such that some upside is still possible. I’m an risk averse investor so I only seek to buy at a price significantly below their worth.

Properties should be pretty obvious to everyone. It has been in the headlines for a long time with mostly bullish news. Price are still bursting through the peak. Flip through the newspapers and properties advertisement and sale launches are still everywhere. Similar to stocks, I reckon it is not a good idea to buy near the peak.

I am actually bidding my time to capitalize on events which I think it may happen in the near future.

The stock market has been trending sideways for the past year or so. There are a few issues which may have a potential for stocks to be on the downside. These issues now are the Greek debt crisis and the sluggishness of the US economy being weighed down by huge amount of the debt. I would say that the latter is contributing more to the sideway trending that we are seeing now. Despite of this, I do not think that the market is going to fall heavily. I am waiting for the opportunity to snap up quality stocks but meanwhile, it will be waiting and waiting for the market to fall and monitoring the companies on my watchlist.

The property market locally is a bubble waiting to be burst. For me, it is not a matter of if but when. There has been a few articles out there warning about this. The main factors are as the following.

  • Tightening of foreign labour policies
  • Oversupply of land and properties
  • Rise in interest rates

The tightening of foreign labour policies will see a drop in demand and the oversupply of land coupled with properties with developments coming in the pipeline in the next few years will be a double whammy. Besides, interest rates will not remain low forever and when it rise, it will affect the mortgage payments of properties owners and the serviceability of their loans. Still remember the property crash back in 1998 ? When this happens, it will be easy to snap up properties counters at firesale prices.

Home prices slip but the ‘centre’ still holds

Home prices slip but the ‘centre’ still holds
Central region resists overall dip for now, but luxury market also expected to stay flat

By KALPANA RASHIWALA from the Business Times, 29th March 2011

Prices of completed private apartments and condos have slipped slightly, overall, as the government’s cooling measures made themselves felt. But those in the most posh part of town are still holding their own.


Latest flash estimates for February from the National University of Singapore show a weaker month-on-month performance in price indices compared to January.’The Jan 13 cooling measures are certainly working,’ said Knight Frank chairman Tan Tiong Cheng. ‘The lower loan-to- value limit has affected investors with outstanding housing loans even if they have some financial capacity to purchase another residential property.’

NUS’s overall Singapore Residential Price Index (SRPI) dipped 0.4 per cent month on month in February, a reversal of a gain of 2.9 per cent posted in January.

The sub-index for the Central region – home to Singapore’s choicest residential districts (1-4 and 9-11) – rose one per cent month on month in February, a slower rise than the 3.1 per cent gain recorded in January.

The sub-index for the Non-Central region (where suburban mass-market condos are located) declined 1.5 per cent in February over the preceding month, in contrast with a 2.8 per cent appreciation in January.

Mr Tan predicts that private home prices in Singapore are likely to drift at current levels – ‘unless the government opens the immigration tap again and removes some of these very severe cooling measures such as the seller’s stamp duty rates and 60 per cent LTV for those with existing housing loans’.

Meanwhile, prices in the Central region have risen at a faster clip in the first two months of this year since end-2010 than in the Non-Central region. This marks a reversal of last year’s pattern.

As a result, the SRPI for the Central region has finally surpassed its pre-global financial crisis peak of November 2007, albeit by just 0.1 per cent.

NUS’s indices are produced by the university’s Institute of Real Estate Studies and cover only completed non-landed private homes. The February 2011 flash estimate for the Central region index is up 4.1 per cent from the end of last year. This is a bigger gain than the 1.3 per cent year-to-date appreciation in the index for the Non-Central region.

The February Non-Central region index is up 18.8 per cent from its pre-crisis peak in January 2008.

The overall SRPI has appreciated 2.5 per cent year to date and is 11.5 per cent higher than its November 2007 peak.

February flash estimates reflect year-on-year increases of 10.3 per cent for the Central region, 13.1 per cent for the Non-Central region and 11.9 per cent for the overall index.

International Property Advisor (IPA) chief executive Ku Swee Yong said that prices of projects such as St Thomas Suites and Trillium in the prime districts, which were completed towards the end of last year, have posted price gains as buyers viewing the finished projects have found their quality better than expected.

‘Clients whom we have brought for viewing for other projects like 8 Napier and Parkview Eclat have also been impressed by the quality of finishings,’ he added.

Despite the NUS SRPI for the Central region outperforming that for the Non-Central region in February, Mr Ku is doubtful that this trend will prevail for the whole of this year.

‘Unfortunately, wealth does not trickle from the bottom to the top,’ he said. He does not expect the luxury condo market to outshine the suburban market in 2011 unless ‘we see an influx of more high net worth individuals into Singapore both as tenants and buyers, and bankers receive their one and two-year bonuses again’, he added.

The luxury market is likely to remain flat this year in terms of both prices and transactions, Mr Ku predicts.

Last year, out of the 16,292 private homes developers sold, only about 100 were above $3,000 per square foot.

‘Foreigners are still scouting for buys but are not coming back to the high-end market the way they were in 2007,’ he added.

Agreeing, Knight Frank’s Mr Tan said: ‘The foreign contingent is not back in full force. And there’s still a good selection of units in prime district projects available from developers, which will put pressure on prices. For these reasons, I don’t see a need for further cooling measures.

Property crash of 1996

I’m not sure if anyone still remembers the previous property crash of 1996 where prices of properties tumbled over 40% from the 2nd quarter of 1996 to the 4th quarter of 1998. Going by the euphoria sweeping the market and the tendency for people to forget, the bad memories of this crash are probably distant by now.

I found an excellent chart on the private residential property price index on Singapore Real Estate Info here that gives a graphical representation and the significant news and measures taken by the government from 1960 until 2010.


(Taken from singaporerealestate.info)

Back then at the peak of the market, the property news that made it to the papers were of the following;

  • Enbloc sales being carried out or being proposed at private estates
  • Record sale prices by developers
  • Buyers queuing overnight with long queue lines at launches
  • Influx of foreigners buying properties
  • Flipping of properties to get rich

The government tried to stem this bubble by introducing more land sales to increase the supply and to show that there is adequate land to meet the demand. When that fails, more drastic measures were introduced such as;

  • Housing loans limited to 80% for property purchase
  • Tax on gains from the sale of properties bought within 3 years
  • Additional stamp duty within 3 years of purchase of properties for sellers
  • Stamp duty for buyers of sales and sub-sales of uncompleted properties
  • Foreigners not allowed to take housing loans
  • Permanent residents limited to one housing loan

The property market started to head south and with the impact of the Asian Financial Crisis acting as the catalyst, the housing bubble burst and the property market crashed.

Fast forward 14 years later to the current state, the property news that are making to the papers now are generally the same as in the past though the property market now is not as hot as it was back then. Similarly, it is also seen that the government has introduced an increase in land sales to meet the demand and HDB will also be ramping up its flat supply. Measures to counter speculation have also been introduced though they are not as draconian as in the past. To me, it seems like history is going one full circle in a milder manner though. So the question is where will the market head to from now ? That is something for you to think about.

Car insurance premium

I saw a very useful post on the Hardwarezone forums under the Cars & Cars section on what factors will contribute to the premiums for car insurance.

How premiums for car insurance are calculated

Premium is calculated based on the following factors

1) Age Group

This refers to the age of the car owner. Most company has similar age group factors.

18 to 21 – super expensive
21 to 25 – quite expensive
26 to 30 – a bit expensive
31 to 65 – safe zone

2) Driving Experience

This refers to how long have you had your driving license and has nothing to do with your actual driving experience. This is measured in number of years.

0 to 1 – super super expensive
1 to 2 – super expensive
2 to 4 – quite expensive
more than 4 – safe zone (most insurance companies will charge the lowest rate for drivers with 4 or more years of driving experience, though some other insurance companies will give the lowest rate for drivers with 3 or more years of experience – eg. OAC under Great Eastern)

3) Job occupation (Indoor/Outdoor)

This refers to the nature of work such as desk bounded jobs or sales jobs.

Indoor – cheaper
Outdoor – more expensive

4) NCB Discount

This refers to No Claim Bonus discount or some insurance companies may term it as NCD (No claims Discount). You will get 10% NCB for every year which you do not have an accident. The maximum NCB that you can get is 50%.

For example, your car insurance premium cost $2000 (before NCB) and you have 40% NCB, your premium would be $1284 {[2000 – (2000 * 40)] * 1.07} with GST. Hence the higher the NCB, the lower your premiums will be.

5) NCB Protector

This is applicable to people with 50% NCB. In the event of 1st accident in that policy year, your NCB will remain at 50%. After which, the 2nd accident will cause your NCB to be reduced to 20% (50% – 30%) . If you are very unlucky and meet with a 3rd accident in a year, your NCB will be reduced to 0% (20% – 30%, you cant get -10% so it will be 0%)

It is important to note that NCB protector is only effective if you renew your car insurance with the same insurance company. If your car insurance is with company A and your NCB is 50%, after the 1st accident which is due to your fault, you will still get 50% NCD as you got the NCB protector upon the renewal. However, instead of renewing my insurance with company A, you go with company B, you will only be entitled to 20% NCB.

6) Safe Driver Discount

This is an additional 5% discount if you do not have any traffic offense or demerit points for the past 2 years. You only get this additional 5% when you have a minimum of 30% NCB.

For example, your car insurance cost $2000 (before NCB) and you have 30% NCB and safe driver discount, your premium would be $1423 {[2000 – (2000 * 30%)] * 0.95 * 1.07} with GST.

7) Engine Capacity (cc)

This refers to the capacity of your car engine in cc. The lower the cc, the lower the premium.

8) Year of Manufacture

This generally means the year which your car is made/registered. Generally, the older the car, the cheaper the premium

9) Body Type

This refers to the type of vehicles such as saloon, MPV, SUV etc. Some insurance companies will charge a higher premium for a certain type of vehicle.

10) Engine Type

This usually refers to normal or turbo car engine, It’s important to know that most car insurance company will impose a higher car insurance premium on turbo cars. Some insurance companies will even reject cars with turbo engines.

11) Gender

This is dependent on different insurance companies. Some insurance companies will charge a lower premium for male drivers while others will charge a lower premium for female drivers. For some other companies, the rate remains the same.

11) OPC Car

OPC also know as off peak car (red plate). Some companies give a 5% discount for OPC (eg. NTUC) while other companies does not.

There are a few implications about this factors. Firstly, one should always try to secure a driving licence as early as possible since the number of years that you had your licence irregardless of your actual driving experience plays a part in the premiums. Secondly, it is advisable to get a car after 30 since any age below the age of 30 will result in an increased premium. Thirdly, getting a car with a lower engine capacity will not only lower your insurance premiums, but it will also result in a lower road tax, resulting in savings for both areas.

Genneva Gold

There is a pretty interesting post with a few hundred comments on lioninvestor’s site. The post was about a company called Genneva Gold, which exists in Malaysia and Singapore. The links to the company’s website can be found here. In this post, there were a lot of comments that debate on whether this investment is true or not and there were a lot of heated arguments and debates.

In my opinion, Genneva Gold is likely to be a fradulent company. Firstly, the returns does not corresponds with the risk. It seems to be a high return and low risk investment and that is not possible at all. Secondly, the business model of Genneva Gold seems to be unsustainable. Not much is said about how is the profits of the company being generated. Without being profitable, Genneva Gold will not be able to last long.

There were a lot of interesting insights and detailed analysis made by various parties that explains on why Genneva Gold seems to be a scam. The strange thing is that many still choose to believe that Genneva Gold is workable and not a scam. This is where I think that the greed has blinded them and they choose only to look at the good side of things instead stepping back and take a serious look at this investment. Unfortunately, this is also the very same reason why I think that the majority of people are not likely to do well when it comes to the stock market.