Tuesday, May 20, 2008

About this Blog

Property Investment Determines Your Financial Success in Life

If you've been wondering why this blog has suddenly come to life, here's the reason: Smart Buyer, your humble blog owner here, has lost his job. So for now, his only source of income will be those google Adsense (add cents) you see here :(

Now that Smart Buyer is a jobless bum, he can finally give this blog the attention it deserves. Let me take this opportunity to salute the wisdom and vision of all those faceless, nameless heroes out there call Smart Buyers.

Looking back at life, if it hasn't been prudence and of course some luck, that my property investment has today contributed to most of my wealth generation, I wouldn't have the luxury of being the worry-free blog-bum that I am now.

For those generation-Y investors out there, take these words seriously:

Your property investment may be the sole determinant of your financial success in life.

So don't take your property investment lightly. One wrong move, and you may have to work another 10 years more or so for your property.

Once, when I was young and foolish, I plunged into property investment after watching friends and more friends making loads of money out of flipping property. This was during the long bull run of the 1990s. By the time I made the plunge, price was already at its peak but I was too inexperienced to know better. I took a substantial home loan and it hung around me like an iron chain. I finally sold it and made a small profit, then came the Asian financial crisis and the property market crashed.

By mid 1998 the property price have fallen some 40% to 50%. I was then able to buy a brand new condo, this time without any mortgage, and still kept my first home.

I learned to wait. The cycle goes up, then it comes down. For sure.

In 2006, I bought another property. Today, it's worthed twice the price that I bought it. But, it's the most beautiful home we ever owned and it is not for sale.

I sold my investment properties by end 2007.

That's my gamble: We're heading south again.


Anonymous said...

dear Smart Buyer,
i am sad for you that you've lost your job, but happy that you are not in financial straits due to the smart investments you have made. i would like to ask if your job loss has anything to do with how the local economy is doing (sign of companies retrenching/firing/belt-tightening?) and how that in turn, may impact the property market.

Smart Property Buyer said...

My company has been sufferring from reduced orders and, increase costs of material and transportation. There was no official retrenchment, but bonus was cut to 0. People who resigned were not replaced. People who stayed had to do 2-3 persons work, and were required to work overtime and over weekends foc. I told my boss one day that I could take it no more, he told me to resign. After a long struggle, I decide to do just that.

Firstly, I don't claim to be any investment guru. Just sharing my experience.

Substantial job loss would indeed be the ultimate trigger to a property market crash (ie. price down 40%-50%).

The soaring prices of oil and other commodities is increasing business cost, like for my ex-company. The high oil price is likely to be sustained. At this rate, companies may be forced to relocate to cheaper countries. Job losses are likely to happen in the manufacturing sector first.

There is already first sign of this. Listen the PM and other ministers. Are they not preparing us for the worst?

Sean said...

Dear Smart Buyer,

We seem to have the same traits. I make tonnes of money from selling 4 to 5 properties during the period 2006 - 2008, and fortunately I have bailed myself out with my last property I sold early this year.

At present, I am running my own company, and am financially independent. My advise to everyone here, be smart dont jump into buying properties now. Wait until end of this year or early next year to see if the corrections have come or else continue to wait till you see the sky turns blue.

Smart Property Buyer said...

Hi Sean,
I've following your forum postings quite a bit. Must say I really admire your guts.

I'm only a small fry compare to you. I didn't have 4-5 properties to sell, only 2. Waiting to pick another 1 or 2 if price comes down. If not, I'll enjoy my retirement. Maybe start a small business.

I absolutely agree with you: "My advise to everyone here, be smart dont jump into buying properties now. Wait until end of this year or early next year to see if the corrections have come or else continue to wait till you see the sky turns blue."

But my bet is property price will come down! If economic situation gets worse, we may even be seeing a market crash next year.

Smart Property Buyer said...

I mean "my bet is property price will come down" THIS YEAR !

Anonymous said...

Hi guys I'm glad I came across your comments because I was in two minds whether to buy a piece of landed property now in May. I do see the high prices but somehow don't feel deterred (wtf?!), but with your advice, I have no more doubt I would be freakin loony to jump in now.

Smart Property Buyer said...

Glad we've won another friend .. cheers.

Anonymous said...

Hi all

I am without any Spore property presently and is now residing in China for past 8 years. I long wanted to buy but started thinking (lack funds previuosly)to buy in Spore late last year but was deterred due to the frenzy runup in prices.

I actually quit my job 8 years ago to run a small business in China which is not faring well. Then I began to invest in 3 permanent properties (prices were dirt cheap then) there and flip some.

I sold all when the gov tightened loans last year and downgraded to 5 studios which the rest I put for FD of 4%pa and as funds for purchase of a Spore property.
Since then prices have dropped 20%.

I kept one studio unit as a hotel thinking of returning to Spore permanently and rented the other 4 at 5%ROI. I could say that these 5 studio units is FOC, with amount more than my initial investment
in FD.

I am monitoring the Spore property in China and will return to purchase when realistic prices return. The only problem I have is I may not be eligible for loans and have to do my sums cautiously.

Glad there is a forum here to share information.

Smart Property Buyer said...

You smart, rick jerk! Welcome home any time. You'll be lucky here too .. think price is going to dip here .. keep that FD for the time being .. you know the saying, "In a recession, cash is king." Do visit the site often and your comments are most welcome.

greenhorn said...

Greenhorn:HI i have a small hdb fully paid 5%ROI on rental.have enough cash to down a 800k condo D16. after reading this blog guess i have to wait for a whle more but a saw a unit i really like for retirement, should I be entice? my wife love it too. and would like to ask any influence to the price prior and after TOP?

Smart Property Buyer said...

Dear Greenhorn,
I'm no investment guru. I'm in no position to tell you a yes or no.

As far as I'm concerned, I've bet that property price is set for the south. If there are enough people who think this way, then indeed it will.

More importantly, as people looking to buy properties, we should look at the economic fundamentals.

Looking at the rentals that our "foreign talents" are willing to fork out even with the severe supply crunch today, I'd say property is really over-priced already.

Well, the optimists will say Singaporeans' wealth will catch up with the property price (of today) in 10 years' time. The question then is, does it make sense to pay the "price of the future decade"? Especially for people who have to take up a substantial mortgage? I'd want to give this topic more thought (Watch my blog post).

While Singapore looks set to grow in the next 5-10 years (an outlook that has been exploited to the fullest for those vested to talk up the market), the next 2 years will be very challenging. Nobody knows how this soaring oil price and food shortage will pan out, even it we decide to believe that any US recession will be relatively benign to the Singpaore economy. If there's a nasty turn of event, we can be dragged into an imaginable global crisis that nobody has thought of now.

Smart Property Buyer said...

Dear Greenhorn,
About your last question, which I don't completely understand, the nearer a property is to TOP, the nearer it is to being able to use it. Developers would definitely want to charge more then, but at the end of the day, it's the buyers who collectively must decide what price's reasonable.

Smart Property Buyer said...

correction ...

I meant "unimaginable global crisis".

Anonymous said...

Really felt this is a great website with lots of frank honest comments supported with evidences.

I would like to seek your advice in my current scenarios.

i have a 5 rm HDB which I have bought brand new from gov which we have just finished paying the loan, about 1o years old situated in the heart of Bukit panjang and the government just announce that they are going to built a MRT station opposite my flat. At the same time, i am planning to buy a condo near my in laws place in the central area. We have sufficient cash to purchase a second property and also the minimum sum in cpf, but not sure if keeping the HDB for rental would be a good choice as compared to selling it.

If renting out, We are thinking of renting out the HDB flat and using the proceeds to finance the new condo.

What are your views ?

Greatly appreciate your comments.

Anonymous said...

Really felt this is a great website with lots of frank honest comments supported with evidences.

I would like to seek your advice in my current scenarios.

i have a 5 rm HDB which I have bought brand new from gov which we have just finished paying the loan, about 1o years old situated in the heart of Bukit panjang and the government just announce that they are going to built a MRT station opposite my flat. At the same time, i am planning to buy a condo near my in laws place in the central area. We have sufficient cash to purchase a second property and also the minimum sum in cpf, but not sure if keeping the HDB for rental would be a good choice as compared to selling it.

If renting out, We are thinking of renting out the HDB flat and using the proceeds to finance the new condo.

What are your views ?

Greatly appreciate your comments.

Smart Buyer said...

Dear Anonymous,
It's a basic principle: Higher Risk, Higher Return.

Best scenario: You get a stable, good rental from your HDB flat to finance your condo, and your HDB flat appreciates further in say 10 years time which a good bet with the MRT coming your way.

Worst scenario: There's a recession in the near future; rental goes down, and your household income goes down. To safeguard yourself against such misfortune, I'd advise having enough to reserve to finance the mortgage for as long as a year.

Do some calculations to check the extra amount of mortgage interest you'll have to pay if you decide to keep your HDB flat for rental instead of selling it. Assess if the rental is able to compensate for this extra amount of interest.

Also, consider your risk profile like your likelihood of retrenchment and your reserve. Then decide if you'd prefer higher risk, higher gain or the converse.

Besh wishes.

Anonymous said...

I hope you can give some advice on the following matter. If I choose to buy a flat before the end of this year, I would qualify for HBD grant and loan. If I choose to wait until next year, I might not qualify for the grant and loan (due to pay increment). You mentioned that property prices will most likely drop this year or next year. The question is, do you think the HDB grant and interest savings from the HDB loan will be greater than the drop in property prices? I am looking at resale flats around $350-400k.

Smart Buyer said...

Dear Anonymous,
Do this calculation:
Determine the percentage of price discount you'll obtain buying this year with the grant etc. If this percentage is more than your forecast of any price drop in HDB resale next year, then it'd be better for you to buy now. Also include rent saved if you buy now and of course, the comfort of having your own home sooner which's hard for me to put a price value to it.

The following is the Resale PPI for HDB from 1990-2008 by quarter:

Period Index Percentage Change From The Previous Quarter
II* 131.7 4.4%
I 126.2 3.7%

IV 121.7 5.7%
III 115.1 6.6%
II 108.0 3.0%
I 104.9 1.3%

IV 103.6 1.0%
III 102.6 -0.2%
II 102.8 1.0%
I 101.8 0.2%

IV 101.6 0.4%
III 101.2 -0.4%
II 101.6 -4.8%
I 106.7 0.1%

IV 106.6 1.0%
III 105.5 0.1%
II 105.4 1.2%
I 104.1 0.2%

IV 103.9 1.2%
III 102.7 2.4%
II 100.3 2.1%
I 98.2 1.6%

IV 96.7 0.0%
III 96.7 1.0%
II 95.7 0.2%
I 95.5 -0.8%

IV 96.3 -1.4%
III 97.7 -2.0%
II 99.7 -1.6%
I 101.3 -3.4%

IV 104.9 -2.2%
III 107.3 -2.2%
II 109.7 -1.3%
I 111.1 0.6%

IV 110.4 2.2%
III 108.0 8.1%
II 99.9 1.4%
I 98.5 -1.5%

IV 100.0 -3.5%
III 103.6 -4.3%
II 108.3 -4.2%
I 113.0 -7.1%

IV 121.7 -6.0%
III 129.4 -4.1%
II 134.9 -1.0%
I 136.3 -0.4%

IV 136.9 2.7%
III 133.3 6.0%
II 125.7 12.8%
I 111.4 9.3%

IV 101.9 8.9%
III 93.6 5.9%
II 88.4 11.6%
I 79.2 4.5%

IV 75.8 0.4%
III 75.5 5.6%
II 71.5 2.6%
I 69.7 2.8%

IV 67.8 2.9%
III 65.9 20.3%
II 54.8 31.1%
I 41.8 5.6%

IV 39.6 2.3%
III 38.7 2.1%
II 37.9 6.2%
I 35.7 2.9%

IV 34.7 -0.6%
III 34.9 -0.9%
II 35.2 2.0%
I 34.5 1.2%

IV 34.1 -1.4%
III 34.6 2.4%
II 33.8 0.6%
I 33.6

As you can from the data above, the price plunges by more than 10% in a year only in 1997 and 1998during the Asian Financial Crisis. You must remember then that there was also a huge over-supply of new HDB then of which some still remain unsold today. Given that the government is trying not to over-supply with its BTO, rather than just build without order in the 90s, I personally think it's unlikely for the same sort of over-supply to happen this time round. In addition, the HDB rental demand is very strong too. In the 90s, HDB owners do not have the option of leasing their flats.

The peak price was in 1996, 4Q (PPI=136.9). The current PPI is 131.7, still below the peak. In fact, my judgement says prices for resale HDB are very unlikely to fall like in 1997-98 even if we should go into a recession.

My forecast for price fall is largely for private property where there is an accumulation of unsold units and where ROI is already low and rental yield is likely to see more downside.

Ps exercise your own judgement with regard to my comments.

Best wishes.

Anonymous said...

Hi there

Thank you for all the down-to-earth no frills comments on the property market.

Wanna get some opinions.

Just sold my HDB flat (sold for 3xs original price) waiting to buy a private condo. Currently renting a 4-rm HDB flat for 2.5k.

Is it advisable to buy another HDB flat maybe 3-rm to save on the rental n wait for pte condo price to drop or put up with the rental till price comes down.

Many Thanks !

Opportunity Grabber

Smart Buyer said...

Dear Opportunity Grabber,
HDB resale market is probably at one of its hottest season now, so you are unlikely to get good deal there (otherwise you wouldn't sell your flat). If you're thinking in terms of a downgrading strategy in case your plan for private property didn't work out, then this is probably a safety net. This will allow you the luxury of waiting out the private property market without ever really having to panic. Panic is very bad for buying property.

Good luck

Anonymous said...

Property transactions are costly.
Stamp Duty 3%. Agent Fees 1%. Bank Loan early repayment about 1%.

If you are thinking of selling your done up investment property with the hope of catching it cheaper, it got to go down at least 10% to make sense.... especially if you had plonk down some $$ on renovation as well.

Got a studio that pay me rental of $2k every month.... Prices is now about 20% from the peak compared to Aug last year... However, it is still double of what I pay for in 2004. Could had sold it.... but then again, the rental I received cover me 5% for the last year and will continue to cover me 5% next year and so on. I am in position and don't think I will sell this one.

It is not easy to pick the peak...neither is it easy to pick the bottom.

Just don't over commit. Cheers!

From the Clown

Smart Buyer said...

Thank you for sharing your personal experience.

I thinking investing in property for long term rental yield makes good sense if your purchase price is low and the asset depreciation due to age is not too huge. The investment properties I sold mentioned in this post, for example, were 99 LH suburb condos which I think will suffer huge age-depreciation in time to come that may not be compensated even by stable, good rental yeild of 5-6%. Besides, rental yield in Singapore when averaged over a longer period, say 10-15 yrs, has been low ~2%. I figure I could get better returns in other investment tools which are more liquid than property investment, and of course, being a retiree now, liquidity is more important to me than say for a younger person.

Just my thoughts.

Best wishes.

Anonymous said...

Dear Smart Buyer,

What are your opinions on buying a 99 year landed semi-D, that has only around 72 years left on it? Plus the surrounding houses are a mix of 99/999.
This would be strictly for living in, not an investment. And what are the rules applied to buying such a property ie loans etc.

Fantastic blog, well done!

Smart Buyer said...

Thank you for your compliment.

Well, if the property is meant strictly for your own consumption and investment value is not your concern, then just make very sure that this is the property you'll want to live in for a long time.

There may be some restriction on the use of CPF which is revised from time to time, so do check it with CPF directly. Also banks may have concern. Confirm all home loan, CPF and financial issues before making your commitment. Do not depend on hearsays. Ps confirm officially.

Best wishes.

Anonymous said...

i want to refinance, but existing bank offer me a package on either 3M/6M/12M Sibor + 0.65% for another year till 30Sep09. Should I take the 3M or the 12M Sibor ?

Smart Buyer said...

Dear Anonymous,
I don't know much about bank loan and I don't think I can help you with much advice on that. It's really anybody's guess which way Sibor will be heading in 3M - 12M.

Good luck.

John Goh said...

First of all thanks for this wonderful blog... having been in the internet industry, blogs are always a wonderful source of info on the net :)

I do agree that coming next yr when more properties are completed in 09 there will more more supply than demand and when we see a price correction, the real value of property will then be seen. Being a greenhorn in the property investment and after doing research for 3months, what's your take if you are in the situation where you are buying a property (not taking a loan):
1 - New property developments: paying only a portion that will be TOP only 2-3 later
2 - TOP projects that are on firesale: have to pay 100% but under the risk are low vacancy and rental rates at this time of the market

I am more favorable towards the first option but not sure how some of you investor might go for. I am primary targeting the prime districts 9,10,11 as well as D21 and possibly D5 area. For prime districts should we see a ~50% drop before moving in? Timing the bottom is hard but I think looking forward in '09 1Q/2Q it will be a good time since I am doing research in the price movements in the areas which I am interested in.

Smart Buyer said...

Dear John,
Thanks for your compliment.

Your 2 options are well thought out. I must add, though, that in an acute economic "squeeze", option 2 is more likely to give far better discounted price than option 1 because individuals are far less holding power than developers in an economic squeeze. Vacancy risk is a concern but if the potential loss of rental income is more than compensated by the discounted purchase price, option 2 may well be the better choice.

Best wishes

John Goh said...

Thanks for the reply. What you said does make sense given the fact that you can also view the readymade units. I guess we will see the greater impact of the economy on the property market when prices starts to slide next yr :)

On a side note, what are your personal opinions on property investment (in terms of both rental and capital appreciation) in the D5 area? Prices are rather low and I felt that this area is kinda undervalue at the moment.

Smart Buyer said...

Hi John,
Which project(s) in D5 are you looking at?

John Goh said...

Botannia, Infiniti,Carabelle and The Parc

Smart Buyer said...

Hi John,

Some recent transactions at Infiniti were at $620-630 psf which seem reasonable but there other considerations; eg a unit next to a noisy and polluted highway can be quite unliveable (unless you shut your windows 24/7). The Parc's still going at ~$1000 psf, hardly cheap for a suburb. Haven't been following the other 2.

In general, I don't think we've arrived at the bottom yet.

Just my thoughts. What do you think?

John Goh said...

Yes that's one consideration on the access to transportation in addition to potential onslaught of traffic conditions. I have been there previously and also concern about the road traffic (quite narrow) when the condos TOP and since it is also sharing with other landed properties, it might be worse.

Yeah parc still high but it would not be a top priority since TOP still quite some time.

Suburb is still one of the consideration but what I guess impact will be alot higher since most owners purchase for investment and places like D% are usually more for homestay making the holding power stronger

John Goh said...

What would be a more better buy, a 1rm or 2rm in prime district from your experience? Assuming the common understanding that 2rm would have better capital appreciation and more target market(i.e small family, expats, singles). Is there a sufficient market for 1bedders?

I am torn between making my first property investment in 1bedder and have comfortable liquid cash in bank and investing in a 2bedder with little liquid cash.

The above is with the assumption of purchasing a TOP unit which I have no intention of taking a bank loan. I'm a pretty risk averse person so I considered all worse case scenarios of no future income, no rent for long period etc.. since I have no current loans and debts, what do you think would be a better choice?


Smart Buyer said...

Dear John,
If you're near retirement, I'd say more liquidity; but if you're young and have plenty of earning potential, then I'd say you can afford to take more risk. And if you have no other stream of income, then you should stick to more liquidity.

Just my thoughts. Best wishes.

Anonymous said...

Hi, chance upon this blog and i think its full of real sincere questions and remarks. Its amazing! ;)
I am currently looking out for an acceptable price for condos and apartments, anticipating the possible reduction in prices. The intention is to look for a place to stay and have the potential of capital gain in a few years. This is going to be my first home, but i am also considering purchasing a HDB because of the incentive grants.
What do u suggest?
Private property cause its going to be cheaper with possible capital gains in a few years (after the economy recovers) or HDB with incentive grants and save up the rest of the income to get another private property for investment in future?


Smart Buyer said...

Hi Gary,
Between 99 LH condo and HDB with incentive grants, I'd choose HDB; and save up the money for a future FH private property.

Best wishes.

Anonymous said...

But, looking at the timeframe of about 5-8 yrs, I will probably be investing in a property at a "high" instead of now. And considering later I could possible rent out the condo that I bought and stay in hdb (where the cost of hdb will surely be lower as compared to condo even if prices aret a high) Additionally, with a fairly lower price, rental yields maybe better. Just my thoughts, what do you think? Also I am fairly interested in a unit in Pasir Ris (D17) 99LH just beside downtown east. Coastal Breeze with seaview. Is D17 not a good location for potential capital gains or rental? Thanks for your advice


Anonymous said...

Hey this is such a great blog! It is so nice to hear such truthful feedback. I am interested in buying a property in D15 about a 2bed, for investment which I plan to take a mortgage on and the flip when markets improve.

What would u advise? What is the psf price I should expect to pay in these market conditions? Do u think I should wait a little for the market to dip further in 2009?


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Dear visitors:
Your comments are most welcome!

The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.

Smart Buyer :)