Singapore Property Related Podcasts (Part 5)

Asian Business First Podcast Summary: The risks and rewards of overseas properties

A landed property in KL only costs as much as a 4-room flat in Singapore. Singapore properties are getting too expensive and as a result, some may consider overseas properties. There are heavy stamp duties in Singapore and LTV ratios in recent times. Even if you have a SGD $1mil dollar, you can only get a shoebox condo, which isn’t a lot to speak of. If you don’t buy a second property in Singapore, for the stamp duties saved, you can get a freehold property in Cambodia for just 100k USD. However, for overseas properties, you need to consider exchange rates, government stability and capital appreciation, rental potential etc. In terms of potential, Europe, UK and Australia are still prime targets. One could also buy a home to look for investment, but also to stay there during retirement.

There are two groups of Singaporeans who buy overseas properties: one group is that they know the market, probably studied there; the other group is who have no clue and have not traveled there. They probably assume that if you invest in developing countries, then they think that they can make money, in line with the economic growth of the country. However, one must be cognizant of the risks. You will not know, when investing overseas, where the property is facing, and whether the vicinity is valuable. In Australia, foreigners can only buy properties under construction, and you can only sell to an Aussie local.

It certainly doesn’t mean that you stay in a place for a long time, means that you are very knowledgeable about property. It is important to get knowledge of the area you are planning to invest in. You need not buy property, as you could also buy ETF, REIT, which have exposure into the property sector, which has certainly a lower barrier to entry.

Vietnam is a very hot market right now. An average Singaporean can still invest in overseas properties due to the affordability. The concept of OPM (other people’s money) is important, which is rental yield. If you are able to rent out the property for 15 years, your property basically pays for itself. HDB has a 5 year MOP, and they cannot buy private residential properties, whether local or overseas properties. For Singaporeans, you can rent out your HDB, and stay in your private property, however this does not apply for PR.

For commercial properties, the rental tends to fluctuate, and so do the prices. UK and Australia are very popular among Singaporeans, when investing in properties.

Is there rental yield anymore? The rental market seems to be very dead in Singapore. There are quite a number of property developers moving overseas, like Oxley, Capitaland. Different countries also have interest rates. For property investment, you cannot speculate anymore due to the Additional Buyers’ Stamp Duty (ABSD), you should aim to keep a house for at least 5 years, and an average of about 10 years

Due to Brexit, UK properties could be undervalued at the moment, as there could be a distress to the market. Top emerging market picks are Vietnam, Cambodia and Manila, rental yields are 4 to 5%. New Zealand is quite anti-foreigners when it comes to buying properties, as they have strict regulations on that.




A Measure of Master’s Degrees – Podcast Summary

A Measure of Master’s Degrees – ABF Podcast Summary (16 March 2018)

Is an MBA worth it? It’s the cost that put people off, as a reputable master’s programme can be about 100k USD for a good one overseas, like an Ivy League school. For the INSTEAD one in Singapore, it isn’t cheap as well. The tuition fees also can cost up to a $100k for a programme. In the US, there are plenty of students on debt, and the numbers are growing. Many borrowers may default on their student loans as well. The return of investments may not be very clear as well.

Is working experience more important as compared to having an MBA? Some people would prefer to take up specialists’ masters degrees, as they are cheaper and can land you good jobs as well. The NUS MBA gives you a framework for good decision making, and that would be useful for an entrepreneur, and give you a broad based experience. The MBA can provide you with a lot of contacts, such as that of VCs. Some of the lecturers at NUS are also angel investors, and take care of incubators etc and may be a great value-add for any entrepreneur. A large number of grads in the US have MBAs and it is considered a ‘premium education’.

For the entry level, MBA can give you the edge at the start, and it is easier to land a job. However, whether you can fast track into management remains to be seen. Quite a number of MBAs have relevant work experiences as well. For the Big 4 accounting firms, work experiences matters more. If you get an MBA right after school, the value of it diminishes somewhat.

In Asia, are brand name MBAs important? For investment banking and management consulting, MBAs are a must. One needs to be very clear before taking up an MBA programme. For general management roles, MBAs are preferred also. There are also many options for local Singaporeans to get local scholarships. Quite a number of students are being sponsored by their organizations. The NUS MBA is flexible and you can complete it within 3 years. Academic scenarios or case studies in the curriculum are definitely relevant, and not just theory, for example: digital marketing. For NUS MBA, there are even models you can take and customize your own learning journey.

However, nowadays there are roles that require specialist marketing degrees. Specialist masters are becoming a lot more popular in recent times. Even without masters, MBA, if you upskill yourself in a technical area, it is still possible to strive and do well in the job market, especially in the tech-space.


Singapore Property Related Podcasts (Part 4)

What does HDB flat ownership really mean? (25 May 2018) – The Pulse Podcast

The Housing Development Board (HDB) resale market for flats has been lack-lustre, with the resale price index falling for 6 consecutive months and in general over the past few years. This could be attributed to the gradual decay of the 99 year leases and also after the government’s announcement that not all old flats are eligible for Voluntary Early Redevelopment Scheme (VERS). Increasingly, there will be more and more old flats.

Based on statistics, only 4% of flats are under Selective En-bloc Redevelopment Scheme (SERS) programme currently and Singaporeans should never pin their hopes on that. There are currently around a million flats in Singapore. After 99 years, the government will take back the land and possibly re-develop it, and this will rejuvenate the land for the new generation.

Is home ownership a misnomer? Are people buying a 99 year rental from HDB? Now, you can also re-sell the lease to someone else or even a portion back to the government under the sale-and-leaseback scheme. However, people need to realise that they don’t own the land. Only recently did people start talking about it and start realising the truth. For a long time, many people are able to sell their flats for profits, so they didn’t see a need to worry or even complain.

HDB should consider the terms ‘lessee’ and ‘lessor’ instead. Now, there are lease buy-back schemes, 2 room flats for the elderly etc. Singaporeans expect that government will buy back their own flats via SERS. However, if you do that, HDB will be like de-facto freehold property. This SERS scheme is very expensive for HDB and to the state and HDB is claiming that they are running deficits every year. As such, it is unrealistic for them to conduct SERS for all flats and indeed, the government has never promised SERS at all. Moral of the story: Never believe too much in what your housing agent says.

There are suggestions of removing the profit element of HDB, to level the playing field, as it is only a home. One way is to allow people to sell it back to the government, and the authorities can do a revaluation, and sell it off to someone else. However, through this, people won’t be able to make a profit from selling their flats. You can monetise your flat to fund your retirement. Perhaps for new flats, you could only impose that you can only sell back to the government. There is ‘definitely’ a cost to enjoy your property, which people need to understand. In modern times, the truth is that people are making less profits from selling their HDB.

In the gig economy, not many will have stable incomes. As such, HDB should give young people the option to rent flats at a cheap rate. In many countries, people overseas will rent from the government for public housing. If you let private developers buy over government land and old HDB flats, then it will be like DBSS, which is flawed and the scheme was eventually scrapped. This could reduce the number of public housing in the future.

If you limit the use of CPF to buy a flat, then flat prices will drop but you will have more to spend in your retirement. The thing is that some Singaporeans are only asset rich, but not cash rich. However, the social contract of the government and the people is that Singaporeans enjoy asset appreciation from their flats. It may be possible to allow others to rent HDB, and have a home rental scheme. The government should try to avoid kicking the can down the road and there needs to be a more open forum for Singaporeans to discuss this issue.


Investment Related Podcast (Part 1)

Making the Most of the CPF (Asian Business First Podcast – 24 Jan 2019)

Interest rates have been low after the 2009 global financial crisis. How are you going to derive good investment returns after the financial crisis?

Savings and retirement plans need to be planned. In Singapore, there is a need for a compulsory savings plan and it’s called CPF. For CPF, you can get a payout from age 55. The fact is that everyone is working longer and retiring later nowadays and that CPF contribution rates get reduced as you get older.

CPF contributions get divided into Ordinary Account (OA), Special Account (SA) and Medisave. It is definitely important for everyone to think about their future and retirement right now. For OA, you can use it for mortgage repayments, loan to children for university fees, to buy insurance and to buy investments. Special Account (SA) is for retirement monies, and it has a higher interest rate of 4%. For Medisave, you can use to pay premiums for Medishield life, Eldershield life, and also hospitalization bills. Some people use the CPF Investment Scheme (CPFIS) to invest their OA monies.

Risk-free rate for CPF is at 2.5%, which is higher than bank deposit rates. Government provide additional options for others if they wish to invest. You should beat the 2.5% if you want to use the CPFIS to invest. For SA, do not use it to invest in any products, guaranteed at 4% per year, and it is risk free. For Medisave, you can’t use it anyway.

One could use the monies from OA to pay for mortgage and if you don’t use cash to invest anyway, then might as well use it to pay for the mortgage, rather than using CPF. If you are willing to take some risk, you can use the OA to make some investments. CPF provides an option for conservative investors. In general, equities should outperform the 2.5% CPF interest rate.

The contribution rate is 37% for both employee and employer’s contributions. It limits your contribution to $6000 * 17 months * 37%, if you earn more than that, that portion doesn’t need to contribute CPF.

GIC will invest the CPF funds, and the government will guarantee the difference. You can top up your RA for up to $176,000, which is the max (SRS account). However, it is important to have liquidity before you do it. Or can top up the other 3 accounts, if you want to top up, as well (Voluntary contributory scheme), cannot top up OA only.

CPF Life guarantees the payout from age 65. There are standard plan ($750 to $800 per month), basic plan and escalating plan. Are the amounts sufficient for retirement? The standard plan pays the most when you are alive, however, the bequest after your demise will be the smallest. Basic pays lesser in your lifetime, but with the highest bequest upon death. For the escalating payout plan, the first payout is lower than the standard plan by 20%, however, it will increase over time. The standard plan is the default plan.

CPF is really an annuity. It is possible to transfer from the OA to the RA. CPF should fund the base of your retirement lifestyle. Liquidity is very important. Since Jan 2008, there has not been changes in the CPF interest rates. However, things may change in the future. Is it a good time to enter in the equity market? For equities, you should be assured at least of 2.5% if you want to invest in stocks. During end 2018, the market was at a low and it was possible to enter the market. For people in retirement, you do not want to take risks, and CPF is the best returns annuity scheme around.


Singapore Property Related Podcasts (Part 3)

Outlook for the Singapore property market – 12 Apr 2019

Mandarin Gardens failed to get an En-Bloc, as they failed to hit the 80% of the residents voting for it.  It’s almost a year (July 2018) since the authorities slapped on cooling measures. Is the En-Bloc market truly dead? In 2017, this was when the En-Bloc market started to surge. It is more expensive for developers to buy land, as they have to pay ABSD up front and only a portion is remiss-able. The cooling measures causes developers to be more cautious at the moment.

Even at the height of En-Bloc cycle, it was hard for Mandarin Gardens to En-Bloc, simply because of its size. Developers need about $3 billion to purchase it, as it is a huge site with 1000+ units. There is too much risk and uncertainty around it at the moment. A lot of the owners are uncontactable and hence did not vote in favour of the En-Bloc.

It will continue to be tough for the developers to find suitable land to go for an En-Bloc. Pearl Bank was sold to Capitaland for $800+ million. Developers have to pay ABSD if they can’t sell within 5 years, regardless of the size of the units. The larger the development, the harder it is to go En-Bloc. Foreigners tend to buy in the CCR regions, the high-end properties. The cooling measures affect properties, especially in the CCR regions, where prices fell almost 3% in the last 2 quarters. If you increase the reserve price, people may be more keen on the En-Bloc. However, the developers may not be keen on paying a higher price, and it takes two hands to clap. The minimum floor area of condos is a ‘mini’ cooling measure as now condos will be even more expensive.

There are quite a number of Chinese developers in Singapore, and they did en-bloc projects in Sun Hozier, Shunfu HUDC. Are developers paying too much for the land? And this pushes up the property prices over time? Developers need to lower the selling prices if they can’t sell the units as they need to sell within 5 years. For developers, their business model is to buy land, build and flip and have a shorter term investment horizon. Foreign developers still have to comply with government guidelines. Chinese developers have generally done okay with their developments, in terms of sales.

If you buy property as an investment, you won’t get the desired property yield/rental yield as before. Rental yields have flat-line and remained very low. Interest rates are low in Singapore, and investors are willing to accept a lower yield as well. Expat packages are also lower as compared to the past, and this has an impact on rental yield. Property prices also go through a cycle, just like any other asset class.

Can we expect the same capital appreciation in the future? Fed raised interest rates 4 times last year, which was very significant. However, the Fed announced that they wont increase it for the remainder of 2019. However, interest rates are still low at the moment. For home buyers, they have to manage the interest rate cycles, over 30 years.

More Singaporeans are looking at the overseas property market. You need to understand the reputation of the developer, the local regulations there. You should talk to the agents there and find out what are the good districts. HK residents find Singapore prices cheaper. Most governments have adopted a populist policy and impose taxes on foreigners, in order to protect housing prices for locals. For Vietnam, Cambodia and Thailand, these are popular areas for investments.

The Singapore government is planning to allow developers to build more properties in the CBD. However, this will not be cheap. The masterplan has a 25 year horizon and is definitely a long-term outlook. Co-living and co-working is the way to go, just like New York.

If you work near to your workplace, you save time commuting. Land cost is too expensive in the CBD area. For an investment, people look out for ROI, freehold property, long-term capital appreciation, location etc. For home owner, people look for amenities, facilities, proximity to MRT/parents, neighborhood etc. For example, Indians want to live near their own community etc. Research shows that upgraders tend to move to a place near their old house, within 5km, but towards more central areas. It is unlikely that the cooling measures will be removed in the next 5 years. There are around 60, 70 new launches last year and this year and there is plenty of supply out there.

Learn to buy within your means and definitely work out your finances before making the plunge.


Singapore Property Related Podcasts (Part 2)

Asian Business First Podcast – Outlook for Singapore’s Private Residential Property Sector (26 Oct 2018)

There is currently huge level of interest for properties, given the surge in property price index from late 2017 to third quarter of 2018. There are new cooling measures [12% Additional Buyer Stamp Duty (ABSD) for Singaporeans who purchase a second property] and for new developments (new average size of 85 sqm, from the previous from 70 sqm), no more shoe-box condos for other than the central area. Balcony sizes will be shrunk (not more than 15% of the whole unit). For some old condos, the balconies are too numerous and too large and this limits the liveable space, which is quite a pity. Sentiment among property developers have soured because of the new government property cooling measures.

The various sectors such as commercial, retail, industrial types all have shown weaknesses in terms of rental yield. There are plenty of empty industrial space in Singapore as well of a lot of unoccupied condos around. The on-going US-China trade-war might also affect residential prices as it puts a dampener on the global economy.

The cooling measures are working, as can be seen from a slight decline in residential housing prices at the end of 2018. There are plenty of new launch condo projects in 2018, but there are fewer transacted units, and many projects are not selling that well. For the resale HDB, the number of transactions took a tumble and decreased. The En-Bloc market is also slowing down as a result of the additional stamp duty for developers when they purchase land.

Now, it is a buyers’ market, not a seller’s market, as buyers will adopt a wait and see approach before deciding on anything. There are many En-Blocs which have not found developers to buy, as it might be hard for developers to sell off these units within 5 years. There could be resale units emerging from failed en-bloc units as the previous owners just want to let go of their units. This could lead to a re-pricing of leasehold, freehold properties that failed to En-Bloc, because of the cooling measures and this applies a price pressure downwards. The best is to buy freehold properties in districts 9, 10 and 11. Many home-owners are brought back down to reality after the cooling measures.

Many of the En-Blocs are happening in the HUDC market, and those owners might downgrade to a resale HDB and save their money for their retirement. There are 50,000 new condo units that are new, of which 30,000 of which are unsold. There sounds like a glut in the market at the moment. The thing is that with limited population growth and stable employment and not many PMETs coming in, it is difficult to fill up the vacant units because the growth has tapered somewhat. Rental yields will continue to struggle in the near future. Property investors should certainly think twice before buying something for investment.

Developers build shoebox size units to attract foreign PMETs and property investors. However, for non-central areas, who will want to rent there? That’s the big question. Shoebox units tend to sell at a higher per square foot (psf), and developers will use this to justify charging higher psf for their larger units. People have valid concerns over the small condo sizes. Developers are allowed to build shoebox units, but they will have to build quite a number of 3 bedroom units as well, as the average size must meet the new URA guidelines for condo sizes. These guidelines were not included for the core central region (CCR) because had they were, the prices would be really unaffordable.

On average, the size of HDBs are way larger than private housing, and with a better living environment. A 4 room flat is on average 1,000 sqft. Some developers add the aircon ledge as part of the unit size, which is quite unethical.

The Singapore government really intervenes in the housing market, to control prices, as evidenced by the numerous rounds of cooling measures over the years. An increase in interest rates will eat into your rental yield and hence, your profits. Rental yields are about 3% in Singapore, but interest rates for home mortgages are closing in for 2.5%, and this is uncertain, depending on what the Fed does.


Singapore Property Related Podcasts (Part 1)

Asian Business First Podcast – On Board the En-Bloc Bandwagon (23 Mar 2018)

With a quarter of a million Singapore dollars lying around, you could place a down-payment for a condo/apartment. The En-Bloc fever (it means: all together or all at the same time) has been gaining momentum. Property developers want to buy up the land, demolish the building, and build a new development and hope to earn more by charging high prices per square foot (psf).

The Pearl Bank apartment has managed to go En-Bloc finally. The sale of the Pacific Mansion condominium is the biggest En-Bloc in the last decade, almost close to a billion dollars. Pacific Mansions is located in the CCR, and it is on a freehold land. In an En-Bloc, you get paid to vacate your property, which sounds attractive. However, with the money, you will have to find another place to live and chances are, other houses will be expensive too. In the past year, there has been a resurgence in property market, led by the wave of En-Bloc.

The new Additional Buyers Stamp Duties (ABSD) [increase from 7% to 12% if Singaporeans buy a second property] has hit the investors in the Core Central Region (CCR) region, especially when foreigners refuse to buy and pay the stamp duty. The market used to be suppressed artificially because of the cooling measures. HK has implemented up to 30% of taxes for foreigners to buy their properties, and this is substantially more than the ABSD on foreigners of 20% in Singapore. However, Singapore is still considered cheaper as compared to other big cities in the world, like New York, London. Singapore’s economy is doing relatively okay for now. Buyers have the fear of missing out, as they feel the prices will continue to rise and want to get a property now. For property, it is cyclical in nature, and happens that prices are over-heated now.

Should buyers target projects that have potential for En-Bloc? Can you tell which properties are targets for En-Bloc? It is important to identify the projects are early. If the projects are already slated for En-Bloc, you won’t be able to make a lot because existing owners will want to sell it to you at a premium, and the En-Bloc potential has been factored in the price. Try to avoid buying a property with the simple mindset of hoping for an En-Bloc, as that should be seen as a bonus only, and there are many other factors that make a property desirable (near schools, near MRT, near parents etc).

For location, it matters a lot, as those properties near MRT stations tend to fetch more. For properties near MRT, chances are that the location premium is already factored in. Investors should try to predict future MRT locations, and then you may get to make more money.

En-Bloc helps with the rejuvenation of buildings in Singapore. The winners from En-Bloc will also spend more, and this leads to a re-circulation of capital back to the economy. However, for first-timers, they will be pissed as property prices are likely to rise during En-Bloc fever. There is too much exuberance in the market at the moment. Developers also need to continue to buy land, with is their core business, and cannot stop doing that easily. If there are not enough government land sales, then developers will look to the private market and En-Bloc. The most recent cooling measures have killed off speculations. Those who can still enter the market are those who have the holding power and are cash-rich. The amount of leverage has been reduced and this is actually good for the economy, to avoid buyers getting into financial trouble and encouraging prudence in general. For this reason, it makes sense to keep the cooling measures in place.