Saturday, 24 November 2012

My Property Journey Rewind - 2011 & 2012

I will quickly summarize my property investment journey in the last 2 years and that will bring me up till today. It was a case of doing nothing but moving into the house which I bought in 2010.

The house offered more space for everyone and the desire to go out on weekends actually diminished. Everyone has their favorite corner to hide, including the maid who also got her own room finally.

If you have green fingers, you will definitely enjoy having your own little garden but unfortunately, the green genes from my dad didn't pass down to me. Maintenance is higher due to the higher utilities bills but you don't have to pay the maintenance fee charged by condo and enjoy "free parking". Downside is no swimming facilities unless you build your own lap pool which will then increase the maintenance bills.

As mentioned in my earlier post, the prices of landed housing shot up significantly only in the last 2 years, much better than the condos and apartments. A house in original condition near my street recently transacted at more than $980 psf, indicating a healthy increase from my initial purchase price. This incident taught me a lesson that being a "value" investor is rewarding. I have shared with you previously that I bought a landed because I couldn't find value in condos back then.  I think it is similar to all investments in stocks and shares as well except that property is a highly levered play and it is more rewarding if you managed to catch the right cycle.

I had originally wanted to do an "interest arbitrage" purchase of another property by taking out the "equity value" in 2012, but decided not to proceed even though the bank has granted in principle approval to disburse money to my account to "refinance my loan". I couldn't bring myself to buy at current sky high prices even though the monthly rental income is able to cover the mortgage loans.

I recently went to take a look at Heron Bay (which Minister Khaw blogged about) and Riversails. Under the current market context, both offered good value if you can get it below $860 psf. Personally I prefer Heron Bay's location and designs but it is an executive condo which I wouldn't have qualified anyway.  Riversails is a tad too cluttered for me. (Not that I am seriously considering).

It was pretty funny because at one glance of the brochure, I pointed out the blocks that I want to buy. (3 different stacks). The agent at Riversails told me that those stacks were not released by the developer yet.  It is always the case where developer only release the choice blocks after they managed to sell the "poorer facing" blocks at attractive prices. They will then release the choice blocks at a premium pricing.

I have shared with you previously the things to look out for in selecting a unit within a condo. The same rules apply. Select a unit that faces the pool or garden or one with an unblocked view facing out but make sure it is not facing the evening sun. I prefer higher floors as well.

Happy property hunting and that brings an "end" to the various installments of my property journey. The various installments are below for your ease of reference.

Part 1.
Part 2.
Part 3.
Part 4.
Part 5.
Part 6.
Part 7.
Part 8.

I will continue to share my property journey and my thoughts as it progress. Hope you have find these experiences useful for your own use. 

Oh yes, i promise to share with you the support level to look out for. I think the strong support zone is between 160-180 but there should be plenty of buying interest if price starts to hit the 180-200 zone. I would "visualize" that if prices fall to 180-200 will be a good time to start hunting for a landed property and 160-180 for a condominium. "Unfortunately" for prices to crash to that level, you will need another global financial crisis and i don't see that coming in the next 4 quarters.

Monday, 12 November 2012

Singapore properties prices show no signs of slowing down!

URA released its Q3 2012 real estate statistics and the property market here continues to be hot! The announcement is here.

If you look at the chart above, i think we can see a "bubble" forming in the industrial zone! Due to the series of cooling measures aimed at the residential market, property investors and speculators are piling into the industrial office arena! Many developers are offering "shoebox" industrial space to feed the appetite of these investors! This is really unhealthy and unsustainable. You can see the prices of industrial factory on a steep upward climb! If this continues unabated, i think investors who speculate in such property types will be burnt eventually.  The only good 'sign' is that prices of office and shop units continue to remain stable. As for our residential property, it looked like it is going to resume its uptrend! Let's take a more detailed look at the various residential housing types for a more granular look.

If you looked at the chart above, it seemed like prices have increased across all residential types! I am not sure what kind of new measures the government is going to implement next but it seemed inevitable that Rounds 7,8,9 and 10 are on its way. The post on Round 6 of cooling measure is here. The government has an unenviable task of cooling the market without trying to kill it. I truly pity those couples who are trying to get married and do not qualify for a flat (or what is commonly known as the "sandwich class"). It is a case of not "poor" enough to qualify for a flat but not too rich either to buy a private property without getting into a huge mountain of debt! 

Are you one of those who are in the sandwich class or are you one of those still waiting on the sideline? Perhaps you can share with us your thoughts on what kind of cooling measures you would like to see being implemented. 

Sunday, 4 November 2012

My property journey rewind - 2010

Let's continue with part 8 of my property investment journey today.

Part 1.
Part 2.
Part 3.
Part 4.
Part 5.
Part 6.
Part 7.

If you have been following my blog, you would have known that I made a rash decision in Dec and had a miserable Xmas in 2009.

For the next 3 months in 2010, I concentrated my focus on district 16, an area which I am familiar with.  Buying a landed housing was quite a different experience from buying a condo although the basic evaluation process applies such as tenure, location, facing, and state of conditions. One of the difference in buying a landed is that each property is unique whereas in a condo, you can get units of the same layout in the same "stack" but at different levels.

In early Mar 2010, during one of my viewings, I met an acquaintance from my old school. He has just "changed" profession into an agent representing the seller. He was marketing a 3 storey corner terrace of the size of 3000 sqft for $1.95m (if I remember correctly). I didn't like that house as it was situated right at the T junction and the layout was pretty funny with a small living room area and an elevated dining area.  It was a nice 'reunion' of sort as I found an agent who is "hungry" and willing to work hard for a friend and i know he was someone whom I can trust. It is very important to find someone you trust as an agent be it buying or selling and i will share the reasons with you shortly.

In late march 2010, I spotted an advertisement on the papers along the road which I want to buy. By this time, I have narrowed down my focus to the street which I will want to buy and that is the street where I grew up in. I guess we are all creatures of habit and this trait is hard to shake away but the real reason is that i wanted our kids to grow near their grandparents. I SMS my agent to find out more about the house and arranged for a viewing.

The semi detached house has a land size of about 3,500 sq foot and has 2 levels and an attic. The plot ratio is not "optimised" but I "like" the feeling of "space". The house is in reasonable conditions but still require some renovations to modernise the looks. We always make our decisions fast and viewed the house twice but this time i am more prepared. The first viewing was around 4pm (to watch out for the evening sun) and the second viewing around 9pm to confirm that it is a right choice. I made an offer for $2.128m that night but the agent representing the seller asked for more time to consider the offer and promise to give us a reply by the following Tuesday.

Lessons learnt from the December episode

In the meantime, i have already "learnt" my lessons from the previous round.  I had lined up my "banker" in the last few months. First of all, i got a pre-approved limit. In other words, i know exactly the maximum loan amount which the banks will be willing to lend to us. This helped me to know the range of prices which i can "afford" to look at. 

Secondly, prior to making the offer, I SMSed the banker for an indicative valuation of the house which i would like to buy and i received an indication that it was valued at least $2.3m. In other words, i know that i am "bidding below valuation" and that i can "top up" my offer should my first cheque be rejected.

Thirdly, i have been researching and viewing the "landed homes around the area" and i know what kind of prices to pay. I didn't let my 'bad experience' in December stopped me. One of the corner terrace i viewed around that house has a much smaller land size but was asking for $2.3m. As such, i know that i am bidding at a good valuation.

My first offer was rejected, as expected, but luckily there was no competing offer. The seller's agent said that the owners were expecting at least $2.3m. It was interesting to note that when we were viewing the house, the owners were never around. In fact, there were tell tale signs that all is not well in the house. There was only one pillow one bolster and one set of toothbrush in the master bedroom. My agent then did a search on when the house was 'last marketed' and noted that it was about 6 months ago. In other words, the owners have tried to sell the house since 6 month at $2.3m but wasn't successful. We wanted to put in a bid of $2.2m for my second offer, but my agent advised me to be 'patient' and not appear to be 'eager buyers'. As such, we put in a second bid at $10,000 higher or $2.138m. 

To our surprise, our second cheque for a mere $10k increase was accepted. Probably it helped that there were no competing offers and that the sellers were truly serious in selling. Lesson learnt - couples into a messy "situation" are serious sellers as they want to get out of the marriage as soon as possible even though the offer was about $200k below market. So avoid such situations if you can as divorces can cause a serious dent in your pursuit of financial freedom not to mention the other bad effects on the family.

Having a good agent working for me and on my side truly helps as well. If i had approached the agent who was representing the seller directly, he would have probably advised me to top up my price to $2.2m or more immediately. My agent has helped saved me about $60k and my agent's commission will be paid by the seller anyway.

After buying the landed house, we decided to sell the condo so as not to over-leverage ourselves and get some cash to renovate the new house. As a way of "thanking" him, he became my exclusive agent for the condo that i had. No exclusive paperwork was required and he charged me a "friendship fee" of 1%. 

In May 2010, we started to market my condo more actively. There were a couple of buyers who offered us cheques. In this instance, having an agent whom i trust proved to be once again beneficial. He advised me to reject 2 offers which he considered to be below market. One for $850k and another at $860k. In the following Sunday, he held an "open house" for my unit and at the end of the day, managed to create a "competing situation" between 3 serious buyers and the final bid came in at a "record breaking" $908k for units in that condo at that point in time. (I have also shared an earlier post that the same condo was resold in August 2012 for a $172k profit).

In other words, my agent has helped me achieve a higher than expected selling price even though he has to co-broke with another agent. This time, we made around $300k for this condo and i paid him 1.25% instead of 1% as a reward. I am always a firm believer of rewarding someone for a job well done.

Why having a good agent is important and watch out for rogue agents!

Beside sharing with you the importance of having a good and trustworthy agent, i want to highlight the fact that some agents are 'rouge' agents. In other words, they will not want to accept "co-broking" even though the buyers brought by the other agent are offering higher prices. Let me share with you a numerical example. 

Imagine you appointed a rouge agent to market your house for $2m. There were 2 buyers. One was sourced by your rouge agent and offered $2.1m. The other was brought by another agent whom he needs to co-broke with and that buyer offered $2.3m. Both made the offer at the same time but which one do you think your rouge agent will want you to accept the cheque from? Of course, it will be the one whose buyer he sourced because in this instance, his commission will be 1% x $2.1m = $21,000. If he presents the $2.3m cheque from the other agent, his commission will be 1% x 0.5 (assuming the co-broking arrangement is 50:50) x $2.3m = $11,500. In other words, he will earn $9,500 less. However, in this instance, the owner will be short changed by $200,000! I have seen real-life examples happening, so these are true cases and do watch out for the rouge agents! You will not know that you have been short changed because the you will never get to know of that $2.3m offer if you agent didn't tell you... unless the potential buyer complained about that rouge agent but by that time, the transaction would have been consummated. 

Graphical view of my transactions in 2010

Below is the graphical view of my transactions in 2010. I have purchased a landed home for around $615 psf. (The landed home picture in this instance is for illustration only) since i wouldn't want my fans to come to my house :-P

These little decisions which we made in the last 10 years helped "changed" our life as i reflected about them. As you moved through the various stages in your life cycle, always take time out to think about your life's objectives and work towards them.

A property is a good inflation hedge and it has proven to be so in the last 10 years and in my view, will continue to act as a good hedge against inflation. That was all for 2010, other than spending the following 8 months renovating my house and i have till now, never regretted my decision to buy this place. As you now know, prices for landed homes shot through the roof in 2011-2012 and the increase was even better than that of condominium as Singaporeans start to realise the value proposition of a landed home. (see how the pink line cuts above the purple line in the chart above).

Remember my little advice for you. Things moved in cycles, learn how to invest and catch the right cycles with the right instrument and you will get out of the rat race faster. 

I will share with you what i think will be the support zones to buy in my next instalment but that will have to wait as i have been extremely busy with work and will be travelling extensively in the next 2 months for both work and leisure.

Sunday, 21 October 2012

My Property Journey Rewind - 2009

Let's continue with part 7 of my journey. This time round it is for only 9 months.

It was Q1 2009. I rub my hands with glee because I really didn't expect to be able to experience 2 cycles within a short 10 years!  I have shared with you previously that the prices has fallen to an attractive level of 140 and I base it from analysing the chart below where 140 is the breakout neckline which has now turned into the support zone.

The earlier years of trading and losing in the stock market has actually helped me sharpen my market "feel" and i have learnt to impart that to trading the property market as well.

I began hunting for properties. I told a good friend that it was time to hunt for property and that if she is looking for a property in the Rivervalley area, please call me along. I even told her to hunt for units at Rivergate or The Sail  where I saw units being advertised for between $1,300 to $1,500 psf. 

I called an agent who has placed out a long series of units that is for sale The Sail @ Marina Bay. He said he will arrange viewings and call me back but he never did. Let me share with you what i learnt about the tricks of property agent.

Lesson Learnt: If you see any advertisements showing a long series different units within the same condo or different units in different condo, these are agents who usually have no units for sale. In other words, they don't have real units on their hand. They are not the 'exclusive agent'. They are doing a 'shot gun' approach whereby they hope to receive phone calls from you. If you are a genuine seller, they will try to make you appoint them as exclusive agent. If you are a genuine buyer, they will then try to arrange some units for you to view. If you see only a short description of the property for sale or a picture of the property in the classified ads, the agent is probably the exclusive agent or acting for the seller.

So what happened was that i have called someone who either think that i am not a genuine buyer or that he really couldn't find any units for me. Another agent i called claimed that the owners are out of town or that the units are being rented out and i can only buy it from the floor plan. I was quite put off by these agents and stopped calling after a while.

Lesson Learnt:  Persevere. I should not give up so easily. My intention was to buy a 1,033 square foot apartment at The Sail for $1,300 psf. The condo will cost me around $1.34m. My lack of perseverance cost me dearly as prices has since increased to around $2,500 to $3,000 in June 2011. The "profit loss" is around $1.2m.

Between May and Sep 2009, I visited many showflats. I visited The Arte, the Illuminaire on Devonshire. The units at The Arte were going being sold at between $850 to $900 psf if i remember correctly but i didn't like that location. 

The Illuminaire showflats were full and super crowded and that was in the midst of the crisis! In fact, all the 2 bedroom units were gone when i visited on the 3rd day of the launch of illuminaire and they were transacted around $1,600 psf. Again, the "profit loss" will be significant as the prices has since gone up to around $2,500 psf. 

For one reason or another, i didn't pull the trigger. I don't want to give any excuses here but basically i felt that i have missed the boat. I couldn't make myself chase after rising prices. 

By Nov 2009, i gave up looking at condominiums as i felt that they were overvalued. If you refer to the red rectangle, i was hunting actively for a condo during that period but the recovery is so fast that I couldn't catch it! It will look quite silly if i buy back a unit at the price i sold last time.

Lesson Learnt : Buying a property is not like going to the market. You need time to hunt for one ideal property but sometimes, time and tide waits for no one! When the V shape recovery comes, the prices just keep moving up and there are many who just let the agents market their units and are not genuine sellers. They just wanted to test the market. On the other hand, 6 months is pretty short to find an ideal property....

In Dec 2009, I decided to turn my focus on landed property for my own stay as i felt that the landed homes offer better value and more space and i should "exercise my right" as a Singaporean to own a landed home. I started to hunt for an intermediate terrace and found one in District 15. It has a land size of 1,600 sqt foot unit and was a 2 storey house with an attic and the built up is around 2,700 psf.

The owner asked for $1.68m and i paid the 1% deposit that evening. I was in a hurry as we were flying off the next day for our holidays. Big mistake. 

Lesson Learnt : Never make such an important and hasty decision when you are flying off the next day and never do any prior research.

I have no experiences buying landed homes and i didn't do any homework. In other words, i wasn't prepared. When i came back from the holidays, i started to do my homework and discovered two "harsh" realities. 

1. We are paying the record prices for landed homes in that area! In fact, i will be the record holder if the transaction goes through. I realised that landed homes is valued on the land size and not the built in area.
2. The banks are only valuing the home at $1.5m and i will need to cough out the difference on top of the 20% downpayment.

On top of that, the house will still need some renovations which will set me back by another $100-150k.

After much deliberation, i decided to "cut loss" and move on. My wife has always been supportive of me and i am pretty thankful. Here you go, my hunt for a landed home ended in a disaster in 2009. It was the worst Christmas i had. I became Santa Claus and gave the owner a big Xmas present of $16,800. I paid school fees again.


The house was subsequently sold for a lesser price than $1.68m to another buyer but fast forward till today, i believe the terrace house can be sold for around $2m to $2.3m as landed homes have moved up very strongly in the last 2 years.

Did i ever regret my decision to become a Santa Claus and forfeit my 1%? I will share my journey with you in the next instalment. At the end of my journey, i will share with you the next support level to watch out for if you are looking to buy a property.

Sunday, 14 October 2012

My Property Journey Rewind - 2008 to 2009 Q1

One reader asked if i can speed up my story, so here you go, 15 months at one go. hahaha.

Let's continue to part 6 of my story today where we travel to 2008.

Part 1 is here.
Part 2 is here.
Part 3 is here.
Part 4 is here.
Part 5 is here.

It was early 2008, i had just sold my first condo for a handsome profit and was sitting on a pile of cash. The feeling was good because i had shared with you that i lost at least $100k during my first foray into the property market back in part 1. 

With the benefit of hindsight, actually, i didn't make a lot of money. It was probably slightly around $450,000 before stamp duties and broker's commission. As i shared with you previously in part 5, the reason why i felt the pinch about the broker's commission is because it represent almost 5.8% of my profits!.

Brokers commission = 2% x 1,218,000 x 1.07 (gst) = $26,065.
Profit before stamp duties and commission and loan termination = $450,000
% brokers' commission = 26/450 = 5.8% !!! 

As i shared with you in Part 5 of my story, learn to negotiate the commission with your real estate agent. As you can tell, i never use her thereafter.

Now you will be interested to know what I did with my new-found wealth. I promise to be truthful and you will be quite disappointed. hahaha.

After spending for a nice holiday in December, buying some nice watches for ourselves, i then blow it on my dream car! I upgraded myself from an entry level Japanese car to a German continental car. Still can't run away from the chase of material pursuit. :P  

Lesson Learnt - Man always want to show off. It is in our nature. It was my dream car and i just have to buy it. Maybe we men have a weakness for cars?  But the truth is..... I have never regretted buying it. :P

So here you go. $160,000 gone towards a nice car. While i wish to tell you that i had utilize the money wisely, i am sorry to say that this hasn't been the case. The "model" answer should have been i have used the $160,000 wisely and invest in stocks and properties during the downturn but this was not to be. :-P However, as i told you, i have never regretted buying the car, so the "atas" feeling over this 5 years was probably worth it. hahaha.

I also invested $50,000 of my cash into a pre-IPO Chinese company. I will tell you what happen to that investment in another story. But here you go, now you know my risk profile? There is no "lesson to share" here because i went in with my eyes open so i am prepared to lose this $50,000. On hindsight, this is a risky investment but i guess being flushed with cash can cloud one's judgement? (I am not saying this investment is a bad one). So here you go.... almost half my profits gone.

Lesson Learnt - It is easy to spend money. No one need to teach you how to spend money. You can just easily blow it on nice holidays, cars, bags, watches and frivolous stuff. 

Above is the 5 year chart of BMW and LVMH. If i have invested $160,000 into the 2 stocks back in Q1 2008 and sell it today, I will probably get a return of 71% = $273,600. However, Euro has depreciated from 2.11 to 1.58 against the SGD. So the returns will probably be lowered by 25%. The returns in SGD after accounting for forex movement will be $204,875. So in spite of the depreciating Euro rate, it is still a worthwhile investment to park money in the stock market of the worst region of Europe.   

Lesson Learnt - It is always good to invest in good quality companies during the crisis. 

A few major things happened in 2008. The Lehman Bros went bankrupt in Sep 2008 and AIG was bailed out by the government. The sentiments were extremely bearish and people start to wonder which will be the next company that will go bust. In addition, Singapore government also started several initiatives to boost the local economy. 

As you can see the property prices in Singapore started to correct as well. I intentionally cut off the chart at Q1 2009. This is because we are always at the right side of the chart. We never know what will happen next. The property market has effectively "crashed" in Singapore due to the bearish sentiments. 

There are a few things to share at this juncture and i will end my post shortly.
  1. A market crash is always swift and when it comes tumbling down. You have no time to react. Given that the chart above is a "lagging" indicator, i can probably say that i got out at the peak. 
  2. At Q1 2009, there were 2 schools of thoughts in the market. Will this be a U shape recovery of a V shape recovery? The answer is no one knows! You have to decide for yourself.
  3. Sentiments play an important role! Prices only started to drop when sentiments become bearish and genuine sellers start to appear! This is the reason why i say that for our market to drop, we need to see some bloodshed in the market. Otherwise, it is probably impossible.
However, always be prepared for a crash. I shared with you an old posting of mine made in 5 Oct 2008. I advised readers not to miss the boat again when the prices drop to the 140 levels and this is exactly what had happened. Prices dropped to the 140 levels in Q1 2009.

Lesson learnt - always be prepared and when the time comes, don't hesitate....?

I will share with you my property hunting journey in 2009 in my next posting and how it ended in a disaster.

Have a good week ahead.

Tuesday, 9 October 2012

Round 6 - Will it work this time?

Interestingly, after my post on 25 Sep 12, the government came up with the 6th round of cooling measure.

The two measures are as follows:
  1. Mortgage tenures limited to 35 years.
  2. Lower loan to values on loans over 30 years.
In my opinion, i think MAS (or the government) will continue to watch the market closely and do whatever it takes to cool the market in order to avoid a property bubble.

A graphical view of the cooling measures from the Morgan Stanley report.

The new measures are pretty interesting because it seeks to stop people from buying their 2nd or 3rd investment properties. It is trying to 'curb' the demand. Below is the graphical view of the "decision making tree" of the latest measure from Kim Eng.

I will not rule or further government measures should the prices continue to spiral out of control. However, the latest measure would probably weed out older investors (people aged 45 or more) and investors who are unable to afford the monthly mortgage due to a shorter tenure. It makes it difficult for "yield arbitrage" to take place through a shorter tenure and a higher down payment of 40%. 

Let's talk about how a yield arbitrage works. Let's say i bought a property for $2m and the value has increased to $3m in the last 2 years. I then tell the bank to lend me $1m at 1% and I use the $1m to buy a fully paid property to rent it out for a 4% yield. In this instance, i have a yield arbitrate of 3%.  I was contemplating such a 'trade' earlier this year but decide against it eventually.  Figures provided for hypothetical case. 

Will Round 6 finally work and forced a correction in the property market? Kim Eng seems to think so and believed the latest measures will tip the segment closer to a 10% correction by end 2013... hmm... not too far from the 13% predicted by Morgan Stanley?.

Do share with me if you have originally intended to buy a second property but this latest measure has finally put you off? Or if you are a first time buyer, is this the final measure which you are waiting for? Happy property investing.

Monday, 8 October 2012

My Property Journey Rewind - 2007

The latest government measures to cool the property market hit us on 5 Oct 2012. I will analyse the impact another day but it really seemed that the government is trying its best to stop the property bubble from happening.

Let's continue with part 5 of my story today where we travel back to 2007.

Part 1 is here.
Part 2 is here.
Part 3 is here.
Part 4 is here.

It was Feb 2007. HSBC just announced that it will have larger than anticipated losses from default of subprime mortgages. This was the first warning point and the start of the subprime crisis. I was watching the subprime situation closely.

Lesson Learnt - Be informed and always keep yourself updated to the things that are happening elsewhere in the world. Singapore is a small country with an open economy and will always be impacted by other crisis around the world.

The second warning came in June 2007 when Bear Sterns went into trouble and have to be bailed out. This has a ripple effect on major wall street firms that lent money to Bear Sterns. The failure of Bear Sterns was one of the deciding factors for me to get out of the market while I can. While the property market is holding up in Singapore, somehow my intuition told me that sooner or later, the reality will hit home in Singapore and more failures will hit the market. 

In August 2007, i began to market my property actively and i became a serious seller. In Oct 2007 i received a cheque of $1,000 psf. Someone has offered to buy my unit for $1,218,000. I decided to let go of my unit but i also learn some interesting lessons in the process.

Lesson learnt - Negotiate the commission with your real estate agent.

I have always thought that the agent's commission is fixed at 2%. I was quite naive then. I didn't know that the commission is negotiable, especially for units which you have given 'exclusivity' to the agent. The 2% works out to be around $24,360. Don't get me wrong, i always believe in paying my agents for their services but in this case, the property has not even TOP yet! There was nothing much for the agent to do except listen to phone calls and email the floor plans to potential buyers. In fact, i believed my agent didn't market my unit actively other than to post the ad on their 'intranet'. 

I will share about the importance of having a good agent working for you in future posting but remember my posting today. The commission is negotiable and you pay them more only when they deserved it. - In this instance, a 1% commission would have suffice.

Another Lesson learnt - Don't have to sign exclusivity with any single agent. 

Another lesson i learnt is that you don't have to sign on dotted line the 'exclusive agreement'. I made that mistake and i think my agent wasn't 'too hungry' as a result of that. She took her own sweet time to market my unit and since she is going to receive 2% of the sale proceeds as commission, she wasn't too hungry either. She is most willing to share the commission by co-broking and was not properly incentivised to sell my unit at the best price available. In other words, our interest weren't aligned. I have since learned to sign my agreement with my agent verbally. He or she has to take my word for it that he is the exclusive agent and i am a man or my word.

So here you go, i sold my condo in Q4 2007 and that was before Lehman Brothers went belly up in 2008. As you can see, i managed to sell my condo at the high price back then. The reason why i sold back then was that i didn't know how long the crisis will last and how it will impact the market but my intuition told me to get out of the market while i  can.
The chart is below for your reference.

Lesson Learnt - With the benefit of hindsight, what you think is clever may actually be quite foolish!?

The interesting thing about this was that i thought i was a 'genius' in selling at the top but with the benefit of hindsight, the unit  which i sold at $1,000 psf has since risen to more than $1,500 psf in 2012. So do you think i was clever or foolish in 2007!? :P

The answer to the above question is this. If i have sold and then do nothing after that, i would really have become the most foolish man BUT If i had sold the unit and then do something during the crisis, then perhaps, i am not so foolish after all? My mindset back then for selling was to switch out of district 8 and move into either District 1, 9, 10 or 11. 

Here you go. My story till end 2007. I had a good holiday following the sale. I will share my journey with you what happened from 2008 onwards in my next posting and the foolish things i did with my 'new found wealth'.  :)  

Happy property investing. 

Sunday, 30 September 2012

How i will evaluate a property and a good website to share!

I found an interesting website yesterday. Never knew it existed till someone show it to me.

I think Squarefoot Research was created with the user in mind and intuitively, you will be able to find the information which you may want to know for a particular development.

I think it contains a lot of good stuff which you cannot find through the URA website or other websites. Let's just use one of the examples which i have used previously, Citylights Condo, to show you the thought process behind evaluating a condo.

1. First you get a summary page on the condo.

There are many interesting statistics here. You can know the tenure, the completion date, the number of units, the implied yield and even the buyer profile! There is a also a map showing all the amenities around the condo. 

Questions to ask myself?
Is this a Freehold or Leasehold unit?  
Is the condo near to amenities such as shopping malls, MRT stations, Highways, Schools.
Is the condo typically owned by foreigners or Singaporeans and the profile of the buyers.

Right below you have the transactions for the last 6 months. I think if you subscribe to this website, you will have even more details.

2. Transactions in the last 6 months

I think what is missing from the URA website is the lack of details on the unit numbers! This makes it difficult for me in the past to make apple-to-apple comparison and i have to get those details from my property agent. All units are different in terms of layout, size, level etc. Thus to have more granular details like the unit number is pretty helpful. For example i know from the table above that on Sep 5, a unit on the 8th floor of 570 square foot transacted at $1,665 psf while a bigger unit of 1,841 sq ft on level 40 transacted in July at $1,440 psf. As such, if i am a buyer looking for a unit in this development, i will know whether the price which i am offering or selling for that particular size or level is "fair market value".

Questions to ask myself.
Am i buying or selling at market prices for condo around the same levels?
What is the current market price i am expected to pay if i want to buy one?

3. Price analysis and trend

If you are into technical analysis, you will love the chart below! It shows you the price trend since 2005! How i wish i have such information last time. The trend is your friend! haha.

Questions to ask myself
Will the price will continue its uptrend?
Am i buying at a good base or at a top? (This one hard to predict) ^_^

Lastly, you can see some profitable and losing transactions on this development together with the holding period etc. Wow! This is solid. haha.

4. Profit and loss!

So out of curiosity, i actually went to check out the properties which i have sold in the past and found that the condo which i sold in May 10 was resold again in August 12 for a profit of $172,483!  

5. Rental

If you are buying to 'rent out' or looking to rent a unit there, there is also a list of historical prices to let you know if you are renting at a which percentile. But of cos, there is less granular details here, so you wont know the difference between the rents on the 4th or the 40th floor. Another useful feature is that you know that if you want to stay along this road, what will be the range of rentals which you expect to receive.

Questions to ask myself
How much monthly income can i expect from this condo?
Will the rental income covers the interest and mortgage installment?
Will i be able to service the mortgage if i am unable to rent out for 6 months or if the rental psf drops?

6. Peer comparison

The site must have been designed by a stock analyst. It also have a comparison with the nearest condos within the vicinity! It helps to now that Southbank is the best seller, followed by City Lights then City Square but by rental wise, it is Citylights, Southbank and then CitySquare Residences.


Questions to ask myself
Which condo is offering the best value and yield based on the current market price?
Should i consider alternatives such as Southbank given both are similar in terms of location and rental potentials? 

Well this will be some of my thought process when i analyze a property. Hope you will find this site useful and help you with your thoughts process whenever you evaluate a property to stay or rent out.

Happy house hunting.

Tuesday, 25 September 2012

Any further government cooling measures?

This is a continuation of my previous post

The chart below shows you the various government measures. It is interesting to note that the government has implemented 5 rounds of cooling measures since 2009. 

I am not sure how MS came to this conclusion but they are expecting residential price to tall by 13% by Dec 13?

In my mind, I was expecting the consolidation and correction (if any) will probably take longer and will hit the 180-200 levels only in 2014-2015.

To reach 180 levels in such a short span of time, you will need sentiments in the property market to become really bearish and i can foresee that happening only if we have another Lehman like crisis. Perhaps another "too-big-to fail" company from Europe or US going belly up and affecting the sentiments all over the world. That will be another Global Financial Crisis. (Remember don't miss this chance to buy should it happen again!)....

Happy property investing.

Sunday, 23 September 2012

My Property Journey Rewind - 2006

Lets continue with part 4 of my story today.

Part 1 is here.
Part 2 is here.
Part 3 is here.

It was 2005, we had just sold our HDB flat at a loss, placed a booking for a condominium but we were "broke" and needed somewhere to stay.

We decided to rent a 3 bedroom at a condo in the east. The condo was near to both my parents, in-laws and the caregivers. It was a new condo that had just TOP and was built by City Developments. The owners were staying in a HDB and decided to rent out to us at $1,600 per month for a 1,313 sq foot unit. However, it was on a low floor (level 2) and facing the kids pool.

I have to say that the rental market was pretty 'bad' during the early 2000s. It was the tenants' market and the rental was 'relatively low' in 2005 compared to now where you can only rent a HDB flat with the same amount of money. I have thrown the tenancy agreement away. I should have kept it for keepsake memory if i had known i will be blogging about it. hahaha. Anyway, i wanted to tie in that rental for 2 years and insisted on a 2 year tenancy.

Besides the fact that we have no money to buy a place where we can stay, one of the reasons for renting is that it allows me to feel the market vibes and it became a major catalyst for buying a second condo.

In middle 2006, i started to feel the market is starting to turn up. This is because the rental in my condo has already risen to $2,000 from $1,600. I had this feeling that the market is going to run soon and we started hunting for a second condo. 

Lesson to share - It's okay to rent if the rentals are affordable and you have no money to pay the downpayment. From June 2005 to June 2006, we were able to accumulate more CPF money (since the first condo was under Deferred Payment Scheme) and we were saving up diligently. By renting, i can also feel the market vibes when it starts to turn up.

We humans are creatures of habit. We like to stay in familiar places and surroundings. As such, we have no qualms buying a unit in the same condo where we were renting. We started to scout intensively within the same condo and by late 2006, we managed to find a unit on the top floor with a nice view for a 1,259 square foot unit on the top floor. Once again, we didn't have much options but play within our means. Both my wife and I had one principle in life, that is never borrow from our parents as this is their hard earned money. Just for a point of reference, at that time, we could have bought a freehold landed terrace for around $900k-1m and a semi-detached house for $1.2m-1.3m in the same area.

The owner bought the place for around $660,000 during its launch and initially didn't want to accept a loss. However, they were 'genuine sellers' as they have committed to another property elsewhere. A good thing about buying during the doldrums is that it is a 'buyers' market. We saw the same unit 3 times and put in a cheque of $600,888. I always like to end the buy offer with a nice number. Somehow, it gives the seller a good feeling and an "added incentive" to accept my cheque. The thing about property is this.... it is a very personal experience. It reminds me of a scene from Harry Potter. It is not you who choose the wand but the wand who chooses you. hahaha. Property is probably the same, you will know it when it comes. The feel good vibes from the property must be right and you will feel it straightaway.

Our landlord was more than willing to let us 'terminate' our lease earlier than the 2 years without any penalty. He can easily rent out the unit again at $2,000 or better but he wanted to move into the condo. You can probably imagine how 'funny' it was when we told the movers we want to shift from one unit to another unit within the same condo.

Here you go, a pictorial view of my journey as at end of 2006. Till we speak again next week.


Sunday, 16 September 2012

Don't sell your HDB Flat if you can!

It is interesting for me to make that statement considering that i share with you that my first property purchase ended in a loss.

The times has changed because the rules have changed. Previously, we were unable to rent out the HDB in its entirety and the rules were pretty stringent. However, under the current rules, owners who have fulfilled certain conditions will be able to rent out their flat.

One of my closest relatives have an executive flat and the family shifted back to their parents' place and were renting out their flat for the last 2 years. 

Imagine the rental is $2,500 a month (on the low side) x 12 = $30,000. That is a cool $30,000 a year in the pocket. They have bought the flat directly from HDB for much lower than $300,000. Nevertheless, if i use $300,000 as the cost (including interest), the yield is an unbelievable 10% each year! Where on earth can you find such good stream of passive income going into your pocket every month! If i am allowed to buy a HDB flat and rent it out, i will definitely consider it even if the yield is not as high as theirs. :) 

As such, if you are in a very enviable situation where you can buy a private property or own one without having to sell your HDB flat, then by all means, make use of this opportunity to create a stream of passive income for yourself. It is one of the highest interest yielding assets around.

My relatives, unfortunately, did not heed my advice. They sold the executive flat for $650,000 in April this year. After they sold, my friendly advice to them was this "Now that you have no position in the market, the greatest difficulty for you is to resist the urge to buy a property."  

They now get very excited whenever they read news of HDB flat being sold for $1m or that prices of private properties are not coming down, etc etc. They are now technically "homeless" and are afraid that they will miss the property cycle again. They now go property hunting every weekend and my guess is that they will get into one in the next 6 months. 

That goes back to my property beliefs. It is very difficult to time the market and by being vested in one property at any time, you will feel less urge to "chase the market". I am currently vested in one and watching by the sideline, ever ready to get into a second property when the timing is ripe. In the mean time, I will continue to save up. 

Happy investing and wish you success in your pursuit of financial freedom. :-)

Sunday, 9 September 2012

My Property Journey Rewind - 2005 Selecting a condo

Let's continue with part 3 of my story today

Part 1 is here.
Part 2 is here.

The background to this story can be summarized as follows. It was 2005 and we were looking for a condominium in district 8 since and districts 9,10,11 were too "expensive" for us.

We were deciding between 2 condominiums in district 8. One was City Square Residences and the other was Citylights

The 2 condos were still being constructed and there were no 'real units' to view. We have to make our decisions based on the location, the floor plans and 'gut feel'. As in all new condo launches, we can easily be influenced by the glossy brochures, the glitzy showflats and eloquent property agents. 

In Singapore context, the check lists can be as follows:

1.  Are there good primary schools within 1km?

As mentioned in my earlier post, many of our decisions are influenced and affected by government policies. One of the policy is the primary school admission criteria where children (used to include PRs also) who live within 1-2km of the school compound will get priority in admission. As such, many parents will buy property near good schools. The presence of good schools located within 1km of your condominium will likely maintain and enhance the value of your property. The only trouble is the congestion it creates during the mornings and evenings if you are staying nearby :-P. This wasn't a consideration for me back then.

2. Is the condo located near MRT?

If a condo is located near MRT, it will likely fetch a higher value vis-a-vis another condo further away. It will also appeal to people who wants to rent the place. The only concern for me is the 'noise pollution' you may get. As such, if you buy near MRT stations which are above ground, you will have to consider if you can live with the noise. It is interesting to note that many residents who stay near MRT tracks will "not hear" the noise any more after 6 months. :) For your information. City Square is beside Farrer Park MRT and Citylights is beside Lavender MRT.

3. Are there amenities near the condo?

If the condo is near shopping malls, coffee shops, library, parks, sport complex etc, it is likely to fetch a better resale or rental value. The concern will be the congestion such amenities may bring. It can be very crowded at the shopping malls on weekends or parks. For your information, City Square Mall will be constructed beside City Square Residences. I don't like the hotel currently beside Citylights though.

4.  Is the condo a leasehold or freehold ?

For value wise, i will go for a freehold unit because it represents better value for money although it is sold at a premium. However, i have since realised (from my personal experience in the how the resale prices of City Square and Citylights move) that in a red hot market, it doesn't really matter to many buyers whether the development is a freehold or a leasehold. This is especially if the government allows developers to top up the lease for redevelopment. In addition, the yield from a leasehold property is better than a freehold one because people who rent the units wouldn't care if it is freehold or leasehold and the capital outlay for a leasehold unit is typically lower. City Square is a freehold development but Citylights is a 99 years leasehold development.

However, during an economic downturn, i have witnessed that freehold units will preserve value better and the drop in value is not as drastic. If i am buying the condo for investment to hold for a few years, a leasehold will probably be sufficient. If i am buying to keep the property for my children in future and intend to stay for an extended period, then a freehold unit will make better sense.

Once you are okay with the location, you have to select the units within the development.  Some of the checklist will be:

1. Is the unit facing the evening sun?

Personally i prefer units facing the North-South direction. It can get pretty hot and humid in certain months if your unit faces west. However, i have also realized that foreign buyers from America or Europe seek the sun, so they probably wouldn't mind the evening sun if you sell to them.

2. Does the unit come with a view?

Typically everyone would prefer to have an unblocked view. As such, you either choose the pool view (which can get rowdy or noisy during weekends) or you have the outer view. Make sure your views are not blocked by any upcoming developments. I remember friends buying units in The Bayshore for the seaview only to have their views being blocked by Costa Del Sol a few years later and it was a "complete" block. As such, if the unit you have chosen faces an empty plot of land, it will be very sensible to find out for yourself the future URA development plans for it. If your unit has a view of conservation shophouses, then you are pretty safe in that there will not be any high rise condos blocking your views in future. (For example the units in Duxton facing the Chinatown area will have unblocked views).

3. High floor or low floor?

I prefer to stay on the higher floors but note that it will be more expensive by a few thousand per floor.

4. Layout?

I prefer layouts that are squarish or rectangular as they are more practical and functional. I am not sure if my gut feel is true but i always think that development that look unique on the outside will have a lot of wastage inside (such as curve or corners that is impractical). Perhaps someone who stay at Reflections at the Bay can tell me if it is true? haha

5. Is the unit near power station or the garbage collection point?

I will prefer to stay further away from them. The resale value may also be affected if they are located too closely. 

6. Is the unit big enough to meet the immediate and future needs?

It is a good idea to plan for a unit that will meet your future needs. You wouldn't want to consider a studio apartment if you intend to have kids 2 years later.

7. Can i afford it?

Last but not least, don't bite more than what you can chew. Make sure you don't overstretch yourself and the loan quantum is within your comfort zone.

So if you were in my shoes back in 2005, which condo would you choose? Will it be City Square or Citylights? 

In the end, i chose City Square Residences over Citylights primarily because City Square is a freehold development. I am also "bought over" by the upcoming City Square shopping mall and the fact that it cost less than Citylight. Citylight in turn, has a better view as the higher floors will be able to have a panoramic view of the sea. I also have had some concerns over the location of City Square as many foreign workers may gather at the park near the mall during weekends. 


With the benefit of hindsight, the prices have City Square was lagging behind Citylights for a long period of time from 2006-2008. However, in recent times that i think the two developments are finally selling at prices near each other. In addition, the Citylights were completed earlier, hence you can receive rental income slightly earlier. I was just thinking if i can travel back through time and have to choose again between these 2 developments, will i still make the same decision? Which development would you have chosen if you were in my shoes?

Recent Transaction prices

Option to purchase exercised.

I dug out some old documents to ensure i got the dates right. Well in case you are interested, i paid $631 psf for a very high floor 3 bedroom corner unit. But i since let go of the unit some time back. I will share with you my thoughts when i decided to sell and the lessons learnt next time. :)

Happy investing and i hope this article will help you when you are faced with similar situations in future :)

URA Chart - To show you the various transactions and the timeline.

Till Next time

As i rewind my property journey, I will share some of the lessons learnt from the subsequent transactions and the importance of having a good property agent working for you. Ciao.

Thursday, 6 September 2012

Good old advice?

I was pretty glad that i streamline my blogs this year because different assets classes require different mindset and mentality so when you are at my various blogs, you have to make sure you are in the right frame of mind.

One of my facebook fans "joked" that i compartmentalize my P&L :)

I am sharing that you have to think differently when you are wearing different hats and managing different accounts. 
I would like to share a quote from Benjamin Graham in his book below

"Never mingle your speculative and investment operations in the same account, nor in any part of your thinking"

Today, i was in a cleaning up mood and went through my old postings from this blog to relabel them and see if there are relevant posts which i can "recycle" into other blogs and stumbled upon this old post that is relevant to the Real Estate. 

I actually did made a recommendation for readers not to miss the next property cycle on 5 Oct 2008 and the price level did drop to 140 levels around 2009 Q1  :-) haha if you have been a reader back then and have acted on it, probably you will be thanking me today. I have also shared with you my investment beliefs recently, dont miss the cycles but don't catch the wrong one either.

One of my friends bought her unit in Simei in late 2008 or early 2009 (cant remember the exact date) despite my efforts to ask her to buy a better located one. hahaha but in any case, she is sitting on a nice buffer of profits today. The development will TOP in a few months.

I haven't start on my next posting of my property journey, needs to keep digging back my memory banks. In fact i found my old S&P agreements on the condos i had bought and sold. Maybe i should take some pictures and post them here :)

Happy investing. Remember - be patient and don't give up.

Wednesday, 5 September 2012

Govt Policies and the property market

As in most countries, the property market in Singapore is greatly affected by government policies. You can imagine this to be so since the majority of Singaporeans stay in HDBs and HDBs are governed by policies. HDBs aside, private apartments and landed housing are also governed by policies.

I remember during the run up in the late 90s, a capital gains tax was implemented to curb the hot market and that quick action probably 'killed' the market for many years. The Singapore property market was in doldrums from 2001-2005. 

The government introduced a new policy yesterday to prevent shoebox units from mushrooming into the suburbs area. Let's take a look at the various government policies that are implemented to stop the property market from forming a bubble from 2008 onwards. 

As you can see, new measures were introduced whenever it fails to cool the market. You can be assured that more will be coming if the price continues to rocket.

Let's take a look at the rise of shoe box sales and you can see that it is on the rising trend.

The reason why shoe box units are popular is because the 'capital outlay' in terms of actual quantum is not too high. As such, it is more affordable. The developers see profits to be made by having more shoebox units because they can achieve a higher selling psf for its  project. The report also has a chart to show that the majority of the buyers of shoe box unit has a HDB address. Not sure exactly the implication behind this statement but perhaps this article can shed some light.  

I guess the irony is that Capitaland CEO said the shoebox units is inhuman but the company continues have them in their project. You just can't ignore the market forces. The shoebox policy will not come as a surprise since the Minister has given his warnings a few months back.

Anyway, I have not visited a shoe box showflat befoew before but i can imagine how it can look like because there is always a 'show flat' at IKEA showing you all the space saving ideas! :)

Do you currently own a shoebox?  Do share with us where and why you bought a shoebox unit. Is it for rental or for capital gains? 

Happy Shoeboxing? :)

Thursday, 30 August 2012

Good website to share.

Before i continue on with my story, i actually stumbled on an interesting website which clarify some of the concepts which i have been sharing in very simple terms and with illustration. Will add this to the useful property blogs at the side bar. I previously share my investment beliefs here and you may be able to see some similarities..

I thought some of the articles were worth a read.

Happy reading.

Friday, 24 August 2012

My property journey rewind - year 2005

Let's continue with my earlier blog posting, where my first HDB purchase ended with a loss.

It was year 2005, we were still counting our losses and trying to figure out how much was left in our CPF account after the loss. The fortunate thing is we didn't have to top up the "CPF losses" suffered from the sale but the bad news is, there wasn't much money left anyway. :-) The loss has almost wiped out our CPF accounts and we each have a couple tens of thousands remaining that can be utilized.

There is a silver lining in that we have almost been working for  more than 8 years and have been diligently saving up over this period but the combined  amount isn't fantastic, probably around $100k. Coupled with the remaining $50,000 in the CPF, we have a capital of $150,000 to start with.  Armed with $150,000, we started to look for properties which we can invest in.

In 2005, there is a wonderful wealth creating instrument called the "deferred payment scheme". This scheme was set up during the property doldrums and was withdrawn in Oct 2007.
Basically a deferred payment scheme ("DPS") works like a "call" option. You pay 20% of the purchase price (for the call option) and pays nothing till it TOP, which can be 3-5 years down the road. 

Given that we had just suffered a big loss, we were very wary of getting into another debt situation and was certainly in no mood to pay for mortgages. The DPS suits us perfectly. By working backwards, we figure that ($150,000 divide by 20%) we can afford to pay for a $750,000 condo. We then worked out that  a 1,200 square foot condo will meet the needs of a small family. In other words, we need to find a condo that can 'fit ' a small family for a budget of $750,000.

I got this chart below from Propwise to show you the various districts in Singapore.

Having learnt our previous lesson that location is very important, we set out to find condominiums in district 9,10,11. Oh boy, we realized that $750,000 really couldn't buy us a decent size unit in these high class districts. The new condos of a 1200 sq ft size were selling for at least $1m. We probably couldn't' afford it. To be honest, I don't think we tried hard enough, we weren't experienced enough and we definitely weren't creative enough. If you think about it, $250,000 x 20% = $50,000. If i can use some short term borrowings from the banks, i can possible fork out the extra $50,000 needed to secure a condo in a better location. We decided to give these districts a miss and moved to the fringe city area, district 8.

With the benefit of hindsight, the decision not to buy a condo in district 9,10,11 back then was definitely not a 'wise' decision because in the any market run up, the 'blue chips' always run first and this was exactly what happened in the subsequent run up. The condos in district 9-11 moved up first in a significant way before it spreads to other districts.

Lesson learnt -  Location is important (once again) and prices in prime districts always move first.

There is one trait which a lot of Singaporeans have in common. We all like new things. New condo, new car, etc. but frankly, new things may not be the ones that offer the best value. The reason why i said we didn't try hard enough is because we were looking for new condo launches in these districts that offer defer payment scheme. We were probably 'blinded' by the glitzy brochures, the designer show flats but fundamentally, we like new things.

I have a friend who bought an old apartment in Cairnhill Mansion in 2005 from a bank sale. He paid $1.1m for a 2,000 square foot apartment. If you can see from the prices below, he is already sitting on excellent profits but he is waiting for it to be 'en-bloc' eventually. 

Anyway, back in 2005, we didn't have much money and we have zero experiences in real estate, especially private properties. There wasn't anyone to guide us along or give us directions and we only want 'new stuff' and weren't even looking at the older apartments. In addition, probably there weren't many good property websites or blogs back then to guide us. 

Lesson learnt - Widen your horizon, don't just focus on new property developments. The older developments may offer better value for your money. 

In my next posting, i will share with you what happened when we were searching for a new condo in district 8 and the lessons learnt from that episode. It was an interesting episode because that was our first private property purchase and we had to choose between 2 condos that were newly launched at that time. Ciao and have a good weekend! 
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