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? :)
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