February 13, 2014

Interim Review of Crystal Ball Prediction

By Centauri78

If you have been following the blog, you may recall a prediction that I made a while back in August 2012 with regard to the residential property market, as measured by the URA housing price index. The prediction was for prices to rise for a couple of years from the beginning of 2012, and for prices to stagnate thereafter. Now that the first period of the prediction is over, let’s take a look as to where the market is now. Continue reading

November 23, 2013

An idea to explore if you’re renting (Part II)

By Centauri78

If there’s part I, there must at least be a part II, right? Of course!! If you’ve been waiting for this sequel, sorry I’ve kept you waiting for so long. I hope I pack enough of a punch here to be worth your waiting time!

So anyway, some of you out there may be thinking that you’re nice and comfortable living in your rental place and moving’s such a hassle. However, property ownership still sounds like a good option to hedge against rising rentals. Well, certainly, you can do both! However, there are a few options, and correspondingly, there are a couple of questions you have to ask. Continue reading

October 22, 2013

Investing for income

By Centauri78

This article isn’t about property, but I thought since I’d written about property shares and REITs previously, this may be relevant to some of our readers.

While I am a proponent of investing for income, one thing that irritates me to no end when I read it in articles written by income investors is the concept of yield over original cost.

I read an article a while back by an ex-financial advisor. In it, he was saying how while he was still a rookie, he advised his client to switch from a low-yielding share to another counter having a higher yield. The client refused, saying that while the yield is low, it is actually giving her more than her original buy price each year, or more than 100% yield over original cost! The author, unjustly shamed, took this “lesson” and presented it as a truth of income investing.

Continue reading

September 11, 2013

End of Season 2: Review and Thoughts…

By Centauri78

Dear Readers,

Season 2 of The Straits Times Property News Heat Map has come to an end. We are taking a break from updating the heat map for a few weeks. We will inform you in due course when Season 3 will start up. Here are the results of Season 2:

Week of Negative Neutral Positive Total
13-May 1 6 3 10
20-May 2 6 3 11
27-May 2 13 5 20
3-Jun 2 8 2 12
10-Jun 0 10 2 12
17-Jun 1 15 2 18
24-Jun 3 11 2 16
1-Jul 2 10 3 15
8-Jul 0 11 1 12
15-Jul 3 10 3 16
22-Jul 2 7 1 10
29-Jul 3 4 2 9
5-Aug 2 6 2 10
12-Aug 1 7 2 10
19-Aug 3 7 2 12
26-Aug 1 5 0 6
2-Sep 1 6 0 7
Total 29 142 35 206
% 14.08% 68.93% 16.99% 100.00%

Based on the data above, we can see that the news flow is rather slow, with an average of 12.11 articles per week. Negative and positive news are pretty much balanced. The NUS SRPI currently is only updated till July, but we can definitely see a slow-down. I feel confident in predicting that when the figures comes out for August and September, it should continue the sideways movement.

Latest NUS SRPI up to July 2013. Thanks, NUS!

Qualitatively, we are seeing the cumulative effects of the latest cooling measures in Jan and the TDSR taking hold in the market. It has now become so onerous to buy properties as an investment that the market is taking a break as sellers want to be compensated for their replacement costs and buyers wait for prices to come down, resulting in stagnant prices and low volume.

Personally, I think that with all the cooling measures put in place, those who bought property during this time are in such a secure investment, given the huge amount of equity, that they are able to hold on to it even if times are bad. Chances of fire sales are becoming less and less likely. If anything, the government measures have put a base on prices, and people should recognise this as the new normal.

Over the last week, various people have told me that property prices would drop 5 – 10% over the next few years. They may well be right. After all, with volumes so low, price movements are bound to be exaggerated. However, it doesn’t mean that you will be able to buy the property that you want, even if the index says that prices have dropped. You would need something drastic to happen, like a crisis in China, or something. However, we also need to remember that the cooling measures (or at least some of them) are reversible, so you would need to keep that in the equation.

Disclaimer:
Centauri78 is not a licensed financial advisor. The information contained here is purely personal opinion, and whilst I make every attempt to ensure the accuracy and reliability of the information, this information should not be relied upon as a substitute for formal advice or as basis for investment.

August 5, 2013

An idea to explore if you’re renting (Part I)

By Centauri78

I imagine that in every tenant’s mind, there comes a time when they will question whether it is better to continue renting or to buy a home. After all, rent paid is basically water under the bridge, lost forever. If they were going to pay anyway, wouldn’t it be better to pay your own mortgage and build equity? Just about everywhere, home ownership is the cornerstone of the [insert country name here] Dream.

Of course, there are pros and cons to renting vs owning. Here’s a quick (non-exhaustive) rundown of the main pros and cons:

RentOwnProsCons
Continue reading

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July 27, 2013

Just to share…

I was recently invited to blog on BTInvest, a new online portal by The Business Times, a cherished opportunity to learn from professionals more knowledgeable than myself and also share my personal views and personal experience on investments.

Just thought I’d share my first BTInvest post with all my dear readers here. I will of course still be publishing news and my views on the real estate market here, so please do continue to lend us your kind support by visiting regularly! Continue reading

July 5, 2013

Affordable homes in Singapore? Looking beyond cooling measures.

The 8th round of property cooling measures announced by MAS on 28th June is intended to be a long-term one, put in place not just to tackle the current market situation, but to maintain prudent credit controls in the years to come.

I think at this point it would be timely to remind ourselves why Singapore’s government is so fixated on avoiding a property bubble. Sure, housing affordability is always of certain political significance in any country, but I struggle to think of any other nation where the government is quite so heavily involved in the property market. Having chosen to take on the mantle of providing public housing to over 80% of the population for all these decades and being so closely involved in the control of the private housing market too, it is unsurprising that the electorate considers the health of the housing market a key element when assessing their overall satisfaction with the ruling party’s performance.

As Minister Khaw has pointed out previously, he faces the delicate task of balancing the public’s call for affordable housing, with the need to maintain stable property prices to protect the interests of many Singaporeans whose homes and real estate holdings represent the bulk of their total net assets. Thus in the government’s efforts to provide affordable public housing, they must at the same time avoid a property crash at all costs.

Bending over backward to balance

Bending over backwards to balance

The main focus thus far has been on beefing up rules and regulations: hiking stamp duties imposed on buyers and sellers, and reducing the availability of financing by lowering loan-to-value ceilings, restricting loan tenures, and general tightening of credit controls. But as any honest draftsman or legislator would be able to tell you, it is near impossible to draft a completely watertight book of rules without becoming unwieldy and impractical to implement. And in any case, is there substantive proof that heavy regulatory control is better at maintaining a stable market than free market forces?

An increasingly complex, convoluted series of rules and regulations governing the property market certainly poses a challenge for layperson consumers seeking to purchase or deal with their property holdings. I believe it would be helpful to take a look at trends that have been taking place both in Singapore and other cities for alternative means of coping with rising home prices. Continue reading

June 28, 2013

Hot off the Press: MAS Introduces Debt Servicing Framework for Property Loans

MAS has just announced the introduction of a debt servicing ratio framework, with effect from tomorrow, 29 June 2013.

Whilst the cap of 60% on debt servicing ratios (monthly debt obligations versus monthly income) is not something drastically different from banks’ current practices, my focus would be the impact of the following restrictions:-

  • borrowers named on a property loan must now also be mortgagors (ie. co-owners) of the residential property for which the loan is taken;
  • “guarantors” who are standing guarantee for borrowers otherwise assessed by the bank at the point of application for the housing loan not to meet the TDSR threshold for a property loan are to be brought in as co-borrowers (and therefore, must also become co-owners); and
  • in the case of joint borrowers, that banks use the income-weighted average age of borrowers (based on borrowers’ gross monthly income) when applying the rules on loan tenure (i.e. lower LTV-ceilings for loan tenures exceeding 30 years or extending past a borrower’s 65th birthday ). Continue reading
June 16, 2013

The all-monies mortgage: Interest rate hikes are not the only risk

If you own private property in Singapore, it’s highly likely that you took up a mortgage loan when you first purchased it. Given the widespread use of mortgage loans here, I find it rather alarming that the vast majority of people who have taken up mortgages in the past are unclear on even the basic terminology used in mortgage loans.

A common mistake laypersons make is using the terms “mortgagor” and “borrower” interchangeably. In simple situations, where for example a home is bought by a single person and the loan is similarly taken in single name, the borrower and mortgagor would indeed be the same person. However, the term “mortgagor” specifically relates to an owner of the property that is being mortgaged, whereas “borrower” refers to any parties that are contracting with the lender bank (the mortgagee) to pay back the mortgage loan granted. By necessity, all owners of a mortgaged property are required to contract as borrowers, thus all mortgagors are borrowers, but not all borrowers are mortgagors.

The distinction between the two becomes relevant when non-owner borrowers are included as co-borrowers to support loan applications. Due to the rise in property prices and the various cooling measures introduced, some property purchasers have resorted to adding non-owner parties as co-borrowers, or buying properties together with parties who are either younger in age or able to provide stronger income documents (or both) in order to obtain larger loans, or loans of longer tenure. Continue reading

June 11, 2013

What is really happening in the Singapore property market, as told by the Heat Map

Over the last 4 weeks since we restarted The Straits Times Property News Heat Map, news flow has actually been pretty slow. With 53 articles talking about the property market in 4 weeks, that’s an average of 13.25 articles per week or 1.89 articles per day. In Season 1 (9 Sep 12 – 19 Jan 13), there were 273 articles in 19 weeks, or 14.37 articles per week, or 2.05 articles per day on average.

 Week of  Negative  Neutral  Positive  Total
13/5/13  1  6 3 10
20/5/13  2 6  3 11
27/5/13  2  13  5 20
3/6/13  2 8 2 12

The proportion of articles that were positive, neutral or negative is also instructive. We had 7 negative (13%), 33 neutral (62%) and 13 positive (25%) articles in the last 4 weeks. In Season 1, we had 10% negative, 49% neutral and 40% positive. Continue reading

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