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Parents nudging 32 year old to buy private property.

Wednesday, September 21, 2016

Hi AK

I have been reading your blog for a couple of years. Very inspiring. Thank you very much for talking to yourself. 

I have been talking to myself a lot lately but I couldn’t get to anywhere. Not sure how should i proceed, appreciate you could talk to yourself if you were in my shoes. 

I am a 32 yr old Singapore PR - currently stationed overseas but will be going back to Singapore for good soon. 


Savings of around S$150k, investment of around 150k (which gives me around 10k in dividends per year), CPF OA of around 80k. I will be earning around 8k-9k per month when i return. 

All these while, I have been savings up - with the idea of buying a home in Singapore. Unfortunately, I could only buy a private  property. 


My parents have been encouraging me to buy a property in Singapore (as my sister who is 10 years younger will be graduating next year and she could live with me; my parents could also stay with us whenever they visit). 

I used to rent a room in a HDB flat, should I do the same when i return to Singapore? I have been waiting for the prices to drop but it is still not dropping significantly. 

What would you do if you were in my shoes? How to balance between comfort and being prudent? How to talk myself out that I need to own a roof over my head? 

I hope God AK could enlighten me. 

Thanks! 
YR.





Hi YR,

I would ask readers who are thinking of a bigger home to read this blog post:
http://singaporeanstocksinvestor.blogspot.sg/2015/07/do-i-need-bigger-home-and-what-to-do-if.html

Ask the 3 questions I shared in the blog post.

In your situation, you can only buy a private property since single PRs are not allowed to buy resale HDB flats and you need one by next year when your sister graduates.

If you are thinking of leaving your home as a legacy, then, you might want to get a freehold or a 999 years leasehold condo instead of a 99 years leasehold condo.

To be prudent and not to stretch finances too much, get a property that is priced $1 million or lower. 

This is going to be a consumption item. A (30 year) loan of $700,000 to $800,000 will keep monthly mortgage repayments at around $3,000 a month or lesser. This repayment amount will rise when interest rates rise in future but it should remain manageable for you, everything else being equal.

With a $1 million budget, a 2 bedroom or even 3 bedroom condo in OCR Singapore are within reach.

Best wishes,
AK

Sometimes, we might have to do what is less financially prudent because of more onerous obligations in life.

So, although it might make sense sometimes to rent a home rather than buy one, we just have to make the best of a financially less prudent decision.

----------

Interesting trivia:
Julian Cheung Chi-lam and Anita Yuen Wing-yi decided years ago never to buy property in Hong Kong. The reason was simple. Prices were outrageously high... Cheung once reportedly remarked: “With the amount I need to pay for a house [in Hong Kong], I can rent till I’m over 130 years old.”

Source:http://www.scmp.com/comment/insight-opinion/article/2020388/when-even-hong-kongs-super-wealthy-opt-rent-something-not

Related posts:
1. Affordability and value for money.

2. Wife wants to sell flat and buy condo.
3. Rule of 15: Buy or rent?

3 comments:

Ming-jie Chai said...

The property boom in Singapore is over. Going forward, it'll be very difficult to make much capital appreciation, if any, through property purchase/investment. Given the present dire economic situation and a likely projected recession in Singapore, I'd much favor rental against property purchase because it's much more efficient and makes more sense to channel the huge capital outlay required for property purchase to purchase other higher-yielding assets. However, I totally agree with AK; Whether or not to buy a property depends on the EXTENT that the property can be enjoyed. For example, if the property is purchased for joint parents'/siblings' enjoyment, then it becomes much more worth it as compared to solo enjoyment or, worse, investment. After all, the love for one's parents/siblings - in the form of getting a cosy abode for them to stay in - is priceless and no amount of capital returns can ever match that. In short, if it's for one's own stay - I support rental; if it's for multiple-occupant stay - one might consider buying.

Kevin said...

Hi AK and YR,

You can also consider the option of renting an entire HDB flat(3 room or 4 room unit) and splitting the rent with your sister next year.

Alternatively, you might want to consider district 19 in OCR Singapore as the vacancy rate for apartments and condominiums in the that region stands at 12.3% and 11.9% respectively as at 1Q2016 if you decide to purchase a private property for own usage. Based on the figures, there is a high possibility for prices to fall greater.

As what AK said, not to stretch the finances too much, get a property that is priced $1 million or lower. Do note that a Singapore PR is required to pay a additional buyer stamp duty (ABSD) of 5% for the first property purchase.

AK71 said...

Hi Kevin,

Sharing a rental flat with his sister is a good idea while waiting for property prices to possibly drop further. Coincidentally, I just told another reader that waiting for prices to fall more in NE Singapore is probably a good idea as he didn't mind OCR and a small format condo unit.

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