Parents nudging 32 year old to buy private property.

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.

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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?

Why CPF only cares how much to take from our OA and SA?

The CPF is a tool which we should make good use of in planning retirement funding. 

How we make use of the tool depends on our circumstances.

Just do what we feel comfortable with. 

As long as we are approximately right, we will do OK.






Hey AK,

Thanks for sharing your thoughts although it can be very ambiguous and cryptic most of the time! 

I know how you are trying to not be made liable in case of anything here :)

In between our mails, I did actually drop by CPF Board to check with one of the counter people on my same ask.





So the long story short (correct as of today's goalposts) is that CPF only cares about how much to take from our OA + SA to setup our RA, in accordance to our choice of BRS, FRS or ERS, once we reach 55.  

How we get to that amount is none of their concern.

Yes, you may have addressed this previously or even known about it yourself but I must say, it's really assuring to hear it on my own from the horse's mouth.





Now, I'm even more motivated to get to my targeted amount I shared in my earlier mails by tapping on CPF's risk-free 4% p.a. rate. 

Of course, "downside" is that I can only enjoy at age 55 lah. 





Well, slowly lah hor... take care of my lowest hanging fruits first.

Like you said, as long as we're doing approximately right, we'll do OK :)

Have a good afternoon, AK!

Sincerely,
F

AK agrees with F, of course. 

So does my niece.

A present from my niece.
I think she is approximately right. ;)

Related posts:
1. Get the most out of ASSI.
2. A chat on CPF Top Ups etc.
"In investments, we go for low hanging fruits first. Why should it be different when it comes to planning for retirement adequacy?" - AK