CCR, RCR or OCR for rental income? AK talks to himself.

When we buy properties in Singapore, there is often this idea that if we buy one in CCR (Core Central Region), we should do OK. It is like amateur watch collectors gravitating towards Rolex watches because the brand is deemed safe. To a certain degree it is true as many foreign investors naturally gravitate towards properties in CCR when they invest in properties in Singapore.

Those who are more familiar with Singapore will be braver in venturing out of CCR and into RCR (Rest of Central Region) or even OCR (Outside Central Region). This is probably a prudent choice if they are investing for rental income as well since it is not uncommon to hear of properties in CCR with rental yields of 2% or lower. Sheesh. Why bother?

According to the Singapore Real Estate Exchange Property Index, rental for private non-landed properties in CCR peaked in the months of July and August 2013, post GFC (Global Financial Crisis). It was some 30.8% higher compared to January 2009.  Since August 2013, rental has declined by some 6% by June 2014.

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For properties in RCR, rental peaked in the month of February 2013 and was 38.6% higher compared to January 2009. Since then, rental has come down some 6.7% by June 2014.

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For properties in OCR, rental peaked in the month of January 2013 and was 33.8% higher compared to January 2009. Since then, rental has come down some 7.5% by June 2014.

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From these numbers alone, it would seem that there is more resilient rental demand in the CCR and buying a property in CCR provides greater resilience in rental income. It is also probably because there is more limited new supply of properties in the CCR compared to RCR and OCR.

In terms of percentage growth from January 2009 to June 2014, rentals in CCR, RCR and OCR were higher by 23.2%, 29.3% and 23.7%, respectively. Interestingly, these numbers show that, in general, properties in RCR are clearly the winners when it comes to growth in rental income for the real estate investor, not properties in the CCR.

Also, if we should look farther back to the peaks achieved in January 2008 for all three regions, we would see a startling outperformance for properties in RCR and OCR compared to those in the CCR.

Rentals in RCR and OCR surpassed their peaks achieved in January 2008 by a wide margin while rental in CCR barely recovered to the same level. So, in the last few years, people who bought properties in RCR and OCR before the GFC for rental income would have done better and are still doing better than those who bought properties in the CCR during that time.

Buy a new condo in Queenstown?

Of course, we are only looking at rental indices here. We have not looked at purchase prices. For sure, if we managed to buy an undervalued property anywhere in Singapore, we would do better than the average property investor because we would have a margin of safety.

Where do we find undervalued properties in Singapore? You tell me. I am sure there are some around but they are just harder to find these days. Sounds like a lot of work and we might not even find anything for all our efforts.

So, I prefer to ask another question. When do we find undervalued properties in Singapore? If I were looking to invest in a property for rental income in Singapore now, I would wait. (Hint: Read related post #5.)

Then, CCR, RCR or OCR? You decide.

Source: URA

Related posts:
1. Don't think and grow rich.
2. Real estate: Affordability and value for money.
3. Apartments with rental yields of 4.95% to 7%.
4. Where to buy a shoebox apartment for investment?
5. Smaller apartments' prices more resilient.
"we expect the private vacancy rate to rise ... to 9.9 percent in 2016," ... noting that historically when vacancy rates hit 8 percent, rents and prices start declining.
(Source: CNBC)

The best insurance to have in life.

"Income investors love them and growth investors rarely expect them, but just what are dividends?"

I have blogged about how having passive income that equals our earned income over time will give us the option to work because we want to and not because we have to.

I have also blogged about why there is a higher purpose to having passive income in our lives.




Personally, I find all these reasons very persuasive and make working towards having a passive income stream in my life worthwhile.

Over the years, I have made contact with people who are not convinced. One example:

"I make so little money. Can't save much. Invest so little, what is the point?"





Aigoo... (I have been watching K-drama).

Actually, having passive income is also really a form of insurance.

It is an insurance against the possibility of an economic recession and a pay cut.

It is an insurance against the possibility of retrenchment.

It is an insurance against the possibility of disability which restricts us from active employment.




Insurance is important because bad things happen in life. Passive income is important and it is not just something that is nice to have.

Passive income is the best insurance to have in life because it is able to free up the most valuable resource we have in life and that is the resource of time.

Gradually, as our passive income grows from a stream to a river, our earned income could become something less critical.




Over time, our earned income could become something that is only nice to have.


Related posts:
1. Building an income portfolio.
2. Passive income: A higher purpose.
3. Do the right things and transform our lives.
4. Millionaire or not, plan for retirement.
5. Win $14,000 to $19,200 a year?
6. Matthew Seah on financial freedom.