HDB Upgrade VS Safe Investment

[jljh888]

Recently, an agent spoke to me and ask me to sell off my MOP HDB and upgrade to a resale EC.

I went to do a calculation and it seems like even investing in a safe method like SSB / SGS with a 2.x % returns would be similar to the possible return of selling the resale EC in the future.

If i were to invest in other safe stocks, like Mcd , KO, Brk.B, the returns is even greater.

Aside from a better lifestyle, does upgrading to a resale EC , or shifting to private make sense ?

 

[BBCWatcher]

Aside from a better lifestyle, does upgrading to a resale EC , or shifting to private make sense ?

We're assuming it is a better lifestyle. That's not necessarily a given. You might hate your new neighbors, for example.

But let's assume it's a better lifestyle. In my view it's hard to make this argument in investment terms, above and beyond lifestyle explanations. Specifically, it's hard to monetize the "upgrade" especially if it's owner-occupied. So maybe you enhance your lifestyle in terms of home surroundings, but it'd be at the expense of diminishing other aspects of your lifestyle (tapping more liquid, more granular, long-term investments to fund a more comfortable retirement for more and better vacations, nice restaurants, etc., etc.)

By the way I would not invest in individual stocks. I'd pick a low cost, well diversified, tax appropriate stock index fund (examples: VWRA, ISAC, SWRD for non-U.S. persons tax resident in Singapore) if you're going to invest in stocks, a reasonable thing to do. The examples you provided are not only individual stocks (thus with higher risk) but they're also somewhat or very "tax hostile" from the Singaporean point of view.

 

[jljh888]

We're assuming it is a better lifestyle. That's not necessarily a given. You might hate your new neighbors, for example.

But let's assume it's a better lifestyle. In my view it's hard to make this argument in investment terms, above and beyond lifestyle explanations. Specifically, it's hard to monetize the "upgrade" especially if it's owner-occupied. So maybe you enhance your lifestyle in terms of home surroundings, but it'd be at the expense of diminishing other aspects of your lifestyle (tapping more liquid, more granular, long-term investments to fund a more comfortable retirement for more and better vacations, nice restaurants, etc., etc.)

By the way I would not invest in individual stocks. I'd pick a low cost, well diversified, tax appropriate stock index fund (examples: VWRA, ISAC, SWRD for non-U.S. persons tax resident in Singapore) if you're going to invest in stocks, a reasonable thing to do. The examples you provided are not only individual stocks (thus with higher risk) but they're also somewhat or very "tax hostile" from the Singaporean point of view.

Thank You BBC ,
That's what I thought too..

It is hard to quantify better lifestyle and the calculations between the return of investing in singapore property vs stock index fund is not much of a difference.

Any pro-property investor would like to share your view ?

 

[BBCWatcher]

Somewhat relatedly, if you're going to "upgrade" and if you're good at market timing then the best time to upgrade is when it's a home buyer's market (not a seller's market). Yes, your current home will fetch a lower price. But assuming an equal percentage decrease in home valuations the markup (upgrade cost) will be compressed in a buyer's market. Also mortgage interest rates are likely to be lower, so you can get lower cost financing for the upgrade (and potentially lock in that lower rate for up to 5 years).

 

[elvintay07]

We're assuming it is a better lifestyle. That's not necessarily a given. You might hate your new neighbors, for example.

But let's assume it's a better lifestyle. In my view it's hard to make this argument in investment terms, above and beyond lifestyle explanations. Specifically, it's hard to monetize the "upgrade" especially if it's owner-occupied. So maybe you enhance your lifestyle in terms of home surroundings, but it'd be at the expense of diminishing other aspects of your lifestyle (tapping more liquid, more granular, long-term investments to fund a more comfortable retirement for more and better vacations, nice restaurants, etc., etc.)

By the way I would not invest in individual stocks. I'd pick a low cost, well diversified, tax appropriate stock index fund (examples: VWRA, ISAC, SWRD for non-U.S. persons tax resident in Singapore) if you're going to invest in stocks, a reasonable thing to do. The examples you provided are not only individual stocks (thus with higher risk) but they're also somewhat or very "tax hostile" from the Singaporean point of view.

This is one perspective

Although I think many property owners will shoot them. I said before: “property is something that will miraculously appreciate as you use it”. If tomorrow u use a piece of condom, Chanel bag, car, Rolex, iPad, chair, jewellery, shoe etc etc etc, the value drops when you sell. Property is an interesting asset class that appreciates. Many ppl term SSB as 0 risk but I would say very very low risk (not 0). Furthermore the cap is $200k hence also limited. The consideration about equities is explained in the video but there is risk also and you cannot leverage.
Will global property remains high? I don’t think so if interest rates remain high. Will SG property remains high? Possible if more ppl wants to migrate to SG.

 

[elvintay07]

Somewhat relatedly, if you're going to "upgrade" and if you're good at market timing then the best time to upgrade is when it's a home buyer's market (not a seller's market). Yes, your current home will fetch a lower price. But assuming an equal percentage decrease in home valuations the markup (upgrade cost) will be compressed in a buyer's market. Also mortgage interest rates are likely to be lower, so you can get lower cost financing for the upgrade (and potentially lock in that lower rate for up to 5 years).

I totally agree with timing the market but almost impossible in real life unless you have multiple properties. Let say Mr and Mrs A has no property and buying their first property.
(1) if they wait, prices may go up and become unaffordable
(2) let’s assume they are so good in timing the market, they buy at the lowest in the history. If they don’t upgrade, property will become old after 30 years. If they upgrade, then:
(A) if they buy next 1,2 or 3 properties at ultra low price (market crash), they will also sell their current property at low price (unless they don’t have to sell as they are very rich)
(B) if they buy next property at ultra high price, they will sell their current property at ultra high price also
(C) if they sell their property then wake, they may kana a situation where they don’t have property
The idea is to stay vested regardless of property, equities or whatever. You diversify confirm won’t go wrong

 

[duhduhduh]

Dont forget the ancillary costs of moving house, setting up, furnishing and etc

 

[apriliasiao]

let's take it as buying BRK.B and a condo are giving the same rates of return over a period of 20 yrs. Alot of ppl i believe will still willing to buy a condo over a stock as it is tangible which they can feel and touch. Not to mention that high leverage on mortgage they are taking over forking out 1m on stock.

 

[anddrool]

The important question is do you want to live in a EC, enjoy the facilities and life style.
This is more important than buying it for the main purpose of profit return.

One of the benefit of buy property is the leverage. If the property is $1mil, you don't need $1mil in cash in hand. You can use just $250k to purchase, the remainder is loan.

Placing $250k SSB/SGS, 2.5% for 5 years(total 12.5%) = $31,500

However placing the $250k in property for 5 years(assuming same 12.5% return) = $125k
However need to deduct stamp duty, mortgage interest, agent fee, etc to get the net return.

Therefore I think the most important question is do you inspire to live in a EC and have that lifestyle. Rather than plainly just using it as investment vehicle.

 

[dork32]

Also mortgage interest rates are likely to be lower, so you can get lower cost financing for the upgrade (and potentially lock in that lower rate for up to 5 years)

the junta leader, general lee in nd speech say high inflation, high interest is here to say. who do you think can predict better, general or bbc?

 

[dork32]

Therefore I think the most important question is do you inspire to live in a EC and have that lifestyle. Rather than plainly just using it as investment vehicle.

this is one of the best statement.

i bought my condo 25 years ago for 500k. it is worth 1.4mil today. what have i gained monetarily? nothing. to me paper gain is no gain.

yes i can sell now and move to my hdb. i would quite a lot of money. then my lifestyle will be affected.

yes i can buy another condo unit. you tell me 1.4 mil can buy what 3 bedder today.

the most important thing is wife, me and kids stay shiok shiok in the condo for so many years. we really like our place. imagine if i had bought unit in the ghetto across the road. I would be living in the slump for the past 25 years.

 

[tkdboi]

this is one of the best statement.
i bought my condo 25 years ago for 500k. it is worth 1.4mil today. what have i gained monetarily? nothing. to me paper gain is no gain.
yes i can sell now and move to my hdb. i would quite a lot of money. then my lifestyle will be affected.
yes i can buy another condo unit. you tell me 1.4 mil can buy what 3 bedder today.
the most important thing is wife, me and kids stay shiok shiok in the condo for so many years. we really like our place. imagine if i had bought unit in the ghetto across the road. I would be living in the slump for the past 25 years.

agreed bro. end of the day the primary residence is mostly about lifestyle and quality vs investment returns as cashing out for profit will definitely impact the lifestyle.

I personally take it as it's just cheap rent I am paying. any appreciation if it happens is a bonus. think this applies whether it is HDB or condo as long as it fits your lifestyle needs.

 

[jljh888]

The important question is do you want to live in a EC, enjoy the facilities and life style.
This is more important than buying it for the main purpose of profit return.

One of the benefit of buy property is the leverage. If the property is $1mil, you don't need $1mil in cash in hand. You can use just $250k to purchase, the remainder is loan.

Placing $250k SSB/SGS, 2.5% for 5 years(total 12.5%) = $31,500

However placing the $250k in property for 5 years(assuming same 12.5% return) = $125k
However need to deduct stamp duty, mortgage interest, agent fee, etc to get the net return.

Therefore I think the most important question is do you inspire to live in a EC and have that lifestyle. Rather than plainly just using it as investment vehicle.

Yeah, the only benefit is the leverage that property can get you.

If only we can use the same concept when it comes to buying global index, spy etc..

Buy 1million worth of low risk funds, pay 25% and loan the rest while paying off the loan monthly.. Using the same concept in buying property to buy stocks/funds.

 

[jljh888]

I totally agree with timing the market but almost impossible in real life unless you have multiple properties. Let say Mr and Mrs A has no property and buying their first property.
(1) if they wait, prices may go up and become unaffordable
(2) let’s assume they are so good in timing the market, they buy at the lowest in the history. If they don’t upgrade, property will become old after 30 years. If they upgrade, then:
(A) if they buy next 1,2 or 3 properties at ultra low price (market crash), they will also sell their current property at low price (unless they don’t have to sell as they are very rich)
(B) if they buy next property at ultra high price, they will sell their current property at ultra high price also
(C) if they sell their property then wake, they may kana a situation where they don’t have property
The idea is to stay vested regardless of property, equities or whatever. You diversify confirm won’t go wrong

Lets say if even if Mr and Mrs A could time the market, they could wait for the drop to happen, but there is also a possibility that price increase another 25% in the next x years and drop 10%. Logically, Mr and Mrs A still buy 15% higher if they were to act now.

 

[BBCWatcher]

Property is an interesting asset class that appreciates.

Actually, 99 year leaseholds always eventually depreciate to zero. Most homes in Singapore are that.

One of the benefit of buy property is the leverage.

Nope. Real estate has no special claim here. You can borrow money to buy collectible art if you want. And even if you don't borrow money to buy stocks (for example) the corporations are borrowing, enjoying whatever benefits there are in doing so, with such benefits accruing to shareholders. Your home's refrigerator can't borrow money.

You are not personally responsible for a corporation's borrowing. If you (an ordinary investor) buy a global stock index fund and some corporation (that the fund invests in) defaults on its bonds, those bondholders can't come knocking on your door to grab your house. They don't even have any claim against the fund manager. In contrast, you are personally responsible whenever you personally borrow money. In fact, Singapore is a "full recourse" country. If there's a real estate slump and you default then the lender not only gets to take the whole property but the lender can also take practically everything else you have — as much as needed to make the lender whole. In other countries the lender can't do that and gets, at most, the whole property.

Yeah, the only benefit is the leverage that property can get you.

You can buy real estate with all cash (without a mortgage) if you want. Some people must do that (if they want to buy a home) because they have poor credit and cannot obtain a mortgage. You can buy a stock index fund on margin (with a loan from the broker) if you want. [Although regardless of whether you buy a stock index fund on margin or not the corporations that you fractionally own are doing their own borrowing.]

If only we can use the same concept when it comes to buying global index, spy etc..

Of course you can, if you wish. But whether you borrow on margin or not, leverage will be "in the loop" because that's what corporations do (borrow and invest) as an ordinary part of their business activities.

 

[elvintay07]

Actually, 99 year leaseholds always eventually depreciate to zero. Most homes in Singapore are that.

Nope. Real estate has no special claim here. You can borrow money to buy collectible art if you want. And even if you don't borrow money to buy stocks (for example) the corporations are borrowing, enjoying whatever benefits there are in doing so, with such benefits accruing to shareholders. Your home's refrigerator can't borrow money.

You are not personally responsible for a corporation's borrowing. If you (an ordinary investor) buy a global stock index fund and some corporation (that the fund invests in) defaults on its bonds, those bondholders can't come knocking on your door to grab your house. They don't even have any claim against the fund manager. In contrast, you are personally responsible whenever you personally borrow money. In fact, Singapore is a "full recourse" country. If there's a real estate slump and you default then the lender not only gets to take the whole property but the lender can also take practically everything else you have — as much as needed to make the lender whole. In other countries the lender can't do that and gets, at most, the whole property.

You can buy real estate with all cash (without a mortgage) if you want. Some people must do that (if they want to buy a home) because they have poor credit and cannot obtain a mortgage. You can buy a stock index fund on margin (with a loan from the broker) if you want. [Although regardless of whether you buy a stock index fund on margin or not the corporations that you fractionally own are doing their own borrowing.]

Of course you can, if you wish. But whether you borrow on margin or not, leverage will be "in the loop" because that's what corporations do (borrow and invest) as an ordinary part of their business activities.

99 years up, you probably becomes ash already. Many ppl can accept a lot of things like car becomes ~ $0 after 10 years. But kpkb when leasehold property becomes $0 after 99 years. S&P500 companies not all can last 99 years also. If today one has money to buy freehold, no one stopping you also

 

[jljh888]

Actually, 99 year leaseholds always eventually depreciate to zero. Most homes in Singapore are that.

Nope. Real estate has no special claim here. You can borrow money to buy collectible art if you want. And even if you don't borrow money to buy stocks (for example) the corporations are borrowing, enjoying whatever benefits there are in doing so, with such benefits accruing to shareholders. Your home's refrigerator can't borrow money.

You are not personally responsible for a corporation's borrowing. If you (an ordinary investor) buy a global stock index fund and some corporation (that the fund invests in) defaults on its bonds, those bondholders can't come knocking on your door to grab your house. They don't even have any claim against the fund manager. In contrast, you are personally responsible whenever you personally borrow money. In fact, Singapore is a "full recourse" country. If there's a real estate slump and you default then the lender not only gets to take the whole property but the lender can also take practically everything else you have — as much as needed to make the lender whole. In other countries the lender can't do that and gets, at most, the whole property.

You can buy real estate with all cash (without a mortgage) if you want. Some people must do that (if they want to buy a home) because they have poor credit and cannot obtain a mortgage. You can buy a stock index fund on margin (with a loan from the broker) if you want. [Although regardless of whether you buy a stock index fund on margin or not the corporations that you fractionally own are doing their own borrowing.]

Of course you can, if you wish. But whether you borrow on margin or not, leverage will be "in the loop" because that's what corporations do (borrow and invest) as an ordinary part of their business activities.

Do people borrow on margin to to buy stock index fund ?

think of it in the property concept, it definitely make more money then going in full cash..

 

[reddevil0728]

Do people borrow on margin to to buy stock index fund ?

think of it in the property concept, it definitely make more money then going in full cash..

Yea why not?

 

[sohguanh]

Do people borrow on margin to to buy stock index fund ?

think of it in the property concept, it definitely make more money then going in full cash..

It depend your own view. For old era like me the thought of borrowing monies to buy something is bad. It is like you are a beggar want to buy but no monies so borrow monies to buy. Whether got monies pay back later then say. Of cuz to be realistic there are some items it is almost impossible to pay all upfront in cash and property/house is one good e.g For some ppl a car in Spore too.

For stock which is entirely an optional item (to me at least) borrow monies to buy hmmm... not my cup of tea. I invest with monies I can afford to lose. Which is why I am also quite active in capital guaranteed investment like SSB, FD etc. The non-capital guaranteed will be the stocks,ETFs and those are with monies can afford to lose etc.

 

[elvintay07]

It depend your own view. For old era like me the thought of borrowing monies to buy something is bad. It is like you are a beggar want to buy but no monies so borrow monies to buy. Whether got monies pay back later then say. Of cuz to be realistic there are some items it is almost impossible to pay all upfront in cash and property/house is one good e.g For some ppl a car in Spore too.

For stock which is entirely an optional item (to me at least) borrow monies to buy hmmm... not my cup of tea. I invest with monies I can afford to lose. Which is why I am also quite active in capital guaranteed investment like SSB, FD etc. The non-capital guaranteed will be the stocks,ETFs and those are with monies can afford to lose etc.

Then all the ultra rich ppl are beggars. Lol! Ultra rich leverage for stocks/ properties/ companies. They are the real beggars. The real beggars are rich because they got no debt. People give them cash