Companies took on debts to expand their business. For REITs, they use it to acquire commercial entities for rental income. Accretive acquisitive will increase dividends back to stakeholders. Iām not arguing on this point. This is the nature of all businesses.
Yes, and that's called leverage, in the form of a mortgage (or mortgages). It's exactly the same thing, except you personally are not liable for the debt.
For my own experience, I utilised bank loans not for rental income, but for capital appreciation after 3 years. The cycle repeats.
Well OK, but REITs can do that too. They will often opportunistically sell highly capital appreciated assets. So?
Yes HDB may be attractive in the past, but not now given the long construction time and MOP.
The evidence suggests HDB flats are getting
more attractive, not less. There's significant "compression" between HDB resale flat valuations and comparable 99 year leasehold private condo valuations.
Coupled with the need to use 2 names (there are ways to use one) and also incur ABSD for a second property, it is definitely not the way to go for mid-to-high income earners.
You don't need two names as owners! It's
easier to use one name as owner when the acquisition price is lower (as it is for a HDB BTO)! All you need is an "essential occupier" as the second name, if you even need that. The essential occupier (spouse, typically) is free to buy a home after the MOP, without ABSD (current rules, subject to change of course -- but that's not unique). And all parties are free to buy REITs and other non-direct home purchase investments.
Private home prices rose by 10% in 2021.
Right, and HDB resale flat prices jumped 12.7% in 2021!
Given that one only need to fork out 25% for down payment, the returns are magnified to by 4x ( simplified for the sake of argument) on average solely based on your initial outlay.
If you're eligible for a HDB Concessionary Loan you don't even need 25%, and the single owner name is that much easier for a HDB BTO since the initial capital outlay is much lower. AND you can still invest in the meantime, just not in direct home purchases, that's all. Everything else is fine -- stocks, bonds, REITs, you name it.
To be able to afford a 2+1 apartment at the age of 30, TS will be better off with taking the private home route. Opportunity costs matter.
Disagree. Private home prices are at or near all-time highs, and rental yields are still extremely low on them. Interest rates are headed up, and HDB has been caught flat footed with limited supply. (Not HDB's fault.) In the balance of risks I'd be highly inclined to go the HDB BTO route. It remains a very good deal indeed.
Question is whether should stick with BTO or buy resale.
Buy resale better coz you can
1. Buy under single name
YOU. CAN. BUY. A. HDB. FLAT. UNDER. A. SINGLE. NAME! Resale or BTO. And it's EASIER to do that (lower capital outlay). You may need an essential occupier, but that's not an owner.
2. Avoid opportunity cost of waiting 10 years
What opportunity cost? Go invest! Just do something else, anything else besides a direct home purchase.
3. Can save money on rental
Can also save money on condo maintenance fees, mortgage interest, own unit maintenance, earlier renovation/outfitting, property tax, and all the other expenses involved in buying instead of renting. You also have more free cashflow, a nice thing to have during (for example) a bout of unemployment or other family emergency. And more useful liquidity. You can sell 5 shares of a stock fund, 8 shares of REIT, 10 shares of a bond fund, or whatever. You haven't got a ~$1.5M (or whatever) mortgage hanging over your head, and with interest rate risk to boot.
4. Macroeconomics looks ripe for further property price increase.
Do they? I don't know, nor do you. But OK, if that's your forecast...you can buy REITs! There's
nothing stopping you from profiting from real estate if that's the bet you want to place.
Do we have a lot of property agents in this thread?
