#13: 11 Possible Ripple Effects of the NEW PLH Model (Prime Location Public Housing) | NOTG S2 E13

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Today we’re gonna talk about

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this very popular term that has happened over the past week.

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That’s called the PLH model,

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everybody’s talking about it right now.

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Some of the ripple effects that might happen

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or might not happen

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this is just our point of view.

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And we think that this is going to be an interesting episode.

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So let’s head onto the PLH episode.

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Let’s go.

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So welcome back to our next episode of Nuggets On The Go.

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So today we’re gonna talk about this very popular term

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that has happened over the past week,

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and that’s called the PLH model.

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Everybody’s talking about it right now.

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This is called the Prime Location Public Housing model.

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We will start with a new plot of BTO land on a prime land,

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which is the Rochor upcoming BTO

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that’s going to happen somewhere around in November, 2021.

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So we’re going to talk about some of the ripple effects.

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And in fact, we’ve put up a total of 11, about 11,

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about 10 to 11 ripple effects that might happen

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or might not happen.

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This is just our point of view.

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And we think that this is gonna be an interesting episode.

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The news was announced.

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Right now, today is Thursday, 28th October.

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This thing came out like almost two days ago.

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Let me see when was the first day it came out.

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Yesterday, yesterday was 27th?

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And the news was like explosive.

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And it’s like, everybody is talking about it now.

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And we think that it would be good

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that we chat a little bit about this.

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So by the time you are watching this,

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this news perhaps is already one week to one and a half

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because we need a little bit of time to edit this video.

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But I think this will be a very good topic to discuss about.

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What is the PLH model?

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I think by now you have already read through the news

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that we also have a coverage in our editorial

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as well at PLB Insights.

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Head on to PropertyLimBrothers.com,

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link is right over here.

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Hit on the Insights button,

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you’ll be in the top few news articles

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on the PLH model,

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Prime Location Public Housing Model.

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We are going to talk and focus on the ripple effects.

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We’re going to dive lesser into the facts and all that

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because through the ripple effects,

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you will also be able to understand

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a little bit more about the facts

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as well as some of the new policies

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that will be governing the prime location

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BTO properties, right.

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So all in,

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we think that this initiative is good

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because looking at the number of million-dollar flats

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that have already been transacted in the year 2021,

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it is pretty daunting as well.

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And I think truly our government definitely

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want to make sure that the affordability,

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keeping prime location

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HDB apartments in a more inclusive manner

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is definitely something that is our national policy.

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And overall we think it is a good policy,

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but definitely,

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I think that there will be a couple of ripple effects

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that will happen.

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So let’s have a look at some of the key parameters

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that I think one key question will be

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definitely asked by a lot of families right now,

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even young couples,

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that whether should you go ahead and get a BTO,

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which is under the PLH category policy.

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So the key reason is because your MOP

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will be stretched from five to 10 years.

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The first ripple effect that we noticed is that,

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for example, let’s say if I’m age 30

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and me and my fiancé, my potential partner,

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let’s say we are both 30 years old.

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We go ahead and apply for a PLH

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whether is it this year or next year.

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Looking at some of the news coverage is that

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the government is perhaps planning

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for at least one PLH every single year.

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So if let’s say we get a queue number,

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do we want to go ahead and get that particular BTO

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under the scheme?

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Let’s say if you’re age 30

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and it takes let’s say four to five years

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to construct the BTO.

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By the time we get the keys to our BTO,

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that’s gonna be in five years’ time or four years’ time.

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And we are going to be around age 35.

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And that will mean that when we are eligible

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to sell our property in the resale market,

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should we plan to maybe move location

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or upgrade to a private property,

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or upgrade to a landed property

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and we want to dispose of our first HDB property.

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That happens to be a PLH policy,

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we can only do so at age 45.

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It will mean a total of 15 years of our lifespan.

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And do we want to do that?

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So the first ripple effect is that

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we think that families that already have an intent

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or plan in the mid- to long-term

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to want to upgrade to their next property,

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which might be a landed property or private property,

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then definitely they will not subscribe

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to the PLH-BTO kind of properties.

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So they will then go for resale properties

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as their first home.

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Maybe they will go for the existing prime location,

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resale properties,

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or they might fall back on the BTOs

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that are not under the PLH scheme,

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which then might be city-fringe,

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or maybe outer core region.

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The first ripple effect is that

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this might then give rise to more popularity

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and more take-up rate or application rates in BTOs

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not under the scheme.

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It might also give rise to even more favorable pricing

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for existing prime locations’ resale properties,

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for example, at Pinnacle@Duxton

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for example, like Skyville@Dawson

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or Queenstown area properties or Tiong Bahru properties.

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So properties in a prime region

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that are not affected by this scheme

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because they are already in the resale market right now,

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they might be considered as the last batch

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of properties in a prime location.

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We think that the ripple effect is that

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over the next 10, 15, 20 years,

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these properties might even see a higher uptake

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in terms of resale transactions and also resale pricing.

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So that is the first ripple effect that we might see.

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Coming back to the key question is that,

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should you go for it? If let’s say you are a young couple

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planning to go for your first BTO property

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is that we think that if you have intent

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to go to a private property,

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then maybe this might not be very suitable for you

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because you need to invest 15 years of your time

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compared to the previous version

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where you only need to invest 10 years of your time

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to kickstart your first property.

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The second rationale is that

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you also need to return back some clawback percentage

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of the subsidy when you sell.

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Looking at the article,

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it does seem like for PLH model properties,

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the government is going to throw in more subsidies

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in return for that,

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they are gonna clawback a certain percentage of subsidies.

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And this subsidy will variate

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based on which project year on year.

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So every project will have a different clawback subsidy,

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and this will be made known to the buyers

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of the BTO properties in PLH model beforehand,

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before you even put down your deposit.

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So they will let you know what is the percentage

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that you will need to return back to HDB,

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should you sell your property after 10 years of MOP.

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So this will then of course have a definite impact

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in terms of your resale cash proceeds

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because the subsidy at this point in time

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we don’t know whether it can be returned back

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based on your cash component, in terms of cash proceeds

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because cash proceed has two components.

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One is the CPF component, one is the cash component.

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But looking at the way our resale levy has been crafted

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it’s definitely cash component.

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You need to return back in cash.

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You cannot use your CPF to return back.

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So this subsidy is definitely very likely,

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it might be the cash component,

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which will that eat into your cash proceeds,

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which will also then affect the overall cash proceeds

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that you have, to upgrade to the next property

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should it be a private property and things like that.

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We think that because of this,

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definitely it will then reduce the amount of demand

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for PLH model.

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So PLH, I think it’s really suitable for families

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that want to go for the long game.

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That means you wanna go for a long run,

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living in a prime location.

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You’re not really planning to upgrade in the next 15 years.

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You see yourself and your family living there for long,

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and you love to live in the city.

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You love to live in this brand new type of prime location,

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BTO apartments,

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and you don’t really have an intent to upgrade

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and sell the property.

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Then I think this is very suitable for you and your family.

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Now, next thing. We have covered the BTO part.

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We have also covered the subsidy part.

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I think a lot of the ripple effects are interlinked.

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And why is it interlinked?

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It’s because on top of that,

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what we see are the minute sort of like policies

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within this entire policy is that,

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if let’s say, I want to sell my PLH property

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after waiting for four or five years

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for it to be constructed and 10 years for it to MOP

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my audience that is eligible to buy my property

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will also be restricted and limited.

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Audience for your property

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is going to be a smaller pool

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because the most major impact is that

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now even the buyers for the resale property

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have to adhere to the $14,000 income ceiling

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as a family nucleus.

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This is unheard of previously

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because this will only apply to the current conditions.

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When you go for a BTO property,

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you need to maintain that income celling

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in order to be eligible for a BTO flat.

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So that’s all good and fine

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because that’s the normal policy all along.

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It will only apply to resale buyers

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if they’re taking HDB loan,

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you need to adhere to the $14,000 in order to be eligible

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for HLE, Home Loan Eligibility, HDB loan.

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All along if anybody wants to buy HDB resale property,

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and they are willing to go for a bank loan,

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or they don’t need to take a loan,

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they don’t have to adhere to any income ceiling.

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If I want to buy something at Pinnacle＠Duxton

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let’s say example, I’m a family.

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Me and my wife combined income, $25,000.

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We can buy it, we have to take bank loan or fully pay.

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We cannot take HDB loan

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because our income celling has exceeded $14,000.

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But now under the PLH model,

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it means that when this first batch of Rochor

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PLH housing, hits its MOP in 14 or 15 years’ time,

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let’s say by the year 2035, for example,

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the buyers that will be eligible to buy then

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from the resale market,

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even if let’s say they are not intending to take a HDB loan

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and income is in the combined fashion of maybe $20K.

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They cannot buy.

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Even if they want to take a bank loan,

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they also cannot buy

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because their income has exceeded $14,000.

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This is going to restrict the amount of buyer audience

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that will be eligible to buy.

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00:09:53,600 –> 00:09:55,840
And then that will definitely cause a price cap.

254
00:09:55,840 –> 00:09:57,520
So we are very certain it will cause a price cap.

255
00:09:57,520 –> 00:09:59,080
Why will it cause a price cap?

256
00:09:59,080 –> 00:10:00,720
It’s because of this thing called

257
00:10:00,720 –> 00:10:02,560
MSR limit, which is the base limit

258
00:10:02,560 –> 00:10:04,040
compared to private properties

259
00:10:04,040 –> 00:10:07,400
where we gauge income loan level, based on TDSR,

260
00:10:07,400 –> 00:10:08,880
this is based on MSR.

261
00:10:08,880 –> 00:10:11,280
So MSR has an income ratio of 30%

262
00:10:11,280 –> 00:10:12,480
of the person’s monthly income

263
00:10:12,480 –> 00:10:13,960
after lessening of their monthly commitments

264
00:10:13,960 –> 00:10:14,920
like car loans and stuff like that.

265
00:10:14,920 –> 00:10:16,920
TDSR is 60%.

266
00:10:16,920 –> 00:10:19,600
So naturally when somebody earns an income,

267
00:10:19,600 –> 00:10:20,560
let’s say, example,

268
00:10:20,560 –> 00:10:22,960
me and my wife are both 30 years old.

269
00:10:22,960 –> 00:10:25,360
Let’s say I’m earning $7,000, my wife is earning $7,000.

270
00:10:25,360 –> 00:10:27,520
combined $14,000.

271
00:10:27,520 –> 00:10:30,760
What is our TDSR limit for buying a property?

272
00:10:30,760 –> 00:10:33,360
So we can loan up to $1.87 mil

273
00:10:33,360 –> 00:10:36,400
up to a loan tenure of 30 years.

274
00:10:36,400 –> 00:10:39,600
But if we were to buy a HDB property, resale property,

275
00:10:39,600 –> 00:10:41,080
whether is it a HDB or bank loan,

276
00:10:41,080 –> 00:10:43,000
based on our MSR of 30% cap,

277
00:10:43,000 –> 00:10:47,480
we can only loan up to $838K for a maximum of 25 years.

278
00:10:47,480 –> 00:10:50,640
So that is you’re earning $7,000-$7,000, total $14,000.

279
00:10:50,640 –> 00:10:52,120
Based on $14,000,

280
00:10:52,120 –> 00:10:55,440
the max loan we can go for is $838K.

281
00:10:55,440 –> 00:10:57,160
And that will then translate

282
00:10:57,160 –> 00:10:59,680
if we’re are going for a bank loan, 75%.

283
00:10:59,680 –> 00:11:02,440
And that will then translate to a total purchase price

284
00:11:02,440 –> 00:11:05,080
of $1.11 mil.

285
00:11:05,080 –> 00:11:08,040
So it will mean that for PLH properties,

286
00:11:08,040 –> 00:11:11,360
they will be likely looking at that range of income cap

287
00:11:11,360 –> 00:11:13,560
and price cap for its future resale pricing,

288
00:11:13,560 –> 00:11:16,120
because there’s only so much that the family

289
00:11:16,120 –> 00:11:19,320
with the income ceiling of max cap at $14,000

290
00:11:19,320 –> 00:11:23,160
can loan. And thus, anything that is above that range,

291
00:11:23,160 –> 00:11:24,560
they will have to top up with COV,

292
00:11:24,560 –> 00:11:26,760
they have to top up with cash over valuation

293
00:11:26,760 –> 00:11:28,680
and will they be willing to do so?

294
00:11:28,680 –> 00:11:30,880
And compare that with another version.

295
00:11:30,880 –> 00:11:33,240
Let’s say, for example, now some prime properties,

296
00:11:33,240 –> 00:11:34,360
they are not under PLH model.

297
00:11:34,360 –> 00:11:38,760
And let’s say they get to be transacted of $1.38 mil.

298
00:11:38,760 –> 00:11:42,360
And just so happens that maybe the valuation can match $1.3 mil.

299
00:11:42,400 –> 00:11:44,680
What this will mean is that, if they go for a bank loan,

300
00:11:44,680 –> 00:11:48,200
the bank is very willing to loan them 75% of $1.3 mil,

301
00:11:48,200 –> 00:11:49,760
which is a higher tier amount,

302
00:11:49,760 –> 00:11:51,640
which is close to about $1-odd mil.

303
00:11:51,640 –> 00:11:52,840
in terms of loan size.

304
00:11:52,840 –> 00:11:55,480
The buyers in that category are not restricted

305
00:11:55,480 –> 00:11:57,000
compared to the PLH category.

306
00:11:57,000 –> 00:11:59,720
Coming back to the part of MSR and TDSR

307
00:11:59,720 –> 00:12:02,160
on the same couple earning $7,000- $7,000.

308
00:12:02,160 –> 00:12:04,800
If this couple were to use their income

309
00:12:04,800 –> 00:12:08,040
and not buy something that is under the PLH regime

310
00:12:08,040 –> 00:12:09,800
and they go for the private property,

311
00:12:09,800 –> 00:12:14,080
they can loan up to $1.87 mil based on TDSR model.

312
00:12:14,080 –> 00:12:17,200
So now you see the vast difference with MSR and TDSR

313
00:12:17,200 –> 00:12:19,640
because this creates an impact

314
00:12:19,640 –> 00:12:22,000
in the amount of price appreciation

315
00:12:22,000 –> 00:12:25,760
based on the buying ability of the future buyers.

316
00:12:25,760 –> 00:12:29,120
Whenever there’s a restriction in terms of the loan amount,

317
00:12:29,120 –> 00:12:32,640
it creates a ripple effect on the price growth,

318
00:12:32,640 –> 00:12:35,080
because there’s only so much it can grow

319
00:12:35,080 –> 00:12:37,560
because your audience size shrinks in a sense.

320
00:12:37,560 –> 00:12:39,360
Let’s now look at, for example,

321
00:12:39,360 –> 00:12:42,560
somebody were to be earning, let’s say $12,000,

322
00:12:42,560 –> 00:12:44,120
monthly income at 30 years old,

323
00:12:44,120 –> 00:12:46,960
and maybe the spouse is earning $10,000 at 30 years old,

324
00:12:46,960 –> 00:12:48,800
the combined income of $22,000,

325
00:12:48,800 –> 00:12:53,800
based on MSR, by right they can loan up to $1.318 mil,

326
00:12:54,560 –> 00:12:57,640
and they can buy up to $1.75 mil

327
00:12:57,640 –> 00:12:59,720
in terms of the HDB property.

328
00:12:59,720 –> 00:13:03,520
By restricting this to an income ceiling on $14,000 effectively,

329
00:13:03,520 –> 00:13:06,720
you are removing this category of high-income earners

330
00:13:06,720 –> 00:13:09,880
from the potential audience pool of PLH properties.

331
00:13:09,880 –> 00:13:12,640
And this is a very smart move, I will say by the government,

332
00:13:12,640 –> 00:13:14,840
because only by restricting the audience size,

333
00:13:14,840 –> 00:13:16,520
then can you restrict the price growth.

334
00:13:16,520 –> 00:13:19,040
Naturally this is a demand and supply kind of thing

335
00:13:19,040 –> 00:13:20,200
in the free market.

336
00:13:20,200 –> 00:13:22,720
And I think definitely very smart move.

337
00:13:22,720 –> 00:13:25,720
All right, so we want to talk about the next thing.

338
00:13:25,720 –> 00:13:27,160
So there’s this thing saying

339
00:13:27,160 –> 00:13:29,400
that you cannot own private properties

340
00:13:29,400 –> 00:13:31,200
for the past 30 months,

341
00:13:31,200 –> 00:13:33,880
if you want to buy something for the PLH resale market.

342
00:13:33,880 –> 00:13:35,440
And that is very interesting.

343
00:13:35,440 –> 00:13:36,240
Why?

344
00:13:36,240 –> 00:13:37,960
I think based on the article that we have read so far

345
00:13:37,960 –> 00:13:39,840
is that the government has been really seriously

346
00:13:39,840 –> 00:13:42,480
thinking about this PLH model for the past one year

347
00:13:42,480 –> 00:13:43,760
before coming out with this.

348
00:13:43,760 –> 00:13:46,400
And this is a fantastic smart move.

349
00:13:46,400 –> 00:13:48,640
Our government has data on who are the buyers

350
00:13:48,640 –> 00:13:50,960
buying the prime location HDB properties.

351
00:13:50,960 –> 00:13:52,200
From this move itself,

352
00:13:52,200 –> 00:13:55,280
we already know that, there might be a lot of buyers

353
00:13:55,280 –> 00:13:58,320
that have been downgrading from their private properties

354
00:13:58,320 –> 00:14:01,800
or landed properties, coming on to the prime location,

355
00:14:01,800 –> 00:14:05,960
fully paying off prime locale, HDB apartment retiring.

356
00:14:05,960 –> 00:14:08,560
And I think maybe the numbers are high.

357
00:14:08,560 –> 00:14:11,480
That’s why there’s this new policy as well,

358
00:14:11,480 –> 00:14:13,000
governing the PLH property.

359
00:14:13,000 –> 00:14:14,000
So, why?

360
00:14:14,000 –> 00:14:15,120
Because naturally,

361
00:14:15,120 –> 00:14:17,080
if somebody were to sell their private properties,

362
00:14:17,080 –> 00:14:18,960
or landed properties coming in to fully pay,

363
00:14:18,960 –> 00:14:21,920
they have the financial muscle and power to pay

364
00:14:21,920 –> 00:14:23,840
million-dollars HDB apartments.

365
00:14:23,840 –> 00:14:26,240
And of course, if this is not taken care of

366
00:14:26,240 –> 00:14:27,320
this thing might escalate.

367
00:14:27,320 –> 00:14:29,440
I think one way that the government has done

368
00:14:29,440 –> 00:14:31,120
is that compared to the old model.

369
00:14:31,120 –> 00:14:32,320
Now, what is the old model?

370
00:14:32,320 –> 00:14:33,440
Old model is that example

371
00:14:33,440 –> 00:14:36,040
if I own a landed property, maybe I’m age 55,

372
00:14:36,040 –> 00:14:37,440
my kids have grown up.

373
00:14:37,440 –> 00:14:40,040
They have gotten their own place and me and my wife,

374
00:14:40,040 –> 00:14:41,760
the landed (property) is too big for us.

375
00:14:41,760 –> 00:14:43,720
We’re going to sell off our semi-D

376
00:14:43,720 –> 00:14:44,720
for $5 mil for example,

377
00:14:44,720 –> 00:14:46,760
and I come in, I buy off something

378
00:14:46,760 –> 00:14:49,160
from Pinnacle@Duxton, $1.3 mil,

379
00:14:49,160 –> 00:14:52,160
I am still sitting on $3.7 mil for retirement

380
00:14:52,160 –> 00:14:53,000
is all good.

381
00:14:53,000 –> 00:14:55,200
I can afford to pay $1.3 mil for retirement

382
00:14:55,200 –> 00:14:57,800
I want to live in Tanjong Pagar, fantastic place,

383
00:14:57,800 –> 00:15:00,560
great food, nice conservation heritage shophouses,

384
00:15:00,560 –> 00:15:02,480
and I want to be in town every day.

385
00:15:02,480 –> 00:15:06,320
So I think this is really targeted at this category

386
00:15:06,320 –> 00:15:09,880
of very high financial muscle buyers pool

387
00:15:09,880 –> 00:15:10,640
because in the past,

388
00:15:10,640 –> 00:15:15,320
the old policy is that to buy any resale HDB properties,

389
00:15:15,320 –> 00:15:17,480
all I need to do is that I can buy first

390
00:15:17,480 –> 00:15:20,960
and I only need to dispose of my private properties

391
00:15:20,960 –> 00:15:21,800
in six months’,

392
00:15:21,800 –> 00:15:25,520
time after I complete the sale of the HDB resale property.

393
00:15:25,520 –> 00:15:27,400
So let’s say example, I wanna buy Pinnacle@Duxton

394
00:15:27,400 –> 00:15:28,640
And I still have my landed property,

395
00:15:28,640 –> 00:15:30,120
but I have the cash to buy first.

396
00:15:30,120 –> 00:15:32,120
I have $1.3 mil sitting in my bank,

397
00:15:32,120 –> 00:15:34,480
I go off and pay off a 5-room flat at Pinnacle@Duxton

398
00:15:34,480 –> 00:15:37,120
I wait for the HDB completion three to four months later,

399
00:15:37,120 –> 00:15:40,520
I take the keys, I can then move in first.

400
00:15:40,520 –> 00:15:43,880
And I have six months to sell off my private property.

401
00:15:43,880 –> 00:15:48,120
That is the current policy for all HDB resale properties,

402
00:15:48,120 –> 00:15:50,000
if you own a private property,

403
00:15:50,000 –> 00:15:51,840
but the key difference is that

404
00:15:51,840 –> 00:15:54,520
you must dispose off all your private properties.

405
00:15:54,520 –> 00:15:56,000
That means if you own three landed properties,

406
00:15:56,000 –> 00:15:57,400
please dispose all three.

407
00:15:57,400 –> 00:15:59,760
If you also own residential properties in overseas,

408
00:15:59,760 –> 00:16:01,800
you have to dispose off everything, right?

409
00:16:01,800 –> 00:16:04,040
But this does not pertain to commercial properties.

410
00:16:04,040 –> 00:16:05,520
So this is the current rule.

411
00:16:05,520 –> 00:16:09,120
What is going to happen for PLH kind of HDB apartments?

412
00:16:09,120 –> 00:16:10,520
Is that you cannot do that.

413
00:16:10,520 –> 00:16:14,000
If you want to buy them, you must sell off your landed (property) first,

414
00:16:14,000 –> 00:16:16,800
wait out for 30 months, then you can buy them.

415
00:16:16,800 –> 00:16:18,000
So what does this mean?

416
00:16:18,000 –> 00:16:21,880
This is actually meant to deter private property owners

417
00:16:21,880 –> 00:16:23,440
from buying them.

418
00:16:23,440 –> 00:16:25,120
Because it will then put me off.

419
00:16:25,120 –> 00:16:28,400
If let’s say I need to sell my landed (property) for $5 mil,

420
00:16:28,400 –> 00:16:30,000
then I need to go rent for two and a half years.

421
00:16:30,000 –> 00:16:32,760
Then I can buy the PLH, I might as well don’t buy it.

422
00:16:32,760 –> 00:16:35,640
I might as well go for prime locale HDB apartments

423
00:16:35,640 –> 00:16:36,600
not under this rule.

424
00:16:36,600 –> 00:16:38,680
So it will then cause a further ripple effect is that

425
00:16:38,680 –> 00:16:41,200
maybe the existing prime location

426
00:16:41,200 –> 00:16:43,840
HDB apartments will continue to rise up in fashion.

427
00:16:43,840 –> 00:16:47,200
But the PLH ones will not see that high growth effect

428
00:16:47,200 –> 00:16:50,720
compared to the existing ones, not affected by PLH.

429
00:16:50,720 –> 00:16:53,280
So now, if i were to buy a PLH apartment

430
00:16:53,280 –> 00:16:55,160
I cannot rent out forever.

431
00:16:55,160 –> 00:16:56,840
And that is forever.

432
00:16:56,840 –> 00:17:00,760
Prime location HDB apartments, their rent is fantastic.

433
00:17:00,760 –> 00:17:02,480
One of the highest rental,

434
00:17:02,480 –> 00:17:04,280
you just have a look at Pinnacle@Duxton

435
00:17:04,280 –> 00:17:06,640
If you own one of them, oh my goodness

436
00:17:06,640 –> 00:17:07,600
you just look at the rental

437
00:17:07,600 –> 00:17:09,880
yield you generate, it’s better than a private property.

438
00:17:09,880 –> 00:17:12,400
What is the key strategy for existing owners

439
00:17:12,400 –> 00:17:15,440
that are currently owning prime locale HDB apartments?

440
00:17:15,440 –> 00:17:17,520
It’s that some of them might not sell

441
00:17:17,520 –> 00:17:19,200
and some of them might bite the bullet

442
00:17:19,200 –> 00:17:23,280
to buy another private property with ABSD.

443
00:17:23,280 –> 00:17:25,040
So the usual strategy is like this.

444
00:17:25,040 –> 00:17:27,640
Let’s say, me and my wife, we own Pinnacle@Duxton

445
00:17:27,640 –> 00:17:29,280
for example, or we own Dawson

446
00:17:29,280 –> 00:17:31,680
Or maybe Queenstown, Tiong Bahru, example.

447
00:17:31,680 –> 00:17:33,160
We hit our five-year MOP

448
00:17:33,160 –> 00:17:35,720
and maybe we still have a little bit of loan to pay off.

449
00:17:35,720 –> 00:17:36,520
And then we say,

450
00:17:36,520 –> 00:17:38,080
okay, let’s focus to pay off the loan

451
00:17:38,080 –> 00:17:38,880
for the next two years.

452
00:17:38,880 –> 00:17:41,400
And maybe on the seventh year, once it hits its MOP

453
00:17:41,400 –> 00:17:42,400
we pay off the loan.

454
00:17:42,400 –> 00:17:43,640
And then maybe we say that,

455
00:17:43,640 –> 00:17:45,840
okay, this HDB is prime location.

456
00:17:45,840 –> 00:17:46,680
Maybe let’s keep it,

457
00:17:46,680 –> 00:17:50,880
let’s upgrade to maybe an Outside Central Region condominium

458
00:17:50,880 –> 00:17:54,120
or maybe let’s upgrade to a RCR zone condominium

459
00:17:54,120 –> 00:17:55,840
because maybe you don’t really need to stay in town.

460
00:17:55,840 –> 00:17:58,920
We can rent out this, move nearer to parents example.

461
00:17:58,920 –> 00:18:02,200
And let’s say you buy a $1.5 mil private property

462
00:18:02,200 –> 00:18:05,120
in the Outside Central Region, in the mass market region,

463
00:18:05,120 –> 00:18:06,440
you can still maybe get a 3-bedder, for example,

464
00:18:06,440 –> 00:18:11,000
ABSD 12% of $1.5 mil, $180K, right?

465
00:18:11,000 –> 00:18:13,680
So maybe you have sufficient CPF funds

466
00:18:13,680 –> 00:18:15,120
or spare cash to pay off that.

467
00:18:15,120 –> 00:18:17,760
The key determinant to go for a second property

468
00:18:17,760 –> 00:18:19,880
while keeping the HDB is to take note of two things.

469
00:18:19,880 –> 00:18:22,120
One is that, if your existing HDB property

470
00:18:22,120 –> 00:18:24,080
has been fully paid, then you can take 75% loan.

471
00:18:24,080 –> 00:18:26,440
But of course, if it’s not fully paid,

472
00:18:26,440 –> 00:18:29,520
that is a little bit tougher to take on a second property

473
00:18:29,520 –> 00:18:32,480
and pay ABSD because on top of paying 12%, ABSD

474
00:18:32,480 –> 00:18:34,880
you must pay 55% downpayment.

475
00:18:34,880 –> 00:18:36,480
Because you can even take a 45% loan.

476
00:18:36,480 –> 00:18:38,440
Also, usually this strategy is for families

477
00:18:38,440 –> 00:18:41,000
that have already fully paid the existing HDB

478
00:18:41,000 –> 00:18:44,160
and they can still take a 75% loan of the $1.5 mil property.

479
00:18:44,160 –> 00:18:46,520
And they pay the 12% of $180K.

480
00:18:46,520 –> 00:18:48,920
And why are they willing to pay that 12% of $180K?

481
00:18:48,920 –> 00:18:50,840
It’s because if you work backwards

482
00:18:50,840 –> 00:18:51,920
and let’s say, you can rent out

483
00:18:51,920 –> 00:18:54,920
your current HDB apartment for $3,000 a month,

484
00:18:54,920 –> 00:18:57,600
per year, you’re collecting a gross rental income of cash

485
00:18:57,600 –> 00:18:59,160
at $36,000.

486
00:18:59,160 –> 00:19:02,440
Multiply that by five years, in five years time,

487
00:19:02,440 –> 00:19:05,920
you will recuperate your $180K ABSD.

488
00:19:05,920 –> 00:19:07,040
And in five years’ time,

489
00:19:07,040 –> 00:19:09,320
you will pay off your ABSD that you have already paid

490
00:19:09,320 –> 00:19:10,640
from the rental here

491
00:19:10,640 –> 00:19:11,960
and you will own two properties,

492
00:19:11,960 –> 00:19:13,640
HDB fully paid, private property.

493
00:19:13,640 –> 00:19:15,040
You just serviced that loan.

494
00:19:15,040 –> 00:19:16,400
So that is one of the key strategy

495
00:19:16,400 –> 00:19:18,280
that a lot of families have been using.

496
00:19:18,280 –> 00:19:19,800
And by paying the ABSD,

497
00:19:19,800 –> 00:19:21,840
provided they have fully paid here and rent out here.

498
00:19:21,840 –> 00:19:23,360
But now coming up to the point

499
00:19:23,360 –> 00:19:26,600
is that you cannot rent out your PLH flat anymore.

500
00:19:26,600 –> 00:19:28,600
It will then really be for families

501
00:19:28,600 –> 00:19:30,360
that are in for the long game

502
00:19:30,360 –> 00:19:32,640
that is not planning to buy a second property.

503
00:19:32,640 –> 00:19:34,880
So I will say that if you fall into this category

504
00:19:34,880 –> 00:19:35,360
that I just mentioned,

505
00:19:35,360 –> 00:19:37,200
wanting to keep the HDB and rent out

506
00:19:37,200 –> 00:19:39,640
and buy a second property and pay ABSD and things like that.

507
00:19:39,640 –> 00:19:41,480
Then this will not be suitable for you.

508
00:19:41,480 –> 00:19:42,880
Now, next point,

509
00:19:42,880 –> 00:19:46,360
PR families cannot buy PLH anymore.

510
00:19:46,360 –> 00:19:47,440
The tweak is that,

511
00:19:47,440 –> 00:19:51,520
even if let’s say you want to buy a resale PLH in future,

512
00:19:51,520 –> 00:19:53,080
the family household nucleus

513
00:19:53,080 –> 00:19:55,560
must have at least one Singapore citizen,

514
00:19:55,560 –> 00:19:57,480
and it can comprise of one Singapore citizen

515
00:19:57,480 –> 00:19:59,680
plus one Singapore permanent resident.

516
00:19:59,680 –> 00:20:03,840
It can no longer comprise of two permanent resident buyers.

517
00:20:03,840 –> 00:20:06,640
Perhaps, I think there’s only also data showing

518
00:20:06,640 –> 00:20:08,680
that a lot of pure PR families

519
00:20:08,680 –> 00:20:11,120
are buying prime location resale properties.

520
00:20:11,120 –> 00:20:12,840
Of course in the first place PR families

521
00:20:12,840 –> 00:20:14,640
in order to be eligible to buy

522
00:20:14,640 –> 00:20:16,280
both husband and wife must fulfill

523
00:20:16,280 –> 00:20:19,240
a three-year permanent residency status in Singapore.

524
00:20:19,240 –> 00:20:21,560
Then they’re eligible to buy a resale HDB property.

525
00:20:21,560 –> 00:20:23,560
So they have already fulfilled this,

526
00:20:23,560 –> 00:20:25,600
but now they’re not allowed to buy PLH model.

527
00:20:25,600 –> 00:20:27,240
So similar ripple effect existing prime locale

528
00:20:27,240 –> 00:20:29,240
HDB apartment might then see a further uptake

529
00:20:29,240 –> 00:20:30,120
in terms of demand,

530
00:20:30,120 –> 00:20:31,800
because they are the last batch right now.

531
00:20:31,800 –> 00:20:34,680
And then PLH, smaller volume

532
00:20:34,680 –> 00:20:36,760
in terms of a smaller audience size.

533
00:20:36,760 –> 00:20:39,000
Maybe it could be because a lot of PR families,

534
00:20:39,000 –> 00:20:40,600
they have higher financial power.

535
00:20:40,600 –> 00:20:42,640
I think this is one way the government is restricting.

536
00:20:42,640 –> 00:20:44,840
And then the second thing that we noticed is

537
00:20:44,840 –> 00:20:47,440
that now singles above 35 years old,

538
00:20:47,440 –> 00:20:51,000
cannot buy the PLH apartments from the resale market.

539
00:20:51,000 –> 00:20:51,920
That’s pretty interesting

540
00:20:51,920 –> 00:20:53,320
because there could also be data

541
00:20:53,320 –> 00:20:54,840
that a lot of single professionals,

542
00:20:54,840 –> 00:20:56,240
maybe they are high-income earners.

543
00:20:56,240 –> 00:20:58,760
They are buying prime area HDB resale properties.

544
00:20:58,760 –> 00:21:00,080
So this might be another thing

545
00:21:00,080 –> 00:21:01,560
that the government is trying to curb.

546
00:21:01,560 –> 00:21:02,840
With just one news.

547
00:21:02,840 –> 00:21:04,440
There’s so many ripple effects.

548
00:21:04,440 –> 00:21:05,400
Let me just do a count.

549
00:21:05,400 –> 00:21:08,120
I think about 11, probably 11 ripple effects.

550
00:21:08,120 –> 00:21:08,960
Am I right?

551
00:21:08,960 –> 00:21:10,360
The ripple is very clear.

552
00:21:10,360 –> 00:21:12,920
I think the key ripple is that the existing

553
00:21:12,920 –> 00:21:15,960
in summary, the existing prime locale HDB apartment

554
00:21:15,960 –> 00:21:20,840
will see even more demand in the next five, 10, 15, 20 years.

555
00:21:20,840 –> 00:21:24,480
I also do see that this thing will only start to take shape.

556
00:21:24,480 –> 00:21:28,320
We can only see the true ripple effect in 15 years’ time

557
00:21:28,320 –> 00:21:29,840
because in the first place,

558
00:21:29,840 –> 00:21:33,120
the amount of PLH projects are not a lot,

559
00:21:33,120 –> 00:21:35,360
because maybe if it’s only one to two per year

560
00:21:35,360 –> 00:21:36,960
and they are gonna hit MOP

561
00:21:36,960 –> 00:21:39,640
after a four- to five-year construction period, plus 10 years (MOP)

562
00:21:39,640 –> 00:21:41,000
that’s about 15 years’ time.

563
00:21:41,000 –> 00:21:43,880
That means we were looking at 2035 onwards.

564
00:21:43,880 –> 00:21:46,600
So we can only truly see the ripple effect later on.

565
00:21:46,600 –> 00:21:49,640
The current effect will definitely be people

566
00:21:49,640 –> 00:21:51,680
maybe having the mindset that,

567
00:21:51,680 –> 00:21:54,440
okay, then let’s just focus on the existing ones.

568
00:21:54,440 –> 00:21:55,800
The current ripple effect is that

569
00:21:55,800 –> 00:21:58,320
maybe the BTO is not affected by PLH.

570
00:21:58,320 –> 00:22:00,040
We’ll see more uptake in demand.

571
00:22:00,040 –> 00:22:01,960
The existing prime location resale

572
00:22:01,960 –> 00:22:03,120
would continue to do well.

573
00:22:03,120 –> 00:22:04,960
Would there be a ripple effect on private properties?

574
00:22:04,960 –> 00:22:05,840
There might be,

575
00:22:05,840 –> 00:22:07,800
especially in the prime locale.

576
00:22:07,800 –> 00:22:10,680
Because maybe higher income earning family nucleus

577
00:22:10,680 –> 00:22:11,680
they will think that,

578
00:22:11,680 –> 00:22:14,080
hey, you know, let’s just go for a private property, right?

579
00:22:14,080 –> 00:22:15,280
Maybe it will happen.

580
00:22:15,280 –> 00:22:16,120
Buyers will think that,

581
00:22:16,120 –> 00:22:17,920
hey, okay, so it’s already very hard

582
00:22:17,920 –> 00:22:19,200
to get a BTO in the first place.

583
00:22:19,200 –> 00:22:21,840
Now with all these new regulations,

584
00:22:21,840 –> 00:22:23,960
maybe let’s just go for private property.

585
00:22:23,960 –> 00:22:25,120
That could happen as well,

586
00:22:25,120 –> 00:22:27,880
or maybe they would just go on straight to the resale market.

587
00:22:27,880 –> 00:22:30,880
So I think all in there’s no perfect policy,

588
00:22:30,880 –> 00:22:33,600
but I think this is definitely a good move

589
00:22:33,600 –> 00:22:36,360
in order not to see our HDB properties

590
00:22:36,360 –> 00:22:39,160
go up to like $2 mil in 10 years’ time.

591
00:22:39,160 –> 00:22:40,680
So I think all in,

592
00:22:40,680 –> 00:22:43,720
there’s a key summary of all the 11 ripple effects that we have.

593
00:22:43,720 –> 00:22:44,960
And we hope that you enjoyed this episode of

594
00:22:44,960 –> 00:22:46,160
Nuggets On The Go.

595
00:22:46,160 –> 00:22:48,120
End of the day I think most importantly is that

596
00:22:48,120 –> 00:22:49,480
work out your time horizon,

597
00:22:49,480 –> 00:22:51,680
because from the time you intend to get married

598
00:22:51,680 –> 00:22:54,120
or from the time that you have saved up as a single

599
00:22:54,120 –> 00:22:57,920
or time horizon to invest in properties in and out

600
00:22:57,920 –> 00:22:59,240
it’s only so limited.

601
00:22:59,240 –> 00:23:01,520
I mean, it’s right on from like 30 years old,

602
00:23:01,520 –> 00:23:05,080
or maybe if you’ve an early head start 25, 28 years old,

603
00:23:05,080 –> 00:23:06,720
or maybe you are starting at 35 years old.

604
00:23:06,720 –> 00:23:09,480
It’s only up to about the age of 50+

605
00:23:09,480 –> 00:23:12,520
before we start to take on a more defensive approach.

606
00:23:12,520 –> 00:23:15,120
Because from 50, 55 onwards,

607
00:23:15,120 –> 00:23:17,160
most of the time, families and buyers,

608
00:23:17,160 –> 00:23:20,520
they take on a more defensive approach to maybe downsize,

609
00:23:20,520 –> 00:23:23,160
if let’s say they’re holding to one or just two properties,

610
00:23:23,160 –> 00:23:25,040
or maybe take a more defensive step

611
00:23:25,040 –> 00:23:26,280
to rent out their property

612
00:23:26,280 –> 00:23:29,200
and then to have a little bit of a lesser mortgage

613
00:23:29,200 –> 00:23:30,240
in the sense.

614
00:23:30,240 –> 00:23:34,040
So your horizon is really from 30 to 50+

615
00:23:34,040 –> 00:23:35,880
and thus, it is important to plan out

616
00:23:35,880 –> 00:23:38,440
what you intend to do with your property portfolio

617
00:23:38,440 –> 00:23:39,440
moving forward.

618
00:23:39,440 –> 00:23:41,400
Importantly, time is of the essence.

619
00:23:41,400 –> 00:23:43,800
So opportunity cost is still very important.

620
00:23:43,800 –> 00:23:45,400
Try to balance that out as well.

621
00:23:45,400 –> 00:23:48,440
Plans do change as you progress in life.

622
00:23:48,440 –> 00:23:51,720
So maybe after, when you hit 40, you have different needs,

623
00:23:51,720 –> 00:23:53,040
your kids have different needs,

624
00:23:53,040 –> 00:23:54,520
location-wise, also different needs

625
00:23:54,520 –> 00:23:55,800
because maybe you suddenly thought of

626
00:23:55,800 –> 00:23:57,960
moving back to near where your parents stay,

627
00:23:57,960 –> 00:23:59,120
perhaps you don’t want to be locked down

628
00:23:59,120 –> 00:24:01,000
by too many regulations.

629
00:24:01,000 –> 00:24:02,520
Yeah, so I think at the end of the day,

630
00:24:02,520 –> 00:24:03,560
work out your preferences,

631
00:24:03,560 –> 00:24:06,040
write down all the pros and cons on a piece of paper

632
00:24:06,040 –> 00:24:08,280
and then try to balance out what works best for you

633
00:24:08,280 –> 00:24:09,080
and your family.

634
00:24:09,080 –> 00:24:11,200
And most importantly is to be happy.

635
00:24:11,200 –> 00:24:14,200
(laughing)

636
00:24:14,200 –> 00:24:15,360
And we hope that you’ve enjoyed this episode.

637
00:24:15,360 –> 00:24:16,600
Sorry, I just choked on my own saliva.

638
00:24:16,600 –> 00:24:18,960
So, meantime we’ll see you on the next Nuggets On The Go.

639
00:24:18,960 –> 00:24:22,120
And we hope that you take care, stay safe. Take care.