#23 Rising Mortgage Interest Rates | Nuggets On The Go E23 | Melvin Lim

1 [Melvin Lim]
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♪ Bruno Mars, Anderson .Paak, Silk Sonic – Leave the Door Open ♪

2 [Melvin Lim]
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– All right, welcome back to Nuggets On The Go.

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Today we’re talking about a very hot topic

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at this point of recording, which is interest rates.

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Interest rates has been the top of the concern

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of a lot of property owners,

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as well as property buyers for the entire 2022

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until right now, at the point of recording is May 2022.

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So interest rates,

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just have a look at all these articles.

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Even just today, there was an article

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that just popped up this morning

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talking about home buyers or home owners

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who have existing properties might be in a double whammy

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when interest rates continue to rise

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or are expected to rise for another four to five rounds,

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depending on how many rounds the federal reserve

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is going to raise the rate hikes for the rest of 2022.

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So of course at the point of filming,

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we have already been through one of the largest increases,

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which is 0.5 basis points.

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So that has technically tanked the stock market last week.

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Not only that, previously towards the tail end of 2021,

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cryptocurrency market has already sort of like,

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has a lot of volatility, tech stocks,

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all the FAANG stocks, a lot of volatility.

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And just as of last week,

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we responded to the rise in the rate hike

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through the stock market,

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and we want to discuss this topic in detail,

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on how interest rates hikes

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could potentially cause any form of concern

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in the Singapore real estate market.

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So let’s dive in.

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So let’s have a look at this chart first,

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we’re going to showcase a lot of different charts

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and explore the topic

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on what is the weightage of interest rates

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on the performance of property price indexes in Singapore

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on the mindset of homeowners and sellers

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in Singapore as well

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when it comes to making decisions to purchase property,

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or should we time the market?

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So we’re going to answer based on what had happened

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in the past,

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looking at facts, figures, and charts,

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and then what people are thinking on the ground.

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And then the third thing before we end off,

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is that what should we do?

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Should we time the market or should we not time the market,

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or should we enter the market?

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So let’s have a look at the first thing.

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The first thing is that

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if we take out this very fantastic research

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from Morgan Stanley, and this was released in the year 2018.

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So out of the five rounds of interest rate hikes

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in the past, in Singapore’s history,

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four rounds, we have seen an increase

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in our real estate price index.

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Only one round, which was in 1996, 1997,

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during the Asian Financial Crisis,

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and back then there wasn’t any cooling measures in the past.

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That was the only round that property price index dropped

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in tandem with the rise in interest rates.

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The rest of the rounds basically prices increased,

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and of course, if you look at that particular chart,

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there was this bar then

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talking about 2014 till date.

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So at the point of the research, it was released in 2018,

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so they’re talking about that part, 2014 to 2018.

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But if I were to bring out this new chart,

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which is a new chart done by our PLB Insights.

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It showcased the fact that in the season of 2016

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to about the tail end of 2019,

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we actually went through another round

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of federal rate hike increase.

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If you see that increase

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in conjunction with our property price index,

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it is the same thing that has happened as well,

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that our property price index

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actually went up when rates increased.

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So that in combination,

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we can summarise that out of six rounds

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of interest rate increment,

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five rounds we see an uptick

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in terms of property price index.

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What is going to happen this time round in the year of 2022?

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Rates are increasing,

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will property price rise or will property price fall?

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So this is something that everybody is trying to answer.

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And why are we trying to figure this out?

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It’s because this will cause a correlation

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on how we make decisions

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on whether should we wait for 2023,

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having a wait and see approach

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before we enter into the market.

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But we are going to dive in deeper

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because it will then help us

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to make sense of this current market,

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because waiting

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can be a very costly opportunity cost sometimes.

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Waiting can also be very beneficial

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because if you can buy something at a lower price,

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that will make a lot of sense at the end of the day.

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So, the second chart that we want to showcase right now,

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basically is to look at all the host of factors.

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If you have been following us,

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these factors are extremely important,

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because there’s in total of about 15 to 16

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different internal and external factors combined.

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And all these factors will help us to make a decision

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on whether we should time the market.

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Now if you look at the top,

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interest rates fall on of course one of the key factors,

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together with quantitative easing.

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As of this year, we know for sure

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that interest rates are definitely going to increase.

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We also know for sure

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that quantitative easing is tightening.

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So when these two factors are gone,

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and these two factors are now one of the key things

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that might affect the property market,

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what is going to happen to the global property prices,

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and what is going to happen

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to the Singapore real estate prices.

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So let us bring out this new chart now.

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Let’s discuss globally,

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how do people view interest rates

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in terms of relationship to property prices?

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When we talk about interest rates rising,

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the next effect is that we will then discover

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and we’ll try to ascertain,

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will an interest rate rise

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cause our disposable income to drop?

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And in reality, that is for sure.

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Because when interest rates rise,

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just have a look at these two different examples.

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If you were to purchase a $2 mil property

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where interest rate is at, let’s say 1.5%,

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and if you were to purchase a $2 mil property

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where interest rate is at 2.5%,

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just by a 1% increment in your mortgage interest rate,

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the instalment amount in totality

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increases pretty substantially.

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And if you were to break down both instalment components

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into the P and I component, principal + interest,

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you will see a significant increase

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in the interest that you have to pay,

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which forms a huge portion of your total monthly instalment

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compared to when interest rate was much lower at 1.5%.

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So 1% increment causes

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not just the total instalment to rise,

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but it affects the amount of components

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that the P and I takes on overall

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in terms of the total instalment.

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So there are two effects that happen just by 1% increment;

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Firstly, overall money instalment increase.

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Secondly, it becomes not so worth it

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in a sense that because the amount of principal

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that you’re putting into your home reduces,

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and actually the interest

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that you’re paying to the bank increases.

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Compared to when interest rates were much lower,

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you’re actually saving more

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because you’re putting more into the principal amount

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and you’re actually paying much lesser interest to the bank

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on the month-to-month basis.

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So naturally, it is more advantages for the homeowner

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to buy when interest rates are low

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compared to when interest rates are high.

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And globally speaking,

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correct behaviour is that when interest rates increase,

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because of the fact that our monthly instalment

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and monthly commitment increases,

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your disposable income as a family or as a homebuyer drops.

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And when that happens,

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the amount of purchasing power gets affected,

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overall demand would then start to dip.

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And when that happens as well,

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homeowners become more realistic

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as home sellers when they want to exit the market,

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when they want to sell their properties,

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they will then price their properties more realistically.

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So when this entire chain happens,

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property prices becomes more tepid or they stabilise,

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or they start to fall,

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and depending on what kind of economy

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or what kind of country is this real estate market in.

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So that is the standard behaviour when interest rates rise.

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On the flip side, let’s bring out this chart.

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When interest rates fall, the reverse is going to happen.

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Firstly, when interest rates fall,

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it increases the purchasing power of home buyers,

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because home buyers now become more confident.

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They see that borrowing cost has dipped,

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monthly instalment is going to drop

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for the same amount of purchase price

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of a particular property.

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Everybody becomes more confident

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because I’m paying lesser for my interest,

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overall monthly instalment drops,

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some of my rental can cover the entire cost.

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I feel more confident as a home buyer.

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And because of that, demand surges in the entire economy,

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and that then brings about a rise in prices.

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Because when demand increases,

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homeowners then know

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that the demand is out there right now.

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They want to raise their price and challenge the selling price

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before they’re willing to let go of their property

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in the secondary market.

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So when that happens, interest rates falling

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corresponds with a rise in prices.

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So let’s have a look at the third scenario,

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which is the base case,

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and based on historical data,

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out of six rounds of interest rates rise,

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why is it that Singapore home prices still rise?

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And why is it that it behaves differently from the norm,

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based on the first two scenarios that we are saying.

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Will this round have the same effect as in the past?

222 [Melvin Lim]
00:08:51,920 –> 00:08:54,600
Because what we’re trying to answer is that this time round

223 [Melvin Lim]
00:08:54,600 –> 00:08:56,040
interest rate is going to rise,

224 [Melvin Lim]
00:08:56,040 –> 00:08:59,760
will our price go up, stay stagnant, or will it come down?

225 [Melvin Lim]
00:08:59,760 –> 00:09:02,000
Secondly is that, we also want to answer this question,

226 [Melvin Lim]
00:09:02,000 –> 00:09:03,040
because maybe you might be asking,

227 [Melvin Lim]
00:09:03,040 –> 00:09:04,960
“Hey Melvin, why are we in Singapore,

228 [Melvin Lim]
00:09:04,960 –> 00:09:08,760
in such a way that when interest rates drop, prices rise?

229 [Melvin Lim]
00:09:08,760 –> 00:09:11,200
Why is it also that when interest rates rise,

230 [Melvin Lim]
00:09:11,200 –> 00:09:12,400
prices still rise?

231 [Melvin Lim]
00:09:12,400 –> 00:09:14,680
And then what should I do as a Singaporean,

232 [Melvin Lim]
00:09:14,680 –> 00:09:17,240
or what should I do as an investor in Singapore?

233 [Melvin Lim]
00:09:17,240 –> 00:09:18,040
Should I buy?

234 [Melvin Lim]
00:09:18,040 –> 00:09:19,680
Does it mean that we buy all the time?

235 [Melvin Lim]
00:09:19,680 –> 00:09:21,960
Does it mean that it is wrong to time the market?

236 [Melvin Lim]
00:09:21,960 –> 00:09:23,480
Does it mean that whether it is in the year,

237 [Melvin Lim]
00:09:23,480 –> 00:09:27,720
2020, 2021, 2022, 2023, 2024, I should always buy?

238 [Melvin Lim]
00:09:27,720 –> 00:09:31,240
And we’re going answer all these fantastic questions.

239 [Melvin Lim]
00:09:31,240 –> 00:09:33,600
And these are very legitimate concerns

240 [Melvin Lim]
00:09:33,600 –> 00:09:35,160
because we want to understand,

241 [Melvin Lim]
00:09:35,160 –> 00:09:37,920
when should we enter the market, when should we not?

242 [Melvin Lim]
00:09:37,920 –> 00:09:40,520
So let me just clear this out of the picture first.

243 [Melvin Lim]
00:09:40,520 –> 00:09:42,680
Firstly, when we bring back this chart

244 [Melvin Lim]
00:09:42,680 –> 00:09:44,440
with about 15 to 16 factors,

245 [Melvin Lim]
00:09:44,440 –> 00:09:45,800
we can see that interest rates

246 [Melvin Lim]
00:09:45,800 –> 00:09:48,200
and quantitative easing correlates

247 [Melvin Lim]
00:09:48,200 –> 00:09:51,000
to the amount of liquidity that flows into money supply,

248 [Melvin Lim]
00:09:51,000 –> 00:09:53,840
the expansion of money supply in the entire world,

249 [Melvin Lim]
00:09:53,840 –> 00:09:58,040
in Singapore, in US, and how is that important?

250 [Melvin Lim]
00:09:58,040 –> 00:10:00,480
And that definitely has to do with inflation.

251 [Melvin Lim]
00:10:00,480 –> 00:10:02,920
Because when our money supply increases too fast

252 [Melvin Lim]
00:10:02,920 –> 00:10:05,200
over the past years, because the Feds,

253 [Melvin Lim]
00:10:05,200 –> 00:10:07,200
because the central banks are trying to save the market

254 [Melvin Lim]
00:10:07,200 –> 00:10:08,760
by buying out government bonds,

255 [Melvin Lim]
00:10:08,760 –> 00:10:10,480
increasing the amount of money supply,

256 [Melvin Lim]
00:10:10,480 –> 00:10:13,560
that has caused and created a huge amount of liquidity

257 [Melvin Lim]
00:10:13,560 –> 00:10:14,400
in the market.

258 [Melvin Lim]
00:10:14,400 –> 00:10:16,000
And when that expansion happens,

259 [Melvin Lim]
00:10:16,000 –> 00:10:17,520
we can see that in the stock market,

260 [Melvin Lim]
00:10:17,520 –> 00:10:20,800
we can see the flight to safety when people profit take,

261 [Melvin Lim]
00:10:20,800 –> 00:10:23,280
and they want to park their funds in assets

262 [Melvin Lim]
00:10:23,280 –> 00:10:26,560
with a better store of value, a more stable store of value.

263 [Melvin Lim]
00:10:26,560 –> 00:10:28,160
And when inflation rises,

264 [Melvin Lim]
00:10:28,160 –> 00:10:31,200
asset inflation also happens at a rapid rate.

265 [Melvin Lim]
00:10:31,200 –> 00:10:33,840
So back to the topic, CPI inflation happens

266 [Melvin Lim]
00:10:33,840 –> 00:10:37,480
right now in Singapore in March 2022, it is at about 5.4%,

267 [Melvin Lim]
00:10:37,480 –> 00:10:39,800
asset inflation behaves extremely differently.

268 [Melvin Lim]
00:10:39,800 –> 00:10:41,520
So we have come out with this brand new chart

269 [Melvin Lim]
00:10:41,520 –> 00:10:44,480
to ascertain CPI inflation

270 [Melvin Lim]
00:10:44,480 –> 00:10:48,480
in relation to asset inflation on landed properties.

271 [Melvin Lim]
00:10:48,480 –> 00:10:50,720
So although we are looking at CPI inflation

272 [Melvin Lim]
00:10:50,720 –> 00:10:53,080
of about 5% in the past month,

273 [Melvin Lim]
00:10:53,080 –> 00:10:55,320
the actual fact is that in the past two years,

274 [Melvin Lim]
00:10:55,320 –> 00:10:59,120
asset inflation on particular regions of landed properties

275 [Melvin Lim]
00:10:59,120 –> 00:11:01,280
and this particular type of landed property

276 [Melvin Lim]
00:11:01,280 –> 00:11:02,400
just for example and showcase,

277 [Melvin Lim]
00:11:02,400 –> 00:11:06,120
inter-terraces, it has already appreciated by 20% to 33%.

278 [Melvin Lim]
00:11:06,120 –> 00:11:09,480
So on the ground, assets behave drastically differently,

279 [Melvin Lim]
00:11:09,480 –> 00:11:11,000
and compared to CPI inflation,

280 [Melvin Lim]
00:11:11,000 –> 00:11:14,120
it is not a good gauge of property price inflation growth.

281 [Melvin Lim]
00:11:14,120 –> 00:11:16,320
So when we take that into consideration,

282 [Melvin Lim]
00:11:16,320 –> 00:11:19,240
and looking back at this entire list of factors,

283 [Melvin Lim]
00:11:19,240 –> 00:11:22,400
interest rates is just one of the 16 factors

284 [Melvin Lim]
00:11:22,400 –> 00:11:23,720
that we need to consider,

285 [Melvin Lim]
00:11:23,720 –> 00:11:26,120
on what grounds real estate in Singapore.

286 [Melvin Lim]
00:11:26,120 –> 00:11:28,160
Because the very reason why Singapore

287 [Melvin Lim]
00:11:28,160 –> 00:11:30,240
might possibly behave differently

288 [Melvin Lim]
00:11:30,240 –> 00:11:31,920
can be so many different factors.

289 [Melvin Lim]
00:11:31,920 –> 00:11:34,000
Number one, let me bring out this black colour chart

290 [Melvin Lim]
00:11:34,000 –> 00:11:35,480
with like a stacking model.

291 [Melvin Lim]
00:11:35,480 –> 00:11:38,800
So this stacking model shows the foundation of Singapore,

292 [Melvin Lim]
00:11:38,800 –> 00:11:41,400
because the base layer of most properties

293 [Melvin Lim]
00:11:41,400 –> 00:11:42,560
that Singaporeans own,

294 [Melvin Lim]
00:11:42,560 –> 00:11:45,720
having 75% of Singaporeans owning HDB apartments,

295 [Melvin Lim]
00:11:45,720 –> 00:11:48,720
forms an entire suite of foundation

296 [Melvin Lim]
00:11:48,720 –> 00:11:50,240
in terms of our real estate market.

297 [Melvin Lim]
00:11:50,240 –> 00:11:53,720
Reason being, 90% of Singaporeans own their own properties.

298 [Melvin Lim]
00:11:53,720 –> 00:11:56,720
And most of Singaporeans own their first properties

299 [Melvin Lim]
00:11:56,720 –> 00:11:58,760
as a primary residence property.

300 [Melvin Lim]
00:11:58,760 –> 00:12:00,880
Meaning that a lot of people own properties to stay,

301 [Melvin Lim]
00:12:00,880 –> 00:12:02,400
for family building,

302 [Melvin Lim]
00:12:02,400 –> 00:12:04,560
buying properties near to their kids’ schools.

303 [Melvin Lim]
00:12:04,560 –> 00:12:06,120
And there’s a lot of reasons

304 [Melvin Lim]
00:12:06,120 –> 00:12:08,000
that people hold onto their property

305 [Melvin Lim]
00:12:08,000 –> 00:12:09,560
without speculative reason.

306 [Melvin Lim]
00:12:09,560 –> 00:12:11,720
So meaning that if I were to buy this property here,

307 [Melvin Lim]
00:12:11,720 –> 00:12:13,520
maybe it is because it’s near my parents’ home,

308 [Melvin Lim]
00:12:13,520 –> 00:12:14,800
or it is near to my kids’ school.

309 [Melvin Lim]
00:12:14,800 –> 00:12:18,440
The likelihood of me trying to quickly disposing the property

310 [Melvin Lim]
00:12:18,440 –> 00:12:22,280
that I’m living in through an economic downturn is very low

311 [Melvin Lim]
00:12:22,280 –> 00:12:25,280
because I have a very strong propensity

312 [Melvin Lim]
00:12:25,280 –> 00:12:26,360
to hold onto my property.

313 [Melvin Lim]
00:12:26,360 –> 00:12:28,960
Because my motivation is not for speculation reason,

314 [Melvin Lim]
00:12:28,960 –> 00:12:31,040
it is really for my family’s needs.

315 [Melvin Lim]
00:12:31,040 –> 00:12:33,360
Thus, with the bed rock of 90% home ownership,

316 [Melvin Lim]
00:12:33,360 –> 00:12:35,920
that creates an enormous moat

317 [Melvin Lim]
00:12:35,920 –> 00:12:36,880
in the Singapore real estate market.

318 [Melvin Lim]
00:12:36,880 –> 00:12:39,360
And then as families with dual income

319 [Melvin Lim]
00:12:39,360 –> 00:12:40,800
do well professionally,

320 [Melvin Lim]
00:12:40,800 –> 00:12:43,000
they then upgrade to the OCR condos,

321 [Melvin Lim]
00:12:43,000 –> 00:12:45,000
or they upgrade to RCR, and CCR condos,

322 [Melvin Lim]
00:12:45,000 –> 00:12:47,840
and then they might also upgrade to a landed property market,

323 [Melvin Lim]
00:12:47,840 –> 00:12:49,920
which is about 5% segment in Singapore.

324 [Melvin Lim]
00:12:49,920 –> 00:12:52,040
So that creates the entire foundation.

325 [Melvin Lim]
00:12:52,040 –> 00:12:53,560
The second chart that we bring out right now.

326 [Melvin Lim]
00:12:53,560 –> 00:12:54,400
Cooling measures.

327 [Melvin Lim]
00:12:54,400 –> 00:12:56,600
Of course, right now if you look at all these bar charts

328 [Melvin Lim]
00:12:56,600 –> 00:12:58,080
that our PLB Nucleus Team,

329 [Melvin Lim]
00:12:58,080 –> 00:12:59,800
which is our PLB Tech Team has created,

330 [Melvin Lim]
00:12:59,800 –> 00:13:01,160
there are close to about 20 different types

331 [Melvin Lim]
00:13:01,160 –> 00:13:03,080
of cooling measures already into the price graph.

332 [Melvin Lim]
00:13:03,080 –> 00:13:06,680
And we’re still seeing Q1 2022 having an uptake,

333 [Melvin Lim]
00:13:06,680 –> 00:13:08,320
not just in the luxury market,

334 [Melvin Lim]
00:13:08,320 –> 00:13:10,840
but also in all regions of the market.

335 [Melvin Lim]
00:13:10,840 –> 00:13:13,840
With that, that creates also another solid foundation

336 [Melvin Lim]
00:13:13,840 –> 00:13:17,280
because Seller’s Stamp Duty is one major deterrent

337 [Melvin Lim]
00:13:17,280 –> 00:13:19,480
that people will quickly offload their properties.

338 [Melvin Lim]
00:13:19,480 –> 00:13:22,440
Everybody is buying into their real estate,

339 [Melvin Lim]
00:13:22,440 –> 00:13:23,960
if let’s say it’s their first property,

340 [Melvin Lim]
00:13:23,960 –> 00:13:27,360
with a desire to live in it or a desire to own it

341 [Melvin Lim]
00:13:27,360 –> 00:13:28,560
for at least three years.

342 [Melvin Lim]
00:13:28,560 –> 00:13:31,080
So that Seller’s Stamp Duty technically increases

343 [Melvin Lim]
00:13:31,080 –> 00:13:33,160
the holding period of homeowners.

344 [Melvin Lim]
00:13:33,160 –> 00:13:34,520
In fact, there’s also this chart

345 [Melvin Lim]
00:13:34,520 –> 00:13:36,520
that ever since Seller’s Stamp Duty was introduced,

346 [Melvin Lim]
00:13:36,520 –> 00:13:38,760
the holding period of every single property

347 [Melvin Lim]
00:13:38,760 –> 00:13:40,160
that people buy in Singapore

348 [Melvin Lim]
00:13:40,160 –> 00:13:42,840
has increased to an average of seven to nine years.

349 [Melvin Lim]
00:13:42,840 –> 00:13:45,000
Secondly, on top of the Seller’s Stamp Duty,

350 [Melvin Lim]
00:13:45,000 –> 00:13:46,960
everybody now purchases property

351 [Melvin Lim]
00:13:46,960 –> 00:13:49,560
with at least a 25% down payment.

352 [Melvin Lim]
00:13:49,560 –> 00:13:52,760
And on top of that, you still have to pay a 4% Buyer’s Stamp Duty,

353 [Melvin Lim]
00:13:52,760 –> 00:13:55,640
and that’s 29% down into the property.

354 [Melvin Lim]
00:13:55,640 –> 00:13:57,840
So people are entering real estate

355 [Melvin Lim]
00:13:57,840 –> 00:14:01,200
with a capability to come with at least 29%

356 [Melvin Lim]
00:14:01,200 –> 00:14:04,200
as the first trench of down payment that is needed,

357 [Melvin Lim]
00:14:04,200 –> 00:14:05,320
which is 25% (down payment) + 4% (BSD).

358 [Melvin Lim]
00:14:05,320 –> 00:14:07,920
The third effect is that everybody is buying in

359 [Melvin Lim]
00:14:07,920 –> 00:14:10,400
with financial prudence because the TDSR

360 [Melvin Lim]
00:14:10,400 –> 00:14:13,680
scrutinises everybody’s income, credit, debt,

361 [Melvin Lim]
00:14:13,680 –> 00:14:16,480
to ensure that you have a base case

362 [Melvin Lim]
00:14:16,480 –> 00:14:19,320
of at least the ability to service the loan

363 [Melvin Lim]
00:14:19,320 –> 00:14:22,120
up to a 3.5% threshold interest rate.

364 [Melvin Lim]
00:14:22,120 –> 00:14:24,800
And that’s the bed rock of TDSR calculation from MAS.

365 [Melvin Lim]
00:14:24,800 –> 00:14:28,440
That then increases a homeowner’s confidence level

366 [Melvin Lim]
00:14:28,440 –> 00:14:30,800
in holding their property for at least the mid-term,

367 [Melvin Lim]
00:14:30,800 –> 00:14:32,560
or I would say for at least three years.

368 [Melvin Lim]
00:14:32,560 –> 00:14:36,040
And thus, if let’s say from 2022 to 2025,

369 [Melvin Lim]
00:14:36,040 –> 00:14:37,480
if there were to be any form

370 [Melvin Lim]
00:14:37,480 –> 00:14:39,640
of economic downturn or recession,

371 [Melvin Lim]
00:14:39,640 –> 00:14:41,600
every single owner, because of the fact

372 [Melvin Lim]
00:14:41,600 –> 00:14:44,560
that they have these three things as foundation,

373 [Melvin Lim]
00:14:44,560 –> 00:14:45,640
Seller’s Stamp Duty,

374 [Melvin Lim]
00:14:45,640 –> 00:14:49,760
25% + 4% down payment, TDSR calculation,

375 [Melvin Lim]
00:14:49,760 –> 00:14:51,000
this creates a confidence

376 [Melvin Lim]
00:14:51,000 –> 00:14:53,760
that they might not need to fire sell their property.

377 [Melvin Lim]
00:14:53,760 –> 00:14:55,680
Because anyway, this is buying for own stay,

378 [Melvin Lim]
00:14:55,680 –> 00:14:57,760
it’s buying really for my kids’ education,

379 [Melvin Lim]
00:14:57,760 –> 00:15:00,160
it’s really buying for my family to enjoy the property.

380 [Melvin Lim]
00:15:00,160 –> 00:15:03,200
And the icing of the cake is that everybody

381 [Melvin Lim]
00:15:03,200 –> 00:15:05,360
has this thing called the disposition effect,

382 [Melvin Lim]
00:15:05,360 –> 00:15:08,760
which means that if for example, somebody would to purchase

383 [Melvin Lim]
00:15:08,760 –> 00:15:11,400
example a new launch property back in 2020.

384 [Melvin Lim]
00:15:11,400 –> 00:15:14,200
And let’s say having all this thing in conjunction

385 [Melvin Lim]
00:15:14,200 –> 00:15:15,720
with the disposition effect,

386 [Melvin Lim]
00:15:15,720 –> 00:15:17,840
is that if their property is not performing.

387 [Melvin Lim]
00:15:17,840 –> 00:15:19,640
For example, let’s say they bought into this new launch

388 [Melvin Lim]
00:15:19,640 –> 00:15:22,920
at $1,600 PSF, and it is not performing.

389 [Melvin Lim]
00:15:22,920 –> 00:15:25,880
Meaning that even after TOP, the price is not rising,

390 [Melvin Lim]
00:15:25,880 –> 00:15:28,600
because of maybe any form of recessional risk

391 [Melvin Lim]
00:15:28,600 –> 00:15:29,920
or maybe economic downturn.

392 [Melvin Lim]
00:15:29,920 –> 00:15:31,760
What is technically going to happen

393  [Melvin Lim]
00:15:31,760 –> 00:15:33,160
through the mind of the home buyer

394 [Melvin Lim]
00:15:33,160 –> 00:15:35,120
that has bought this property in the year 2020,

395 [Melvin Lim]
00:15:35,120 –> 00:15:37,080
and in 2023, they collect their keys.

396 [Melvin Lim]
00:15:37,080 –> 00:15:38,800
They bought at $1,600 PSF,

397 [Melvin Lim]
00:15:38,800 –> 00:15:41,560
2023, let’s say when the property TOP-ed

398 [Melvin Lim]
00:15:41,560 –> 00:15:43,240
and they want to exit the market,

399 [Melvin Lim]
00:15:43,240 –> 00:15:46,360
and it is still ongoing at $1,600 PSF,

400 [Melvin Lim]
00:15:46,360 –> 00:15:48,200
because nobody is able to exit,

401 [Melvin Lim]
00:15:48,200 –> 00:15:50,480
at let’s say $1,800 PSF,

402 [Melvin Lim]
00:15:50,480 –> 00:15:52,160
because the market is not doing well.

403 [Melvin Lim]
00:15:52,160 –> 00:15:54,120
What is going happen is that the first thing

404 [Melvin Lim]
00:15:54,120 –> 00:15:55,920
that will go through the homeowner’s mind,

405 [Melvin Lim]
00:15:55,920 –> 00:15:57,200
through the disposition effect

406 [Melvin Lim]
00:15:57,200 –> 00:15:58,440
is that they will not sell.

407 [Melvin Lim]
00:15:58,440 –> 00:16:00,000
They will move in, or they will rent out,

408 [Melvin Lim]
00:16:00,000 –> 00:16:01,960
or they will wait for the market to recover.

409 [Melvin Lim]
00:16:01,960 –> 00:16:04,960
The reason is because they are already in the game,

410 [Melvin Lim]
00:16:04,960 –> 00:16:06,160
they have skin in the game.

411 [Melvin Lim]
00:16:06,160 –> 00:16:08,920
There’s no point in selling back at the same price,

412 [Melvin Lim]
00:16:08,920 –> 00:16:10,920
because that will mean that they will be making a loss

413 [Melvin Lim]
00:16:10,920 –> 00:16:12,040
through the holding cost,

414 [Melvin Lim]
00:16:12,040 –> 00:16:14,120
through the bank interest rate they’ve been paying,

415 [Melvin Lim]
00:16:14,120 –> 00:16:15,520
through the Buyer’s Stamp Duty that they’re paying.

416 [Melvin Lim]
00:16:15,520 –> 00:16:17,960
There’s no point in them realising the loss.

417 [Melvin Lim]
00:16:17,960 –> 00:16:20,280
It’s similar to somebody that has bought a stock,

418 [Melvin Lim]
00:16:20,280 –> 00:16:22,200
or that has bought this particular counter

419 [Melvin Lim]
00:16:22,200 –> 00:16:23,040
in the stock market.

420 [Melvin Lim]
00:16:23,040 –> 00:16:25,760
And now because of the market downturn,

421 [Melvin Lim]
00:16:25,760 –> 00:16:27,520
they are seeing red on their balance sheet.

422 [Melvin Lim]
00:16:27,520 –> 00:16:30,280
And what is going to happen is that they will not exit

423 [Melvin Lim]
00:16:30,280 –> 00:16:32,160
because they don’t want to realise their loss.

424 [Melvin Lim]
00:16:32,160 –> 00:16:34,240
It is also called the loss aversion theory.

425 [Melvin Lim]
00:16:34,240 –> 00:16:38,120
So they will only exit to profit keep if the market rises,

426 [Melvin Lim]
00:16:38,120 –> 00:16:40,360
and they want to cash in on their profit.

427 [Melvin Lim]
00:16:40,360 –> 00:16:42,640
So there is a similar effect as well

428 [Melvin Lim]
00:16:42,640 –> 00:16:43,480
in the real estate market.

429 [Melvin Lim]
00:16:43,480 –> 00:16:44,800
And because of disposition effect,

430 [Melvin Lim]
00:16:44,800 –> 00:16:46,880
what we’re going to see is that if owners

431 [Melvin Lim]
00:16:46,880 –> 00:16:49,000
don’t make that paper gain that they’re looking for,

432 [Melvin Lim]
00:16:49,000 –> 00:16:50,360
they might just hold on to their property.

433 [Melvin Lim]
00:16:50,360 –> 00:16:52,640
And that also reduces the speculative effect

434 [Melvin Lim]
00:16:52,640 –> 00:16:53,680
in the Singapore’s real estate market.

435 [Melvin Lim]
00:16:53,680 –> 00:16:57,040
And because of that entire mindset and entire thing,

436 [Melvin Lim]
00:16:57,040 –> 00:16:59,400
we think that what is going to potentially happen

437 [Melvin Lim]
00:16:59,400 –> 00:17:01,400
in the next 12 to 18 months

438 [Melvin Lim]
00:17:01,400 –> 00:17:04,000
is that even if interest rates were to rise,

439 [Melvin Lim]
00:17:04,000 –> 00:17:06,160
a lot of people are already in the market,

440 [Melvin Lim]
00:17:06,160 –> 00:17:08,840
and they will not easily throw off their properties

441 [Melvin Lim]
00:17:08,840 –> 00:17:11,160
unless they own multiple properties,

442 [Melvin Lim]
00:17:11,160 –> 00:17:13,200
and unless their multiple properties

443 [Melvin Lim]
00:17:13,200 –> 00:17:15,880
also have that secondary factor is that,

444 [Melvin Lim]
00:17:15,880 –> 00:17:17,400
for example if they have a second property

445 [Melvin Lim]
00:17:17,400 –> 00:17:19,720
that is let’s say a 1- or 2-bedder,

446 [Melvin Lim]
00:17:19,720 –> 00:17:21,520
in the CCR region or RCR region.

447 [Melvin Lim]
00:17:21,520 –> 00:17:24,320
Unless they’re unable to find a tenant

448 [Melvin Lim]
00:17:24,320 –> 00:17:26,080
or to rent it out effectively

449 [Melvin Lim]
00:17:26,080 –> 00:17:28,120
to at least cover most of the mortgage,

450 [Melvin Lim]
00:17:28,120 –> 00:17:29,680
then that will cause an issue.

451 [Melvin Lim]
00:17:29,680 –> 00:17:31,600
Or maybe they have two to three properties,

452 [Melvin Lim]
00:17:31,600 –> 00:17:34,280
they’re unable to find tenants to actually occupy it

453 [Melvin Lim]
00:17:34,280 –> 00:17:36,440
and there’s a lot of high vacancy risks,

454 [Melvin Lim]
00:17:36,440 –> 00:17:38,440
then probably they might feel stressed

455 [Melvin Lim]
00:17:38,440 –> 00:17:39,640
from the money mortgage payment.

456 [Melvin Lim]
00:17:39,640 –> 00:17:41,640
But let us look back again

457 [Melvin Lim]
00:17:41,640 –> 00:17:43,680
on how did these homeowners

458 [Melvin Lim]
00:17:43,680 –> 00:17:46,760
initially own two to three residential properties.

459 [Melvin Lim]
00:17:46,760 –> 00:17:49,400
Now, if you were to purchase any multiple properties

460 [Melvin Lim]
00:17:49,400 –> 00:17:51,520
in the recent years,

461 [Melvin Lim]
00:17:51,520 –> 00:17:52,760
what is technically going to happen

462 [Melvin Lim]
00:17:52,760 –> 00:17:54,680
is that if you are buying a second property

463 [Melvin Lim]
00:17:54,680 –> 00:17:56,200
through a decoupling module,

464 [Melvin Lim]
00:17:56,200 –> 00:17:58,640
and you have, let’s say the hubby owning

465 [Melvin Lim]
00:17:58,640 –> 00:18:01,600
the primary property, Mrs owning the second property,

466 [Melvin Lim]
00:18:01,600 –> 00:18:04,640
similarly you also have to pay 20%, 25% down payment.

467 [Melvin Lim]
00:18:04,640 –> 00:18:06,240
What is going to happen is that you go through

468 [Melvin Lim]
00:18:06,240 –> 00:18:08,800
the TDSR process, you go through the SSD process.

469 [Melvin Lim]
00:18:08,800 –> 00:18:10,360
And if you are renting it out,

470 [Melvin Lim]
00:18:10,360 –> 00:18:13,280
if you can effectively cover most of the mortgage,

471 [Melvin Lim]
00:18:13,280 –> 00:18:15,160
or you can cover the entire mortgage,

472 [Melvin Lim]
00:18:15,160 –> 00:18:16,200
then technically speaking,

473 [Melvin Lim]
00:18:16,200 –> 00:18:18,080
I think you are pretty well buffered.

474 [Melvin Lim]
00:18:18,080 –> 00:18:20,960
And on top of the fact is that if two separate owners

475 [Melvin Lim]
00:18:20,960 –> 00:18:23,480
after decoupling, and owning one property each,

476 [Melvin Lim]
00:18:23,480 –> 00:18:25,800
and they are both salaried professionals,

477 [Melvin Lim]
00:18:25,800 –> 00:18:27,160
having CPF contribution

478 [Melvin Lim]
00:18:27,160 –> 00:18:28,840
into their ordinary account every month,

479 [Melvin Lim]
00:18:28,840 –> 00:18:31,480
what is going to happen in that investment property

480 [Melvin Lim]
00:18:31,480 –> 00:18:34,680
is that for example, if this mortgage is $4K a month,

481 [Melvin Lim]
00:18:34,680 –> 00:18:36,960
and they have $1,260 coming into the OA,

482 [Melvin Lim]
00:18:36,960 –> 00:18:38,840
that $1,260 will definitely be going

483 [Melvin Lim]
00:18:38,840 –> 00:18:40,760
into paying off the mortgage.

484 [Melvin Lim]
00:18:40,760 –> 00:18:44,160
And you have then, that $2,800

485 [Melvin Lim]
00:18:44,160 –> 00:18:45,240
that you have to take care of.

486 [Melvin Lim]
00:18:45,240 –> 00:18:48,200
If your rental, if it’s a $4K monthly instalment,

487 [Melvin Lim]
00:18:48,200 –> 00:18:51,040
your rental is let’s say, for example, $3,500.

488 [Melvin Lim]
00:18:51,040 –> 00:18:52,800
That $3,500, after netting off

489 [Melvin Lim]
00:18:52,800 –> 00:18:54,440
that $2,800 you have to cover

490 [Melvin Lim]
00:18:54,440 –> 00:18:57,480
will still give you a $700 cash access,

491 [Melvin Lim]
00:18:57,480 –> 00:19:00,040
and you can use that $700 to pay off the MCST fee of $300,

492 [Melvin Lim]
00:19:00,040 –> 00:19:02,560
you can still keep a $400.

493 [Melvin Lim]
00:19:02,560 –> 00:19:04,760
And thus, that is the mindset of owners

494 [Melvin Lim]
00:19:04,760 –> 00:19:07,360
that are owning two properties, husband and wife,

495 [Melvin Lim]
00:19:07,360 –> 00:19:09,560
kind of modular basis.

496 [Melvin Lim]
00:19:09,560 –> 00:19:11,600
Let’s look at maybe another profile.

497 [Melvin Lim]
00:19:11,600 –> 00:19:12,600
Let’s say for example,

498 [Melvin Lim]
00:19:12,600 –> 00:19:15,520
singular investor, already has their own property.

499 [Melvin Lim]
00:19:15,520 –> 00:19:17,120
Let’s say he or she bites the bullet

500 [Melvin Lim]
00:19:17,120 –> 00:19:20,920
to buy a second property during maybe 2020 or 2021.

501 [Melvin Lim]
00:19:20,920 –> 00:19:22,920
In order to buy a second property,

502 [Melvin Lim]
00:19:22,920 –> 00:19:25,960
firstly you have to bite the bullet to pay ABSD,

503 [Melvin Lim]
00:19:25,960 –> 00:19:27,720
which back then was 12%.

504 [Melvin Lim]
00:19:27,720 –> 00:19:29,560
And you bite the bullet, you pay 12%,

505 [Melvin Lim]
00:19:29,560 –> 00:19:31,760
on top of the Buyer’s Stamp Duty of 3%-4%,

506 [Melvin Lim]
00:19:31,760 –> 00:19:33,520
you already sunk in 15%

507 [Melvin Lim]
00:19:33,520 –> 00:19:35,520
to pay the Additional Buyer’s Stamp Duty,

508 [Melvin Lim]
00:19:35,520 –> 00:19:36,480
and Buyer’s Stamp Duty.

509 [Melvin Lim]
00:19:36,480 –> 00:19:39,720
On top of that, you can only loan 45% from the bank,

510 [Melvin Lim]
00:19:39,720 –> 00:19:42,600
which means you have to come up with 55% down payment.

511 [Melvin Lim]
00:19:42,600 –> 00:19:45,000
And because of the fact that you come up with 55% down payment,

512 [Melvin Lim]
00:19:45,000 –> 00:19:47,080
your monthly instalment is going to be so little,

513 [Melvin Lim]
00:19:47,080 –> 00:19:49,760
because you’re only leveraging 45% on the bank.

514 [Melvin Lim]
00:19:49,760 –> 00:19:52,560
And because of that, that enhances the safety net,

515 [Melvin Lim]
00:19:52,560 –> 00:19:54,440
and there’s no reason for this investor

516 [Melvin Lim]
00:19:54,440 –> 00:19:56,880
holding that second property to fire sell their property

517 [Melvin Lim]
00:19:56,880 –> 00:19:59,240
because they only have such a little mortgage to pay.

518 [Melvin Lim]
00:19:59,240 –> 00:20:01,320
And let’s have a look at the key difference.

519 [Melvin Lim]
00:20:01,320 –> 00:20:03,960
If it is a $1.2 mil property,

520 [Melvin Lim]
00:20:03,960 –> 00:20:05,840
75% loan will mean that your monthly instalment

521 [Melvin Lim]
00:20:05,840 –> 00:20:06,640
is this amount.

522 [Melvin Lim]
00:20:06,640 –> 00:20:08,120
$1.2 mil property,

523 [Melvin Lim]
00:20:08,120 –> 00:20:10,000
45% loan will mean that your monthly instalment

524 [Melvin Lim]
00:20:10,000 –> 00:20:10,840
is only this amount.

525 [Melvin Lim]
00:20:10,840 –> 00:20:13,800
And if you already had the ability to pay 55% down,

526 [Melvin Lim]
00:20:13,800 –> 00:20:15,880
12% Additional Buyer’s Stamp Duty, 3% BSD

527 [Melvin Lim]
00:20:15,880 –> 00:20:19,360
you already had 55% + 12% + 3%.

528 [Melvin Lim]
00:20:19,360 –> 00:20:22,360
And that formulates a total of 70%.

529 [Melvin Lim]
00:20:22,360 –> 00:20:24,200
If you’re somebody that has 70%

530 [Melvin Lim]
00:20:24,200 –> 00:20:26,520
to pay a $1.2 mil purchase

531 [Melvin Lim]
00:20:26,520 –> 00:20:27,800
as a second property investment,

532 [Melvin Lim]
00:20:27,800 –> 00:20:29,880
I don’t think the instalment is going be an issue for you.

533 [Melvin Lim]
00:20:29,880 –> 00:20:31,760
So with that scenario,

534 [Melvin Lim]
00:20:31,760 –> 00:20:33,200
I don’t think this singular investor

535 [Melvin Lim]
00:20:33,200 –> 00:20:34,640
is going to fire sale the property

536 [Melvin Lim]
00:20:34,640 –> 00:20:36,440
in the event if interest rates were to increase,

537 [Melvin Lim]
00:20:36,440 –> 00:20:38,920
because that would not have a significant impact

538 [Melvin Lim]
00:20:38,920 –> 00:20:40,000
on the monthly instalment.

539 [Melvin Lim]
00:20:40,000 –> 00:20:41,160
And if I were to take

540 [Melvin Lim]
00:20:41,160 –> 00:20:43,640
this singular investor’s second property to highlight here.

541 [Melvin Lim]
00:20:43,640 –> 00:20:47,760
Having that 45% out of the $1.2 mil loan,

542 [Melvin Lim]
00:20:47,760 –> 00:20:49,920
based on let’s say 1.5% interest rate,

543 [Melvin Lim]
00:20:49,920 –> 00:20:52,360
vis-a-vis 2.5% interest rate,

544 [Melvin Lim]
00:20:52,360 –> 00:20:55,280
the instalment increment is only so insignificant.

545 [Melvin Lim]
00:20:55,280 –> 00:20:57,680
And that is just a marginal increase,

546 [Melvin Lim]
00:20:57,680 –> 00:20:59,160
which definitely this investor

547 [Melvin Lim]
00:20:59,160 –> 00:21:01,160
with a 70% down payment ability

548 [Melvin Lim]
00:21:01,160 –> 00:21:02,840
can definitely easily take care of

549 [Melvin Lim]
00:21:02,840 –> 00:21:05,360
by just renting out this property, very easily.

550 [Melvin Lim]
00:21:05,360 –> 00:21:08,720
With that, let’s come back to that scenario again.

551 [Melvin Lim]
00:21:08,720 –> 00:21:12,120
So this time round, when interest rates increase further,

552 [Melvin Lim]
00:21:12,120 –> 00:21:14,880
what is going to happen to our real estate prices?

553 [Melvin Lim]
00:21:14,880 –> 00:21:17,280
I think that we have to really consider

554 [Melvin Lim]
00:21:17,280 –> 00:21:19,200
the third aspect that we kicked off

555 [Melvin Lim]
00:21:19,200 –> 00:21:20,040
at the start of this video,

556 [Melvin Lim]
00:21:20,040 –> 00:21:22,200
is that if you are timing the market,

557 [Melvin Lim]
00:21:22,200 –> 00:21:24,480
let me bring out these nine scenarios for you.

558 [Melvin Lim]
00:21:24,480 –> 00:21:26,680
So back here at PLB, we just did this,

559 [Melvin Lim]
00:21:26,680 –> 00:21:28,360
through one of our sessions with our guys,

560 [Melvin Lim]
00:21:28,360 –> 00:21:31,400
because we run this module called 777 Series,

561 [Melvin Lim]
00:21:31,400 –> 00:21:33,080
where we talk about investment concepts,

562 [Melvin Lim]
00:21:33,080 –> 00:21:35,360
property investment concepts deeply with our guys.

563 [Melvin Lim]
00:21:35,360 –> 00:21:37,040
And we study that week after week

564 [Melvin Lim]
00:21:37,040 –> 00:21:38,480
in order to grow ourselves together.

565 [Melvin Lim]
00:21:38,480 –> 00:21:40,720
So we came up these nine different scenarios.

566 [Melvin Lim]
00:21:40,720 –> 00:21:42,360
For example, somebody that’s planning

567 [Melvin Lim]
00:21:42,360 –> 00:21:44,280
to buy a $1 mil property,

568 [Melvin Lim]
00:21:44,280 –> 00:21:47,560
what is going to be the opportunity cost and outcome,

569 [Melvin Lim]
00:21:47,560 –> 00:21:49,800
if we wait or we enter the market?

570 [Melvin Lim]
00:21:49,800 –> 00:21:51,200
So we came up with this permutation,

571 [Melvin Lim]
00:21:51,200 –> 00:21:55,640
$1 mil property, based on a 1.5% interest rate,

572 [Melvin Lim]
00:21:55,640 –> 00:22:00,280
and we projected outcome of 2.5% interest rate towards 2023.

573 [Melvin Lim]
00:22:00,280 –> 00:22:02,280
So based on $1 mil property,

574 [Melvin Lim]
00:22:02,280 –> 00:22:04,400
if price were to stay the same,

575 [Melvin Lim]
00:22:04,400 –> 00:22:06,320
and the reason for doing this projection

576 [Melvin Lim]
00:22:06,320 –> 00:22:07,200
is that we want to see,

577 [Melvin Lim]
00:22:07,200 –> 00:22:10,320
should we buy now or should we wait until 2023

578 [Melvin Lim]
00:22:10,320 –> 00:22:11,520
when interest rates increase,

579 [Melvin Lim]
00:22:11,520 –> 00:22:15,240
to try and gamble and see if the price will come down.

580 [Melvin Lim]
00:22:15,240 –> 00:22:18,240
And if we do this projection, out of the nine scenarios,

581 [Melvin Lim]
00:22:18,240 –> 00:22:19,600
price remains the same,

582 [Melvin Lim]
00:22:19,600 –> 00:22:21,880
price dropped by 5%,

583 [Melvin Lim]
00:22:21,880 –> 00:22:23,200
price dropped by 10%,

584 [Melvin Lim]
00:22:23,200 –> 00:22:24,960
price dropped by 15%,

585 [Melvin Lim]
00:22:24,960 –> 00:22:27,160
price dropped by 20%,

586 [Melvin Lim]
00:22:27,160 –> 00:22:30,440
and following which price increased by 5%, 10%, 15%, 20%.

587 [Melvin Lim]
00:22:30,440 –> 00:22:33,520
These nice scenarios, what is the probability?

588 [Melvin Lim]
00:22:33,520 –> 00:22:35,240
Now, based on these nice scenarios,

589 [Melvin Lim]
00:22:35,240 –> 00:22:37,560
we’re going to write down all the breakeven prices

590 [Melvin Lim]
00:22:37,560 –> 00:22:39,200
on the right hand side for you to have a look,

591 [Melvin Lim]
00:22:39,200 –> 00:22:42,760
meaning that compared to buying now at $1 mil,

592 [Melvin Lim]
00:22:42,760 –> 00:22:44,120
at 1.5% interest rate,

593 [Melvin Lim]
00:22:44,120 –> 00:22:46,320
vis-a-vis the nine scenarios later,

594 [Melvin Lim]
00:22:46,320 –> 00:22:48,600
what will be our risk and opportunity cost?

595 [Melvin Lim]
00:22:48,600 –> 00:22:50,560
So if you were to have a look at this,

596 [Melvin Lim]
00:22:50,560 –> 00:22:52,200
the only winning case

597 [Melvin Lim]
00:22:52,200 –> 00:22:55,520
is only if the price drops significantly

598 [Melvin Lim]
00:22:55,520 –> 00:23:00,160
by at least 15% to 20%, for me to see a savings.

599 [Melvin Lim]
00:23:00,160 –> 00:23:02,160
And when we calculate the breakeven price,

600 [Melvin Lim]
00:23:02,160 –> 00:23:04,920
we calculate based on the entry price of $1 mil,

601 [Melvin Lim]
00:23:04,920 –> 00:23:06,560
plus Buyer’s Stamp Duty,

602 [Melvin Lim]
00:23:06,560 –> 00:23:08,840
based on the purchase price of the nine different scenarios,

603 [Melvin Lim]
00:23:08,840 –> 00:23:11,360
based on the interest rate cost,

604 [Melvin Lim]
00:23:11,360 –> 00:23:14,040
holding for the next 25 years.

605 [Melvin Lim]
00:23:14,040 –> 00:23:16,720
And what this gives us is that we want to see

606 [Melvin Lim]
00:23:16,720 –> 00:23:20,280
what is the breakeven cost of the different scenarios,

607 [Melvin Lim]
00:23:20,280 –> 00:23:21,720
based on the entry price

608 [Melvin Lim]
00:23:21,720 –> 00:23:24,960
and the entry interest rate that we’re entering to in 2023.

609 [Melvin Lim]
00:23:24,960 –> 00:23:28,040
And the only way for us to win is that we have to gamble

610 [Melvin Lim]
00:23:28,040 –> 00:23:30,560
and bet on the fact that price is going to collapse

611 [Melvin Lim]
00:23:30,560 –> 00:23:32,040
by at least 15% to 20%.

612 [Melvin Lim]
00:23:32,040 –> 00:23:34,560
Because other than that, all other scenarios

613 [Melvin Lim]
00:23:34,560 –> 00:23:37,200
basically are unfavourable to wait.

614 [Melvin Lim]
00:23:37,200 –> 00:23:38,880
Meaning that if we were to just take a gamble

615 [Melvin Lim]
00:23:38,880 –> 00:23:40,360
for the next one year and we wait,

616 [Melvin Lim]
00:23:40,360 –> 00:23:44,960
anything that would be happening in this 66% to 70% range,

617 [Melvin Lim]
00:23:44,960 –> 00:23:46,880
it will be more unfavourable,

618 [Melvin Lim]
00:23:46,880 –> 00:23:49,320
compared to me entering the market right now.

619 [Melvin Lim]
00:23:49,320 –> 00:23:52,680
So based on that, why do we want to take a gamble?

620 [Melvin Lim]
00:23:52,680 –> 00:23:54,120
And that is something for us to think about.

621 [Melvin Lim]
00:23:54,120 –> 00:23:57,000
Because if we are to just bang on this probability

622 [Melvin Lim]
00:23:57,000 –> 00:24:00,400
of about 30%, what will be the risk that would be involved

623 [Melvin Lim]
00:24:00,400 –> 00:24:02,680
and what would be the opportunity cost to you as well?

624 [Melvin Lim]
00:24:02,680 –> 00:24:03,840
One more thing to take note of

625 [Melvin Lim]
00:24:03,840 –> 00:24:05,880
is that then what about this one year?

626 [Melvin Lim]
00:24:05,880 –> 00:24:06,920
Where are you at?

627 [Melvin Lim]
00:24:06,920 –> 00:24:09,400
Are you maybe bunking in with your parents,

628 [Melvin Lim]
00:24:09,400 –> 00:24:10,840
or are you renting a place

629  [Melvin Lim]
00:24:10,840 –> 00:24:12,680
and paying rental for your landlord?

630  [Melvin Lim]
00:24:12,680 –> 00:24:15,800
O r are you, let’s say delaying entering the market

631 [Melvin Lim]
00:24:15,800 –> 00:24:17,120
by holding onto your property?

632 [Melvin Lim]
00:24:17,120 –> 00:24:18,640
And of course, if you have followed us,

633 [Melvin Lim]
00:24:18,640 –> 00:24:20,040
we also mentioned a lot of times

634 [Melvin Lim]
00:24:20,040 –> 00:24:21,600
that if you are moving to a bigger property,

635 [Melvin Lim]
00:24:21,600 –> 00:24:24,040
it’s better to move to a bigger property first

636 [Melvin Lim]
00:24:24,040 –> 00:24:26,080
compared to staying put at your own property

637 [Melvin Lim]
00:24:26,080 –> 00:24:27,360
while monitoring the market.

638 [Melvin Lim]
00:24:27,360 –> 00:24:29,400
Because bigger properties move much faster

639 [Melvin Lim]
00:24:29,400 –> 00:24:30,680
than smaller properties.

640 [Melvin Lim]
00:24:30,680 –> 00:24:32,800
So based on that, the three things just to recap.

641 [Melvin Lim]
00:24:32,800 –> 00:24:34,880
We look at facts, figures, and charts.

642 [Melvin Lim]
00:24:34,880 –> 00:24:36,680
Second thing, we talk about the mindset,

643 [Melvin Lim]
00:24:36,680 –> 00:24:37,920
disposition effect,

644 [Melvin Lim]
00:24:37,920 –> 00:24:40,880
loss aversion effect of homeowners, home buyers,

645 [Melvin Lim]
00:24:40,880 –> 00:24:43,960
thirdly, based on these nine different permutations,

646 [Melvin Lim]
00:24:43,960 –> 00:24:45,560
and of course your own preference

647 [Melvin Lim]
00:24:45,560 –> 00:24:46,840
in terms of time preference,

648 [Melvin Lim]
00:24:46,840 –> 00:24:48,680
in terms of family preferences,

649 [Melvin Lim]
00:24:48,680 –> 00:24:50,000
in terms of investment preference,

650 [Melvin Lim]
00:24:50,000 –> 00:24:51,800
should you wait or should you not wait?

651 [Melvin Lim]
00:24:51,800 –> 00:24:54,360
So we hope that this episode on interest rates helps you,

652 [Melvin Lim]
00:24:54,360 –> 00:24:55,280
adds value to you.

653 [Melvin Lim]
00:24:55,280 –> 00:24:56,560
And once again, my name is Melvin Lim.

654 [Melvin Lim]
00:24:56,560 –> 00:24:58,160
Thank you for staying on Nuggets On The Go,

655 [Melvin Lim]
00:24:58,160 –> 00:25:00,160
we hope to see you soon on the next episode, take care.