#8: How Long Do You Need to Save your First Downpayment – Just Graduated from University?| NOTG S2 E8

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– Can you hear my voice loud and clear?

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Okay, great.

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All right-
(phone clatters)

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(laughs)

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Mr. Daniel went off on a date today, on a Saturday.

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And we have Mr. Bahri here in the house.

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All right, a halfway intermission.

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What is gonna happen on the 18th of August is that

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PropertyLimBrothers is going to have

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a collab webinar with UOB,

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and we’re gonna talk about some deep dive trends

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in the landed property market.

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So you can click on the link right down below

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to register your interest for this free webinar,

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it’s a collaboration between PLB and UOB.

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And we’re gonna have probably a one-hour webinar session

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to deep dive into the landed market,

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current trends in the year 2021 and moving forward.

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So we hope to see you there on the webinar itself,

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and do remember to register,

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and we’ll see you soon, cheers.

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Okay, so we’re back with Nuggets On The Go,

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episode number eight, I think.

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And welcome back.

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Hope that you’re enjoying our 2021 series,

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Nuggets On The Go, so far.

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So we ended with episode number seven,

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talking about what is some of the definition

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on how we look at risk in real estate.

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Just to recap, we mentioned that risk in real estate

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in episode seven, is our own definition in PLB is that

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if you were to purchase a property

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with zero growth for appreciation,

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that’s considered risk, in a sense.

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Because an investment, by definition,

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is to put your money into an asset,

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that has appreciation growth in the mid to long term,

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especially in property, where it’s classified as

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an asset that is a little bit more illiquid

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Because the moment you buy,

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especially a property in Singapore,

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you need to hold it for at least three years.

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Then you can exit from the market.

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If we are talking about the private residential market,

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because there’s a three-year seller stamp duty involved.

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And if you were to exit within that three years,

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you’ll be taxed with the seller stamp duty tax,

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which is definitely not something that we want.

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And thus, usually in Singapore,

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everybody will hold their residential private properties

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for at least three years.

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And because of that fact,

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the market in Singapore is fairly stable,

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because everybody buys already with the presumption

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that they will at least hold it for three years,

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and thus, you will very seldom see people sell

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within that first, second year, and third year mark.

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Thus actually, cooling measures on the flip side,

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is basically good for the market,

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because it stabilises the volatility of the market.

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And you will seldom see people having to do

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fire sale as well.

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Because right now, based on TDSR check, there’s a 60%,

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kind of like haircut already,

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for the assessment of every individual

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before they are allowed to take a bank loan

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to finance their mortgage.

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And on top of that,

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we also have to put in a 25% down payment and stamp duty,

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making up to close to about 29%.

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So everybody has already technically done

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their due diligence,

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before they actually commit to a property.

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Now what we want to talk about today

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is a very interesting topic.

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So recently I was reading on this blog,

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on Seedly, that talks about how do I go about

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saving $100K by 30 years old?

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And I think it’s a pretty interesting topic

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because it is also a topic that is relating to,

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you know, if let’s say, example,

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you were to be just graduated from university,

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and you’re planning, hey, you know,

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how much do I need to save

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in order to buy my first property?

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This topic is just,

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really sinking into the same kind of trajectory.

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Because how much you can save,

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how much you can build in your CPF as a Singaporean,

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it contributes to the speed on

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how fast you can actually purchase your first property.

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Typically, in terms of this entire graph,

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we’re gonna draw out this graph.

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For guys, you are typically going to graduate

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at the age of around 25 or maybe 26, depending.

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whether you go to junior college or polytechnic,

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and then you have to serve two years in the army.

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And then by the time when you start school,

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depending on three or four years programme,

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you are typically gonna graduate at about age 25.

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And then that’s the year

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that you will start working, at 25, 26.

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For ladies, that would be a little bit earlier,

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two years earlier than guys,

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probably about 23 years old, there about.

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And thus, if you will look at this trajectory

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towards the lifespan that we have usually.

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From the age of 25 all the way to age of 65,

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why do we take 65 as a gauge is because

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when you take a mortgage from the bank,

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they usually look at 65 years old, less off your current age,

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and then they will max out the tenure

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based on 30 years maximum.

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Although, if you were to refinance at a later stage,

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there are some strategies that you can actually

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stretch your tenure to 75,

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but that’s a whole lot different topic together.

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Today we’ll just focus on how banks assess

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your loan eligibility and your loan tenure.

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So let’s say you are 25 years old,

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even if you have the capital to buy the property,

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they will take 65 minus 25, that’ll be 40,

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but they will still cut it down to 30 max tenure

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for you to own your first property.

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So that is the initial bank loan that you will take.

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But of course, when you buy a property,

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let me just put a hypothetical example.

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Let’s say it’s with a $1 mil property.

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A very quick shortcut to calculate on how much you need

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in terms of down payment is that 25% will be down payment.

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Out of 25%, 5% will be cash.

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20% can be cash or CPF.

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You need to set aside an additional 4% for stamp duty

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if the property is at least $1 mil and above.

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If it’s below a million, it’s 3%,

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but there’s a small little calculation caveat.

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Take 4% minus 15,400, or 3% minus 5,400.

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So for this example, the quick shortcut is that

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let’s say you go and see a property.

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The property is $1 mil, just take out a calculator,

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take $1 mil times 29%, and less off $15,400.

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That will be the amount that you need to prepare

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in order to buy the property.

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Of course, there’s some small little additional amount

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like legal fee, and also there’s the valuation fee as well.

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So set aside perhaps about another $3,000 to $4,000

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for that range.

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Also take note that your stamp duties can also be paid

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through your CPF amount, if it’s a new launch.

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If it’s a resale, it can also be paid through your CPF amount.

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The only thing is that

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when you first purchase a resale property,

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you have to pay the stamp duty in cash first.

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And when the property is completed,

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your lawyer can actually claw back the amount

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from your CPF OA account back to you.

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So in the end, you can still use CPF,

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it’s just that at the start point,

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you need to have that cash ready.

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So something for you to take note,

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all these small little minute details.

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We have other Investors series and Ask series

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that talks about all these things in detail.

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Coming back here.

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This means that when you buy a $1 mil property,

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you need to have at least $274,600,

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to prep yourself in terms of cash and CPF.

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Minimum cash component is definitely already $50,000.

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The balance can be from CPF.

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But what does this mean for a young adult,

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young person that just come into society,

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and then you’ve got a first job,

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and you’re planning in advance.

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But before that, maybe let’s head back a little bit

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to define…

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All right, so it’s commercial break number two.

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What is going to happen at the end of August is that

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we’re gonna have a District 5 landed property webinar.

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And during this webinar, we’re gonna help

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one of the developers talk about

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some of the new landed properties

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that they’re gonna launch within the District 5,

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especially in the Pasir Panjang Hill region.

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So if you’re interested to attend this webinar

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that we’re going to have,

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and it’s gonna be a live webinar at the end of August,

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the specific date and time is not out yet,

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we’re still finalising the details.

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But if you would like to attend this webinar,

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and especially if you’re interested

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in the freehold landed property in the District 5 region,

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and that’s walkable to the Haw Par Villa MRT Station,

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keep a lookout for the webinar.

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And the link to sign up is actually

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on the description box down below.

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I’m gonna flash it down here as well.

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So when you sign up,

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they’re going to bring you to our PLB landing page.

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And then you can key in your name and email.

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And shortly after, once the webinar link is confirmed,

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we’re gonna send you the webinar link for you to attend

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the live webinar with us.

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And we’re gonna chat about some of the insights

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on the District 5 landed property market trends,

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as well as talking about some of these new landed properties

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that the developer will be planning to launch.

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So we hope to see you there on the webinar,

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and meantime, take care.

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Okay, but before that,

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maybe let’s head back a little bit to define

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what are the different generations,

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and then based on Wikipedia,

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there’s like, Gen X.

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Okay, it’s from 1965 to 1980.

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And then of course, I belong to Gen Y, 1981 to 1995.

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And that’s also called the Millennials.

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Of course, Gen Z, 1996 to 2012.

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And guess what?

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Right now, Ethan belongs to Gen Alpha,

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2013 onwards,

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they are considered Gen Alpha, according to Wikipedia.

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But let’s go back to scenario one.

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Assuming you are single, you are not getting married.

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Drawing a salary, what are your property options?

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Can you buy a BTO?

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No, you cannot buy a BTO unless you are at 35 years old,

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which is 10 years later.

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And if you want to buy a BTO at age 35 and single,

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you can only go for a 2-room BTO.

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You have to be at least 35 years old to qualify for a resale HDB.

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You can buy up to an executive apartment

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and stuff like that.

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It’s just that there are some additional

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terms and conditions

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where you can only take bank loans and stuff.

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Also a whole lot different topic.

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But, the key is that you must be at least 35.

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So if you are 25, you cannot touch HDB property

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as a single person.

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So what are your options?

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You can only go for a private property,

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if we are talking about residential property.

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And a lot of times, 25 to 35 is the years

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are these 10 years for you to save up.

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So it depends very strongly on what industry are you in.

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What kind of salary range are you drawing.

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But let’s refer back to this

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blog article that we talk about.

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Very interestingly,

250
00:10:11,879 –> 00:10:13,840
I’m going to flesh out this chart for you.

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00:10:13,840 –> 00:10:15,940
So the link to the full article is right down below.

252
00:10:15,940 –> 00:10:17,940
So it talks about the fact that

253
00:10:17,940 –> 00:10:21,039
if you start off with a graduate’s salary

254
00:10:21,039 –> 00:10:24,399
at a median range of maybe $2,900 per month,

255
00:10:24,399 –> 00:10:27,600
after CPF, you take home $2,320.

256
00:10:27,600 –> 00:10:30,799
And if you save half of your take-home salary,

257
00:10:30,799 –> 00:10:34,679
you’re gonna be able to save $16,240 per year,

258
00:10:34,679 –> 00:10:37,379
including your 13th month bonus in cash.

259
00:10:37,379 –> 00:10:41,559
By age 30, if you can diligently save 50%

260
00:10:41,559 –> 00:10:44,200
of your monthly take-home salary,

261
00:10:44,200 –> 00:10:48,759
you will be able to save $104,526,

262
00:10:48,759 –> 00:10:51,960
after six years of working full-time.

263
00:10:51,960 –> 00:10:54,740
And this is, of course, assuming you have no job lapse.

264
00:10:54,740 –> 00:10:58,299
And assuming that your salary is increasing at

265
00:10:58,299 –> 00:11:01,960
4% salary increment for the next six years.

266
00:11:01,960 –> 00:11:04,240
So, basically your cash savings

267
00:11:04,240 –> 00:11:07,019
is not sufficient to buy a property yet at 30 years old.

268
00:11:07,019 –> 00:11:10,779
But we also have to take into account your CPF amount.

269
00:11:10,779 –> 00:11:13,720
So after six years, that is the estimated CPF sum

270
00:11:13,720 –> 00:11:15,600
in your CPF ordinary account.

271
00:11:15,600 –> 00:11:18,320
So take note, you contribute 20% CPF.

272
00:11:18,320 –> 00:11:22,039
Your employer contributes an additional 17% CPF.

273
00:11:22,039 –> 00:11:25,000
So basically this 17% is on top of

274
00:11:25,000 –> 00:11:27,159
the salary that is shown, right?

275
00:11:27,159 –> 00:11:29,320
So if it’s $2,900 plus CPF,

276
00:11:29,320 –> 00:11:31,059
employer contributes another 17%.

277
00:11:31,059 –> 00:11:34,700
Out of this 37%, certain percentage will be going to

278
00:11:34,700 –> 00:11:37,500
your OA, SA and MediSave account.

279
00:11:37,500 –> 00:11:40,419
And the amount that you can use for properties

280
00:11:40,419 –> 00:11:42,159
only from the OA account.

281
00:11:42,159 –> 00:11:44,259
And let’s take this example,

282
00:11:44,259 –> 00:11:46,720
and pump into this data for next six years.

283
00:11:46,720 –> 00:11:51,159
So basically this CPF built up over the next six years,

284
00:11:51,159 –> 00:11:53,820
we have to take into account the accrued interest

285
00:11:53,820 –> 00:11:55,659
that you have earned from CPF OA account

286
00:11:55,659 –> 00:11:57,519
which is 2.5% per annum.

287
00:11:57,519 –> 00:12:00,940
Roughly estimation, if I don’t count your 13th month bonus,

288
00:12:00,940 –> 00:12:02,740
you will be able to get,

289
00:12:02,740 –> 00:12:05,000
save up probably close to about $60,000

290
00:12:05,000 –> 00:12:09,179
after six years in your CPF OA account.

291
00:12:09,179 –> 00:12:12,720
And then adding back to the $104,000,

292
00:12:12,720 –> 00:12:13,679
that would then bring us to

293
00:12:13,679 –> 00:12:17,320
close to about $164,000, thereabout.

294
00:12:17,320 –> 00:12:23,299
And this is still insufficient to buy a $1 mil property.

295
00:12:23,360 –> 00:12:24,620
Why do we say $1 mil?

296
00:12:24,620 –> 00:12:27,220
Is because right now, in the year 2021,

297
00:12:27,220 –> 00:12:28,379
if you were to go ahead and look at

298
00:12:28,379 –> 00:12:30,340
all the new launches in the market,

299
00:12:30,340 –> 00:12:33,159
if we talk about new launch residential properties,

300
00:12:33,159 –> 00:12:37,059
you cannot find any 2-bedders that’s below a million.

301
00:12:37,059 –> 00:12:38,899
The only thing you can buy below a million is

302
00:12:38,899 –> 00:12:42,919
these are all 1-bedders, and they are like $900,000 range.

303
00:12:42,919 –> 00:12:46,000
So our pricing in terms of benchmark prices

304
00:12:46,000 –> 00:12:49,559
for brand-new residential properties is really inching up.

305
00:12:49,559 –> 00:12:51,379
It has inched up for the last two years.

306
00:12:51,379 –> 00:12:54,580
Especially after the latest, Pasir Ris 8,

307
00:12:54,580 –> 00:12:58,159
very, very good performance for the launch.

308
00:12:58,159 –> 00:13:00,679
I think this weekend is like a lot of developers,

309
00:13:00,679 –> 00:13:02,519
they are like, sort of raising prices

310
00:13:02,519 –> 00:13:03,919
based on what we’re seeing on the ground.

311
00:13:03,919 –> 00:13:06,340
Initially, we thought that there’s a chance for resale

312
00:13:06,340 –> 00:13:08,320
and new launch to close up a bit,

313
00:13:08,320 –> 00:13:10,139
but now it seems like new launch also

314
00:13:10,139 –> 00:13:12,600
starting to inch upwards already.

315
00:13:12,600 –> 00:13:14,860
Because a lot of the balance inventory

316
00:13:14,860 –> 00:13:17,340
has been cleared over the past six months,

317
00:13:17,340 –> 00:13:19,379
as the market has been doing really well.

318
00:13:19,379 –> 00:13:22,940
So we think that resale still has some room to grow

319
00:13:22,940 –> 00:13:26,220
in a sense, and we’ll continue to monitor the market

320
00:13:26,220 –> 00:13:27,100
and update you guys.

321
00:13:27,100 –> 00:13:28,779
Okay, but back to this topic.

322
00:13:28,779 –> 00:13:31,379
So by age 30, cash and CPF,

323
00:13:31,379 –> 00:13:34,639
you can save up to about $166,000.

324
00:13:34,639 –> 00:13:36,620
It means that you can’t still afford,

325
00:13:36,620 –> 00:13:38,620
like, a $1 mil property.

326
00:13:38,620 –> 00:13:42,100
Because you need a minimum of $276,000.

327
00:13:42,100 –> 00:13:45,299
So if you want to calculate based on $166,000 what you can buy,

328
00:13:45,299 –> 00:13:49,200
very simply, you just take $166,000 divided by 0.28.

329
00:13:49,340 –> 00:13:51,539
Because technically, below a million,

330
00:13:51,539 –> 00:13:54,220
you take a 28% down payment plus stamp duty.

331
00:13:54,220 –> 00:13:56,299
That’s the quick calculation method.

332
00:13:56,299 –> 00:13:58,480
So you take $166,000 divide by 0.28.

333
00:13:58,480 –> 00:14:00,559
That’d be the amount of the property that you can buy.

334
00:14:00,559 –> 00:14:04,080
And as we elongate that to 10 years, using that same formula

335
00:14:04,080 –> 00:14:06,659
from the cash savings and CPF savings,

336
00:14:06,659 –> 00:14:10,259
that will mean that at the end of 10 years, when you’re aged 35,

337
00:14:10,259 –> 00:14:13,440
your CPF would then build up to about $120,000,

338
00:14:13,440 –> 00:14:15,820
and your cash, you can potentially build up to

339
00:14:15,820 –> 00:14:18,559
close to $200,000, provided you use the same formula.

340
00:14:18,559 –> 00:14:21,700
Save 50% of your take-home pay, salary increase by 4%,

341
00:14:21,700 –> 00:14:23,259
you never get out of job.

342
00:14:23,259 –> 00:14:24,340
By the time you’re aged 35,

343
00:14:24,340 –> 00:14:28,779
you will have saved up about $320,000.

344
00:14:28,779 –> 00:14:29,980
And then,

345
00:14:30,899 –> 00:14:32,440
using the formula again,

346
00:14:32,440 –> 00:14:34,700
$320,000 divided by 0.29 plus $15,400.

347
00:14:34,700 –> 00:14:35,840
You can buy something up to

348
00:14:35,840 –> 00:14:38,940
about $1.1 mil kind of range.

349
00:14:38,940 –> 00:14:41,080
So very comfortably, you can then own a property

350
00:14:41,080 –> 00:14:41,919
at about $1 mil.

351
00:14:41,919 –> 00:14:43,120
But of course,

352
00:14:43,120 –> 00:14:44,620
we then have to take into consideration that

353
00:14:44,620 –> 00:14:46,799
in 10 years’ time, let’s say if you’re now aged 25,

354
00:14:47,659 –> 00:14:49,159
10 years’ time, aged 35,

355
00:14:49,159 –> 00:14:51,019
how much will our property price be?

356
00:14:51,019 –> 00:14:52,620
Will be in the year 2031.

357
00:14:52,620 –> 00:14:56,299
And definitely, at this rate of growth,

358
00:14:56,299 –> 00:14:58,539
perhaps by that time, $1 mil

359
00:14:58,539 –> 00:15:00,419
will also be a little bit challenging.

360
00:15:00,419 –> 00:15:01,360
These are things that of course,

361
00:15:01,360 –> 00:15:03,679
it will happen in the future, we won’t know yet.

362
00:15:03,679 –> 00:15:07,419
But this is the typical route to save up

363
00:15:07,419 –> 00:15:09,159
probably up to about $300,000,

364
00:15:09,159 –> 00:15:10,779
based on some parameters right here.

365
00:15:10,779 –> 00:15:12,580
So of course, that’s scenario one.

366
00:15:12,580 –> 00:15:15,100
Why do we talk about this is because

367
00:15:15,100 –> 00:15:18,000
this is going to lead us to the next two scenarios,

368
00:15:18,000 –> 00:15:21,399
whereby the speed of course, to get your first property

369
00:15:21,399 –> 00:15:24,639
would then be accelerated if, of course you are,

370
00:15:24,639 –> 00:15:25,679
if you’re getting married.

371
00:15:25,679 –> 00:15:27,360
Because when you are getting married,

372
00:15:27,360 –> 00:15:30,899
as long as both you and your spouse are above 21,

373
00:15:30,899 –> 00:15:32,620
you can apply for BTO.

374
00:15:32,620 –> 00:15:35,840
You can go for resale HDB, and in Singapore,

375
00:15:35,840 –> 00:15:39,139
the CPF grants for first-timer resale HDB,

376
00:15:39,139 –> 00:15:43,759
and the subsidy plus grant, for first-timer BTO buyers

377
00:15:43,759 –> 00:15:44,940
are a lot.

378
00:15:44,940 –> 00:15:48,360
For example, if you’re a first-time couple,

379
00:15:48,360 –> 00:15:50,240
just got married, matrimonial property,

380
00:15:50,240 –> 00:15:52,100
first time buying a resale HDB,

381
00:15:52,100 –> 00:15:54,100
your grants can be up to $160,000.

382
00:15:54,100 –> 00:15:57,480
And that essentially is already the first bullet

383
00:15:57,480 –> 00:15:59,240
for you to put in the down payment.

384
00:15:59,240 –> 00:16:03,059
And if you get a HDB loan, you can loan up to 90%.

385
00:16:03,059 –> 00:16:06,200
So let’s say if you buy a $600,000 resale HDB,

386
00:16:06,200 –> 00:16:08,419
you only need $60,000 as down payment,

387
00:16:08,419 –> 00:16:11,059
which is already covered in your CPF housing grant.

388
00:16:11,059 –> 00:16:13,279
And that’s how our government helps couples

389
00:16:13,279 –> 00:16:16,379
to get their first property at a faster rate.

390
00:16:16,379 –> 00:16:18,240
And of course in Singapore,

391
00:16:18,240 –> 00:16:20,340
government policy is to encourage people

392
00:16:20,340 –> 00:16:21,820
to build families and things like that.

393
00:16:21,820 –> 00:16:23,960
So thus, the HDB properties,

394
00:16:23,960 –> 00:16:26,320
which are meant as public housing,

395
00:16:26,320 –> 00:16:28,360
to encourage different forms of policies, right?

396
00:16:28,360 –> 00:16:30,659
So of course, we will leave it as that.

397
00:16:30,659 –> 00:16:32,519
But what we’re trying to say is that

398
00:16:32,519 –> 00:16:34,779
there are scenarios one, two, and three.

399
00:16:34,779 –> 00:16:36,879
As a single person, what are your options?

400
00:16:36,879 –> 00:16:39,360
As a married couple, what are your options?

401
00:16:39,360 –> 00:16:41,940
As a couple that,

402
00:16:41,940 –> 00:16:43,700
maybe you’re not intending to go for HDB property,

403
00:16:43,700 –> 00:16:45,980
what are your options for private residential?

404
00:16:45,980 –> 00:16:48,759
And thus, we’re gonna talk about this scenarios two and three

405
00:16:48,759 –> 00:16:49,600
in the next topic.

406
00:16:49,600 –> 00:16:52,419
But right now, I wanna end off this episode

407
00:16:52,419 –> 00:16:54,820
with scenario one.

408
00:16:54,820 –> 00:16:57,179
That means coming back to the fact that if you are single,

409
00:16:57,179 –> 00:17:01,840
and let’s say you manage to save up even more.

410
00:17:01,840 –> 00:17:05,019
Perhaps you got a better high-paying job,

411
00:17:05,019 –> 00:17:07,559
you run a business, you’re self-employed.

412
00:17:07,559 –> 00:17:10,720
Or maybe your career is doing well.

413
00:17:10,720 –> 00:17:13,839
Or you’ve managed to invest in maybe

414
00:17:13,839 –> 00:17:15,559
stocks, bonds, and stuff like that.

415
00:17:15,559 –> 00:17:19,299
And then, you managed build up your capital faster.

416
00:17:19,299 –> 00:17:21,880
Even before reaching age 65.

417
00:17:21,880 –> 00:17:24,019
What we’re seeing on the ground is that

418
00:17:24,019 –> 00:17:26,099
we think that is also very important

419
00:17:26,099 –> 00:17:28,559
to not hastily just buy any property,

420
00:17:28,559 –> 00:17:32,480
because your overall quantum budget is limited.

421
00:17:32,480 –> 00:17:35,400
And you go ahead and buy, let’s say a property,

422
00:17:35,400 –> 00:17:37,380
which is very hard to exit in three to five years’ time,

423
00:17:37,380 –> 00:17:39,940
we have seen many times before,

424
00:17:39,940 –> 00:17:43,160
single buyers, because of the fact that they wanna rush in

425
00:17:43,160 –> 00:17:45,339
and quickly own the property.

426
00:17:45,339 –> 00:17:49,259
And they just pick up based on the limited budget they have.

427
00:17:49,259 –> 00:17:51,880
And they go for, let’s say a very smallish property.

428
00:17:51,880 –> 00:17:54,079
And then by three years or five years’ time,

429
00:17:54,079 –> 00:17:56,619
when they want to sell, some of them, they approached us,

430
00:17:56,619 –> 00:18:00,980
and they ask us for opinions and advice like,

431
00:18:00,980 –> 00:18:03,220
Hey, why is it that, you know, I bought a,

432
00:18:03,220 –> 00:18:04,660
like, example, a 1-bedder.

433
00:18:04,660 –> 00:18:06,559
But after five years, there’s no appreciation.

434
00:18:06,559 –> 00:18:09,960
We have to perhaps take a more helicopter scope

435
00:18:09,960 –> 00:18:12,920
and understand a little bit on the ground

436
00:18:12,920 –> 00:18:14,420
on what is actually happening.

437
00:18:14,420 –> 00:18:17,180
Because we can feel the ground on top of statistics.

438
00:18:17,180 –> 00:18:18,779
Based on the amount of viewings

439
00:18:18,779 –> 00:18:21,140
and everything that we do on a weekly basis

440
00:18:21,140 –> 00:18:22,339
by our sales team.

441
00:18:22,339 –> 00:18:23,759
Now the key rationale is because

442
00:18:23,759 –> 00:18:26,480
sometimes there are two varying factors.

443
00:18:26,480 –> 00:18:27,660
On top of many different factors.

444
00:18:27,660 –> 00:18:30,079
One is that, if you go for smaller apartments,

445
00:18:30,079 –> 00:18:32,160
because the square footage is smaller,

446
00:18:32,160 –> 00:18:33,680
even though if let’s say the project

447
00:18:33,680 –> 00:18:37,079
has an incremental increase of $100 PSF.

448
00:18:37,079 –> 00:18:37,920
What’s going to happen is

449
00:18:37,920 –> 00:18:40,220
let’s say you buy a 400 sqft apartment.

450
00:18:40,220 –> 00:18:43,160
And you buy in at $2,000 PSF.

451
00:18:43,160 –> 00:18:45,839
If the project increases by $100 per square foot,

452
00:18:45,839 –> 00:18:49,519
that will mean that your property has appreciated by $40,000.

453
00:18:49,519 –> 00:18:53,619
But $40,000 is not enough to cover your bank interest,

454
00:18:53,619 –> 00:18:57,359
your renovation, your stamp duty, and things like that.

455
00:18:57,359 –> 00:18:59,160
And thus, even if you were to increase by

456
00:18:59,160 –> 00:19:00,700
$200 PSF,

457
00:19:00,700 –> 00:19:02,579
that will have increased by $80,000.

458
00:19:02,579 –> 00:19:04,619
And thus, like three, five years later,

459
00:19:04,619 –> 00:19:05,799
when you wanna sell the property,

460
00:19:05,799 –> 00:19:07,740
after you calculate it, you add back everything,

461
00:19:07,740 –> 00:19:10,359
you add back your legal fee, stamp duty,

462
00:19:10,359 –> 00:19:13,559
you add back your commission to pay to your broker

463
00:19:13,559 –> 00:19:16,880
that helps the market and viewings and things like that.

464
00:19:16,880 –> 00:19:18,339
And you add back your bank interest.

465
00:19:18,339 –> 00:19:20,900
You’ll find that it’s technically like a net loss,

466
00:19:20,900 –> 00:19:22,599
or you just break even.

467
00:19:22,599 –> 00:19:25,839
And thus, it’s also very important to determine

468
00:19:25,839 –> 00:19:27,799
is this property for your own use?

469
00:19:27,799 –> 00:19:30,160
Because if it’s your own use, you are perhaps,

470
00:19:30,160 –> 00:19:32,319
you are definitely the person paying the instalment.

471
00:19:32,319 –> 00:19:33,160
If you rent out,

472
00:19:33,160 –> 00:19:35,700
then there’s still additional rental income to cover.

473
00:19:35,700 –> 00:19:37,319
The most important thing is to understand that

474
00:19:37,319 –> 00:19:38,900
the smaller the size of the property,

475
00:19:38,900 –> 00:19:40,500
the smaller the square footage,

476
00:19:40,500 –> 00:19:41,880
even though you see appreciation

477
00:19:41,880 –> 00:19:44,640
in terms of PSF for the entire development,

478
00:19:44,640 –> 00:19:48,240
the amount in terms of quantum appreciation is limited.

479
00:19:48,240 –> 00:19:50,980
Compared to a larger apartment, let’s say 1,000 sqft,

480
00:19:50,980 –> 00:19:54,380
a $200 PSF increment will be equivalent

481
00:19:54,380 –> 00:19:58,259
to a $200,000 quantum appreciation.

482
00:19:58,259 –> 00:20:00,180
And thus, the size does matter.

483
00:20:00,180 –> 00:20:02,940
And the second thing is that

484
00:20:02,940 –> 00:20:05,579
we always advocate buying something

485
00:20:05,579 –> 00:20:10,259
that you already can sort of forecast and foresee.

486
00:20:10,259 –> 00:20:12,519
Of course, not to 100% certainty,

487
00:20:12,519 –> 00:20:14,619
but you know that three, five years later,

488
00:20:14,619 –> 00:20:16,160
when you want to exit,

489
00:20:16,160 –> 00:20:18,880
the audience that is willing to buy your property

490
00:20:18,880 –> 00:20:22,140
is larger than the audience

491
00:20:22,140 –> 00:20:25,039
that will buy another type of property

492
00:20:25,039 –> 00:20:26,680
that you initially thought about.

493
00:20:26,680 –> 00:20:29,500
So in Singapore, we have to look at the demographics.

494
00:20:29,500 –> 00:20:32,900
Which is why we always look at OCR, RCR, and CCR.

495
00:20:32,900 –> 00:20:34,019
We look at different districts.

496
00:20:34,019 –> 00:20:37,299
We look at what are the predominant demographics there.

497
00:20:37,299 –> 00:20:39,480
For example, is this district having

498
00:20:39,480 –> 00:20:43,240
a support pool of HDB upgraders, families?

499
00:20:43,240 –> 00:20:46,059
And that will mean that, are there a lot of HDB BTOs?

500
00:20:46,059 –> 00:20:48,839
What are the prices of the HDB flats doing right there?

501
00:20:48,839 –> 00:20:50,339
Do they make a profit?

502
00:20:50,339 –> 00:20:53,920
And thus, if I know that the property that I’m going to buy

503
00:20:53,920 –> 00:20:55,140
has a support level,

504
00:20:55,140 –> 00:20:56,880
then perhaps I want to go for a 3-bedder,

505
00:20:56,880 –> 00:20:59,279
because I want to be able to exit

506
00:20:59,279 –> 00:21:01,980
to an audience that will love my product.

507
00:21:01,980 –> 00:21:04,400
I’d want to buy a 1-bedder in a estate

508
00:21:04,400 –> 00:21:07,359
with a lot of HDB BTOs.

509
00:21:07,359 –> 00:21:09,680
And then, after three or five years,

510
00:21:09,680 –> 00:21:11,599
when I wanna put the property on the market,

511
00:21:11,599 –> 00:21:13,059
the one bedder has no audience

512
00:21:13,059 –> 00:21:14,839
because all the potential buyers,

513
00:21:14,839 –> 00:21:16,740
they’re all coming to at least own the 3-bedder,

514
00:21:16,740 –> 00:21:17,920
because they’re upgrading from HDB,

515
00:21:17,920 –> 00:21:19,579
they already, they’re married,

516
00:21:19,579 –> 00:21:21,480
they have one to two or three kids.

517
00:21:21,480 –> 00:21:23,420
They need at least three bedrooms to function

518
00:21:23,420 –> 00:21:25,220
as a liveable space.

519
00:21:25,220 –> 00:21:28,140
And thus, when we buy properties in certain areas,

520
00:21:28,140 –> 00:21:28,980
when you look at launches,

521
00:21:28,980 –> 00:21:30,200
when you look at resale properties,

522
00:21:30,200 –> 00:21:32,660
study the demographics of the district,

523
00:21:32,660 –> 00:21:34,140
the zoning, the area.

524
00:21:34,140 –> 00:21:36,660
Look at the demographics currently,

525
00:21:36,660 –> 00:21:39,740
and try to forecast in three, five years, eight years’ time,

526
00:21:39,740 –> 00:21:43,779
when your property is being put to the market,

527
00:21:43,779 –> 00:21:45,119
is this product something

528
00:21:45,119 –> 00:21:46,980
that a lot of people will want to own?

529
00:21:46,980 –> 00:21:49,460
Because if you go in and buy a property hastily,

530
00:21:49,460 –> 00:21:51,339
and then you find that three, five years later,

531
00:21:51,339 –> 00:21:53,180
when you wanna exit, it’s very difficult.

532
00:21:53,180 –> 00:21:56,059
Then the challenge will come in right then.

533
00:21:56,059 –> 00:21:58,140
So you wanna be able to forecast first.

534
00:21:58,140 –> 00:21:59,279
Of course, what I’m saying is that,

535
00:21:59,279 –> 00:22:02,200
I’m not saying that 1- or 2-bedders are no good.

536
00:22:02,200 –> 00:22:05,019
In fact, I myself own a 2-bedder, right?

537
00:22:06,099 –> 00:22:09,299
I love properties that has very high tendency,

538
00:22:09,299 –> 00:22:09,839
kind of return.

539
00:22:09,839 –> 00:22:12,859
And 1-bedders and 2-bedders are very easy to rent out,

540
00:22:12,859 –> 00:22:15,259
because there’s a very high fluidity.

541
00:22:15,259 –> 00:22:17,900
And the overall rental quantum is much lower.

542
00:22:17,900 –> 00:22:19,819
And I’m not saying also that

543
00:22:19,819 –> 00:22:21,220
3- and 4-bedders is not easy to rent.

544
00:22:21,220 –> 00:22:23,140
It all depends on a lot of different parameters.

545
00:22:23,140 –> 00:22:24,980
But what we’re trying to say is that

546
00:22:24,980 –> 00:22:27,539
there are districts and places

547
00:22:27,539 –> 00:22:29,819
to hunt for 1-bedders and 2-bedders.

548
00:22:29,819 –> 00:22:32,220
There are districts and places that are more suitable

549
00:22:32,220 –> 00:22:34,000
for 3- or 4-bedders.

550
00:22:34,000 –> 00:22:36,680
And more suitable is in a sense of,

551
00:22:36,680 –> 00:22:38,920
we are talking about the exit speed.

552
00:22:38,920 –> 00:22:42,579
So if you want a higher and fastest exit speed,

553
00:22:42,579 –> 00:22:44,019
you want more buyer audience,

554
00:22:44,019 –> 00:22:46,680
then hunt for the right product in the right district,

555
00:22:46,680 –> 00:22:47,700
in the right zoning.

556
00:22:47,700 –> 00:22:50,099
Thank you for staying tuned with us on Nuggets On The Go.

557
00:22:50,099 –> 00:22:51,859
We hope to see you soon on the next episode.

558
00:22:51,859 –> 00:22:53,859
Meantime, take care, and ciao.