tzlee.com/blog

Author: Justin Lee

  • What I think about the Singapore Property Market in 2016

    What I think about the Singapore Property Market in 2016

    Here’s what I think of the Singapore property market in 2016 (and beyond). I’ve just sold my HDB and am renting temporarily waiting on the side to jump in. If you’d like me to summarise in one sentence, I think the market has not softened enough. At the moment only the super luxury properties in Core Central Region (CCR) ~$5m and above are feeling the pinch. There are also some condominiums in Rest of Central Region (RCR) with prices above $2m that are feeling some pressure because at $2m the buyer pool starts shrinking. However,  anything below $2m is still quite resilient because many owners are still holding on to their prices with hope that the cooling measures may be relaxed soon.

    Let’s start with HDBs

    HDBs prices in general have tanked quite a bit due to the flood of BTO in the last few years. However, BTO represents only a fraction of the overall Singapore property buyer population as BTO/DBSS flats are only eligible for [married|single>35yr] Singaporeans. There is still demand from PRs and foreigners going to resale HDB and condos.

    By H2 2016, many BTO/DBSS flats especially those in Choa Chu Kang, Punggol, Sengkang would have obtained their temporary occupation permit (TOP) and would be ready for occupation. Once these BTO flats are ready, there will be landlords losing their tenant(s) and parents potentially downsizing after their kids have moved out. This will lead to another depression in property prices. There are many more HDB flats TOP-ing in 2017 in more areas like Woodlands, Yishun and Sembawang and the numbers are scary; I’ll leave you to do your own research here.

    PRs can only buy resale

    As of now (2016) the HDB resale market is still being kept afloat by PRs. There’s also decent foreigner rental demand for cheaper HDB flats/rooms, but that said, the price gap between a HDB and Condo room rentals have narrowed as Condo landlords are facing the pressure and lowered their expectations.

    2021 and beyond will be the bloodbath years

    Here’s the interesting part: I think that in 2021 (5 years from now) when all the newly built flat owners fulfil their HDB minimum occupation period (MOP), there will be a flood of resale properties in the market. The competition for resale HDB will be interesting to watch. My personal opinion is that you should consider selling your properties now if you live in any of the towns that have more than 2,000 units TOP from 2016 and beyond.

    Condominiums below $2m still hot

    Condos are still a lifestyle dream for most Singaporeans. Most people I know sold their HDBs to upgrade to a Condo, otherwise they would simply stay put for good. There’s still decent demand for Condos right now, especially in the Outside Central Region (OCR) where decent sized 99-year leasehold condos can be had by young families for ~$1m or less to enjoy the facilities and prestige.

    The amount of investing and rental activities have dropped quite drastically, however, partially caused by weak market affecting (foreign) employees and investors.

    Like I mentioned earlier, condos above $2m are feeling more pressure because at that quantum, the number of real buyers, i.e. people buying for own stay, are significantly lesser as such amounts can fetch a decent landed property (more on that later). Rental yields also start to diminish at above $2m.

    Seller stamp duty is a deterrent and is keeping resale condo prices high

    There are also many condos TOP-ing this year and the next few years. This will cause a dip in condo rental prices within the next few years, but my gut feel is that condo resale prices will stay for now because the seller stamp duty (SSD) is a deterrent; if sellers want to make a profit, the SSD would be factored into the sale price causing resale condo prices of newly TOPed projects to actually increase. This is the primary reason why I said in the opening paragraph that the market has not softened enough — we need to ride out the SSD period.

    Location, location, location

    Another general observation is that there’s also less price gap between 99, 999 and freehold condos as most investors look at rental yield as a baseline for their return on investment. As with all properties, location is the key to price.

    For condos, expect to see drop starting in 2018 and hitting hard in 2021

    Similar to HDBs, I think 2021 will be a big bloodbath. Why? Seller stamp duty (SSD) takes 3 years to taper off, so many newer projects that TOPed within these few years would have been free of SSD by ~2018 and the would be a flood of condos on resale. Then, as HDB MOPs are fulfilled in 2021, thousands of properties would be up for resale or rental. The HDB sales and rental competes directly with condos for the PR/foreign buyers/tenants.

    So the big question is, can you wait?

    If are intending to upgrade to a condo and bought your HDB in 2009/2010 and recently just fulfilled your MOP, you can probably still sell your HDB now for a decent profit (20-30%) from 2009/2010 prices. Assuming you bought your property for $300K, that would be close to $90K in profits. Rental market is soft now, so assuming you rented a decent HDB for around $1,800 per month, the profits can hold you through ~50 months which is more than sufficient for you to ride the tides to a lower point before buying again.

    Don’t forget also: meanwhile your CPF account is not paying mortgage, so all the money (and profits) that went back in your CPF is collecting a handsome 2.5% interest for your next property purchase instead of getting stuck in the current rising interest rate environment. You could easily save yourself several hundreds of thousands in dollars from current condo prices.

    What about landed properties?

    In general, freehold landed properties will still hold good value as the number of land plots are truly limited. It has not much direct competition from HDB or Condos as people buying landed are seeking different lifestyles and priorities. Landed properties generally do not generate good rental yield. Also note that only Singaporeans can buy landed; PRs can apply with Singapore Land Authority (SLA) but I heard that it can be difficult to obtain approval. The downside to landed property is low liquidity as the buyer pool is smaller. If you decide to plonk all your life savings into a landed property, be sure you can afford to hold it.

    99 year landed properties will generally remain stagnant unless the location is good, simply because it does not provide better rental yield than condos in general. It is OK to buy for own stay and house multiple generations under one roof, but I personally would avoid it as an investment vehicle.

  • Spring cleaning surprises

    Spring cleaning surprises

    I wrote two entries towards the end of 2015 about slowing down (a.k.a. work-life balance) and de-cluttering.

    Enter 2016 + Chinese New Year spring cleaning. Spring cleaning this year it is a big affair because I am moving house, so almost every corner of my house gets packed.

    Here’s the top three surprises I’ve found in my home:

    1. There are more kitchen appliances than you can ever imagine. The kitchen already has a hob and a built-in oven, but then there’s also an air fryer, mini toaster oven, microwave oven, juice blender, food blender, handheld blender (for baking?), pots, pans, more pots, even more pans, tea sets, even more tea sets (I don’t even drink tea, so they have been in storage for eons), dozens of cups/mugs/salt+pepper shakers from events or weddings.
    2. There’s more gadgets than you can ever use in a day. Air filters. Fans. Radio… speakers… more speakers big and small. Earphones/headphones… lots of them. Old MP3 players, iPods, old iPhones, iPads, cameras. USB cables, power cables, even more USB cables. TVs — two of them. Ugh!
    3. There’s more cleaning products/gadgets than you ever need. Vacuum cleaners, steam cleaners (this was really a bad purchase on my part), traditional mop, high-tech 3M mop. Long brush, short brush, big brush, small brush, weird shape brush. Febreeze, Dettol, Lysol, Clorox, 3M and about a dozen other cleaning solutions.

    It’s NUTS! All the crap I bought. All the things I was made to believe work wonders when in fact all I really needed was probably a third or less of those. I sold/donated/threw a bunch of stuff away, and it was really hard to make some of those decisions, but I had to because the harder the decision, the stronger the memory. I am also making it a point to blog about this so I will never repeat the same mistakes.

    But what really surprised me was my OCD tendency to keep track of all my bank statements, bills and other documents. To my surprise, I have every single one of my bank statements since 2007. Looking back at them reminds me of my past, and tells a better story than I can even recall myself:

    I was living paycheck-to-paycheck back in 2007 and had close to no savings. I had maybe several hundred dollars balance at the end of every month (and it never grew). I remember I would look at my bank statements and make a note beside every transaction trying to figure out what it was for or where I spent my money, but a large bulk of it would be cash withdrawals at the ATM, so it was not clear if it was food, fancy restaurant meals (did not have credit card back then), cab fares or maybe even shopping.

    The turning point was when I started tracking my expenses in detail. Having an iPhone 3G (2008) and an app was key. I tracked close to every single cent I spent and saw that food expenses made up around $600/month. I tried to reduce, but it was hard because I worked in CBD, and food was (is) generally expensive. I also ate out most of the time — including dinner. My transport expenses were also high, because I occasionally cab or drive to work and had to pay crazy parking rates in town.

    I switched jobs in 2008. I worked outside of CBD but I drove to work daily and still had to pay for pretty expensive parking (averaging around $400/month) because I could not get season parking and had to pay hourly. However, food was cheap and I ate chye png almost every day for lunch and that brought my total expenses down. Together with an increase in salary, I started to see some savings, and with some excess money, I also bought basic life and health insurance.

    The rest of the story will be for another day. Anyway, as I flipped through my bank statements, I saw how this similar pattern added on to my savings bit by bit. My income has risen over the years of course, and my lifestyle may have also gotten more expensive, but the key was that my lifestyle expenses grew less than my income, and I think this is really important. Hopefully, an old friend is reading this — YOLO is not the way to go.

     

    I said in an earlier post that I would write about my resolutions for 2016. So here it is.

    Be grateful. I am grateful for all the people whom I’ve met along this journey, good or bad because all that has happened made me where I am today. I do hope to continue having more exciting years ahead.

    Reduce. Consumerism is scary and it will suck the life out of you. The next time I whip out my credit card, I need to think thrice. As a result, I’ve also reduced all my credit card limits. Banks are really insane these days to give out 4x your monthly salary.

    Focus. I had little distractions during the early years of my work life and it allowed me to focus on what I had to do, so I could do it right. I’ve found this very important, and the lack of focus is the reason why a lot of people fail. Not being arrogant but I do get quite a fair bit of “noise” with people approaching me to become a tech co-founder. Do not take offence if I reject you because I can’t do so many things at once; if I were your co-founder, you’d want me to focus on your stuff too.

  • Make space; consumerism sucks

    Make space; consumerism sucks

    One of the best quotes this year from a friend.

    People buy stuff because they can’t think of anything else better to do.

    – T. Lake

    It’s so darn true. I am guilty of turning to shopping whenever I am bored. But in a country where space (land) is a premium, we really should think hard before we buy stuff.

    I’ve ranted about consumerism not just once. I’ve spent the last few years trying to clear out junk in my house — basically things that I haven’t been using — only to have them accumulate again. Most times I am not part of the problem. I get a lot of hand-me-downs which at times are hard to simply just dispose of. I am getting increasingly frustrated that I am trying to make space, but things just keep appearing.

    I also realize that I have to spend so much more time/effort — and even money — to get rid of things than to keep or store them. This is really the biggest pain, and is really a first world problem.

    I have to spend so much more time/effort — and even money — to get rid of things than to keep or store them.

    I tried giving away computers last year. It took me months. I even had to constantly remind people to come pick them up. Some even said computers are too bulky and preferred laptops. I mean, even for free it seems people had a choice. In the end, I had to trash 3 of them.

    I am compelled to think of how to solve this problem, but I don’t have an idea yet. There’s nothing an online trading platform can’t do. Just browse Carousell for used items under $10 and you will know how much junk there is out there. If only people would stop buying stuff and spend time/money on things, like social connections, knowledge, services and experiences. All the cheap online shopping from China isn’t helping at all.

    It is always an eye-opener to chat with people who newly immigrate to your country because they usually bring little or nothing with them. Pay attention to what or where they spend their time and money, and observe how much time they have because they have nothing. Be amazed that they know more about the things happening in your own country than you do.

    De-cluttering continues to be my goal, year after year. People think I’m trying to save money. Yes, it may save money if I started with less and kept it that way. But right now it actually costs money for me to get rid of things.

    Have a house full of people, not a house full of things.

    Stop buying stuff. Stop going to shopping malls. Start going to places. Start meeting people. Start buying experiences. Start living life. Have a house full of people, not a house full of things.

  • Looking back

    Looking back

    It’s December again. How time flies. Next year marks the 10th year of my “official” life as an economic hamster. It’s starting to become obvious that the “wheel of fortune” keeps spinning, but you seem to get nowhere — until you jump off.

    I have tons of work and business related commitments. Now that I have a child, I have even less time for myself. I’m very tired and worn out.

    To most of my peers, I would probably seem to have “made it”. I may have some wealth, but at this juncture I’d really love to have some time instead to do the things I want and spend more time with the people I love.

    I never set out to work with the aim to become filthy rich. All I set out to do was to make some money so that I could do or buy the things that I want and then set aside some money as savings. Not that saving up is bad, but mindlessly hoarding money can also get out of hand pretty quickly. FYI, I found out that obsessively hoarding money can be some rich people’s hobby — some rich people don’t spend; they just store more and more to an extent they have so much money that they do not know what to do with it.

    When I first set out to work, I made barely enough for myself to get by. However, I spent my time (and money) on things that I enjoyed, such as R/C helicopters, computers, gadgets, music, games, books, etc. It may sound absurd, but these little things also helped build some of my knowledge/skills and even my (social) network. It was also one of the best times I’ve had — I would stay up on Fridays to repair my R/C helis and wake up early on Saturdays to meet friends at a “fun fly” where a few enthusiasts would gather at an open field to chit chat, share knowledge, and watch each other fly our R/C helis, crash them, then spend our Sundays buying parts and repairing them, then the week starts all over again. The point is: having something you love/are enthusiastic about makes your life meaningful and keeps your energy (“qi”) flowing.

    But I had no savings. That was the only miserable part.

    These hobbies started to take a backstage as I got busier with business and work. I knew that having no savings was bad and I have definitely come a long way from then. Today, I no longer struggle to pay my bills; I can easily afford the gadgets I want, and can even afford to have people clean my house on weekends — a luxury to most people. I’m no where near to being a millionaire of course, but the point is that I do not feel poor either.

    But what have I given up? Time. Lots of it. I have given up lots of hobbies and personal projects. I know that I am losing traction trying to keep up with technology —  the core of my livelihood. I don’t have much time with friends, and likewise they don’t have much time for me either.

    The worst part of all this is that it’s hard to get out of the spinning hamster wheel. If you jump off, you may fall and hurt yourself. The hamster wheel may also be spinning so fast that you may never be able to get back on. Slowing down is the hardest thing to do.

    I went to KK last weekend for grandma’s funeral and during my stay there I took my mind entirely off work. I spent a day chatting with my cousin whom I probably have not spoken with in 10 years. He shared about his small business (in Sarikei, East Malaysia) and how he makes just enough to get by. RM2,000 every month (S$700) would allow one to live very comfortably in his opinion. He spends his free time with family, friends and church. It seems to be the way he is going to live the rest of his life. It struck me that in a small town where life is simpler, people were indeed happier because they found the right balance between money, time, and spiritual dedication and that is the way life should be.

    It is ironic that we all trade our time to work for money, and once we have (some) money we want to trade it for time. Some people, though, use money for things that consume all their time instead (in an unfavourable manner) and that is when it gets really fucked up, and I hope none of my friends are doing that.

    Every Chinese New Year I clean my house and pull out my old R/C helis and camera equipment. I pack them in nice boxes, hoping that some day I will find time to play with them again. Year after year, I never did. Once reality sets in, you will see some of these items on Carousell.

    Right now I just want to get things I need to do done and over with so I can get them out of my head. I will use the rest of December 2015 to think through what I would like to do for 2016 and blog about it when I have a better idea.

  • Rest in peace

    Rest in peace

    People come and go. That’s life. But everyone of us came into this world with a purpose. Grandma was no big shot, she is neither famous nor rich. She was, to most people, just another parent/grandparent. She was a simple person, very down to earth, and didn’t really cared much about material wealth. She cared for me and my siblings during our primary and secondary school days, and watched over us while our parents were busy at work. There’s usually only these things on her mind: food, sweets (yes, she loves Hacks and Ricola), shower, prayers, sleep.

    Grandma started having mild dementia, and as a young ignorant kid I found it annoying that she asked the same questions over and over again. It was only that when I grew up that I learnt that it is an irreversible medical condition that affects many older people.

    Grandma spent many years in Singapore with us, but since she was getting older and gotten physically weaker, she returned to her hometown in Kuching, Sarawark. Several years later, she moved in with my uncle in Kota Kinabalu.

    I visited grandma a few years ago. I think I haven’t seen her for close to 10 years as I was busy studying in poly, then went to the army, then to work. She was still strong, and at the age of 80+ (close to 90), she was still able to walk up and down stairs. I believed it was her simple way of life, the simple food that she ate, and her active lifestyle that kept her physically strong. It is unfortunate that her dementia had gotten worse. She would forget if she had eaten, and often mistook me for “ah beng” — my elder cousin, and she still thinks I’m studying although I was already married.

    I heard about grandma’s detrioriating condition and visited her earlier this year. Most times she would be asleep in the nursing home, but one day she was awake, and her eyes were wide open. My mum tried speaking to her, but she didn’t seem to respond, or was basically unable to respond. My mum thought she couldn’t see or hear anymore. I took my phone, dug out some photos of me and my wife and I crawled up on the bed and placed my phone in front of her. I said to her in chinese: “Do you remember me? I am TZ. I am married now. This is my wife. I’m no longer studying and I’m working now. Do you remember me?” She nodded.

    But it was hard for me to see grandma in such a condition — she was in pain and had tubes in her nose and was not able to move or speak. She had an operation on her leg, and because she couldn’t move her leg, her leg muscles had stiffened up so much that she was always in a foetal position. I wished I could do something to help her.

    As part of her dementia, grandma would often have negative thoughts: She would say things like somebody stole her money, or somebody scold her, and she would also often say (in Chinese) that she wants God to take her away. Of course we would tell her to stop talking nonsense.

    But now, I hope God has really taken her to a better place. She would turn 94 next year, and her journey has been a long one. She didn’t give us (kids) gifts, money or other things. She left behind nothing material. But what is most important is that she gave us her love and left behind fond memories of her. For all that she has done, I am eternally grateful.

    May you rest in peace. We all miss you.

  • 2016 COE trend and illogical used car prices

    2016 COE trend and illogical used car prices

    Why are used car prices so ridiculously high when COE prices are down? It does not make sense, or does it?

    New cars are actually cheaper (in depreciation) now

    A brand new VW Golf (Mk7) 1.2 TSI was going for $98.8K over the weekend. This translates to a depreciation of approximately $9.5K/yr. If you do a search for VW Golfs on the second hand market now, there’s nothing below $11K/yr, and most are averaging $12K/yr — even the Mk6 1.2 TSI ones.

    A brand new Subaru Forester 2.0 (non-turbo) was also going for $116.8K. This translates to a depreciation of only $11K/yr for a brand new feature packed car. If you look at the second hand market, there’s nothing below $12K/yr for a Forester.

    So what has caused used car prices to go topsy-turvy?

    Here’s what I think is happening:

    1. The loan curbs (min. 5 years + 40% downpayment) priced many people out of the market. The high downpayment meant that people with less cash could only buy older cars. 5 year old cars seem to be in a sweet spot.
    2. People are adopting a wait-and-see attitude in hopes of further COE drops, so they are buying used cars with short lifespan to hold out for another year or two before they get a new car in 2017-2018, the predicted the “COE tsunami” years.
    3. Rising interest rates and weakening global economy in general deters people from spending on cars or luxury items.
    4. Old cars with 1-2 years left are being bought by rental companies turning them into private Uber fleets.

    The Uber-iztaion of Singapore

    In mid-2013 — when COE was some $60-70K — I bought a Subaru Impreza 1.6A with slightly over a year left of life at just below $5K/yr. If you look at the second hand market now, Imprezas are going for around $10K/yr. That’s a whopping two-fold increase. There’s practically no automatic Japanese sedans below $7K/yr right now.

    This whole Uber thing took off in the last 1 year or so, i.e. some time around mid/late 2014 till present. I strongly believe this is what wiped a lot of 8-9 year old cars off the market. These old cars were the best targets for rental because the risks are low — if the car is problematic or destroyed in an accident, just scrap it.

    Uber, renew or buy?

    I’m being asked quite often: Should I sell my car and go public transport/Uber, or renew COE, or buy a new car now?

    If you can live with public transport or Uber, why not? It will be cheaper than any form of car ownership. I’ve done my math and any basic car ownership right now would cost you somewhere between $14K-16K/yr for the car, road tax, insurance, fuel, parking, etc. If you have a $1K/mth budget for Uber, I’m sure you’ll be going places comfortably.

    But if you really need the convenience of a car, and — here’s the important part — you have the cash to spare, you can either renew 10 years provided your car is in good mechanical condition, or buy a brand new car with better technology, fuel economy, warranty, etc. Used cars are just so ridiculously priced right now that it doesn’t make much sense.

    If you are thinking of selling your 5-year old car and going Uber till COE drops, IMHO, now is the time.

    Where will COE be headed?

    I think COE will still continue to fall a little bit over the next 1-2 years, but I think it should bottom out at around $40K+. There’s a general resistance around that point, because at $40K+ the entry level Japanese / Korean cars could be going for around $70-80K and that seems comfortable for most people (and spells trouble for a lot of used car dealers).