Future-Many Will Be Stuck With Overpriced Property

[Zangetsu77]

My target is simply to have at least 3 fully paid properties

 

You shouldn't pay off SG properties in full.

 

Once it's fully paid off, in the event that you need cash, you have to over-draft against the property, which has a much higher interest rate.

 

You cannot refinance or get a housing loan once a property is fully paid up. The difference in interest rates is usu 2 to 2.5%, which is substantial when the sum is large.

 

What a lot of rich people do is to maintain a nominal loan sum even when they have the cash to pay off (e.g. S$500K loan for a S$20m bungalow). Then, when interest rates are low (e.g. 1.25%), they gear fully, take out another S$15m, place it into fixed return instruments like say bonds at 3.75%. 2% passive income on S$15m is 300K per year. When interest rates are high again, just pay off the loan again.

 

But once you fully pay off the property, you'd be looking at 4% interest rates easily.

Edited July 19, 2010 by Zangetsu77

[Wind30]

Probably if your house or car is one of those hit by the flood, you would say otherwise. Precisely because they are the best paid team in the world, they are expected to do better than the countries in the region also battling floods.

 

kind of curious. Where is the orchard road of Kuala Lumpur??? does it flood? Or where is the orchard road of Jarkarta? Does it flood too?

 

I never been to indo and malaysia so dunno....

[Throttle2]

You shouldn't pay off SG properties in full.

 

Once it's fully paid off, in the event that you need cash, you have to over-draft against the property, which has a much higher interest rate.

 

You cannot refinance or get a housing loan once a property is fully paid up. The difference in interest rates is usu 2 to 2.5%, which is substantial when the sum is large.

 

What a lot of rich people do is to maintain a nominal loan sum even when they have the cash to pay off (e.g. S$500K loan for a S$20m bungalow). Then, when interest rates are low (e.g. 1.25%), they gear fully, take out another S$15m, place it into fixed return instruments like say bonds at 3.75%. 2% passive income on S$15m is 300K per year. When interest rates are high again, just pay off the loan again.

 

But once you fully pay off the property, you'd be looking at 4% interest rates easily.

 

 

Dude, understand what you mean, I also employ a somewhat similar "technique"

My idea of paying them off will mean me also having a fair amount of liquidity in various other forms of bankable assets and shifting accordingly.

 

The difference here is I wont ever be rich (not being sarcastic as some people here choose to believe), and I know it.

So I wont be striving or thinking of owning a $15m bungalow. Other things in life are more important to me.

But if Lady Luck is attracted to me, I'm fine with it too. Heh heh

 

 

 

[Viceroymenthol]

You shouldn't pay off SG properties in full.

 

Once it's fully paid off, in the event that you need cash, you have to over-draft against the property, which has a much higher interest rate.

 

You cannot refinance or get a housing loan once a property is fully paid up. The difference in interest rates is usu 2 to 2.5%, which is substantial when the sum is large.

 

What a lot of rich people do is to maintain a nominal loan sum even when they have the cash to pay off (e.g. S$500K loan for a S$20m bungalow). Then, when interest rates are low (e.g. 1.25%), they gear fully, take out another S$15m, place it into fixed return instruments like say bonds at 3.75%. 2% passive income on S$15m is 300K per year. When interest rates are high again, just pay off the loan again.

 

But once you fully pay off the property, you'd be looking at 4% interest rates easily.

 

[Yattokame]

You shouldn't pay off SG properties in full.

 

Once it's fully paid off, in the event that you need cash, you have to over-draft against the property, which has a much higher interest rate.

 

You cannot refinance or get a housing loan once a property is fully paid up. The difference in interest rates is usu 2 to 2.5%, which is substantial when the sum is large.

 

What a lot of rich people do is to maintain a nominal loan sum even when they have the cash to pay off (e.g. S$500K loan for a S$20m bungalow). Then, when interest rates are low (e.g. 1.25%), they gear fully, take out another S$15m, place it into fixed return instruments like say bonds at 3.75%. 2% passive income on S$15m is 300K per year. When interest rates are high again, just pay off the loan again.

 

But once you fully pay off the property, you'd be looking at 4% interest rates easily.

 

provided valuation can match, and no cpf usage on the initial 15m.

[Mike1234]

U like tat say....

 

I like very jia lat....

 

Single....Somemore also havent buy hse yet....

 

[Zangetsu77]

Dude, understand what you mean, I also employ a somewhat similar "technique"

My idea of paying them off will mean me also having a fair amount of liquidity in various other forms of bankable assets and shifting accordingly.

 

The difference here is I wont ever be rich (not being sarcastic as some people here choose to believe), and I know it.

So I wont be striving or thinking of owning a $15m bungalow. Other things in life are more important to me.

But if Lady Luck is attracted to me, I'm fine with it too. Heh heh

 

Paiseh, dun misunderstand, my main point here is to highlight that once you fully pay off the properties, you basically "deny" yourself the option of low interest re-financing, which may prove useful in times when Lady Luck frowns on you, and you have asset value in the form of your paid up/nearly paid up properties.

 

I use bungalows as a point for illustration because it's the most expensive, there are rich people who can pay off in full cash, but many will opt to retain a small loan because it allows them access to this source of liquidity.

 

[Felipe]

so Phillipines got worse after Marcos?

thats the point. as long as the best get to run our country, and we got a choice for that, things will always be better.

[Tigerwoods]

importing FT is a short cut. the right way is to invest in ur own citizens via free education e.g germany, japan, italy, holland, france, scandinavians do.

 

but it take time but it solve problem at the root. dun keep harping not enuf talent when u dun invest.

e reason they need import ft cos gdp tied to their pay and they wan pay raise asap.

This I agree partially.

The problem with most develop countries is that everyone wants to be a Graduate.

This is evident in the recent News the Korean Taxi Driver has a few Degrees up his sleeves but can't find a White collar job.

 

The society has to have a mixture of Poor, Lower, Lower Middle, Middle, High Income population.

Unless we replace all lowly paid jobs by robots, Investing in our citizens with free Education will not work - it can cheapen our standards...

 

We will not face the problem of FTs had we been busy making babies.

Our 2.3mil true blue born-in-Spore can only do so much and to increase GDP, we need more pple.

The population in SG has to increase to attain it. LSS's Cheaper Better Faster is just trying to squeeze more water from a dry cloth.

 

The correct approach is increase funding to create more and more entrepreneurs.

Korea did it with a free flow of money to big companies like Samsung, Hyundai, LG. We shd do it to across the board. Sadly Garment Scholars always make short term plans and Kiasu style.

 

By increasing more knowledge base companies we reduce the dependence on Foreign $ to set up shop that only last if we are attractive enough (makes me feel we are a Prostitute country).

If we are advanced enough, these Foreign Companies will automatic want throw money at us to be part of the win-win business.

 

This way automatically the FTs will want to come here, and we can become very very selective who becomes Citizens (currently its like a free meal ticket).

 

[Fresh]

Restart the system...

 

vote out those pigs...

 

get at least 2/3 opposition in to transparent them...

 

hahahaha and vote your type in? hahahahahahahahahahahahaha

 

[Throttle2]

Paiseh, dun misunderstand, my main point here is to highlight that once you fully pay off the properties, you basically "deny" yourself the option of low interest re-financing, which may prove useful in times when Lady Luck frowns on you, and you have asset value in the form of your paid up/nearly paid up properties.

 

I use bungalows as a point for illustration because it's the most expensive, there are rich people who can pay off in full cash, but many will opt to retain a small loan because it allows them access to this source of liquidity.

 

 

Yes, I understand.

 

My point is when I do decide to fully pay up, I already know that I do not want to use that property as an option of low interest financing becos there should be enough liquidity elsewhere.

Numbers on paper, it may not work out to be the best, but different people draw their lines differently, much of it driven by their hearts which is as important as the head although sometimes neglected in such decisions.

 

 

 

 

 

[Chucky2007]

You shouldn't pay off SG properties in full.

 

Once it's fully paid off, in the event that you need cash, you have to over-draft against the property, which has a much higher interest rate.

 

You cannot refinance or get a housing loan once a property is fully paid up. The difference in interest rates is usu 2 to 2.5%, which is substantial when the sum is large.

 

What a lot of rich people do is to maintain a nominal loan sum even when they have the cash to pay off (e.g. S$500K loan for a S$20m bungalow). Then, when interest rates are low (e.g. 1.25%), they gear fully, take out another S$15m, place it into fixed return instruments like say bonds at 3.75%. 2% passive income on S$15m is 300K per year. When interest rates are high again, just pay off the loan again.

 

But once you fully pay off the property, you'd be looking at 4% interest rates easily.

 

you are wrong. paid up property can be pledged as a collateral to obtain either a term loan or overdraft, depending on purpose & usage.

 

anyway people with paidup property does have loads of cash sitting around.

 

[Lethalstrike]

This I agree partially.

The problem with most develop countries is that everyone wants to be a Graduate.

This is evident in the recent News the Korean Taxi Driver has a few Degrees up his sleeves but can't find a White collar job.

 

The society has to have a mixture of Poor, Lower, Lower Middle, Middle, High Income population.

Unless we replace all lowly paid jobs by robots, Investing in our citizens with free Education will not work - it can cheapen our standards...

 

We will not face the problem of FTs had we been busy making babies.

Our 2.3mil true blue born-in-Spore can only do so much and to increase GDP, we need more pple.

The population in SG has to increase to attain it. LSS's Cheaper Better Faster is just trying to squeeze more water from a dry cloth.

 

The correct approach is increase funding to create more and more entrepreneurs.

Korea did it with a free flow of money to big companies like Samsung, Hyundai, LG. We shd do it to across the board. Sadly Garment Scholars always make short term plans and Kiasu style.

 

By increasing more knowledge base companies we reduce the dependence on Foreign $ to set up shop that only last if we are attractive enough (makes me feel we are a Prostitute country).

If we are advanced enough, these Foreign Companies will automatic want throw money at us to be part of the win-win business.

 

This way automatically the FTs will want to come here, and we can become very very selective who becomes Citizens (currently its like a free meal ticket).

 

Agreed.

 

The 4 factors of production in any economy are labour, land, capital and entrepreneurs.

 

Since land is scarce, we will have to depend on the 3 remaining factors for more GDP growth. Singapore's economic policies had focused a lot on labour (compulsary education, encouraging girls to go to school etc ) and capital (machinery, technology etc) for the past few decades.

 

With the past policies, we had already milked all its worth by transforming Singapore into what it is today.

 

A no-brainer way to go forward is definitely to increase the number of entrepreneurs, since they are also the ones who can fuse labour, land and capital into final goods and services in an economy. Apparently, it is an uphill struggle with our system here in SG, which simply does not encourage creativity, risk-taking and spontaneity.

 

Noticed our incumbent government is already running out of ideas. Examples ?

The 2 casinos, introduction of the 1st night F1 race, hosting of Youth Olympics are all measures trying to promote and sell SG to the world. Or rather, as bro Tigerwoods had mentioned, prostituting ourselves.

 

 

 

 

 

[Zangetsu77]

you are wrong. paid up property can be pledged as a collateral to obtain either a term loan or overdraft, depending on purpose & usage.

 

anyway people with paidup property does have loads of cash sitting around.

 

I really dunno. This was told to me by an established conveyancy lawyer, and i'm neither a lawyer nor banker myself. Was told that the over-draft on a fully paid property is effectively a mortgage over-draft and has a higher interest rate as compared to a refinanced housing loan, which consists of the original housing loan and a term loan.

 

For me, this discussion is academic purely... Heck i won't be able to pay off any property or car in cash, ever... Not even my watch... even my undies and my cat bought on installment plans...

Edited July 19, 2010 by Zangetsu77

[Zangetsu77]

Zangetsu77

 

FMI what bonds give 3.75%.

 

Hmm... I don't invest or trade bonds. Based on my limited knowledge, you could look at:

 

1. Govt bonds

2. Corporate bonds

 

Govt bonds issued by Singapore Govt, used to be ard 4% yield, of which 10% is taxable. Just checked SGS website, looks like the yield has fallen. US bonds the yields are thereabts. If you have the appetite for risk, can consider Brazilian govt bonds still ard 12% yield. Venezuelan - 15%. Can check Bloomberg.

 

Corporate bonds can be either be issued from local companies or foreign companies. Depending on the company, the yield can be quite variable. Openly issued/traded ones from local companies i think from HDB and LTA. However, most banks will have access to corporate bond issues from local/foreign companies, these yield btw 4-6% i think.

[Throttle2]

Hmm... I don't invest or trade bonds. Based on my limited knowledge, you could look at:

 

1. Govt bonds

2. Corporate bonds

 

Govt bonds issued by Singapore Govt, used to be ard 4% yield, of which 10% is taxable. Just checked SGS website, looks like the yield has fallen. US bonds the yields are thereabts. If you have the appetite for risk, can consider Brazilian govt bonds still ard 12% yield. Venezuelan - 15%. Can check Bloomberg.

 

Corporate bonds can be either be issued from local companies or foreign companies. Depending on the company, the yield can be quite variable. Openly issued/traded ones from local companies i think from HDB and LTA. However, most banks will have access to corporate bond issues from local/foreign companies, these yield btw 4-6% i think.

 

Yields for SGD bonds with good rating and sound names are very low.

Probably around 2 - 3+% pa and likely to have maturities exceeding 5 yrs.

HDB and LTA bonds i think yields below 2%pa by now.

Local corp bonds (usually unrated and low liquidity) are mostly below 4%pa yield and maturities again likely exceeding 5 yrs

Minimum size for such bonds are SGD250k

 

As for bonds of other currencies, you will either have to take FX risk or eliminate FX risk using leverage instead.

 

No free lunch again.

 

 

 

 

 

 

 

[Throttle2]

I really dunno. This was told to me by an established conveyancy lawyer, and i'm neither a lawyer nor banker myself. Was told that the over-draft on a fully paid property is effectively a mortgage over-draft and has a higher interest rate as compared to a refinanced housing loan, which consists of the original housing loan and a term loan.

 

 

yes, thats correct. It will be more expensive to take a loan using an unencumbered property.

 

 

 

Sidelining to the topic of reallocation of funds it is also better for everyone to pay off their car loans fully should they have access to a housing loan which frees up cash

(in consideration that there is no other area of allocation for the cash besides paying the car loan)

 

 

 

 

[GoodCar]

My target is simply to have at least 3 fully paid properties, each of about $2mil, by 45 yrs old.

Anything more than that to me is excessive.

Just enough for me and my children when they grow up, thats all.

 

 

I have a dream too, but not as high as you

 

One more at district 5 and one more at district 2 to surround district 9 ,10, 11

 

Enough to retire gracefully ok liao......but district 2 a bit hard to achieve