Rental prices still going down?

[explain]

For god's sake - read. what. i. have. typed.

Anyone putting $800k down and borrowing $1.3m, for $4,200 is stupid.

Why bother when for $800k you get $3k rent, no monthly negative payments? Do a calculation and see which works out better over 25 years.

You can use $800k a lot smarter than that.

Please explain how you get 3k rent from 800k? 800k gets you a tiny little condo or an hdb, neither will achieve 3k in rent. Or am I wrong?


Concerning yields in general, the only unique method is simple. In the case of the 2.1mio and 4.2k rent, the gross yield is (12*4.2k)/2.1mio = 2.4%. But this excludes maintenance, tax, insurance, transaction costs, agents fees and void periods. The actual yield would be far less than even 2.4%, probably closer to 1.9%.

The question of how to take into account the cost of the 1.3mio in mortgage is really not relevant as it varies depending on circumstances. But if the interest costs (not including repayment) are less than the net yield of 1.9% then he is doing better than that net yield and if he borrows above it then he is doing worse. None of this is rocket science.

[Big mistake]

Please explain how you get 3k rent from 800k? 800k gets you a tiny little condo or an hdb, neither will achieve 3k in rent. Or am I wrong?

It's not too difficult actually. Obviously I bought at a good time, but if you're not familiar with local property, the websites iproperty and propertyguru are good places to start.

[Possible]

For god's sake - read. what. i. have. typed.

Anyone putting $800k down and borrowing $1.3m, for $4,200 is stupid.

Why bother when for $800k you get $3k rent, no monthly negative payments? Do a calculation and see which works out better over 25 years.

You can use $800k a lot smarter than that.

Please explain how you get 3k rent from 800k? 800k gets you a tiny little condo or an hdb, neither will achieve 3k in rent. Or am I wrong?


Concerning yields in general, the only unique method is simple. In the case of the 2.1mio and 4.2k rent, the gross yield is (12*4.2k)/2.1mio = 2.4%. But this excludes maintenance, tax, insurance, transaction costs, agents fees and void periods. The actual yield would be far less than even 2.4%, probably closer to 1.9%.

The question of how to take into account the cost of the 1.3mio in mortgage is really not relevant as it varies depending on circumstances. But if the interest costs (not including repayment) are less than the net yield of 1.9% then he is doing better than that net yield and if he borrows above it then he is doing worse. None of this is rocket science.

No problem getting 3k for a 800k studio. Eg - One North Residences or City Square Residences. In fact the going rate is around 3.2k. Can get 3.5k rent for a 850k studio Citylights.

[aaaaaaaa]

Looking at the arguments above, now I full understand why certain individuals do not invest in properties. It is really a worthwhile investment. One cannot compare the rental income against the entire mortgage payment. Paying into the principal is more like a forced savings because it pays down your loan. Rental should be compared only against the interest. I am an owner of a few properties. In most cases, it's pretty amazing. My tenant pays fully for BOTH my principle AND my interest. I only have to foot the first 20%. I benefited from 3 front:-

1) Rental yields at 5% more than covers by interest of 1%. 4% postive yields

2) The rental fully covers by instalment in most cases. It means I only have to pay up 20% of the property. The rest of the 80% will be paid down by my tenant.

3) At the end of 10 years, even though I've only paid 20% of the property - it becomes fully paid-up. I end up owning 100% of the property. When I sell my property, I no longer have to repay any outstanding loan . In short, even if there is ZERO capital gains, my $200k becomes $1 million when I sell it because my tenant has fully paid off my loan indirectly.

4) Capital gains. #3 above is considering without capital agains but in reality, all of them are sitting on postive gains.

Hope this clarifies. From the above post, I suspect some may not understand the math.

There is no residential property in Singapore which fetches a rent so attractive that the tenant will help you pay the remaining 80% of price (with a 20% downpayment) within 10 years, without the owner topping up with cash every month.

It should take at least 25 years for the tenant to pay up your 80% loan without owner topping up.

I should know because I  also have a few properties rented out.

[effective today]

Well a bunch of them can't borrow 80% any more anyway.

SINGAPORE: The government said Monday that it will increase the holding period for imposition of Seller's Stamp Duty (SSD).

The SSD will be raised from the current one year to three years.

Another measure will impact those who have more than one outstanding housing loan.

Property buyers who already have one or more outstanding housing loans at the time of the new housing purchase will have to pay more money upfront.

The government will increase the minimum cash payment from five per cent to 10 per cent of the valuation limit.

Those with more than one outstanding housing loan will also see a decrease in the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS.

The LTV will be lowered from the current 80 per cent to 70 per cent.

The measures will take immediate effect on August 30.

The government said the objective of the measures is "to ensure a stable and sustainable property market where prices move in line with economic fundamentals".

It noted that the property market is currently very buoyant, with prices increasing by 11 per cent in the first half of this year.

It added that while Singapore has enjoyed strong economic growth in the first half, growth is expected to moderate in the second half of the year.

Should economic growth falter and the market correct, the government said property buyers could face capital losses.

It has thus decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers.

[ZR]

Good..... that will weed out some if not all of the speculators.
Otherwise the property market will become a another casino.

[professional_advisor]

These development by government should provide well need support to the market. Now can look forward to 20-30% appreciation over 12 months as the Singapore government once agains show how able they are to exercise the prudent management to support the stable matrket going forward.

[left foot professional]

Yeah right.. 20% appreciation over 12 months is a stable market. What do you smoke?

[ZR]

20-30pc appreciation over next 12 months!!!!!
What sort of professional_adv are you?
Are you ok!!!

[Almost]

Looking at the arguments above, now I full understand why certain individuals do not invest in properties. It is really a worthwhile investment. One cannot compare the rental income against the entire mortgage payment. Paying into the principal is more like a forced savings because it pays down your loan. Rental should be compared only against the interest. I am an owner of a few properties. In most cases, it's pretty amazing. My tenant pays fully for BOTH my principle AND my interest. I only have to foot the first 20%. I benefited from 3 front:-

1) Rental yields at 5% more than covers by interest of 1%. 4% postive yields

2) The rental fully covers by instalment in most cases. It means I only have to pay up 20% of the property. The rest of the 80% will be paid down by my tenant.

3) At the end of 10 years, even though I've only paid 20% of the property - it becomes fully paid-up. I end up owning 100% of the property. When I sell my property, I no longer have to repay any outstanding loan . In short, even if there is ZERO capital gains, my $200k becomes $1 million when I sell it because my tenant has fully paid off my loan indirectly.

4) Capital gains. #3 above is considering without capital agains but in reality, all of them are sitting on postive gains.

Hope this clarifies. From the above post, I suspect some may not understand the math.

There is no residential property in Singapore which fetches a rent so attractive that the tenant will help you pay the remaining 80% of price (with a 20% downpayment) within 10 years, without the owner topping up with cash every month.

It should take at least 25 years for the tenant to pay up your 80% loan without owner topping up.

I should know because I  also have a few properties rented out.

Depends when you bought an how much you paid. I have a place that I rent out at a rental yield of 9% on the price I paid (with 20% down)  5 yrs ago. I could now take that rent any pay off the remaining loan in 8yrs. OK, that makes 13yrs if you include the 5yrs I lived in it,but it's not bad. There are of course a lot of other costs (prop/income tax, mtce etc etc to take into account as well

[well so what]

When people look at investment they are talking about yield to price now.

Jeez, on your basis my London house yields about 30%. About as useful as a chocolate teapot for anyone looking to buy now.

[Almost]

Of course, but the point is that things change over time. The PP's assertion that it would take 25yrs to pay back the loan without topping up assumes that prices and rents remain static.

[ok fair enough]

But the 8 years also assumes constant rent and rates going forward. Could end up being 6 years, could be never if rents fall below interest levels.

[aaaaaa]

Of course, but the point is that things change over time. The PP's assertion that it would take 25yrs to pay back the loan without topping up assumes that prices and rents remain static.

An ageing property and especially one that is more than 15yrs old is not going to enjoy the same quantum of rental increase as a relatively newer property would. Have to factor in the increasing repair/renovations for an ageing property as well. If you upgrade to a newer property of the same size after some time, you will have to end up topping up quite a bit more.

[Almost]

But the 8 years also assumes constant rent and rates going forward. Could end up being 6 years, could be never if rents fall below interest levels.

Yes, also true. Certainly rates are not going to be where they are for the next 8 yrs