Retirement Planing with SG Residential Property

Sell 1, Buy 2?

If you have a high income, able to secure the bank loan and comfortable with paying huge sum of installment every month, Sell 1 Buy 2 make sense. However, most of the singaporean don't have that kind of money.

How about renting the property?

Receiving passive income is great but it should not be the priority. However, you still have to factor in income tax, property tax and other miscellaneous cost. After deducting all these costs, is the net income generated still more than your monthly installment? Rarely. If you want passive income dividend stocks or Reits are better, because is tax free in singapore, but it take a long time to build.

How should i as an average singaporean invest in property?

Time in the market is important, because you dont have "forever" like in the stock market, everything will end at 55 years old, when CPF OA transfer to RA and you cant leverage on your CPF anymore.

i will exclude BTO. Because BTO guaranteed to profit but the period from the time you take keys to fulfill the MOP is almost 10 years. However, if you are going for a BTO, make sure you know the location of all the million dollar resale HDB, for your consideration, and get a big unit.

The concept is to treat your property as a "Retirement plan". Is important to get a house as soon as you can afford, either go for a condo or EC. Every few years, you upgrade your property to a bigger unit, each upgrade increase the quantum and when you reach around 50 to 55 years old then downgrade to a resale HDB (your last property). At each upgrade, you will make capital gain along the way, at the end of the cycle you will have 1 huge sum and a roof over your head. You may use part of the profit to paid off your house, if you want, so basically your house is free.

The monthly installment paid is a kind of "Force Saving". Because the money will return back to you when you sell your house and the capital gain are your "interest". In my opinon, this is the best saving plan because you get a roof over your head while you save and you going to get a house anyway might as while fully ultilise it.

Longterm Trend of the SG property market.

HDB is a depreciation asset. But the pandemic had make singapore resale market shoot up this year, both HDB and private. Maybe Singapore government will come in cooling measure or maybe not. Regardless, looking at longterm trend, no matter what the government going to do the private market will always go up in the long term.

Driver for Property Market

Singapore land are scarces and the property prices are driven by supply, demand and inflation. The population expected to keep on going up, although at a much slower pace.

As the resale HDB price increase, this will also pump up its surrounding private properties prices. Given the fact that, private properties should alway be more expensive than the HDB. For the new launch condo, as the GLS and construction price increases and factor in the developer profit margin, the future new launch condo will most probable get more costly, cost of living only goes up due to inflation. Thus the later you buy, the more expensive it will get.

What to consider when buying an investment property?

Currently, i feel the new launch condo are really expensive, it does not mean it will not appreciate, but in order to profit $150k - $200k you do not need to buy a $2million property if you can do it with a $1.2 - 1.5 million resale condo.

if you are tight in budget, go for new launch because you can do progressive payment. If you can afford go for a resale condo.

Assuming you are able to afford. There are some factors to considers when buying a investment property, of course mid and high floor are always more desirable and always buy as big as possible.

Price trend of the project

If you buying a resale condo, look at the price trend of the project, not all project is trending up and make sure past transactions are all profitable. If you are buying a new launches, look at the surrounding projects what are the trend and $psf. If the surrounding condo are cheaper than the new project and if the surrounding projects are quite recent (less than 5 years), then the resale is a much better bargain.

Price you Paid

Probably the most important thing, paying the house at the fair price by looking at the past transactions for similar unit, size and floor. Should be around that range. If after you bought, somebody bought a similar unit at a higher price then you have make a paper gain. You want to look for area where there is alot of transaction.

Location

The location makes how desirable your project is. Walking distant from MRT and Shopping mall are the most desirable (interchange are the best), who does not like that? Any future development that can add value to the project.

Conclusion

This "Retirement plan" appealed to me as i going to buy a house anyway, might as well ultilise it, killing two bird with one stone. However, the key is still affordability, you must have the holding power to hold untill the profitable point to sell. Always go for capital appreciation for SG property.