35-year limit set on home loans

[WolfT]

Anyone have friends who belong to this group?

Hi hyom,

I can relate what I know from my personal experience and my own social circle.

Currently, I have three friends who own an investment property (incidentally, they are all married with at least 2 kids). I do not know what is their refinancing schedule like but from what I understand it may be time for some of them to refinance in the next 1-2 years as they entered the market some time in 2010-2011. Assuming a three-year fixed rate loan (which is the common thing nowadays), it will begin to switch to floating rates probably some time in 2013-2014.

Sad to say I don't have much details about the location of properties, tenure, amount paid and other details; but I do recall one of them bought a condo for $1.2 million, and probably is on a 30-year mortgage.

What I can conclude is that it's pretty common nowadays for couples with kids in their 30s (my age group) to own one HDB and one investment property (condo), some even two! These are professionals who are holding good jobs (both husband and wife probably combined salary of $10,000 and more), educated and have to invest their money somewhere and have all chosen real estate.

Not sure if they will be affected, but I always assume people do their homework and ensure margin of safety.

Hi Musicwhiz,

Like you, I have never given a thought to buying a second property. The reason is the same. I do not want to take on debt. The price of heavy debt is the loss of freedom and slavery to one's salary job. Having a bully as a boss and not being able to quit the job will lead to mental depression. I would rather keep some f**k you money just in case I go through burnt-out conditions again.

When I lost my job last year, I toyed with the idea of starting my own company. One big problem was finding the right partners to complement my many weaknesses because people who know me expect me to be the last person on earth to start a company.

The love of property among Singaporeans in their 30s compound the problem of finding right partners to start a company. If a friend owns a 30-year mortgage with heavy monthly interest payment, he is a madman if he is willing to go without income for the next 2 years to pursue a dream with high chance of failure. Even if he dares to, his family members will exert tremendous pressure on him not to because he really cannot afford to. "Be responsible, you got mouths to feed. Don't be selfish ...". All are valid reasons. How to argue against that? It is like sabo-ing a friend to ask him take on such risks, not to mention his family's huge dislike of whoever that ask him out.

By the way, if all of you don't mind, may I know who else besides Musicwhiz do not own a second property here or at least not a slave to the salary job because of heavy debt? Building a list ... just in case Heehee.

well... i do not own any residential property (sold my HDB) now staying with parents!but i co own a retail shop(currently renting).

[CityFarmer]

Hi Musicwhiz,

Like you, I have never given a thought to buying a second property. The reason is the same. I do not want to take on debt. The price of heavy debt is the loss of freedom and slavery to one's salary job. Having a bully as a boss and not being able to quit the job will lead to mental depression. I would rather keep some f**k you money just in case I go through burnt-out conditions again.

When I lost my job last year, I toyed with the idea of starting my own company. One big problem was finding the right partners to complement my many weaknesses because people who know me expect me to be the last person on earth to start a company.

The love of property among Singaporeans in their 30s compound the problem of finding right partners to start a company. If a friend owns a 30-year mortgage with heavy monthly interest payment, he is a madman if he is willing to go without income for the next 2 years to pursue a dream with high chance of failure. Even if he dares to, his family members will exert tremendous pressure on him not to because he really cannot afford to. "Be responsible, you got mouths to feed. Don't be selfish ...". All are valid reasons. How to argue against that? It is like sabo-ing a friend to ask him take on such risks, not to mention his family's huge dislike of whoever that ask him out.

By the way, if all of you don't mind, may I know who else besides Musicwhiz do not own a second property here or at least not a slave to the salary job because of heavy debt? Building a list ... just in case Heehee.

I do not own second property. It is not due to avoidance of debt. Equity investment suits me better than property investment.

IMO, Debt (leverage) is not a devil, it is just a tool. Wrong use of the tool will hurt, but a proper use of the tool will help (in productivity).

[etan]

You are right on this point!
From my experience, banks normally don't look after old (existing) customers; they are more interested to look for new customers!
That is why they always indicate: 'fresh funds' to enjoy new higher fd rates.

Basically, if I am the bank, I will be quite happy to increase the loan interest rate since the borrower is stuck.
So shiok, now the banks have a group of customers to exploit.

---

We are not in your age group but we don't own one HDB and one investment property (condo) or even two. We are not pretty common.

You're not alone. Technically I don't own my HDB (as I am still paying my mortgage loan) and I also do not have any investment property.

Frankly, I admire people who are prudent and do not over-extend. I kinda feel Singaporeans are stretching it in most cases. What we see is only the illusion of affordability - dig deeper and many people are bleeding from multiple commitments and liabilities. I'd rather be free of all that worry.....

i always think the same. One can make it in life without using "leverage". Even some people in businesses don't use leverage to expand. They only expand their businesses when they have made enough money. They plough their earned profit to open new outlets. And by the way it may not be a "slower" way to expand because the businesses do not have to pay interests on the loan if leverage is used. And it is a also a safer way to expand as you may not experience "cash flow" problem. Not enough business ($$$), no expansion.

Sorry, theory only.
But some businesses really go this way.
But in practice, i have done this for my personal's financial life.
Amen.

It's a matter of choices. Some people think it's good to use leverage on OPM.
To me, I didn't want to go through the hassle of bank loans when I bought my replacement property. I paid up fully since I have the means. My neighbour thinks I should take up bank loan and have more cash on hand for other investments. But I choose the simple way out, just don't want to make my life so complicated.

But on second thought, I should have applied 'value investing'?

But I think better not; I don't want to be caught swimming naked when the tide goes out.

[Temperament]

You are right on this point!
From my experience, banks normally don't look after old (existing) customers; they are more interested to look for new customers!
That is why they always indicate: 'fresh funds' to enjoy new higher fd rates.

Basically, if I am the bank, I will be quite happy to increase the loan interest rate since the borrower is stuck.
So shiok, now the banks have a group of customers to exploit.

---

We are not in your age group but we don't own one HDB and one investment property (condo) or even two. We are not pretty common.

You're not alone. Technically I don't own my HDB (as I am still paying my mortgage loan) and I also do not have any investment property.

Frankly, I admire people who are prudent and do not over-extend. I kinda feel Singaporeans are stretching it in most cases. What we see is only the illusion of affordability - dig deeper and many people are bleeding from multiple commitments and liabilities. I'd rather be free of all that worry.....

i always think the same. One can make it in life without using "leverage". Even some people in businesses don't use leverage to expand. They only expand their businesses when they have made enough money. They plough their earned profit to open new outlets. And by the way it may not be a "slower" way to expand because the businesses do not have to pay interests on the loan if leverage is used. And it is a also a safer way to expand as you may not experience "cash flow" problem. Not enough business ($$$), no expansion.

Sorry, theory only.
But some businesses really go this way.
But in practice, i have done this for my personal's financial life.
Amen.

It's a matter of choices. Some people think it's good to use leverage on OPM.
To me, I didn't want to go through the hassle of bank loans when I bought my replacement property. I paid up fully since I have the means. My neighbour thinks I should take up bank loan and have more cash on hand for other investments. But I choose the simple way out, just don't want to make my life so complicated.

But on second thought, I should have applied 'value investing'?

But I think better not; I don't want to be caught swimming naked when the tide goes out.

I fully agree.
Simple rule for me, no money don't borrow to spend or buy....unless banks agree to loan me to start a business. Wait long, long if without upfront capital or collateral. Ha! Ha!

[CityFarmer]

It's a matter of choices. Some people think it's good to use leverage on OPM.
To me, I didn't want to go through the hassle of bank loans when I bought my replacement property. I paid up fully since I have the means. My neighbour thinks I should take up bank loan and have more cash on hand for other investments. But I choose the simple way out, just don't want to make my life so complicated.

But on second thought, I should have applied 'value investing'?

But I think better not; I don't want to be caught swimming naked when the tide goes out.

I respect your choice.

IMO, between swimming naked and swimming with full gear, there are still lot of options

[Temperament]

Yes! You are spot on in the sense that i have evolved into a "Rojak Investors".
Investing in "bonds", property and the stock market.
And "forced to" into cash which has very negative return now.
Actually my ideal is all in stock and and some in cash for daily /emergency living and in anticipation of a Bear's pounce.
Which i did it before.
Lastly, not forgetting the forced CPF's minimum sum that at least see that we have some food on the table, till 80 or 85 year-old. If God says so.

NB:
Actually my wife and me do not really care how old we live but wish that we can leave this world "happily" for everyone.
The best way to go we think is like my youngest aunt and my eldest brother. Both just slept and left this world. Is there a way to invest in this or better way to leave?
Amen.

[Muck]

I don't own an investment ppty either. My f-u cash (as hyom has described it) was put to good use last year to let my employer know I'm not to be exploited
That feeling of having a choice is indescribable.

[greypiggi]

My take. 1-3 years, no major drop in property prices. Beyond that, depends on sg GDP growth and inflation and affordability vs price.. Strangely, if us, eur continue to languish, interest rates will remain low and that supports local prop price. If us recover, Europe solve, markets rally, wealth effect will sustain prop ownership but may make prop less attractive vis a vis stocks.

Either way I cannot see prices in sg falling a lot. At most 5-10%. Must remember that spore,china,indo,india,hk etc has many cash rich millionaires and regionally we are the most stable country around.

As for cooling measures, I see it as the govt recognizes too much demand for prop. Will they change behavior ? And do they dare to swing the other way? I doubt it. Prop price drop more than 10%, people will scream for u turn already.

I just switch to double property allocation and bougth 1 kl and 1 more local property this year. Am I smart or dumb money? Dunno.... Only time will tell..... Do your own math and thinking?.. But I am aware anything can happen, so I am leveraging only 60% overall

[Musicwhiz]

Seems we have about an even split between those who have investment property and those who do not.

I'd like to ask - for those who do invest in property, do you see gains more in terms of rental (i.e. yield) or capital appreciation. If it is the latter, what is the timeframe for this appreciation and magnitude which would justify this investment?

I personally use my own benchmark of 5% to 6% unlevered as a comparison base. Of course, leverage will obviously magnify these gains.

(On a side note, hyom and Muck, glad that we are in this together - we seem to be increasingly becoming the "lonely few" who believe more in equities than property in this country!)

[Temperament]

I don't own an investment ppty either. My f-u cash (as hyom has described it) was put to good use last year to let my employer know I'm not to be exploited
That feeling of having a choice is indescribable.

I fully support your actions. i had done this more than one time in my working life. Sometimes i were forced to do it. As i said earlier, i realise most probably due to my character, i am unable to handle office politics or how to adapt to it. Therefore i only have friends who are "transparent". Another words i should be at least be a hawker or taxi driver or an active business-man.
So now you know why i have been a passive business-man for life since 40 year-old.
i fully support your action.
Cheers!