Is sg property cheap now?

[specuvestor]

Even the asset u live in can be counted as an income producing asset if u want it to be. Private more so. You can rent out one of your rooms or even draw out a secured overdraft from ur house to invest. Local residential asset is a niche that is not covered in reits or stocks on sgx. It has lower vacancy rate compared to office or retail and is currently “affordable”(median asset price to income ratio) due to gov cooling measures and waiver of gst.

Own view

Like I wrote previously, a car can be either an income generating asset or expense depends on its purpose. Just like property but generally self-stay is not income generating. There are other intangible considerations. Sometimes it’s grey

If a study of an individual's balance sheet can be conceptualised as a study of a company's balance sheet, then everything that an individual owns -- regardless of whether it is income-producing and/or held-for-trading, is an asset on his/her balance sheet.

While a house does not produce income, it is necessary for the survival of an individual, thereby allowing him/her to produce income. Just as a manufacturing business cannot only have machines and operate them without a factory floor. So the next question is, how much 'factory floor' does an individual need?

If the individual allocates a higher proportion of assets to, say housing (than is 'necessary'), then he'she will have a lower proportion of assets available for more of the 'income-producing' assets, such as production lines and so on. For an individual, this could mean having more stocks and bonds which generate a return. The effect of having a higher proportion of housing on your balance sheet is a lower ROA. It is the same if a company spends too much on a factory which it does not utilize efficiently.

Of course, things are seldom so straight forward. A high-earning professional may justify his need for higher housing spending; that the (in)tangible qualities of the more expensive house helps to maintain/motivate their high earning. They may be able to earn a (more than) satisfactory ROA in spite of a higher housing spending.

Just to be clear, I am not promoting the adoption of such parochial views of the individual. But if wealth accumulation is your thing, you might want to think of the kind of company you want to model after. The one that shows book value gain on revaluation of assets, but does not monetise its valuation, or the one that grows both book value and dividend payouts.

Person’s balance sheet is similar to company but the big difference is preference vs economical. A lot of decision making from personal point of view is based on preference, hence usually the so called assets are actually accounting assets or capitalised expense. You are actually not expecting to make money from it

If it is necessary for survival like food or water, roof over the head is a necessary expense. If you extrapolate to factory floor etc it is grey cause the cost is “variable” based on discretionary decision but it is directly attributable to income generation rather than say “leisure” 🙂

Housing, as I’ve been posting, is peculiar because people tends to hold very long term and with 4X leverage. Very few people would consider the next biggest ticket item, car, as being an appreciating or income generating asset. In an inflationary environment ie nowadays enshrined 2% target rate, it always gives the perception of high ROE. That’s why I’ve been saying that the CPF board deducting the 2.5% CPF opportunity cost is actually a good policy to bring people back to earth (though policy makers can communicate that better)

@porkbelly so you can guess from what I wrote above that things that you buy for preference is likely to be accounting assets: branded bags and clothes, $2k mobile phone, OLED TV, diamonds. You generally wouldn’t buy these for a company’s employees to boost productivity (except maybe annual D&D to boost morale which supposedly boost productivity) as there are more economical alternatives that serves similar purpose.

NB I am not saying decision by preference is incorrect, as there are other intangibles to consider. But I am saying that we need to know the rationale of the “assets” on our balance sheet, is it 1)accounting asset 2)capital appreciating asset 3)income generating asset

[corydorus]

Let's do this logic.

1. 5 Room HDB (Asset : $500k) - Lifestyle
Use 2 rooms (Bed and Study). 1 room empty. Couple lack of cash. Still refuse to rent out the empty room for privacy.
Has Zero saving. Falls into Poor group and ask for government help.

2. 4 Room HDB ( Asset : $400k) - Financially balance
Couple use only 1 room. 2 room empty which they rent out to support their retirement.
Zero Saving. Did not ask for gov help.

Asset is an asset. Need not earn money. But face the same music. Know what you have, and plan for it.

Cory

[Temperament]

Whatever Accounting like to categorise my residence, i consider it as a last resort asset.

"The end of the road" asset convertible to cash asset.

Like now i am living in 4-room HDB, if i come to the end of the road, i can sublet 2 rooms or downgrade to 3 or even 2-room HDB.

Or even i go and rent a room if i think i am too old to buy already.

Touch wood.

Who in his normal mind will think like that?

But it is doable in real life.

[specuvestor]

Let's do this logic.

1. 5 Room HDB (Asset : $500k) - Lifestyle
Use 2 rooms (Bed and Study). 1 room empty. Couple lack of cash. Still refuse to rent out the empty room for privacy.
Has Zero saving. Falls into Poor group and ask for government help.

2. 4 Room HDB ( Asset : $400k) - Financially balance
Couple use only 1 room. 2 room empty which they rent out to support their retirement.
Zero Saving. Did not ask for gov help.

Asset is an asset. Need not earn money. But face the same music. Know what you have, and plan for it.

Cory

Asset need not make money. Think about that logic for a while.

[brattzz]

Rent out the rooms, rental cash flows, invest prudently and waos! make money and buy condo, rent out again, invest rental cash flows, cycle repeats until all loans are paid off, 👍 Huat Har!!

[Temperament]

Yes any 99 year lease hold residence is actually a "depreciating asset to zero value".

HDB flats now after 30+ to 40 years have not much resale value in most estate.

So my youngest brother who has bought a FH condo who not only lives FOC (aka rent free) for > than 30 to 40 years, now it is worth more than 1.2 to 1.5 $million.

So if U can, young man buy FH lol.

That is the moral of the story here.

[Temperament]

That was why when my son at the age of about 13, i downgraded from a maisonette to a 6-years old 4A HDB resale flat.

Er.... made a little money too but not the reason for downgrading.

Just in case, my only son will definitely have a shelter over his head, no matter what happens.

[corydorus]

Let's do this logic.

1. 5 Room HDB (Asset : $500k) - Lifestyle
Use 2 rooms (Bed and Study). 1 room empty. Couple lack of cash. Still refuse to rent out the empty room for privacy.
Has Zero saving. Falls into Poor group and ask for government help.

2. 4 Room HDB ( Asset : $400k) - Financially balance
Couple use only 1 room. 2 room empty which they rent out to support their retirement.
Zero Saving. Did not ask for gov help.

Asset is an asset. Need not earn money. But face the same music. Know what you have, and plan for it.

Cory

Asset need not make money. Think about that logic for a while.

Think in English ?

asset
/ˈasɛt/
noun

1. a useful or valuable thing or person.
   "quick reflexes were his chief assets"
   synonyms:
   benefit, advantage, blessing, good point, strong point, strength, forte, talent, gift, strong suit, long suit, virtue, recommendation, attraction, attractive feature, selling point, resource, beauty, boon, value, merit, bonus, aid, help; More
   
   
   • an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
     "growth in net assets"
     synonyms:
     property, resources, estate, holdings, possessions, effects, goods, valuables, belongings, chattels, worldly goods, worldly possessions; More
     

[specuvestor]

Think in Finance maybe better since we are not English teachers. That's why I stated there's 3 different types of "assets",one being your traditional accounting definition

[Porkbelly]

Accounting asset!!
Thanks Specuvestor, for giving clarity.

Certainly, for the home we live in ( and paid for )
it is an accounting asset. And as Temperament describes it,
it is an asset of last resort.
 

Concepts and theories usually are very attractive till
applied in real life scenarios. The mechanics will very
likely be challenging. Execution is a major consideration.

Of course if the pursuit of income or ROA is the goal, then
the home becomes an income generating asset, as stated by Corydorus.

Being prudent and conservative, especially our homes, to me is peace of mind.
Speculate with measured risks anything but the home.
To me its necessary grounding.