My Retirement Planning Project 2013 – Property ?

Like everyone else, I dreamed of owning my own place since young. In fact, I have the entire series of IKEA catalog starting from year 1995 – 2014.


Buying a HDB Resale at 35 ?

When I reached 35 in 2009, I was very excited. Hurray ! I could finally buy a HDB resale flat ! Then, I had approximately SGD 322K of investment generating a passive income of SGD 20K and SGD 222K of CPF. I spent endless hours looking through PropertyGuru, iProperty etc. hunting for suitable flats to buy (A 3 room cost approx. 250 – 450K SGD, a 4 room cost approx. 350 – 550K SGD, a 5 room cost approx. 400 – 800K SGD).

Another homework I gave myself was to check the budget I needed to allocate to fund this purchase. However, I realized that buying a home is a very costly proposition, I need consider the following expenses :

  • Downpayment – One Time
  • Legal Fees – One Time
  • Agent Fees – One Time
  • Renovation – One Time
  • Furnishing – One Time
  • Insurance – Yearly
  • Property Tax – Yearly
  • Interest Rates – Monthly
  • Maintenance Fees – Monthly

I couldn’t justify to myself why I should sacrifice or delay my investment and passive income just to fund this purchase. First, I had to wait for 5 years before I can rent out this flat. The rental yield I could get from this buy after 5 years is approx. 6% which is the same yield I am getting with my investment without all the expenses listed above. In fact, if we take the expenses listed above into yield consideration, we are only talking about a yield of 4-5% for this HDB resale investment. I am currently trying to grow my CPF to see whether there is a possibility for me to pay off a HDB resale with just my CPF alone. I am not keen to touch my existing investment / passive income. This HDB resale will probably be my retirement home rather than an investment tool.

Buying a HDB BTO ?

This year, the government announced that singles can now buy new Build-To-Order (BTO) flat. FANTASTIC ! All my single friends were all cheering when we heard this news ! We fainted when we saw that only singles that are aged 35 and above and earn less than SGD $5000 are eligible. According to the statistic, there are 220,000 single Singaporeans aged 35 and above and more than 80% earn under SGD $5000. Thus, my dream to own a BTO was immediately shattered. I guess I can explore this option when I officially retire. I think BTO is a great investment as it cost only $76K – $133K which I could easily cover using my CPF. Singapore News on Eligibility of Singles to buy BTO flat

BTW, if you are reading this blog and is responsible for setting the housing policies, there are less than 20% of singles aged above 35 earning more than SGD $5000 who are trying very hard to retire responsibly. We would be very grateful if you could be more flexible with this income cap.

Buying a Private Property ?

In the past few years, there has been a property fever in Singapore. Everyone is talking about buying a property or two as a form of retirement investment. Everyone is telling me how much the property that they are living in right now is worth and the capital gains or rental yield they could get if they were to sell or rent it. They also told me that the government is going to increase the population to 6 million and since land is scarce in Singapore, the property price can only keep going up. The housing crisis that the US were facing in 2008 will never ever happen in Singapore just because of the limited land that we have. In fact, many friends advised me to revise my retirement portfolio and allocate a portion of it to invest in a property because they deemed it as a safer investment as compared to stocks.

Was I tempted ? YES. Did I proceed ? NO.  The rental yield you can get for any private property in Singapore is only in the range of 3-4%. I can’t convince myself why I need to get myself into 10-20 years of debt and incur so much expenses (listed above) just to get a 2-3% returns (after deducting the expenses). My current mode of investment is bringing me decent capital gains and passive income with zero debt and expenses. I will need to delay my retirement by many years just to own a private property in Singapore. I really don’t want to let the dream of home ownership come at the expense of financial and lifestyle flexibility that I am enjoying today nor delay my retirement timeline.

I am totally convinced that one can make a lot of money from Property but this form of investment is not suitable for me at the current price level. I simply have NO GUTS to buy a private property with my current position :-). I finally understood why Warren Buffet still lives in the house that he paid $31,500 for despite being a billionaire. Warren Buffett, Billionaire, Still Lives in Modest Omaha Home Which Cost $31,500 In 1958

My Retirement Planning Project 2013 Series 

My Retirement Planning Project 2013 - SGD 51K per year passive income ?.

My Retirement Planning Project 2013 - Retire by 42 ?.

  1. drizzt

    it is not possible for them to give you BTO when you are a top earner in Singapore. shattered shouldn’t be the word to use but leaving it for those who requires it more.

    Buffett advocates having a dwelling too.

    perhaps do not look at yield as the only valuation. valuation is the most important but also evaluate your existing assets versus that of other assets. evaluate the opportunity cost now instead of using historical yield on cost.

    do not fall into sunk cost fallacy. look at your starhub market yield, business model, risk versus that of a property.

    • Lady, You Can Be Free

      Hi Drizzt,
      Thanks for dropping by :-).

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