3rd quarter 2009 residential price index

URA has released the 3rd quarter 2009 real estate statistics. Click here to go to the URA website. I have done a snapshot of the chart on the residential price index. I draw a blue line to see whether there is any trend. Will the index goes up some more? Is now the best time to buy property?

My housing loan

In 2003, I have bought my flat with good location(5min to mrt, amenities, swimming pool, shopping mall and sport hall). The price that I paid is at a good bargain, I am considered very lucky to buy it. Seeing the property agent leaflets, the flat may cost $100000 to $200000 more if I buy now. So I am seeing myself at least $100000 richer than my peers who bought the flat now. If you are interested how I select my flat, you may click on the link under "My Lessons on choosing a house" on the right side bar of my other blog "Singapore Property Guides"

If you can see at below my blog, my housing loan monthly payment is $400. My wife is actually paying a lot less than me. I manage to gain $167.60 (from interest and dividends) from my OA account. Remember the OA account currently give you 3.5% interest per year for the first $20000(cannot use for investment). That alone already give me 0.035x$20000 = $700 per year or, $58 per month. Other amount are from the dividends. I look at passive income and not capital gain or loss when it comes to investment.

I am currently paying $400-$167.60 = $232.40 per month for my flat. That will mean that I can save more OA amount to be invested next time. By following this cycle, sooner or later about 3 to 4 years, my OA passive income will eventually reach $400, and my house is free!!! See my cash flow diagram for reinvesting passive income.

You may want to find out more about whether it is better to take 15 years or 30 years housing loan here.

How to choose a house? Part 4

The fourth consideration is cost. Most people will need to take loan especially in Singapore. First thing you must know is how much loan you need to take after buying a house. The more loans you take, the more you need to pay for interest and monthly payment. Do not buy a house that is overpriced and ended up yourself become a slave for your house. Remember what I mentioned in my last post on assets and liabilities? The price that you paid for your house will determine whether your house can be an asset or not. My advice is to limit the monthly payment to 20% of the total household income. Example if your household income is $4000, the maximum monthly payment is $800. If the monthly payment is more than $800, you might want to think twice before you make your purchase.

Second thing you must know is how much is the interest for the loan. Currently, HDB loan is fixed at 2.6%. For bank loan, the interest rate will vary from time to times. My suggestion is to take HDB loan if you are eligible. The reason is 2.6% is considered low and your monthly instalment will be fixed. If you take bank loan, it will be very hard for you to calculate the exact monthly instalment.

I have put a loan calculator on the right side of my blog. You may want to use it to check how much monthly instalment you need to pay given a total loan sum and interest rate. Of course use it at your own risk as I cannot guarantee the calculator is 100% error free every day.

How to choose a house? Part 3

The third important consideration when choosing the house, is the facing. Check all the major windows facing direction on all bedrooms and living room. It is best for all major windows facing direction to be North and South. If most of the windows are facing East or West (see picture above), it will not be very good. The reason is simple, sun rises from the east and sets to the west. If your windows are facing East or West, a lot of sunlight will go into your house, making your house very hot and unbearable. Even you have aircon, is of not much of the use. Better think twice if you intend to buy such house.

One more thing, make sure that the house is bright. Normally a house with a lot of windows will be brighter. House which is dark even during the noon time, will make people feel sleepy and unenergetic. So make sure you do a check during noon time to ensure that the house is bright enough.

Click here for part 4.

How to choose a house? Part 2

After choosing the location, the next important thing is the layout of the house. All the rooms in the house must either be in rectangle or square shape. Don't fancy those rooms that have odd or weird shape because they can pose a problem when you are putting in the furniture. Long rectangle living room is not advisable as you will face the problem of positioning your sofa and television. Corridors in your house are area just mends for walking and you cannot put anything there. Otherwise you will block the walking path. Hence there should not be big corridor area in your house as it will take up space for nothing. I have posted some example based on common flat layout in Singapore.



The first layout above shown (in my opinion), the best layout you can have. You can see all the bedrooms are rectangle and the living room is square. The corridor area is very small, hence you are not wasting the space. You will find it very easy to put in all your furniture.



The second layout above shown (in my opinion), is considered average. You can see all the bedrooms are rectangular. But the living room is a very long rectangle shape. You will find it hard to put your TV, sofa and your Home theatre system in the living room. Lastly, the corridor takes up a bit more space than the first one, but still consider okay. Unless your location is good, other wise, try not to get the house with this layout.



The third layout above shown (in my opinion), is not a good one (I have seen layout worse than this one). Two out of three bedrooms and living rooms are in odd shape, which make it difficult to put in the furniture. The corridor takes up a lot of space hence making your house smaller. Try not to get the house with this layout even the location is good.

Click here for part 3.

How to choose a house? Part 1

It is normal in life that you will be buying a house to stay. Buying a house is not like buying a pair of jean or mobile phone. It is a big commitment in term of money especially in Singapore. If you buy a wrong house, you will not feel good and will feel very stressful when you are not able to sell your house. So what are some considerations when buying a house? For this post, I will talk about the most important consideration, which is location.

You must choose a place that is most convenience for you. If you are married, it will be better to live close to either your spouse parents' house or your parents' house. There are a lot advantages in doing it. Firstly, for any emergency, you can immediately get help. Secondly, if you have a baby, you can easily send your baby to your spouse parents' house or your parents' house for taking care. In this case, you do not need to have a car. Thirdly, you can go to their house for dinner with them every night to share the cost.

The location must be near to transportation hub like bus interchange or MRT (subway). This make travel more convenience when you go to work every day. Of course you need to pay more for such location to have this convenience.

Some calculations that I make if you need to make extra trip to transportation hub:
If additional trip is $1, one day is $2, so twenty years is $2 X 365 X 20 = $14600. Your spouse and you will pay $14600 x 2 = $29200. If include your future children, the cost will be more.
If additional trip is 20min, one day is 40min, so twenty year is 40min x 365 x 20 = 202 days.
So is it more worth to pay more for good location?

The location must be near to amenities. Just imagine you need to buy groceries and go out for a quick meal. It will be very convenience if your house is near to amenities. If these amenities are too far, it will be troublesome to carry the groceries back home especially when you need to take a bus. If you are hungry, you will feel lazy to go out to eat as the food stores are very far, and you will be ended up eating instance noodles.

Make sure you check the surrounding on possible air or noise pollution. Living in places that have air or noise pollution can greatly affect you and your emotion.

Lastly, if your house is near to transportation hub and amenities, it would be easy to sell, or sell high price with profit.

Click here for part 2.

Is Condo consider a good assets?

Remember what is an assets? Assets are thing you bought that bring in money. Yes, you can collect rental from the condo but does it bring in money? In this post, I will not be saying how much you will be selling your condo in the future. Why? Because you will never know. DO NOT ASSUME that you can sell HIGHER.

I putting three loan value $600000, $800000, $1000000 and a fixed interest of 3.5%. If you are loaning $600000, you are paying $2694.26. Say maintenance cost is $300, the minimum rental you must collect is $3000. For $800,000, the minimun rental is $3900 and for $1000,000 the minimum rental is $4800. In order for your condo to be qualified as asset, you must charge higher than the minimum rental cost.

There are a lot of thing to consider if you intend to rent you condo.
Firstly, you have to find people who are willing to pay the minimum rental that you set. This may be difficult when economy is no good.

Secondly, people who rent your house may one day move out again. You have to factor in the lost in rental for certain month.

Lastly people who rent your house may accidentally damage some parts of your house. You must factor in the repair cost.

So do you think is a good assets?

Housing loan, make it 15 years or 30 years?

I am using an example where housing loan is $150, 000 and the interest is 2.6%. You can see that you are paying $31306.80 in interest for 15 years and $66180 for 30 years. Wow so 15 years is better because I am paying $35000 less in interest. I can tell you a lot of my friends and colleagues will say the same thing. But I am totally disagreeing with this. No matter how I explain to them, they do not have any idea what I meant. The main reason I gave them is in your OA account, CPF will pay you at least 2.5% interest.



I am comparing how much OA CPF you have in 30 years (because both housing loan will be up in 30 years). Suppose your monthly OA amount is $1200. In 15 year plan, you save about $193 per month or $2312.88 per year. In 30 years plan, you save about $600 per month or $7194. By adding up the saving and interest for 30 years, in 15 year plan you will have $318287. In 30 year plan you will have $315836. The different is only less than $3k. Amazing? One points to note, CPF is giving 3.5% for the first $20000 in OA, so in fact the difference will be smaller.

This is just an example. My point here is to make your own calculation before you commit on the number of years for servicing your housing loan.

You may want to google "Housing Loan" to find out what are the rates given by different banks.