Sunday, January 17, 2021

Should Gen-Z just give up their private property ownership dreams ?


Before I start, I just want to say that I have no expertise in residential real estate investing. I got a EC about 6 years ago and sitting fairly decent capital gains. These gains are trivial as my kids go to a school next door and it will be at least 7 years before I can even move on.

Vina Ip's Behind the Scenes of the Property Market is a good first read for budding property investors who are not looking for a property right now and want a primer on the local property markets. 

First, I enjoyed the general tone of the book which is negative and somewhat cynical. Singapore is a high trust society but we should not trust commissioned real estate agents so readily. The book is full of anecdotes that uncover the various unethical practices of local developers and their agents. I particular love the exposes on developers who manipulate units for sale to always give the impression that markets are bullish. 

This alone is worthy for the time,effort and money to read the book. 

Secondly, I'm somewhat neutral about whether the book can help someone who is looking for private property to buy. Perhaps this is the objective of the author as she does conduct workshops.

I can summarise her approach into two parts:
  • The 3-3-5 approach seems very conservative. I should not have purchased my EC judging by the earned income of my household at that time. My neighbours who do not have millions in the REIT markets are also sitting on excellent capital gains today and many have already cashed out moved out. I leave the reader to google what the 3-3-5 rule is but I prefer you support the author. 
  • Secondly, most of the best deals shared by Vina were largely based on exploiting the downturn of a different economic era. This means that even if you have an intention to buy private property, there is fairly solid evidence that the trend of residential property prices will be down moving forward.
Combining these two insights, this is tantamount to saying that Gen Z should simply BTO and forego their private property dreams!  She might be right and I leave it to the reader to decide whether to agree with her. 

I can't seem to decide my stance on this.

What I really disagree with her about, which should not be held against her because she's entitled to her opinion, is my impression of her view on government policy. She seems negative about Singapore's high rate of home-ownership close to 90%. This is the highest in the world.

The impression she and quite a number of seemingly anti-PAP property gurus ( that I shall not name ) is that home-ownership saps innovation of a country and we've evolved into a risk-averse population as a result of that. Interestingly, she came from a place where some elderly live in coffin-sized apartments. She goes as far as to assert that Singaporeans give up a slice of their personal happiness to support their expensive mortgages. 

In my opinion, that is a step too far even for a very credible property guru.  

My personal take is that broad-based home-ownership produces more good than harm. Sure, we're a lot more risk-averse and maybe even less innovative than Hong Kongers, but we still make decisions that are the best for the community at large and we're less individualistic. It was the Christmas tree at Hong Kong Festival walk that was burned down by the innovative and entrepreneurial protestors of Hong Kong that affected MNACT shareholders. Also, home-ownership means we have a greater incentive to look after our property, as a landlord she should be aware of how "entrepreneurial" a tenant can be with property that they don't own. 

It's the reason why our heartlands are such pleasant places.

But my disagreement should not be a reason for someone not to read her book. I learnt a lot from HK D&D players who are extremely proficient an creative in gaming as individuals, but Singaporean players are better team players and form stronger teams.  One of my most memorable games was making a HK DM rage-quit after the Singaporean party members decided to cooperate and refused to backstab each other in the game regardless of the game scenario. Even the HK DM admitted that this Singaporean trait was hard to beat because he's warier about being betrayed by his own kind in a business engagement. 

To folks from Hong Kong, Singaporeans will always be naive, gullible, kiasu, less creative, less entrepreneurial than HK counterparts. In an individual deal, Singaporean businessmen can be outmanuevered. As a country, however, I leave the reader to investigate how we're faring in this pandemic and the state of our GDP per capita. 

The author's eventual transition to become a Singapore property owner shows how correct our policies are. 

1 comment:

  1. First off, let me just say that BTO & EC are the highest probability property investment in S'pore. Unfortunately you can't own multiple BTOs or ECs. And you have to factor in the costs associated with buying a replacement home. Even downgrading involves costs in terms of quality of life, location, even safety (no more security guards & samsengs can loiter outside your HDB flat).

    One way I've seen someone use BTO to clear their mortgage liability within 6 years is to move to another BTO in the same estate. I.e. where the selling price of your 1st BTO has a high probability of being much higher than your 2nd BTO, thus (1) eliminating any more mortgage, and (2) giving more than enough to cover the renovation of the 2nd BTO.

    This was what a friend did when he moved from a 4rm BTO in punggol to another 4rm BTO in punggol. He's a gig driver without full O-levels and with 2 kids. If he hadn't done the above, he'd be looking at paying for his HDB till his 60s or being forced to downgrade. Now he can use his entire income on his family. He just needs to maintain basic but sufficient insurance. I've encouraged him to top up into his CPF SA, but he's loathed to contribute any more than the minimum into his Medisave to renew his annual license. Haha.