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The Ordinary Singaporean – who loses out
October 9th, 2010 | Author: Contributions
http://www.temasekreview.com/2010/10/09/the-ordinary-singaporean-who-loses-out/
The Ordinary Singaporean (TOS) started life humbly in a HDB when he first got married. I can safely say that many Singaporeans are TOS who started off life, built a family and dream home in that manner. I can always remember the day I bought my first home, a new 5 room HDB in Marine Parade in 1973. I bought it for $34,000 by sharing every dollar I had with my wife.
At every point in our life, as we earned more money, we all have the urge to upgrade and live in a better and bigger home. The urge to have more space became stronger when my 2 daughters came along. Like many of my contemporaries, I sold my HDB in 1980s for $165,000; took up a 80% bank loan and bought a terrace house. My neighbours in Marine Parade—– Jimmy and Robert ( real people but not their real names ) who were both working in the financial industry subsequently sold theirs and moved to a Semi -D in Bedok and an apartment in Katong respectively. You see upgrading for us then was easy as we could get a bank loan of 80/90 percent easily.
In 1995, my perception of a dream house took another turn. With children growing up and fighting over space, the desire to have a bigger house took me by storm. I sold my terrace house and bought a large Semi-D with a 90% home loan. Many of my friends did the same. Jimmy put a 5% cash deposit on a luxurious apartment that was under construction in Orchard Road. When the Orchard apartment was ready 2 years later he paid for it with a 90 % loan, sold his semi-D in Bedok for a cool profit and switched into semi retirement mode since. His apartment in Orchard is now worth over $6 million. As for Robert, he took up a 80% loan and bought a bungalow in Mountbatten road area and has been living there since. As he is richer than most of us, he can afford to keep his Katong apartment which is now rented out for $ 5000 a month.
Bridging loan by banks then was easily available with few restrictions, and that allowed us time to sell our first property and used the sale proceeds to reduce our outstanding loan in the newly purchased house. If you want to build asset in property investment, especially in a trending -up market, I have learned that it is best to buy your dream house first, before you sell your first house. In this way, it is less disruptive as this will give you time to renovate your new house before you move in. The delay action in selling your first house is often a blessing as it often reaps a better price and gives you more than adequate money to settle your bridging loan and other expenses. But with the new rulings, this door is as good as closed.
As I have said, TOS form the majority of the house- owners in Singapore today. They comprise all those who owns only one house ( either a HDB or private), with desire to upgrade to a better home when they can afford it. So what is wrong with that. ? If nothing is wrong, then why should TOS now has to bear the brunt of the latest change in rulings governing property purchase? Previously, before the new rulings, TOS who wants to start a family can either buy a HDB direct from the Board or from the HDB resale market. If he buys from HDB he has to live in it for 5 years before he can sell it. But if he so prefers, he can buy a resale HDB as the stipulated live-in period was one year ( later changed to 3 years). But this has since been changed to 5 years, thus making it difficult for TOS to upgrade. He is now lock-in for 5 years before he can sell and upgrade.
But that is not the only obstacle. TOS who now lives in a HDB can only borrow 70% if he wants to buy a private house to move to the next level. It means that if TOS wants to buy a $1.5 million landed private house, he has to put up cash/ and CPF of $450,000. And that is no joke and not a small sum.
In the past, many TOS who lived in HDB usually took the upgraded path by buying a private property ( mostly apartment ) that was under construction. For a minimal cash deposit of 5 to 10 percent he could book the apartment and pay progressively with a bank loan varying from 90 to 80 percent ( depending on which period the loan was arranged ). When the new house was ready, TOS could sell his HDB and move to his new home. But now, under the new rulings, if TOS wants to buy a private apartment and in need of a 70% home loan, he has to show proof that he has sold his HDB. That would means he has to move out and stay somewhere while the apartment is under construction which can take 2 to 3 years! That is enough to drive him up the wall and deter him from upgrading. In this, I feel very sorry for the young aspiring HDB dwellers who are planning and saving to move to the next level —to own and live in private property.
Looking back, I have seen many aspiring TOS ( of my era) make good and built up their assets by investing a good property. Many of us have come to realize that property investment in Singapore is the best way of building and protecting our asset. In this connection, to prevent the property market from ballooning, the Government has put in many screws which aim to cool the property market—like putting a brake on the rate of buying by foreign PRs in HDB resale, disallowing private property owners from buying HDB, making it more difficult for one to buy the second property, releasing more government land for private and public houses to be built to meet the rising demand of accelerated population growth which is planned to move to the 6 million mark.
With all these measures to cool the market, I cannot help but feel that those who call the tune has lost touch and forgotten the interests of The Ordinary Singaporean. Well, if the majority of the humble citizens will lose out in this exercise, then who is the real gainer(s)? As the adage goes, if someone loses, someone must gain. This is the question that I am still pondering and I believe there are many answers to this question.
Moses CM Tan
* Moses C.M Tan was a senior bank officer with one of Singapore biggest local banks for more than 30 years and played a significant role in growing the bank’s home loan, credit card, and branch banking business. He called it a day recently, and is now a loan specialist and spent most time helping his friends and clients in arranging financing for their property purchase.
October 9th, 2010 | Author: Contributions
http://www.temasekreview.com/2010/10/09/the-ordinary-singaporean-who-loses-out/
The Ordinary Singaporean (TOS) started life humbly in a HDB when he first got married. I can safely say that many Singaporeans are TOS who started off life, built a family and dream home in that manner. I can always remember the day I bought my first home, a new 5 room HDB in Marine Parade in 1973. I bought it for $34,000 by sharing every dollar I had with my wife.
At every point in our life, as we earned more money, we all have the urge to upgrade and live in a better and bigger home. The urge to have more space became stronger when my 2 daughters came along. Like many of my contemporaries, I sold my HDB in 1980s for $165,000; took up a 80% bank loan and bought a terrace house. My neighbours in Marine Parade—– Jimmy and Robert ( real people but not their real names ) who were both working in the financial industry subsequently sold theirs and moved to a Semi -D in Bedok and an apartment in Katong respectively. You see upgrading for us then was easy as we could get a bank loan of 80/90 percent easily.
In 1995, my perception of a dream house took another turn. With children growing up and fighting over space, the desire to have a bigger house took me by storm. I sold my terrace house and bought a large Semi-D with a 90% home loan. Many of my friends did the same. Jimmy put a 5% cash deposit on a luxurious apartment that was under construction in Orchard Road. When the Orchard apartment was ready 2 years later he paid for it with a 90 % loan, sold his semi-D in Bedok for a cool profit and switched into semi retirement mode since. His apartment in Orchard is now worth over $6 million. As for Robert, he took up a 80% loan and bought a bungalow in Mountbatten road area and has been living there since. As he is richer than most of us, he can afford to keep his Katong apartment which is now rented out for $ 5000 a month.
Bridging loan by banks then was easily available with few restrictions, and that allowed us time to sell our first property and used the sale proceeds to reduce our outstanding loan in the newly purchased house. If you want to build asset in property investment, especially in a trending -up market, I have learned that it is best to buy your dream house first, before you sell your first house. In this way, it is less disruptive as this will give you time to renovate your new house before you move in. The delay action in selling your first house is often a blessing as it often reaps a better price and gives you more than adequate money to settle your bridging loan and other expenses. But with the new rulings, this door is as good as closed.
As I have said, TOS form the majority of the house- owners in Singapore today. They comprise all those who owns only one house ( either a HDB or private), with desire to upgrade to a better home when they can afford it. So what is wrong with that. ? If nothing is wrong, then why should TOS now has to bear the brunt of the latest change in rulings governing property purchase? Previously, before the new rulings, TOS who wants to start a family can either buy a HDB direct from the Board or from the HDB resale market. If he buys from HDB he has to live in it for 5 years before he can sell it. But if he so prefers, he can buy a resale HDB as the stipulated live-in period was one year ( later changed to 3 years). But this has since been changed to 5 years, thus making it difficult for TOS to upgrade. He is now lock-in for 5 years before he can sell and upgrade.
But that is not the only obstacle. TOS who now lives in a HDB can only borrow 70% if he wants to buy a private house to move to the next level. It means that if TOS wants to buy a $1.5 million landed private house, he has to put up cash/ and CPF of $450,000. And that is no joke and not a small sum.
In the past, many TOS who lived in HDB usually took the upgraded path by buying a private property ( mostly apartment ) that was under construction. For a minimal cash deposit of 5 to 10 percent he could book the apartment and pay progressively with a bank loan varying from 90 to 80 percent ( depending on which period the loan was arranged ). When the new house was ready, TOS could sell his HDB and move to his new home. But now, under the new rulings, if TOS wants to buy a private apartment and in need of a 70% home loan, he has to show proof that he has sold his HDB. That would means he has to move out and stay somewhere while the apartment is under construction which can take 2 to 3 years! That is enough to drive him up the wall and deter him from upgrading. In this, I feel very sorry for the young aspiring HDB dwellers who are planning and saving to move to the next level —to own and live in private property.
Looking back, I have seen many aspiring TOS ( of my era) make good and built up their assets by investing a good property. Many of us have come to realize that property investment in Singapore is the best way of building and protecting our asset. In this connection, to prevent the property market from ballooning, the Government has put in many screws which aim to cool the property market—like putting a brake on the rate of buying by foreign PRs in HDB resale, disallowing private property owners from buying HDB, making it more difficult for one to buy the second property, releasing more government land for private and public houses to be built to meet the rising demand of accelerated population growth which is planned to move to the 6 million mark.
With all these measures to cool the market, I cannot help but feel that those who call the tune has lost touch and forgotten the interests of The Ordinary Singaporean. Well, if the majority of the humble citizens will lose out in this exercise, then who is the real gainer(s)? As the adage goes, if someone loses, someone must gain. This is the question that I am still pondering and I believe there are many answers to this question.
Moses CM Tan
* Moses C.M Tan was a senior bank officer with one of Singapore biggest local banks for more than 30 years and played a significant role in growing the bank’s home loan, credit card, and branch banking business. He called it a day recently, and is now a loan specialist and spent most time helping his friends and clients in arranging financing for their property purchase.
