Webinar: Property outlook 2022 — Saving for your property and life goals
Endowus Insights

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Webinar: Property outlook 2022 — Saving for your property and life goals

Jul 2022
Jan 2022

Get updated about the latest residential property plans in Singapore in 2022, and how to manage your life goals better.

Despite the wage stagnation and economic hardship caused by COVID-19, Singapore property prices have still been climbing to new highs, with a record number of million dollar HDB flats transacting in the past year. Further, property cooling measures in terms of stamp duty and the tightening of the Total Debt Servicing Ratio (TDSR) have led to concerns of how property prices may be unsustainable.

With these measures in place, what is the property market outlook for 2022, and how can Singaporeans better plan for retirement?

00:00 - Introduction to ERA and Endowus

09:12 - Property outlook 2022: Will property prices fall?

26:46 - What are the new property cooling measures?

32:55 - Why are there new property cooling measures?

35:15 - Implications of the new property cooling measures

44:55 - Prime location public housing (PLH) and its impact on resale markets

55:28 - Should you use CPF or cash for your property investment

1:07:25 - Saving up for property investments

1:14:12 - Diversifying your investments beyond property

1:20:17 - Live audience Q&A

Excerpts from Webinar

Property Outlook 2022: Will property prices fall? (11:27)

Marcus: If we take a look at the rise of the property market, it is much more than the drop. During the world economic crash, there was a 35.8% drop but it rose by 442.7%. During the asian financial crisis, it dropped by 44.9% but it also rebounded by 40.4%. During the Sars and Dotcom bubble burst, it dropped by 18.1% but rebounded by 57.8%. During the global financial crisis, it dropped by 23.1% but rebounded by 62.2%. Everytime there is a drop, there is a recovery that is even stronger.

Private property price index throughout crises and cooling measures
Source: URA, ERA Research and Consultancy, 2021

Will the additional buyer stamp duty (ABSD) cooling measure affect property sellers?  (29:17)

Marcus: From 2018 to 2020, the number of people that are paying for ABSD is lesser. The majority is not affected by this rule. With cooling measures, people have adapted and changed the way they look at ABSD. For example, people are using individual names to buy one property instead of joint names. Since you have two names, the husband’s and wife’s, the husband buys one property and the wife buys one property. That makes it two properties but you don’t have to pay ABSD since they each own one. This is the norm in the market now. When there is a policy change like this, the way views are structured have also changed. This shows that the majority of the private property transactions do not involve ABSD.

Proportion of private property transactions involving ABSD
Source: Data.gov, ERA Research & Consultancy, 2021

Will rental income from property investment be affected by cooling measures?(37:47)

Marcus: We foresee that the rental demand will remain strong as more people will sell their home first. Due to the delay in construction and the delivery of the properties as well as more foreign demand from Vaccinated Travel Lanes (VTL) coming in, I think the rental demand will be strong.

Is it more profitable to buy a PLH property or a non-prime BTO? (50:08)

Marcus: Using a case study comparing PLH and a non-prime BTO resale, because of the subsidy recovery of 6%, your net selling price for the PLH is $938k instead of $998k. That makes a difference. If you take the net selling price minus the total cost of the holding period (minimum occupation period) of 10 years compared to 5 years, it looks like the profit from a non-prime BTO resale is more attractive. This is not so much about profit, but more about inclusivity, to have HDB flats in prime locations.

Comparison of sales proceeds between PLH and non-prime BTO
Source: ERA, 2022

Should you use CPF or cash for your property investment? (57:45)

Marcus: If you want to use cash, you’re someone that is risk-averse and would like to earn CPF risk-free 2.5% p.a interest. And if the mortgage rate is lower than 2.5%, go for the maximum mortgage and at the same time, use cash. If you’re using CPF, you should need to use cash for other reasons and if the mortgage rate has risen beyond 2.5%.

Gregory: If you’re using CPF, it frees up the cash on hand for other obligations and you might be able to afford a bigger down payment. The cons of using CPF is the pitfall of negative cash sale and paying for the accrued interest. You will also have less CPF money to prepare for retirement adequacy through investment. CPF is the longest term of money in your life. You should be taking long term risk with your CPF money and be compensated for this long term risk.

The pros of using cash is that you can invest your CPF for the long term investment returns. You can take on more fluctuations and volatility to achieve a higher expected return. If you do make a poor investment decision with your CPF, you do not have to pay the losses back to CPF with the accrued interest. Definitely, the objective is not to put yourself in that situation, but it is something to consider.

Importance of investing beyond property investment (1:07:40)

Gregory: What you need to remember is that if you sell, and try to time the market, you need to buy again. Otherwise, you won’t own a property and you’ll be paying rent forever. So most of the time, you end up buying at a higher price. For example, if I bought at $900 psf and sold at $1500 psf and thought that I made a great profit. But I would need to buy in again and ideally I wouldn’t want to downgrade my lifestyle. So I would need to buy in again at potentially an even higher price even if I were to “profit” on this trading of my own property. What ends up happening is that a lot of people end up sitting out of the market for a very long time, renting and not being able to get back into the market. This is not a very good strategy, if you ask me. I think that you need to invest your savings while you own your property and make the long term decisions to really increase your wealth so that you can buy or upgrade your next property. Relying on your property alone is not sufficient because that is a closed loop.

Learn more about real estate investment through funds here.


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