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Thread: Would there be Negative Yield Eventually or Soon?

  1. #1
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    Default Would there be Negative Yield Eventually or Soon?

    If you have investment properties in Malaysia where housing loan rate at about 5% and high vacancy rate, you will understand the meaning of negative yield. Even if the property is tenanted, after deducting all expenses like taxes and maintenance/repairs, you are paying your tenant to stay at your place.

    Let's define YIELD. Yield should be based on the current estimated value of your property and not the historical costs which could be 10-20 years ago. Or perhaps your acquisition costs (include all taxes and duties) if it is higher.

    Now, the market is reading US rate hike of 4-6 times within the next 12 months. This is very very scary if you are a borrower.

    Let say rate hike of 2% within the next 12 months for Singapore housing loan, which will bring the housing mortgage rate to almost 4-4.5%. Most of the gross yield now is about 3-3.5% or even less if the acquisition cost is high.

    So, after deducting all expenses, property tax, maintenance (getting higher), repair, commission etc, the net yield is likely to be in negative.

    If that happen, if investors counting on rental income to pay off the monthly instalments would be facing difficulties in serving the loan even with lower LTV.

    I am not sharing something that would not happen, but it is highly likely if interest rate is going up.

    Next, Singapore has very high export value. The impact of trade war on Singapore cannot be under-estimated. The consequences of trade war, is the possible and potential job loss and economy downturn.

    My point is... think twice before you jump.

    Dunno why I share so much these few days... just perhaps, contribute two cents worth of view

  2. #2
    Join Date
    May 2012
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    Default

    Thanks for sharing more.

    Actually US has hiked interest rates 6 times from 0% to 1.5% already

    Our side, interest rate has probably moved less than 0.5%.

    So is it better to buy extremely old LH properties (say 20 years left) on the basis that current yields will be very high?
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  3. #3

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    Yield is only part of the play.

  4. #4
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    Default

    Quote Originally Posted by Arcachon View Post
    Yield is only part of the play.
    Of course, I know the other part is capital gain or perhaps come to this forum and tell people about your South Bank

  5. #5
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    Quote Originally Posted by Kelonguni View Post
    Thanks for sharing more.

    Actually US has hiked interest rates 6 times from 0% to 1.5% already

    Our side, interest rate has probably moved less than 0.5%.

    So is it better to buy extremely old LH properties (say 20 years left) on the basis that current yields will be very high?
    The real life problem is high maintenance and repair cost, not just the money, but the problems can kill you.

    Also, very difficult to find tenant for extremely old LH...

    Enbloc for 20 years lease left is near zero

  6. #6

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    Then how about 50 years left? Bought 2 old freehold in 2016 and enbloced in 2018. The maintenance issues can really kill you. So many problems, almost every month will receive call from tenants. And now the rental market is very very very bad. Consider the prime location, it takes one month to rent one room out.

  7. #7

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    Archron bought his southbank in 2005 or 2006? Totally different from now, I don't see any value in those new projects.

  8. #8
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    Quote Originally Posted by oldfreehold View Post
    Then how about 50 years left? Bought 2 old freehold in 2016 and enbloced in 2018. The maintenance issues can really kill you. So many problems, almost every month will receive call from tenants. And now the rental market is very very very bad. Consider the prime location, it takes one month to rent one room out.
    Only those been through will understand what I meant. Congrats on your enbloc

    For investment properties :
    Your property in Sub-location : cannot find tenant
    Your property in Prime Location : cannot meet price expectation

    I just lower my rental today to catch the tenant

  9. #9
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    Default

    Btw, I stop writing from here.
    Too busy

  10. #10
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    Mine all relatively new properties. No problem for me sourcing and renewing tenancy.

    All non central.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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