What are your views - Currency deposit interest vs rental income

[Regulators]

I have been monitoring currencies like the Australian dollar and interest rates in their savings and deposit accounts work out to between 3-4.6% per annum, which seem to offer a higher rate of return compared to condo rental. For instance if you put $500k into a Aussie account yielding 4.6%, it works out to $1900 of interest a month, rather attractive by today's standards for that amount. Of course the downside would be currency risk.

[hyenergix]

But you lose out on capital gains.

[Regulators]

That is why I chose to pose this topic in this current market. do not foresee much capital gain coming from buying a private property at the current peak. Those who buy property will end up like those who bought in 1996, having to recoup only in this upcycle more than 10 years later. the current US economy is bouyant simply becoz of tax cuts, when the tax cuts are lifted, the increase in taxes and interest hikes will cause the economy to go into a dip. Double dip is inevitable and signs can be seen from the current property market in US. When would the crisis start some of you may ask, it won't be long, beginning of next year....


But you lose out on capital gains.

[blackfire]

I have been monitoring currencies like the Australian dollar and interest rates in their savings and deposit accounts work out to between 3-4.6% per annum, which seem to offer a higher rate of return compared to condo rental. For instance if you put $500k into a Aussie account yielding 4.6%, it works out to $1900 of interest a month, rather attractive by today's standards for that amount. Of course the downside would be currency risk.
FX risk should not be underestimated. Fx is the most volatile, unpredictable investment instrument and easily manipulated by the central banks. Do it if you need the currency, such as if you intend to migrate to Australia. So unless you are a trader or you have multi-currencies deposits as a hedge, it is not advisable to place too funds into it, take it as a speculation and hope that AUD to strengthen over time.

[gfoo]

Good strategy esp if you think ozzie. Ie think in aud, use gains to invest in aud prop cap gains, time, etc. Too much hassle to think sgd

[devilplate]

if u tink crisis is coming soon....the more u shdnt change into AUD now...rem AUD only 1 to 1 SGD early last yr after lehman bro saga

but having said tat, during crisis, $$ shd be spent on GSS!!!:D :D :D

[kane]

AUD even went below the 1-1 parity...

[gfoo]

if u tink crisis is coming soon....the more u shdnt change into AUD now...rem AUD only 1 to 1 SGD early last yr after lehman bro saga

but having said tat, during crisis, $$ shd be spent on GSS!!!:D :D :D

I think the sgd has gone up too far in the back of dodgy economic growth claims. In a recession, i would dump the sgd and go into commodity backed currencies or the yen

[JuzMe]

AUD does give good interest rate. As you mentioned, the risk is there with exchange differences when you go in then getting out. AUD has been quite volitile since April till now due to politics in country. Exchange rate versus SGD can go either way till end of the year :beats-me-man:

[devilplate]

I think the sgd has gone up too far in the back of dodgy economic growth claims. In a recession, i would dump the sgd and go into commodity backed currencies or the yen
I wud rather use the money to showhand on stocks. Can leverage smmore....Alternatively, i wud choose gold bar rather den aud

[DC33_2008]

Why Aussie $ after what happen to the recent political scene?
AUD does give good interest rate. As you mentioned, the risk is there with exchange differences when you go in then getting out. AUD has been quite volitile since April till now due to politics in country. Exchange rate versus SGD can go either way till end of the year :beats-me-man:

[gfoo]

I wud rather use the money to showhand on stocks. Can leverage smmore....Alternatively, i wud choose gold bar rather den aud
Physical gold is a given - everyone should have their gold and silver shelter set up

I'm a gold bug ;)

[DC33_2008]

Will it hit $2000 at the end of this year?

[devilplate]

Will it hit $2000 at the end of this year?

higher chance of winning to bet on NO:D

but will gold eventually hit 2k....YES:D

[Regulators]

you are right, when aud goes down, buy more yen :)


I think the sgd has gone up too far in the back of dodgy economic growth claims. In a recession, i would dump the sgd and go into commodity backed currencies or the yen

[Regulators]

lol...i think so too, but wouldnt commodity prices soar when currencies are down? I had many regrets in life and gold is one of them. I should have bought 10kg of gold bar when prices were hovering at $18...lol


I wud rather use the money to showhand on stocks. Can leverage smmore....Alternatively, i wud choose gold bar rather den aud

[Regulators]

1-1 parity is too risky for our economy especially against major currencies like aud. we want to keep our exports affordable to these developed countries so our govt will adjust our currency to keep it lower for the sake of competitiveness. Our govt always looks at the big picture...


if u tink crisis is coming soon....the more u shdnt change into AUD now...rem AUD only 1 to 1 SGD early last yr after lehman bro saga

but having said tat, during crisis, $$ shd be spent on GSS!!!:D :D :D

[amk]

Double dip is inevitable and signs can be seen from the current property market in US. When would the crisis start some of you may ask, it won't be long, beginning of next year....

if you are a firm believer of this, then you could simply buy puts on all the major indexes. no need to look at the miserable yields from any ccy.

[Regulators]

not into options and unfamiliar with such instruments.


if you are a firm believer of this, then you could simply buy puts on all the major indexes. no need to look at the miserable yields from any ccy.

[devilplate]

if you are a firm believer of this, then you could simply buy puts on all the major indexes. no need to look at the miserable yields from any ccy.

for local stocks, i ever go long on short using cfd....very simple...interest rates not high:D


i did shorting on some stocks during 08 and hold for more den 6mths:D

[devilplate]

if you are a firm believer of this, then you could simply buy puts on all the major indexes. no need to look at the miserable yields from any ccy.

amk: u noe alot about forex?

forex min leverage 20x rite? i attend forex seminar b4 by philips

[hyenergix]

That is why I chose to pose this topic in this current market. do not foresee much capital gain coming from buying a private property at the current peak. Those who buy property will end up like those who bought in 1996, having to recoup only in this upcycle more than 10 years later. the current US economy is bouyant simply becoz of tax cuts, when the tax cuts are lifted, the increase in taxes and interest hikes will cause the economy to go into a dip. Double dip is inevitable and signs can be seen from the current property market in US. When would the crisis start some of you may ask, it won't be long, beginning of next year....

For investing in a property, mid-term 5-10 years there is still a good chance of capital gain. But short-term is very risky now as interest rates are moving up. You can see this increase for NZD and AUD fixed deposit rates easily this year (I have some NZD deposits). It should be quite interesting in 2011 when many projects TOP. By then if interest rate here starts to move up marginally, sentiment will change. I'm just waiting for this to happen to get another property while accumulating my savings in NZD.

I recommend you read the economist Andy Xie's blog. His predictions are quite accurate. Compare what he said early last year to what is happening now http://english.caijing.com.cn/2009-04-13/110142377.html
He mentioned several times 2012 is the year to watch out (I suggest you lock the interest rates to cover 2012 onwards if you have loans). More of his blogs are here in Mandarin
http://xieguozhong.blog.sohu.com/entry/

[devilplate]

For investing in a property, mid-term 5-10 years there is still a good chance of capital gain. But short-term is very risky now as interest rates are moving up. You can see this increase for NZD and AUD fixed deposit rates easily this year (I have some NZD deposits). It should be quite interesting in 2011 when many projects TOP. By then if interest rate here starts to move up marginally, sentiment will change. I'm just waiting for this to happen to get another property while accumulating my savings in NZD.

I recommend you read the economist Andy Xie's blog. His predictions are quite accurate. Compare what he said early last year to what is happening now http://english.caijing.com.cn/2009-04-13/110142377.html
He mentioned several times 2012 is the year to watch out (I suggest you lock the interest rates to cover 2012 onwards if you have loans). More of his blogs are here in Mandarin
http://xieguozhong.blog.sohu.com/entry/

u sold ur ppty? how come waiting to buy? last yr nvr buy when its low?:confused:

[hyenergix]

Actually bought a sub sale unit this yr due to office new location, but e price didn't move up much from launch price. Mid to long term still worth buying. Looking for a MM unit w good location if e price is really good. But e interest rate is key worry.

[hyenergix]

Actually bought a sub sale unit this yr due to office new location, but e price didn't move up much from launch price. Mid to long term still worth buying. Looking for a MM unit w good location if e price is really good. But e interest rate is key worry.

[DC33_2008]

Do you foresee interest to move up in the next 12 months? It is unlikely looking at US and Europe.
Actually bought a sub sale unit this yr due to office new location, but e price didn't move up much from launch price. Mid to long term still worth buying. Looking for a MM unit w good location if e price is really good. But e interest rate is key worry.

[Regulators]

i think interest will move up. govt also support developers in singapore coz of GLS and they would be slapping themselves if they didnt. govt is allowing developers to offload their existing projects first before imposing any draconian measures. What do you guys think?


Do you foresee interest to move up in the next 12 months? It is unlikely looking at US and Europe.

[devilplate]

i think interest will move up. govt also support developers in singapore coz of GLS and they would be slapping themselves if they didnt. govt is allowing developers to offload their existing projects first before imposing any draconian measures. What do you guys think?

only if the prices spike up again....

mass market prices looks flattish for the time being...:beats-me-man:

[Wild Falcon]

Interesting that there are who are still looking to buy. I've more or less decided to let go of one unit at RCR D15. It's at an unglam and inner side of D15 - i.e. older development , fairly "large" (>1200 sq ft) with no sea view and once tenancy ends (which is this month), I will let it go. Rental yield wasn't fantastic to begin with. Will put it on the market once hungry ghost month goes away. Just like your property, the price hasn't moved much this year - any upside from hereon will be immaterial. Might as well let go and take some cash off the table. But I don't think interest is such a big worry - it's unlikely to move up in a big way in the next year or so. And as long as you take lower leverage (<60%), a rise in interest rate really shouldn't be a "key worry". And always ensure there is adequate "buffer", i.e. make sure that even if interest goes up by 200-300 basis points, you still can serve your mortgage and still have lots of "leftovers" to enjoy life.


Actually bought a sub sale unit this yr due to office new location, but e price didn't move up much from launch price. Mid to long term still worth buying. Looking for a MM unit w good location if e price is really good. But e interest rate is key worry.

[hyenergix]

i think interest will move up. govt also support developers in singapore coz of GLS and they would be slapping themselves if they didnt. govt is allowing developers to offload their existing projects first before imposing any draconian measures. What do you guys think?

In Singapore the local banks and developers are linked to an important FamiLee... If the interest rate is low, it is indirectly supporting land price that the government is selling, and the properties that both the government (HDB) and developers are selling. Banks also earn more from bigger loans. But interest rates should be moving up else the inflation will be a concern.

But I think recent news reports & advertisements indicate that some developers are launching their properties earlier than expected. If you look at the pte property vacancy units, it is climbing...

So I will not look at rental income if I were to get a MM property (must be FH or 999) in the next 1-2 years. It is more for weekend getaway, future retirement home (easy to maintain) and for the capital gain (if I really need the cash). I'm quite happy with my property and NZD deposits at the moment (hedging in both ways).

[devilplate]

But I think recent news reports & advertisements indicate that some developers are launching their properties earlier than expected. If you look at the pte property vacancy units, it is climbing...



care to share whr u get the stats for vacancy rates?

i read smwhr rental is climbing instead....:confused:

[amk]

I recommend you read the economist Andy Xie's blog. His predictions are quite accurate.
huh andy xie. he said singapore is supported by massive money laundering and that's how he got fired by morgan stanley. he said SG economy is going to crash as soon as indons withdraw their money. he also said china stock is going to crash big time. in 2010. so far none has happened. I think he's becoming "populist" nowadays. Last time when he's chief economist in MS he was much more "optimistic" in Asia. Nowadays it's very easy (and popular) to be a doomsday expert. :)

sorry for the OT. ;)

fx deposits against rental. simple fx deposits gives u a yield of what, 4/5% annualized max ? a small SGD appreciation by MAS can wipe out all in one day. (like in Mar this year). I think u do fx deposits if you really have a need for it (like pty in Aus/NZ, kids studying there etc). Otherwise the vol of fx is too high to be considered a fixed income yield instrument.

[devilplate]

huh andy xie. he said singapore is supported by massive money laundering and that's how he got fired by morgan stanley. he said SG economy is going to crash as soon as indons withdraw their money. he also said china stock is going to crash big time. in 2010. so far none has happened. I think he's becoming "populist" nowadays. Last time when he's chief economist in MS he was much more "optimistic" in Asia. Nowadays it's very easy (and popular) to be a doomsday expert. :)

sorry for the OT. ;)

fx deposits against rental. simple fx deposits gives u a yield of what, 4/5% annualized max ? a small SGD appreciation by MAS can wipe out all in one day. (like in Mar this year). I think u do fx deposits if you really have a need for it (like pty in Aus/NZ, kids studying there etc). Otherwise the vol of fx is too high to be considered a fixed income yield instrument.

keep saying market crash...if it happens...become FAMOUS....haha

SGD consists of a basket of currencies...but 'concealed'....any idea?

i tinking of holding some china yuan instead....can foreigner open a savings acct in china easily?

[hyenergix]

care to share whr u get the stats for vacancy rates?

i read smwhr rental is climbing instead....:confused:

It is some raw data from Singstat.

Type of Property 2008Q4 2009Q1 2009Q2 2009Q3 2010Q4 2010Q1 2010Q2
Condominium Units
Available 111,850 112,597 114,697 116,160 115,478 115,795 118,958
Vacant 6,645 6,116 7,143 7,318 5,344 4,892 7,320

If I take Signature Park condo as an example using data from URA (I know many units in this condo are rented out to Koreans), then it seems that the rental is recovering. In 2008Q4 the global recession hit us but the rental was still quite high. Only in 2009Q1 then it dropped, so there is a lag of 1 quarter. China and US economic data were quite good in 2010Q1 and Q2, but the bad news only came in 2010Q3, so I think rental might peak in 2010Q4, unless some good news come out again.

$psm 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4
Median rental 1.83 2.17 2.42 2.42 2.34 2.36 2.34

$psm 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2
Median rental 2.00 1.90 1.93 2.08 2.14 2.25

[hyenergix]

huh andy xie. he said singapore is supported by massive money laundering and that's how he got fired by morgan stanley. he said SG economy is going to crash as soon as indons withdraw their money. he also said china stock is going to crash big time. in 2010. so far none has happened. I think he's becoming "populist" nowadays. Last time when he's chief economist in MS he was much more "optimistic" in Asia. Nowadays it's very easy (and popular) to be a doomsday expert. :)

sorry for the OT. ;)

fx deposits against rental. simple fx deposits gives u a yield of what, 4/5% annualized max ? a small SGD appreciation by MAS can wipe out all in one day. (like in Mar this year). I think u do fx deposits if you really have a need for it (like pty in Aus/NZ, kids studying there etc). Otherwise the vol of fx is too high to be considered a fixed income yield instrument.

He was too frank...actually Indonesians are *very* rich and they have been very supportive of our property. They like to buy the condos around River Valley. China stocks didn't crash but it did dropped quite a lot in 2010 compare to 2009
http://www.tradingeconomics.com/Economics/Stock-Market.aspx?Symbol=CNY

For fx deposits, if you buy when the exchange rate is favorable, then you will earn on fx on top of your interest rates. When AUD exchange rate is favorable and it is politically stable, then I will put a bit inside too.

[Wild Falcon]

I think vacancy rate is something to watch in the next 2 years when lots of developments TOP. Read the report below about vacancy rates in Beijing Chaoyang District. 50% vacant for 3 years. :)

The rich speculators are holding on to their vacant "luxury" units, keeping prices artificially high while the masses have no place to stay. Totally depressing. Will this happen in Singapore? Vacant units everywhere while prices still remain high?

By staff reporter Xu Ming 08.26.2010 18:46
Beijing District Releases Official Housing Vacancy Rates

Chaoyang District's housing vacancy figures are the first of its kind to be issued in China, amid growing fears of a property bubble
Beijing's largest district Chaoyang has issued figures showing that a total of 1.33 million square meters of residential space are vacant. Over half of the space has been empty for at least three years.

Among the empty residences, villas and luxury apartments totaled 521,000 square meters, accounting for 39.2 percent of the total and 54.9 percent of homes have remained empty for over three years. Ordinary flats accounted for 18 percent of the empty residential space, according to the report.

But the report failed to make the distinction between unsold housing or the commonly believed unoccupied housing after sales.

With rising fears of an emerging property bubble, market concerns over the housing vacancy rate across China have deepened. However, little official data has been released. The Chaoyang District housing vacancy report is the first of its kind.

According to earlier media reports, 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. But the figures were denied by power companies.

Andy Xie, board member of Rosetta Stone Advisors, said that the huge quantity of empty flats represents speculation in current home purchases. Under normal market conditions, the vacancy rate should be equal to the number of households relocating, times the average transition period, plus newly formed households times the average purchase period, said Xie.
Xie estimated that the vacancy rate for the China's private, commercial housing stock is between 25 and 30 percent, at least double compared to normal market conditions. Xie said the value of the inventory held by speculators probably accounts for around 15 percent of GDP.

According to the Chaoyang district report, from January to July, property investment in the district reached 44.63 billion yuan, up 17 percent year on year. During that period, commercial housing sales totaled 1.45 million square meters, down 57.4 percent year on year.


It is some raw data from Singstat.

Type of Property 2008Q4 2009Q1 2009Q2 2009Q3 2010Q4 2010Q1 2010Q2
Condominium Units
Available 111,850 112,597 114,697 116,160 115,478 115,795 118,958
Vacant 6,645 6,116 7,143 7,318 5,344 4,892 7,320

If I take Signature Park condo as an example using data from URA (I know many units in this condo are rented out to Koreans), then it seems that the rental is recovering. In 2008Q4 the global recession hit us but the rental was still quite high. Only in 2009Q1 then it dropped, so there is a lag of 1 quarter. China and US economic data were quite good in 2010Q1 and Q2, but the bad news only came in 2010Q3, so I think rental might peak in 2010Q4, unless some good news come out again.

$psm 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4
Median rental 1.83 2.17 2.42 2.42 2.34 2.36 2.34

$psm 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2
Median rental 2.00 1.90 1.93 2.08 2.14 2.25