Property market sentiments 2011

[devilplate]

was Orchard Road FH yield ever the same as like hmmmm, some OCR LH condos or for more extreme comparison, Orchard Road FH yield ever higher than HDBs? in 1990s,2000s?
so Orchard Road FH is perpetually overpriced?

nvr owned luxury....but D11 ppty like those near UE sq, novena sq can achieved 3-4% yield...tats norm...if below tat mabe overpriced....so goto compared its past performance to make a judgement

[hopeful]

nvr owned luxury....but D11 ppty like those near UE sq, novena sq can achieved 3-4% yield...tats norm...if below tat mabe overpriced....so goto compared its past performance to make a judgement

That's right, compare within a segment, then across segments. Then can find out underpriced or overpriced.
But the key objective of us all is to make money. And most money is made from capital gains rather than nett rental yield. So look at properties which has potential from capital gains rather than net rental yield. Rental yield is just a tiny bonus for those who have difficulties making mortgage payments.

[devilplate]

That's right, compare within a segment, then across segments. Then can find out underpriced or overpriced.
But the key objective of us all is to make money. And most money is made from capital gains rather than nett rental yield. So look at properties which has potential from capital gains rather than net rental yield. Rental yield is just a tiny bonus for those who have difficulties making mortgage payments.

er...if u sell to next investor...u goto make sure the yield still acceptable at ur selling price aso mah.....so yield hf direct impact on ur capital gains in future

[hopeful]

er...if u sell to next investor...u goto make sure the yield still acceptable at ur selling price aso mah.....so yield hf direct impact on ur capital gains in future

Let say my gross yield in 2009 is 4%, which is market rate. Rent out for 2 years. Condo is $1mil.
In 2010 january, property market now rising. I want to sell for $1.1mil. so yield now drop to 3.63% for next owner. So now nobody want to buy from me?
What do you propose I do?
A) Wait until end 2010 when the tenancy expired and sell? So new buyer can rent out at 4% yield.
B) sell at $1.05mil in 2010 january, yield for buyer is 3.81%.
C) hope for property market to crash, so that I sell at 900k. Yield for next owner is 4.44%.

[devilplate]

Let say my gross yield in 2009 is 4%, which is market rate. Rent out for 2 years. Condo is $1mil.
In 2010 january, property market now rising. I want to sell for $1.1mil. so yield now drop to 3.63% for next owner. So now nobody want to buy from me?
What do you propose I do?
A) Wait until end 2010 when the tenancy expired and sell? So new buyer can rent out at 4% yield.
B) sell at $1.05mil in 2010 january, yield for buyer is 3.81%.
C) hope for property market to crash, so that I sell at 900k. Yield for next owner is 4.44%.

i suppose rental shd go in tandem with prices....if not, den bubble is forming...hehe....so right now, no bubble yet

[Regulators]

With regard to capital appreciation, the value of the RH unit appreciated in price from what i paid almost instantly as the unit i bought was underpriced. I bought RH to park my money there rather than to let it waste away in the bank. I could pay off the entire mortgage now if i wanted, but i chose to let the future rental pay off this unit i bought. If you do your math, it will take me only 20 years or less to full pay the remaining 80% of my loan from the rental alone and would you say that a property with 65yr left has no value? The price that i sell the condo then will be the profit you are talking about. Investors buying properties for rental do not realise profit the same way that investors who buy for capital appreciation do. Moreover with 65yr remaining, a good location and a big piece of land, there is potential for en bloc in future.

Who buys purely for rental yield anyway?
Capital gains is the way to make money.
Rental is only to sustain the mortgage.

How come nobody ever answer my questions?
1) you make more money from net rental or from capital appreciation?
2) Those of you who goes for rental yield, you never hope for capital appreciation?

[hyenergix]

I see a lot of postings and passionate discussions on rental yield. I guess many buyers are not buying for own stay. I can imagine the competition for tenants get hotter if the immigration number stays around 2010 level in 2011 and 2012.

[hopeful]

.......Investors buying properties for rental do not realise profit the same way that investors who buy for capital appreciation do. .......

Hi, I am interested to know more about the above statement.
How does investors buying properties for rental realise profit as compared to investors who buy for capital appreciation?

Care to explain? I am willing to learn.

But the core of your posting above, is still capital appreciation right?

[Regulators]

Extracted from my last post: "If you do your math, it will take me only 20 years or less to full pay the remaining 80% of my loan from the rental alone and would you say that a property with 65yr left has no value? The price that i sell the condo then will be the profit you are talking about."

Hi, I am interested to know more about the above statement.
How does investors buying properties for rental realise profit as compared to investors who buy for capital appreciation?

Care to explain? I am willing to learn.

But the core of your posting above, is still capital appreciation right?

[Regulators]

The rationale is this, to an owner who has fully paid off his house using mortgage, do you think the owner would be very concerned about that 10% drop in his property price when it is time for him to sell? This is when owners can still make money even when there is no capital appreciation. Investors buying for rental all have that same mentality. If along the way comes en bloc, it will just be an icing on the cake.

Hi, I am interested to know more about the above statement.
How does investors buying properties for rental realise profit as compared to investors who buy for capital appreciation?

Care to explain? I am willing to learn.

But the core of your posting above, is still capital appreciation right?

[blackfire]

Theoretically for investment property, rental yield is directly related to capital appreciation. Reasons why some properties prices rises faster than rental yield are either (1) property market is experiencing some form of speculation activity or (2) The property has some unique features which caters more for owner occupation or long term investment. For example the rental yield for landed properties is low compared to condo, but the prices are still climbing due to fact that you are sitting on a real piece of land, which people valued, especially Asians. Another example is The Sail, the rental yield is not attractive now but there is anticipation that the surrounding area once redeveloped, will attract higher rental and property prices.

As for whether to buy for rental yield or capital appreciation, it depends on whether you are long term investors or short term investors or speculators. If you are just looking at capital appreciation alone, you are running the risk of property market making a sudden downturn and you are not able to command a good rental to buy time. For long term investors of more than 3 years, it is better to invest in good yield units. For bullish short term basis, investors should look for capital appreciation. For owner occupation or other personal reasons, rental yield may not be very important.

[Wild Falcon]

Rental yields does affect capital value over time. If a property gives 5% yields, over time investors will realise its capital value is under-valued such that it will normalise to "normal" yields of say 3%. It's like high-yielding stocks hold their capital value very well because it has strong cash flows. Rental = cash flows. And if you value the capital of any asset, it should be based on the discounted value of future cash flows. So to say rental (which is like dividend) has no impact on capital is really naive. who will buy a property dreaming of capital gains where there is no good cash flows to support the equity value? Of course u will use the usual "foreign hot monies" like to anyhow invest without looking at future cash flows, well, foreign hot monies sometimes are not dumb.

i still find it amusing people keep saying i don't care rental cash flows because capital values will increase without future cash flows. Really? Take some financial classes and u will realise that cash flows is everything.

And seriously, do you think there is that much capital gains at today's prices? some properties only fetching 2% yields. If capital value goes up further, it will fall to 1%. And capital gains (not supported by current cash flows) will only happen to areas with new developments, e.g. second CBD, new tranport links etc. Those fetching 2% yields TODAY and NO future prospect, the investors are only looking at investing for a bigger bubble and looking for bigger idiots to buy their property.

Who buys purely for rental yield anyway?
Capital gains is the way to make money.
Rental is only to sustain the mortgage.

How come nobody ever answer my questions?
1) you make more money from net rental or from capital appreciation?
2) Those of you who goes for rental yield, you never hope for capital appreciation?

[Regulators]

that is why i believe in buying a property with a good rental yield. The higher the yield, the greater the likelihood (i didn't say absolute) that the property is undervalued. Average yield for private should be around 3% so anything in the region of 4-5% will ring some bells.

Rental yields does affect capital value over time. If a property gives 5% yields, over time investors will realise its capital value is under-valued such that it will normalise to "normal" yields of say 3%. It's like high-yielding stocks hold their capital value very well because it has strong cash flows. Rental = cash flows. And if you value the capital of any asset, it should be based on the discounted value of future cash flows. So to say rental (which is like dividend) has no impact on capital is really naive. who will buy a property dreaming of capital gains where there is no good cash flows to support the equity value? Of course u will use the usual "foreign hot monies" like to anyhow invest without looking at future cash flows, well, foreign hot monies sometimes are not dumb.

i still find it amusing people keep saying i don't care rental cash flows because capital values will increase without future cash flows. Really? Take some financial classes and u will realise that cash flows is everything.

And seriously, do you think there is that much capital gains at today's prices?

[devilplate]

that is why i believe in buying a property with a good rental yield. The higher the yield, the greater the likelihood (i didn't say absolute) that the property is undervalued. Average yield for private should be around 3% so anything in the region of 4-5% will ring some bells.

so ideally, go for FH+4-5% yield? hold 20-30yrs sure make $?

[Regulators]

ideally, yes

so ideally, go for FH+4-5% yield? hold 20-30yrs sure make $?

[stalingrad]

Value derives from what it can generate over times in yield. without yield, value is shit. simple as that.

[kingkong1984]

The rationale is this, to an owner who has fully paid off his house using mortgage, do you think the owner would be very concerned about that 10% drop in his property price when it is time for him to sell? This is when owners can still make money even when there is no capital appreciation. Investors buying for rental all have that same mentality. If along the way comes en bloc, it will just be an icing on the cake.

The points that I agree on

a) Fully paid mortgage, dun bother about price up or down. Only if price has increased a lot for him to cream it then he will sell, if not, it is better off to hold them for rental yield. Enblock is jackpot. Never enblock, hold for rent and even properties with 30 yr old has its value.

b) Buying at $100k below value is already a winner. Sell at value would give some profits too.

c) No condo properties should be rented at less than HDB prices. $2k no problem. Of course can ask for more.

d) Housing is one thing that when many people chasing, it will go up. When no body chasing, it will go down. No sell means NO PAIN.

[blackfire]

Rental yields does affect capital value over time. If a property gives 5% yields, over time investors will realise its capital value is under-valued such that it will normalise to "normal" yields of say 3%. It's like high-yielding stocks hold their capital value very well because it has strong cash flows. Rental = cash flows. And if you value the capital of any asset, it should be based on the discounted value of future cash flows. So to say rental (which is like dividend) has no impact on capital is really naive. who will buy a property dreaming of capital gains where there is no good cash flows to support the equity value? Of course u will use the usual "foreign hot monies" like to anyhow invest without looking at future cash flows, well, foreign hot monies sometimes are not dumb.

i still find it amusing people keep saying i don't care rental cash flows because capital values will increase without future cash flows. Really? Take some financial classes and u will realise that cash flows is everything.

And seriously, do you think there is that much capital gains at today's prices? some properties only fetching 2% yields. If capital value goes up further, it will fall to 1%. And capital gains (not supported by current cash flows) will only happen to areas with new developments, e.g. second CBD, new tranport links etc. Those fetching 2% yields TODAY and NO future prospect, the investors are only looking at investing for a bigger bubble and looking for bigger idiots to buy their property.

Share like GLP, which do not provide dividend now doesn't mean it doesn't have a growth story. Similarly for properties, a low rental yield now can still command a high price if there is a "growth" story behind it, eg future MRT, university,CBD, etc,etc, which will eventually command a higher rental.

At the end of the day whether your property investment make money depends whether your property is in demand when you decided to sell it, be it rental, owner occupation or investment.

As I said, for investment properties, it is better to buy good yield properties, which can weathered the market downturn longer. unless personally you have some reasons like "foresight" or insider information on the surrounding development in the future, then you look at capital appreciation alone.

[teddybear]

Actually, properties with super high rental yield usually have low capital appreciation! That is it! It is true! In order to entice buyers to buy properties with low potential capital appreciation, sellers have no choice but to sell at lower price to ensure reasonable to high rental yield! (This theory is same as buying stocks! High yield stocks have high yield because investors think they have potentially low capital appreciation in terms of share price!).

After understanding the above, is it any wonder that OCR properties tend to have slightly higher rental yield than CCR? (and yet OCR properties not necessary all the time have better yield and yet difficult to get good tenants - all these make it even more sucks!).

Let say my gross yield in 2009 is 4%, which is market rate. Rent out for 2 years. Condo is $1mil.
In 2010 january, property market now rising. I want to sell for $1.1mil. so yield now drop to 3.63% for next owner. So now nobody want to buy from me?
What do you propose I do?
A) Wait until end 2010 when the tenancy expired and sell? So new buyer can rent out at 4% yield.
B) sell at $1.05mil in 2010 january, yield for buyer is 3.81%.
C) hope for property market to crash, so that I sell at 900k. Yield for next owner is 4.44%.

[stalingrad]

teddy is the kind of person that buy bonds when interest rates are heading higher.

[devilplate]

Actually, properties with super high rental yield usually have low capital appreciation! That is it! It is true! In order to entice buyers to buy properties with low potential capital appreciation, sellers have no choice but to sell at lower price to ensure reasonable to high rental yield! (This theory is same as buying stocks! High yield stocks have high yield because investors think they have potentially low capital appreciation in terms of share price!).

After understanding the above, is it any wonder that OCR properties tend to have slightly higher rental yield than CCR? (and yet OCR properties not necessary all the time have better yield and yet difficult to get good tenants - all these make it even more sucks!).

hahahaha

den y OCR increased so much since 2008??? high yield+high gain leh...u missed it rite....too bad for u

[hopeful]

The rationale is this, to an owner who has fully paid off his house using mortgage, do you think the owner would be very concerned about that 10% drop in his property price when it is time for him to sell? This is when owners can still make money even when there is no capital appreciation. Investors buying for rental all have that same mentality. If along the way comes en bloc, it will just be an icing on the cake.

Let me get this straight.
Assuming you pay 200k for a $1mil condo, take loan 80% for 20 years.
Assuming the rental can fully cover mortgage + other expenses, so that in 20 years, the loan is fully repaid.

so in 20 years time, fully paid up, and if sell at $900k, you still make 900k-200k = 700k profit? instead of 100k loss.
Since your initial cash outlay is 200k.

Let me chew on this.
What a foreign concept

[hopeful]

How come nobody chasing industrial or shophouses or retail lots properties since they have higher yields? not withstanding that is a residential property forum.
In what situation does a person sell his HDB flat? Since rental yield is the highest of all residential properties?
So is that one reason why HDB flats are going up and up since yield is so high.

[Regulators]

interesting you said that, coz that is also on my agenda. I am looking out at a freehold office/retail space somewhere within 1 min of cityhall mrt station entrance. yet to find my ideal unit.

How come nobody chasing industrial or shophouses or retail lots properties since they have higher yields? not withstanding that is a residential property forum.
In what situation does a person sell his HDB flat? Since rental yield is the highest of all residential properties?

[devilplate]

How come nobody chasing industrial or shophouses or retail lots properties since they have higher yields? not withstanding that is a residential property forum.
In what situation does a person sell his HDB flat? Since rental yield is the highest of all residential properties?
So is that one reason why HDB flats are going up and up since yield is so high.

i cannot own a HDB for eg....got restrictions leh....if one can buy many many HDB....HDB prices will at least go up by another 30% almost immediately or OCR ppty will fall...lol

been hearing industrial/retail ppty giving 8-10% yield wor....any experts here? but mostly 30-60yr lease rite?

[devilplate]

interesting you said that, coz that is also on my agenda. I am looking out at a freehold office/retail space somewhere within 1 min of cityhall mrt station entrance. yet to find my ideal unit.

mostly FH ones r shophse leh...i see liao faint...duno rent to who type...lol

[gn108]

HDB is like a stock with someone holding a veto Golden share.
HDB yield is high for many reasons - you own only the space, not the land. Ownership is restricted and rental is subject to policy changes anytime.

On the other end, is FH in CCR - those can have yields just straddling mortgage rates as these are where the big boys play.

How come nobody chasing industrial or shophouses or retail lots properties since they have higher yields? not withstanding that is a residential property forum.
In what situation does a person sell his HDB flat? Since rental yield is the highest of all residential properties?
So is that one reason why HDB flats are going up and up since yield is so high.

[hopeful]

i cannot own a HDB for eg....got restrictions leh....if one can buy many many HDB....HDB prices will at least go up by another 30% almost immediately or OCR ppty will fall...lol

been hearing industrial/retail ppty giving 8-10% yield wor....any experts here? but mostly 30-60yr lease rite?

10% yield, payback in how many years? so why not popular?
Thought there was an article in December, of a lady who invested in many industrial properties...around 400k per unit

[hopeful]

interesting you said that, coz that is also on my agenda. I am looking out at a freehold office/retail space somewhere within 1 min of cityhall mrt station entrance. yet to find my ideal unit.

I am looking at Boatquay & Circular shophouses, FH somemore. Looking for ideal unit also, ie within my budget But at the price they are asking, yield is like 5% only.

[gn108]

For retail try Lucky Plaza or Far East in Orchard
Or Holland Road Shopping Centre in HV for D10.
Freehold/Strata titled.

interesting you said that, coz that is also on my agenda. I am looking out at a freehold office/retail space somewhere within 1 min of cityhall mrt station entrance. yet to find my ideal unit.