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Thread: Who is paying ABSD?

  1. #31
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    Quote Originally Posted by imjason
    Will old bird kan cheong spider if correction >20% ?
    I doubt it. The bird is well diversified and has strategy to weather storms better than most of us.

  2. #32
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    Quote Originally Posted by Ringo33
    Yes. amortized it over 4 years loh..

    But 5.5% is a lot base on total quantum compred to $ park in bank. Unless u pay 100% cash

  3. #33
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    Quote Originally Posted by minority
    But 5.5% is a lot base on total quantum compred to $ park in bank. Unless u pay 100% cash
    assume you buy a 600k 1br with 40% down i.e. 240k

    if 240k half put in the bank half buy short term bond you probably can find a safe 1.5-2% return per year easily, if inflation at 4% you lose 2% of that 240k which is about 5k per year so in 6y time if inflation stays at 4% you lose 30k+

    if you use that 240k to buy the 1br, you pay additional 3% ABSD and 2.5% BSD, 5.5% of 600k is 33k upfront lost

    some way in between, you probably can go for 40k high yield stocks, 100k 2-3y bond yield 2% and another 100k 5y or 10y corp bond yield 3-4% just to beat inflation
    Ride at your own risk !!!

  4. #34
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    Quote Originally Posted by phantom_opera
    assume you buy a 600k 1br with 40% down i.e. 240k

    if 240k half put in the bank half buy short term bond you probably can find a safe 1.5-2% return per year easily, if inflation at 4% you lose 2% of that 240k which is about 5k per year so in 6y time if inflation stays at 4% you lose 30k+

    if you use that 240k to buy the 1br, you pay additional 3% ABSD and 2.5% BSD, 5.5% of 600k is 33k upfront lost

    some way in between, you probably can go for 40k high yield stocks, 100k 2-3y bond yield 2% and another 100k 5y or 10y corp bond yield 3-4% just to beat inflation

    True

    So the assumption is min hold 6 yrs at least if not the ABSD cannot not be negated. also assumption is inflation rate stay at the 4% range.

    Risk will be the down side risk of buying prop at current rate might be peakish( debatable) Other is post 2015 interest rate movement might not be as low. If int rate move to 2-3% within the 6th years then ur break even need to be longer than the 6yrs. maybe add 2yrs more?

    How abt Cooperate bond and rights? they are in the 3.75-5.5% range. w/o leverage.

    Hard Property do have the Capital gain factor but a weak/over leverage hand might get in trouble in a down cycle. But post 4yrs if is investment rental generation would help. Provided country n economy stay on course.

    anyway best is play within ones means and diversify a bit.

  5. #35
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    for foreigners say US or EU... the absd sort of offset their fx gains in SGD the past yr... not so much pain, just make less

    for locals... the 3% absd $$$ (+ 10% from foreigners) can help govt push back GST hike plans; i think it's good in a way as it taxes the more well-to-do owning multiple properties... if GST hike, the income gap will widen further

  6. #36
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    Quote Originally Posted by minority
    But 5.5% is a lot base on total quantum compred to $ park in bank. Unless u pay 100% cash
    Yes and no.

    3% of $1m, is 30k, this is basically the only disadvantage I have for having more than 2 properties. If the property value appreciate by say 1.5% per year, it would have easily cover the ABSD within 2 years. And this is excluding the positive rental cash flow from rental, which could amount to >$1.5 per month (based on current interest rate and 60% loan).

    So if we apply this over 4 years, property value appreciation will be around $60K, while positive cash flow from rental will be $72k, total $132K. And this is excluding the loan reduction from 4 years of mortgage payment.

    If I put $400k in the bank, will it be able to generate $130k returns over 4 years? Perhaps yes if you are an adventurous investor.

  7. #37
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    Quote Originally Posted by Ringo33
    Yes and no.

    3% of $1m, is 30k, this is basically the only disadvantage I have for having more than 2 properties. If the property value appreciate by say 1.5% per year, it would have easily cover the ABSD within 2 years. And this is excluding the positive rental cash flow from rental, which could amount to >$1.5 per month (based on current interest rate and 60% loan).

    So if we apply this over 4 years, property value appreciation will be around $60K, while positive cash flow from rental will be $72k, total $132K. And this is excluding the loan reduction from 4 years of mortgage payment.

    If I put $400k in the bank, will it be able to generate $130k returns over 4 years? Perhaps yes if you are an adventurous investor.
    you cannot compare putting in bank, because it entails different amount of risk. you should only compare with a portfolio that has the same risk e.g. say 30% high yield stocks, 30% 5y corp bond AA rated, the rest in junk bond

    what the government did was trying to reduce the attractiveness of property as an investment by introducing additional risk to cancel the advantages of low interest rate
    Ride at your own risk !!!

  8. #38
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    Quote Originally Posted by phantom_opera
    you cannot compare putting in bank, because it entails different amount of risk. you should only compare with a portfolio that has the same risk e.g. say 30% high yield stocks, 30% 5y corp bond AA rated, the rest in junk bond

    what the government did was trying to reduce the attractiveness of property as an investment by introducing additional risk to cancel the advantages of low interest rate

    So assuming if you have $400,000 today, what will you be buying?

  9. #39
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    Quote Originally Posted by Ringo33
    So assuming if you have $400,000 today, what will you be buying?
    there is no absolute answer as different people already have different assets / liabilities and different risk appetites with different inclination

    it does not mean that your decision to buy a 3rd property is wrong as you may have fully paid up the other two and you may have many children so u thinking of buying for them

    Ride at your own risk !!!

  10. #40
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    Quote Originally Posted by chiaberry
    I doubt it. The bird is well diversified and has strategy to weather storms better than most of us.
    Need to frequent this forum and learn from old birds... cause Im pretty Kancheong spider lately...

  11. #41
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    Quote Originally Posted by phantom_opera
    there is no absolute answer as different people already have different assets / liabilities and different risk appetites with different inclination

    it does not mean that your decision to buy a 3rd property is wrong as you may have fully paid up the other two and you may have many children so u thinking of buying for them

    If only have one prop and have 400k, will u buy? Curious to hear your respected views

  12. #42
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    Quote Originally Posted by imjason
    Need to frequent this forum and learn from old birds... cause Im pretty Kancheong spider lately...
    Mai gan cheong, coz chances are the more gan cheong the more stupid mistakes like anyhow hoot a unit will occur. In the midst of 100% sellouts, stay calm n look slowly

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