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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
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    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.

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    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

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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

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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.

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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.

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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

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    Btw, I stop writing from here.
    Too busy

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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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    Quote Originally Posted by oldfreehold View Post
    Archron bought his southbank in 2005 or 2006? Totally different from now, I don't see any value in those new projects.
    I see another 2006 coming because they cannot stop printing.

    Ever wonder where they get the money for all the infrastructure in Singapore.

    2006 -- $558 psf --958 sqft --$535,000 RCR D7 99yrs

    SOUTHBANK NORTH BRIDGE ROAD Apartment 07 RCR 99 yrs lease commencing from 2006 Resale 1 1,480,000 - 958 Strata 26 to 30 1,545 Mar-18

    2011 -- $899 psf 1453 sqft $1,305,800 OCR D19 99yrs

    TERRASSE TERRASSE LANE Condominium 19 OCR 99 yrs lease commencing from 2010 Resale 1 1,525,000 - 1,453 Strata 01 to 05 1,049 Feb-18

    2018 - $1523 psf 969 sqft $1,475,300 OCR D19 99yrs

    THE GARDEN RESIDENCES SERANGOON NORTH VIEW Apartment 19 OCR 99 years leasehold New Sale 1 1,475,300 - 969 Strata 01 to 05 1,523 Jun-18
    Last edited by Arcachon; 10-07-18 at 12:01.

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    Quote Originally Posted by Kelonguni View Post
    Mine all relatively new properties. No problem for me sourcing and renewing tenancy.

    All non central.
    Yes, you still can find tenants, but what is the rental yield now? Normally we play property game by leveraging, if you have paid up in full of coz rental yield don't bother you. This time round I am lucky, the old apartment went through successfully. With so many maintenance problems , these old apartments can not attract any good tenants. If you rent to those bad profile ones, it will bring you more problems. I can't imagine those out skirt condos, what is the rental yield looks like now.

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    Quote Originally Posted by Laguna View Post
    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
    For investment properties :
    Your property in Sub-location : cannot find tenant
    Your property in Prime Location : cannot meet price expectation

    Totally agree, unless you bought the properties before 2007 or went through the en bloc in 2017-2018.
    Agents will always ask you to buy, once you commit, you will understand. Those buying 1 or 2 bedders in District 19, good luck to you.

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    Average yield for 3 properties based on current prices is 4.3%.

    Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.

    Quote Originally Posted by oldfreehold View Post
    Yes, you still can find tenants, but what is the rental yield now? Normally we play property game by leveraging, if you have paid up in full of coz rental yield don't bother you. This time round I am lucky, the old apartment went through successfully. With so many maintenance problems , these old apartments can not attract any good tenants. If you rent to those bad profile ones, it will bring you more problems. I can't imagine those out skirt condos, what is the rental yield looks like now.
    The three laws of Kelonguni:

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

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    Quote Originally Posted by Kelonguni View Post
    Average yield for 3 properties based on current prices is 4.3%.

    Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
    You need to use current prices to tell yourself it is not a good buy, then you wait and wait and wait until the prices is right.

    I only know if I can buy, Bank can loan just buy.

    Rental will sure cover your interest, just use it as a saving plan then wait for lucky draw.

  16. #16
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    Quote Originally Posted by oldfreehold View Post
    For investment properties :
    Your property in Sub-location : cannot find tenant
    Your property in Prime Location : cannot meet price expectation

    Totally agree, unless you bought the properties before 2007 or went through the en bloc in 2017-2018.
    Agents will always ask you to buy, once you commit, you will understand. Those buying 1 or 2 bedders in District 19, good luck to you.
    In short buy within town,outskirts town area city fringe.

  17. #17
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    Did you have to pay SSD or the collective sales Paid for it?

    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.
    The three laws of Kelonguni:

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

  18. #18
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    Quote Originally Posted by Kelonguni View Post
    Did you have to pay SSD or the collective sales Paid for it?
    SSD is paid by the seller, the collective sale will not pay.
    What is the end date of enbloc for the purpose of SSD, date of completion? or approval by Strata Board?

  19. #19
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    Quote Originally Posted by Kelonguni View Post

    Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
    I just share :
    in the same project
    Investor 1 bought it 15 years ago at $500,000,
    Investor 2 bought it now at $1,500,000
    Both are more or less identical and rented out at a gross rental of $3,000pm
    Gross Yield : Property 1 : 36,000/500,000 = 7.2%
    Property 2 : 36,000/1,500,000 = 2.4%

    If I am a potential buyer, which is the right number I will want to know? It is based on today's market price.

    You cannot have a project with yield that is out of syn from market.

  20. #20
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    Quote Originally Posted by Kelonguni View Post
    Average yield for 3 properties based on current prices is 4.3%.

    Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
    Must be based on current prices, because those are the current value of the properties which you can extract if you were to sell it and deploy the capital elsewhere. If you still use the prices prevailing 10, 20 years ago, you are comparing oranges with apples. Say you bought a home 50 years ago, your rental yield would probably approach 100%. That is just wrong.

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    Quote Originally Posted by Laguna View Post
    I just share :
    in the same project
    Investor 1 bought it 15 years ago at $500,000,
    Investor 2 bought it now at $1,500,000
    Both are more or less identical and rented out at a gross rental of $3,000pm
    Gross Yield : Property 1 : 36,000/500,000 = 7.2%
    Property 2 : 36,000/1,500,000 = 2.4%

    If I am a potential buyer, which is the right number I will want to know? It is based on today's market price.

    You cannot have a project with yield that is out of syn from market.
    Of course, it is just common sense.

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    But you sell gotta pay even more to buy back (15-18% more leh).

    Quote Originally Posted by stalingrad View Post
    Must be based on current prices, because those are the current value of the properties which you can extract if you were to sell it and deploy the capital elsewhere. If you still use the prices prevailing 10, 20 years ago, you are comparing oranges with apples. Say you bought a home 50 years ago, your rental yield would probably approach 100%. That is just wrong.

  23. #23
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    That is not the issue we are talking about, right? The issue is what is the correct way to calculate yield. Whether you are going to buy them back or not is another issue.

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    Quote Originally Posted by Kelonguni View Post
    But you sell gotta pay even more to buy back (15-18% more leh).
    I got walk in who tell me he should have bought Poiz Residences because it look cheap compare to The Garden Residences. I told him he will look back again and said he should have bought The Garden Residences. Buying is not the deciding factor you profit or lost, selling is.

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    https://www.scmp.com/business/articl...id-levels-home

    Actress Shu Qi splashes out US$16.2 million for luxury Mid-Levels home

    May be she did calculate about yield before she buy.

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    Quote Originally Posted by stalingrad View Post
    Of course, it is just common sense.

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    Quote Originally Posted by Arcachon View Post
    I got walk in who tell me he should have bought Poiz Residences because it look cheap compare to The Garden Residences. I told him he will look back again and said he should have bought The Garden Residences. Buying is not the deciding factor you profit or lost, selling is.
    Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
    Be professional in your advice please. Both buying and selling, holding power etc are counted.

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    Quote Originally Posted by Laguna View Post
    Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
    Be professional in your advice please. Both buying and selling, holding power etc are counted.
    You must have hear a lot of professional advise, sometime it is good to take your shoe out and wear the other party shoe to understand what is going on. The Glass of water is half fill or half empty depends on who look at it, same goes to the professional getting professional advise.

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    Quote Originally Posted by Laguna View Post
    Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
    Be professional in your advice please. Both buying and selling, holding power etc are counted.
    Quote Originally Posted by Arcachon View Post
    You must have hear a lot of professional advise, sometime it is good to take your shoe out and wear the other party shoe to understand what is going on. The Glass of water is half fill or half empty depends on who look at it, same goes to the professional getting professional advise.
    You started your property journey in 2006 at the low of the previous property cycle. You were either savvy or lucky when your entry point was low and hence between 2006 to 2016 (10 years), you was able to ride into the next cycle and benefited.

    Imagine if you started your journey in 2011, do you think you can achieve what you had achieved by 2021? The entry point in 2011 would have been rather high and we can see what it will be like in 2021 after 10 years. And you are going to say that how many 10 years one can have? You do it right the first 10 years, is better than you ended up trying to fix yourself and catching up with the market for the next 20 years.

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    Quote Originally Posted by Amber Woods View Post
    You started your property journey in 2006 at the low of the previous property cycle. You were either savvy or lucky when your entry point was low and hence between 2006 to 2016 (10 years), you was able to ride into the next cycle and benefited.

    Imagine if you started your journey in 2011, do you think you can achieve what you had achieved by 2021? The entry point in 2011 would have been rather high and we can see what it will be like in 2021 after 10 years. And you are going to say that how many 10 years one can have? You do it right the first 10 years, is better than you ended up trying to fix yourself and catching up with the market for the next 20 years.
    No one knows what the future will become, but history do give us a small window to what the future will be.

    When one know Bank is allow to print money and MAS control the flow, money become smaller and smaller.

    When one know GLS is not going to sell cheaper than the previous sale, land price can only go up not down.

    When one know Singapore cannot be like America and Europe where they can just move out of a Town and build another Town, property price got only one direction.

    Any person who can buy property in Singapore need to jump over 9 Control Measure if he or she still alive and still don't buy can only join the MTB.

    Feel sad for those who can buy and did not buy, they just need to pay 5% more.

    I need to work for 8 years without spending a single cents just to pay the stamp duty if I buy now to be what I am.

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