Singapore Watch

On Sunday, I bought a $79.95 bicycle that was on offer at carrefour. It had like, 10 speeds I think, but no front/back suspension, much like the first bicycle I owned when I was younger. It had a 5% instant discount, + 5% rebate on the POSB Everyday card.

I’ve a bike, so now I need a lock to secure the bike right? Looked at locks. $19.90! Woah, I guess having paid only $72 (after rebates) for a bike, I wasn’t prepared to fork out 27% of its price on a lock. So I got a $5 lock near my house instead, and a $4 bell for it. In the event it did get stolen, I wouldn’t cry too much over it.

But that got me thinking: With so many options these days, one can easily spend more than $300 on a bicycle with front and back suspensions, and lots of speeds. But after spending more than $300 on the bicycle, you’ll than feel like you need to spend more on a good lock to protect your investment.

Is that $19.90 lock good enough? Should I fork out more for that $50 lock cause it looks more secure, and it would be a shame to lose my $500 bike just because I was too cheap to buy a better lock right?

Before you know it, your $500 purchase balloons to $800, with all the blinkers, bells and whistles. Hidden costs.

It happens with buying pets too. You can get a dog from the pasir ris dog farm for less than $500. However, by the time you’re done buying it’s accessories, training cage, carrier, food, toys etc, you find that *oops*, you’ve spend almost as much money on these stuff as the dog itself!

I guess that’s why it always seems like money no enough, cause we forget about all the hidden costs that comes along with our purchases.

This blog currently brings me approximately USD1 a day in adsense revenue. I told my cousin that, and she said “you need to start like a 100 more of such blogs!” Lol.

This blog is still more of a hobby than anything, cause that $1/day just about covers its annual hosting and url fees.

If you do see an ad that interests you though, do visit the link. It does help keep this blog alive!

Speaking about retirement. In US, they have Social Security. In Singapore, we have CPF.

Most Americans have no faith in Social Security, with young adults today believing there won’t be any money left by the time they retire. The average Singaporeans trust the Government has planned for their retirement, and has it covered through the CPF scheme.

Now the good thing about Americans being skeptical about no retirement money coming from Social Security, is some of them are slowly socking away money into their own personal retirement plans like 401(k) and Roth IRA.

The bad thing about Singaporeans thinking CPF is sufficient, is that aside from the compulsory 20% CPF contributions each month, few are putting aside additional funds in their own retirement plans.

Recent CPF Trend reports that only about 33.8% of Singaporeans aged 55 met the minimum sum requirement of $106k.

According to CPF Life, with minimum sum in 2023, one can expect $570-$620/mth on a Life balanced Plan. Taking into account inflation, this sum gets even smaller. And this has to cover food, medical, electricity/phone bills, property tax, transport, etc etc.

In Summary,
- In 2008, about 66.2% of Singaporeans aged 55 do not have minimum sum
- Majority of Singaporeans would have pledged their property as half of minimum sum
- Minimum sum might not be sufficient to retire on
- Essentially, more than 2/3 of Singaporeans above 55 will not be able to retire
- Start planning for your own retirement. Do not rely solely on CPF

(Part of “The Almost Complete Goondu’s Guide to Buying a HDB Flat in Singapore” series.)

If I sell my property and make a profit, do I need to pay tax on the profits?

No. According to IRAS, profits resulting from the sale of property is known as ‘capital gain’, and Singapore does not have ‘capital gain’ tax.

However, if you are a trader who makes a living out of the profit of buying and selling houses, you might have to declare profits made under ‘other taxes’.

Check out IRAS’s “Gains from sale of property, shares and financial instruments” for more information.

If I rent out my property, what taxes will I have to pay?

Rental properties have to pay property tax calculated as 10% of its Net Annual Value (NAV) value. Apart from that, rental income will be taxed minus rental expenses.

Related Articles from IRAS:
- “Having investments in Singapore”
- “Rent and Net Annual Value”

What are the differences between a HDB loan and a Bank loan?

1) To qualify for a HDB loan, your household income must be less than $8k, whereas, anybody can apply for a Bank loan as long as your loan amount is at least $100k.

2) You can take out a 80% or 90% loan from HDB at the same interest rate, and your down-payment can be fully funded from your CPF.

However, for a bank loan, 5% of the down-payment must be paid in cash, with the rest via CPF, be it for 80% or 90% loans. On top of that, 90% loans charges a much higher interest rate.

3) HDB interest rates are pegged at 0.1% above CPF OA’s interest rates (currently 2.6%). Thus, it is more transparent and stable. Also, HDB is less likely to kick you out of your flat if you miss a few months payments, and are more ‘understanding’ and will try to work with you.

On the other hand, bank interest rates move up and down in line with the economy. In some case (like now), interest rates are way below that of HDB loans (some loans currently carry a 1.3%pa interest rate). However, if you do not keep up with your payments, banks might not be as forgiving, and would repossess your house, as they are commercial entities.

How to calculate Rental Yield?

Where do you see this?

In property brochures or advertisements.

What does it mean?

Rental yield is the annual rental return from a property, or the amount of rent the property earns over a year. It is expressed as a percentage of the purchase price. The higher the yield, the better the return.

It is calculated this way:
rent x 12 months
——————– x 100
purchase price

To work out the net rental yield, you will have to subtract maintenance costs, commissions and other expenses from the rent figure. If you have spent money on renovation, add the amount to the purchase price.

In Singapore, rental yields of 3 to 4 per cent are common.

Why is it important?

It gives you an idea of the returns from your property investment and allows you to compare different properties.

As one of the indicators of the investment potential of a property, it can help you decide on the purchase of an investment property. So you want to use the term? Just say…

‘I want to buy property in District 9 or 10 because I hear the rental yields are good.’

Source : The Sunday Times, Jan 11 2009

(Part of “The Almost Complete Goondu’s Guide to Buying a HDB Flat in Singapore” series.)

Can Permanent Residents apply for HDB flats?

Married PR couples or 2 PR siblings are allowed to apply for HDB resale flats. However, no HDB loan or grants are available for PRs.

Can I use my CPF to pay for my brother’s HDB flat?

If the HDB flat is not under your name, you are not allowed to use your CPF monies for it. Unless you and your brother bought a HDB flat together, you cannot use your CPF to pay for his flat.

If I currently own a private property, am I allowed to buy a HDB flat?

Yes you may. However, you are limited to the resale market, without HDB loan or grants. Also, the HDB flat must be your primary residence. Do note that if you buy a HDB flat, your property tax rate for the HDB will be 4% (owner occupied tax-rate), while your private property will now be taxed at 10%.

As long as you do not rent out the whole unit in the 1st 3 years, you can still apply for permission to sublet the whole unit from the 4th year onwards.

I need to downgrade my HDB. Can I still take a HDB loan?

No you cannot. A 2nd HDB loan will only be issued if your household income is less than $8k (family) or $3k (singles), and you are upgrading (eg. 2rm to 3rm, or 4rm to 5rm etc. Selling a 4Std and buying a 4A is NOT considered upgrading).

If you really need a HDB loan, you can try appealing to HDB or visiting your MP and see if they will write you a letter that might help you. The process is tedious and long and you might still not get a 2nd HDB loan.

What is a Housing Bridging Loan and how do I apply for it?

When you sell your house, you will not get back your CPF money till 1 week after the completion date. However, if you intend to buy and sell at the same time, and you need the CPF money that is currently tied up in your house to pay for your new house, that is where a bridging loan comes in.

A Bridging loan is a bank issued loan usually for a short period of a few months, charged with interest. You cannot use a bridging loan to get cash for paying for Cash over valuations, or the cash component for your deposit. It can only be used to make up the CPF portion of your payment (usually 15% of the purchase price).

Are there any alternatives to taking a bridging loan from the Bank?

If you have enough money in your CPF currently, to pay for your 15% downpayment (and the other 5% in cash), you actually don’t need a bridging loan. Check with your bank if they allow you to prepay part of your loan without penalty, such that when your CPF money is released from the sale of your flat, you still have the option of putting in the extra money into your loan to lower the total amount.

The downside of this though, is your monthly installment payments might be higher than if you had put down a larger downpayment. That might not be a problem however, as you will still have money in your CPF to help with the larger payment.

Can I sell my HDB flat before Minimum Occupancy Period (MOP) is up and buy a private property? Can I just repay the grant from proceeds from the sale?

Unfortunately, it’s not possible, even if you were willing to repay the grant. HDB wouldn’t approve the sale in the first place, so it would never get beyond the 1st appointment. They are pretty strict that way.

You’ll have to wait till your MOP is up before you can put down a deposit for any private property. It doesn’t matter if the private property would only TOP in 5 years. You can only put down a deposit for any private property once your MOP is up.