Saturday, March 9, 2013
Finally bought a property! (Part 3)
Then, we chanced upon Topiary, which looked very far off on the Singapore Map near Sengkang, along Fernvale and Yio Chu Kang Road.
It is not within 5 minutes to walk to Fernvale LRT. It is a good 15 minutes. We walked over to Greenwich, which has a cold storage and a number of nice restaurants. The nearest MRT was Buangkok 3km away, followed by Yio Chu Kang, a 10 minutes drive away.
Clearly, the location was not the best. However, we noticed that new condo developments just across the road were selling for at least $1100 PSF. Even older developments can be rent out at about $3,000 for 1000 square feet condominium. There were not many condominiums in that area, being a new estate, but at seletar area, there are many landed properties, similar to Kembangan, Siglap area. The area gives me a nostalgic feel, with Holland Village as a similar feel (before MRT was up then). I am likely to drive and continue to drive hence dropping off my wife then at MRT station in the morning will alleviate her transport woes.
The pricing was reasonable. On average, they are selling for $730 PSF. The unit I am eyeing for, a 21st level pool facing 3 Bedroom unit is selling for $716,000 for 915 square feet. This works out to be $783 PSF before grant. As our income is at $12,000, we are eligible for deferred $10,000 grant when my fiancée becomes citizen. This will further reduce our cost to $772 PSF.
Assuming ECs will trade at a 15% discount to nearby similar age properties, there is at least a $100 PSF upside for Topiary. This allows me to floor my downside risk of purchasing market at current levels. Assuming I am able to rent out my condo after 5 years at $2800/month, my gross yield will be 4.76% after grant, before interest costs.
My cash portfolio of stocks generates at least $20,000 per annum of dividends returns, which can comfortably cover the monthly installment of the purchase.
This allows me to continue my cash investments and not be afraid of losing my job. At most I become a tuition teacher, taxi driver or full time blogger; I will not lose the condo over my head. Both my wife and I can work in a $2,500 job and still afford the monthly installments without touching our retirement nest egg.
My CPF investments can continue as well as I am only utilizing $60,000 from my OA account for the down payment and stamp duty, the rest shared with my partner.
The calculations are as follows:
5% cash = $35,800
15% CPF = $107,400
3% Stamp Duty - $5400 = $16,000
Total = $159,200
Loan = $573,000
Monthly installment base on 2.5% = $2,270.
We are actually buying at the peak of the property cycle. I must be prepared for a 20% downside for my property. Hence, I am likely to liquidate my property counters to avoid taking double layered risks.
My partner and I have about 3 years more before we move in. We need to ensure that we can wait till then and not break up before marriage or we will lose 20% of the property price.
There are at least 2 more sites reserved for ECs, thus limiting upside for Topiary. I do hope that developers bid higher prices for the land so as to translate to higher selling prices.
The next post will be on why we chose a 3 Bedroom instead of a 3 Bedroom dual key and forgo the potential for rental when Topiary is just minutes away from the Seletar Aerospace hub.