Property investment;

In perhaps the biggest shake-up for the mortgage landscape, the Monetary Authority of Singapore (MAS) launched the landmark interest rate in 2021 – SORA (Singapore Overnight Rate Average). This shift is considered a massive game-changer, and could have major impacts on existing home-owners and home buyers. So read on to find out what is this SORA is all about and how it may affect your financial decisions if you are looking at taking new home loans, refinancing or repricing of home loans.

Thus far, the US Federal Reserve has hiked interest rates by a total of 0.75% in 2022. Against the backdrop of record inflation rates in US, the Federal Reserve has also signalled their intention to increase interest rates further in the coming months. Incidentally, the rising interest rates take place at a time when MAS mandates the roll-out of SORA and discontinuation of SIBOR (Singapore Interbank Offered Rates) by 2024.

In the past, the volatility of US interest rates usually led to corresponding volatility in the SIBOR rates. However, with SORA, the situation has changed a fair bit as SORA works quite differently to SIBOR.

Before proceeding to explain what is exactly the difference between SORA and SIBOR, you should take note of the key dates:

31 March 2022 – 6-month SIBOR have ceased

31 Dec 2024 – 1-month and 3-month SIBOR will cease

Those who were on 6-month SIBOR home loans should have been notified by their banks to convert their loans.

In Singapore, many people use their CPF Ordinary Account (OA) savings to pay for their property loan instalments. Fundamentally, there is nothing wrong with this approach. I have been doing this since I bought my first property in 2010. Then again, it is important to be mindful of the amount of CPF accrued interest because it may lead to negative sale when you disposed your property.

Due to the HDB lease decay issue, the prospect of facing HDB negative sale is very real for some HDB owners in recent years. This is especially so for those who owned ageing HDB flats. What is HDB negative sale and how does CPF accrued interest play a part in it? In this article, I will explain why it is important to factor in the CPF accrued interest when you buy and sell properties.

CPF accrued interest and its dark side

CPF’s rule is that whatever amount of CPF savings you take out for housing or education purposes, you must refund the amount with compound interest. The rationale is that our CPF savings is primarily meant to fund our retirement needs. This is akin to borrowing money from your own retirement fund and paying back yourself with interest.

In the aftermath of the 2009’s Great Financial Crisis, interest rates had remained very low, driving Singapore wealth builders to look to overseas properties that generate high returns. In addition, the implementation of Additional Buyer Stamp Duty (ABSD) has also led to many wealthy Singaporeans to invest in overseas properties in United Kingdom, Malaysia and United States. In this article, the risks of investing in overseas properties are discussed.

Before we talk about returns, it is important to think about the risks of owning a foreign property. Context is important because investing in properties in Singapore is very different as compared to investing in overseas properties.

In life, if it is too good to be true, it probably is. Henceforth, I always believe in taking care the downside risks and let the potential upsides do the talking itself. Broadly speaking, the downside risks are geopolitical, regulatory and market supply.

Geopolitical risk

Unlike many countries, Singapore has a very stable government with strong ruling party. This is an important factor because investors do not like uncertainties arising from a change of government or major upheaval in the political environment, which often leads to new policies for property ownership for foreigners.

Brexit is a prime example.

One of the most often raised questions among property investors is whether to purchase a leasehold or freehold property in Singapore. While many would argue that freehold is definitely better than leasehold because of the perceived perpetual ownership, this argument may not hold water in Singapore due to the Land Acquisition Act.

In this article, I would share my views on freehold property in Singapore. Once again, I am putting a disclaimer that this article is not meant to be a form of financial nor legal advice. The content is produced to the best of my knowledge and research. If there are any factual errors, please feel free to let me know. I would be happy to amend my article.

Leasehold property

Generally, 99 years old leasehold property must be returned to the government upon expiry of lease. In March 2017, Minister for National Development, Lawrence Wong, highlighted specifically that all leasehold private and public housing will be returned to the state upon expiry. Due to land scarcity, the government needs to recover land to meet changing social needs.

Effectively, this means that home-owners will [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only.

According to Minister for National Development, Lawrence Wong, there were 7900 second-timer households who paid the required resale levy when buying second subsidized flat from the Housing and Development Board (HDB) from 2010 to 2015. Notwithstanding the figure, I suspect many people are not aware of the lurking dangers of deferred resale levy rule.

Not knowing the rule can cost you an arm or leg because without the knowledge, you are unable to strategize and do proper asset planning. In this article, I will share with readers how to exploit the deferred resale levy rule with the goal of building wealth with property.

Please note that I am not advocating anything illegal or sleazy. No, nothing of that sort. In fact, this information that you are going to read is something that you are not likely to find in most personal finance blogs. I learnt about this relatively unknown rule in the course of purchasing my third property and hope to share this really useful information with readers. Read on if you are interested.

Second timer applicants

Most Singaporeans are aware that they are given two chances to purchase new subsidized flat from HDB. Hence, Singaporean couples can apply twice for Build-to-Order (BTO), Design, Build and Sell Scheme (DBSS) or Executive Condominium.

My wife and I have been house-hunting for the past few years and recently just decided to purchase an Executive Condominium (EC). The desire to upgrade to an EC is because of the new addition to our family. With the arrival of my boy, we need a bigger space. But the key motivation behind this move is basically I want my children to grow up in a better environment. I always feel that people living in HDB three room flats come from “challenging” backgrounds – drug addicts, ex-convicts, etc. I know it is too sweeping to make this sort of statement as I have been living in HDB three-room flat for more than 30 years. But as parents we all want the best for our kids. So in today’s article, I shall note down how to manage CPF proceeds from the sale of HDB flat to build your wealth.

Selling your existing HDB and buying another resale HDB

Firstly, if you are buying EC, you can only apply for bank loans. HDB don’t offer loans to EC owners. Nevertheless, before I touch on the financial aspects for buying EC, I will like to touch on the finances for buying a second resale HDB flat.

In Singapore, more than 80% of the residents live in HDB flats. Yet how many are aware of the various HDB regulations and its implications to themselves and their loved ones? Not knowing the rules can potentially land you in financial troubles, but may also cause family disharmony and destroy relationships. One of the most overlooked clause is the Manner of Holding, specifically, “Joint Tenancy” and “Tenancy-in-Common”. Read on if you are a joint owner of a HDB flat and is curious to find out how it can impact you.

When you are buying a HDB flat with your spouse or other family members, you would need to decide on the manner of holding the flat upon the transfer of flat ownership, either through joint tenancy or tenancy-in-common.

Technically, under joint tenancy, all the flat owners have an equal share in the flat. However, in the event of a demise of any joint owner, the right of survivorship applies and his interest in the flat would automatically be passed on to the remaining co-owners. This is regardless of whether the deceased joint owner has left behind a Will.

According to an example quoted from HDB’s website “Mr A, Mrs A (wife) and Mr C (son) own an HDB flat under joint tenancy.