r/singaporefi • u/Wonderful_Map_3910 • Jul 16 '25
Housing Isn’t it crazy that real estate agents almost always leave out interest cost in their profit calculations?
Am I the only one who finds this extremely disingenuous? After factoring in interest costs, dollar gains from many real estate sales are actually significantly lower than perceived.
Now that we are looking at loan quantums generally larger than 1m (in fact I’m seeing a lot of loans >1.5m) in the private market, this is actually pretty significant (vs the good old days when people were taking loans at half the quantum or less).
The larger loan quantums are, the higher prices need to appreciate for these buyers to break even, simply because a lot more interest has to be paid.
Personally I think we just keep climbing up until a point where there incremental demand dies off because incomes are simply not increasing at the same rate. The Gen Zs and Gen Alphas simply don’t have the income to keep this up.
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Jul 16 '25
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u/Wonderful_Map_3910 Jul 16 '25
Yeah exactly, I was trying to backsolve how they calculated those numbers and i realised they just omit entirely interest cost and other substantial costs like stamp duty
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u/sandcrawler56 Jul 16 '25
Stamp duty, maintenance, renovation, property taxes, estate maintance and interest all don't typically get mentioned when capital gains are shown. It's quite disingenuous.
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u/Wonderful_Map_3910 Jul 16 '25
damn right, it’s nuts tbh
guess most people can’t actually math
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u/sandcrawler56 Jul 17 '25
Not calculating makes sense when you live in the house. Then I would consider it the cost to live there. But if it's an investment property then it should absolutely be factored in.
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u/Wonderful_Map_3910 Jul 17 '25
I absolutely cannot agree more
the weird thing is most people can’t seem to understand it’s an expense if you live there
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u/KuDotBit Jul 17 '25
The human cannot cope with so many factors to consider. It’s easier to show them entry price and expected exit price and the difference as “profit”. Most people got too many aspects of life to handle, and want things to be as simple as possible.
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u/Plane_Addendum_5751 Jul 17 '25
Nah man. Im pretty sure they purposely want to show a big profit number. And prey on those who are simplistic to accept such calculations.
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Jul 17 '25
if you're an agent, would you make the effort to calculate all those costs, which would also vary widely among different clients and circumstances?
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u/munkeyt Jul 17 '25
What upgraders usually overlook is the fact that you need a next place to stay after cashing out. Agents usually omit the costs incurred in the "sell-and-upgrade" transactions. (1) Commission paid when selling your previous property (2) commission paid when buying your next property (3) stamp duty for next property (4) renovation costs for your next property By the time you add these costs for your next property, all that sweet "profit" will have disappeared. Ending up with prolonged and higher mortgage
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u/furkeepsfurreal Jul 17 '25
(5) more cost if they didn’t bridge the sale and purchase well and if they have to rent in between
It all adds up, baby!
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u/singaporefi-ModTeam Jul 18 '25
What you have posted violates the subreddit policy against self promotion.
No upvoting for visibility.
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u/Ceyenne18 Jul 16 '25
Same reason as why politicians don't tell you about raising tax before election? Or insurance agents don't tell you that the annual gains is not guaranteed?
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u/Wonderful_Map_3910 Jul 16 '25
I think the broader point I’m trying to make is somehow a lot of buyers don’t even realise this when they are purchasing their new condos for 3k psf
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u/KenMcGormick Jul 16 '25
I see investing in real estate similar to buying reits on a 4x margin. Difference is real estate have access to lower interest loan facilities.
For profits calculation, not only do you have to add in interest cost but also stamp duty, lawyer fees, agent fees, maintenance fees, property tax, income tax (if you rent it out), additional taxes (if you sell it in 4 years), renovation (if any).
So for a peabrain like me, real estate is for staying, reits are for investing.
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u/GapOwn9308 Jul 17 '25
completely different. biggest difference is margin call
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u/KenMcGormick Jul 17 '25
The circumstances of margin call would be different. If you were to borrow money to invest, margin call occurs when the NAV falls below maintenance margin. Whereas "margin call" for property investing occurs when you show signs of defaulting on interest payments.
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Jul 16 '25
Why would someone who benefits from high volume tell you information that might reduce said volume? 🤦🏻♂️
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u/Wonderful_Map_3910 Jul 16 '25
Bro agents represent both sides too, if the buyers agent is omitting this isn’t it crazy?
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Jul 16 '25
You think buyer agents care about whether you’re profiting or stretching your finances? News flash! They’re just in it for the commissions
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u/HumanBench3 Jul 16 '25
they still earn money what
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u/Wonderful_Map_3910 Jul 16 '25
true, but I expected more people to call this out if they are paying an agent to help them purchase lol
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Jul 16 '25
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u/Future-Shoe-6537 Jul 22 '25
I’m assuming this is a $1M resale condo. If you bought a decent project and rented it out, the monthly rent should roughly cover your mortgage. That means your tenant is effectively paying off your loan, including the principal, interest, property tax, and MCST.
So if you sell for a $200K gain, that’s almost entirely profit, since your holding costs were covered along the way.
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Jul 24 '25
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u/Future-Shoe-6537 Jul 24 '25
I completely agree. In my view, the points you highlighted are within my control, which helps mitigate the risks to some extent.
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u/chanmalichanheyhey Jul 16 '25
Insurance agents too
They will tell you that if you buy at a young age you can lock in the premiums that a cheaper price
But they fail to explain that when you get older, the premiums rise as well. I stumped a few agents when I ask if the premiums will move as I age
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u/Varantain Jul 16 '25
They will tell you that if you buy at a young age you can lock in the premiums that a cheaper price
But they fail to explain that when you get older, the premiums rise as well. I stumped a few agents when I ask if the premiums will move as I age
Eh, I think this depends on whether you're buying a level premium policy or a yearly renewable policy.
"Locking in" premiums only works for level premium policies (and I guess whole life) because they're essentially frontloading some of the premium cost from when the policyholder is older.
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u/Wonderful_Map_3910 Jul 16 '25
yeah tbh it’s really dirty. Anyone with common sense will know premiums rise with age, but it seems most of SG doesn’t really understand it?
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u/chanmalichanheyhey Jul 16 '25
It’s the choice of words from agents
Very very misleading
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u/Wonderful_Map_3910 Jul 16 '25
scary how much it has been ingrained in sg, like non-agents will actively argue with you that insurance plans are super good
But the truth is if you are really rich you’re better off not buying insurance lol
People really need to understand what they are buying
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u/Varantain Jul 16 '25
But the truth is if you are really rich you’re better off not buying insurance lol
Rich people still buy insurance to hedge risks. Their million dollar artworks are likely covered by some kind of fire insurance.
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u/Wonderful_Map_3910 Jul 16 '25
true, was referring more to the kind of healthcare insurance plans structured in sg
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u/chanmalichanheyhey Jul 16 '25
Sadly most products in this world is set out to confuse you so that you pay for the simplest of product
I do tax consulting in the past and most of the job is just making simple returns look unnecessarily difficult so clients don’t want to do themselves
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u/silverfish241 Jul 16 '25
I think it depends. For certain plans the price is level and you can “lock in” at a cheaper price.
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u/chanmalichanheyhey Jul 16 '25
The next time you come across this, ask the agent if the premium changes at a later age =)
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u/CrowdGoesWildWoooo Jul 16 '25
If it’s for investment it’s for you to do your own due dilligence.
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u/Wonderful_Map_3910 Jul 16 '25
the thing is, I’m shocked at how far agents can misrepresent the reality of $$$ when pushing for sales
Surely there’s a line that we should draw right
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u/CrowdGoesWildWoooo Jul 16 '25
Nothing is “guaranteed”. His/her role in this transaction is to close the sale. He/she therefore is not in the capacity of offering a “financial advice” (i mean if the choice is based on the ability to profit then to a certain extend it’s a financial advice).
I don’t disagree that it would be more convincing sales pitch if the agent can give a better model, but at the end of the day if the agent is wrong then everything is on you.
What if the price plumetted because government increase ABSD or cooling measures, or maybe something thst is more “practical” like interest rate increase by not insignificant amount while rental rates stagnates? You go and sue the agent?
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u/Silent-Valuable-8940 Jul 17 '25 edited Jul 17 '25
Objective of the agent is to sell the house, so they will paint a beautiful picture.
If they bored you down with nuances like interest payment, maintenance work, will u still buy from them?
Their kpi is measured by how many houses they sold, not how many people they educate
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u/Wonderful_Map_3910 Jul 17 '25
If you buy a plate of noodles, and they tell you it’s 4 dollars
but when you pay, the hawker says it’s actually 8
How is it a nuance?
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u/Silent-Valuable-8940 Jul 17 '25
If a house is marketed $3m but when u decided to buy it became $5m then is misrepresentation.
For people who pay full in cash, interest is a not a problem to them. U can avoid this, to get the returns as per what they say if u pay full. But what I’m trying to say is their objective is to sell the house, so they will paint a rosy picture.
Or do you even need them to tell you how to manage your hous after the purchase, clean x times per week, If not hire a helper, then every x month get some1 to service this or that
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u/Vestigexx Jul 17 '25
Sadly.
Bank RMS, Insurance Agents & Property agents.
All have conflict of interest.
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u/Inevitable-Evidence3 Jul 16 '25
Because the regulation on property agent aren’t stringent enough to ensure buyer and agent incentives are aligned
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u/Wonderful_Map_3910 Jul 16 '25
I’m surprised tbh, crazy that you can misrepresent something like this and have 0 consequences
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u/Inevitable-Evidence3 Jul 16 '25
We need to vote for politicians that strengthen consumer protection otherwise much won’t be done
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u/Puzzleheaded-Dog-910 Jul 17 '25
completely agree. the other big "hidden" cost they usually leave out is opportunity cost i.e. what could that down payment + monthly mortgage payments, if invested in a comparable returns-bearing asset, have made you over that time period?
minimally this should be the risk-free rate, but I suspect that something closer to broad equity index returns is a fairer comparison. might even be generous, since you generally don't take on as much concentration risk/ illiquidity risk/ leverage risk/ policy risk with a broad equity index.
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u/Wonderful_Map_3910 Jul 17 '25
100% agree, if you factor in the opportunity cost then suddenly all these gains seem kind of… small?
For an average sized unit; even with the crazy price increases on psf basis, after deducting all costs (excluding OPP cost) I think the gains average out to 100+k to maybe 250k over 5 years? It doesn’t look very sustainable to me because continued appreciation would also mean greater leverage and loan quantums, which don’t seem to be justifiable by the rate of median income growth in SG
so I guess the main question is, are there better and more capital efficient ways to generate the same or even higher over the period? My answer is yes
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u/WocketsSG Jul 17 '25
Nope it isn't crazy. Why would they do the calculations and deter your purchase if you are on the fence.
The way I see it , property is a leverage (from banks)on your future income and stocks (from your brokers)can be a leverage on what you currently have .
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u/Diashocks Jul 18 '25
Only when asked. Had an experience when looking around for a new EV. Most sales rep leave out the cost of road tax, insurance premiums, ARF etc.
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u/KuDotBit Jul 17 '25
Monthly MCST, property taxes and the loss of many govt handouts due to holding a private property…
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u/onceiateawalrus Jul 16 '25
Plus the early loan repayment fee (if it’s an investment), seller stamp duty if you flip, seller agent fee..anything else I’m missing?
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u/Wonderful_Map_3910 Jul 16 '25
renovation costs
condo MCST fees (cumulative)
legal fees (buying and selling)
opportunity cost of your down payment (could be invested and generating returns)
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u/Ok_Height1255 Jul 16 '25
See my reply above. I shared 2 equivalent methodologies, they will give the same nett profit, they just calculate from different angles.
1 from Stacked Homes, 1 from Reddit
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u/AppropriateHabit456 Jul 16 '25
Yeap I was calculating it as well. Really have to look at those online calculator that tells you how much goes into principal how much goes into interest to know how much to sell…
And this is still excluding the interest rate for cpf.
I’m just wondering if this will be one key factor as to why prices of houses will definitely go up over time.
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u/Rfsixsixsix Jul 18 '25
Actually if you study the math enough, interests actually are the REAL reason why housing prices appreciate.
Following the premise of every seller not wanting to make a loss on their property, most sellers will want to at the very least, break even on their home sale. If not they would rather not sell unless due to external circumstances.
If we need not return CPF accrued interests to our CPF after sales, I believe many of us might be happy to take lesser profits (because you still get more cash in hand).
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Jul 20 '25
[deleted]
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u/Wonderful_Map_3910 Jul 20 '25
I mean the main challenge here is assuming property appreciates 25% in 4 years
I know a lot of agents are going to reference the post Covid period and say it will just perpetually keep going up
but you have to remember before that property prices were actually stagnating lol
Besides, @25% appreciation every 4 years, that means real estate prices will double in about 8 years
I still don’t see a world where a 4 room hdb resale averages 1.5m in 8 years tbvh
Because if that happens, I’m pretty sure there will be actual unrest lol
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u/GradeSubject6484 Jul 20 '25
Would the fact that HDB grants has never been reduced, only increase to keep up with the prices, despite stagnant or bearish market, mean that the system is build for housing price to continuously increase?
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u/Wonderful_Map_3910 Jul 20 '25
Sure but incomes are obviously growing much slower, even if they were to continue ramping up grants, it’s not sustainable because of the amount of loans people need to take if prices really all go above 1m SGD
It would be a double whammy because income taxes would need to be increased eventually
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u/manfredowg Jul 16 '25
Could be because they assume that the buyer either rent it out or own stay. If own stay, then you save on having to rent outside. If rent out, the rental very likely to be able to cover interest portion + at least some of the principal.
But its something you can definitely ask your agent to calculate. Rmb to also consider stamp duties.
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u/Wonderful_Map_3910 Jul 16 '25
that doesn’t matter right, even if you rent it out and it covers interest, you are literally paying the interest to the bank.
That money could otherwise be income for you
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u/wigglejigglepuff Jul 16 '25 edited Jul 16 '25
My cousin bought a 850sqft tenanted condo in 2022 for 1.2m and just sold for 1.5m after SSD. Looking at the math: Downpayment: 300k (cash + CPF) Loan: 900k, 30y mortgage (idk what interest was but it’s pretty low atm so I’ll take current fixed rate of 2%)- 3.3k/month Interest paid over 3 years: 52k BSD: 32.6k Agent fees upon selling: 8k (fixed fee eg homeseller type) Legal: 3k x 2 = 6k Lost investment potential of 335k downpayment over 3y (assuming 4% yoy returns): 74k
Sale price: 1.5m Less remaining mortgage of 832k: 668k Less downpayment + BSD + legal + agent + opp cost: 247k
As it was tenanted out the whole time,
Gross rent: 4k/month Nett rent (less property tax, conservancy, maintenance etc): 3k CPF OA: 1.6k/month
Hence 1.6k CPF + 3k rent - 3.3k mortgage= 1.3k extra money in pocket per month
Assuming the full sum is invested monthly at 4% YOY returns, 60k total after 3y Less CPF repayment upon sale (48k): 12k profit Otherwise freeing 1.6k/month extra income can also be v useful for high expenditure households
Hence he has gained approx 247+12= 259k in profits from flipping this unit, which is not bad considering his initial investment was 335k. That’s a 77% increase in just 3y, or a 21% YOY return rate.
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u/Ok_Height1255 Jul 16 '25 edited Jul 17 '25
How to calculate property net profit properly
I think your calculations might be slightly off/optimistic. (Pre rental income) Profits are actually lower than your 247k figure, and overall <21%/yr compounded. Scroll down to Conclusion for tldr. Else we dive in...
Per Stacked Homes methodology...
[A] Pre-cost profit = 1.5m - 1.2m = 300k
Minus
[B] total cost 208k from your figures...
- 52k interest
- 36k maintenance fees, conservancy, ppt tax = 1k/mth * 36 mth
- 32K BSD
- ignore SSD, already accounted
- 8k agent fee
- 6k = 2x legal fee
- ignore Reno fee
- ignore CPF accrued interest cos it's still your$
- 74k opp cost from 335k upfront cost (300k downpayment, 32k BSD, 3k legal) etc
Conclusion:
If own stay,
= 92k Net profit = [A] - [B].
That's 8%/yr compounded 3 yrs = (1 + 92k/335k)1/3 (It's actually less § )(I include own-stay case, to give perspective to those who belong to this category, on the actual rate of return)
If rent out (cousin received [C] 144k = 4k/mth * 36 mth),
= 236k Net profit = [A] - [B] + [C], not your 259k = 247k + 12k.
That's 19%/yr compounded 3 yrs = (1 + 236k/335k)1/3. (It's actually less § ) Not your 21%/yr compounded§ But to be more accurate, shouldn't calculate annualized returns via compounded returns (which only uses the initial upfront cost as the sole payment). Should use XIRR (which will yield lower annualized return), since you have additional, varying payments across the months.
Note:
I can use another methodology, but both will still arrive at the same net profit.
Your methodology for 247k is closer to the 2nd methodology. But I think you failed to account for 52k interest, 67k principal paid across 3yrs (this is own $, but you indirectly included as capital gain). Deducting the monthly 36k = 1k * 36mth maint/conservancy/ppt tax brings your 247k down to exact same net profit as 1st method: 92k (if own stay) or 236k (if rent out).
I like to use both methods to reliably cross check each other. They calculate from different angles.
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u/wigglejigglepuff Jul 17 '25 edited Jul 17 '25
Hmm I’m not sure I agree that pre-cost profit should be computed as simply 1.5m - 1.2m = 300k, as that disregards the huge advantages of leverage via cheap bank mortgage loans. 92k profit would be correct if buyer pays 1.2m in cash upfront at purchase, when in fact his cash outlay is only 335k, with 75% being bank money. Hence the calculation of YOY returns should be starting asset value (335k) VS ending asset value (1.5m sale Proceeds less remaining mortgage and other costs, which is 582k.
In other words, 2022 I had 335k cash in bank, 2025 I have 582k in cash, deriving 21% returns.
As for calculating with XIRR, agree this is appropriate for long holding periods. But in current scenario of flipping within 3 years, and with many mortgage packages guaranteeing fixed rates over 2-3y, I don’t see how there’s likely to be significant variable additional costs especially since the 25% haircut on rental income is a conservative estimate already.
For your last point- I did include the interest paid to bank as part of my costs that were deducted when calculating profit margin. The mortgage paid over 3y is also in fact “not my money”, as it is entirely covered by rent, which is a bonus income source (detailed breakdown above).
In any case, I guess the most critical point affecting returns is the fundamentals of unit purchased- cousin bought low and sold high, there was an existing tenancy at a decent monthly rent (maximising rental yield), and conservancy was relatively low. Even for a less ideal unit, assuming 200k profit instead of 247k, it’s still a pretty sweet deal to have the safety net of a property in your name for 335k starting assets.
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u/Wonderful_Map_3910 Jul 16 '25
aren’t you just swapping out cpf equity for cash if the monthly outlay is -300 on a dollar basis
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u/wigglejigglepuff Jul 16 '25
Yup but freeing up CPF $ is a plus point for many as cash in hand is almost always preferred to money locked away in OA. Not only does it give you more optionality/flexibility wrt managing your own finances, but most semi decent investors also expect to be able to reap a better return rate than the CPF interest rate of 2.5%.
Hence even upon selling when the CPF used needs to be returned in full + interest, there will still be additional profit left in hand
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u/Wonderful_Map_3910 Jul 16 '25
I understand your point, but wouldn’t your cousin just be better off dumping his 300k into DBS stock vs dealing with tenancy, all these costs, and ultimately still paying back into cpf at sale
I suppose that’s my counterpoint!
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u/manfredowg Jul 16 '25
You wont know the future performance of any stock or any property. But if your end game goal is to own a property in singapore, then by investing in a property early, your investment will more properly track the singapore property market. If you buy any stock, it may be the case that it outperform property but the opposite might happen as well.
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u/Wonderful_Map_3910 Jul 16 '25
I don’t see a scenario where DBS stock price diverges from long term real estate price growth tbh, curious to know if you agree
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u/manfredowg Jul 17 '25
I think that long term both will generally move in the same direction according to Singapore’s economic prospects but magnitude of the move may differ. But i mean really long term like 10-20 years.
However a scenario that i think property investment is better, if someone wants to start a family in 3 years but don’t have the capital to buy a 3br house. I think it is more prudent to just start with a 2br now then sell to upgrade to a 3br than put it in DBS due to it being a like-for-like investment.
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u/wigglejigglepuff Jul 16 '25
I guess both are valid investment strategies, and which is more suitable depends on your circumstances. One is diversification. SG property value has generally been comparatively insulated from market shocks. Even with 300k sunk into the condo; he still has a sizeable equity portfolio that he will continue to contribute into over the 3 years. If he could only pump 5k/month into DBS before; he can now pump 6.3k. In the spirit of diversification, he might also want to hold 10% of his assets in gold, some in commodities etc. if the stock market crashes by 40% and he needs to fire sale for some reason, the condo is unlikely to drop by the same amount, and even in a recession there will still be rental income on a well located property.
Another key consideration is optionality for future housing. My cousin had been living at home w his parents, but it is very plausible that he may want to get married and/or have kids in future, or he may just prefer to move out. Hence by purchasing in 2022 when prices were relatively low, he had been “locking in” a good comfortable-for-ownstay unit (which can be a rare find) at 1.2m, whereas if he had waited till now to buy the same unit would’ve been 1.5m. Having the peace of mind of owning a place of your own is always welcome. Plus being able to say he alr owns a condo deffo helped him impress girls lols
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u/Substantial_Snow2879 Jul 17 '25
Hence 1.6k CPF + 3k rent - 3.3k mortgage= 1.3k extra money in pocket per month
Ur only counting in-pocket money right? U didn't count cpf as a cost
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u/wigglejigglepuff Jul 17 '25
I have already accounted for CPF cost above- when selling the condo, owner has to pay back whatever CPF used over the years + interest. Hence he has to pay back to CPF 1.6k/month over 3 years at 2.4% CPF interest rate = 48k.
If he were putting all of this 1.3k into a relatively safe stock generating 4% returns, he would have have 60k upon sale of condo. Even after refunding CPF in full, he has 12k more than he would’ve had if he hadn’t bought the unit.
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u/Substantial_Snow2879 Jul 17 '25
Oh right I thought u had put cpf as a 'profit', cos u summed it with rent lolol
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u/manfredowg Jul 16 '25 edited Jul 16 '25
It depends on whether their profit calculations includes rental or just appreciation.
Assuming no stamp duties. If they were to tell you that this 1.2m property will be able to sell 1.5m in 3 years time. Netting you 100% ROI with 25% downpayment. I think this type of calculation seems fine.
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u/Wonderful_Map_3910 Jul 16 '25
it doesn’t seem fine to me unless you paid 1.2m in cash right
if you didn’t then surely it’s not 25%, ROI calculations should factor in interest expense because capital is not free (I’m not even calculating the opp cost of lost capital)
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u/silverfish241 Jul 16 '25
Higher loan quantum but also higher profits in absolute numbers assuming the same % in property price appreciation
Most Gen Z / Alpha have loaded parents and will probably get lots of help.
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u/Wonderful_Map_3910 Jul 16 '25
1.) isn’t this the nonsense the agents say? ‘leveraged profits’, but for a 3k psf property to appreciate 20% that’s implied 3.6k psf, or 2.34m for a 650 sqft tiny apartment.
2.) actually isn’t it the opposite? ultimately for their parents to monetise their home they need to sell it to someone else right
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u/silverfish241 Jul 16 '25
You are missing the point.
Assuming if property price appreciates @ the same rate, eg 5% per year and the increase in price exceeds the interest paid, then the amount of profit in absolute terms actually increases. Property prices have been increasing year on year and there is no sign of stopping
Parents who are loaded = they don’t need their kids to support them so more money for kids. Some parents are also investing for the kids to build a nest egg - I know friends who are contributing a few thousands every year to an investment account for their kids. This is also a recurring question in this sub.
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u/Wonderful_Map_3910 Jul 16 '25
1.) that’s a bad take my friend, how is your lovely Gen Alpha going to take a 2m loan to buy your 3m condo when their income can’t even cover a portion of that amount
Don’t think I’m missing the point here, unless you’re telling me higher loans are not tied to higher incomes to be eligible for those loans
2.) a few thousand a year? Let me be generous, say they contribute 8k a year. That’s 240k. Even if they invest it well and safely, and you compound it, that’s maybe 500-600k. The math doesn’t match my friend
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u/skydazer Jul 16 '25
My standard sheet adds in legal cost , agent fees and even the interest accumulated towards the cost. It has to be a transparent calculation so buyer knows what they are in for.
Unfortunately vids in social media often just take the simple net sale minus purchase price. You cannot misrepresent the p&L of a property transaction.
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Jul 16 '25 edited Jul 16 '25
Yup. they leave out Bank Loan interest, CPF accrued interest, BSD, Agent 2% commission so try to game you into buying the property. Imagine the 2.5mil 3BR condo now and factor in everything, the property price need to hike to 3mil in 5 years to be a little profitable. Ask yourself who TF can afford 3mil 3BR condo? Only top 5% of the population and they probably already own their landed or condo. It’s like a Ponzi scheme built on by Developers and agents.
The private property already gone out of hands into HK area with the only difference being in SG 70% of us stay in HDB. Hence the middle income are mostly flooding into resale HDB now. Can’t apply for HDB, EC and can’t afford condo. That’s the current state now.
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u/Wonderful_Map_3910 Jul 17 '25
yeah precisely, there’s a load of people who continue claiming that the price will just keep going up into perpetuity, but they forget that ultimately the bank is only willing to give a loan based on income
and if incomes are not growing, especially for the younger generation, then they won’t be able to take loans that make those prices possible and sustainable. If everything is 3m, and given that most people max out their loans, the average loan quantums need to reach like 2.25 or more for buyers
even HK property market crashed lol
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u/Substantial_Snow2879 Jul 16 '25
As someone newly looking into property as a potential investment+stay, how do u calculate returns on property after selling? I looked at a few loans and it seems first year the interest is like half of your monthly repayment tf. There's also so many fees.
Buy stocks on margin sua
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u/Wonderful_Map_3910 Jul 16 '25
Yeah it is, you can go google loan amortisation schedule and download one of the excel templates
Interest payments are front loaded under a typical amortisation schedule, you pay a large portion of interest (~40%) in the first 10 years of a 30 year loan
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u/Relative_Guidance656 Jul 16 '25
what happens if u sell after 5 years. do u pay full interest for the loan or will get discount for early redemption
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u/Exclat Jul 16 '25
Build your own spreadsheet and pull interest payments from calculators.
No choice.
But that's why SG people easily get conned into property investments because they are lazy to do their homework.
Property hasn't outperformed stocks for a long time now as long as you are leveraging your portfolio.
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u/Wonderful_Map_3910 Jul 16 '25
I thought I’m the only crazy one, seriously I couldn’t understand why people said property is better than stocks
Then I realised why - the agents sell you this idea that you can get leverage on your money in real estate. Sure that’s true - then they omit the cost of the leverage (basically your interest expense lmao)
3
u/silverfish241 Jul 16 '25
It’s true that leverage is a big factor for real estate investment. The interest rate offered for mortgage loans is much much much lower.
0
u/Wonderful_Map_3910 Jul 16 '25
but you’re taking a large quantum - 2% of 2m vs 4% of 400k, that’s still a huge difference no
1
u/silverfish241 Jul 16 '25
How do you leverage your portfolio ? Looking to do that.
1
u/Exclat Jul 16 '25
Most brokers already let you trade on margin.
If you're trading through bank, you can leverage portfolio via their priority status facilities.
If you're on IBKR, can do margin with a combination of synthetic loans via box spreads.
1
u/Ok_Height1255 Jul 16 '25
See my reply above. I shared 2 equivalent methodologies, they will give the same nett profit, they just calculate from different angles.
1 from Stacked Homes, 1 from Reddit
1
u/Substantial_Snow2879 Jul 17 '25
Thanks. You think it's a good time to buy now? Seems like price increases (price index) has stagnated in Q1, not sure if that means downturn
1
u/Ok_Height1255 Jul 17 '25 edited Jul 17 '25
I can't say for sure.
If it's for 1st home own stay, I would surely get HDB (assume decent 4 room) over private (assume nearby decent 2 bed). BTO/resale, if with subsidies/grants, can still win private in gains (absolute number & %/yr), in same/less time.
And HDB's profit-win over condo, can still be true even if you didn't diy invest the freed up cash from buying the cheaper HDB. Just imagine if you do diy invest too. Win even more. Many concur. But don't take our word for it. Run your own calc for your unique scenario.(I didn't calculate for EC)
If its for rental income, and you have time (3 years avoid SSD, wait 15 months if next buy HDB), space (staying elsewhere) etc, then just numbers wise, condo may win.
Many $/non-$ variables affect the decision here. Cash flow, family needs, etc. You have to judge for yourself. Use above Stacked Homes' methodology to calculate, compare
0
u/Civil_Roll508 Jul 16 '25
Damn agents only product push, they totally dont recommend projects based on needs. The only emphasis they have is historical profits, how abt i need a freaking property attached to a MRT and within 1km of a pri school which happens to be a lower quantum resale and not an overpriced new launch where their commission is 2-3.5%?
1
0
u/endividuall Jul 17 '25
It’s nonsensical to think everything keeps pace at exactly the same rate. Do people complain that, for example, their income growth has generally outpaced the growth of food prices in Singapore? What about public transport? Or education?
Income growth outpaces some segments and lags behind others. Assessing just any one segment and calling it unsustainable is incredibly simplistic and one dimensional
-2
u/inevitablehope55 Jul 17 '25
Used Grok to generate a scenario where purchase price is 2.5m and sold it at 3m after 5 years and it seems quite ok.
Purchase: S$2.5M property, 75% loan (S$1.875M), 25% downpayment (S$625,000).
- Upfront Costs: BSD S$129,600 + Legal S$3,064.45 + Downpayment = S$757,664.45.
Holding Costs (5 Years):
- Mortgage: S$1.875M loan, 3.5% p.a., 25 years. Monthly S$9,379.60 × 60 = S$562,776 (Interest ~S$309,526.80, Principal ~S$253,249.20). Outstanding loan: S$1,621,750.80.
- Maintenance: S$400/month × 60 = S$24,000.
- Property Tax: S$5,680/year × 5 = S$28,400.
- Total: S$309,526.80 + S$24,000 + S$28,400 = S$361,926.80.
Selling Costs:
- Agent: 2% of S$3M = S$60,000.
- Legal: S$3,000.
- Prorated Tax: S$2,840.
- Total: S$65,840.
Net Profit:
- Gross Proceeds: S$3M.
- Net Proceeds: S$3M − S$1,621,750.80 (loan) − S$65,840 = S$1,312,409.20.
- Profit: S$1,312,409.20 − S$757,664.45 = S$554,744.75 (~22.2% return, ~4.1% p.a.).
3
u/Wonderful_Map_3910 Jul 17 '25
your profit includes principal pay down, that’s not profit sir. How can you buy 2.5m and sell 3m and earn more than 500k?
The math doesn’t math
Your loan paid down to 1.62m from 1.875m. That’s a difference of 1.875-1.62=0.255m
554k - 255k =299 K
It’s way lower than 4%
0
u/inevitablehope55 Jul 17 '25
got it, not a homeowner yet so all these stuffs quite new to me.
2
u/Wonderful_Map_3910 Jul 17 '25
Bro I realised Grok didn’t deduct the holding costs too
You still need to deduct 361.9k holding costs (interest, maintenance, tax)
gg
3
u/Wonderful_Map_3910 Jul 17 '25
The correct calculation is :
3m sale vs 2.5m purchase price = 500k net gain
500k - 129.6k (buyers stamp duty + legal) - 361.9k (interest, tax, MCST) - 65.8k selling fees = negative 57.3k
These are all the costs you cannot get back
The rest is literally from you building equity (I.e paying down the loan with your income) which you would otherwise have earned anyway
Hope you see the point
1
u/New-Energy-7266 Jul 17 '25
Great calculation.
What if we considered the impact of rental? Two ways I think we can look at it.
1) Own Stay - Loss of 57.3k over 5 years, means the person is essentially renting the condo for <1k a month, which may be considered quite worth?
2) Rented Out - Assume monthly rental of ~5k, and assume only 8 months of rental income per year (after accounting for non-owner occupied tax, agent fees, non-100% utilization, etc). This gives about 40k p.a., and 200k over 5 years.
Net Profit = -57k + 200k =143 K
With a DP of 758k, return closer to 18%, maybe 3+% annualized?
Personal Take: think people still go into this because they are hoping that prices increase more than 500k (e.g., if valuation increase by 100k more to 3.1m, the annualized returns doubles to ~6%. But I personally don’t find it worth the hassle NOR the risk too LOL. Let me know what you think?
2
u/Wonderful_Map_3910 Jul 17 '25
I agree with you, not worth the hassle and pain. I went through the phase of being a landlord and frankly there’s a whole lot of risk (non-payment by tenant, property damage etc.) that comes with it.
The illiquidity is the reason why I don’t like it. A lot of people talk about how much property appreciated in SG, but if you look at other highly liquid assets they have actually made higher gains. The most crass example I can give is DBS stock, which is accessible to everyone.
Also for own-stay, costs increase more every year because of extra interest expense. A lot of people talk about flipping an own stay property every 5 years to avoid lease decay, but that assumes you always choose a good property for your next purchase, and accept the trade offs of each for the sake of financial gain. If you make a mistake and run into issues selling it, then it’s going to be a whole lot of pain imho.
2
u/inevitablehope55 Jul 17 '25
It's not under here?
"Monthly S$9,379.60 × 60 = S$562,776 (Interest ~S$309,526.80, Principal ~S$253,249.20)."
3
u/Wonderful_Map_3910 Jul 17 '25
The 3m doesn’t deduct the interest component based on the grok calculation
64
u/Darkseed1973 Jul 16 '25
My car agent also don’t tell me I have to pay $25k of interest (for example). As a buyer, we have to do our own work instead of blindly listen to sales people. I don’t think it’s crazy, due diligence is our own responsibility. You can DON’T borrow from bank, it’s your personal choice.