People Are Forgetful...

Its amazing how property prices in Singapore have moved up so quickly so fast ever since the last crisis caused by a property bubble bursting in US. Guess people are forgetful. People have forgotten how a $980,000 property bought in 1997 is valued only at $450,000 in 2003. 

Monthly repayments for home is affordable now because the crisis since 2008 is not fully resolved. Too much  money have been spent on resuscitating the economy to risk another collapse and most government is wary about rising interest rates too fast too soon. This has driven cheap money into the economy giving people the ability to buy more expensive houses, driving up the demand. Of course this always brings out the emotions in people and making them blind to the fact that property is still an asset and there is a possibility of prices going down.

With the cooling measures just introduced, it does not have much effect on the market. People seem to be still wanting more exposure into property.. its probably because monthly repayments are still affordable. 

Lets take for example, Buying a property that cost $1 million. Lets say being a first owner, you get to purchase your property with a 80% loan. The bank lends you $800,000. Your monthly repayment based on an interest rate of 1.5% for a 30 years term is estimated to be about $2,757.

An increase of 0.25% in the loan interest rate will move the repayment up to estimated $2.849. Bring the interest rate up to the point where it was in 2007 where lowest interest rate is probably 3%, monthly repayment estimated about $3,364 (3% is only for first year then)

This is for first timers, I do not even want to mention for those who buying second property having shorter repayment terms and higher duties. 

Inevitably when the interest moves up there will be less people being able to afford houses thus driving down demand thus bringing down the property prices, thus causing people to panic sell, thus having fire sales when people cannot pay up (we hope there is less fire sale compared to 2003), unless of course the government sticks to the promise of 6.9 million population which so many property owning Singaporeans are so against....

So when will interest rates move up? Its when economies are doing well, inflation is increasing, to cool an overheated economy governments increase interest rates as one of the strategies. When interest goes up, cheap money is taken out of the economy, causing less spending bringing down inflation. When this is happening which asset class is going up? Equities! Which asset class is slowing going down, property! So doesn't diversification make sense? Then again this is in theory, but again I maintain that diversification is the way to go. 

I just can only hope that what happened in 2003 does not happen again... then again people are forgetful...

Investing? Diversify!

Just sold off some investments I did 2 years ago in funds. Did these investments with a bank I was before. Been sometime I looked at it and thought now is a good time with the whole Cyprus issue and all.

Walked into the bank and asked for my portfolio. I glanced at the printed copy of my portfolio and was dismayed to find a particular fund that showed -12% under the rate of return column. Looked at the fund that was at negative 12%, Global Property. Alamak since when I have this fund man! Probably I did, it was one of those decisions I made that since global property has been going down the only way is up. Wrong call....

Glanced at the other funds I had. An asian managed dividend paying fund and a Singapore fund. 5% (excluding the dividends I got over 2years) and 29% respectively. Woohoo! Whatever losses I made in the property fund is nicely covered by my other 2 funds.

I have been an advocate of long term investments (though 2 years ain't that long term, but this is tactical asset allocation), diversified asset allocation and dollar cost averaging. This strategy has helped give potential returns of about 10% per year. Though like they say past experience is not indicative of future performance, but diversification has helped all the time.

Some of you may argue that Tang 10% could be something I do in an hour. Sure but will you tell me if you lost 10% in an hour? The fact is if something can give you a potential return of 10% in an hour it also potentially can give you 10% losses in the same hour. And that, like I have mentioned in my previous post is not investment but speculation.

And again it is not wrong to speculate, but do so only when you have core financial planning done then go speculate, knowing that losing 10% in an hour is not going to affect future plans. In fact, even if you lost all your money in the casino or spent it on all the quick picks in every Singapore Pools in Singapore for the 10 million price draw, you are rest assured that future plans will not be affected, then go ahead do it! Come on admit it, we all dream that one day when we tio the Toto we will throw resignation letter in our bosses face.

I have secretly dreamed that if I did tio the Toto, I will photocopy and blow up my Toto ticket and paste it behind me in my work station, then chill and do minimal work just to hit KPI, just to justify my existence. My winnings left in a dividend paying fund drawing 4%, for every million it is $40,000, can sustain my daily living and working is just getting more money from the company. Boss walks out of the room and say Tang your performance not up to standard, without looking at him, I use my thumb to beckon him to look at my winning ticket. Boss no choice walks back into room. If only....

Sigh...

But that was corporate life. Now I am the boss, resignation letter I throw in my own face :).

So before you foray into investments ask yourself some questions:

1. How long is my time horizon?
2. Is my core financial portfolio in place?
3. How much am I able to lose?
4. Is the investments I am going into diversified?

There are many solutions that fit different needs and risk profile so start taking action, because what you do today will impact your future.

Korea...

Korea... what can I say. Just as I had thought Girl's Generation, Gangnam Style and plastic surgery. But to be fair, if my wife wrote this blog I am sure it will be a different tone altogether. Its a women's paradise after all! 

First meal - Ramen

Namdaemun

Stayed at Lotte World Hotel for the 1st 2 days. The first day we got there on the 5th, we went searching for food and had Ramen, yes I know having Japanese in Korea..that's the product of globalisation. Decided to go to Namdaemun market in the evening, only to find out it was actually relatively far from Jiasil station where Lotte World was. We got there also to realise it was not a night market. Walked a bit and decided to go into one of those roadside stalls with the plastic covering the sides (those you see on Korean dramas, so I have been told). Had some chicken bbq-ed on skewers, some octopus pancake and wash it all down with Korean so-ju. Damn I practically stumbled back to the hotel.

Jaeson Dynasty Tomb

The next day we went to a nearby tomb where the last emperor of the Jaeson dynasty rest. Nice walk in the morning, calm before the shopping! And one of the few shops that really catch your attention (maybe because they are at almost every corner) are shops selling facial products! Face Shop, Nature Republic, Skin Food, Etude House.. in your face (no pun intended)!

Moved to Myeong Dong on the 3rd day. It is supposedly the orchard road of Korea. This place is probably as big as Simei estate where I stay but the whole place is nothing but shops! And once again in this small area, there are like 4 Face Shops, 4 Etude House... I mean its just overflowing with facial products store. Why will an area need so many?

Korea is all about shopping and eating. But even the eating is not spectacular.. how often can you eat Korean food? It taste the same probably because of the sauce they use. But I actually liked the kim chi in Korea not sour like the ones you find in Singapore. And food is not exactly cheap in Korea. A bim bim bap will cost about $8. The cheapest meal we had was at one of those obscure noodle place. Now eating Korean food at our foodcourts feels cheap.

In 3rd Tunnel 

The highlight of this trip was the DMZ or the de-militarised zone, the border between the democratic South Korea and the communist North. It is so interesting to know that technically the north and south is still at war because the only thing that was signed in the 1950s was a cease fire agreement but never a peace treaty. And during this time the North have been digging tunnels into South Korea in preparation of maybe a surprise attack. The South found 4 tunnels and the last tunnel was found in 1999. You never know that there may be more still not found.

Visitor Pass

The new leadership in the North has also been creating tension and the tour agency has already warned us that the tour may be cancelled if there is any border issue. And it seems the day I was there, was the day the North claimed they had a nuclear warhead for every state in America....

I was glad I made it clear to a good friend of mine that if anything happens I have policies only with Prudential and the monies have been planned for my kids in the case of emergency. He laughed it off saying its not going to happen. Well yes but you never know, just in case was what I told him. That's the reason I bought the policies.... just in case...

The tour went on smoothly enough and by the evening we were back in the hotel and the next day we were flying back. After a day of touring the border, my legs were tired and I was seated in the couch in the room when wife said she is going shopping... if you don't want to come, you nua in the hotel first. One hour later we meet at the restaurant. Will whatsapp you.

I stayed in the hotel and played Candy Crush...

The amazing thing is that wi-fi in Korea is literally everywhere and its free! and fast!

On the day we were going back we stuffed all the facial products into the luggage when suddenly a thought struck me. We did not book the same flight! Therefore I have to maintain 20kg and so does she. But we only have 1 big check in luggage! Went down to the lobby put the luggage on the weighing machine.. 32kg! Had to repack and manage to share the load.

Went to the airport really happy knowing I am seeing my little girl soon! Well as for Korea, friends have told me Jeju island is beautiful and all, well it seems there is diving there.... can consider...

Korea, Singapore Changi Airport

Never actually thought I will be on a flight to Korea. I mean Korea? The thing that comes to mind: Girl's Generation, Gangnam Style and girls that have been under the knives and probably the guys too.

The only thing that interest me is the DMZ. The place that borders North Korea.. can you imagine being at the border of 2 countries that technically is still at war?

Hopefully Korea will hold surprises for me.. well stay tuned!

Chinese New Year is Over

Well CNY 2013 was gone in a flash. The kgs put on also came in a flash. The season is changing once again and the heat seems to be back.

And I am going to Korea tomorrow! Stay tuned for my next escapade to Korea! Its great that most of my airfare and some of my accommodation is paid for. Woohoo!