"House Upgrading Culture" cause Property Rich, Cash Poor...

[Dennis Ng]

yes, what I understand that in Singapore, on average, people move house once every 5 years. For myself, I'm still staying in the same HDB Resale Flat I bought in 1995.....17 years in the same house, while many of my friends have moved house at least once to 4 times...I read that Warren Buffett (3rd Richest Man in the world currently) has been staying in the same house for the last 60 years.

Most people if we analyse their Balance Sheet, we would realise their their Home and Car are the Main Assets, which are both Personal Use Asset.

While if you want to reach Financial Freedom, you need to put your money into Investment Assets...that's how you get richer and richer.

In 1998, after crash of stock markets in Asian Financial Crisis, I was down to S$50,000, but over the years, my Investment Assets grow and grow, now to S$3 million, while my Personal Use Asset (I only have a house, no car) after deducting loan, is only S$500,000 or 14.2% of my networh (Assets less Liabilities), or my Investment Asset to Networth ratio is 85.7%.

Your house is NOT an investment, it is just a Personal Use Asset. Property is only an investment if you have more than 1 property and you do NOT live (use it personally). If you own 1 property, if property prices go up, you sell High, you also Buy High, where is the Profit? If prices go down, you sell Low, you also Buy Low... so don't kid yourself anymore, be financially educated so that you won't have misconceptions about such things and think that you're getting Richer when you're NOT.

How much is your Investment Asset to Net Worth ratio? Guess would be less than 50%...yet most people don't understand why they don't have enough money to retire by age 60...

Cheers!

Dennis Ng

Note: below article not written by me.

The Straits Times
Mar 14, 2012
'Upgrading culture' propagates property-rich, cash-poor trend

ALLOWING the property-rich but cash-poor scenario to continue contravenes the original objectives of the Central Provident Fund (CPF). Cutting down unnecessary and extravagant expenses in property upgrading could help reverse this scenario.

Last Thursday's letters by Mr Michael Dee ('Protect CPF savings from inflation') and Mr Leong Sze Hian ('Explain the lower payouts of new CPF Life plans') are thought-provoking. As Mr Dee noted rightly, inflation has been going up faster than before - and this is a worldwide trend. Protecting the value of savings is a new challenge for people and the CPF Board. With longer life expectancies, more of us are concerned about whether future CPF payouts are adequate.

Home financing is a key component of our CPF scheme that uses up most of the savings. More liberal use of CPF savings for upgrading and investment on properties was allowed in recent years. We need to ask whether there are abuses of this liberalisation that may result in eroding the CPF savings for some, and whether buying bigger and more expensive homes is a good way for value-hedging.

A substantial sum is spent on taxes, commissions, legal fees, new furniture and renovation or rebuilding when upgrading one's home. It is not uncommon for some to spend $100,000 to renovate a $300,000 flat. The money spent is consumption rather an investment. Even if the property's value appreciates over time, if interest paid and other opportunity costs are taken into account, what is the net gain, if any?

Of course, there are the lucky owners who enjoy capital gains, but most people have only one property; even if they sell that single home, the chances are they would reinvest in an upgrade or more expensive home, and incur more expenses.

We may well be one of the top spenders on property upgrading. The extra upgrading expenses many spend can buy a good home in other countries.

This 'upgrading culture' must be moderated. It is one of the main causes of property price increases, influx of so many foreign construction workers, and low savings for many.

Ng Ya Ken

[Dennis Ng]

Behaviour of Singaporeans Observed By a German Permanent Resident

An observation made by a German national who has lived in Singapore for 9 years.

44 years of economic and material success have spawned some very strange behaviours among Singaporeans.

They spent so much to buy a house or flat, furnished it up like a palace, but spent their time outside, most of the time at work. And the maids are the ones enjoying the million-dollar or multi-million-dollar assets.

Then they pay so much, the highest in the world, for a car only to park at home. Too expensive to drive, too many ERPs and car park charges to pay. And they are encouraged to park their cars at home and take public transport, being cheaper and more convenient.

And when Singaporeans travel, instead of seeing the places, they went shopping. The best part is that they would head for the cheapest bargains, buying stuff that they could get in Chinatown or pasar malam, at even cheaper prices. But they are still happy that they got a bargain.

And while the heartlanders are busy trying to make a life here, being told to bust off if they are not happy, which they could not, the rich and presumably very happy and contented citizens are buying up properties overseas just in case they need to make that escape from this paradise.

While many Singaporeans are thinking of jumping ship, or preparing to jump ship, hoards of new immigrants are rushing in to take their place in this paradise.

And to top it all up, they keep complaining about the government and all the policies that they found unpalatable, but come every election, they will vote and return the government to power.

Strange Singaporean behaviour!