So here's the setup. The home is a condo (originally an E-condo) with a 99-year lease. It is now 12 years old. Things are starting to break down here and there, although perhaps nothing major. It worked well when the kids were studying at schools nearby. But now that they have moved on to tertiary education, the location is no longer ideal.
All that's desired is to find another equivalent place to move to, which places the kids nearer in terms of travel time to their tertiary locale, and my time of travel to work is no worse off.
A 17th floor condo at 1292 sq ft bought 12 years ago was $501,000, and is roughly worth $950,000 now. That sounds like so wow. BUT, to get an equivalent place, the price tag appears to be $1,300,000 for a 5-year resale condo on a mid-floor, with only ~1000 sq ft! That's a differential of +$350,000 for a smaller space.
A completely new condo that is yet to TOP is even worse. That same price can only fetch an 800 sq ft unit! Anything in the range of 1,000 to 1,200 sq ft appears to be $1,500,000 to $1,800,000. Phew.
The alternative is to renovate the current home and fix up all that needs to be fixed. Probably $80,000 you think? But the pain is on having to pack everything to move out during the renovation period, rent a temporary place for a couple of months, and then move back in again thereafter. That's two moves.
Wifey and I are 52 years old now. Is it viable to live in the 12-year old home for the next 30-40 years? Or would a 5-year old resale home be a better option? While it is smaller, I do foresee that one or both kids would ultimately get married and move out in a matter of 5-10 years from now. So the slightly smaller space might just be a short term situation.
What would you do?
9 comments:
I would prefer any newer, resale/freehold with enbloc potential for next property cycle or at least is more "valuable" legacy for them when I reach life expectancy
Hope my experience can help you decide.
I am staying in a condo bought (2nd hand) eleven years ago. We decided on the condo precisely for the reason you mentioned - that it would be more convenient for my children to attend the JCs. My previous condo was convenient for them to go their secondary school. Both my children have since graduated from universities. Time flies. The condo obtained its TOP in 1999, making it slightly more than 20 years old.
Although the condo is more than 20 years old now and since my children have graduated, we decided to renovate three of our four bedrooms, just this July, to make them better suited for my now adult children. The renovation cost us $28,000, and took the whole of three weeks to complete. With proper planning and close coordination with our ID (interior designer), we didnt have to move out of our home while the renovation was in full swing. Yes, there was a lot of packing of stuff, shifting them from one room to another, dust to tolerate, we managed it. The three weeks was over in the blink of an eye. The renovation contractor also helped us to replace some old electrical wiring and installed new ceiling fans in the process. Now with three newly renovated and beautiful bedrooms, it is easy to forget that in the thick of the renovation, our living room and dining area were like a furniture factory - unrecognizable to us!
The other point I want to share is that while we can plan or hope that our children will marry and move out and build their own home & family, the reality is that more young people are opting to remain single or marrying late. It is thus best to plan that the children will stay with you for a while yet, maybe even up to their mid-thirties.
The third point is on the seemingly ever increasing property prices in Singapore. Will property prices drop? My take is that it may drop if the economy turns south but in the long run, property prices will continue to rise for the following reasons:
1. Rising cost of land
2. Rising cost of building materials
3. Rising cost of manpower
4. Better equipped homes
5. Land is scarce in Singapore
The irony of the cooling measures is that it curbed/removed the speculative element in the property market and thus prevent big price drop even when market is weak. Many foreigners see our property market as a safe haven to park their money.
My 4 bedroom condo at 1650 sq ft bought 11 years ago costs the same as my investment condo at 900 sq ft TOP in 2014. One is generating cashflow and the other is not - a topic for another post??
"Adam"
My humble 2 cents:
1) at 52, do u think u want to take on more loan or eat up a chunk of ur retirement money on housing?
2) how important is it to spend the 350+k on convience, 7 yrs younger housing?
3) should u have spent this 350k, eating into your retirement, should u hv needs in your old age, where would the money come from? I reckon if this is a small sum that doesn't impact your retirement, u wld not be thinking so hard abt it. If u think the money wld come from ur kids, think again. https://youtu.be/LkZMahAi3Q8
3) is it really necessary to spend $80k to fix the things that need to be fixed? Or are there alternatives to spend a lower amount to fix only the things that really need to be fixed.
4) is it really important for the family to stay together when the kids are in tertiary education? Or would it be possible for the kids to stay in their university halls (if there is)? It may not be a bad idea as the kids can learn to be independent as well.
Hi Lizardo,
I think some of the guys and gals here give some really good answers. I have not much to add but I would say two things... you got to prioritize what is it you want. I know as financial bloggers, we often think about the money aspect. And we cannot run away from that.
However, the priorities I am talking about is for a home, what is it we look for. Children are adults. They can move around. They should be far more independent. What kind of living conditions? One commenter highlights his experience in renovation and we wonder would that improve things. so on and so forth.
Would you be open to a resale HDB flat? I guess you might need a 6 month period between selling your condo and getting one. Would an HDB flat that is well renovated fit the needs? Just putting things out there.
Once you have ascertain the lifestyle aspect we can think about whether you need the home to perform well for your retirement or accumulation for the matter.
Just some thoughts.
Thanks to Busybody, 'Adam', pf and Kyith for sharing the respective views. Many of these were thoughts I had considered as well.
With a 5-year old home compared to 12-year old, against the backdrop of 99-leasehold, I figure the newer unit holds more promises in terms of its lifespan, and condition of the home and facilities.
I have lived in a 3rd hand HDB which was more than 20 years by the time we moved out. Things were literally falling apart. So I really don't view positively staying in a HDB unit beyond 20-years of age. Major refurbishment is needed.
Staying put and fixing up renovation in-situ, moving room by room, and enduring the smoke and noise was something wifey wasn't keen to put up with. Fascinating that 'Adam' managed to live with it. I don't think I'll be able to survive - wifey can be quite OCD. Haha.
As for accommodating the children's travel time to school, it's a consideration, not primary. So it's a bonus. Selfishly, my consideration is that it should not worsen my travelling time. If it shortens travel time, I get extra minutes every day. If it is linearly nearer, it also means cheaper Grab/cab fare on those days when I feel too tired to take public transport. The resale condo I am exploring would reduce travel time by 20-30 minutes each day. That's precious time that I value.
How big a burden is $350k? Well, unfortunately, the burden is closer to $600k. Will elaborate that on another post. I estimated it would set back FIRE by another 3 years. So it's a question of whether I want to bear another 3 additional years. Pondering.
Very useful thoughts and experiences shared by all, and very much appreciated.
[Apologies to those struggling to build up nest eggs if some of these numbers look extravagant. But I make no apologies for the ~30 years of hard work and prudent lifestyle that wifey and I have put in to make it possible to be where we are today.]
Actually it is intriguing how badly can a property deteriorate when it's just 12 yrs old. Cld u pls elaborate?
I bought my resale, 2nd hand. The previous owners sold it as soon as they were able to. I'm expecting my hdb to last another 5 yrs or so before it needs any renovation. I have friends and family who does not renovate after their first renovation and they have been staying in their flat for 20 yrs.
Hi Lizado,
Our lives are for us to live and there is no need to apologize to anyone how we spend our hard earned money as long as we are responsible in how we spend it. If we are irresponsible in spending our money and ended up squandering them away, we may have to apologize to our dependents (spouse, children etc..) and other people that we may have to depend on in the future.
Having the benefit of walking lfe's journey quite a few years ahead of you, I would like to share with you the factors we considered in deciding on the type of home we finally chose to purchase.
1. Job stability
When we bought our current 4 bedroom condo, we were passed our mid-40s. A key factor was that we should not be taking on any loan. This was because we do not want to be tied down to a long term loan that we might not be able to see through, especially if we were to lose our jobs as we get older and become more costly to our employers. At that time, we could easily qualify for a loan to buy a semi-detached home, but we decided on the 4 bedroom condo and paid for it in full. No loan, and peace of mind- priceless.
2. Cashflow
As we get older, we became more conscious of the need to have cashflow streams other than from active employment. If we were to buy a semi D home, we would not only be paying the home loan, but would be hard pressed to find the cash to invest for other streams of passive income. As it turned out, buying the condo we bought and paying for it in full, allowed us to build up new savings that was sufficient for a downpayment for an investment condo which we rented out to generate rental income. The rental income was able to cover the loan repayments freeing us to save new money.
With the savings, we were able to continue our investment in stocks, which provided us another stream of income. And as we are still working, the dividends are continually re-invested, which in turn grow the dividend. This year, in spite of the stock market volatility, the dividend still came in at a decent $78,000, up from $65,000 the year before.
At the same time, we wanted a robust source of income in our retirement. We are more than aware that both rental and dividend income sources are highly dependent on the economy and we cannot be dependent on them 100% to fund our retirement lifestyle. Thats where the CPF comes in. At every opportunity and whenever we have spare cash, we will do the following:
1. Return money to our OA - money that was used to buy our properties. By now we have fully returned all the money we used, to our OA.
2. Do voluntary cash top up to our CPF. As we are above 55 yo, our CPF contribution from employment is only 26%, we topped up the 11% shortfall every year to make it up to $37,740 each year.
3. Top up the RA to meet the new limits of each year. In my case it is the ERS limit of each year.
Suffice to say, the yearly interest from our combined CPF accounts is quite substantial - more than the dividends we are receiving from our stocks.
3. Legacy
We all want to leave something behind for our children when we pass on. But first thing first. We must make sure we dont become a financial burden to them in our old age. That is, we should aim to be the "last sandwiched generation", and not let our children be another sandwich generation having to support us financially and their own family.
Thus buying a home should not drain us financially. Choose a home that will allow us to continue save and to build cashflow generators that will see us through in our retirement.
In other words, dont be asset rich and cash poor, when you need cash the most.
"Adam"
pf,
Hope your electricals are in good shape. I loave to experience those power trips, especially when the whole family is overseas! You can imagine.
"Adam",
A detailed thought process as always. Thanks for sharing.
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