Depends on which side of the coin you are looking at

I was reading the Straits Times titled “Young Asian adults likely to face cash crunch in retirement” by Lorna Tan and it was mentioned nearly one-third (30 percent) of millennial investors expect to run out of money later in life. Mr Michael Dommermuth, Manulife’s head of wealth and asset management said,” While previous generations relied heavily on real estate for their retirement fund, economics and demographics mean that today’s millennials need to take a different approach.” Young people today will need to start saving, and investing, sooner rather than later

My parents’ generation relied on properties to help them grow their first pot of gold. The condominium cost only S$500k in 2002 for a 2 bedder + 1 study 1080 sqft in the suburban. Today it can command about S$1,000k in 2017 based on today’s market. That’s a whopping 100% return. However, you need to look at the economical status of the country at this present moment. Does it seem like a developing stage? Or is it fully developed? In the 1960, a GCB cost about $10k and it will become $20m in today’s context because of the inflation and the growing of the nations. However, going forward with the moderate to slow growth, how far can the property market move? With the ageing population, how far can the property market move? Yes, let’s open up the flood gate and increase our population to 7m, maybe our property market will see a new high? My personal view is depressing times for the property market ahead.

Interestingly, if you look at PropertyGuru “Singapore millennials look to property for financial security” by Romesh Navartnarajah, it chooses to focus on 68 percent of Singapore millennials plan to purchase a property, with two out of five doing so to generate rental income. Despite having the lowest satisfaction with rental yields in Asia, Singapore millennials (aged between 25 and 34) favour investing in property to achieve financial security, reported the Business Times, citing the Manulife Investor Sentiment Index Survey. 

Recently, we rented out our parents’ condo, we realised that there are other hidden cost which will drastically affect your yield. Rental income will be added to your based income which will be taxable. A rented out property will command a higher property tax. You still need to pay for your maintenance fees. Unless you bought the condo at the range of 500-700k range, you will not get a decent yield. Using recent years quantum as a basis, if you buy a 1m condo, less all miscellaneous cost, a net rental income of 2.5 k/month is 3% yield.  You can easily achieve this by buying a property counter or a REIT and save all the headache of been a landlord.

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