coming of age

In a series of chance conversations over the weekend, I have now confirmed a wedding coordinator, emcee and photographer. I have also agreed to be a wedding coordinator and best man. It's interesting how this has become a dominant theme of late. I have come of age.

shanghai

It is rather stressful to visit a country where all the tourist guides are screaming "the locals are out to cheat you of your money!" That's what they said about Shanghai. So it was with some mild trepedition that we boarded the plane - but it was by far overpowered by the relief of getting away from the rat race, and the excitement and anticipation of seeing a new country and visiting the baby sister.

Roads
The adventure began the moment we got off the plane, with the most hair-raising taxi ride ever. our driving was weaving in and out of traffic doing 140 km/h, flashing his lights and horning at everyone that got in the way. (On hindsight I decided it was safer that he flashed and horned, but if I was any of the other drivers we passed he would surely have raised my ire.) So I smiled knowingly when I saw this headline on STI upon our return to Singapore: "Shanghai drivers told to hold the horn".

Cityscape
Driving through Shanghai is like driving through any modern city today, with elevated highways snaking in and around the city centre, and tall skyscrapers springing up every which way. A leisurely stroll down the city streets gives a much different experience, and you can really appreciate the full range of architectural styles, both classic and modern. Shanghai is like a microcosm for all cultures - in one moment you can be walking through high glass-walled boutiqes like 5th Avenue in NYC, the next moment you pass impressive colonial British fascades, and then sandwiched between a mall and a skyscraper you spy a chinese temple peeking out cheekily from another era. If there was one thing I will remember with fondness of Shanghai, it is the lovely buildings in a myriad of architectural styles. (Interestingly, my uncle who works there expressed his distaste at all the new buildings, which he sees as all the local architects striving to outdo each other with gaudier and gaudier designs. So I suppose it is possible to tire of it.)

People
While not everyone in Shanghai is out to cheat you of your money, most wouldn't have any qualms about profiting obscenely from your ignorance. The people in Shanghai are rude, impatient and very pushy when it comes to sales. This took some of the pleasure away from bargain-hunting, and made the overall shopping experience quite tiring at times. We were quite glad that we had come now, rather than on our honeymoon which was one of our previous plans.

The Propoganda Museum
The only touristy sightseeing thing we did in Shanghai, apart from all the eating and shopping, was to visit the Shanghai Propoganda Poster Art Centre. Nestled in the basement of a condominium, this little-known private museum provided a very interesting angle on Chinese history during the communist era. Captions beside each poster related it to changes in the political climate as major event and upheavals brought newe issues to the fore, as well as the artistic influences at play during each period. Definitely worth a visit!



Food

Food in Shanghai is cheap, and we were really looking foward to it! Among our gastronomical conquests we the most famous Nanxiang Mantou Dian in Yu Yuan for Xiaolongbaos, as well as the street food at Wujiang. Sticks of mutton kebabs, delicious BBQ chicken wings and huge oysters grilled in garlic probably made that the best meal of the trip! We also tried a Singaporean Rou Gu Cha restaurant, which gave some respite from the overly salty and oily Shanghainese fare.


Clothing

Another popular stop we made was at the tailors. Suits for S$120, shirts for S$20, cheongsams for S$60, and all manner of designs to choose from. And of course the girls went wild with all the other cheap clothes, shoes and bags.


... to be continued ...

arbitrage

Just got back from Shanghai. Lots of words and pictures to follow shortly. For anyone looking for a shopping holiday, this is my take on the toothbrush scale of purchasing price parity:

A nifty toothbrush that costs $7 in Singapore and $5 in Malaysia costs only $2 in Shanghai.

mac misery

After a really tiring week we decided to stay home on the weekend. So after 5 months enduring her mac misery, my fiance decided to tote her Macbook over to IT Support so that I could put her out of her pain once and for all. (That's what happens when you buy the laptop purely for the looks.)

So we sat down to install Boot Camp, to allow her to do a dual boot between Tiger and Windows XP. I must say the installation guide is very comprehensive, and everything was going smoothly until the software popped up an error message telling us we needed to back up all the data on the system and reinstall Tiger first.

That's when the painful waiting process started...

• First we had to back up the external harddisk and reformat it with Fat32 instead of NTFS so that the Macbook could write to it
• Then we had to reinstall Tiger; this took more than 2 hours! And at the end of it we had already filled up 20GB of the hard disk, I must say that Apple is very comprehensive.
• Then we reformetted the Windows partition and installed Windows XP, which took almost 2 hours. And this doesn't even include installing all the essential software.
• And finally sometime after midnight ... voila! We had a Windows Macbook. Which I immediately shut off and went to sleep.

To be fair, everything went smoothly. It just took a super long time!

how to structure a housing loan

If you are new to this blog, please see this entry (just below) first. You may also be interested in the decision process that led to choosing HDB over Condo.

May, Varushka, Otto, Prata and Xiaoming are quintuplets. (Nevertheless in order to be politically correct they have been given multi-ethnic names, but which in no way dictates their level of intelligence in the decisions to come.) In true sibling fashion, they have all chosen to get married on the same day (to different people) and have bought identical flats at the same time. However, they have chosen different approaches to taking up the housing loan.

Each married couple has savings of $100k. Their flats all cost $250k. As they all do not qualify for the HDB Loan, they can take a maximum loan of $200k (80% loans have better interest rates), leaving them with $50k to save or invest. They also have spare income of $2k each month to pay off the loan, save, or invest. (In this calculation the exact numbers are not important, as long as they are kept constant.)

May does not like to be in debt for too long. She decides to take the full $200k loan amount for a 10-yr period. She puts her remaining $50k into a diversied portfolio of unit trusts managed by her financial advisor, along with the balance of $2k left over from monthly payments.

Varushka decides to do the same thing as May, but over a 15-yr period.

Otto consults an investor friend and is advised to take the longest loan possible, so that he can use more of his monthly income towards investments. So he also takes the maximum $200k loan, but over a 20-yr period. (Can go up to 35 years but that would mean a lot more Excel columns to fill. 20 yrs should suffice to measure the desired result.)

Prata decides to follow Otto's method. But because he is debt-averse, he decides to sink his remaining $50k into the purchase, so that he only takes a $150k loan over the 20-yr period.

Xiaoming also wants to follow Otto's lead, but he also plans to refinance his loan every three years. Hence he takes a $200k loan over 20 years with refinancing every three years.

The question in all their minds is this: at any point in time over the next 20 years, if something happens that requires them to terminate the housing loan (most likely selling the house), what would be the total value of their assets? And how would this vary over time depending on the loan structure?

There are a number of other variables that affect the calculation, the two biggest being the variable interest rate of the housing loan (currently 4%) and the return on investment. The following two graphs (using OCBC loan calculator) show two opposite cases of the possible outcomes.

For the first graph, the return on investment consistently exceeds the interest rate by 4%. In this case, interest rate is 4% and investment return is 8%.

For the second graph, the investment return underperforms the loan interest rate by 4%.

It can be seen that the performance ranking of each strategy is almost entirely dependant on the relative performance of investment and interest rates. If investments underperform, the short-term loans and smaller loan amounts do better, and vice versa. The only consistent thing is that a loan with refinancing performs marginally better than a loan without refinancing.

When the quintuplets buy their property, they know that there are two likely outcomes. Either they will stay there for the rest of their lives or they will upgrade to private propertly in approximately five years. Hence, let's zoom in on the total asset value for each strategy for these two time frames.

In this case, the choice is pretty clear. If you think you can reap a good return on investment for spare capital, then clearly you should take the largest possible loan over the longest possible time period. For added kick, you should also refinance periodically. And if you decide to terminate early, then it doesn't really matter which loan you took.

So which bank should you go to? Most are quite competitive, but the following comparison between DBS, OCBS and Maybank shows quite a clear leader over 20 years, but in the short term it doesn't really matter.

In summary, the brevity of this post does not quite belie the depth of analysis it is based on. Nonetheless there is no time to go into further detail, or I'd never get this out. So I hope it provides a useful starting point for other people thinking about such things. The two key points to note:

1) If you are not averse to investment risk, take the largest possible loan with the longest possible duration and dump all your savings and spare capital into the investment market. If you are risk-averse, then just take the smallest and shortest loan possible.

2) If you qualify for a loan direct from HDB, just take it. If you can't get the HDB loan, get the Maybank one. (Correct at the time of writing.)

And pray that my appeal for the HDB loan goes through :)

25,000 Excel cells went used the making of these calculations.

the truth about housing loans

After making the decision between HDB vs Condo, we bought the HDB. The next big financial decision is what kind of housing loan to take. A cursory survey of the banks shows that rates are pretty competitive.

POSB HDB Loan

OCBC Home Loan

Same same lah. So the question isn't really which bank to take the loan from, but rather how large a loan to take and how long a loan period. The truth about housing loans is that the interest is heavily front-loaded; this means that the bulk of the interest is paid in the early years of the loan. Let's take a look at this 10-year loan for $200,000.

Yellow shows the loan outstanding, blue shows the principle repaid and red shows the interest repaid. Blue + Yellow at any instant = $200,00 which is the loan amount. While the amount of interest paid increases over time, it slopes up sharply in the early years and flattens out in the later years. Just how big is the difference? Let's zoom in ...

This shows that 72% of the interest payments have already been made by the 5th year. 47% has been repaid by the 3rd year. So if you decide to terminate the loan early (for example to upgrade a larger property), you would already have paid up most of the interest.

So what does this mean for us? Take a larger loan over a longer period and invest your spare cash or take a smaller loan over a shorter period and get it over quickly? I'll explore this another day, I'm sleepy.

buses and trains

This is why everyone should move to Serangoon Central ... the centre of the world.

Within ten minutes walk you can reach Serangoon Interchange, Serangoon Station (for both Northeast Line and Circle Line) and three main roads: Boundary Road, Yio Chu Kang Road and Upper Serangoon Road. On these three alone I count a total of 23 buses serving routes to all corners of Singapore from Changi to Clementi to Yio Chu Kang and Shenton Way, and there are a few smaller roads on the periphery.

There is also the upcoming Serangoon Hub, modelled after the successful Ang Mo Kio and Toa Payoh hubs, and touted to be like Ngee Ann City when completed.

Everyone should move here!

expensive day

It's that time of the year again, with at least a wedding a week and sometimes two. Today was a particularly hectic wedding day with the morning at the Ritz-Carlton and Dinner at Shangri-La. In between we fixed up appointments to design wedding bands and view samples of the bridal studio's photographer.

Then halfway through lunch, we were persuaded to go view a flat. And after some high drama moments we secured it at the asking price. So now we are another $1000 poorer after signing the Option to Purchase. And we finally have another major decision out of the way.

Now to navigate the ins and outs of HDB Loan Eligibility and house loan structures. It's time to interrogate the banks.

siblings day

While the cats were away, the mice spent labour day having a ball of a time together lunching on crabs, catching a movie and whiling the afternoon and evening away playing assorted card and board games. After a lovely day, I thought I would share the good stuff.

First, we had an excellent lunch at Dragonfly Inn in Serangoon Garden where they are having a special offer on crabs. Each crab of approx 500g is $14, buy two get one free! Another highly recommended dish was their homemade toufu. Overall we spent $70 for 4 people, including the three crabs and were hugely satisfied.

And while I cringe and hide everytime my fiance mentions the dreaded words chick flick, I was cornered into watching 200-pound beauty because my baby sister wanted to. The Korean movie is about a fat and ugly voice-over artist who undergoes plastic surgery and becomes a star in her own right. Interwoven into this is lots of drama over her love for the director, and lots of philosophical views about plastic surgery.

The movie sums up the common man's view with the words it's ok as long as it's not my girl. Very apt.

I've never thought much about plastic surgery before, because it is certainly far less common in Singapore than it is in South Korea (where people give surgery as presents). But it reminded me of a conversation many years back with an acquaintance in Britain. Over beer, he looked me squarely in the eye and asked me if I had ever had a girl with a boob job. He then proceeded in graphic detail to explain how unpleasant it was to encounter the hard texture of silicone implants, and how much he hated them. But of course, without them he might never have got into bed in the first place. (Aside: it was conversations like this that formed my opinion that while Americans get a lot of bad press, the British are far more promiscuous. Or at least they are more open about it.)

So the interesting thing is the plastic surgery isn't even just physical beauty. It is even less than physical beauty; it is merely visual appeal. Because once you enter the tactile domain the illusion vanishes and reality bites. How ridiculous then, to dream of changing one's appearance to romance a man, when the secret would never last beyond the first one night stand.

I guess plastic surgery is practical for those who make their living on magazine covers or motion pictures. But I can't see how it would fit into a healthy relationship.