sketchupdate

The work goes on ... it's kind of exhilerating shopping with a budget of thousands of dollars for so many things.

Sketchup will never be able to tell exactly what the house will look like, because only a few manufacturers actually provide Sketchup models for download. But it's good enough to get a general feel, and very good for space management.

the housing saga

I've refrained from writing much about the new flat since we first found it, simply because our entire flat-acquisition process has been full of dramatic ups and downs. It's not over yet, but I hope that by now, we have sufficient assurance that the pieces have fallen into place.

the flat
The drama first began halfway through a wedding lunch when our agent asked us to view a flat ASAP. None-too-happy about missing out on food from the Ritz Carlton, we nonetheless decided he was sufficiently insistant to make the trip back to Serangoon Central. Once there, we were satisfied that finally, we had found a place that met our requirements for good location and minimal need for renovations. We had lost out on previous flats due to indecision (in terms of hours, not days mind you), so after some quick discussion we decided to meet the seller's asking price and put down the $1000 deposit. In the process, we beat out about 3 other bidders, one of whom was right in the flat with us and had offered within $1k of the asking price. This caused the other parties quite a bit of consternation that took a great deal of time to resolve. We went home with hearts beating fast and nerves slightly frayed, but relieved that we had finally secured a place to live. We thought our housing quest had finally ended; in reality it had just begun...

then again
After quite some time writing and re-writing, I have come to the conclusion that some details of this whole experience are a little bit too personal and private to post on the internet. To cut a very long story short, we were fighting very hard to get half a CPF grant (of $20k), and when this was suddenly snatched away from us due to eligibility considerations we could only put our trust in God that he had a better plan for us. Now if everything goes smoothly, we will be qualifying for the full $40k grant, and again I can only say that God works in strange and mysterious ways.

Throughout the whole process, we ensured that we did everything by the book, but because of the complications of our situation we were definitely treading in some very grey areas. Suffice to say that after almost being screwed up multiple times by a housing agent from hell (bad advice, wrong information, soured relationships), we found help from a most unexpected quarter in the form of the hdb officer.

It also pays to be really nice to people, because even though I have never met this lady face to face yet, we have become almost friends. Se says she was driven to go all out to help us because I am one of the only gentlemen she has dealt with. Compared to other people who shout and spit at her when she gives them bad news, I have always been civil and courteous. It's not really a big deal - I never saw the point of offending people unnecessarily - but it really helped!

the finer details
In the process, I'd say we've become quite expert on some of the finer points of HDB policy. So if anyone wants to know the details you can ask me. The best word of advice: always always go back to the HDB website and if it is not clear, best to send HDB and email. Don't rely on housing agents.

interior design

Buying a house is really exciting, and one of the first impulses of any new home owner is to start planning the renovations and buying furniture. But one of the frustrations is that it takes about 3 months to complete the transaction, so while you are all fired up and enthusiastic, you don't really have access to your new place yet and it's difficult to really make decisions on the interior design. And by the time you get the keys you are too busy with the wedding preparations. Of course some things you can do are to obtain the floor plan, measure the dimensions of all the rooms and take a lot of pictures.

Then there is another way introduced to me by Jed, and that is Google Sketchup. Google Sketchup is a free software with a very easy-to-use interface for 3D modelling. So you can practically draw out your entire home from the ground up, and add in furniture, colours and textures. You can also grab some stuff from Sketchup's 3D Warehouse. So after about an hour or two of tinkering, I was able to produce a pretty good model which I proudly sent to Jed one night. I even popped in a few pieces of furniture for good measure.

The reply I got the next morning was, "I cleaned it up for you". (Notice the addition of windows, door frames, and protrusions in the walls, all nicely superimposed onto the actual floor plan.)

And he spent much less time than I did, too! Oh well I guess that is why he is an architect and I am not. Now I just need to add in the colours, textures and furniture. Of course all this happened a couple of weeks ago, and I'm still trying to find the time to sit down and work on it some more. First, I should also watch the instructional videos which are supposed to tell me everything I need to know. And when it's ready I can have a virtual housewarming before I even get the keys.

the great mattress hunt

The Great Singapore Sale is a great chance to stock up on all sorts of wedding-related items, from jewellery to furniture and appliances or clothing.

We went to Takashimaya to look for little knick knacks and find a cheap bottle opener for our new house so that I can start using it now. Along the way, we stumbled into the world of luxury mattresses and got kind of, well, sucked in.

We are taking quite an economical approach to our first home, since we figure we might not stay there very long. So there's no point splurging on expensive leather sofa sets that might not match our next abode. But one thing we are absolutely agreed on is that sleep is important - and therefore the bed and mattress are probably the most important and exciting purchase we will make towards to our new house.

After spending an hour or more carefully testing all the mattresses in Takashimaya, we soon became highly skilled in discerning the attributes of each mattress. Pillow or latex tops, determine how quickly you sink into the mattress when you first apply weight. Continuous springs are more plush, but pocketed springs offer more support and prevent the tossing on turning on one side of the bed from affecting the other. Most importantly, some matteresses are divided into three or five different zones of stiffness, and this ensures that it wraps to your body contours when you sleep on your side. A good mattress will allow your shoulder to sink in, while supporting your abdomen and head, preventing a sore shoulder in the morning.

We finally came to the unanimous conclusion that Serta would be our choice. Serta mattresses offer us the best balance of comfort and support, and they come with a free sheep. It also comes with a pretty nice bed and foot bench, which saves a bunch of money.


There are places for trying mattresses, and places for buying mattresses. Good places for trying include Takashimaya, Courts (we were at Toa Payoh outlet) and The Furniture Mall @ Parkway Parade. Mattresses we tried include Simmons, Sealy, King Koil, Dunlopillow, Lady Americana, and many others. Big branded shops have lots of variety to try, and nice price tags to go with it.

The best places for buying mattresses are the smaller neighbourhood shops. Two good ones that we visited are Ackerman & Smith @ Toa Payoh Hub and Hommage @ Serangoon Central. Ackerman still has some semblence of a showroom and a pretty good range of Serta to try. Hommage only has a catalogue from which they will order the mattress for you ... but they have the lowest prices of all.

So for anyone else who decides on Serta ... check these out.

Ackerman & Smith Pte. Ltd.
Blk 190 Lor 6 Toa Payoh #03-510 Singapore 310190
Tel : 6255 5575

Hommage Furniture
Blk 263 Serangoon Central Dr #01-65 Singapore 550263
Tel : 6282 6264

17 Jun 07 Update:
We finally went back to Hommage this week to order out mattress, and to our great distress were told that Serta has cancelled his distributor license. "Kena complain too much," he said ruefully. Dammit, it just happened 2 days ago some more. So we went to Ackerman to buy instead.

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!

hdb vs condo

We've pretty much picked the rock and hotel, now it's time to move on to the biggest financial decision of our lives: where to live.

This is something we have agonised and debated over for quite a number of months now, and it basically boils down to the choice between condominium or HDB. (Unfortunately, we do not qualify for the HDB subsidy or this would not be an issue at all.) The pros and cons of each are pretty intuitive: condominiums have much better finishing and additional facilities. HDBs are more spacious and have better locations (since our tight budget cannot afford an MRT-side condo). For quite some time now, the argument has stalled on my reluctance to buy a HDB because I feel it is a depreciating asset in the long term, as compared to a 999-year or freehold private condo. This weekend, I took out the spreadsheets and put this assumption to the test.

The results, rather counter-intuitively, are that HDB flats are a much better investment. This is predicated on the assumption that with a fixed budget, the money not spent paying off the much higher loans for a condo can be invested to reap a conservative return. Thus, although the HDB value is lower in the long term, the HDB buyer has a lot more money in the bank.


Specifically, I tested the hypothesis using the following basic parameters: the initial cash available from savings is $100,000 and the amount of cash available to pay installments is $3,000. The annualised investment yield from a conservative diversified portfolio is 8%. And the two properties under consideration are a $500,000 3-room condominium or a $280,000 4-room HDB flat. (For those not familiar with the terms, both configurations have 3 bedrooms.) Additional renovation costs of $20,000 and $40,000 were incurred for condo and HDB respectively, in order to bring both to a similar comfort level.

In the calculation, I used a 20-year time horizen. Over this period, I assumed that the condo would increase in value by 50% while the HDB dropped in value by 10%. To finance these homes, the following loans (from the OCBC Loan Calculator) can be taken:

First, the 20-yr condominium loan, leaving $30,000 cash on hand.

Next, the 20-yr HDB loan, leaving $32,000 cash on hand.

Finally, a 10-yr HDB loan, also leaving $32,000 cash on hand. This would also mean that interest repayments would be high for the first 10 years, but for the next 10 all available income would go into savings.

Below are some graphs that show the Net Asset Value (NAV) of various homeowners over a period of 20 years. NAV is calculated as the value of the home + accumulated savings - loan outstanding. The loan bit is not entirely accurate because you can reduce interest payments by terminating early, but its accuracy will increase towards the tail end of the time horizen which is the main point being examined.

Condo Buyer would be worth $750,000 (Condo value) + $214,156 (Investment Savings) for a total value of $964,156.
HDB Buyer with 20-year loan would be worth $252,000 (HDB Value) + $941,854 (Investment Savings) for a total value of $1,193,854. This is about 24% more than the condo buyer.
HDB Buyer with 10-year loan would be worth $252,000 (HDB Value) + $831,445 (Investment Savings) for a total value of $1,083,446. This is approximately in the middle.

Of course this calculation depends on many assumptions, but the verdict seems quite solid. Ceteris paribus, here are some observations on how variations in data affect the result:

1) Property Values. Condo would be a better investment if its value doubles in 20 years while HDB value remains static. But I am not that bullish on the private property market. An AMEX graph (below) shows that an increase of more than 1.5 times would bring us above the historical high, which I feel is unlikely. This would probably only happen if there is significant developments (MRT, malls, schools) in the surrounding area. The HDB price index also suggests that HDB prices should be fairly stable.
2) Investment Returns. All three net asset values would approximately equalise if the return on investment drops to only 4% per annum, which is about equivalent to the loan rate. But given that the STI went up about 14% in 2005 and 24% in 2006, this seems rather unlikely over a 20-year average.

In conclusion, a HDB seems to be a much better choice to meet capital preservation objectives, even if one does not qualify for government subsidies. It is also much more affordable - how many of us really have $3,000 a month in spare cash, and how many will continue to do so after adding additional mouths to feed and possibly losing a breadwinner.

training the spouse

Hmm... I wonder if this works for wives and girlfriends too?

We went to a counselor to smooth the edges off our marriage. She didn't understand what we were doing there and complimented us repeatedly on how well we communicated. I gave up. I guessed she was right — our union was better than most — and resigned myself to stretches of slow-boil resentment and occasional sarcasm.

Then something magical happened. For a book I was writing about a school for exotic animal trainers, I started commuting from Maine to California, where I spent my days watching students do the seemingly impossible: teaching hyenas to pirouette on command, cougars to offer their paws for a nail clipping, and baboons to skateboard.

I listened, rapt, as professional trainers explained how they taught dolphins to flip and elephants to paint. Eventually it hit me that the same techniques might work on that stubborn but lovable species, the American husband.

The central lesson I learned from exotic animal trainers is that I should reward behavior I like and ignore behavior I don't. After all, you don't get a sea lion to balance a ball on the end of its nose by nagging. The same goes for the American husband.

From NYTimes, "Modern Love: What Shamu Taught Me About a Happy Marriage", June 25 ,2006