Friday, April 6, 2012

Increasingly Motivated Property Sellers

I was sent an Amortisation Tabe for Progressive Payment for a certain new development from a property agent. He is wasting his time as i told him politely i am not interested in property now as i expect it to go down. I am definitely not buying even after stamp duty rebates, furniture vouchers, special discount here and there, extended warranty and prices magically reducing by some weird way of calculation(hmm did i even hear a renovation rebate, valentines discount..) Setting ridiculously high asking prices and then reducing it is an old marketing trick.

However way i see it, i am increasingly more bearish on the property market. Let us look at the Amortisation Table sent by this agent who seems so persistant, i have to give it to him to at least read his emails.



The purchase price is $1,500,435 after all the discounts,30 years repayment, 80% loan with progressive payment till TOP. During the first few years before TOP, the buyer is charged at a 3-month Sibor (about 0.4319%).
During these first few years before TOP, the buyers have to pay as low as $444 monthly, increasing steadily every 4 months to $1816 monthly till TOP. After TOP, it immediately jumps to $3029.WOW!!. This will be a rude shock and bear in mind all these numbers are based on only 3 month Sibor,without addition of a board rate. It is not 1+3month sibor. The calculation is just based on 3 month sibor which is given to uncompleted properties.

From TOP+1 year to TOP+2 year, the interest rate is 1.75%.(Will it be so low!!This is after 2015!)The monthly repayment is $4430!Its slowly ballooning this cash drain!.

From TOP+2 year t TOP+3 year, the interest rate is 2%.The monthly repayment is now $4565.

From TOP+3 year to TOP+4 year, the interest is 2.5%, The monthly repayment is now $4831

From TOP+3 year to TOP+5 , the interest is 3%.(This is long term average rate i feel but it has spiked up to 6% before.) The monthly repayment is now $5097

From TOP+5 year onward, the interest rate is 3.5%. The monthly repayment is now $5244.

It will be interesting to see how things will unfold when the large supply of new properties start to TOP and there lies the huge jump in monthly repayment which will surely affect the psychology of the sellers. From $444 to $5244. In addition, if you are thinking of renting, think again.

Do not forget to add in the maintenance fees which averages about $250 - $400 per month for newer private apartments after they TOP, before sinking fund fees are even added subsequently.

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