I've been back from France for around a week, but something happened on my wife's family side so I've been busy helping them out til now.
And I didn't have any free time til now and hopefully I'll be back to my usual routine from now onwards for a couple of weeks before our next flight.
So a reader sent me his current situation and I'll see if I can share some comments.
I'm not here to tell him what to do. Just sharing some comments and opinions. He'll have to decide what's best for himself and his family.
Here is the key situation which the reader is concerned about.
He is 49 years old.
He stays in the west of Singapore, 15 minutes walk from an MRT station with a lot of amenities nearby.
It is a 5 room HDB, but it is 33 years old, 66 years left.
He can easily pay off the bank loan but since CPF rate is higher than the bank loan rate, he has decided not to pay off the bank loan yet.
Current value of the flat is around $470k.
As he's used to staying in the west, he was looking around the west side and a new 5 room sales of balance flat could cost up to $700k in a good area.
He's thinking if he should move to a new BTO so that he can avoid the HDB time bomb that he grows old with an expiring HDB.
However, since he is nearing his retirement target age, he is concerned of taking up a new loan and spending too much money on renovation and other fees.
He's thinking of retiring at 60-65.
He has a 15 year old daughter and he and his wife has set aside some money for her to study in a local University. If she requires more money to be sent overseas for study in a private Uni, they will have to set aside more money for her. The decision to send her overseas or not will be around Jan 2020.
The reader's main concern is that he's currently sitting in a depreciating HDB which will be very old by the time he retires and during his retirement.
He wonders if he should get a new HDB but is concerned that this would incur more expense which may delay his retirement age.
He also has concerns that he may need the additional money to fund his daughter's study overseas.
I'll just share some thoughts about his situation.
Cos everyone has different wants in their lives, what they are ok to live with, what they aren't ok to give up. And eventually they have to live with their own decisions and consequences.
I also cannot expect people to live like me. I hardly spend any money unless it's for the activities revolving around my wife's work. (Car & travel)
So I'll try to be balanced in my comments.
Ok, let's get down to it.
There are 2 things that jump straight out at me when I read about the reader's situation.
1) The reader has "gotten used to" staying in the west and was looking for another place in the west.
My experience with this is that it's quite easy to get used to live in another area.
I stayed with my parents when I was young. It was around central/west area. Very convenient around town. They had an en-bloc and since the money couldn't buy much within the same area anymore, they decided to move far east.
My sis didn't like the idea and said "I don't think I'll ever get used to living in the east."
For me, I didn't bother too much. I've pretty ok with moving around cos all I need is a place to stay and eat.
My sis eventually got used to the east pretty quickly. Humans tend to adapt very quickly.
And she even forgot her initial comment of "I don't think I'll ever get used to living in the east."
When my sis was planning on moving out after getting married, they were looking at places in the north.
And during discussion, she once again said "I cannot imagine myself living in the north."
And my brother in law said... "That's what you said about living in the east."
The thing is, I believe, people get used to living in an area very quickly. They will likely grumble a bit at the start and after 6 months, they get used to the new operations, where to find their new groceries, doctor, food court, etc.
That's not to say that the reader should find some place that there's NO amenities. I understand the convenience of having a doctor, food court, groceries nearby. For example some of the new estates aren't really well developed yet so there isn't many amenities nearby, but I think probably, the reader should open himself up to other areas of Singapore which is equally convenient.
2) The 2nd thing that jumps right out at me is that he has decided that if his daughter needs it, he will provide her with an overseas education.
This is his choice. I'm not saying that he shouldn't do it.
For me and my sis, we grew up with the understanding that we would NEVER be sent overseas. So we knew our parameters and we played along those parameters. We knew that if need be, we would go to Polytechnic or any local private University. That's how our parents set the rules.
In my opinion, once a child knows that their parents will "bail them out" they may not work as hard or potentially, form a sense of entitlement.
I never blamed my parents for not sending me overseas. I knew the rules, we weren't exceptionally well off, I didn't expect my parents to scrimp and save just to send me overseas if I couldn't make it into a local Uni.
There are many successful people from all walks of life, with or without a Uni education. In the end, I think many of us, after 10-20 years of working, realize that it's not the level of education that makes a person successful or not.
But this is a choice for the reader to make.
Ok so these are the first 2 things that jump out at me.
The reader is living in an old 5 room HDB.
This is a really big HDB. As the reader gets older, he may want to get a smaller place. Cos I reckon his daughter will want to get married and move out eventually. People tend to fill the house regardless of the size. So the bigger the house, the more stuff they have. The smaller the house, the less stuff they have. People tend to just make do with what they have.
For me, I don't like the idea that my HDB expires worthless after 99 years. I'd like to try to leave something left... (I also dunno for what... since I've no kids)
But I think that may be the same for the reader.
And like what I've said in my previous posts, it's pretty much a zero sum game.
Price = Lease + Location + Size
For the reader currently this means...
$470k = 66 years left, 5 room HDB in the west.
So if the reader wants to "extend" his lease without injecting more of his own capital then...
$470k = 80-99 years left, 3/4 room HDB in the further west/north/east?
Then top up another $20k-$30k for fees and renovation.
He can choose to buy a new BTO or straight from the market.
There are many other areas which have great amenities and also close to MRT stations.
Also another point to highlight is the need or lack of need for space.
Depending on families... some families expect to take care of grand kids, others do not.
So as the reader gets older, he may not need such a big place with his wife. Maybe even a 3 room HDB would be good enough, cos it will take a lot less effort to keep a 3 room HDB nice and tidy.
Unless they have a helper... which is an increased expense... really, imagine doing household chores at 60-70 years old for a large 5 room HDB.
However, if the reader is expected to take care of grand kids, then maybe he would need a larger place?
Personally, I think a new 4 room HDB is too small for kids to be running around. It is sufficient for living, but it's pretty cramped in my current situation.
Ok so let's wrap this up a little bit...
The reader is 49 years old, average lifespan is around 85, so we are talking about maybe 35-40 years more.
If he stays in his current place, it will be 25-30 years of lease remaining.
So theoretically, he doesn't really need to do anything.
He COULD get a relatively new or BTO HDB and move to another area of Singapore with similar amenities with an increased lease. 80-99 years lease. In his later years, this would end up at around 45-60 years left.
The issue is maybe at this point in time, he might be unable to decide how big a place he needs, cos his daughter is still around.
He alternatively COULD wait 10 years before doing anything. By then, his current HDB would be left with 56 years remaining, then he could do the switch after his daughter moves out, he may also be better able to decide the size of the place he wants, or if he is planning on taking care of grandchildren.
The issue with doing this is that his current HDB would be worth less relative to the younger HDBs, but this is to be expected due to the depreciating lease.
But he may look at HDBs with 70-80 years lease remaining at that point in time. Then it would last him til his later years and still have excess lease/value and will not expire worthless.
He may also consider doing it a few years after retirement. By then, he will be better able to assess his budget and retirement funds. I also find that after retiring, many people realize that they don't need so many stuff in their lives and may willingly move to a quieter area of Singapore and a smaller unit.
It also provides the opportunity to declutter years of stuff accumulated from decades of working which might not be needed anymore after retirement.
The mentality after retirement is also different so you may not be interested to do a lot of reno and be quite satisfied with a simple low cost renovation upon moving.
The thing is, when you're working, you tend to keep a lot of stuff cos it's convenient and there's no real time or opportunity to clear them out, but after retiring, you may realize that you don't need a lot of stuff and you have a lot of time to slowly buy something or work around the situation if something isn't readily available at home.
Probably the next few big ticket items the reader has to consider is his daughters further education, or some parents may want to help out with the wedding expenses of their kids or housing renovation expenses, and maybe grandchildren, and of course their own renovation if they so decide to move.
And of course within all this is also potentially to decrease overall expenses. I think a lot of people overestimate what they require after retirement. If you live a frugal lifestyle all the time, expenses will easily drop after retirement.
And that's about it for this post. It's really up to the reader to determine what's best for himself.
I think at different stages in life we all want different things it would be easier to decide after key intervals in life, like when/if his daughter moves out. Cos by then he may think, the house is too big and empty and it's tough to tidy and maintain such a big place.
Deciding now at this point in time, may not be so easy. Cos there's a lot of unknowns about what the future may bring. But of course waiting also has it's issues, cos property prices will change and all that. That's just part of life and we all have to try to make the most informed decision at any point in life, in relation to what we want and whether we are ok with any risks involved.
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