Thursday 31 August 2023

Month of August 2023

Updated finance page.

Having lost a few kilos and trying to reduce more, I was thinking how to keep myself motivated. It's tough having to eat less so I rather burn more calories. That meant more and higher intensity activities. I did badminton with new friends and was breathless after an hour. Also tried new jogging routes near home and at Botanic Gardens. The furthest distance achieved was 4.7km and the cramps lingered for a couple of days. Walking was easy but the time efficiency value wasn't great. Among the various exercises, the most convenient was planking. It started with one minute in the morning after I wake up and then increased to two minutes at which I'm maintaining for now. The weighing scale remained stuck when compared to last month.

There were a number of meet ups with friends and business associates from overseas. Somehow, they managed to spread out and there was lunch/dinner appointment every week this month. In between, I visited Batam for site survey with two of them and stayed overnight. It's been such a long time since my last trip there and much changes were in store. New department malls, outdoor cafes and industrial developments sprouted everywhere. For a while, it felt like Singapore, where construction and road digging were part of the landscape. But there were also many empty storefronts and factories. Cost of living was affordable.

The best moment this month was to celebrate my wife's birthday. By some luck, we sneaked in last minute and watched the latest Mission Impossible movie at a Gold Class cinema. It's amazing how this franchise lasted so long and able to keep us captivated for almost three hours! Ethan Hunt will have to retire some day so let's enjoy while it lasts. Fortunately, I managed to refrain from visiting the restroom after restricting myself to a cup of ice lemon tea. Straight after, we went for dinner at Claudine. We already had fries and chicken wings earlier, so decided to manage the portions and ordered a pork terrine, tomato salad, cod and scallops. They came well plated like a garden and tasted delicious. The masterful technique was certainly a French culinary display, with the Ponderosa tomato dish a standout. Despite our full bellies, the meal rounded off with two desserts and a lovely digestif. Sometimes, we just have to indulge ourselves a little.

Tip: Iyo Kagiya Black Junmai Ginjo, nice aroma, mild candy floss and pear, supple finish

Friday 18 August 2023

Sharing HDB Notes To My Boss

**Before you read further, I want to qualify that the below is purely a work of creative thinking.

Since the Prime Minister decided to talk about the topics of HDB and CPF, I thought it would be fun to chip in some ideas. Let me put myself into the shoes of Perm Sec MND and dream a little.

To start off, I'm outlining some basis and assumptions that guide this post's direction. 

a) A HDB flat is meant for stay, be affordable and not for investment. The current situation requires ways to address flat affordability, uneven wealth distribution, inclusivity for poor and elderly and help for young generation to start a family. As shall be shown, my measures are meant to reduce BTO price and curb resale values, essentially rebooting the system with new rules.

b) CPF is for retirement. As a safety net, the CPF must not be allowed to fluctuate too much from its contributed amounts. Its goal is to be a long term accumulation tool and ensure a stable payout at the appropriate time.

Now, the dream begins. Even if some figures below may be farfetched, it's because I didn't do in depth calculations. So this is a broad outline and my personal (maybe somewhat controversial) take.

1) The BTO scheme will be revamped and prioritized for Newcomer (defined as first time married couples and/or singles above 29 years old). Such applicants must choose a flat if their queue number permits, otherwise they lose the status of a Newcomer for three years. Any leftover BTO flats will then be opened to others on a ballot basis with families having at least one Singaporean child given five times additional chances. The MOP is 20 years but has an option that allows the owner to sell the flat after 10 years. If this happens, the transaction value is subjected to 20% tax, decreasing 1% each year from the 11th year onwards, on top of point 2 below.

2) A new tax scheme, Seller's Windfall, will be introduced for resale flats. The first S$400k of the transacted flat value shall be exempted and amounts above that are placed in tiered categories and imposed a taxable percentage, up to 60%.

3) The BTO salary ceiling will be revised to S$12000, housing loan payment via CPF shall be capped at S$1000 per person per month, therefore the remainder is by cash. The lending value of a house loan is capped at 70% of the valuation or sale price.

4) For private housing, each couple or single (above 29 years old) can own 1 HDB and 1 private apartment. Landed owners (defined as non strata titled land) will not be allowed to purchase a HDB flat. If a landed owner sells away his house, he becomes eligible to do so immediately. Any violation of holding both a landed property and HDB concurrently for more than 6 months will be heavily penalized. A year long exercise will be launched to check all residents' stated NRIC address against actual living address. ABSD for second apartment purchase (exclude HDB in calculation) and above starts from 30%.

5) Existing grants will be removed or reduced and focused mainly on the lower income tier and couples below 35.

6) The EC and PLH scheme will be discontinued.

7) HDB is to embark on a 10 year building plan to achieve 30000 flats per year. During this period, the aims are to sooth supply constraints, encourage those with expiring leases to move and young couples to start a family early. Among the new BTO flats, these include a variety of one to four bedrooms (up to 1800sqft). Certain floors eg second to fifth levels in certain blocks are earmarked for retirees only. These are one or two bedrooms flats strictly on a rental basis. The household nucleus for this may include the retiree (with spouse) and son(s)/daughter(s). A retiree's grandchild is not included and therefore the parent(s) must move out. Once the retiree (including spouse) passes away, the flat is returned and prepared for the next occupant. 

8) State clearly any flat upon reaching 99 years will be returned at zero value. Only a small percentage of flats may be eligible for SERS and the probability decreases while point 7 is being implemented. HDB will commit to make an offer to acquire flats with leases less than 15 years (amount expected to be token value contributing partly as down payment for next flat). It is a one time event and requires 80% resident's support. If rejected, then the flat follows its due course.

9) CPF in OA can only be used for housing (per point 3). CPF in SA can only be used for government securities, fixed income instruments or fixed deposits.

10) The interest rate for the various CPF accounts will remain for now but starting from the next review and subsequently, it will be adjusted under the formula (6 month Sora - 0.5%), subject to a minimum of 2% in OA and 4% in SA/MA.

Tip: Chateau Ferrande Graves Rouge 2017, tobacco and woody, inviting bouquet, slim finish

Tuesday 15 August 2023

Finance Investment Movement 36

The political space in Singapore had been in overdrive in the past few weeks with various scandals and investigations happening. This is not the staid environment that I'm accustomed to where our government operates with a robotic touch. While the rumour mill continued to swirl, my focus was elsewhere. I watched the National Day speech with keener interest. Even though it was a short one, the sneak preview given by the Prime Minister will generate even more excitement until the rally date on 20 August. That's because he had touched on two issues closest to every citizen's heart; HDB and CPF. It meant something was brewing and the status quo no longer worked. I had mentioned before (over here) about my observations and glad the government is going to address such sensitive topics. My guess is there will be some measures to help the poor and elderly (maybe singles as well), tweaking eligibility rules and enhancing retirement. There's just too many areas and possible solutions (A side note: I don't support higher grants). In my opinion, the housing issue must be tackled now as any misstep will lead to a disastrous outcome, affecting the entire society strata as a house is the most expensive asset/liability. In about two decades, when more HDB flats come close to reaching lease expiry, the anxiety will be felt if nothing is done to reset expectations. Obviously, the government will not want to crash the market but neither should it allow seemingly unabated price increase. Therefore, it must start shifting existing policies to allow time to sink in, hopefully transitioning within a decade. As per Singapore style, let's put in another decade as buffer. Because if things don't work out, 20 years from now, the generation of new home buyers, existing home owners and retirees of that time will look back and ask "what if" questions with regret. I believe given the long term vision of our wise leaders, they have a plan and hope to gift the incoming Prime Minister a nice platform to begin a new era. Otherwise, I see this as the biggest sabo of a lifetime.

There is something unusual in the bank deposit rates. As the US Fed raised interest rates, our local banks have gone in the opposite direction by offering lower mortgage and deposit interest. Corporate financing rates remained high at around 6.5%, which meant the banks earned about 3% in interest income for such transactions. Why is this possible? I reckoned that's to do with the status of Singapore as a safe financial hub. Given the uncertainties in other countries, global depositors have basically transferred excess cash into Singapore based banks, causing an indigestion, so much so that DBS could even lend money to MAS! To small retail customers, the banks could afford to be stingy such as the HSBC EGA bonus program being taken away or GXS reducing its interest rate to 2.68%. I think the banks will be even more selective, thus it's important to lock in quickly if a good deal presents itself. My investment since the last update was adding another $1000 into the Pimco GIS Income Fund. At the end of the month, I will subscribe to the SSB as it can be used to replace an older tranche that gave a lower coupon rate.

Tip: Vergelegen Chardonnay 2020, lemon and toasty, heavy acidity and dry