1. The 33% increase I would say was definitely an anomaly and I don't quite see the same kind of increases right now. The anomaly is due to COVID (prices were a lot lower because people were not moving into Singapore, and the shot up as more ppl came in).
3. S&P is not linear but over a long period of time, it does hit around 10-11% annualized returns. If you are looking for more stable, passive income, then S&P 500 would have a lot more variance.
4. Agreed on the emotional part! It is really up to individual choice.
Yes, the "psychology of money" can't be argued against with logic always, but if you have the privilege of having to think only for yourself, then you should try and take more rational decisions when you can.
In Istanbul where I am leaving now the percentage for mortgage is 20% per year. Inflation has been up 283% for three years (economic crisis in turkey due to dictatorship president owned decisions in economy ) and rent price has doubled in last two years.( immigrants because of war in Ukraine which russia started)
How can we get access to the wealth documentation and over-time projection spreadsheet? (5 years, 10years, +) I am in the creative industry and wouldn't even know where to start in making my own spreadsheet and roadmapping in this way. But would LOVE to be able to!!
Hi Ana! So I did build a FIRE calculator and haven't launched it yet but want to show it to you early in case it is helpful. http://peekfire.streamlit.app/ There are some advanced settings around specific growth rates for assets, so I am happy to do a walk-through with you as well, and see where I could provide some guidance.
Feel free to also reach out to me on LinkedIn or email - happy to share more and see how I can help.
Kudos for all the work on the models but if I were you, I’d take a step back because it seems that you are ignoring fundamentals. Any property that you rent has a cost and it would be the same if you buy or rent. Since you are not the owner but a renter, there is also a profit that you will be covering with your rent. Any model that suggests you are better off renting assumes you can do better at “investing” than the owner and that the owner is in an investment “loss” position. Not saying that it’s an impossibility but I’d be weary of models suggesting a definitive win for renting as that’s absolutely not the case when considering a significant number of rental contracts.
First of all, I want to make it clear that the model doesn't necessarily suggest a definitive win for renting - if you play around with the numbers, you'll find that in certain situations it actually does make sense to buy vs. rent. It's just that in my particular case of looking at the condo at Icon, it made a lot more sense for me to rent vs. buy. Check out the calculator here: https://peekrentorbuy.streamlit.app/
Secondly, owners might have different financial preferences and needs. Often, the landlord that you are renting from is looking for more stable and fixed returns as an investment and might prefer that over the stock market. My landlord is an older gentleman in his 50s and understands property much more than stocks, wants stable passive income, and therefore, is probably okay with the potential upside that would come from stocks. But just bear in mind that the cost of those preferences can be substantial in my case because I'm much younger, and prefer more growth investments, have higher tolerance for volatility, and more years of my life to smoothen out the variance in outcomes.
Hi Sherry, I completely agree with you that you can get better returns from the stock market than you can from property. I think the difference is that I assumed that your primary housing pot is not an investment pot and I still think it's wise for it not to be treated as one.
Correct me if I'm wrong but your model uses a constant rent price for the entire period. I don't think that's a reasonable assumption for many markets and even in the case of rent control you will not have constant rent. There is the issue of rent growth being so unpredictable so I'm not even sure how one goes about modelling the growth in the general case. You might need to introduce several rates of rent growth or something like that.
Hi George. Actually in the calculator it does assume that the house is an investment - see "net proceeds" calculations. This is assuming house price growth of 4% a year which is an investment. Afterwards, when you sell it, it is counted as "investment gain."
This particular model just assumes a flat rental price growth - I can definitely in the future add in variability into the calculation across different time periods. For now, you could use a different rental price growth rate if you would like to see how the numbers would look in different scenarios.
Very good. If you can do another case study of a 4mil condo (buy vs rent) you will see even larger differences. Icon at 1mil isnt much difference, if you go higher in quantum condos or Landed houses you will see a Massive difference. Like yourself, i chose to rent and my cashflow pays for my bungalow rental, and more
Assumed on investing in the USA (everything is fine) with USD outperforming all currencies (80 years history) and the Singapore context (do Mericans pay $1.2mil for 500sqft?).
Inflation is not really 3% (never been) and real assets hold their value.
Model seem to work for the _narrative_: equities are the rage, indexing will work forever, and expensive unit in expensive city. It may hold but to be proven out (by 2054)
Hey Thomas thanks for the comment! The calculator (https://peekrentorbuy.streamlit.app/) is designed for you to input your own assumptions about the growth rates of both equities and property. You could even tweak the assumptions around inflation as well. Those might give you very different results - give it a spin :)
Hey Donn! That's exactly why I decided to build the calculator because a lot of ppl have had unquestioned assumptions around investing in certain markets and don't bother to do the math to check. Bare in mind - this doesn't count for HDBs where you get substantial subsidies from the government that skew the returns in favor of buying (which is the whole point of the policy).
1. You mentioned that your rent went up 33%. And then assume 3% rental inflation for 30 years.
2. House you need to buy at the dip. And then assume interest rates don’t go up a lot.
3. Assumption S&P goes up linearly. Each recession it crashes 60% from peak. Unlike Covid in previous cycles takes 2-3 years to recover.
4. Housing is emotional decision.
Time to buy isnt when rent is higher but you think stability is needed.
Hey Nirav! Thanks for the comments.
1. The 33% increase I would say was definitely an anomaly and I don't quite see the same kind of increases right now. The anomaly is due to COVID (prices were a lot lower because people were not moving into Singapore, and the shot up as more ppl came in).
3. S&P is not linear but over a long period of time, it does hit around 10-11% annualized returns. If you are looking for more stable, passive income, then S&P 500 would have a lot more variance.
4. Agreed on the emotional part! It is really up to individual choice.
Yes, the "psychology of money" can't be argued against with logic always, but if you have the privilege of having to think only for yourself, then you should try and take more rational decisions when you can.
In Istanbul where I am leaving now the percentage for mortgage is 20% per year. Inflation has been up 283% for three years (economic crisis in turkey due to dictatorship president owned decisions in economy ) and rent price has doubled in last two years.( immigrants because of war in Ukraine which russia started)
Oh man sorry to hear about that! It's a tough situation macro wise.
How can we get access to the wealth documentation and over-time projection spreadsheet? (5 years, 10years, +) I am in the creative industry and wouldn't even know where to start in making my own spreadsheet and roadmapping in this way. But would LOVE to be able to!!
Hi Ana! So I did build a FIRE calculator and haven't launched it yet but want to show it to you early in case it is helpful. http://peekfire.streamlit.app/ There are some advanced settings around specific growth rates for assets, so I am happy to do a walk-through with you as well, and see where I could provide some guidance.
Feel free to also reach out to me on LinkedIn or email - happy to share more and see how I can help.
- https://www.linkedin.com/posts/sherry-jiang-12557332
- sherry@peek.money
Kudos for all the work on the models but if I were you, I’d take a step back because it seems that you are ignoring fundamentals. Any property that you rent has a cost and it would be the same if you buy or rent. Since you are not the owner but a renter, there is also a profit that you will be covering with your rent. Any model that suggests you are better off renting assumes you can do better at “investing” than the owner and that the owner is in an investment “loss” position. Not saying that it’s an impossibility but I’d be weary of models suggesting a definitive win for renting as that’s absolutely not the case when considering a significant number of rental contracts.
Hey George! Thanks for your feedback.
First of all, I want to make it clear that the model doesn't necessarily suggest a definitive win for renting - if you play around with the numbers, you'll find that in certain situations it actually does make sense to buy vs. rent. It's just that in my particular case of looking at the condo at Icon, it made a lot more sense for me to rent vs. buy. Check out the calculator here: https://peekrentorbuy.streamlit.app/
Secondly, owners might have different financial preferences and needs. Often, the landlord that you are renting from is looking for more stable and fixed returns as an investment and might prefer that over the stock market. My landlord is an older gentleman in his 50s and understands property much more than stocks, wants stable passive income, and therefore, is probably okay with the potential upside that would come from stocks. But just bear in mind that the cost of those preferences can be substantial in my case because I'm much younger, and prefer more growth investments, have higher tolerance for volatility, and more years of my life to smoothen out the variance in outcomes.
Hi Sherry, I completely agree with you that you can get better returns from the stock market than you can from property. I think the difference is that I assumed that your primary housing pot is not an investment pot and I still think it's wise for it not to be treated as one.
Correct me if I'm wrong but your model uses a constant rent price for the entire period. I don't think that's a reasonable assumption for many markets and even in the case of rent control you will not have constant rent. There is the issue of rent growth being so unpredictable so I'm not even sure how one goes about modelling the growth in the general case. You might need to introduce several rates of rent growth or something like that.
Hi George. Actually in the calculator it does assume that the house is an investment - see "net proceeds" calculations. This is assuming house price growth of 4% a year which is an investment. Afterwards, when you sell it, it is counted as "investment gain."
This particular model just assumes a flat rental price growth - I can definitely in the future add in variability into the calculation across different time periods. For now, you could use a different rental price growth rate if you would like to see how the numbers would look in different scenarios.
Very good. If you can do another case study of a 4mil condo (buy vs rent) you will see even larger differences. Icon at 1mil isnt much difference, if you go higher in quantum condos or Landed houses you will see a Massive difference. Like yourself, i chose to rent and my cashflow pays for my bungalow rental, and more
Assumed on investing in the USA (everything is fine) with USD outperforming all currencies (80 years history) and the Singapore context (do Mericans pay $1.2mil for 500sqft?).
Inflation is not really 3% (never been) and real assets hold their value.
Model seem to work for the _narrative_: equities are the rage, indexing will work forever, and expensive unit in expensive city. It may hold but to be proven out (by 2054)
Hey Thomas thanks for the comment! The calculator (https://peekrentorbuy.streamlit.app/) is designed for you to input your own assumptions about the growth rates of both equities and property. You could even tweak the assumptions around inflation as well. Those might give you very different results - give it a spin :)
I did not think this would apply to Singaporeans. Great read!
Hey Donn! That's exactly why I decided to build the calculator because a lot of ppl have had unquestioned assumptions around investing in certain markets and don't bother to do the math to check. Bare in mind - this doesn't count for HDBs where you get substantial subsidies from the government that skew the returns in favor of buying (which is the whole point of the policy).