Having the means doesn’t mean you have to

Tuesday, August 25, 2015 Coftea Coftea , HDB , Thoughts 2 Comments

I had a chat with a friend recently and I brought up the usual tease question that is always directed at him. “So when are you going to buy a condo?” His usual response was to give a shrug, tell people he was waiting for the right moment and share some details of condos he has scouted. His reply this time however, surprised me. In his matter-of-factly tone, he said he is not going to buy one.
Let me step back and describe his background a little. He is in the oil and gas industry, working in a stable position that pays above average salary. Not only that, he easily gets more than 6 months of bonus annually. He is single, lives with his parents and has no major commitments other than taking care of his parents. Despite his high income, he does not spend frivolously. No car and no luxury goods, indulging in a yearly short and long vacation. My group of friends started teasing him with the condo question when we realised how cash rich he must be. We were light hearted in our question, but when he took it seriously, we knew he has the resources and was seriously considering one.

His reasons for giving up the idea of a condo? First, he is uncomfortable committing to a huge debt. He feels that he will be financially ‘locked down’ for many years.

Second, he will be eligible to purchase a HDB as sole owner in about 5 years' time. If he choose not to buy a condo now, he can fully purchase a HDB without a loan by then. He can then rent out the entire HDB. No debt no worries.

Third, he is worried that once he has a private property, downgrading back to a HDB isn’t easy. Moreover, should he want to buy a BTO next time, he will have to wait 30 months after selling his condo to bid for one. On the other hand, there isn't much restrictions to buy a condo after his HDB if he has the means to get one.

Forth, I don’t know how he ‘sensed’ that many big MNCs are moving their operations away from Singapore. He told me costs are rising and companies no longer find Singapore attractive to setup operations. There might be truth in it as the latest MOM figures reflected that unemployment has crept up a little in 2Q 2015 after declining for the past 4 quarters. So, demand of rental might fall and getting consistent yield from a condo might sound easier than reality.

His reasons are fair and much thought were given to them. We all have our own risk appetite, which is something we must listen to or be constantly stressed over our finances. Having the means doesn’t mean you have to. And one more thing I noticed is he has assumed he will remain single in his future plans. Who knows what fate has in store for him.
The only suggestion I could offered was to make his money ‘work’ when he is saving up. Since he has not taken up my recommendation to start stock investing (after many tries), I know his savings will only end up depreciating in the bank. The first thing that came to my mind was the Singapore Savings Bond (SSB). I am glad that he is already well informed and has plans to put money in it. He has also been looking at Fixed Deposits but prefers SSB for the option to fully cash out without penalty. Come to think of it, making voluntary contributions to CPF is also another good idea..

Whatever his final decision might be, I’m happy to see a friend making sensible financial choices. Too bad I won't be invited to his condo for BBQ anytime soon.