2022 Edition – Guide to Asset Progression for Financial Freedom
2021 Inflation in the USA was 7.9% and in Singapore 4%. That was the official numbers from the powers that be but, look around, what was once $4 Mee pok is not $4.5. Or how how about CEO for Cat 2, its $92.5K. How do you keep up with inflation. Even if you had $1 million now, that number shrinks 3-4% a year. Can you keep your money until you are well into your retirement without worries? Perhaps we should incorporate Financial Investing Strategies into our curriculum so people won’t be so lost when it comes to their finances. Since we’re a property blog, we’ll talk about Real Estate and how that can help you. For the most parts, younger properties do track well with Inflation and it does give that bit of sanity and safety for most.
Thankfully, more youngsters gravitate towards the concept of asset progression if they wish to spend a much more financially stable and healthy future. With the correct implementation of asset progression, it is not only possible to have a strong grasp on your present, but you can also work on making your future stable for the ones coming after you
Read on below to get a complete 360 degree look into asset progression for the Singaporean edition.
What is Asset Progression?
Before you learn more about the intricacies involving Singapore property prices and Singapore real estate, it is crucial to understand asset progression. A majority of owners of private Singapore tend to confuse what it means. Asset progression is basically a master plan that helps improve and increase the value of your current worth total.
It is crucial to remember that asset progression doesn’t follow a quick and easy way of making money; instead, it is a long-term plan that can do wonders when carried out with guidance and appropriate calculations.
When talking about the Singapore audience asset progression is the art of gradually growing your wealth with the help of Singapore real estate investment. As the name indicates, the idea is to progress from one property type to another and move on gradually towards growth.
The final objective of any asset progression plan is to reach the executive condominium or any other high-level private property Singapore from the house for rent in Singapore. Gradually by progression through real estate, one should create a retirement funding plan that can carry them through their old age with ease.
Why opt to get Asset Progression?
A major query for the Singaporean audience is why should they invest in an asset progression plan? The counterargument that could come up is that you have energy funds available, you have a good house that you’re satisfied with and paying for through your Central Provident Fund (CPF), or you are smart with your money, and you don’t need any such plans.
However, no matter how smart and responsible you are with your funds, an asset progression plan removes the concept of uncertainty and brings a level of stability in future planning. All individuals who are paying off their house loans using their CPF are actually dipping their fingers in their retirement plans.
Furthermore, while using CPF for property purchase seems like a feasible deal, it is everything but that when considered in the long run. Using CPF means that people must pay back the amount gathered when they intend to sell off their property. To put it, accrued interest is all the money in the interest portion that could be saved had you not used it.
Moreover, the third and most important point is that no matter how smart and reasonable one is with their finances, it is still not sufficient for retirement funding. That’s because a large portion of one’s wealth is derived from the sale of their primary residence. The old strategy was to purchase a large home, remain in it for 40 years, and downsize. The strategy hasn’t worked in a long time. From 1975 to 2019, house prices rose from 8.90 Index Points to 152.2 Index Points. The rise totals up to around 1600%!
Asset Progression for Singaporean Audience
Both for the Singaporean audience and individuals living outside of Singapore, the concept of asset progression is pretty attractive since it comes with a huge number of pros. Buyers out of Singapore have attracted ed since the region offers political stability, low crime rate, exceptional education system, and good value of properties.
With the stale property prove appreciation levels, various buyers from Singapore and those from outside of the region have been able to generate passive rental income and gain profits and en-bloc sales.
Traditional Asset Journey
To understand asset progression better for Singapore, here is a look at the typical buyer journey. Initially, buyers start by getting married. A traditional couple in Singapore would start by purchasing an HDB flat. This is either a resale Singapore real estate property or a brand new one.
As time progresses, it is possible that down a couple of years, the pair might decide to sell their HDF flat and opt for something more sophisticated such as their private property. It is also possible that those who can afford it might hold on to their HDB and get private property. For many people, this is where the journey comes to an end.
However, there’s ore. At the stage of the highest changes in their career, property owners decide to upgrade their wealth and assets. While doing this, the most common mistake is buying a relative price property hoping that it will be an update; this doesn’t always work.
The last stage is that of retirement. However, when they reach this stage, buyers tend to sell their current real estate properties in Singapore and go back to an HDB flat perfect for their tun retirement fund.
How Accrued Interest Can Pile Up
Understanding the implications of accused interest is crucial to figuring out asset progression’s importance. For instance, let’s begin with an example of $300,000. The total down payment of 10% for this property would equal $30,000, while the stamp duty and mortgage duty would be $9,000 and $500, respectively. With an additional legal fee of $2500, the total CPF used just for the initial payment would amount to $42,000.
This would eventually result in a huge chunk taken in the CPF accounts. Out of the huge chunk, a majority would be just allocated to accrued interest. A property that was supposed to sell for a maximum of $30,000 will cost you double or even triple its actual price.
Common Myths about Property Progression
While property progression is a sound way of securing your future and retirement plan, many people tend to get scared of the concept because of some myths. Some of the most common myths are:
1. HDB Flats are a Sign of Investment
Buying an HDB flat means that you have an investment on the side, and its value will keep increasing as time passes. This is not correct at all! There is a major hike, approx. Around 12% in the prices of HDB flats. The government has put various measures in place to deal with the scenario, which eventually led to lower demand and lower prices.
2. Asset Progression Needs Tons of Money
To get into asset progression, one needs to have a lot of money to invest. This is incorrect as well. One must have around 8% to 10% of the buying price to begin their journey if you don’t own a property, but if you do, you don’t even need that. There are tons of funding plans that can assist you throughout. Buyers often overestimate their real financial and CPF requirements.
3. Price Equates Profit
The pricier the property, the higher the profit. This is once again completely false. While it might feel like you are upgrading by buying an expensive property, it doesn’t always equate to more profit. Keep in mind that no correlation exists between the profit size and the price of the property. What’s more, a majority of times, it’s even challenging to profit from pricier properties instead of affordable ones. This is because the number of buyers available for affordable properties is always higher.
4. Not Taking Time in Consideration
Any real estate agent will tell you that the most important thing is to act quickly. Your whole wealth growth strategy might be ruined if you make a hasty choice or enter at the wrong time. You may lose a wonderful opportunity if you procrastinate too long. For Singaporean buyers, the loan-to-value ratio is an important consideration. Because of limited market entrance, the maximum quantity of loans you are eligible for may also decrease.
Use your CPF Strategically
When you have decided not to waste away your CPF on purchasing real estate, you can start by investing it in different regions that can boost your portfolio. The easiest options include buying stocks, buying property, or transferring the amount to CPF Special Account.
Make sure that you spend an ample amount of time researching your options before you make a decision. The first step in any asset progression journey is staying informed. Gauge Singapore landed property price trends, conduct a thorough analysis of your financial situation, and manage the risk in the most efficient way possible.
Reach us if you’d like some help with your own real estate port folio. We’d love to help!