How quickly the mood has changed. The optimism that we saw in January has quickly become less positive no thanks to the strong labour market and inflation numbers. Markets are now pricing in a higher peak in the Fed Funds Rate although it seems that the market still expects rates to start coming down by next year.

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Sadly, I’m finding this out the hard work in my latest job. I endeavour to write more and hopefully, through that exercise, I’ll become a better writer in time.

Buying A Modest Home Has Been A Poor Wealth Building Advice For The Past 10 Years (15HWW)

The gist of this post is that Mr. 15HWW is experiencing FOMO.

Before I shared my thoughts, let me state upfront that my wife and I have also benefited from the run-up in property prices.

Selling our BTO flat to move into a resale HDB in a much better location has been a game-changer in terms of quality of life. We’ve managed to cut our travel time to and from work and for personal reasons, this estate works much better for us.

Selling our BTO flat also meant that a fair amount of the resale flat’s price was paid for by the buyer of our BTO flat. In a way, it’s just simply unlocking the value in home equity that would otherwise remain trapped in your home and you may be getting richer on paper as Mr. 15HWW found out but it won’t really translate into something tangible. The bonus is that the recent increase in HDB resale flat prices mean that our home equity has also increased by a six-figure amount.

At the same time, those who are feeling FOMO for missing out on the increase in property prices need to see things from a broader perspective. Most people who sold their BTO flat to buy another property would probably have taken a more expensive mortgage and have higher loan repayments. With the recent increase in home loan rates, these same buyers are probably feeling the heat so I wouldn’t be too envious of them.

From the story, it also seems that the Senior’s mortgage also keeps going up with every next property purchase. I’m not sure about others but that seems unpalatable to me. I wouldn’t like the idea of having to continually face higher monthly payments on my home loand as I age. This should be particularly true for those in their 40s who will probably see their earnings peak and encounter a higher chance of being let go in an economic downturn.

The last problem with looking at home equity as a form of wealth is that if you only have one property, your home equity is locked up in the property which is a roof over your head. To unlock that value, you have to buy and sell that property*. When you sell, you will have to move. Having moved house twice (once to my BTO, and now once more to my current place), I can safely say that I don’t enjoy the process.

Anyhow, if you see buying (and staying) in a home as part of your wealth-building process, then it is only right that you consider the growth of the total portfolio equty and not just the equity in your home. After all, monies not invested in property can and should be used to invest in other assets. If you see things that way, the gap between someone who benefited from a rise in property prices and those who haven’t shouldn’t be so huge.

*I know you can take a home equity loan if you have private property but that also comes with its associated costs and risk.

How Much is Enough to Retire Comfortably?
(A Wealth of Common Sense)

The post is commentary on a Bloomberg article which did a poll. Anyway, long story short, those polled said they need an average of $3m to retire. There are some minor differences in proportion of respondents across geographies but that’s the most common response.

$3m is real terms. If that number is truly real, then I think a good swath of the population will never be able to.

Ever since I wrote those two posts on retirement in Singapore, I’ve been seeing more opinions and views on retirement. It’s probably some psychological effect that I’m noticing more of these sort of articles but nevertheless, it’s more data to help form an opinion on this issue.