Today, I read an interesting article (quoting a research paper), titled "CPF returns attractive versus risk: Institute of Policy Studies", which you can read at this URL...
The part which is believe is "interesting" BUT doesn't quite make sense in the paper cited by the news article is pertaining the claimed return of CPF, where it says:
"The CPF has similar returns, over 20 years, when compared to a typical balanced portfolio of 60 per cent equities and 40 per cent bonds, the paper said. But these returns of 5.7 per cent a year come with a standard deviation of just 1.4 per cent due to various guarantees in the system. By contrast, the standard deviation for the 60:40 portfolio is 12.3 per cent, with expected returns a tad higher at 5.9 per cent."
I don't know how the authors obtain 5.7% a year return for our CPF money locked in CPF, because as we know, CPF money has been paid 2.5% per annum (p.a.) for very long time, and the first $60,000 will get 4% p.a. The CPF has a minimum sum of $161,000 for retirement fund and another about $50,000 for Medisave account, making a total of $211,000 locked inside CPF for every Singaporean. If only $60k receives interest of 4% p.a. and the other $151k receives interest of 2.5% only, how the hell the authors of the paper arrive at 5.7% p.a. return? May be the 5.7% p.a. is the AVERAGE return (total return over 20 years divided by 20 years) and NOT ANNUALIZED return? But hey, ANNUALIZED return is usually used in the financial sector and presenting the return as 5.7% AVERAGE return and then comparing to say about 5.7% ANNUALIZED return from stocks and bonds are like comparing APPLE to ORANGE!
For people who are not sure about the difference between AVERAGE return and ANNUALIZED return, let me explain it in a simple way:
1) Say you have AVERAGE return of 5.7% over 20 years, then your total return over 20 years = (5.7%)x20 = 114%.
2) Say you have ANNUALIZED return of 5.7% over 20 years, then your total return over 20 years = (1.057) to the power of 20 = 303.04%.
Hey, the difference between (2) and (1) above over 20 years = 189% !!!
I leave it to all of you to figure out the details or call for more clarifications from the authors of that paper.
Showing posts with label EYES wide open. Show all posts
Showing posts with label EYES wide open. Show all posts
Tuesday, December 9, 2014
Monday, August 18, 2014
Read NEWS with eyes wide open and brain functioning!-(2)
Can't help but to raise this issue again: Please Read NEWS with eyes wide open and brain functioning!
It is really hilarious to see news reported of some issues or some comments that doesn't make sense, and yet appear in newspapers as though they are facts! This time, I am referring to a Channel News Asia article with title: "Experts optimistic about take-up rate of buyback scheme", you can read the details at this URL...
The part I am referring to are as follow:
" Property analysts have welcomed the extension of the Enhanced Lease Buyback Scheme to four-room flats, noting that the option to unlock value from their dearest asset would now be available to close to 60 per cent of the population.
...
He also felt there was no need to extend the scheme to owners of five-room or bigger flats. “They can always downgrade. They also have more rooms to lease out for additional income,” he said. "
Comments:
* If 5-room flat owners can always downgrade, the same is also true of 4-room flat owners, why disadvantage against 5-room flats' owners?
* HDB 5-room flats also only have 3 bedrooms, and are no different in term of number of bedrooms compared to 4-room flats! So, if 5-room HDB flat owners can lease out their rooms for additional income, the same is also true for 4-room HDB flat owners which also have the same number of bedrooms. So, why there is no need to extend the scheme to owners of 5-room flats when 5-room flats are just like 4-room flats (except with an additional dining room)?!
It is really hilarious to see news reported of some issues or some comments that doesn't make sense, and yet appear in newspapers as though they are facts! This time, I am referring to a Channel News Asia article with title: "Experts optimistic about take-up rate of buyback scheme", you can read the details at this URL...
The part I am referring to are as follow:
" Property analysts have welcomed the extension of the Enhanced Lease Buyback Scheme to four-room flats, noting that the option to unlock value from their dearest asset would now be available to close to 60 per cent of the population.
...
He also felt there was no need to extend the scheme to owners of five-room or bigger flats. “They can always downgrade. They also have more rooms to lease out for additional income,” he said. "
Comments:
* If 5-room flat owners can always downgrade, the same is also true of 4-room flat owners, why disadvantage against 5-room flats' owners?
* HDB 5-room flats also only have 3 bedrooms, and are no different in term of number of bedrooms compared to 4-room flats! So, if 5-room HDB flat owners can lease out their rooms for additional income, the same is also true for 4-room HDB flat owners which also have the same number of bedrooms. So, why there is no need to extend the scheme to owners of 5-room flats when 5-room flats are just like 4-room flats (except with an additional dining room)?!
Tuesday, August 12, 2014
Read NEWS with eyes wide open and brain functioning!
On 24 July 2014, we saw NEWS on Channel News Asia with headline news like this:
"‘Too early’ to ease property cooling measures: MAS"
The news article then continues to say:
"Property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, MAS says."
You can read the full details at this URL.
There is no doubt that the above is true in the overall sense, but only on face value.
If you delve deeper into the overall conclusion, you will find that the conclusion is NOT true of Singapore properties in certain specific localities, mainly the Core Central Region or CCR (i.e. the urban city area).
Since they said "Property prices risen 60% over last 4 years", I will look at the property prices from 2009 - 2014 now specifically in different locations, E.g.:
1) In 2009, a 1367 sqft 99-years leasehold property in Outside Core Region (OCR) or suburb, Sengkang, was transacted at about $500 psf.
In 2014 Jun, the property was transacted at $929 psf. This is a gain of 85.8%.
2) In 2009, a 2293 freehold sqft property in Core Central Region or urban city in Orchard, was transacted at $1153 psf.
In 2014 July, the property was transacted at $1168 psf. This is a gain of only 1.3% (after about 5 years!).
Similar transacted price trends can be seen for most other properties in the OCR and CCR neighbourhood whereby there is very little price increase for CCR properties bought in 2009 and now, while there is a huge increase of almost 85% or more for OCR properties.
You will be even more confused if you know that during the 2007 property price peak, similar OCR property was only transacted at about $700 psf while similar CCR property was transacted at >$2500 psf!
Thus, we can see that statement that the private property prices have risen 60% over last 4 years is a serious under-statement for OCR property prices AND yet a serious over-statement for CCR property prices. This is despite of the so many cooling measures and the most recent most damning ABSD and TDSR.
On the other hand, we can see that the biggest bargain to be had right now is the CCR private residential properties (vs historical prices)!
However, I also note that despite of this fact, most ordinary Singaporeans can't afford such CCR properties, rendering them no choice but to buy "expensive" OCR properties that are "more affordable" to them. The truly rich are having their big cherry to picks (other than having to pay ABSD)! These CCR properties are mostly fire-sale by those owners who are not rich and are now in need of money, partially also squeezed by TDSR and inability to re-finance at a better terms and rate etc.
"‘Too early’ to ease property cooling measures: MAS"
The news article then continues to say:
"Property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, MAS says."
You can read the full details at this URL.
There is no doubt that the above is true in the overall sense, but only on face value.
If you delve deeper into the overall conclusion, you will find that the conclusion is NOT true of Singapore properties in certain specific localities, mainly the Core Central Region or CCR (i.e. the urban city area).
Since they said "Property prices risen 60% over last 4 years", I will look at the property prices from 2009 - 2014 now specifically in different locations, E.g.:
1) In 2009, a 1367 sqft 99-years leasehold property in Outside Core Region (OCR) or suburb, Sengkang, was transacted at about $500 psf.
In 2014 Jun, the property was transacted at $929 psf. This is a gain of 85.8%.
2) In 2009, a 2293 freehold sqft property in Core Central Region or urban city in Orchard, was transacted at $1153 psf.
In 2014 July, the property was transacted at $1168 psf. This is a gain of only 1.3% (after about 5 years!).
Similar transacted price trends can be seen for most other properties in the OCR and CCR neighbourhood whereby there is very little price increase for CCR properties bought in 2009 and now, while there is a huge increase of almost 85% or more for OCR properties.
You will be even more confused if you know that during the 2007 property price peak, similar OCR property was only transacted at about $700 psf while similar CCR property was transacted at >$2500 psf!
Thus, we can see that statement that the private property prices have risen 60% over last 4 years is a serious under-statement for OCR property prices AND yet a serious over-statement for CCR property prices. This is despite of the so many cooling measures and the most recent most damning ABSD and TDSR.
On the other hand, we can see that the biggest bargain to be had right now is the CCR private residential properties (vs historical prices)!
However, I also note that despite of this fact, most ordinary Singaporeans can't afford such CCR properties, rendering them no choice but to buy "expensive" OCR properties that are "more affordable" to them. The truly rich are having their big cherry to picks (other than having to pay ABSD)! These CCR properties are mostly fire-sale by those owners who are not rich and are now in need of money, partially also squeezed by TDSR and inability to re-finance at a better terms and rate etc.