Sunday, 15 April 2018

Where Art Thou, TPG?

Just when I thought TPG was very quiet in its plans to roll out its 4G network, it suddenly announced on 19 Mar that it would provide the elderly with a free mobile plan for 2 years that includes unlimited calls and 3GB of data. That sounds really good on paper, but is TPG's 4G network ready?

According to the terms of the spectrum auction, TPG has to achieve the following network coverage by certain dates following the commencement of its spectrum rights on 1 Jul 2017:

Coverage Quality of Service Duration Date
Street Level 95% coverage 18 months 01 Jan 2019
In-Building 85% coverage 30 months 01 Jan 2020
MRT Underground Stations & Lines 99% coverage 54 months 01 Jan 2022
Thus, if TPG's roll-out schedule follows the above milestones, its network coverage is good only at the street level when it launches next year. Within buildings, the coverage will be sporadic. What is the use of having free mobile plans if they cannot be used to make or receive calls within buildings? 

Between street level and in-building coverage, TPG only has 1 year to roll out to all buildings. Given that there are so many buildings in Singapore, I do not think TPG can achieve the required Quality of Service (QoS) imposed by IMDA. Thus, if my guess is correct, it will be several years before TPG's 4G network is capable of matching those of the existing telcos. 

On the capex to build the nation-wide network, TPG has quoted a figure of $200M to $300M. If you compare to M1's fixed asset costs for "network and related application systems" of $517M as at end Dec 2017, TPG's proposed capex of $200M to $300M is on the low side. No doubt, M1's fixed asset costs include the 3G, 4G and Narrow-Band Internet-of-Things (NB-IoT) networks, but to build a nation-wide 4G network capable of meeting all the QoS standards at $200M to $300M still looks low.

Perhaps, what TPG is thinking of is to leverage on the 700MHz frequencies, which require less base stations than the traditional 900MHz and 1800/1900MHz frequencies. However, the 700MHz frequencies are dependent on the population switching out of analogue TV into digital TV, which is expected to be completed only by end Dec 2018.

In an interview by Zaobao on 27 Mar, M1 also had doubts on whether TPG could complete their network by the end of the year, noting that to set up a network, a telco has to purchase land, build base stations, connect the base stations to the core network and configure them. The largest obstacles are in buying the land and building base stations. M1 has around 2,500 macro base stations, and that does not include smaller base stations which are 2 to 3 times that number. Based on their observations, TPG does not seem to have started building the base stations.

In its results presentation for 1H2018 on 20 Mar, TPG reported actual capex of only AUD29.7M (or approximately SGD30.3M) for the Singapore mobile network. This is only 10% of the estimated total capex of $300M, providing further evidence that TPG has been slow in rolling out its network.

It is not easy to set up a telco network from scratch. Based on the experience of U Mobile, the fourth telco in Malaysia, it had to leverage on Celcom's network (i.e. act as a Mobile Virtual Network Operator, MVNO) while it rolled out its own nation-wide network concurrently. But for the case of Singapore, it is highly unlikely any of the existing telcos would allow TPG to come on board as a MVNO, since once TPG's network is completed, it would pose a threat to the existing telcos' business. 

Thus, I do not see TPG as posing a serious threat to the existing telcos any time soon. TPG, I am waiting for you.

Sunday, 8 April 2018

How Long Can (The) Boring Investor Blog Continue?

This is post no. 260, which represents the 5th birthday for this weekly blog. In past years, this would have been a joyous occasion, as it means that I have blogged for another 52 continuous weeks. This year, however, there is a tinge of sadness, as there is a realisation that all things will eventually come to an end, including this blog.

Regular readers of this blog would know that I like to string all posts with the same theme together, such as the telco theme of recent weeks. However, to have something useful to blog about, I need to carry out research. And research takes time. Despite this being a weekly blog, the amount of time needed to search, analyse and write useful stuffs is sometimes quite overwhelming. For example, the 4 posts on Hyflux last year were spread out over 7 weeks, simply because the research could not keep up with the blogging. 

Besides the lag in blogging, a lot of personal stuffs are also piling up. There are 400 over unread emails in my mailbox; I have not calculated my Profit & Loss for 2H2017; my database of 260 stocks is only updated up till 2016, etc.

What contributed to the lag in blogging since last year? Starting from last year, I have been analysing stocks as business investments rather than financial investments. This means having to understand the operations of a business and know what factors would affect its profitability, rather than just looking at its income statements, balance sheets and cashflow statements and conclude whether the stock should be bought or sold. A case in point is the telco theme that I have been blogging recently. To have an informed analysis about whether telcos' profitability is going up or down, I need to understand Will SIM-Only Plans Cannibalise Regular Telco Plans?, Impact of Data Upsize Plans on Telcos, Will MVNOs Cannibalise Telcos' Business?, Is Pay TV Still A Reliable Cash Cow?, Do Telco Investors Need to Fear the Fourth Telco? etc., before I can reasonably conclude Is Starhub's Dividend of 16 Cents Sustainable? Looking at the various aspects of the operations of the business is similar to the scuttlebutt approach mentioned in Philip Fisher's book "Common Stocks and Uncommon Profits".

Although very time-consuming, this change in blogging approach has benefited my investments as well. Global Logistic Properties (GLP) was the largest winner in the 20 years I have been investing with my own money. As for M1, although I am sitting on paper losses currently, I am confident the stock price will turn around. Likewise, I am confident that my analysis for the likes of Keppel Corp/ SembCorp Marine, Hyflux, Starhub will turn out to be correct. There is no going back to the days of just analysing the financial statements and buying/ selling the stock. Similarly, I also believe readers would want to know how the business aspects of the company are doing rather than just the financial aspects. 

Thus, as much as I like to continue blogging once every week, there will come a time when this trend will be broken. After having blogged 52 times every year for the past 4 years, I will be quite sad when this day comes. In the meanwhile, let us relish for every week that this blog can continue.

See related blog posts:

Sunday, 1 April 2018

Will MVNOs Cannibalise Telcos' Business?

How many telcos are there in Singapore currently? If you answered 3, that is incorrect. There are currently 6 telcos -- 3 traditional telcos that operate their own telco networks, namely, Singtel, Starhub and M1, and 3 Mobile Virtual Network Operators (MVNOs) that buy network capacity from the traditional telcos and resell to retail customers. Ever since the first MVNO, Circles.Life, set up shop in May 2016, things have accelerated in the MVNO space. In a short span of 3 months, we have had another 2 MVNOs springing up, namely, Zero Mobile and Zero1. You probably have heard of their promotions, like Circles.Life's 20GB of data for $20, Zero Mobile's Unlimited calls, SMS and data plan, or Zero1's unlimited data plan for $29.99. Since MVNOs compete for the same group of retail customers as the traditional telcos, will MVNOs cannibalise telcos' business? Let us look at each one of them.

Circles.Life vs M1

Circles.Life leases network capacity from M1. Its most well-known promotion is its 20GB-for-$20  plan. Although it sounds exciting, you need to sign up for the base plan first before you can sign up for the 20GB-for-$20 add-on. The table below compares Circles.Life's base and add-on plans and the corresponding M1's SIM-only plans. Note that I am using M1's SIM-only plans that come with 12-month contract, whereas MVNOs do not require any contracts. M1 has no-contract SIM-only plans, but these plans provide less data and I believe most customers would not mind signing up for a 12-month contract for better value.

Circles M1 Circles M1
Plan Base mySIM20 Promo mySIM50
Price  $   28.00  $   20.00  $   48.00  $   50.00
Talktime (mins) 100 100 100 100
SMS 0 100 0 100
Data (GB) 6 5 26 30
Caller ID Yes No Yes No
Equivalent Price  $   30.00  $   25.35  $   50.00  $   55.35

As you can see, Circles.Life's base plan is more expensive than M1's corresponding plan. There are a few add-ons to make both plans more comparable. Circles.Life's plan does not come with free incoming calls. To have this feature, you need to add another $2, making it effectively $30 per month. M1's plan does not come with caller ID, which costs another $5.35. Hence, the equivalent cost is $25.35 per month. In terms of the base plans, Circles.Life is generally more expensive than M1, although Circles.Life has 1GB of data more.

It is only when you add on the 20GB-for-$20 option that Circles.Life becomes cheaper than M1's corresponding plan. After accounting for the necessary add-ons mentioned above, Circles.Life's plan costs $50 whereas M1's mySIM50 plan costs $55.35, but with 4GB of data more.

According to M1, the average data usage for Dec 2017 is 4.3GB per month. Thus, customers who need the 20GB-for-$20 add-on really belong to the minority. Circles.Life is unlikely to threaten M1's telco business.

Zero Mobile, Zero1 vs SingTel

Both Zero Mobile and Zero1 lease network capacity from Singtel. Zero Mobile has 2 plans while Zero1 has 1 plan. The table below compares the plans for Zero Mobile, Zero1 and Singtel's SIM-only plans (with 12-month contract). The corresponding Singtel's SIM-only plans are 10GB for Zero Mobile and 5GB for Zero1, for reasons discussed later.

Zero Singtel Zero Singtel Zero1 Singtel
Plan Zero X 10GB Zero 40 10GB 5GB
Price  $   65.00  $   36.05  $   40.00  $   36.05  $   29.99  $   20.00
Talktime (mins) Unlimited 150 Unlimited 150 200 150
SMS Unlimited 500 0 500 200 500
Data (GB) Unlimited 10 9 10 Unlimited 5
Caller ID Yes No Yes No Yes No
Equivalent Price  $   65.00  $   84.20  $   40.00  $   57.45  $   29.99  $   52.10

Again, for the base plans, MVNO's plans are more expensive than Singtel's corresponding plans. To make Singtel's SIM-only plans more comparable to that of MVNOs, I added unlimited talktime for $16.05, 25GB of data for $26.75 and caller ID for $5.35, where applicable. Unlimited SMS for $16.05 is ignored, since most subscribers nowadays do not send many SMS.

After accounting for all the corresponding add-ons, Singtel's plans are more expensive than all the MVNO's plans. There are important caveats, however. Firstly, "unlimited" does not really mean unlimited usage. For both Zero Mobile and Zero1, "unlimited" means a cap of 5,000 mins of talktime and 5,000 SMS per month. Secondly, Zero X's unlimited data plan does not allow you to share the data with other devices, either by using your phone as a WiFi hotspot, or using the SIM on another device. For Zero1's unlimited data plan, only the first 3GB of data will be at 4G speeds (This is the reason why Zero1's plan is compared against Singtel's 5GB plan and not the 10GB plan). All data after that will be throttled according to the network capacity and performance. Thirdly, for Zero Mobile, any excessive, unreasonable, fraudulent or unapproved usage might be charged at the commercial rates mentioned below.

Monthly Subscription Cost  $   10.00
Mobile Data usage (per GB)
 $   10.00
Incoming Calls (per minute)
 $     0.10
Outgoing Calls (per minute)
 $     0.10
Incoming SMS (per SMS)
 $     0.05
Outgoing SMS (per SMS)
 $     0.05

In the final analysis, most people would not need unlimited talktime, SMS or data. The base plans from Singtel (150 mins of talktime and 5/10GB of data) are sufficient, with a caller ID add-on at $5.35. From this perspective, MVNOs' plans are generally still more expensive than Singtel's plans. Customers who need a lot of data and are attracted to MVNO's plans belong to the minority.


Although MVNOs have exciting promotions, in reality, they are hampered by the fact that they need to buy network capacity from the traditional telcos, and telcos will not offer them such low prices that the MVNOs can undercut them. The relationship between MVNOs and traditional telcos is similar to that between a landlord and tenant; because the tenant has to pay rent to the landlord, he will never be able to offer lower prices than the landlord on a sustainable basis. Thus, MVNOs will not cannibalise traditional telcos' existing business.

P.S. I am vested in M1, Netlink Trust and Singtel.

Monday, 26 March 2018

Is Starhub's Dividend of 16 Cents Sustainable?

A few bloggers have written about whether Starhub's dividend of 16 cents per year is sustainable when Starhub released its results in Feb. This time last year, I reviewed the prospects of its various business segments and concluded that challenging times were ahead for Starhub's dividends. See Challenging Times Ahead for Starhub's Dividends for more info. In today's blog post, I will update the review and discuss whether Starhub's dividend of 16 cents is sustainable. Although mobile services is the largest business segment, I will discuss it last, for reasons explained later.

Pay TV

If you read Is Pay TV Still A Reliable Cash Cow?, you would know that the traditional advantage of Starhub over the other telcos is its cable TV network infrastructure, which is used to provide not only Pay TV but also cable broadband services. The cost structure for Pay TV is fixed capital cost for the network infrastructure, and mostly variable cost for the TV content. The network infrastructure has been in operations for many years and would have been mostly depreciated. Thus, the more subscribers Starhub can get on its Pay TV services, the more profits it can generate. Unfortunately, Pay TV has been on a decline in recent years due to competition from over-the-top service providers like Netflix and online privacy. Fig. 1 below shows the no. of Pay TV subscribers Starhub has since 2015.

Fig. 1: No. of Starhub Pay TV Subscribers

Although Starhub has been rationalising TV content to cut costs and investing into media companies like mm2 Asia to generate exclusive media content, it is difficult to see such measures being able to counter the decline in no. of subscribers. Furthermore, investments into media companies take away cashflows that could be paid out to shareholders. Thus, pay TV is no longer the cash cow it used to be.

Wired Broadband

The same story is repeated for the wired broadband business segment. Wired broadband can be categorised into cable broadband and fibre broadband. Although the total no. of broadband subscribers has remained steady, a breakdown of the no. of subscribers shows that the no. of cable broadband subscribers has continued to decline, in favour of fibre broadband. See Fig. 2 below for the no. of cable and fibre broadband subscribers.

Fig. 2: No. of Starhub Wired Broadband Subscribers

As mentioned above, cable broadband is served though the Pay TV network infrastructure, which is fixed capital cost and mostly depreciated. Thus, the less no. of cable broadband subscribers, the less profits Starhub can generate. On the other hand, fibre broadband is served though the Next Generation Nationwide Broadband Network run by Netlink Trust. Starhub has to pay Netlink a pre-determined amount of money for each subscriber. Thus, the profit margin for fibre broadband is lower than that for cable broadband.

Recently, Starhub has been running a promotion to get more customers on board its cable broadband services, but it is difficult to see Starhub being able to reverse the decline in the no. of cable broadband subscribers. Again, wired broadband is unlikely to become the cash cow it used to be.

Enterprise Fixed Network

This business segment is the rising star of Starhub, with increasing revenue annually. However, part of the revenue growth is from acquisition of companies. Exactly how much profits are generated from the revenue is unclear. Furthermore, as Starhub continues its acquisition path, this business segment will soak up more cashflow than it can generate. Last year, it spent $22.6M acquiring companies. This year, it has already spent $57.5M in doing so. So, do not expect this business segment to generate good cashflows to sustain its dividends.

Mobile Services

We have come to the most important business segment, which is the mobile services. Mobile services is under pressure from different sources, such as the SIM-only plans, data upsize plans, Mobile Virtual Network Operators (MVNOs) like Circles.Life, Zero Mobile and Zero1, plus TPG, the fourth telco. You can read more about the impact of SIM-only plans, data upsize plans and MVNOs at Will SIM-Only Plans Cannibalise Regular Telco Plans?Impact of Data Upsize Plans on Telcos and Will MVNOs Cannibalise Telcos' Business? respectively.

Thus, it looks like even mobile services is facing declining cashflows. However, Starhub recently did something that no other telcos did -- it silently raised the prices of its mobile services plans. It ditched the original regular plans which go by the names of 4G 3/ 4/ 5/ 6/ 12 (representing GB of data) and replaced them with plans which go by the names of XS/ S/ M/ L/ XL. These new plans come with unlimited data during weekends but also higher monthly fees. Generally, the fees are increased  across the board by $5.10 per month. As at end Dec 2017, Starhub has 1.37M post-paid subscribers. Assuming the higher fees do not drive them away, Starhub can expect to collect $83.8M (1.37M x $5.10 x 12 months) more in revenue and profits annually.

However, this $83.8M increase in revenue and profits will only materialise 2 years later, when all the existing 2-year telco contracts have expired and migrated to the new plans. For 2018, assuming the contract expiry dates are uniformly distributed, the expected increase in revenue and profits is about 25% of $83.8M or $21.0M.

Needless to say, the major caveat is Starhub's existing subscribers do not desert it in droves, considering that Singtel has mostly maintained prices (it raised price on its Combo 3 plan but dropped price on Combo 6 plan) while M1 has introduced big data plans, including an unlimited data plan at $118 per month. In the long run, this is likely to lead to subscribers switching to other telcos as they question the need to pay an extra $5.10 per month in exchange for unlimited data during weekends. But in the short run, there will be increased cashflow from the increase in prices.


Overall, we will see declining cashflows from Pay TV and wired broadband but increasing cashflows from mobile services. The Enterprise Fixed Network segment will continue to soak up cashflows through acquisitions. Thus, free cashflow will continue to decline in 2018. In 2017, free cashflow (based on Cashflow from Operations minus Cashflow from Investing) is only $190.1M. Dividing by 1,729.1M shares, free cashflow per share is only 11 cents. So, my conclusion is Starhub's dividend of 16 cents per share is not sustainable.

P.S. I am vested in M1, Netlink Trust and Singtel.

See related blog posts:

Sunday, 18 March 2018

Will SIM-Only Plans Cannibalise Regular Telco Plans?

It has been a year since I last wrote about telcos. Looking back at what I wrote, it has been gratifying to see that I was right about M1's revenue/ profits bottoming out sometime in 2H2017 and Starhub facing challenges in its Pay TV and broadband businesses. See Challenging Times Ahead for Starhub's Dividends for more info.

Even so, there have been hits and misses in my analysis. One of the misses is the Impact of SIM-Only Plans on Telcos. There, I wrote that "for each subscriber who chooses to switch (from regular telco plans), SIM-only plans will result in a significant drop in revenue. The impact to profit is also negative but smaller than the decline in revenue. However, the no. of subscribers who choose to switch to SIM-only plans is likely to be small."

A year later, I have a better understanding of SIM-only plans. My analysis that SIM-only plans will result in a drop in revenue and profitability is still correct, as shown by the decline in Average Revenue Per User (ARPU) since 3Q2015, when M1 launched the first SIM-only plan. Given that existing subscribers who wish to downgrade from the regular telco plans to SIM-only plans have to wait until their contracts expire, and the typical contract period is 2 years, the effects of SIM-only plans will only disappear 2-3 years later, which is around now. As shown in Fig. 1 below, the year-on-year (YOY) decline in ARPU for M1 has moderated starting from 3Q2017.

Fig. 1: Changes in M1's Revenue & ARPU
The part that I got wrong is the popularity of SIM-only plans. It appears that SIM-only plans are quite popular, as shown by the rise in the no. of M1's post-paid customers, which has been growing by at least 3% YOY since 3Q2015 (note: the no. of post-paid customers reported by M1 also includes those of Circles.Life, the Mobile Virtual Network Operator that leases network capacity from M1. Thus, part of the rise in customer numbers is due to Circles.Life).

Fig. 2: Changes in M1's Post-Paid Customers

Thus, when you put the 2 parts together -- (1) SIM-only plans will result in a significant drop in revenue and more moderate drop in profits for each subscriber who chooses to switch from regular telco plans, and (2) SIM-only plans are quite popular, the inevitable outcome is that M1 will see declining revenue and profitability for 2-3 years from 3Q2015 till now. This is evident from the YOY decline in revenue from 3Q2015 to 2Q2017 as shown in Fig. 1 above. In other words, SIM-only plans will cannibalise the regular telco plans that are more profitable. 

Yet, although SIM-only plans will cannibalise the regular telco plans, they also create demand of their own. Given the low-cost nature of SIM-only plans, it will attract new customers who are not on the regular telco plans. In past earnings conference calls, M1 had mentioned that SIM-only plans are value accretive at the EBITDA level, because they attract new customers and eliminate the need for mobile phone subsidies. They also mentioned that approximately 30% of new customers are on the SIM-only plans.

Perhaps the best way of thinking about regular telco plans and SIM-only plans is to borrow an analogy from the airline industry: full-service airlines and budget airlines. Regular telco plans are like full-service airlines; you get a mobile phone, telco services (voice, SMS & data) and maybe a few Value-Added Services (VAS). Whereas SIM-only plans are like budget airlines; you get only telco services. If you need a mobile phone or some VAS, you need to top-up cash. Although budget airlines do take away customers from full-service airlines, they also create demand of their own. Likewise, SIM-only plans will create demand of their own. 

Nowadays, it is not uncommon to have airlines operating full-service brands and budget-service brands under one roof. Likewise, all 3 local telcos have regular and SIM-only plans. Investing Wolf recently compared the regular and SIM-only plans of the 3 telcos (see link). One of them is actually not very competitive in the SIM-only plans, perhaps worried about the cannibalisation of its regular telco plans! It is as good as not having SIM-only plans. We all know what happens to airlines that insist on flying full-service only.

P.S. I am vested in M1, Netlink Trust and Singtel.

See related blog posts:

Sunday, 11 March 2018

How To Select a Housing Loan Package

After selecting our desired condominium, the next step is to choose a housing loan package. There is a variety of loan packages, such as fixed or floating interest rates. For fixed interest rate packages, you could choose whether to fix the interest rates for 1, 2 or 3 years, after which the loan reverts to floating interest rates. For floating interest rate packages, you could select whether to peg the interest rates to the Singapore Interbank Offered Rate (SIBOR), Swap Offer Rate (SOR) or fixed deposit rates. Assuming that you choose a SIBOR or SOR package, you have to further decide whether to peg to the 1-month or 3-month SIBOR/ SOR. Likewise, for fixed deposit rate packages, you can choose between 9-month, 15-month or 36-month fixed deposit rates. The choices can be fairly overwhelming.

Step 1: Fixed or Floating

The first step to decide is whether to go for a fixed or floating interest rate package. Given that US Federal Reserve (Fed) has increased interest rates 5 times since Dec 2015 and plans to increase them another 4 times this year, we decided it is prudent to choose a fixed interest rate package instead of a floating interest rate package.

Step 2: Fix for How Many Years

This is a tricky question. Thankfully, there are some hints. Besides setting the current interest rates, the US Fed governors also provide their projections of future interest rates. By plotting the interest rate projections, we can see how US interest rates are likely to move in the coming years. Fig. 1 below shows the current Fed dot plot, which indicates that the median interest rate projections will rise from 1.375% in 2017 to 2.125% in 2018, 2.6875% in 2019 before finally peaking at 3.0625% in 2020. Having said that, do note that these are just projections by individual US Fed governors. The actual interest rates may differ from the projections depending on how strong the economy is in the coming years.

Fig. 1: US Fed Dot Plot

Given the rise in interest rates over the next 3 years, it makes sense to fix the interest rates for 3 years. However, on the other hand, a 3-year fixed interest rate package is naturally more expensive than a 2-year package, since banks bear the risks of interest rates rising rapidly. Using the bank that we chose as an example, the interest rates for a 2-year and 3-year package are as follows:

2-Year 3-Year
Year 1 1.48% 1.68%
Year 2 1.48% 1.68%
Year 3 15M FD+1.43% 1.68%
Afterwards 15M FD+1.43% 15M FD+1.55%

As shown above, not only is the fixed portion of the interest rates higher, the margin for the floating portion of the interest rates is also higher (note: not all loan packages are as such). For a $650,000 loan over a 25-year tenure, we will end up paying $11,867 more in total interest if we were to select the 3-year loan package. That is equivalent to an extra interest of 1.83% on the $650,000 loan. For the 2-year loan package to be more expensive than the 3-year loan package, the 15-month Fixed Deposit (15M FD) rate, which is currently 0.25%, has to reach close to 2.0%.

We decided on the 2-year loan package. In the event interest rates continue to rise, we can choose to re-finance and fix the interest rates when the lock-in period expires. If conditions permit at that time, we might also choose to pay down some of the loan.

Step 3: Peg to Which Base Interest Rate

As discussed above, we selected a loan package that is pegged to the fixed deposit rates. Fixed deposit rates are actually board rates set by individual banks and are therefore less transparent compared to SIBOR and SOR, which are set collectively by a group of banks. The conventional wisdom is that if banks were to raise their fixed deposit rates to earn more interest on the loans, they would also have to pay more interest on the fixed deposits. Hence, banks are less likely to raise fixed deposit interest rates. However, the reality is that 98% of local banks' deposits have maturity of less than 1 year. Raising the interest rates on fixed deposits of more than 1 year maturity will not hurt them. See Behind Fixed Deposit Home Loan Rates for more info.

On the other hand, although SIBOR and SOR are more transparent, they are more volatile compared to fixed deposit rates. The shorter the SIBOR/ SOR tenure (i.e. 1-month vs 3-month SIBOR/ SOR), the more volatile the rates are. Also, between SIBOR and SOR, SOR is affected by the USD/SGD exchange rate and therefore fluctuates more than SIBOR. See Why Singapore Interest Rates Might Rise Faster than Expected for more info.

Comparing between the transparency of SIBOR/ SOR loan packages and the stability of fixed deposit loan packages, we went for stability as they provide greater visibility on the amount we have to pay every month, which helps us in planning other expenses.


There is a large variety of housing loan packages. It can get overwhelming at times, especially since you have to decide on a loan package quickly after you sign the option to purchase the property. Choosing the right loan package can save you some money and offer greater visibility in later years.

See related blog posts:

Sunday, 4 March 2018

How Much is Proximity to a MRT Station Worth?

In my last 2 blog posts, I discussed the price differential of different ages of condominiums, size of units, as well as how long is the leasehold of the condos. See Areas Where We Saved for Our House Purchase and Could We Afford a Freehold Property? for more info. In both posts, I mentioned my preference for proximity to a MRT station, as there are usually more amenities such as shopping centre, market, hawker centre, etc. Staying close to a MRT station also means that we save on a car, which could potentially cost $200K or more in future expenses. However, I also note that the closer a condo is to a MRT station, the more expensive it is. So how much more expensive is it?

Let us compare 2 condos that are still being built. One is within walking distance of a MRT station while the other one is far away from it. Using the same convention as the last 2 blog posts, the one that is near to a MRT station is Condo C (the same Condo C in Areas Where We Saved for Our House Purchase), while the one that is far away is known as Condo D (Condo D is in the same area as Condos E & F in Could We Afford a Freehold Property?) Both are 99-year leaseholds. Both will be completed in 2020. So, the main difference between Condos C and D is the proximity to a MRT station.

The average transaction price of the condo units for the 2 condos from Jan 2017 to Jan 2018, by no. of rooms and floor area respectively, are shown below.

Rooms Condo C Condo D

2 $1,027 $845
2+Study $1,091 -
3 $1,226 $1,138
4 $1,532 $1,385
5 $1,717 -

Area Condo C Condo D

601-700 - $845
701-800 $1,027 -
801-900 $1,091 -
901-1000 $1,226 $1,138
1001-1100 - -
1101-1200 $1,532 $1,385
1201-1300 - -
1301-1400 $1,717 -

Do note the limitations for the data above, which are described in greater details in Areas Where We Saved for Our House Purchase. However, because both are newly launched condos, there are a lot more transactions for them. Hence, their prices are more reflective of the current investor sentiments. On average, Condo C has 12.2 transactions per month while Condo D has 63.9 transactions per month.

From the data above, it is natural that Condo C, which is close to a MRT station, is more expensive than Condo D. For a 2-room unit, Condo C is more expensive than Condo D by $182K, but that is also partly because Condo C has a larger floor area. The average floor area of a 2-room unit in Condo C is 771 sq ft, while that in Condo D is 660 sq ft. The price difference for a 3-room unit and 4-room unit is $88K and $147K respectively.

Using a 3-room unit as an example, would I be willing to pay $88K more for proximity to a MRT station? Definitely! In terms of finance, we save on a car (or 2 cars to last us until we retire). Each car can easily cost $100K, not to mention the running costs. So while we pay $88K more for the convenience of a MRT station, we save at least $200K in future expenses from not having to own a car. The net saving is at least $112K for staying close to a MRT station. In terms of travelling time, assuming we do not own a car, we save at least 15 minutes travelling from the MRT station to Condo D as compared to Condo C. Multiply that by 2 for the journey to-and-fro, and multiply the resultant figure by the no. of journeys per year, it adds up to very significant time savings. In terms of convenience, there are usually a lot more amenities near to a MRT station. If you are hungry, you could go to some nearby coffeeshops which are open 24 hours a day. If you forget to buy something, you could walk to a 7-eleven store to get it. In contrast, if you stay in an area with no MRT station, even getting something can mean a 20-minute bus ride to the nearest town!

In conclusion, while a condo within walking distance of a MRT station is more expensive, the higher price will usually pay off by itself in terms of finance, travelling time and convenience.