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What's good for you may not be good for me

More than ten years ago during my early banking days, I was chatting with a friend over lunch. At that point of time, I had just purchased my house and the economy was gradually recovering from the shock of the 2008 financial crisis.

In the midst of our random conversation, the idea of living debt-free came up and I said to him:

"My ultimate objective is to pay down all the debt in my property as fast as possible."

He sounded surprised.

Being in banking and "living and breathing" finance day in and out, he had expected that we understood the concept of an optimal capital structure, which meant that for the firm or investor, returns could (and should) be maximised by the use of leverage, assuming that cost of leverage was cheaper.

As a fledging professional in finance, it sounded stupid that one would not make use of this to improve your investment.

We had also just emerged from the US mortgage crisis at that point of time, and central banks around the world had launched what was called “quantitative easing”, which kinda meant cheap money for all. Governments all around the world were basically throwing money into the economy to stimulate consumption and investment. Leverage had been cheap.

In those years, the trajectory of the Singapore property market also favoured this hypothesis, allowing many people to maximise their returns in real estate investment. In short, any fool could make money through property.

The construct was based on a few simple ideas:

  1. Real estate has traditionally been a good store of value. In fact in Singapore, one could potentially even make outsized returns.

  2. Cost of borrowing is low. The Singapore government also did a relatively good job of maintaining the city’s status as a prime financial center, attracting a lot talent, which in turn encourages foreign investment and economic activity, which again in turn translates to lots of liquidity chasing investors and home buyers' money.

  3. Employment stats are healthy. A stable socio-economic environment allows the working class to comfortably service their mortgages. All else being constant, assuming a steady increase in property prices, even the average working household can be a millionaire on the books after 30 years.

Because it seems like a no brainer, a lot of people are puzzled at why I do not want to put more money to work in real estate.


We bought our house on the secondary market in 2011. It was a relatively pricey purchase, especially when you compare it with the remaining leases and state of facilities of the new developments. We could afford to buy the new developments, and on hindsight, those would have also possibly paid off more handsomely today if I had "flipped" it in the market. Had I taken leverage, the returns would even be magnified.

But I did not regret my decision:

  1. If you own one property (assuming you need to stay in that property), it's almost impossible to achieve outsized returns i.e. if you sell high, you have to buy high. Fortune in property investment only favours those who have more than one property or can afford to stay 'homeless' after selling their house.

  2. The house that I live in is within less than a 2 km radius from my parents and parents-in-laws i.e. they are never too far away to visit.

  3. The nearest MRT station is only a 5 minute walk (both ways once the Thomson East Coast line is open). In addition, I have direct buses to any where in the city area. And perhaps more importantly, because of these, I never need to set aside a hefty budget for owning a car.

  4. There is good food all around - from the cheap hawker fare at Tiong Bahru market to artisanal coffee. Unlike most, I do not need to ‘travel’ and queue for these good food. They are basically just around my hood

  5. The commute to the CBD takes me no more than 30 minutes door-to-door. Extremely convenient when I need to schedule meetings in town.

Sure enough I have the options of (i) paying off my home loan or (ii) re-levering to cash out some equity, but I see my current mortgage amortisation as a ultra-long-term rental arrangement without having to worry whether or not the landlord will jack up my lease and chase me out.

Buying or investing in a big house would have probably worked the same way too. We would still have solved for having a roof over our heads and potentially cashing out a healthy profit in the future. But going back to my first point above: when you sell high and cash out, you have to buy high as well.

Cash and the peace of mind is the oxygen of independence.

“The difference between what someone suggests you do and what they do for themselves isn’t always a bad thing. It just underscores that when dealing with complicated and emotional issues that affect you and your family, there is no one right answer. There is no universal truth. There’s only what works for you and your family, checking the boxes you want checked in a way that leaves you comfortable and sleeping well at night”


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