The Broken Dream

I grew up in Singapore hearing about how Australia was a great place for retirement. I suppose back in those days, a Singaporean who received his golden handshake could easily buy a big house on a large plot of land for $100,000 in Australia and live happily ever after. So the story went. 

The sentiments never changed till today. As far as I'm concerned, I'm still receiving emails from hopeful Singaporeans telling me how they love life in Australia as they seen it during their holidays. Still, I'm hearing folks asking me why I moved to the "slow land" they would only consider to go in their candles are burning short. Is it really that simple? I thought probably not, financially at least.

The last time (today) I meddled around real estate websites, I found that standard "4x2" houses were in the $500,000 price zone at modest suburbs in Perth. The better suburbs will cost even more. I put on my Singaporean cap and tried my best to recall the standard mentality of my people. A checklist would look like this;

1. Buy a house - Must
2. No apartments. Because enough of HDB living. Land - Must
3. Land doesn't depreciate. Houses do. So land is a must. No land no go.

For a pissed poor migrant with very little education and skills and no perky arse, it has always been my style to chuck the book of standards into the bin. I think every migrant who can count with fingers can do the sums here to find out where he stands in the current situation for living the the past is a foolish mistake a man can commit. So how does the sums look like these days? Off the back of my head, 

If Ah Hock saves up a $50,000 deposit and buys a $550,000 home in a stylo-milo suburb that allows him to enroll his son in a stylo-milo school, he takes a $500,000 home loan over 25 years and pay a 7% interest rate. (It's probably possible to get a rate of 5%+ these days but it's always the best to do worse case scenarios in such calculations)

Over the next 25 years, Ah Hock will end up paying more money in interests to the bank than he'll pay to actually buy the home. The interests paid at the end will total to a jaw dropping $560,000, fully non-tax deductible. The total repayments will be $1.06 fucking million bucks. Not inclusive of home repair and maintenance costs, which could come up to a big sum over 25 years.

So if Ah Hock sells his house 25 years later at $1.06 million, how much money did he really make? Let's see.... Ah Hock would tell me, "I bought my house 550k, I sold at 1.1mil, I made 550k leh, sibei song! Singaporean mathematics. Top 10 in the world. No wonder creative accounting in big back home. Let's just leave this at that to make Ah Hock feel better since regardless of who paid what, Ah Hock would have $1.06 million of asset on paper. I have been wondering really hard if anyone would pay that amount of take a 25 year old house off the books. Will Ah Hock lose money if valuation amount to only $1million? Optimistic ones will even tell me it could go at $1.5mil by then. Maybe. Maybe not. I have no crystal ball to peer into.

Whatever will be, the figures are telling enough to inform me that the old notion of Australia being a place for retirement will be completely irrelevant in a matter of 1-2 decades, if not already. Having the privilege of coming from Singapore, I could see where this is leading to. The question is, would the others and how would they position themselves in their own strategies?


  1. > 3. Land doesn't depreciate. Houses do. So land is a must. No land no go.

    Buy freehold-condo with strata entitlement will also get one a "share" of the condo land-parcel. No need for "single-family home" (i.e. bungalow/house) lah!

  2. Hi,
    I've to admit I know nuts about banking and finance stuff and do correct me if I'm wrong but I think the calculation of interest rate you did there is incorrect.

    A 7% p.a. interest on $550,000 loan over 25 years means:

    $550,000 / 25 years = $22,000 per year
    7% x $22,000 = $1,540 interest per year (or $128.3 per month)
    $1,540 x 25 years = $38,500 interest over 25 years

    So the amount you'll be paying per month is:
    $22,000 / 12 + $128.3 = $1961.6

    Also, if you think about it, it doesn't make sense for the interest to be over 100% of the product you are purchasing whether it's houses or something else.

    1. Your calculation is totally wrong.

    2. Hi GaiJinHan,

      I believe ASingaporeanSon's calculation is closer to reality. The reason is that the i/r is based on the entire balance remaining, not $22K/year as per your illustration.

      The i/r calculation is usually done like this: 7/365 = 0.0197% per day. So at the end of each day, the bank's system will apply this 0.0197% on your entire remaining balance for interest due. That is why paying a mortgage weekly (e.g. $250/wk) compared to an equivalent sum per month (e.g. $1,083 every 4.333 week) will save you some $$$ even though you're technically forking out the same amount each month -- because you're reducing your balance due weekly instead of monthly.

      Declaration and disclaimer: I used to work in banking and financial services, but not in the mortgage department.

      Cheers, WD.

    3. Yep! I'm not proud of my ignorance in finance stuff. As the author put it, "Singaporean mathematics. Top 10 in the world." =/

      Thank you for explaining, W.D. Now it makes perfect sense.

  3. No more 500K for a 4x2 house. the median is 550K. You probably looking at 650K at least for a good public school zone. Bear in mind the stamp duty will kill you too.

  4. Fortunately or unfortunately, after submitting the comment, I found the $38,000 over 25 years impossible for a bank to make money and ran the calculation by an Australian housing loan site and found your calculation to be correct. Hmm... Apologies.

  5. If you can afford to buy A$500k house and A$30k car in Australia, migration is a merry life.
    Otherwise don't waste time.
    One shall not apply the same financing principle (pull it off over 20 years at 1.5 to 3% in Singapore) in Australia (5.5 to 7%).
    Migration for the poor is fantasy. Migration for the rich is reality.
    Mathematics is very simple. Bring $$$$ if you want to migrate to Australia.
    To a financial institution such as bank, credibility and $$$ are the only criteria of your net worth.
    In any foreign land, no money, no goods and services.

    1. Not true!
      I came to Australia with only money borrow from my mum. I was poor but now I am good.
      Trick 1: Get a job. Australia's job pay so well.
      Trick 2: Don't get suck into the real estate ponzi scheme.

  6. Ask yourself the reason for migration.

    If 4x2 is attainable with a job, then why not. If not 3BR or 2BR house or unit, apartment or maybe at another more affordable suburb.

    If you can overcome house and job titles, migration is easier.

    The above is only one of the many obstacles. .... ...

  7. We have to take note that by the end of 25 years, you will 'break even'. However, you failed to take into consideration the rent you have to pay over the 25 years if you do not buy a house. Or in some cases, renting part of the estate out to people. I have witnessed someone renovating their house to have 10 rooms. And renting 9 of the rooms out and getting an average of 1k/week as it is full when uni starts and 1/2 empty when the uni holidays comes along. Renting may not be the only way. Some people turn their house into child daycare center.

    At the end of the day, it boils down to how you want to make something work for you.

  8. Interesting insight. I'm now wondering about our HDB flats

    1. Totally different ball game in Singapore bro, where the mortgage interest rate is at least half that of Australia's and the rental yield is much higher. In such a situation it is rational to own than rent. That is why some Singaporeans come to Australia will blindly dive into the housing market blindfold without examining the different mechanics that require some attention on top of the above mentioned.

  9. Don't buy if the price is not right. I have been renting for the past 8 years and save tons of money. I have been channeling my extra money into my superannuation fund and now my fund is so bloated that I will most likely retire in a few years time before I turn 50. The so call 'dream of your own home' is just a massive sucker deal (at this price).

  10. Australians now trying to retire in Malaysia or Thailand....

  11. Yes Malaysia is within my consideration. I see no point in living in such a high cost place when I retire. AUD15 for a pack of noodle, 17 to 19 with meat. OMG!