A visit to Dakota Residences

I visited Dakota Residences over the weekend. There was no crowd, just a couple of families looking at the showflat and the architectural model.

Currently Dakota has fully sold its 2 bedroom apartments and are left with few units of 3 bedroom apartments. 4 bedroom apartments are still plentiful as there are little takers.

I enquired about the 3 bedroom apartments. They cost a minimum of $1.16m or $889 psf for a low floor unit, with an area of 1313 square feet. Similarly sized unit but at 17^th floor, costs $1.33m or $1014 psf.

Seriously, for a 99 year leasehold property I do feel that such prices are out of the reach of ordinary Singaporeans.

Let the numbers tell you why.

Assuming I pay a 20% downpayment to purchase the 17^th floor unit, I will need to take out an 80% loan which will mean a monthly repayment of nearly $4,800 @ 3.5% interest. I would have paid about $2m for the house after 30 years.

(I used 3.5% interest as it is usually the interest rate banks use to calculate the affordability of individual income on the house and to be conservative)

After 5 years, my outstanding loan will be about $956,530. I would have paid 60 months of mortgage installments amounting to about $288,000.

If I intend to sell it in 5 years, I will need to sell it at $956,530 (to cover outstanding loan) +288,000 (interest and principal paid) +266,000 (down payment paid) = $1.51M just to BREAKEVEN.

This amount does not include legal fees, stamp duty, renovation, insurance, maintenance fees and other miscellaneous expenses.

Dakota Residences site was purchased at height of property boom in June 2007. It is understandable that the price that developers set need to be profitable to the shareholders, after paying hefty remuneration to the company directors, CEO, senior management etc. They probably need to achieve at least a net profit margin of 15%-25% to ensure that shareholders are happy on their equity investment.

The site next to Dakota Residences was sold at a slightly lower price (per plot ratio) to UOL recently. Personally, I might not buy Dakota Residences even if I have the full cash to pay for one apartment.

Firstly, I would need to endure another 3 years of construction noise and dust at my residence while the 2^nd condominium project is being built.

Secondly, the apartments might be priced lower by UOL to entice buyers.

Thirdly, I went for hawker fare at old airport market and found the food rather mediocre. The hawker centre has poor ventilation and you can smell where the toilets are.

Lastly, I have the choice to buy a 5 room HDB nearby at $650,000 and use the spare cash for gym membership and a trusty Japanese car. Who need a door step MRT then?! I would have saved at least $2M at the end of 30 years!

Perhaps buying stocks is still safer for some of us now.