Property investment has produced a spectacular return over the past four decades in Singapore. Will it be a good investment for the next two decades? The answer is “maybe, yes”, but you have to approach it in the right way.
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7 comments:
Thanks for this. As a young couple living in singapore, we have been going back-n-forth over whether to buy a property right now or not.
I guess I'll wait from the sidelines and watch for now.
Marc Faber, who lives in Chengmai, Thailand, once said his friend bought a property in this famous resort for US400,000, the property was foreclosed at the height of the Financial Crisis, and was subsequently sold for US60,000.
Just follow the famous Chinese saying, Wei Ji Shi Zhuan Ji -
a crisis is an opportunity.
Guess following this age old advice applies to property investment too.
The irony is that the best looking property market today is where the financial crisis started 5 years ago --- yes, the US residential property market. From valuation basis, affordability basis and interest rate basis, they now have the best figures since 70 years ago from WW2.
Since late-2011, many richer US investors and many more international investors (mainly Chinese, Indo, S'porean, Hongkie, Taiwanese) have been buying up houses in mid-level to high-end cities and renting them out.
You can buy houses in middle-income neighbourhoods for less than replacement cost i.e. the price you pay is less than the cost price to build a new house. The land essentially comes free.
People basically buy nice 3-bedroom, 2-bathroom houses for US$100K, spend US$10K-US$15K to renovate, and rent them out for US$1.2K/month. They pay 20% downpayment and take 80% mortgage --- stretch to 30 years on fixed interest rate and pay US$300/month mortgage. US is one of the rare countries to have guaranteed 30-year fixed interest mortgages.
The rental income is just sideline to the investors. Their main aim is to wait for housing recovery in the next 3-5 years. With their 5:1 leverage, a modest 30% housing price recovery means 150% gains.
The reason why investors started buying now is becoz signs are in over the last few months that US residential property has finally hit bottom, banks have finally vomited and willing to auction off their foreclosed homes, prices have stabilised and started to inch up, and the US housing industry indices have turned upwards for a few months already.
@" During my past years, there were at least two occasions when I could buy an attractive property
at less than half of the price at its previous peak. I was not able to take up the offers and I was
fully committed to my existing property, bought at a higher price. I was not willing to take a loss on the previous property and to incur the high transaction cost.
This type of opportunity will come every 5 to 10 years, during the downturn of the cycle. If you
are not committed to an expensive property, you can take up the attractive offers when they
appear on the market."
I agree with you and had quite similar situation. Luckily, I was able to turn around due to current high prices and perhaps break-even as high interest paid took away the gain. But that was purchased in 1996 peak.
Just imagine EC are now much more expensive than FH condo then. Turnaround if husband + wife dare to commit and if both of them would not lose your jobs???
Last weekend, I was reading the the ST advertisments on EC properties. Several of them came with impressive calculations of combined estimated incomes to support a 30 yr mortgage for a double 99 yr EC at over $730 ~ 850 psf. "No need for monthly cash top-ups, only use your CPF". This is ridiculous. Even though interest is low now, a couple has to cough out money upfront from their CPF to pay off the mortgage loan for 30 years...Say promotions are expected and wages will rise, considering current income stagnation affecting PMETs and volatite economics and employment conditions, if they buy fresh, it means they will have "zero" amount left in CPF after paying off the 30 yr mortgage. Any cash on hand will have to meet daily expenses, car, maid, kids, family, etc expenses, whatever modes costs are incurred.
"Asset-rich but no retirement savings" will become a problem even if jobs are a given and no hard landings for the property market.
Those calculations misled what is real affordability.
Some rule of thumbs for property investment overseas:
1. Buy only in urban, city area
You are familiar with that type of environment and how to live in it.
2. USA is a very, very big country with many, many cities and many, many different state laws with taxes on property ownership, tennancy protections and sales tax.
3. China is still communist state. Property ownership is doubtfull. It is also a very big country with many, many provinces with many, many different rules in each.
4. Australia is another big country. Land is in abundance. Buy only within city limits... and high ground too!
5. Malaysia is also a big country.. land is abundant. Rules change like the weather.
6. UK properties has many, many council rules, and prohibitions.. proceed with eyes bigger than binoculars.
People with business connections and ability to create holding companies to own these properties are much better insulated then single retail investor.
Looking for quick profit like what you hear from agents and articles in sunday papers???
Be carefull.. why don't they produce articles of people who have failed?
There is vested interest.
Invest in yourself: learn how to understand markets and read reports.Learn how to analyse information.
It will cost you very little.
And you will understand a lot.
Definately cheaper than
US$500,000
A$500,000
CNY500,000
M$500,000
GPB500,000
Rule of thumb for all investments: "Not sure, don't touch." by Warren Buffett
With large hedge funds moving huge capital by just clicking the mouse, all investment products including property investment, the cycle(up and down) of which have become unpredictably short and very volatile. Unless someone is very good and skilful in hedging the positions that they are holding. Otherwise, for any inexperience investor to be swallowed by the market shark is an all too common occurrence. Our GIC and Temasek holdings experienced that not too long ago - jumped into water aggressively in the year of 2000.
We should be aware of the things that our agents can do. They can make or break our business depending on what they are doing. We should be aware that investing should have 24/7 attention on it. Making sure that our investment will be more effective.
Real Estate Investments
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