We’re no strangers to the many disruptions the pandemic has caused–some experienced pausing their investment plans or letting go of their investment plans. As you review your portfolio of property investments, let me give you the 5 things to consider about property investments.
Government’s Interventions
We all know how the Singapore government effectively steps in to cool the market when things get a little too hot. Too much of this causes prices to spike, which makes it hard for citizens to purchase properties in the long run.
In Dec 2021, Singapore announced the rollout of new cooling measures to slow the pace of the real estate property market. Some of which is the raising of Additional Buyer’s Stamp Duty (ABSD) and tighter Total Debt Servicing Ratio (TDSR).
You can be sure that the government will be ever-vigilant regarding these things. You can only look at private properties as your “playground” for investment in this country. Still, we all need to accept that the system finds ways to discourage multiple property ownership, in line with its goal to “promote a stable and sustainable property market.” (source: https://www.mnd.gov.sg/).
These implementations are all designed with good intentions. Similarly, if you genuinely consider real estate properties as your means of investment, you will have to go through these seemingly “hurdles” in acquiring a few.
Break-Even Points
There’s a lot more to consider in break-even points, in the sense that you will need to look at historical data.
To give you an idea, the trends in the last 15 years are:
- The market plunged by 40% during the Asian Financial crisis in 1997, and lasted for about three and a half years.
- In 2001, the market dove down by 20% and lasted for 6 years, thanks to the Dot Com Bubble.
- Property prices lowered by 24.9% for a year in 2008.
- The Singapore government introduced cooling measures in 2013, which brought the prices down by 11.6% and went on for 15 quarters.
- Cooling measures were rolled out again in 2018, which caused a downcycle of up to 0.7%
- Covid-19 happened in 2020 and brought prices down by 1% for a quarter.
If you’re wondering why the dip in prices due to the pandemic only went by for a quarter, it’s because the past cooling measures protected the market from future spikes. Also, the TDSR and MSR made sure that people who take out a property loan can cope with its payments well. Not to mention, the work-from-home arrangement and online school caused a high demand for HDB upgrades and bigger spaces.
Going back to break-even points, it all differs depending on when the properties are bought. The following are some figures:
- Properties bought at the peak in 1997 are best held until 2008 to reach the same value. Break-even point: 10 years
- Investors who bought in 2000 will reach a break-even point after 7 years.
- Properties bought in 2008 must hold them until 2010. Only 2 years to break even!
- Purchases in 2013 will reach the break-even point in 2020.
It was definitely a crawl for individuals who invested in 1997 for having to wait 10 years just to break even. The good news is that our financial market is ever-evolving and has grown more resilient in the face of crisis (this pandemic included). Should a downturn affect your property value, there is hope for a shorter period to recovery.
Inflation
Among the many factors that change the economy, inflation is one that you cannot ignore. It is a broad measure of the increase in prices or cost of living over a period of time, and it’s one of the biggest reasons you and I should always invest because our money will always lose its value as the years go by.
For example, a property in RCR back In 2015 that is sold from $1,400 to $1,500 per square meter. Today it’s at $1,800 to a whopping $2,400 per square meter. Can you imagine how much you saved, if only you bought 7 years ago?
Singapore is expected to be subjected to an average of 3.4% inflation this year, according to focus-economics.com. The proof is in the rise of prices all around us, from household essentials to properties.
This is where the advantage of investing early comes: you are protecting yourself from inflation and high-interest rates, and it also predicts how much you can earn from it when you sell.
Some win, some lose.
As much as we want everybody to win, there are losses in the market as well. Due to the factors mentioned above, your investment may or may not give you that 6-figure profit in a jiffy. While others bask in their well-earned income from their property, yours might look a little different, and you will have to hold on to it for 7 more years before you can sell them.
In some cases, owners would sell their properties for less value than they bought due to emergencies and other concerns that will force them to forgo their investment.
Having a wise financial plan and a good grasp of the market helps. Be extra careful when it comes to your investments.
Your idea of financial security.
When you ask anyone why they work and save, they would mention that they want to achieve a sense of financial security, and we all have different interpretations.
An emergency fund of $100,000 is a lot for an entry-level employee, while an executive-level leader might consider this sum his average monthly expense. Some would define financial peace as having four properties, two cars, and a sizeable amount in their bank accounts, while others might think of it as having insurance policies, even if they are renting month by month.
Believe it or not, your idea of financial security will drive your decisions on investing and selling.
So, what am I driving at? At this day and age, it is wise to include investments in achieving our life goals and supporting our lifestyle, however that should look like for you. The risks and uncertainties will always be present, but being strategic about our investments will always pay off in time. After all, it has always been a game of strategy, and we’re here to help you out.
Contact us if you want to start investing! Click here for a complimentary call with us.
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Disclaimer: All information presented is based on personal opinions. Singapore Real Estate Insider is not liable for any losses and expenses whatsoever related to investment decisions made by the audience. The ideas presented are here for reference and educational purposes only.
