Property investment in Singapore
Let me rebut his vested interest advice point by point.
I will begin with his first point of leverage.
One of the biggest disadvantages of investing in property over other assets is that you can borrow a large sum of money at a low interest rate to buy a house. When interest rate goes up, thats when the nightmare begins. If the price of your property goes down, your loss on the money you invested is multiplied.
There are four scenarios here, When you buy the right property at the right time, you can make a lot of money. When you buy the right property at the wrong time, you can lose a lot of money. When you buy the wrong property at the right time, you will still lose money. Of course when you buy the wrong property at the wrong time, you will lose your pants, your house, and your life even.
His second point is regarding generating income from rent as a passive income.
We all know that but what many people did not know is the potential nightmare of a landlord. What can be more frustrating than owning a property yet the tenant can do what he likes including thrashing your place. What is the percentage of ROI on rental investments in Singapore? A paltry 2 to 3 percent, not even enough to outpace inflation but wait, this is not the final returns as you will have to factor in maintenance costs, fees, taxes and what not. Lots of Reits nowadays give you much higher return without the accompanying headaches of being a landlord. The hassle of being a landlord is understated. Wait until you become one to experience it and will know what I mean.
His third point nearly make me fall off my bed.
It is about the opportunity to renovate your porperty.
It appears that he is viewing doing up renovation by yourself a very pleasureable past time. Most people would rather leave renovations to the professionals but even that can be a nightmare. Anyone with any experience in renovations hassles and like it?
property investment returns are overstated, while risks are understated.
The fact that such websites/blogs are popping up like mushrooms shows the extent of the speculative activity associated with properties in the current property bull run…..
The article is presume that everything go smoothly.. a one-sided analysis. In a professional analysis, an expert will also warn of the risks and cons.. eg what if you can’t find tenants, what if interest rate go up.
His fourth point is about the No Capital Gains tax.
There is also No Capital Loss refunds! Reits also does not have Capital Gains tax but that is not the point. The point is you will definitely have to pay the Property Tax, rentals are also taxed and you also loses other concessionaries that are tagged onto your property status, like no or less rebats given out annually based on your property status as well as the means testing which disqualifies you based on your housing status again.
His fifth and final point is the most dangerous of all.
Property is a well trodden path towards wealth creation
He forgot to mention that Property investment could also be the well trodden path to financial and emotional ruin.
He cites forbes reports but unfortunately there are no agencies reporting the reasons for people committing suicides. Nor are there any statistics to show how many people kill themselves when their property ventures go bust. We just need to look at America to see how many are sleeping in the parks and why they could not afford to buy a house and a roof over their heads when there are actually properties there selling for a U.S. dollar. America, a first world country, with the greatest freedom embeded in the constitution, yet properties in freehold sites with clean mountain air and clear lakes are going for a pittance without buyers. Why?
perhaps the reason why Singaporeans do not believe in a potential crash in property is because they think we are so different from the USA. There is a persistent belief that the Govt will help prop up prices, and that the never-ending influx of foreigners will keep demand for condos and GCB high, thus providing more support to ever-rising prices.
As for the media, they love to sensationalize those who made big money on their leverage, but quietly neglect those who fell by the wayside. Call it survivorship bias if you will, but the “losers” are not the ones who are interviewed (very seldom), it’s mostly those who made tons speculating in property. Thus, the views espoused end up being very skewed.
Actually property like in all investments is all about timing. Buy low sell high we all know. So if you look at properies in Singapore now, is it high or low? If one must invest in properties and does not mind the accompanying hassles and disadvantages, then one must be looking for properties where the prices are low. Try America, their prices are at an all time low.
What makes them think that the American government does not want to prop up their own property prices. If American government cannot prop up their property prices, then we should seriously reconsider whether property prices can be propped up permanently by any government as it is dependent on many factors not within the control of anyone.
As for our media, we know why they are ranked 154th. To listen to them only is the surefire way to financial ruin.
To put it simply, what is the reason for someone to keep posting positive comments about an investment, especially when that someone is a promoter of that investment. It does not take much to conclude that there is vested interest and the purpose is to help him or her get richer. Contrast this with the person who tells you otherwise, why should he or she bother unless there is a personal conviction to point out the facts? So whose words will be more in your interests?
there is a lot of vested interest, especially for the promoters of property (e.g. agents, company representatives etc). This is why many articles on property investment are biased and do not give a proper account of the risks and rewards.
With the proliferation of more websites touting the “benefits” of investing in property, this can only mean things are getting frothy. It is similar to equities where bull runs tend to cause people to set up investment funds to capitalize on the Greater Fool Theory.
I am sure our own Govt would very much love to support property prices, as even MM Lee himself keeps mentioning that higher property prices are good. But if the winds of change blow our way, everyone may be in for a very nasty surprise…
I know I may sound like a perma-bear on properties, but just highlighting the ever-present risks which have simply increased over the last 2 years due to runaway prices.
Timing was the 90’s.
Now it’s different.
Nearly everyone has a home now. Some even have 2 or more. I remember a few months back… this teacher in the Straits Time invested in 3 residential properties for rental. Only a teacher can have 3 investment properties. (Another reason why if you are looking for a job, go join the public sector)
As people age …. they will downgrade to smaller units.. and when they go, empty units will appear.
Singapore seems to have reached a poplation plateau. It can be seen in all the anger vented at the government on overcrowding in MRTs, carparks, FTs, etc, etc.
According to the law of demand and supply … when there is more supply then demand, the price will fall.
Where will the supply come from?
1. Over 10,000 units thrown in by MBT
2. Aging population downsizing
3. Those leaving
And the reduction in demand? (Note that it is REDUCTION)
1. Negative population growth rate
2. Reduced FTs
Don’t need a smart person to see what’s happening. We can see our future by looking at other’s past.
1. Japan’s property peaked in early 90’s. How many years already now?
2. USA peaked 2006.
Both will most probably never come back as population declines. Japan is aging and has no FTs. USA lasted slightly longer as they have FTs … but now their baby boomer generation are aging and retiring.
This is why when one start a career, one should never go into sunset industry. Engineering, construction, development is a sunset industry once population growth slows.
Jobs will come in from Finance, Service industry, Law, Medical (more aged people), etc, etc.
Any kind of investment can be a good investment provide you don’t buy high and don’t over-borrow.
Blue chip Stocks can also be a good investment. Why not? Got dividendends, well trodden path (look at Warren Buffett, Peter Lim, …) …but when you buy at the high price, it can kill you.
housing bubble in Japan, Ireland, USA, Spain, etc kill so many people financially.
….next one may be Hong Kong or Singapore.
Another point of view, when Reit prices clash, investor also nightmare. As for tenant, you have to screen properly. normally, a family will be ok. avoid students.
things stated therein are NOT WRONG, but this piece is meant for beginners. lack critical arguments.