Is Singapore Property A Good Investment Right Now?
During the last Wealth Academy, a couple of people asked whether property was a good investment, especially in Singapore. Well, I am no property expert, but I did make quite a handsome profit on a property (semi-D) I bought 2 years ago. Bought it for $1.7m and not just got the latest valuation of $2.5m (50% increase in 2 years). So will property continue to boom in the next 5-10 years?
I did a bit of research and found the property index chart for the last 46 years (attached below). After punching in the values in my financial calculator, I found that the annual compounded growth rate in property is 6.73% over the last 43 years.
(Source: Redas.com)
Some people might think that 6.73% in too small a figure. Well, remember when you buy a property, you NEVER pay the full price of the house. You put a 20% down payment and borrow 80%. So what does this mean?
This means that if you had $100,000 to invest (to keep it simple)
=> You will be able to buy a property worth $500,000 (since you get 5 x leverage)
=> Assume you pay an interest rate of 3% for your mortgage
=> Your actual return will be 6.73%- 3% = 3.73%
=> So, your $ return will be ( 3.73%) x $500,000 = $18,650
=> Your return on investment will be $18,650/ $100,000 = 18.65% return!
So, with the power of gearing, investing in property over a long period of time will give you a 18.65% annual compounded rate of return (this is interest rate is 3%, for simplicity sake). However, this assumes you hold property through UPS and DOWNS
However, if you know how to study the property price chart and buy just as it is on an uptrend (LIKE NOW!!!) and get out when it begins to turn into a downtrend, then you could be making a lot higher returns. You can actually APPLY what Conrad and I taught at Wealth academy about TEHNICAL ANALYSIS on property charts. I guess I went in at the right time 3 years ago and just caught the new bull run. According to a statement made by Singapore billionaire Kwek Leng beng (Chairman of Hong leong Group), this bull run would be Singapore’s strongest and could last to 2012.
Have Fun and Make Money
Adam Khoo
Thanks for sharing Adam. It seems that my intention to buy a flat here (to save money) will turn out to be an investment.
Btw, you may consider teaching this in WA as well. I think it’s really helpful. IMHO, investing in property is more or less similar to value investing.
Kenny
http://www.kenny-tran.com
Thanks for confirming that we can apply TA on property charts as well.
I have a property at Meyer that I bought during the SARS period, it has also gained about 50% since. However, the rental collected was very low and I am still bound by the tenancy agreement that lasts till Oct this year. I was studying whether to take profit or hold. Now, with your e-mail, at least I am more confident how to reseach, analyze and make an informed decision.
Thank you so much, Adam. Whatever I have invested in attending your program is more than worth it by heaps.
Gratefully,
Fong
Hello, I’m just wondering when the actual dates are for your : ‘I Am Gifted, So Are You!?
This is because I go to boarding school in England and we break up for summer holidays on the 6th of July, and I so badly want to enroll my self on your program that I’m praying it wont be before then. If it is, how many times a year do you do run the seminar??
I’m sounding so desperate I know, I’m doing my A Levels next year (as in I’m in the first year now), and I’ve been going down a spiral I’m just looking for something that will push me back again and trying my last attempt at succeding academically and in life before its too late!
I got this site from your book: Master Your Mind, Design Your Destiny (thanks so much for writing it, I have never seen a book which has adressed all of my habits/personality trait that’s contributed to my failure experiences).
I would be grateful if you can email me at: my.draught.of.delicate.poison@googlemail.com for the final dates of your programs.
Thanks and take care,
Jayne (16 yrs)
Not sure whether property index is in tandum with the share technical analysis. Any research on this area?
As far as I know about investment in property, it is good to hold two - one for stay and one for investment. If you only have only one, most likely you have to either sell high buy high, or go for a higher rent after you cash out. Look at those en bloc owners, after cashing out they have to either find a place to rent (one of the contributing factors for the current shortage in houses/apartment for rent), or they have to downsize or move to a less desirable location if they want to keep some cash. Pity the old folks who do not wish to go for en bloc.
So who is the winner? Govt who collects stamp duties and investors who hold more than one properties.
Elaine
Hi Adam,
I wrote an article comparing ETFs and Mutual Funds. I spent a lot of effort to write out the whole article and think that it will be a pity if it goes unseen. I hope that you can read through and offer your valuable insights or maybe even post on your blog for your viewers if you think it is useful. The article is over here:
http://www.firstmillionchallenge.com/mutual-funds-vs-exchange-traded-funds/
Do let me know what you think.
Regards,
Hang Wei
Hi Adam,
One question from me, if you had $100,000 now, would you invest in properties or other investments ?
Is it the best investments currently let’s say we have the holding power to hold for another 30 years.
Will properties’ return remain stronger than other areas like stocks or options?
Thanks
Vanson
http://www.funmobilephones.com.sg
Hi Adam,
That’s a great analysis on ROI. I have another version, taking advantage of today’s high rental yield.
As under $1m property appeals more to most people, let’s take example of a 2rm property in District 11 (abt 12mins walk from Novena MRT) at $900k.
Assuming 80% loan at 3.5%…
Property Price: S$900k
Your Investment: $180k
Monthly Installment: $3233
Potential Rental Return for this property has been between $3800 - $4200 in the past 3 mths. But let’s use the lower rate.
At $3800, means a Rental Yield of 0.506%(3800×12/900k). That’s not bad for Singapore investment!
But then, again like Adam points out, your actual investment is really the initial capital of $180k, so adding misc cost like stamp-duty, maintenance, legal, etc, your total cost is perhaps $205k.
Therefore, using $205k of your cash to invest in property that generates $45.6k annually means a whopping 22.24% ROI !!! Now which investment in Singapore gives you such return over 2years at least. Not forgetting you still own a physically asset, which has no monthly installment to worry (as the $3800 rental pays the monthly installment of $3233 $180 maintenance fees).
Not forgetting, you can also potentially collect “bonus” in capital appreciation, during a bull-run, as Adam quoted Kwek Leng Beng above that it may run to 2012. Assuming annual growth of 6%, that could mean potentially capital appreciation of at least another $100k to $200k. That should more than take care of all cost, including interest incurred over 2years.
of course, like any investment with high returns, there’s always downside risk. But unlike stock (which can drop to 0), you still have a physical asset that you can still rent out if the market is not favourable for sale, and generate income to pay towards part if not all of your monthly installment while you wait for the next wave.
So the bottom line is, may sure you have holding power before you enter any investment. Not only should you have the cash to invest, but also the cash to hold to weather thru any storm.
Sigh… now we know why why the rich people gets richer.
Hi Adam,
Good analysis.
The trouble I see is that people do not want to “get out when it begins to turn into a downtrend”, expecting it to go higher and higher forever.
hi,
which one is better for investment ? Singapore property or Indonesia property ?
thank you