Investing in property is one of the safest ways to invest your hard-earned money, at least in Singapore. The property market is set in a socio-economically and politically stable country, and government intervention helps to ensure that it does not get hugely affected by the whims and fancies of the rich few.
Despite that, investing in property is not for everybody. Here are 5 reasons that property investment is not for you.
1. LACK OF CAPITAL
Property in Singapore is extremely expensive, where private property is considered. While public housing is affordable and accessible to a large proportion of the population, the pricing of public housing has a low threshold, beyond which prices will hardly appreciate enough to justify an investment.
(Of course, the main purpose of public housing is for own stay and to ensure that residents have a place to call home at the end of the day – hardly an investment asset.)
A private property in the mass market generally requires a capital of around $200k (cash + CPF) from you to invest as downpayment and you should still maintain a decent lifestyle. This means you’d most likely have to have worked for at least a few years (and still be working while you own the property), save up enough on a monthly basis, or have parents/partners who can support you financially in your investment.
2. LACK OF CLEAR GOALS
Why are you buying a house? Is it for own stay for the next 30 years? Do you plan to sell it sometime in the future, and if so, when and why do you plan on selling it? Do you already own a house and want to get another one to rent out? What other investment products do you have?
Way too many times have I come across clients who insist on a freehold property (vs. a leasehold property) but when pressed further, they have no real reason other than something along the lines of “it’s mine forever.” Yet, if you look at past transactional data, leasehold property prices have increased two times more than freehold property within the same time frame.
If you’re thinking of selling the property at some point, then leasehold property could be a safer bet. But if you’re not thinking of selling it so soon, then you need to make sure that you:
1. have enough capital to pay for the freehold premium
2. are willing to accept a smaller-sized unit for the same price point than a leasehold property
3. are OK with less facilities in a smaller development (generally speaking)
All in all, what are your goals? At which stage of your investing portfolio are you at (starting up or consolidating)?
Lacking clear, defined goals almost guarantees you’ll be making the wrong move.
3. UNWILLING TO GIVE UP YOUR LAVISH LIFESTYLE
I’m afraid this is a point that I have to bring up. I’ve had to learn myself, especially when I left my full-time job in the public service that there were things I had to give up to make sure that I was spending my money wisely.
This meant less dinners with friends at expensive restaurants, less trips to the bar in the evenings, less shopping sprees at Sephora’s 20% Black Card Member Sales… But the more I had to force myself to stick to a spending budget each month, the more it got easier, and the more I realised that I was spending unnecessarily on things I didn’t really need.
The same lesson applies to buying a house. First of all, buying property already requires a lot of money to be put aside each month for the mortgage. This means less disposable income to spend on other things like frequent overseas travel and a car loan. If you cannot live with that, then investing in property isn’t for you because this is a long-term thing, which needs at least 3-5 years of commitment.
4. DON’T BELIEVE IN PROPERTY AS AN INVESTMENT TOOL
One of the main reasons I became a property agent was because I truly believe in using property to make money – and I don’t mean by selling and earning commissions. I see property investing as a legitimate, low-risk, relatively safe way of growing my money while I work hard in the day and rest at night.
Being an industry insider means that I have countless opportunities to learn all I can about the property market and get first-hand news and updates before most other people. This allows me to take action at the appropriate times to grow my (and my clients’) investments.
(P.S. How else did you think I managed to get my client to the show flat in time immediately after the government announced the new cooling measures last year, such that he was able to get his choice unit before the measures kicked into place at midnight?)
However, not everyone believes in property as an investment tool. If you are just looking to buy a place to call home for the rest of your life and not have to care about whether your home earns you anything, then you shouldn’t think of buying property as an investment, but rather as somewhere you can live the kind of life you want. And honestly, there’s nothing wrong with that.
5. YOUR OTHER INVESTMENTS ARE EARNING YOU ENOUGH
If this is the case, then please share with me your investing tips! As much as I believe in property as an investment tool, I also believe in having a diverse portfolio. This means that property shouldn’t be the only thing you invest in.
While I have recently made the commitment to a new home (check out my blog post here), I also currently have 2-3 other investment-linked assets. Whether these assets are earning me more than my property, that needs some time to be concluded. However, for savvy long-time investors, if your other assets are already getting you good returns which meet your expectations, then you might not wish to consider property as an investment tool but rather simply as a place to call home.
In this case, it might make sense for you to engage an experienced financial advisor who can do the job well of consolidating your assets to streamline your investing efforts.
I hope this blog post helps you in some way to decide if you should buy that home. In a future blog post, I’ll reveal the 5 reasons that property investment is for you. Watch this space!
Retirement & Legacy Planning with Property, PropNex Realty Pte Ltd
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Learn more: www.roxannechiarealty.com
Matthew Lam Division | Marcus Luah Division
🏆 PropNex Overall 2018 Champion Team
🏆 PropNex Singapore & PNG Champion District
As I am a CEA-registered real estate salesperson, I am licensed to market and sell property in Singapore. My clients come first in all my dealings and I look forward to establishing a long-term working relationship with you. If you’re in your thirties and still don’t own a property, do reach out to me. It will be my pleasure to help you in your retirement planning with property.
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