Have you often heard of your friends or someone you know who has profited from buying and selling property? Have you wondered what they have done correctly?
Most of us own a property. We have a home to provide a roof over our heads. However, can this roof really make money for us? Is it still feasible today? These are common questions often asked.
The truth is, property progression takes planning and hard work. Sourcing for that first property is often a heart-thumping experience. However, what's the secret to score eventually?
Let me share with you three winning strategies that many successful property investors take for their private property investment. Today's sharing on is abstracted from the ERA Ultimate Consumer Seminar Tea Talk Series.
Strategy 1 - Property As A Long Term Investment
Have you wondered how much you need to retire at the age of 65? A study by Department Statistics of Singapore in 2012/2013 an average household expenditure is approximately $4724. That works out to an estimate of retiring with $1,000,000 cash!
But in reality, only about 13 out of 100 households have a monthly income of more than $5000 monthly. Would you then say it is important to plan ahead for retirement? More than 50% of us are not prepared. So assuming we do have $1million now, will this amount be of the same value in 10 years time?
According to the Statistics of Singapore, from 2010 to 2019, our Singapore economy has grown an average of 1.8% per annum. So how does one hedge against inflation? Studies have shown that our $1 now would become $0.79 ten years later. Assuming 5% returns per annum compounding interest, one would need approximately $1.63 million in 10 years to have the same value as the $1million of today. Now, the founders of Investopedia have defined that an inflation hedge is an investment that is considered to protect the decreased purchasing power of a currency, that results from the loss of its value due to rising prices (inflation). It typically involves investing in an asset that is expected to maintain or increase its value over a specified period of time.
Source: URA, ERA Research
A quick look at past overall average property prices ($psf) shows an upward trend over time over time. Despite SARS and H1N1, the property market continued to grow.
So what does all these data and information have to do with property? In short, one must be able to hold on to one's private property for long term. Data has shown a growth trend over time. Property is a long term investment and it is extremely important to be able to hold on to your property even through economic crisis. Of course there are other factors one needs to take into account before taking the first step. We shall look into that topic at another time.
Strategy 2: Singapore's Transformation And URA Master Plan
Next, let's take a look at the transformation of Singapore. The URA Master Plan guides Singapore's development and takes about 10-15 years (reviewed every 5 years) to develop. In other words, studying the Master Plan is a glimpse into the future. Property buyers can look at the Master Plan for an indication of future developments that may impact property value.
Remember the 2008 Master Plan on Jurong Lake District (JLD)? The 2008 Master Plan unveiled the blueprint for JLD to become a new growth area containing two precincts: a commercial hub at Jurong Gateway, and a leisure and recreational area at Lakeside. Back then, Jurong was the Let's have a look at what has happened since then and how has the property prices at Jurong moved?
June 2010 - JEM site sold to Lendlease
May 2011 - Westgate site sold to CapitaLand
May 2012 - J Gateway Condo 1st New Condo site
Nov 2012 - Genting Hotel site sold to Resort World Sentosa
Mar 2013 - Vision Exchange + Ng Teng Fong Jurong Community Hospital
Feb 2015 - Jurong East site : the location for HSR
The Jurong Lake District has now grown into a bustling district with property prices have grown to almost $300psf. Together with the 90-hectare Jurong Lake Gardens, JLD will contain over 100ha of extensive greenery and open spaces. Public transport with the new Jurong Region Line and the Cross Island Line will serve the district and seamlessly connect it to the rest of Singapore. The transformation of JLD is still ongoing.
In April 2017, Morgan Stanley reported that the economy was seeing a cyclical uptick, predicting the economy to outperform developed market peers' and thus property prices to double by 2030. Just as everything seemed rosy, on July 2018, the Government implemented a set of cooling measures. In October 2018, Morgan Stanley revisited their thesis. After taking stock of recent developments back then, taking into considerations the fundamental drivers of medium-term home price appreciation remain intact, they reinforced their thesis prediction of home prices to double by 2030.
If you have the means and can take action now, will you invest into your future and take advantage of Singapore's transformation?
Strategy 3: Opportunity To Enter & Exit Strategy
Now let us take a look at the Property Price Index. Many experts point to studying the property price index as an indicative of how the economy is doing. How accurate is the property price index then? Now, if we draw two straight lines from peak to peak of the graph and from bottom to bottom of the graph, we will have the Resistance Line and the Supporting Line.
An academic discussion we often have : When is a good time to enter the property market? My personal opinion is when we are just above the Supporting Line. Each time we bottom out from the supporting line, it takes an average of 16 to 17 quarters to the next appreciation (peak). In 2018 Q3, the property price index had began turning up. Yes! We are still coming up from the Supporting Line.
Now that we have read the three strategies to win in a property investment, does that necessary mean we will succeed? There are several factors that matter as well. Those will be covered in my other blog sharing.
Buying a property is a long term commitment. Knowing that the timing is right is important.
If you do not want to miss the opportunity and want to find out whether you qualify, feel free to contact me 88680680 to arrange for an appointment for a non-obligatory discussion.