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“It is not when you buy but when you sell that makes the difference to your profit”.
Hence I consistently advise my investors to ensure that they have gone through their financial plans thoroughly as they will be entering into a 4-year commitment – after taking into consideration the 4-year Seller's Stamp Duty (SSD) that they will need to pay if they sell their property before 4 years.
Once they have determined the amount of finances they are willing to outlay, they will set themselves at a great advantage by entering the property market and generating passive income from rental yields rather than putting their cash in the bank. Based on the current market, I would advise that they keep a lookout for any good investment property where prices have dropped more than 10% rather than putting it in a fixed deposit which pays 0.5% and does not hedge against inflation which currently stands at 5.7%.
In this aspect, my investors and I are on the same page – we prefer to take advantage of the current low interest rate and put our money in property assets to generate a positive cash flow via rental income. I myself have personally seen some properties generating positive monthly cash flow of up to $1500 after off-setting mortgage costs. This equates to an annual passive income of up to $18 000 per annum which easily beats returns from fixed deposits and also outperforms dividend returns from stocks.
Even though prices of private properties have continued to rise despite the economic uncertainty, we can see that the effect of the cooling measures have lead to a slower rise in prices as compared to 2010.
Currently, we can see that although property prices are holding up, sales are beginning to stagnate. I will attribute this to the following 2 reasons:
1) Many owners' unwillingness to sell at lower prices and buyers' unwillingness to commit to a higher price.
2) Existing demand for properties exceeding supply due to owners being in no hurry to sell, consequently leading to a rise in prices.
I would advise investors to view their Singapore property assets as long-term investments. They should not be excessively alarmed by a slowdown in the property market as their assets will consistently benefit in the long run and increase in value due to the following:
a) Good governance in Singapore
b) Land scarcity in Singapore, and,
c) Inflation which will place and upward pressure on prices
For buyers who would like invest in other types of properties besides the residential segment (such as New Launches & Resales), they may also consider investing in shophouses which likewise can help generate passive income; and are not subject to the recent government cooling measures like the 16% SSD and 40% downpayment required on residential properties.
I cannot help but stress the importance of having ‘holding power'. You should never be forced to sell your property (and make a loss) even during a downturn. Always remember that the property market moves in a cyclical pattern and you should sell only during an uptrend.
A rule of thumb: Do not speculate but invest in properties with a view of holding over a long term even during downtimes.
