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What Should Property Investors do with their Money Today?

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By Guest Blogger Gerald Tay, CREI Academy

I want to share some personal thoughts and investment decisions based on the 2013Q1 URA PPI flash estimate and what it means for the property market.

The 2013Q1 estimate of 213.1 represents a 0.5% quarter-on-quarter increase, which is a moderation from the 1.8% q-o-q pace we saw in 2012Q4, but suggests that the market prices are still rising, albeit slightly, despite 7 rounds of government cooling measures.

Today, we’re at the record peak of the property cycle since 1965. It does not take a lot of common sense to tell us we need to tread extremely carefully, especially in current uncertain economic climate.

My personal predictions (I personally hate to invest on predictions), if you may, is that there might be further price increase in all segments of the property market. The residential market is still being supported by local first-time buyers (though we don’t know for long yet), while the commercial and industrial sector have continued hot money flows resulting from the severe cooling measures on the residential sector.

However, this does not mean investors should simply rush out to buy that new launch property today and hope to cash out in the next few years. The potential downsides are much greater than the upsides, and basing on the price-rental index which is 57% over-valuation (The Economist), buyers and investors today are already paying for future prices years down the road.

SG Wealth Builder

SG Wealth Builder

I have done my personal investment calculations for the residential market, comparing price versus rental. Even with current low-interest rates imputed, most properties (resale & new) are already fetching negative yields, not to mention when these rate start to rise back to ‘normal’ in future.

Today, the Asian property market (Especially Singapore, Hong Kong & China) is being supported by ‘phoney’ money. Money is printed endlessly in the trillions of dollars by irresponsible governments for their personal political motives. Banks are either lowering their reserve rates or cutting interest rates and these fuelled the transfer of more hot money flows.  The money is finding their way into Asia like Singapore, in hopes of so-called higher returns and inflating many asset bubbles. I.e. Singapore, Hong Kong, China.

When a financial crisis erupts (Europe, USA, China crash), these ‘phoney’ money would find their way back ‘home’ faster than a speeding bullet, resulting in severe price deflation and chaos.

I personally urge you, if you are an investor who is still in the midst of growing your wealth for your retirement, please be very careful where you are putting your money today. If you are investing in overseas property, make sure you know that country inside out. When I mean inside out, (NOT as a tourist) I mean you have been living in that country for years and is very familiar with the local real estate market. Or, you have credible partners who are locals in that country who are willingly to invest together with you. If you are simply investing in an overseas property and expecting good returns based on a piece of paper, some cocktail champagne, nice sales talk or because you think you spent 1 full month to do some due diligence , I have to candidly say best of luck to your investment.

As for local properties, invest on cash flow and never capital appreciation.

For myself, I’ve stayed away from our local property market since 2011 and have expanded to USA real estate market. I worked with experienced local USA investors who are more familiar with the terrain and invested their own money with me.

If you do not have the kind of connections or expertise, then my best wealth advice for you TODAY is to leave your money in the bank, despite the low-interest deposits. Be patient to take advantage of massive opportunities to grow your wealth within the next few years when prices start tumbling down again.

Please Remember: The Return of Money is more important than the Return on Money in any investments.

 

Magically yours,

SG Wealth Builder

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Updated: February 24, 2016 — 2:43 am

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