Property investment; Singapore market; private housing prices

Whenever we appraise economic growth, there is always a tendency to take a short rather than a longer-term perspective. Such a focus not only encourages us to see things in a less favourable light, but it also undervalues the importance of historical trends and any incremental growth that the global economy has experienced over the course of the last 30 years or more.

A quick glance at the global economy reveals that the levels of growth sustained since the Great Recession began in 2008 has been immensely disappointing by most metrics. Any prosperity that has been evident in either developed or emerging economies during this time has been sporadic, while uncertainty and geopolitical volatility has also caused significant fluctuating in the financial markets.

Despite this, PWT data on average, real-time inflation per capita GDP tells a slightly different narrative. This reveals that the global population was 80% richer financially in 2010 than it was in 1980, while also underlining the fact that gradual, long-term growth trends are all too easy to overlook. Interestingly, the average material well-being of society is three-times what it was in 1950, and this is an economic trend that should offer hope for future generations.

The Singapore Economy: Should We View it From an Alternative Perspective?

As a wealth builder, I will always try to avoid investing in property stocks because this sector is prone to many restrictive government policies due to the scarcity of land in Singapore. For many property developers, among the most unpopular policies should be the Qualifying Certificate Rules under the Residential Property Act.

Under the Qualifying Certificate Rules, listed property companies are technically considered as “foreign companies” as they would have some foreign shareholders. Thus, they are obliged to sell all their units within 5 years from the date of the Qualifying Certificate or collective sale deal. Failing to do so would incur hefty penalty.

According to property consultancy firm Cushman and Wakefield (C&W), property developers may incur about $238 million of extension charges in 2016. This is certainly not a small amount to be scoffed at and it is also important to note that the extension charges are not one-off penalties. Developers would face annual charges as per the following:

1. 8% per annum on the purchase price of the residential property for
   the first year of extension;
2. 16% per annum on the purchase price of the residential property for
   the second year of extension; and
3. 24% per annum on the purchase price of the residential property for
   the third and subsequent years of extension.