Online Calculator | Five Reasons Why You Should Invest In Singapore Property

Five Reasons Why You Should Invest In Singapore Property

Are properties profitable investments? I've got some experience investing in property (in addition to writing a property blog), and in this post I am going to share my opinion with you. But please be aware that this isn't financial guidance “each individual’s situation is different so do your sums (or ask your adviser) prior to making any investments.

Here are my top reasons explaining why properties make good investments:

1) Cheap leverage available to help bump up your return.

One of the most important advantages of making an investment in property over other assets is you can borrow a large sum of cash at a low rate of interest to get a house. If the cost of your property goes up, your return on the cash you invested is multiplied.

Naturally if prices fall, your equity will decline even quicker. But so long as you aren't too greedy and have holding power, over the long run you'll usually come out fine.

And when you buy the right property at the best time, you can make a lot of money. Imagine getting a bonus of several YEARS pay when you sell your property for a good profit.

2) Can generate passive rental earnings.

You can lease out your property (or a room in your property if you're living in it) to generate rental income. This rental earnings may help to offset your home loan, part of which is going toward the principal repayment, so helping you to raise equity in your investment. If your yield is high enough, you can also get positive money flow after paying off your home loan and the maintenance costs.

3) Capability to make enhancements

If you're the kind of person who likes to mend things, you are able to add price to the property by doing a rebuilding, or sprucing up the interior design. Even merely a fresh splash of paint can do wonders for the value of the property.

4) No capital gains tax

Like stocks, there is not any capital gains tax when your property appreciates in price and you sell it for a reasonable profit (unless the IRAS comes after you as a property trader). Contrast this with your employment income where up to 20% of it (depending on your tax bracket) goes to the taxman.

5) Property is a well trodden trail toward profit generation.

If you look at the Forbes 40 wealthiest folks in Singapore, you will see many of us who made their fortunes developing and investing in real-estate on that list. Or merely look around you “the average Singaporean’s wealth doubtless comes more from the appreciation of his HDB flat than from any other asset.

Drawbacks of making an investment in property

But properties do have some disadvantages versus other types of investments that you should be aware of.

One drawback is that properties are aggravating to obtain and maintain. House hunting can take lots of time and effort, the negotiations to buy can be complicated, then there are the repairs, coping with tenant grumbles and so on.

Also properties are an illiquid asset “that implies it is not as simple and as quick to convert to cash when you want it. Selling real estate may require months dependent on the market.

And the largest hindrance for most people when making an investment in properties is that it requires a massive quantity of capital to get started. Saving enough money to buy one property could take a couple 3 to 5 years of scrimping.

Gluttony, Caution

Please remember that I am really not suggesting that you go and invest in properties immediately. In fact , now that prices (primarily based on the URA Price Index) have overreached the peak in 1996, you should be extra careful. Do not forget Warren Buffett’s advice: “Be afraid when others are greedy and greedy when others are fearful.”

And property is not the only avenue through which investors can earn money. A smart financier can earn money in any asset group IF he knows what he does. You want to work out where your interests, knowledge and capabilities lie before investing. And I enthusiastically believe that you need to only invest in something you know (i.e. Don’t blindly follow the gang).

Hope that you enjoyed reading this Singapore property market article!

Propwise.sg, a top Singapore property blog, is dedicated to helping you understand the real estate market and make better choices. Visit us to read more Singapore property market articles.

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