Millionaires become millionaires NOT by saving pennies, BUT BY INVESTING IN REAL ESTATE!
Fundamental Characteristics of Real Estate
1. The long-lasting nature of brick and mortar
Properties are constructed with the aim to last through generations.
2. The ever-increasing cost of materials
Cost of raw materials set to increase due to rapid urbanization of emerging countries such as China and India.
3. Rising labour costs
Labour cost is also expected to keep pace with inflation, thus increasing the price of properties as time goes by.
4. Rising cost of land
Over time, the cost of land will go up. This is especially so for land in matured estates and commercial hubs which can drive the prices many-fold.
A buyers’ market is a period in a property cycle where a buyer is in an advantageous position to buy a property at a discount or at a fair market price.
• Positive outlook by developers
Recent land bids reflect the positive outlook for continued strong demand for private homes to continue for the rest of the year. Developers are also actively acquiring freehold lands to increase their land banks.
• Interest rates are extraordinarily low in Singapore
The current interest rate of below 2% is unusual; especially when you consider that just across the causeway; it is 4.5%. For example, a buyer who takes a $600k loan at 1.8% interest means that the interest component is only $900/month-the savings on interest can be substantial over the years.
Before you commit to a home purchase, you need to define your reason for purchasing a home in the first place. There are only two reasons for owning residential property in Singapore: It’s either so you could live in it, or so you could invest.
There is a difference between buying a property to live in, and buying one investment:
- If you intend to live in it yourself, your main considerations are the location, your budget and size.
For instance, if you’re single, it makes sense to get a small studio flat. But when you’re a newlywed, you and your spouse might opt for a modest-sized apartment that you can afford with your combined salaries. If you plan to have more children and are making enough money, you may want a spacious home with a more bedrooms.
2. If you’re buying a property as an investment, your main concerns are the rental yield and capital appreciation that the property can generate for you. You don’t really need to worry about whether it suits your personal needs; instead, you will just need to find interested tenants or buyers who are willing to meet your price.
It is about taking the first step and making the right decisions today that will reward you in time to come. Investing in property should be done with a mid to long term perspective of at least 5 years and beyond, if one is to realise greater capital appreciation.