Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.
– Franklin D. Roosevelt, 32nd US President (1882-1945)
The largest financial risk for most people is the loss of a job. Income diversification helps reduce that risk. Developing multiple income streams by building a property portfolio or investing in stocks, bonds etc., between your mis 20s to your mid 40s will help to ensure robust cash flows and brings you closer to financial freedom
Cash flow is the net income from a real estate investment after mortgage payments and operating expenses have been made. A key benefit of real estate investing is its ability to generate cash flow from rental and the ability to increase that rental in times of inflation. In many cases, cash flow only strengthens over time as you pay down your mortgage—and build up your equity.
As you pay down a property mortgage, you build equity—an asset that’s part of your net worth. And as you build equity, you have the leverage to buy more properties and increase cash flow and wealth even more. Owning a portfolio of properties gives you the financial flexibility and the freedom to retire whenever you choose to.
We believe that an alignment of interests with our clients is essential, combining a fundamentally-driven, value-oriented investment approach with independent research and insights derived from our years of real estate investment experience to identify high quality, well-located properties with sustainable income and potential for long-term capital appreciation. We believe that superior cash flow and long-term returns are achieved through active, hands-on strategic asset management.
Real estate is one of the largest and oldest investment asset classes, yet it is widely considered an alternative asset class. It can be an effective means of diversification in many balanced investment portfolios.
Real estate offers investors long-term stable income, some protection from inflation, and generally low correlations with stocks and bonds.
A well constructed real estate portfolio can also offer an income stream that is relatively stable through market ups and downs.
One key advantage that real estate has over other investment tools is the access to leverage over a relatively longer time horizon.
Real estate wealth planning should be complementary to financial/retirement planning. A financial plan takes into consideration one’s financial goals, then works out a plan to achieve the target savings, investment portfolio and cash flow through investment in equities, bonds, unit trusts, endowment plans etc., Since real estate offers key diversification and inflation hedging benefits, it serves to enhance one’s overall portfolio risk-adjusted returns. A well constructed real estate portfolio, actively monitored and managed, can offer an income stream that is relatively stable through market ups and downs. Just as a financial plan should be customised to the individual’s needs and objectives. There’s is also no “one-size-fits-all” approach to real estate wealth planning.
Real estate investing can offer robust long-term returns that are not entirely correlated with the stock market. But costs and risks can run high when you invest in physical property, which may make REITs the best choice for those who have limited money to invest or who aren’t looking for a primary residence.
Real estate investment trusts take the fuss out of owning real estate. Management handles all of the ownership and rental logistics—you just sit back and collect dividends, which are frequently higher than many stock-based investments.
BUT, it is important to note that while the value of REITs does benefit from the rise in asset prices, the prices of REITS are highly correlated to the stock market and hence is much less effective in mitigating risk within an investment portfolio.
For any property type, including residential property, location is the critical factor in determining value. Properties with the highest value per unit of space are in the best locations and have modern features and functionality. Moderately valued properties are typically in adequate but not prime locations and/or have slightly outdated features. Properties with the lowest values per unit of space are in poor locations and have outdated features.
In summary, unless you are planning to pass the specific property down to the next generations, from an investment perspective a freehold property is not superior to a leasehold property.
Real estate values may decline initially when interest rates rise. Unlike a fixed-rate bond with a fixed maturity price, however, property income, land prices, and real estate values may increase over time. Increasing land and property construction costs also raise the rental threshold at which new developments can generate target returns. In a nutshell, property prices will continue to rise in an inflationary environment even as interest rates are rising.
Whether to upgrade to a bigger home or to buy an investment property instead depends very much on your needs and preferences; your citizenship, as well as your willingness and ability to pay the ABSD if necessary.
For example, if you are married and own an HDB flat and decoupling is not an option, then you should explore your investment alternatives in accordance to your long term financial goals. If you are planning to build a long term portfolio of assets to provide a stable cash flow upon retirement, you may consider dividends from an investment portfolio of equities, funds and bonds, or an investment property that would provide a rental yield. If you do not own a HDB, then decoupling might be an option.
Of course, the final decision would depend on many moving parts and would require a detailed review of your current financial position, financial goals, following which a real estate plan may be drawn up. Input from your banker or financial adviser, and your real estate consultant are crucial to ensure that you make the most optimal decision.
Growth in the economy is generally the most important single economic factor affecting the outlook for all property types including residential property. Job creation also tends to be reflected in increased demand for multi-family accommodation as newly employed people gain the financial means to buy/rent their own accommodations.
Singapore’s stable political climate and it being a regional financial and trading hub makes Singapore an attractive place to investment in; not just for its citizens or residents but also for foreigners who are looking for a safe haven to store and build their wealth.
So is the Singapore residential property market overheating? A simple answer is no; but are there pricing pressures? Yes. Due to the shortage of new supply, both HDB and private, coming onto the market. While the Singapore government is cautious about a developing property bubble, they are confident that the cooling measures in place will continue to keep the local residential property market stable, affordable and globally competitive.
In its press release following the December 2021 additional cooling measures, the Ministry of Community Development commented that “Even though House Price-to-Income ratios remain below their historical averages, there is clear upward momentum…If left unchecked, prices could run ahead of economic fundamentals, and raise the risk of a destabilising correction later on. Borrowers would also be vulnerable to a possible rise in interest rates in the coming months.
Apart from ensuring that your real estate consultant is licensed, it is important to work with people whom you are comfortable with sharing your personal aspirations and information with. Working with a team has its advantages as it means more knowledge, experience and time-tested strategies; if you are looking for someone to help you with restructuring your property portfolio for optimised return, or simply want to find out what your options are, email or Whatsapp us for a chat. With combined experience of more than 20 years in the wealth management and real estate industry, armed with the most up-to-date real estate wealth management qualifications, we are confident that we will be able to add value to your real estate investment journey.
Combining a fundamental, value-oriented investment approach with independent research and unique insights, we identify high quality, well-located properties with sustainable income and potential for long-term capital appreciation.
