The perennial value of private property

The recent property curbs may have thrown a spanner into the works for some developers, home seekers and investors but despite the price differential, private properties remain one of the most valuable assets in Singapore.

Private property continues to be a valuable asset in investment portfolios

River Place. Picture: iProperty

While the stakes have gotten a little higher, analysts continue to view private real estate as a perennial asset, at least in the local context. The stamp duty hikes and tighter loan limits are directed at those who may be overextending themselves in terms of debt servicing.

This may seem like an immediate setback, and rightly so, but in the medium to longer term, this might be more helpful to the buyer as their ability to service the mortgage becomes higher as the loan amount is lower.

Financial experts see real estate as the core of an investment portfolio. In hedging against inflation, private residential property seems to provide higher yields than shares.

For example, the residential price index has increased a compounded 5.1% over the last 30 years. However, timing and holding power are crucial factors in determining the success of the investments.

Careful calculations as property investments are front-heavy

As property investments can require a large initial sunk-cost, careful calculations are required on part of the investors. Rental yields are another consideration especially as the costs of buying a private property now could be higher than can be covered by rental yields.

For investors who have a wider range of investment portfolios, real estate will remain a viable asset. Real estate is less dependent on traditional asset classes and can effectively diversify an investor’s portfolio. There are however risks involved in real estate investment, such as lack of liquidity, high transaction costs and building management and fees.

Aside from residential real estate, commercial and industrial real estate are becoming more popular with investors.

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