Over the past few weeks, I’ve met several potential buyers contemplating property purchases for either personal residence or investment purposes. However, these individuals share a common uncertainty regarding whether entering the property market is the right move, or if they should explore alternative investment avenues such as cryptocurrencies, which they believe could offer higher yields.
My question to them remains consistent: “What is the underlying motivation for considering a property purchase?” Often, the answer leans towards investment, particularly for those who already have accommodation arrangements, either living with family or partners, and thus lack an immediate need for housing.
Certainly, when discussing real estate as an investment asset, with rental yields averaging 3-4%, or even higher for properties in prime locations with high demand, it presents a viable investment option. With a $300k down payment, one could easily secure a 1-bedroom unit in the Downtown Core area, complete with tenancy, ensuring a decent rental yield and immediate rental income.
The subsequent question I pose to my clients is whether they could achieve similar returns by leveraging their current investment portfolio or by investing the entire $300k in the stock market. Interestingly, most respond negatively.
This leads me to emphasize the financial aspects of property ownership to my clients, highlighting the ability to leverage real estate to acquire a tangible asset for personal residence, potential long-term capital appreciation, and the security of having a place to live.
However, it’s essential not to overlook other investment opportunities. Diversification is crucial, ensuring that one doesn’t concentrate all assets in a single avenue.
The allure of instant gains often associated with stocks, forex, or cryptocurrencies creates a contrast with the slower, more stable returns of real estate. While a stock may surge 10% overnight or Bitcoin may spike 20%, the immediate gratification from such gains often overshadows the perceived ‘burden’ of property ownership, including mortgage payments, property taxes, and management fees.
It’s important to recognize that the volatility of stock and cryptocurrency markets requires swift decision-making to capitalize on opportunities, but it also entails significant risks, with prices fluctuating unpredictably. In contrast, Singapore’s property market has shown resilience over time, attributed in part to government interventions such as cooling measures and the Total Debt Servicing Ratio (TDSR), which have curbed speculation.
Ultimately, the choice between stocks/shares and real estate hinges on individual priorities, needs, and risk tolerance.