5 things a property investor should remember

By Ryan Khoo / Alpha Marketing, The Edge Property | November 3, 2015 9:32 AM SGT
The property market has cooled down a fair bit. Singapore has seen two consecutive years of price declines. Malaysia, meanwhile, has seen transaction volumes drop significantly and prices stagnate. Popular overseas investment destinations such as Melbourne, Sydney and London appear to be near their peak, with large incoming supply. The gap between buyers’ and sellers’ expectations is still too big and there does not seem to be much good news on the horizon for either party.
On the ground, we are seeing smaller crowds at show flats and property shows. Property agents are getting fewer enquiries and are seeing lower returns on their marketing dollar. A net total of 1,492 agents left the industry in the Council for Estate Agencies’ registration period ended March 2015.The figure is expected to rise in the next renewal exercise, which ends Oct 31.
In these times of despair and low morale, itis important to remember a few rules on property investing so that your decision- making remains solid.
Property markets work in cycles
What goes up, must come down. So say the critics of the property market who believe that prices must drop further in order to stimulate buying. But the lows of the current cycle are rarely lower than the lows of the previous cycle. Singapore property prices during the downturn of 2009 were higher than those in the stagnation years of 2001 to 2006.
Property prices in Singapore will drop further, but it is likely to be a very gradual drop and unlikely to return to 2009 levels. With more than 80% of citizens owning homes in the city state, the government will intervene to prevent a sharp price fall.
On the other hand, if you look at the glass as half full, having a property cycle also means that at some point in the future, prices will have to inch back up. And one factor driving prices back up is inflation.
Inflation is a property investor’s best friend
A lot of recent discussion about the property market is on supply versus demand. Less has been said about the impact of inflation on prices. A bowl of noodles today costs $4 versus $1 some 30 years ago. People complain about the cost of living and how it only goes up. Similarly, the same can be said about construction and land costs. At some point, the replacement cost to construct a new property...