Are high returns and ‘fuss-free’ investments too good to be true?

By
/ The Edge Property
|
September 16, 2015 12:00 PM SGT
Guarantees of high returns and ‘fuss-free’ investments have ensnared an increasing number of investors in Singapore in recent years. Will enhanced advertisement guidelines be enough? Can more be done to rein in marketing agents flogging questionable overseas projects?
Enhanced guidelines for property investment advertisements and investment seminars introduced by the Advertising Standards Authority of Singapore Council took effect from Aug 12. The ASAS Council said it had observed an increase in advertisements, including those of investments in overseas properties that promise high or guaranteed returns, but that they often lack sufficient warnings against any financial, legal or regulatory risks.
Between January 2013 and May 2015, ASAS had received 41 “feedback cases” about advertisements by companies that offer training as well as tips on investing in financial instruments and properties. Of particular concern was investment in overseas properties. Of the 41 cases, 12 had involved advertisements on overseas property investment that contained non-substantiated claims.
The enhanced guidelines will go some way towards protecting investors. However, for those who had fallen prey to such advertisements, the measures by ASAS may have come a little too late.
A year ago, many of the investors in Singapore who bought rooms in the Ibis budget hotels in Knutsford and Warrington Lymm, near Manchester in the UK, figured they were onto a good thing. They were lured by advertisements claiming “guaranteed 24% nett return over three years” and “109% guaranteed buyback”.
One such investor, who only wants to be known as “Nick”, saw the advertisement on Ibis Warrington Lymm on July 13, and attended the property seminar that Saturday together with his wife. The returns dangled that day were even sweeter than what was advertised, with offers of 9% return a year and 115% buyback at the end of three years.
The price of a hotel room at Ibis Warrington Lymm was £94,500, which translated into about $200,000 then. “What convinced us to buy were the high returns, the assurance that it was a completed project and, more importantly, because of DWG [Dennis Wee Group], which we thought was a very reputable marketing agency,” says Nick.
He signed the option to purchase and paid the booking fee of $4,000 (£2,000) on July 13. As the advertisement had said, “Meet the developer”, Nick asked who the developer was.
He was introduced to Lee Bramzell, founder and director of Shepherd Cox, who made a presentation on the project...