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Star Wars wisdom: Five insights for investors

By Lin Zhiqin

/ The Edge Property |

December 21, 2015 10:19 AM SGT

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Star Wars takes place in a cinematic universe a long time ago in a galaxy far, far away. As the curtain rises on Star Wars: The Force Awakens, we chose our favourite Star Wars moments that can teach us a thing or two about investment.

Avoid acting on dark side emotions.

In the current market, with prices and rents sliding, as well anticipation over an interest rate hike, some investors might feel pressured to cut their losses and sell sooner than later. Like the Jedi, who believe there is a Dark Side but refuse to dwell on or follow it, property investors should avoid acting on emotions such as panic and fear. Instead, they should calmly take stock of their circumstances and consider options such as mortgage refinancing or adjusting their spending to support the investment mortgage. A temporary reduction in discretionary spending could help provide sufficient cash flow to tide them over the period taken to secure a tenant.

Let go of attachment.

If you own an HDB flat and a condo, which should you stay in and which should you rent out? Or should you sell one of them to raise capital for something else? Property purchases are often fraught with emotions, including instances where investors fall in love with their property, particularly their primary residence. Those who are in it for the money should weigh the worth, in terms of resale price and potential rental yield, and other factors as objectively as possible.

Your eyes can deceive you.

It is important to learn more about the property and surroundings by visiting it before buying. Additional information can be gleaned from talking to neighbours, who can give an unbiased view compared with the seller or agent. A house that looks to be in great shape could mask hidden issues. Buyers can take advantage of the following Council for Estate Agencies guideline in the Professional Service Manual to probe deeper: “When asked by a buyer or through his salesperson, the seller’s salesperson must find out from the seller and convey to the buyer or the buyer’s salesperson information on the property, such as loan shark harassment, bankruptcy issues, recent deaths from unnatural causes, and defects such as spalling concrete and water leakages.”

Search your feelings.

Most of us are familiar with buyer’s remorse, and seller’s remorse is not uncommon for big-ticket items like property. As human investors and not droids, it would be impossible to be completely unfeeling. Perhaps the key question to ask is, “Would I be able to sleep soundly tonight after acting on my decision?” If an investment will cause you to lose sleep over issues such as stretching your finances too thin, then it should sound off alarm bells. Although the Total Debt Servicing Ratio stands at 60%, a prudent investor might want to trade some leverage for a better night’s rest.

Unlearn what you have learnt.

We all have preconceptions about property and the market, but can we rely on them? The common practice of drawing parallels between past and present could be unreliable when there are no rational or economic underpinnings for the relationships. According to Alan Cheong, head of research and consultancy at Savills Singapore, dangerous ideas about property can turn out to be falsehoods, and the public needs to think carefully about the information they are fed with.

This article appeared in The Edge Property Pullout, Issue 708 (December 21, 2015) of The Edge Singapore.

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