Wednesday, April 11, 2007

Rising Property Prices

We are hearing reports of property prices rising almost every month in the news. Why the sudden surge in price over the past 1 year? Let me speak from my point of view.

1) The buyers this time round are more international than Locals. The demand are largely from the Europeans, Americans, Chinese and Indonesians.
Our 2 IRs and the F1 talks had successfully attracted lots of attention to this small red dot.

2) Property is a highly geared investment. I'm able to pay little deposit and borrow the rest. If price rise fast enough, I can make a profit of 10 over thousands when I only pay a few thousand of interest and legal fees.

3) Property investments had created thousands of millionaires in the past. Such thoughts are re-visiting these people again 10 years of dampened interest in this investment class.

Will I invest if I have money?

The price increase are largely constrained to the higher end properties. The current prices are too high and had reached a speculative stage. As new supplies of condos start coming in, the prices will stablise and profit may be capped. I will not invest in them unless I had too much money to spend like some Arabians or Indonesians.

I'll prefer to invest 60% in Reits or Infrastructure companies that gives regular dividends, Unit Trust that invest regionally and basic amenities as such food, fuel, etc at bullish times like this. 20% can speculate into Shares and Rest of 20% into Bonds or Money Markets.

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