Over the years, we see that our roads are starting to be filled with more and more luxury cars. I'm not referring to the usual Mercedes or BMW, which are already a pretty common sight, but the high-end cars, such as Lamborghinis, Ferraris, Bentleys and the likes. Which brings the question, Are there really so many wealthy Singaporeans?
According to a report from the Boston Consulting Group. Singapore had 10% of its resident households who were millionaires in 2013.
If 10% of the population were millionaires in Singapore in 2013, you can be sure this number is constantly growing every year.
And how many BILLIONAIRES do we have in Singapore? According to a Forbes article in 2017, we have 30 Billionaires in Singapore. And most of the wealthy individuals and families have built their wealth from real estate.
Why is Real Estate in Singapore such an effective way to build your wealth?
1. Land Scarcity Singapore has a total land area of 721.5 square kilometres as of 2017. For a major city with a population of 5.61 million people, we have one of the highest population densities (7,775 people per sq km) in the world. This also means that there is a high demand for land in Singapore.
2. Property Prices in Singapore always go upwards in the long run Because of the high demand for land in a small country, prices for property in Singapore have seen an upward trend since 1975.
A strong indicator for growth is to notice the "High/Low Peaks". The new high are higher than the previous highs. Similarly, the new low are higher than the previous lows.
3. Property offers more financial leverage Properties are one of the best assets to leverage and multiply your wealth.
For example, if I purchase a condominium for $1,000,000 I can put down a 20% deposit (of which 5% cash + 15% CPF) and borrow 80% from the bank. If that property increases in value by 10% I have made $100,000, because I have only contributed 5% of the purchase price but I get 100% of the growth.
This concept has been used by the rich to grow their wealth substantially within a short period of time. And did you know, even if your property doesn't appreciate in value overtime, you are still making money!
To understand this concept lets reexamine it.
Price of condo: $1,000,000 5% Cash deposit: $50,000 (paid by you) 15% CPF deposit: $150,000 Bank Loan: $850,000(paid by bank)
Bank loan at 2% for 30 years,
Monthly mortgage: $3,141/month Of which, Interest: $779/ month
After 5 years, if condo sells for $1,000,000.
Total interest paid for 5 years: $779 x 12 x 5 = $46,740(paid by you) Outstanding loan amount: $661,540
*(CPF monies are refunded back into your own CPF post sale) - thus not taken into account.*
Your initial $50,000 investment has grown by almost 5 times its value even though the price hasn't increased! And if property prices always moving upwards in the long run, you can easily see why the rich have grown their wealth so quickly!
4. Hedge against Inflation Because property prices in Singapore generally move upwards. The capital gains and rental gains (if you rent it out) usually far exceed an interest rates in the banks.
While most people fear inflation, as a rental property owner, I look forward to it! Why?
Because, when the price of a plate of chicken rice increases to $10, guess what else is going to shoot through the roof? Everything, including rents and property values! This is why real estate is often called “a hedge against inflation."
5. Tenant pays for your mortgage
Some of you might be wondering, "The monthly mortgage is so high! How am I going to pay?"
Another advantage to property investing is that tenants are paying down your mortgage. Using the strategies I have formulated, my clients have been able to sit and watch their investments grow in value, while tenants help to finance their mortgage loans.
6. Properties are brick-and-mortar Unlike stocks, shares, bonds and other equities, property has a good store of value. During a Financial Crisis, equity prices plunge and some companies may go bankrupt, and never recover. Thus your stock or bond becomes a worthless piece of paper.
Likewise, during a financial crisis, property prices usually drop. However, because properties are brick-and-mortar assets, there will demand! People still need a house even during a crisis. And once the market recovers, property prices will resume their upward trend again!
From these 6 reasons, we can see why property is such a good investment. However, don't be too eager to jump onto the bandwagon and start buying properties randomly.
There are a few factors to consider when buying a property, which can be found in my previous post.
It is VERY important to find an agent that is able to not only decipher the current and future market direction, but to also be able to accurately calculate your financial capabilities and options.
I provide my clients with my foresight and advice for identifying key opportunities in the property market, and also provide them with in-depth financial analysis of their financial options.
Arrange for a sharing session today with me, and learn to grow your wealth systematically through my sound and safe strategies.
9759 2826 / 8388 4881 PropNex Realty Pte Ltd
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