Top 3 Reasons Real Estate Should be Part of Your Investment Portfolio

There are various reasons why Singapore is a country of home owners. Government’s public housing policy has helped many young families in property ownership. The notion that your house being an asset also imbued many towards property ownership at some point of their life.

If you are not into property investment yet, the following reasons might set you in rethinking your investment strategy.

Reason #1 – Forced Savings + Leveraging

The mortgage payment which is paid to the financier (either HDB or banks) is broken down into Interest and Principal portions. While interest payments are sunk costs, principal paid towards your property is accumulated equity. This equity is returned to you when you sell your property.

It is also possible to “unlock” the equity of your property by taking an equity term loan (ETL). Using this method would mean that you have either accumulated sufficient equity in your property, or your property has appreciated significantly based on valuation. The ETL method however is only applicable for private residential and commercial properties. HDB flats being subsidised housing cannot be leveraged for additional loan.

Reason #2 – Diversification

While there are different school of thoughts when it comes to investment diversification, allocation of your resources in different asset class is seen as prudent. Real Estate is known to hedge your wealth against inflation and presents a lower risk as compared to the stock market.

You can choose to rent your property for passive income, or sell for substantial capital appreciation after holding for a few years. Whichever strategy you choose to deploy depends on the your property profile in terms of building age and location.

Reason #3 – Stable Growth

Based on the Property Price Index for Q1 2021 released by URA, Singapore’s private residential sector grew by 3.3%, as compared to 2.1% in the previous quarter. The overall data presented also suggests that growth is stable in the private residential sector over a 5 year period.

It surprised many that property market is still bullish despite the evolving Covid-19 pandemic. Delays in construction has forced buyers toward resale properties, which inevitably pushed prices up.

While this is an overall trend for the sector, specific projects with unique attributes has outperformed the growth trajectory of this index. This is the reason why choosing the right property will fast track your wealth accumulation through property investment.

Putting aside the investor hat, I feel that every property is unique due to its different layout, facing or level. That’s the reason why I enjoy owning properties 😉