Should property be your biggest investment?

Below is a summary of Providend’s podcast, “Should property be your biggest investment? What 35 years of Singapore data reveals”:

1. As an investment, Singapore properties have strong returns in the past 35 years.

CAGR of property and equity index returns (1990 to 2025):

– Private residential: 4.8%
– Landed: 5.2%
– Non-landed: 4.6%
– HDB resale: 6.2%
– MSCI All Country World Index in SGD: 4.8%

2. CAGR of property index is different from the return of owning a physical property.

The latter can underperform or overperform an index. Location, lease tenure, development quality, age, competition from new projects and supply-and-demand all matter.

Besides, owners need to pay the following:

– Buyer and seller stamp duties
– Mortgage interest
– Property tax
– Renovation
– Maintenance
– Agent fees
– Periods without tenants
– Legal and ownership costs
– The cost of your time and effort

3. Leverage is a double-edged sword. It can magnify both gains and losses.

– If property is paid entirely in cash, the value appreciation is roughly the same as the annual return of the property.

– If property is leveraged, when there is a drop in value and rental return, the owner still has to pay the same mortgage. An example is between 2013 peak and 2017 trough when Singapore’s broad property index fell about 12%.

4. Property investment returns are dependent on Singapore specific factors.

Factors, especially demographic ones, contributed to the 35-year housing price growth between 1980 and 2015 (47% for HDB and 81% for private housing). They may not be as strong in the next 35 years for the following reasons:

– Very low fertility
– Rapid aging population
– Slower citizen population growth
– High ABSD and TDSR constraints
– Government cooling measures
– Increasing housing supply
– Rising vacancy in private properties

5. There are risks of owning a second property versus having a globally diversified portfolio as investment.

– Concentration: One property can be millions of dollars
– Illiquidity: A property cannot be sold in percentage or in phases
– Costs: Stamp duties, maintenance, taxes, renovation and transaction costs
– Operational burden: Tenants, repairs, refinancing and administration
– Regulatory risk: Government policies that change property ownership
– Diversification: All economic interests, including job, CPF and first home are all tied to Singapore

CAGR from September 2017 to Q1 2026:

– Non-landed property: 5.43%
– Landed property: 6.13%
– Index Plus Equity SGD: 9.41%

6. The actual return of properties after time and effort is lower.

A property’s return should include the costs of time and mental energy spent to acquire and manage. When the owner is approaching retirement, a property-heavy portfolio can be asset-rich but cash-flow constrained.

The conclusion of Provident on “Should property be your biggest investment?”: Not necessarily, and probably not for most investors for investment property rather than the home you live in.

My two-cents on property investment

Note that Provident is a fee-only wealth advisory firm. It is understandable why it advocates diversified portfolios in asset, sector and geography.

However, as a retail investor who retired early, my main focus is protecting my wealth while maintaining reasonable return and value appreciation for existing assets. At this stage, I am not so interested in diversification in case it becomes diworsification.

Personally, I earned my first pot of gold from properties between 2002 and 2010. Allow me to share my two-cent worth on the question “Should property be your biggest investment?”.

1. Past performance doesn’t guarantee future results

Since 1965, Singapore’s economy has experienced exploding growth. Coupled with easy financing, housing prices have multiplied many times in the last 60 years. However, we could no longer go back to the days with double digit GDP growth and 5.85 total fertility rate.

The factors highlighted by Provident are all valid. When the future is uncertain, the risk is high if property is the biggest (and illiquid) investment. Too many times we forgot what goes up must come down.

2. Property investors are at the mercy of government regulations and global economy.

When I was a multiple-property owner, the bank could raise mortgage rates any time, dating effective date a month ago. I also obligingly paid stamp duties, property taxes, and higher personal income tax (after adding rental income). But the authority had imposed new cooling measures 15 times since 2010, not consulting us even once. New rules, with stricter buying constraints and higher taxes each time, were made effective at midnight on the same day.

Likewise, rental return is at the mercy of immigration policy and the economy. Prices of stocks and properties go down with a bad economy. But there are other assets that can benefit from a gloomy outlook.

3. Whether the return from properties justifies the time and effort

No one told me that rental from tenants are active income rather than passive income. I have sold my rental properties for long, leaving only the house we are staying in. Since then, I don’t have to deal with bad tenants, errant agents or bad contractors anymore.

Profits from my properties were re-invested in other types of investment that don’t involve so much upfront costs and ongoing expenses. I have since found a bigger pot of gold elsewhere, plus with no mortgage interest and zero tax.

Food for thought

Don’t get me wrong. I still love properties. But buying them is another thing., and definitely not the biggest investment.

One day I might look at properties again. But the numbers must be right. And the money better worth my time and effort.

“Although we both make our money in properties, we can’t deny the fact that times have changed. In the past, we had every reason to be optimistic. In fact, we had all the cards in our favor – cheap properties, easy borrowing, low interest rates, few buying restrictions, reasonable taxes, good budget tenants …

Like it or not, things are different now. We have no choice but to invest carefully and conservatively. To be honest, we may not want to consider investing in properties in this market. Because even if property prices continue to go up, the yield and profit may not beat other types of investment. But if prices drop after our purchase, there is plenty of room for market correction. In other words, the potential for loss outweighs the potential for gain. Property investment carries higher risks but lower chances for good returns.

After all, the number one priority in investing is always to preserve the capital.”

– “Comparing notes with property investors“, PropertySoul.com

(the above is a repost from my facebook page fb.com/propertysoulblog)

My book Behind The Scenes of The Property Market is available for preview and order online.

If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.

Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.

If you miss “The Future of Singapore Homes” education seminar, you can watch the recording here.