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Is property a hedge against inflation?

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abbby
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Is property a hedge against inflation?

Post by abbby » Sun, 14 Jun 2020 12:33 pm

So..it seems like prices are not coming down as some of us have discussed before and with more foreign funds coming in, it could only go higher even with times like this.

Is property investment or simply just buying up any property in Singapore a good hedge against inflation?

I personally think it's better than keeping money in the bank...the same amount of money in 5 years' time cannot get you the house for the same price as today.
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PNGMK
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Re: Is property a hedge against inflation?

Post by PNGMK » Sun, 14 Jun 2020 4:19 pm

Historically in most countries yes. War and disaster can change that curve but in general most developed or developing countries see real estate rise in the long term. There are some parts of the world where it is falling though due to falling population (Japan for example).
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Re: Is property a hedge against inflation?

Post by Max Headroom » Mon, 15 Jun 2020 12:56 pm

It's bound to be better than cash.

That being said, since Singapore's property market has peaked, and arguably is still peaking even now, I think values going up are the least likely scenario, certainly in the next 2-3 years or so, though even beyond that, I don't really see it happening. Nor would it necessarily be beneficial as such.

Again though, it's probably still going to do better than cash.

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Re: Is property a hedge against inflation?

Post by TropicalExpat » Sun, 12 Jul 2020 2:23 pm

It's too simplistic to think "oh funds are coming in i should buying up any property in Singapore".

Just say you are a SC, you buy a residential property for 1mn - your stamp duty is 24,600; total outlay (ex lawyers) = 1,024,600
For you to get any profit out of it, you would need prices to rise 2.5%
Sounds reasonable right? Yes

Now of if you buy a second residential property for 1mn, your stamp duty is 144,600; total outlay (ex lawyers) = 1,144,600
For you to get any profit out of it, you would need prices to rise 14.5%
Sounds reasonable right? A bit more difficult

Now of if you buy a third residential property for 1mn, your stamp duty is 174,600; total outlay (ex lawyers) = 1,174,600
For you to get any profit out of it, you would need prices to rise 17.5%
Sounds reasonable right? Even more difficult.

There are different rules for commercial properties, so ... it's not something jump straight into.

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Re: Is property a hedge against inflation?

Post by PNGMK » Mon, 13 Jul 2020 10:17 am

TropicalExpat wrote:
Sun, 12 Jul 2020 2:23 pm
It's too simplistic to think "oh funds are coming in i should buying up any property in Singapore".

Just say you are a SC, you buy a residential property for 1mn - your stamp duty is 24,600; total outlay (ex lawyers) = 1,024,600
For you to get any profit out of it, you would need prices to rise 2.5%
Sounds reasonable right? Yes

Now of if you buy a second residential property for 1mn, your stamp duty is 144,600; total outlay (ex lawyers) = 1,144,600
For you to get any profit out of it, you would need prices to rise 14.5%
Sounds reasonable right? A bit more difficult

Now of if you buy a third residential property for 1mn, your stamp duty is 174,600; total outlay (ex lawyers) = 1,174,600
For you to get any profit out of it, you would need prices to rise 17.5%
Sounds reasonable right? Even more difficult.

There are different rules for commercial properties, so ... it's not something jump straight into.
A couple strategies around this:

1. Decouple when the first property (private of course) has enough equity so the highest income earner can go onto the next property purchase. (Decoupling means if the prop title has multiple names take them all off except one).

2. Buy through your children or other younger relatives if you trust them.

Edit 3. Third strategy is apparently to buy with 5% down but not transfer title but flip for a profit.
Last edited by PNGMK on Wed, 15 Jul 2020 3:56 pm, edited 1 time in total.
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Re: Is property a hedge against inflation?

Post by midlet2013 » Wed, 15 Jul 2020 2:49 pm

How much do condo prices appreciate in general over time. Is it better than Stocks ?

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Re: Is property a hedge against inflation?

Post by PNGMK » Wed, 15 Jul 2020 3:55 pm

midlet2013 wrote:
Wed, 15 Jul 2020 2:49 pm
How much do condo prices appreciate in general over time. Is it better than Stocks ?
Midjet - long time no see!

Yes - in Singapore for sure if you compare indexs.
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Re: Is property a hedge against inflation?

Post by midlet2013 » Wed, 15 Jul 2020 5:22 pm

HI PNGMK

How tall are you? But I hope u r doing well. I don't have much reason to visit this forum anymore.

What index are u talking about . Singapore or US ? Cuz I did pretty well in US stocks in the past few years. Mostly tech so worked out well. So I feel US stocks seem like a good bet for passive income.

We have been PR for 6 and 12 years so can buy either HDB or condo. But I never liked the idea of owning a flat. I also don't think its a great financial investment in the first place. But I mite be wrong.

What is the appreciation of condo prices in general. Is it like 10% annually. I checked some data and I felt that mostly its between 2-5% over a 10 year period. Which is not impressive.

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Re: Is property a hedge against inflation?

Post by Max Headroom » Wed, 15 Jul 2020 6:01 pm

That's because the property gravy train here has decelerated considerably over the past few years.

As Singapore pretty much tripled its population since the early 80s, supply was always going to lag behind demand. But now that the equation has run its course, I don't think we're going back to those halcyon days.

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