Singapore’s property market is booming, with activity centred in districts 4, 9, 10, 11 and 15. And I believe there is a lot more upside yet. Why?

Singapore’s property market is booming, with activity centred in districts 4, 9, 10, 11 and 15. And I believe there is a lot more upside yet. Why? For each key event listed below, I expect an above average movement of $200 per square foot for the districts mentioned in the years ahead:

Year 2008: Singapore will host the world’s first Formula One night racing. The world will be invited to Singapore, interact with and invest in Singapore.

Year 2009: The first integrated resort (IR) at Marina Bay will be completed with US$5 billion flowing into Singapore from the first wave of tourists. They will come from the business travel, meetings, conventions and dexhibitions segment.

Year 2010: The second IR on Sentosa will be completed with another US$5 billion flowing in from the second wave of tourists. These tourists will come from destinations beyond a nine-hour flight radius.

Year 2011: My guess is that there will be a general election in Singapore which could see some election year goodies.

Year 2015: Singapore celebrates her 50th birthday and hopefully fulfils Prime Minister Lee Hsien Loong’s vision of Singapore as the jewel of the region.

Can we really profit from investing in the property market?

While many wealth creation fads come and go, property investment has consistently created more permanent millionaires than any other investing strategy in history. Here are what some of the wealthiest Americans have said:

‘Real estate is the basis for all wealth.’ - Theodore Roosevelt

‘Eighty per cent of all millionaires made it through real estate.’ - Andrew Carnegie

‘Buying real estate is the best, safest way to become wealthy.’ - Marshall Fields

The truth is that property investment is not just for the rich. If done correctly, anyone who has the desire to succeed can create enough passive income or a lump sum of cash to become financially free.

According to an annual World Wealth Report compiled recently by Merrill Lynch and research firm Capgemini, Singapore has 66,660 millionaires (in US$ terms). They account for about 1.5 per cent of the population, that is, three out of every 200 people here are millionaires.

But the sad truth is that only three out of every 200 Singaporeans will be financially independent when they retire. The rest will either be dependent on family, friends or charity, or have to work indefinitely.

If you’re spending all the money you make and banking on your Central Provident Fund (CPF) for retirement, I want you to wake up from your sweet dreams! The CPF is designed as a supplement to your retirement plan. If CPF savings are all you’ve got, you are either going to have to continue working well past retirement age, or live a meagre lifestyle.

Most people think that the safest option is to park their money in fixed deposits. But they fail to take account of inflation. Today’s inflation rate is about one per cent a year. You need to earn one per cent on your money in fixed deposits just to break even. You’ll need to earn more if you want to create wealth. As such, you will definitely want to invest in instruments that will not only give you a good return but also appreciate in value over time. One good way is to invest in property.

There are two roles to consider. In the beginning, you enter the property market as a buyer and after some time, you exit as a seller. We call this: ‘Buy low, sell high, make money.’ I’ll use a real-life example of the process that made a buyer a cool profit of almost $1 million in a year.

Step 1: The buyer places a one per cent deposit for an option to purchase a property at $1.6 million. That comes to $16,000. The option gives the buyer the right, but not the obligation, to buy the property within two weeks. The owner of the property is not allowed to sell the property to someone else during this period.

Step 2: The buyer exercises the option two weeks later with an additional payment of 4 per cent or $64,000. Once this step is completed, the buyer will have about eight weeks to raise money for the outstanding amount.

Meanwhile, conveyancing work will have started to ensure both parties are legally approved by the authorities for this transaction.

Step 3: Eight weeks later, the buyer pays another 5 per cent - or $80,000 - to complete the purchase.

All in, the buyer has to fork out a cash amount of a $205,600. This comprises 10 per cent for the downpayment, $42,600 for the stamp duty and $3,000 for legal fees. (Stamp duty is taxed at 3 per cent of $1.6 million minus $5,400).

At this stage, the buyer would have invested 10 per cent of the value of the property in cash. The other 90 per cent is financed through bank borrowing. Once this process is completed, the seller hands over the house key to the buyer.

One year later, the owner sells the property for $2.7 million and reaps a profit of $970,715. That is calculated on the sale price of $2.7 million minus the purchase price of $1.6 million. On top of that are the other expenses: stamp duty of $42,600, legal fees of $3,000 X 2 (incurred on the buying and selling); bank redemption of $26,685 (the bank’s penalty as part of loan agreement); 2 per cent for agent’s fee of $54,000 (this is double the market rate to incentivise performance).

There is no secret formula to investing in the property market. All it takes is an understanding of the key terms, a commitment of time and most importantly, a ready lump sum of cash to initiate the purchase.

Where are the areas to invest?I highly recommend Sentosa Cove and District 10.

Sentosa Cove offers one of the most exciting propositions - a residential enclave that shares the island with an integrated resort. The wealthiest individuals in the world will be looking to buy your property which will be situated right next to their favourite entertainment spot.

In district 10, the Duchess area is the place where you can invest in your child’s future. Within a one-km radius, it offers several premier schools: the Nanyang and Raffles Girls’ primary schools, St Margaret’s Secondary School, Nanyang Girls’ High, Chinese High School, Hwa Chong Institution, National Junior College and Hwa Chong Junior College.

When do we invest in the property market? The answer is: Now! There is no better time to start investing for the future.

The writer is CEO, Freely Business School. www.freely.com

Source: The Business Times, 04 July 2007