If you read the news recently, you would have seen that Singaporeans have formed the largest group of foreign investors from Asia who are buying up foreign properties worth US$11.9 billion. Astoundingly, the city-state beat out China even though the mainland has over 250 times more people.
As you are probably aware, buying a home in Singapore still requires a large sum of upfront cash while some overseas properties require not more than one month of salary as deposit.
So why would I still say that Singapore remains an attractive destination for property investment?
Here’s what would have happened if a Singaporean had invested S$1 million into two foreign markets five years ago and sold it today.
Tokyo has good rental yields of 5.0+ percent. However, over the past five years, Japan’s currency has depreciated by 35 percent. To help illustrate, S$1 million then would be equal to S$650,000 at present. Any capital growth over this period in Japan would have to exceed 35 percent to register the slightest profit for the investor (barring round trip costs in buying and selling).
What then did the Tokyo residential market do on average over the past five years? 20 percent.
A nett loss for investors.
In the last five years the Australian dollar has weakened by 20.52 percent. This means the S$1 million invested at the time is worth S$800,000 today. Any capital growth would have to exceed 20 percent in order to register a profit for the investor. Again, barring round trip buying costs.
How did Melbourne fare over the past five years?
The housing market has grown by approximately 22 percent in the span of five years. Capital growth has been largely wiped out with the strong Sing dollar.
Using the same comparison, you can also compare many other regional property markets and currency fluctuations.
In conclusion, although local properties face additional taxes, the policies of Singapore made by our Monetary Authority of Singapore (MAS) puts the SGD on course to appreciate steadily in the long term over most other major currencies in the world.
This enables investors to preserve and grow their wealth in Singapore.
Read about the reasons why the SGD will ALWAYS appreciate in the long run in my other blog post.
(Note: The above study is based on the assumption of zero leverage. With leverage, results will differ.)