Tuesday, 31 August 2010

Chart - FTSE ST Real Estate Holding and Development Index

The government announced a new slew of measures with immediate effect to curb property speculation and to cool the red-hot property market for the 3rd time in 12 months to prevent a property bubble from happening.  Some of the changes include:

·         Private property owners to sell their homes within 6 months of buying an HDB flat;

·         Buyers of second property have to fork out at least 10% cash (instead of the previous 5%) and can only loan up to 70% of the value of the 2nd property (instead of 80%)

·         Seller stamp duties will apply for a period of 3 years instead of 1 year.


The government does not rule out further action to “cool” the market but is “very reluctant” to impose capital gains tax. I guess they still remember clearly how the previous capital gains tax crashed the Singapore property market. The property stocks were understandably affected after the news were announced and this is reflected by the charts as well. Let see if the measures are ‘effective’ in curbing property prices from rising further.


The property market is actually one of the places you should look at if you want to achieve financial freedom. I am not advocating that you buy blindly or buy now but it is an asset class that can help you to retire earlier. But remember there are a few things you might need to do take note of:


(1) buy close to the bottom of the cycle and ride up the cycle;

(2) you need at least 2 properties to ride the cycle. No point cashing out at the peak of the cycle and then buying into it again;

(3) property allows you to “leverage” at a one of the lowest interest rate.

(4) Location is important.


Happy investing.  

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