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And the best property investment is …?

With the property market in a clear downturn now - with the higher-end residential property falling by reportedly as much as 25 per cent - it may be a good time to take stock - and take a look backwards in time - as to what was the best property investment in the last 17 years or so?

Shops had the lowest growth?

According to data from the Urban Redevelopment Authority (URA) - the property index by type - increased by about 8, 15 and 22 per cent respectively, for shops, office and private residential property from 1997 Q1 to 2014 Q3. (Source: URA Property Price Index by Type of Property Annex A-6)

So, you would have been worse off during this period if you had invested in shops which grew by only 8 per cent - at least from a capital gain perspective, without taking into account the rental yield.

Since private residential property had the highest relative return during the period, at 22 per cent - which type of private residential property had the highest returns?

Detached houses and condominiums grew by 16 and 24 per cent respectively during the period.

What next?

So, what may be a good bet if we want to consider investing in property now or in the near future - hopefully when the market begins to shows signs of a turnaround?

Well, of course nobody can predict the future.

If I were to make a guess - I would select shops as the relative returns over the period was the lowest at just 8 per cent - if you subscribe to the principle that the longer and lower the returns for an investment - the higher may be the probability of higher relative returns in the future.

A “bargain” may be the key?

But, in my view, perhaps a more important factor in property investment, regardless of the type of property - may be what I call “getting a bargain”.

So, what am I talking about?

According to figures from Colliers International - 131 properties were put up for auction by mortgagees from January to October - 5 times more than the 25 properties in the same period last year. (Reference: “More homes go under the hammer in weak market”, Straits Times, November 21)

Also, the fact that media reports said that several high-end residential properties had no takers at the auction although prices were slashed by as one example cited - a loss of $2.7 million on the purchase price of $7.2 million - a whopping drop of about 38 per cent! (Reference: “Luxury homes face nearly $3m in losses in mortgagee sale”, Straits Times, November 24)

So, perhaps you may like to try your luck and bid a very low price for a distressed property - regardless of the property type. But do your due diligence and get your financing ready - and do your research to check out the property first before you try your luck for a bargain.

Good luck!

 
Robin Han
Leong Sze Hian

Dr Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, has authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper column, Wharton Fellow, SEACeM Fellow, acting managing editor and columnist for theonlinecitizen, columnist for Malaysiakini, a Member on the CIFA International Advisory Board, executive  producer of the movie Ilo Ilo (8 international awards), treasurer of Maruah, and invited to speak more than 100 times in more than 25 countries on 5 continents. He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.