Investing or speculating in SG properties. ABSD nightmare!

Over the years, I have talked to myself about real estate and my philosophy.

With the Additional Buyer Stamp Duties (ABSDs) increased by quite a bit, a reader asked for my thoughts on the property market in Singapore now.

Regular eavesdroppers on AK would be able to guess the response.

My philosophy has not changed.

If we are investing in real estate, just like investing in stocks, we want to invest in an asset that, after expenses, will generate a meaningful income for us.

If we buy real estate thinking that the price of the asset will rise in the next few years and that we would be able to flip it for a profit, that is not investing.

That is speculating.

Usually, I would stop here.

However, for quite a few years now and it has gotten a lot worse, we have people buying real estate in Singapore not to generate any income nor to flip for a profit.

They simply want Singapore properties as a store of wealth because of the strong Singapore Dollar and the politically stable environment.

They are mostly foreigners.

Wow! 

So many ultra rich foreigners!

From which countries?

You ask, you answer.

I am not going there.

I have said before that when we buy a property, we want to ask 2 questions.

1. It is not just a question of affordability but we should also ask if it is value for money.

2. Do we have deep pockets for if things go wrong and many things could go wrong.

However, to these very rich people, these two questions are most probably irrelevant.

So what if the properties don't make money or if they should even lose money?

If the ultra rich are able to protect a big fraction of their wealth, they would still be very rich and that could be more than enough for them.

For the rest of us, we really have to stay grounded and not be swept away by barbers telling us we need to have more frequent haircuts even if we are  going bald.

Now, for those who bought properties in Singapore recently thinking they could flip them a few years later at higher prices, the much higher ABSDs announced might have turned those dreams into nightmares.

The government of Singapore wants properties to be sold mostly to genuine owner occupiers because housing affordability is a big issue.

Singapore welcomes foreign direct investment but we do not want foreign direct speculation.

Hence, the recent strengthening of property cooling measures.

For those of us who are still thinking of investing in properties for passive income in Singapore in spite of the ABSDs, I would go back to those 2 questions I said we should be asking.

Cannot remember?

Scroll up and take a screenshot.

Nightmares do not discriminate between speculators and investors.

This is a fact.

Pay a price too high and we could have a high price to pay in future.

Anyone who is not ultra rich but wants to be a real estate investor in Singapore might want to read the related posts below.

Related posts:
1. Condo investment has been a drag.
2. This condo has also been a drag.
3. Investment philosophy and properties.
4. Two questions we should ask.
5. Affordability and value for money.