SGD Insights

Buy low, sell high, buy even higher. Is it even logical?

While the strategy of "buy low, sell high" is a fundamental principle in property investment, applying it to the Singapore property market requires careful consideration due to the unique dynamics of the real estate sector.

Successful property investment begins with a thorough understanding of market cycles. Historically, the Singapore property market has experienced cycles influenced by factors such as economic conditions, government policies, and global trends.

While selling a property at its peak value allows investors to realize maximum profits, often, this approach also implies that the subsequent property investment purchase will occur at an elevated price. Is this strategy of sell high, buy even higher even logical?

In the dynamic world of real estate, the strategic decision to sell a property at its peak and reinvest in the next at a higher price is not just a theoretical approach but a strategy grounded in compelling data, observable trends, and robust analytics.

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Cooling Measures on Property Market

Implemented to curb rapid price increases, cooling measures in Singapore's real estate market, such as elevated interest rate floors and reduced loan-to-value ratios, aim to maintain market stability. These measures make it harder for buyers to enter, necessitating larger downpayments and potentially excluding some from the market, ultimately reducing transaction numbers and slowing price growth. Despite these challenges, cooling measures prevent housing bubbles, fostering long-term market stability.

An additional benefit is the potential for market stabilization through stricter loan-to-value ratios, ensuring buyers make more responsible and prudent borrowing decisions. This reduces the risk of over-leverage and encourages property owners to navigate financial challenges without hastily selling, minimizing price volatility. Furthermore, these measures promote affordability by slowing price escalation, benefiting specific groups such as first-time buyers and low-income families.

It's crucial to note that cooling measures are not permanent and may change based on market conditions. Buyers and investors should stay informed about evolving policies. In times of economic strain, observing adjustments to these measures becomes vital for safeguarding property prices, given real estate's significance in Singaporeans' wealth portfolios.

In essence, while cooling measures pose challenges, their primary purpose is to prevent excessive price growth and sustain a stable real estate market. Staying abreast of policy changes and collaborating with experienced advisors is key for navigating this dynamic landscape.

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As 2023 inches closer to the end, the escalating interest rates pose a significant concern for prospective market entrants. The Singapore Overnight Interest Rate (SORA) is on the rise due to the US Federal Reserve's tightening monetary policy, rendering financing more expensive for buyers and potentially deterring them from entering the market. High interest rates not only discourage buyers but also impede homeowners from refinancing, leading to potential defaults and foreclosures, resulting in higher monthly payments.

Amidst challenges for buyers and homeowners, opportunities emerge for investors. The pandemic-induced construction slowdown and housing shortages are often cited for high rental prices, yet few consider the contribution of rising interest rates. As interest rates climb, more individuals may opt to rent, increasing demand for rental properties and subsequently raising rental prices. This trend could also foster the growth of co-living spaces and serviced apartments, thereby expanding options for renters.

Setting speculations aside, the realization of higher rental prices and lower property prices hinges on various factors. Notably, there is a growing potential for a Federal Reserve pivot towards lowering interest rates. If this occurs, it could signal the beginning of a new bull market for the real estate industry, with lower interest rates stimulating demand and propelling both price and volume growth. Investors should be prepared for anticipated market shifts in the event of an interest rate cut.

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