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Property's place in investment portfolios


THERE is talk aplenty of doom and gloom in Singapore's real estate sector, but in the past few months, certain sub-sectors have begun to show signs of stabilising, and even green shoots of recovery.

No doubt the government has been hard-nosed in its stance that the property cooling measures should stay. This has perhaps led some investors to rejig and reduce the real estate allocations in their investment portfolios. But is this the right approach?

One man's over-pessimism is another man's opportunity. And the experts who have contributed to this supplement continue to believe that there are pockets of opportunities for the forward-looking investor.

Besides, research studies have shown an inextricable link between Asians and real estate investments.

In short, Asians love their real estate. At the World Cities Summit this year, Man Cho, a professor at the Korea Development Institute and The KDI School, cited two studies done in 2011 and 2016 which compared the composition of household wealth between South Koreans and Americans.

These studies showed that for South Koreans, housing residence and other real estate (e.g. rental homes and commercial properties) make up 46 per cent and 35 per cent respectively of their household wealth - a whopping 81 per cent combined - while annuitised pension constitutes just 8 per cent. This is in contrast to Americans, whose housing and other real estate assets make up only 25 per cent of household wealth, while annuitised pension makes up 45 per cent.

So where can investors still place their money in the property sector amid the market correction? Among the opportunities identified in this issue of our twice-yearly property supplement is the luxury condominium segment in prime districts.

Prices for this crème de la crème sector of the non-landed residential market were back on the uptrend in the second quarter, rising 0.3 per cent - its second consecutive quarter of increase after 11 quarters of price decline since Q2 2013.

That said, the latest flash estimates showed a 1.8 per cent price drop in the Core Central Region in the third quarter amid macro-economic jitters; statistics for the full quarter's performance will be released at end-October.

Another sub-market that is expected to see a price rebound is landed homes - especially for those with buying and holding power.

An analysis by Savills shows that landed properties tend to react in a more pronounced way to market forces than condominiums. What this means is that when the market outlook is poor, landed property prices would fall more than non-landed ones. But on the upturn, they also outperform their non-landed cousins. In the long run, landed properties also perform better.

So does property still have a place in one's investment portfolio? Two investors can look at the same scenario. One can see a crisis, and the other, opportunity. Sometimes a situation is what you make of it. Others' perception of danger may be entry points for cool-headed investors with long horizons focusing on fundamental value.

Hopefully this supplement helps you make better informed decisions when making your property investments.

Supplement editor: Lee Meixian Sub-editor: Agnes Wee Cover design: Gareth Chung Cover illustration: Jennifer Chua Graphics: Jennifer Chua, Sarah Loyola, Noordin Ayob, Ludwig Ilio, Angeline Ngiam, Sarah Chua Advertising sales: Stella Yeo 9799-9001; Shirley Chua 9620-1339; Lina Tan 9620-1355