Be rational, not emotional, when investing in real estate

FOR many who are diligent (if not astute) with personal financial and wealth planning, investing in property - especially in Singapore, over the years - has reaped big gains, money-wise.

Over the past five decades, the property market here - both public and private housing - has seen a capital appreciation that reflects Singapore's growth and spectacular transformation from backwater to a global hub. The official private home price index surged from 8.9 in 1975 to a high of 154.6 in the third quarter of 2013. Factors such as land scarcity and the availability of financing through one's CPF savings contributed to the stellar rise in property values.

But property may not necessarily be a sure path to riches. For one, the authorities have made clear the intention to keep property price increases in line with economic fundamentals. Given that Singapore is a fairly mature economy, gross domestic product is expected to grow at a modest pace. This implies that we can likely expect fresh cooling measures whenever there are signs of the market overheating. In short, we can expect a smaller pace of capital appreciation for private homes in the future compared to the past.