In the mutual funds universe, you have index funds on one end of the spectrum, and “special situation” funds at the other. The former simply track the market index, rising and falling in tandem with the market’s peaks and troughs. The latter, on the other hand, attempt to home in on unique upside opportunities and gain alpha.
As a property investor, you should try as far as possible to emulate the latter rather than the former. I draw inspiration from strategies taken by the fund manager behind a special situations fund I once invested in. He looked for themes that were on the uptrend, then dug beyond the obvious to seek out a more targeted vehicle for harnessing that trend. For instance,when he felt that international trade was set to boom, instead of banking on shipping stocks, he bought into ports, as the latter represented a more finite resource – you can have as many ships as can be built, but ports are strictly limited by geographical and administrative factors, amongst other constraints. Similarly, when he sought a means of investing into Asia’s growing need for infrastructure, he avoided construction companies, and went for the one key player providing the cranes to the many construction companies. This all took place years ago, but I reckon there is timeless wisdom in the investment style adopted.
Where will property prices be in the next few years? Will property prices plunge 30 – 50% as per the doomsday prophets? Will property prices trundle along sideways, moving up and down within a 10% band? Or will property prices continue its steady climb upwards? Unfortunately, I don’t know, so I can’t tell you. If I knew for sure, I wouldn’t tell you either. So, since I don’t know for sure, I will lay down how I think the different scenarios may play out so you can make your own educated guess. But before we go into the heavy stuff, let’s have some fun with a poll!
Have a read of the article out today in The Straits Times.
In a nutshell, for someone interested in property as an investment, there are 3 main takeaways:
1. Rentals are seasonal. If you’re planning to rent your property out to expats, April and May (or more accurately the couple of months after that) are crucial months;
2. The rental market is still firm for now. However, there seems to be somewhat of a temporary bootstrapping effect, with rents supporting prices and prices supporting rents; and perhaps most importantly
3. Expat packages are waning. Increasingly, expats are now being localised with little or no housing allowances.
You’ll have to draw your own conclusions about what this means for you, but this information certainly helps to steer my investment decisions…
I love to lie on my belly to read. And as a young child growing up in England, I used to imagine that my dream home would have a lovely bay window looking out to a sprawling garden, with colorful cushions and loads of natural sunlight streaming in. I would picture myself nestled there, enjoying a good book.