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  • Writer's pictureSeth Wu

3 Attributes of Real Estate That Makes Many Invest During Crisis

Updated: May 4, 2020

What makes Real Estate attractive that even during recession or crisis many are still putting their money into it? Below is the vlog. If you prefer to read, please scroll down further.

Real estate is a very special thing to human for the longest time. It touches everyone, young or old, male or female, in many ways. Some love it. Some hate it. Some give their life for it and some just don’t care as long as they have a place to stay.

We even see some became multi-millionaires and billionaires because of real estate. And during recession and crisis, we often see many investors park their funds in real estate to ride through the storms.

What is so special about Real Estate that makes many want to invest all year round, even during crisis? Let us examine its attributes

Real Estate has lower volatility

Comparing to investing in stocks, shares, unit trust and businesses, Real Estate may sometimes be not as liquid, but it is less volatile. Stocks and share prices can swing from one end to another end within hours or even minutes. Real Estate prices may still change but takes a longer time. Why?

Stocks and shares are largely driven by greed and fear which can change in an instant when certain news is released or when some events happen. We are living in a very fast pace and easy access information technology era, with so many news available from many sources on social media to the internet. As soon as the news are released, it many times will influence investors at an instant.

Real Estate prices can be affected by many factors but I would say most times are driven by demand and supply. Demand largely has to do with population, and generally population number changes slowly over time. New supply of real estate requires time to plan, design and build. This probably take years to even decades. All these will affect Real Estate pricing in a much slower pace than stocks and shares. To many, Real Estate is a hedge against volatility.

Real Estate can produce stable income or yield

When you invest in a Real Estate, what is probably the first thing you will do is to rent it out. You won’t want to have your property to be collecting dust.

When you invest in a Real Estate in a good or high demand location, very good chance you should be able to consistently have your property rented out.

Real Estate is a basic need of any human being. In a city like Singapore where there are many expats, foreign students, workers, it is almost certain they will need to rent a property. There are many Singapore locals who are renting due to many reasons like staying near to good schools for parents with children, and staying near to work place for young adults who want to be independent.

During crisis period, your rental income most likely should still keep streaming in as most cases tenants don’t break lease in an instant. This makes Real Estate yield a more predictable income stream.

Real Estate is known to be an inflation hedge

As mentioned in my previous point, Real Estate is a basic need of any humans, along with food, water, transport, energy, etc. Other than in a crisis which usually don’t last long, we all know that prices for our basic necessity are usually on the up trend. Monetary Authority of Singapore has Consumer Price Index (CPI) to track inflation of major spending for people staying in Singapore. Going into MAS website you will find that all goods and services over 10 years generally has an inflation of 2% to 3% (as of Mar 2020), including Housing or properties.

Other than being an inflation hedge, it is almost certain that Real Estate should appreciate in value over time. A point to note is that some property in certain location may appreciate more than others, depending on many factors.

Above are 3 attributes of Real Estate that I know. Investing in real estate requires much planning, funding, understanding market and location and many others. Most people when investing hundreds of thousands or millions of dollars will often engage a professionals for guidance, advice, planning and execution.

Likewise, investing in Real Estate can be a positive experience when you have a competent realtor to walk this journey with you. If you like to understand more and have a further discussion or planning, or if you like to be updated of my new blog & vlog, please leave your contact details (at "sign up and stay updated") below and I will be in touched with you. See you soon.

**all data and information extracted from URA and OrangeTee & Tie Research & Consultancy. The content and information provided is for general information only. It should not be treated as an invitation or recommendation to buy or sell any specific property or product. Each illustration in the presentation or article is based on current information as at the date of publication. Readers are to consider the content as one of the many factors in making investment decision and should seek specific investment advice. Readers should carry out their own due deligience or verification of such information. The author and publisher of the article are not liable for any losses. All right reserved.

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