Have a question about Singapore property? Ask Mr. Propwise (AMP)!

Dear Mr. Propwise,

I own a 99 year leasehold property and am presently renting it out at a 6.2% yield. I am thinking of selling the property for a profit of $500,000 because of the following reasons:

1. I believe the property cycle is already at its peak
2. The impending supply glut in 2013 to 2015
3. China’s property bubble is forming at an alarming rate

Do you think I should keep the property and earn the 6.2% rental yield or sell the profit and take the $500,000 of capital appreciation?

Mr. Tay

Hi Mr. Tay,

Congratulations on getting such a good yield and capital appreciation!

I agree with you that prices might soften or stay flat in the near future. As to whether you should sell, is your 6.2% yield on cost or market value? If it’s on current market value, that’s a very good yield and you can consider holding it for income. If based on market value the yield for your leasehold property is in the 3-4% range, then I might think about selling it to lock in that capital gain and wait
for better opportunities.

No one can know (except via hindsight) when the peak of a cycle is, but my sense is that we are fairly close to a peak if we are already not at one. And you are right to worry about the supply glut coming in the next few years – the only uncertainty is whether demand will be able to step up to prevent a correction.

As for the China property bubble, well that’s a whole other issue. Just my personal opinion and not financial advice!

To wisdom and beyond,

Mr. Propwise

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