How to Invest in Property for Your Retirement

By Ku Swee Yong (guest contributor)

Can the average Singaporean enjoy a comfortable retirement by investing in property? We recently caught up with Ku Swee Yong, CEO and Director of International Property Advisor Pte Ltd, a real estate family office, to find out his views on the Singapore property market and how to do just that. He has just published his first book, Real Estate Riches – Understanding Singapore’s property market in a volatile economy.

What is your outlook on the Singapore property market for the next 12 months?

I am mildly positive, especially for the mid-tier residential and luxury residential segments. I am seeing more activities and enquiries in the segment of $2 to $5 million with prices in the $1,500 to $2,500 psf range.

Two macro factors have also caused me to turn positive:

1. The unemployment rate remains very low, currently at 1.9%. As Foreign Direct Investment continues to be brought in by EDB, the MNCs will need to hire. More Employment Pass holders will be needed, and this will result in more demand for housing, albeit more renters than buyers.

2. The Investment PR scheme remains very attractive to foreigners wishing to seek the comfort and security of life in Singapore for themselves and their children. This will further add to housing demand for buying property.

For someone who has cash to invest, say from getting a lump sum of CPF money upon hitting the retirement age, what should they invest in if they’re planning for a comfortable retirement? Are property, stocks or fixed deposits the best investment?

My general preference is for real estate because of the monthly rental returns. For a retiree with bills and expenses they have to pay monthly, it doesn’t make as much sense to invest in stocks, fixed deposits etc that do not have regular payouts. Investing in REITs is a compromise as most listed REITs pay out quarterly dividends.

For someone close to retirement, should you invest in a property for capital gain or rental yield?

The focus has to be on a rental income stream, and also considering the handing over of the asset to the next generation and your loved ones. If we focused on yields alone, then 99-year properties may be preferred. Yields for 99-year leasehold properties are usually higher (3.5% to 5.0%) than freehold properties (2.5% to 3.8%).

If you were considering wealth succession, the preference would be for freehold properties. The compromise is to find an older freehold property, say 15 years old, where you might be able to get a yield of 3.5% or higher, but in this case, the land value does not depreciate. Chapter 18 of my book deals with how one should consider 99-year leasehold versus freehold property.

Which areas and types of properties do you think are more promising for property investment, and which areas should we avoid?

This depends on what investors are familiar with. Most investors would go for residential because it is a sector which is straightforward to understand, has a deep market, and sufficient data for decision making.

In terms of geographical areas, I am positive on the Holland area and negative on Bukit Timah. I would also avoid the North-South corridor, including Upper Thomson Road, Marymount Rd etc. This is because of two major infrastructure projects: the Thomson MRT line and the North-South Expressway. These projects are expected to complete in 2019-2020 if there are no delays. But for the next eight years, we can expect congestion and this would be negative for investors looking for tenants for their apartments.

Would you recommend buying cheaper properties overseas (e.g. in Johor) for investment? Why or why not?

This is inconvenient unless you frequent that city (say Perth or Johor) and you are very familiar with how things work in that city (leases, tenancy agreements, local agents). Furthermore there is the currency to worry about, and also the differences in law, government policies etc.

But if you were a seasoned real estate investor and feel overexposed to Singapore real estate, then go ahead and explore outside. Retiring with an apartment that is rented out in Sydney, London or even Japan could mean that you also enjoy travelling to tend to your property’s taxes, tenant matters, bank mortgages etc.

What advice do you have for the average Singaporean who would like to invest in property for a comfortable retirement?

For the average retiring Singaporean who already has an HDB flat that is fully paid up, some spare cash and his CPF monies released in full, he can look for properties that are better valued and well located. For example, instead of Katong in District 15, he can consider Upper East Coast in district 16. Note that the current rules prohibit HDB owners from purchasing private property if they have not completed the Minimum Occupation Period.

Get an apartment that is 5 to 10 years after TOP and one that comes with a good, secure tenant. Budget for a property that is $1 to 1.5 million, which means you need cash plus CPF of about $300,000 to $600,000, depending on your ability to take an 80% LTV mortgage. Check that the tenant and the tenancy contract are good and valid before handing over your cheque.

What is your book “Real Estate Riches” about and why did you decide to write it?

Many real estate investors plunge into the market with a little bit of knowledge, calling a few agents they found on the internet, speaking with friends and reading articles here and there. But we know that a little knowledge is a dangerous thing, especially when we are not aware of what we do not know. Many investors live with decisions they regret, simply because they thought their research and understanding of the market was sufficient. There is so much to know and we have to be careful where we tread.

What this book is not: This book will not promise to make you a millionaire, nor give you the secrets to owning many properties on a small budget, nor teach you how to make a quick profit by flipping. It will not give you motherhood statements such as “do not overstretch your finances”, “do your due diligence” etc. It is also not a discussion about the property market from 30,000 feet in the air and making conclusions based on URA’s quarterly price indices.

What this book is: The business model of International Property Advisor Pte Ltd is based on the family office concept, with a focus on real estate assets. We represent the needs of high net worth families and therefore we work closely with private banks to take care of our clients’ real estate portfolio.

We look at the details of transactions in the private property market. We try to understand the reasons behind why a property traded above or below average prices. We try to analyze trends in demographics, lifestyle, finances, the URA’s Masterplan, infrastructure developments etc.

This book captures our experience and knowledge from working with clients, bankers, fund managers and lawyers. It contains the answers we have to research to respond to their queries.

This book tells it as it is.

I have come across many investors who received bad misleading advice from agents and from reading articles that were neither researched nor substantiated. As such, I am constantly approached to help “troubleshoot” the issues investors face, to help extricate them from investments they regret.

I thus decided to write and educate more, and to highlight certain erroneous public perceptions. For example, investors have been misled about the en bloc potential of several condo projects. Upon helping them to check, we found from the URA Masterplan that the zoning for these projects were for a lower density (lower plot ratio).

I hope readers can avoid painful decisions by using the data and information I provide in my book.

By guest contributor Ku Swee Yong, founder of real estate agency International Property Advisor, which provides services to high net worth individuals. Real Estate Riches is available at major bookstores including Times, Kinokuniya, Popular, Page One, NUS, and the airport bookshops (Dufry and Relay). 

10 Replies to “How to Invest in Property for Your Retirement”

  1. Just a question. For a retiree to buy a $1-$1.5mil property with $300k – $600k from CPF monies + cash and with a 80% LTV, I would say most if not all the income he/she gets from the rental will go towards paying the instalment + maintenance. How would this person survive on a monthly basis after this? Unless this person can buy a property 100% in cash and enjoying the rental income in full. I doubt this strategy works.

    1. Hi Alec, if you’re using $300-600k CPF + cash to buy a $1-1.5m property, then you’re not taking an 80% loan but more like a 30-50% loan, and that’s why you’re likely to have positive cashflow from your rental – mortgage etc.

  2. Hi Propwise, I have been looking around at property since 3 months ago, as I just woke up to the idea of investing and also I just accumulated enough for a decent deposit so that I can take up only 60% loan. However, I am 40yrs old now and don’t have too many years to pay off the loan and enjoy the benefits. So I want to invest asap, but the present prices are very high compared to 2 yrs ago. So do I wait for prices to drop or should I go in now (and hope it won’t crash? because if it does, a $50psf or $100psf drop can wipe out a fair bit of money!). I need your advice, can you please help?

  3. Hi Propwise. I am 64 years old. I live in the landed terrace. I always talk my friends not loan too much from bank. Also try no to touch you CPF.Bicos who know when the interest rate going to jump up after 2014. the economic still holding by the western countries. When our age getting older. we will find the usefull of CPF.
    By the way, I like to learn from you that within 10~20 years later. whether Singapore will be same as Hong Kong not easy to find Landed Property. The current landed property will be End Block before 2020.

    1. Hi Chan, I think there will still be landed property for the foreseeable future unless the URA decides to change its zoning rules. But as the Government wants to increase the intensification of land use in Singapore as it is a scarce resource, the future new supply of landed property will be very small. Another way Singapore is becoming more like Hong Kong is in the shrinking of flat sizes – we now have 600+ sqft 3 bedroom apartments!

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