Alternative Ways To Invest In Property Market Without Buying Real Estate | Property market is always the talk of the town in Singapore news. Every month or every quarter you can see news discussing about the property market sentiment and the valuations. It can be quite thrilling especially if you own one, always eagerly to know how the property market is doing especially the district that you have invested in. With the given demographic, economic and socio-economic, Singapore is still topped as one of the best country to invest in. Though it is famous as one of the most sound country for property investments but do not forget that the tiny little red dot is going through scarcity of land which causing the property prices are one of the world’s most expensive. It is not something to be rejoice if you own a property but have finance issues to support it, even your HDB unit in Choa Chu Kang or a condo unit in Punggol. Luckily there are ways to support your property dearly without burning a hole in the pocket or even going through the traditional ways to buy that property. Let’s see what other few alternatives that looking to be exposed in the lucrative property market here.
Real Estate Investment Trust (REITS)
Do REITs ring a bell to you? Well, that’s if you are familiar around the stock market for long. REITs, it’s a structure where investors can buy shares of companies which own or manage a portfolio of real estates that generate incomes. REITs are quite popular with yield hunters which provides regular dividend income. You will benefit from investing in REITs because the amount of exposure to the property market with small amount of money. Though to be in property investment, you will need huge amount of money, but for REITs it is slightly different because it requires lower amount of capital compared to buying a property. The characteristics of REITs is different from physical property where it is more liquid than the latter and the plus side is you can choose the type of sub-sector of the real estate. The entry point is so easy because of the low upfront cost and as low as zero ‘property’ management. But, there are some risks you may need to consider like the macro and micro environment. For example, the government policies that regulates the real estate that could impact the REITs pricing.
Property related stocks
Property stocks investment is one of the most straightforward way for anyone to invest in the property market without getting a physical property. Typically, a property counters are those that has a number of properties under them and lease them out or choose to sell them, like property developers. Similarly, like other listed companies, property counters are what you should be looking at as they are involving in the real estate market which also affect the overall stock’s valuation. So, if government is announcing the new cooling measure, you can see the property counter is affected. The advice here is to research the basic knowledge of the company before investing in it. You must be wondering what’s the difference between property stocks and REITs, aren’t they the same? There are huge different which the REITs are compulsory to pay at least 90% of their net income after tax as dividends. Meanwhile, property stocks are subjected to management fees which will be deducted from their yields before the dividend distributions.
Property Exchange-traded Fund (ETF)
This may sound complicated, but ETF is a type of fund that gathers money from many investors to own assets (stocks, bonds, stock index, gold, foreign currency, etc.) and divides ownerships of these assets into shares. Generally, it trades very much like a listed stock which you can buy and sell them like stocks. It was recently that Singapore Exchange announced that they will offer a new REIT ETF in the second half of 2016 which has also now launched an index that tracks 30 REITs across the Asia Pacific region. The index is based on REITs from different countries where you are able to diversify your risks and also capture returns from countries that have higher-yielding properties.
Crowd-funding in Real Estate
Crowdfunding has been a huge financial assistance over the past few years and now, it is available in the real estate industry though in Singapore it is still consider as the early stages with plentiful of platforms offered for investors to see how it works in Singapore. It works by collecting small amounts of money from individuals using an online platform which then after pooled the amount that can be used to fund developing real estate projects. Investors are able to look towards with earning high-interest rates ranging from 6% to 20% depending on the project and the amount they put up for crowdfunding. These promises of high-interest rate returns are perhaps the key attractive feature that will consider is the risk of platform. Imagine how the local banks are offering you to deposit low money in their savings account. But, there’s a possibility if high risk using property crowdfunding as an investment.
Boutique developers are the ones most likely to use such platforms that will posed a higher risk of failure. This in turn will cause them to not complete the project on time or the project might need more funds and being dragged out. There’s no guarantee success by using these crowdfunding platforms or even if the projects go down the drain. Often, we do hear stories of successful real estate projects that was carried out through real estate crowdfunding platforms in Singapore. There are also cases where similar schemes turned sour.
There are other ways to invest in the prospering property market in Singapore and not just by investing in physical property. What we have shared has easier entry point, liquid market and lesser capital. However, do your own research before dumping all your funds to the investments.