Achieve Financial Freedom through Property Investments in Singapore in 2023
Financial freedom is an end goal for many people around the world. It is almost everyone who wishes to achieve financial freedom for early retirement.
There are many methods that you can achieve financial freedom. Through investment and diversify your savings and make your money work harder for you.
In Singapore, one of the safest methods is to invest in Real Estate to accumulate your wealth and reach retirement earlier.
In this article, I will share about Achieve Financial Freedom through Property Investments in Singapore in 2023.
Everyone knows that our life expectancy is slightly above 83 years old on average in Singapore. But we can’t be working in our whole lifetime. We have a limited window period in our lifetime to accumulate their wealth for retirement.
A simple illustration of the different stages of a typical human life can divide into 4 phases. I will illustrate based on our life expectancy in Singapore.
Phase One Of Our Life
Phase One: At Birth – 20 years old
In our early stage of life, we are busy enjoying, playing, and learning during our childhood time. It is the time that most of us do not have any income.
At this stage, many of us, including myself, wish that it will be good if we can grow up faster so that we can start working and earning a living for ourselves.
Phase Two Of Our Life
Phase Two: 21 – 40 years old
In this stage, many major events happened here.
When we graduated from school and started working, we tend to buy our first bike/car and first home. Getting married and having kids.
During this stage, many of us are busying working and paying off the vehicle/home loans, and children’s education fee, totally forgotten about the retirement plan.
I am here to remind you.
“You should start accumulating your savings (cash and CPF) in phase two of your life so that you can execute your first and subsequent investment plan later.”
Phase Three Of Our Life
Phase Three: 41 – 60 years old
At the age of 40, many starts to think of business, buying a second property and worry about children education fee and what do we have for our children.
Many of them also start to worry about the future that they may be a burden to their children when the cost of living is getting higher.
Thus, by this age, you should have your various investments instrument in place and make your money work harder for your retirement plan not later than this stage of your life.
Phase Four Of Our Life
Phase Four: 61 years old Onward
Phase Four: 61 years old and above
Then by this stage, you should have a retirement nest that allows you to enjoy your life peacefully and comfortably with your grandchild when you retired.
If you realized, half of the lifetime, many or almost all of us do not have any income (stage one and four).
The golden period that you can plan for retirement is in phase two of your life, where you are still young at your career peak and have enough energy to work harder to accumulate more saving before you regret.
By saving is not enough for you to grow your wealth and aim toward your retirement plan. Instead, you should invest the money that you have saved and make it work harder for you so that you can achieve financial freedom at the later stage of your life.
TYPE OF INCOME:
The two types of income – Active and Passive income will determine where you stand and work toward your retirement goal. Let’s take a look at the difference between the two types of income using the ESBI concept by Mr. Robert Kiyosaki.
Many of them started in the E quadrant, trading your time working hard for others for an income.
There are many people stuck in the E quadrant for not being planning well for their retirement.
Some started to plan after years of working for others, realizing that they should start something for themselves.
Some began to work for themselves as self-employed at the S quadrant. You may take six weeks of holiday enjoying yourself, but you won’t have any income when you are enjoying your holiday.
Therefore, many are working toward achieving to be in the B quadrant to be a business owner so that they can employ people to work hard for them and have a steady income while they are on holiday.
But to maintain a business well is not as easy as it is. Some fold up the company after some time and go back to the E quadrant.
It is why I recommend that everyone should plan well and work toward being an investor and stay in the I quadrant where you invest your money and make the money work harder for you to achieve financial freedom.
Some examples of investors that have accumulated their wealth by making their money work hard for them are Warren Buffet, Masayoshi Son, Robert Kuok, Peter Lim, Jim Rogers, and Robert Kiyosaki, to name a few. They travel, spend time doing what they love, and lead exciting lives.
There are many ways that you can make your money work harder for you. Some investment type that we see commonly are:
- Real Estate
- Straits Time Index / Stocks
- Gold
- CPF OA Account
- SG Fixed Deposit
- SG Bank Saving Accounts
But one must be extra careful because not all are generating a good Return on Equity (ROE).
Based on Forbes Singapore’s Richest in 2022, 16 out of 50 made their wealth through real estate.
WHY INVESTMENT IN REAL ESTATE?
Looking at the Singapore Property Price Index, although we see some downward trend along the way due to various financial crisis, the Dot-com bubble, Recession, SARS Outbreak, Singapore property curbs, and Covid-19, it has, on average, on an upward trend since 1980.
Furthermore, a positive inflation rate further pushes property prices on an upward trend.
“$1 Ten Years Ago Is Worth $0.70 Today! How Much Will $1 Today be Worth in the next 10 Years?”
INFLATION AFFECTS EVERYTHING AROUND US
THE SAFEST HEDGE TO PRESERVE AND GROW WEALTH THROUGH REAL ESTATE.
Comparing to Education, Food, Health, and Transport category inflation rate, private property growth over ten years outperforms all others.
- Private Condo Growth: 41.76%
- Executive Condo Growth: 60.17%
- Landed Property Growth: 39.71%
- HDB Flat Growth: 20.29%
Real estate investment advantages over other types of investments include potentially higher returns, stability, inflation hedging, and diversification.
Real estate potentially provides better returns than the stock market without as much volatility. It also has high tangible asset value, and values of the property tend to increase over time.
Most importantly, real estate property is Tangible. It is physically there. Thus should the value appreciated, you may choose to cash out. On the other hand, if it’s depreciated, you still can choose to rent it out to generate rental income or want to stay in the property physically.
PAST 10 YEARS STUDY ON VARIOUS INVESTMENT CHOICES
How does Singapore Property fare against a basket of investment choices?
Case Study: 10 Years HDB Investment Returns
Growth Rate
20.29% Growth (2.029% per year)
$377psf to $453psf
Assuming 1,000sf unit, profit over 10 years, ($453-$377) psf x 1000 sf
$76k
Assuming 10% Downpayment and
90% Housing Loan,
Purchase Price: $377,000
Sale Price: $453,000
10% Downpayment: $37,700
Buyer Stamp Duty: $5,910
1% Brokerage Fee + GST: $4,033.90
Initial Capital Outlay: $47,643.90
Returns on Equity: 159.52%
Case Study: 10 Years Executive Condominium (EC) Investment Returns
Growth Rate
60.17% Growth (6.017% per year)
$645psf to $1,033psf
Assuming 1,000sf unit, profit over 10 years, ($1,033 – $645) psf x 1000 sf
$388K
Assuming 20% Downpayment and
80% Housing Loan,
Purchase Price: $645,000
Sale Price: $1,033,000
20% Downpayment: $129,000
Buyer Stamp Duty: $13,950
Initial Capital Outlay: $142,950
Returns on Equity: 271%
(Min. ROE as term loans possible whenever value goes up)
Case Study: 10 Years Condominium Investment Returns
Growth Rate
41.76% Growth (4.176% per year)
$1,165psf to $1,651psf
Assuming 1,000sf unit, profit over 10 years, ($1,651 – $1,165) psf x 1000 sf
$486K
Assuming 20% Downpayment and
80% Housing Loan,
Purchase Price: $1,165,000
Sale Price: $1,651,000
20% Downpayment: $233,000
Buyer Stamp Duty: $29,550
Initial Capital Outlay: $262,550
Returns on Equity: 185%
(Min. ROE as term loans possible whenever value goes up)
Case Study: 10 Years Landed Investment Returns
Growth Rate
39.71% Growth (3.971% per year)
$864psf to $1,207psf
Assuming 2,000sf unit, profit over 10 years, ($1,207 – $864) psf x2000 sf
$686,000
Assuming 20% Downpayment and
80% Housing Loan,
Purchase Price: $1,728,000
Sale Price: $2,414,000
20% Downpayment: $345,600
Buyer Stamp Duty: $46,440
Initial Capital Outlay: $392,040
Returns on Equity: 175%
(Min. ROE as term loans possible whenever value goes up)
Case Study: 10 Years GOLD Trend
48.70% Returns on Equity
Case Study: 10 Years Straits Times Index Trend
82% Returns on Equity
Case Study: 10 Years in CPF ORDINARY ACCOUNT
We all know that CPF Board is paying 2.5% p.a. for saving that are residing in the CPF Ordinary Account. Lets assuming you have $100,000 compounded at 2.5% annually over 10 years
Today’s Value: $128,000
28% Returns on Equity
Case Study: 10 Years in SG BANK SAVINGS ACCOUNT
Assuming you have $100,000 compounded at average 0.16% annually over 10 years
Today’s Value: $101,611
1.6% Returns on Equity
Case Study: 10 Years in SG FIXED DEPOSITS ACCOUNT
Assuming you have $100,000 compounded at average 2% annually over 10 years
Today’s Value: $121,900
21% Returns on Equity
10 Years Comparison of Common SG Investment Choices
| Investment Type | Initial Capital (2013) | Returns (Aug 2023) | Return on Equity % | *With 5/10 Years Rental Returns |
|---|---|---|---|---|
| Executive Condo | $100,000 | $388000 | 271% | 308% |
| Landed Property | $100,000 | $686000 | 175% | 249% |
| Condominium | $100,000 | $486000 | 185% | 259% |
| HDB Flat | $100,000 | $76,000 | 159.52% | 196.52% |
| Straits Times Index | $100,000 | $82,000 | 82% | NA |
| GOLD | $100,000 | $48,700 | 48.70% | NA |
| CPF Ordinary Account | $100,000 | $28,000 | 28% | NA |
| SG Fixed Deposits Account | $100,000 | $21,000 | 21% | NA |
| SG Bank Savings Account | $100,000 | $1,600 | 1.6% | NA |
All property types are 25% cash deposit and 75% loan except HDBs 10% deposit and 90% loan. Assuming 1.5% nett yields.
* Due to HDB/ECs need to fulfill MOP 5 years, the rental returns is based on 5 years returns, add 37% to ROE. Private properties add 10 years rental yield, 74% to ROE.
In conclusion, the case studies discussed above clearly show Real estate is a better investment choice as it gives a higher amount of return, and it’s able to generate an ongoing passive rental income.
We see some down-turn occurs or correction period due to financial crisis or epidemic disease that affect the overall economy over the world. But the Singapore Private Residential Property Price Index clearly shows that over time, prices are still on an uptrend on average, which is worth investing in a long term basis.
Property still on uptrend despite Covid-19 (Jan2020)
If you intend to upgrade, restructure your property portfolio, or invest in real estate for the first time but are unsure which method to go about, you may contact me for a friendly non-obligatory discussion. I can provide you with Property Wealth Planning (PWP)™ plans that are suitable for you.
Hello, I am Darren Ong
As a real estate professional, my duty is to help my clients achieve financial freedom and grow their wealth through Property Wealth Planning™.
I believe that with prudent strategies and a clear investment road map, anyone can enjoy a life of abundance and financial stability.
Darren Ong (王伟丞)
Associate District Director of Huttons Asia Pte Ltd
CEA Registration No.: R026434F
Agency License: L3008899K
Contact: +65 9383 9588
