- Maine Soh
Turning COVID-19 Crisis to Opportunity through Real Estate Investment
Updated: Jun 8, 2020
Since our first corona virus confirmed in Singapore on 23 January 2020, the overall atmosphere has turned gloomy. Our natural survival instincts keep us moving away from people with the slightest sniffle or cough.
With more than 1.92 million confirmed cases affected by Covid-19 worldwide, many countries have stepped up their unprecedented measures to reduce people-to-people contact to prevent the spread of the virus.
To pre-empt the spread of the virus, Singapore has likewise taken another step to implement a stricter measure “Circuit Breaker” which will take effect from 7 April 2020 to 4 May 2020.
We have been bombard on hourly basis by our friends and love one on the latest information of Covid-19. Even my 5year old son is aware of the dangers and all the precautionary measures that we all need to take.
Many are focusing on the negativity of how Covid-19 would destroy life or the diverse impact on the severe economic disruption, but the fact is, life still need to go on!
LET US LOOK AT THE POSITIVE SIDE
#1 Blessing: Be Grateful That We Are Staying In Singapore
First of all, Singapore’s handling of crisis wowed the world. Since the start of the 1st case in Singapore, Singapore has been taking the case seriously and implement all necessary measures to prevent the spread.
World Health Organisation (WHO) has been impressed with our country’s efforts at contract tracing, as well as our swift and transparent approach to limit transmission and tackle the issues.
Nevertheless, we also need to give all our shoulder a pat for being a responsible and law abiding individual to prevent the spread of the virus.
In virus-free environment, our advance digital communication platforms seem to have taken away the social bonding. But, during this Covid-19, all the available social platform has bring Singaporean more united.
#2 Blessing: Rescue packages are available to cushion the economic impact
A total of $60 billion aims to aid Singaporean and non Singaporean from the economic impact of Covid-19
Singapore Government has come up with the third resilient package within a month to manage impact of economic downturn, save jobs and protect livelihoods.
Do you know that many Singaporean has seize their opportunity and purchase their dream home or investment unit before the shut of all showflats?
This is because they understand the real meaning of Crisis!
Many people have been complaining that the price is too high and wish the price could be corrected back to those golden era.
I am not saying that the price will be corrected back to our parent's time where landed property cost only around 300k.
However, let me explain why this is the best time to grab your opportunity!
Opportunity #1: Rebound is Certain
Firstly we need to understand that, regardless of any economic downturn situation, Singapore always able to rebound back quickly. Each time it rebound, it is always higher than our last high.
Notwithstanding this depressing scenario of a worldwide pandemic, similar to SARS or other virus, we know that Covid-19 is not going to stay. With the resilient package introduced to cushion the impact of economic downturn, consumers and businesses will brave through this and soon we will return to our normal routine rhythm of activities.
Opportunity #2: Lower Entry Price for New Launch
Unfortunate for some developers who had their scheduled launches during this critical period but it is definitely a good news for ready prospective buyer.
During this period, Developer not only need to step up on the necessary precaution measures to safeguard the health of their staff and marketing agents to instill confidence for potential buyer to continue visiting the show flat, but also ensure that the entry price of their project remain attractive.
One good example is Kopar@Newton which is selling at $2108psf. This project is located at District 9. Instead of pricing at their potential of $2600 to $3000psf, developer chose to price it attractively for the following reason:
Developer has a 5 years completion deadline to avoid addition buyer's stamp duty
Developer best interest is to sell off their existing pro-folio and acquire another landed for development. As such, developer would like to prepare for their next entry into the market whenever the opportunity arrive at their door.
The potential gain you can receive if you take action today could be a minimum $250k on paper instantly
Another project, The M, launched during the Covid-19 has achieved very strong sales with more than 392 units sold (70%) out of 522 units.
Concurrently, our Executive Condominium at Parc Canberra has sold 64% of its unit at average $1085psf. This obviously show the demand of the people who try to grab the opportunity.
Therefore, if you have been thinking that this is not the right time to take action, you may need to change your mind set today!
Opportunity #3: Low Bank Interest
On 3 March 2020 US Federal Reserve took an emergency action that slashes their benchmark interest rate to nearly zero in attempt to offset the economic impact cause by Covid-19.
The objective of the slashes is to continue to keep financial markets stable and ensuring low borrowing costs.
In view of the economic recession, Government is on expansionary fiscal policies which include ensuring that the bank interest rate remain low. Instead of paying more on interest during the bullish market, this period is the best time to invest in property by leveraging on the low bank interest rate.
1) CURRENT HOME OWNER : Refinancing Your Mortgage Loan
If your lock in period is over, you need to take action to refinance your loan.
The above shows a simple example of my client, Mr Lim, who still has an outstanding loan of approximately $1 million as of today. He took the loan from DBS on July 2018 where the lowest interest rate back then is 2.55%.
He decides to go for a fixed interest rate of 1.75% for a lock in period of 2 years.
The possible saving he could save per month is $360 which is equivalent to $4,320 for the first year.
This is only possible if you take action and not procrastinate. Remember, each month you are losing an opportunity cost of $360 by not doing anything.
2) PROSPECTIVE HOME OWNER: Secure a Loan for your purchase today!
As shown in the above comparative table for the repayment schedule. During a higher interest environment, for a $1 million mortgage amount, you will be paying a higher monthly installment of $4,511.39 instead of $4,117.89 in current low interest rate environment.
The amount of principal paid during a is also higher during lower interest rate environment at $32,739.47 instead of only $29,721.28 at the end of 2 years. This also means that, you not only pay more in monthly installment but also mostly are used to pay the interest instead of the principal.
In summary, I hope this article has help to divert your focus from all the negative news or your frustration over circuit breaker into something more positive.
We all know that Covid-19 is not going to stay. We are waiting for the virus to complete its course or our medical expert to come out with the vaccine. The impact of this epidemic could be just temporary even though we may not know when exactly it will end.
However, something for certain is that once the epidemic is over, we will see all economic indicator back to normal and everything is likely to spike from there.
As such, I strongly urge you to take action today and seize all the opportunities amid the uncertainty market condition as this opportunities may also only available for a short span of time.
Do you need more clarification?
If you are still unsure what to do or you need more information before taking action, feel free to contact me.
Click Whatapp to get in contact with me for a 1 time free 30min Property Wealth Planning (PWP) consultation.
A PWP consultation includes the following:
A detailed financial affordability assessment
A clear and customised investment road map for your real estate investment journey.
Maine Soh has been in Singapore Real Estate Consultant and Property Wealth Planner since 2009.
During the early stage in the industry,she mainly served various relocation companies.
As such, upon graduation from NUS, she became very attached to this industry especially she has not only built a pool of clientele portfolio, she has also built a pool of friends whom she felt a sense of responsibility to take care of their leases or sales of their properties.
To date, her greatest fulfillment is still the capability of assisting her clients and friends to source the right property that they call home and achieving the best offer that bring smiles on their faces. She valued all the relationship that came into her life. Thus, it is common for her to go extra mile for her client whenever required.
Most of her clients trusted her as she is not only well versed with all the marketing strategy and tools, she hold them through the complex process of the transaction ensuring they make informed decision and prevented them from making avoidable mistake. Thus, her success is evident from consistent referrals from my clients and friends.
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