Is it wise to buy a house in Singapore?

Question

Hi all,

So, Iâ€™m  living and working in Singapore, and was just offered a real-estate deal. I currently rent a house for 2,500$ a month (this is the â€œnormalâ€ price for foreigners in Singapore). The offer can be a good investment since Singapore is now really hot in the Far East real estate market. I can buy a 300,000$ house in a good neighborhood, with a 80% finance from the bank, and can rent it for about 2,000$ easily, which represents an excellent rate of return.
Do you think it is wise for me to go for this deal? I also heard that Japanese, Chinese and Korean market are getting hot among foreigners, looking for better deals than they can find in Europe or US, with a lower risk and better economies. Anybody knows someone who has done such a deal?

Thanks in advance

Sali

Brian Levredge · Answer

There is an asset bubble in real estate in the Far East right now.  There is a ton of money, as you mention, that has been pouring into Asia for awhile now.  That means too many dollars are chasing too few goods which is pushing prices way up.  I would check to see how much prices have gone up in the last year and I most likely wouldn't buy since you are gambling if you pay market rates for a property.

Vikram C. · Answer

One of my friends has bought two properties in Singapore - both in the S$ 4million + price range.  The property value on each has appreciated by over $2 million and he feels pretty smart about his investments and has tried to convince me to buy something there.

But every time I look at Singapore property prices, I am reminded of Tokyo in the late 1980s.  I realize Singapore has perhaps the best government in the world, but I do not see why that should justify such astronomical property prices.

BTW, when you are referring to a "house" in Singapore for $300K, you actually mean "tiny condo," right?  As far as I know, the few real houses in Singapore go for quite a bit more than $300K.