On the 15th May 2020 National Development Minister Lawrence Wong who co-chairs a multi-ministry taskforce on COVID-19 mentioned that construction costs in Singapore will increase as authorities impose a new COVID-19 testing regime on workers in the industry. He mentioned that due to the new COVID-19 testing regime he has “no doubt that it will mean construction costs in Singapore will be higher because of these regulatory requirements. And all of us must be prepared to pay this higher cost, because we want construction work to be done safely in Singapore from henceforth.” This was a stark reminder to myself and many of my clients that property prices are continuously steeping despite the COVID 19 situation. It has brought much assurance to my clients and I that properties will continually stay as a safe asset that hedges against inflation.
Recently I mentioned this point in my webinar on how to effectively use Real Estate to hedge against inflation. The above chart is a testament that in the past 16 years and even beyond, our Singapore’s property has always been above the inflation line regardless of how low the prices have fallen to. Even in the 2009 market when the market has reached its all-time low due to the subprime crisis, the yield of our properties have not fallen below the inflation line. Past 20 years, the past transactions for HDB increase 72.28% averaging to a compounded rate of 2.772% whereas for non-landed private properties increase 131.77% averaging to a compounded rate of 4.292% per annum. This has outperformed our country’s inflation rate of an average of 2.4% per annum.
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