Thoughts on Investment and Money built on a Christ-Centered Mindset


How to hedge real estate prices in Singapore

Getting exposure to real estate

Being Asian, I obviously love real estate.  It's a long term play on the economy etc. I especially like real estate in key gateway cities like Singapore, Hong Kong, New York, LA and London. 

However, it can be quite difficult to buy and manage physical real estate far away from where you live. And since I am also a stock market guy, I constantly look for ways to get exposure to these markets using "proxies".

Let me give you an example. 

In Singapore, many analysts like to use City Developments as a proxy for real estate returns in Singapore because they are one of the largest real estate developers. Does that work?

In 1995, the Singapore Residential Real Estate Price Index was about 70-80. Today, it is about 155. So it has roughly doubled. Anecdotally I feel it is too low, but this is a composite index.

In 1995, City Developments was trading at $8. Now, it is also trading at $8. Duh?

Is all hope lost?

Interestingly, I found that the local banks are pretty decent proxies. For example:

in 1995, OCBC was trading around $3.80. Today it is trading about $9. So it has more than doubled, outperforming the SG real estate index. Plus all the dividends along the way.

I actually don't like investing in banks much because they are a black box and inherently leveraged. But my objective re this post was to illustrate how to find proxies for real estate. And the Singapore banks have a lot of exposure to property related loans, plus the wealth effect. I have not done a similar analysis for DBS and UOB, so maybe they might have been better proxies?

What do you think?

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