Knowing the 3 Stages of a Property Life Cycle

3 Stages of a Property Investment Life Cycle

Property investments are traditionally considered 'passive' and safer in nature as compared to investments such as stocks and equities. However, passive management does not mean that a 'buy and hold forever' strategy works for all types of properties and is automatically a safe approach as value decays over time for leasehold properties. Aside from Freehold (Or equivalent 999/9999 years leasehold) properties, the growth trajectory of 99years leasehold properties generally fall into 3stages called GSD:

Growth

Stagnation

Declination

Stage 1: Properties That Are Growing in Value

One simple way to identify the growth prospects of a property is to compare it against the price index of resale and new properties of the same tenure within the same district.

In the example above, we can see how over the past 9 years, Clover By the Park has performed relatively well (31%) vs the prices of other 99 years new (+34.5%) and resale (+47%) private condominiums in district 20.

(Note: Comparisons beyond Q4 2020 are excluded as COVID delays created artificial price increments for typically stagnant projects which we forsee will normalize once COVID passes).

Stage 2: Property Facing Stagnation in Value

In this example, we can see how over the past 9 years, Lilydale has seen stagnation in value (+3.72%) vs the prices of other 99 years new (+50%) and resale (+36%) private condominiums in district 27.

(Note: Comparisons beyond Q4 2020 are excluded as COVID delays created artificial price increments for typically stagnant projects which we forsee will normalize once COVID passes).

Stage 3: Property Facing Decline in Value

In this third example, over the past 9 years, The Bayshore has clearly underperformed (-0.2%) vs the prices of other 99 years new (+23.6%) and resale (+7.8%) private condominiums in district 16.

(Note: Comparisons beyond Q4 2020 are excluded as COVID delays created artificial price increments for typically stagnant projects which we forsee will normalize once COVID passes).

Factors that Affect a Property's Growth Potential

So, what are the factors that can affect the growth rate of a property vs its surroundings?

Our research team has curated a list of 10 critical factors that historically shows that the more factors a property fulfills, the higher the likelihood that it will continue to appreciate in the longer term and vice versa.

It is crucial that investors understand that leasehold properties require active management from time to time to 'recycle' profits and funds from stagnant and declining properties into higher profit potential ones.

This will allow them to continue to outperform the general market and enjoy greater capital growth on their equity.

________________________________

For an analysis of your property portfolio and a more precise in-depth discussion, reach out to us for a Property Wealth Planning consultation.

A PWP consultation covers the following:

- An in-depth financial affordability assessment and timeline planning

- Highly relevant investment insights

- Entry and exit strategies

- A clear and customised investment road map

- A curated list of best buys in today's market with good growth potential & minimal risks

- Selecting units with the highest potential in upcoming new launches

- Finding out if your property has stagnated in price and your options

- Advice on marketing and getting a buyer for your property fast