common property-related myths

1. Prime properties never fall in price.

During the last property market correction in Singapore from 2001 to 2005, property across the entire spectrum of the market was affected, regardless of whether it was high or low-end. Remember, there is a difference between high prices and increasing prices. Prices may be high, but they may not be increasing.


2. House prices do not fall to zero like stock prices, so it is safer to invest in real estate.

It is true that house prices do not fall to zero, but your equity in a house can easily fall to zero and even below that. It just takes a fall of 30 per cent to completely wipe out people who only have 25 per cent equity in their house. This means that house price crashes may actually be worse than stock crashes.

Singaporeans should take note especially since most of their retirement funds are locked in their property, and the money may be leveraged. Over-leveraged may kill you unexpectedly so never under-estimate this risk and over-confidence of future earning. Your future earning can be unexpectedly affected by personal, family or financial crisis