Posted on December 25, 2009 - by Tan Kin Lian

Investing in properties

Photo by woodleywonderworks

Many people made huge gains by investing in properties in the past. This was achieved at a time when property prices were relatively low, compared to today. At today’s prices, it will be difficult to expect further appreciation along the scale as was achieved in the past.

The trend of interest rate is also going against property investments. During the past twenty years, there was a decline in interest rate globally. This decline contributed to appreciation in property prices. For example, if interest rate dropped from 6% to 3%, the prices of properties will double.

Interest rate is very low now. At the short end, it is near zero. For longer terms, it is around 3%.  In the future, it is likely to increase. This will result in a drop in property prices. It could drop by 50%, if the long term interest rate were to double from today’s level.

Interest rate is expected to remain low, due to deflation, but may increase from the highly depressed level of today, so you can expect some correction in property prices in the year’s ahead. Read more…

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