I am no fan of Magnus Bocker, the SGX CEO, as various previous posts in this blog show —https://singaporegirl.wordpress.com/?s=magnus+bocker and an interview he gave the Straits Times published on Sep 28, purporting to enlighten investment newbies, reinforces my view.
While much of his “advice” was ho-hum ordinary and nothing that anyone with common sense won’t have been able to cough up, what made me sit up was what he said about investing in property.
Under the sub-head, “What I should avoid when investing”, he gave this incredible answer: Property.
OK, it isn’t because he pin-pointed property but the reasons he gave for avoiding property that make me wonder yet again how SGX could be run by this man on an annual pay of $1 million plus other perks 🙄
He said: “The worst investment I ever made was my house in New York. The lesson is that property is actually a high risk investment, partly as it is an illiquid investment. If you, say, needed $100,000 suddenly, you cannot sell part of your apartment to raise the $100,000. And selling your property will take time as you have to wait several months for your money.”
First, the worst investment he ever made wasn’t his house in New York but when he attempted to engineer a merger of SGX with the Australian Securities Exchange. Thankfully, the Australian Foreign Investment Review Board stopped him and so instead of a multi-billion $ fiasco, SGX suffered only the cost of the failed attempt. Which still amounted to a few million $. Not counting the damage done to its share price.
Second, while property is somewhat more illiquid than securities, it isn’t as illiquid as he makes it out to be. If you need just $100K in a rush and your home, fully paid for, has a value of $1 million, you can always get that bank loan by pledging your property. Or mortgage it for that required sum. Or if you still have an outstanding mortgage, you can always get a second mortgage.
Sure, if the value of your home is under water, there could be a problem.
But then, with securities, such as Reits — which Mr Bocker favours as a proxy to property — they could be as illiquid as property if not more: depending on the mood of the market, the flavour of the month and whether or not, your particular security has been suspended by SGX for some arcane infringement unforeseen at the time of purchase.
And if the sale is done, you could suffer more than a haircut. You might lose an arm and a leg too!
Lastly, his assertion that a property sale could take months to complete is only partially true. Three months is about standard in Singapore but could be shortened to half that subject to agreement of the buyer and other conditions that might be imposed in the contract.