After the session, learners will understand better these real estate investment principles:
• Capital gain is not a 'given' in any investment, and basics of capital gain is capital appreciation or price growth, which in turn is dependent on many influencing factors.
• Capital appreciation does not reveal the full picture of the financial health (e.g. profitability and income growth from rents) of a real estate investment. An investment may be experiencing recurring negative cash flow and/or capital depreciation
• When the property is not sold (e.g. due to Seller’s Stamp Duty), capital appreciation leads only to paper gains.
• Paper gains may belie negative cash flow – especially when property prices appreciate due to speculation, but rental stagnates.
• Investors may be able to forecast capital appreciation by (i) discerning the price growth pattern by tracking relevant historical data, or (ii) conducting the Cash Flow Analysis of the investment units.