If you have been following my blog since 2011, you will know that I made several investments in London residential apartments in 2012 and early 2013. They have since risen by around 24% - 30%. On top of that, when I bought them, GBPSGD was around 1.91. It is now 2.10. On top of capital gains, I made a currency gain of 10%. When I started investing, the price to income ratio for London properties was around 11.8x. It is now 14.8x. It is still relatively cheap compared to Singapore's 23x. I believe GBPSGD will eventually rise to 2.25 when BOE starts to hike rates in early 2015. By 2016, I expect GBPSGD to reach 2.50. This is a further 19% currency gain.
I recently ventured into Brisbane and Melbourne. Again, part of the reason is that I believe AUDSGD will recover from 1.18. In my post yesterday, I talked about the recovery of the global mining sector. AUDSGD could break 1.20 by end 2014, and reach 1.25 by end 2015. This is a 6% forex gain over SGD. If the mining supercycle continues into 2016, AUDSGD could reach 1.30. I doubt it can go much higher than that.
Brisbane's price to income ratio is a very respectable 6x, while Melbourne's is close to 8x. Australian properties, despite what the press might have you believe, is NOT in a bubble. But in London, it is RED HOT, almost near bubble territory. The only other cities that I believe have major upside are European cities of Dublin, Madrid, Lisbon and Barcelona, as well as most American cities.
You should hedge your currency bets if you're a Singaporean by changing your SGD to GBP or AUD if you have further payments to make. Otherwise, if you're receiving your income in GBP or AUD, keep it that way.
It is also time to fix your mortgage rates for as long as you can. If you have a dual currency loan, you should keep it in SGD for the lower rates, that is IF YOU HAVE A HIGHER RISK APPETITE and A STRONG VIEW THAT SGD WILL WEAKEN AGAINST AUD and GBP. Getting your currency forecasts wrong could result in MARGIN CALL and it can be very unpleasant.
You should also know that long term, GBPSGD tends to fluctuate wildly. But mostly, the GBPSGD is trending down, with lower highs and lower lows. By 2017, we could see GBPSGD touching 1.75 if there is another global recession. For AUDSGD, it fluctuates between 1.34 to 1.00. These are very wild swings but the AUDSGD should not depreciate like GBPSGD over the long term.
It is precisely the wild swings in FX that you should be careful when borrowing in different currencies.
I recently ventured into Brisbane and Melbourne. Again, part of the reason is that I believe AUDSGD will recover from 1.18. In my post yesterday, I talked about the recovery of the global mining sector. AUDSGD could break 1.20 by end 2014, and reach 1.25 by end 2015. This is a 6% forex gain over SGD. If the mining supercycle continues into 2016, AUDSGD could reach 1.30. I doubt it can go much higher than that.
Brisbane's price to income ratio is a very respectable 6x, while Melbourne's is close to 8x. Australian properties, despite what the press might have you believe, is NOT in a bubble. But in London, it is RED HOT, almost near bubble territory. The only other cities that I believe have major upside are European cities of Dublin, Madrid, Lisbon and Barcelona, as well as most American cities.
You should hedge your currency bets if you're a Singaporean by changing your SGD to GBP or AUD if you have further payments to make. Otherwise, if you're receiving your income in GBP or AUD, keep it that way.
It is also time to fix your mortgage rates for as long as you can. If you have a dual currency loan, you should keep it in SGD for the lower rates, that is IF YOU HAVE A HIGHER RISK APPETITE and A STRONG VIEW THAT SGD WILL WEAKEN AGAINST AUD and GBP. Getting your currency forecasts wrong could result in MARGIN CALL and it can be very unpleasant.
You should also know that long term, GBPSGD tends to fluctuate wildly. But mostly, the GBPSGD is trending down, with lower highs and lower lows. By 2017, we could see GBPSGD touching 1.75 if there is another global recession. For AUDSGD, it fluctuates between 1.34 to 1.00. These are very wild swings but the AUDSGD should not depreciate like GBPSGD over the long term.
It is precisely the wild swings in FX that you should be careful when borrowing in different currencies.
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