Graph displays SGD/GBP conversion rate from xe.com on 18/07/2019
Looking at that graph, we can see the British Pound (GBP) has devalued dramatically over the past 5 years from the Singaporean Dollar SGD. This would come as no surprise to many who follow the choppy waters of Brexit.
Does this mean investors who are holding some Singaporean dollars would shy away from investing into UK real estate or instead invest more? It all depends on the investor’s experience and attitude, but we see it as an opportunity, particularly when it come to Life Tenancy Investments. Let’s look at an example of a property we have live right now:
Three Bedroom House in Kent valued at GBP £265,000
The conversation rate is currently sitting around B so in SGD that is $424,000.
Because this is a life tenancy investment, there is 53.6% discount on the property in exchange for a married couple ages (65 and 67) to live in the property until passing.
The means the investment price is GBP £122,725 or SGD $196,360 with that same 1.6 conversation rate. Note: buying this 5 years ago when the rate was around 2.10 the purchase would have cost SGD $256,778.
If the tenants passed away on day one and the exchange rate doesn’t change.
Investment: GBP £122,725 (SGD 196,360)
House price inflation: $0
Value of Asset to Sell: GBP 265,000 (SGD $424,000)
Profit: GBP £132,275 (SGD $227,640)
It is of course unlikely the tenants would pass immediately, but this shows the profit if there was no house price inflation and no change in currency conversion.
If the tenants passed away after 10 years and the conversation rate returned back to Pre-Brexit rate (speculation)
Investment: GBP 122,725 (SGD 196,360)
House price inflation: GBP £127,265 (based on conservative rate of 4% PA)
Value of Asset to Sell: GBP 392,265 (SGD $823,757)
Profit: GBP 269,540 (SGD $627,397 – 319% ROI)
If the tenants were to live longer and investment term ended up being 15, 20 or 25 years. For the investor it simply means greater house price inflation.
And don’t forget, our hypothetical investor has:
No letting agents to pay
No income tax to pay
No Stamp Duty tax to pay
No maintenance costs to pay
No eviction and court costs to pay
No council tax to pay
No rental voids.
There are really so many benefits to Life Tenancy Investments and they are notably amplified with the GBP being so low right now. If you’re holding SGD or any other currency that is strong against the GBP at present, download our brochure to learn how it all works.