Is property a good investment in times of war?
April 21, 2017
The Easter weekend was filled with tensions. It started with Donald Trump using Afghanistan as a testing ground for the Mother Of All Bombs and killed 96 Islamic State militants. This was followed by a failed missile launch by North Korea on Sunday. US Vice-President Mike Pence warned that ‘the era of strategic patience is over’.
Suddenly, everyone is on their toes. A war sounds imminent.
What will happen if there is a war? Are we safe? Will Singapore economy be intact? How are we affected financially? What will happen to the property market?
Wars won’t stop mortgage payments
First of all, there is a big difference between living inside or outside a warzone. If the war happens in our country, all male citizens and PRs between the age of 18 and 40 will be compulsorily enlisted in national service.
When the home owners leave their jobs to serve their country, they are still required by the banks to repay their housing loans every month. Mostly likely, the government will step in, increase taxes or issue war bonds to help the servicemen to temporarily pay their mortgages while they are away. When they come back, they have to continue paying their loans.
Since no home protection or mortgage insurance cover acts of war, even if a house becomes uninhabitable after a bombing raid, the owner is still liable to pay the outstanding housing loan.
That’s why it is wiser to rent than to own properties in wartime.
People will sell their home at whatever price they can fetch if they anticipate that a war is coming. For the rich, they will either leave their country or sell their properties to stay in a hotel.
I just read Barton Biggs’ book Wealth, War and Wisdom. Biggs is a hedge fund manager famous for correctly predicting the dot.com bust. His book examines how different asset classes performed during World War II and which ones proved to be the winners after the war... read more