Many people, even local Bruneians, think that investing in Brunei real estate is a waste of time. "The prices never rise!!" is often the main perception these "investors" conceive. Well, that is only one side of the coin. A lot of potential local investors fail to appreciate the high return on investment (ROI) Brunei real estate have been maintaining.
We are looking at 6-8% per annum for residential properties and more than 8% for standard commercial properties. If you are not getting at least this kind of figures on your property, you should start consulting a property management firm and do something about it.
Some properties wearing tenancy contract with the government can potentially fetch 10% or more per annum. Government rentals are normally signed for 3 years and renewable. The good news is we hardly ever see government giving up tenancy ever since they started renting. So technically speaking after 10 years of renting you get a FREE house! Of course it takes a few more years if you are making use of any loans or mortgages.
Brunei real estate prices do not appreciate as much as what we see overseas. 25% increment per year may seem alien to you when you hear your friends from cities like Melbourne, Auckland, Singapore and Vancouver boast about their success stories in "Real Estate Investment". However, they never tell you about how much they worry about a burst in the price bubble there.
If you have been following property prices in Brunei, you can see a semi-detached house sold for about BND220,000 4 years ago; a similar property recently built next door is now transacting for about BND270,000. The recently price hike is mainly due to the worldwide increase in prices for major building materials such as steel, concrete, timber etc.
A typical residential property in Brunei is about 75-80% building value and 20-25% land value. The rise in material prices contributes much to the property prices. Building value is more or less standard all over the region. The differences between the property prices of a 3000s.f. bungalow in Singapore or Kuala Lumpur and a similar one in Brunei is the Land value.
Land value fluctuates, building value will only go up based on the uncontrollable appreciation in oil price and steel price. So since a major price component (Building value) of Brunei property is rising while the minor price component (Land value) is pretty stagnant, we can safely see some price rise in property market in the near future if material prices continue to rise.
Land value is probably about 50-60% of the property price in cities like Vancouver, Auckland and Melbourne. Whereas in Singapore, Hongkong and Tokyo it could be 85% or more. The point is that there is not much room for a Brunei property price to fall further simply because no one will build a house at $200k and sell for $200k. (That is when land value is 0% of the property price).
So the conclusion about investing in Brunei real estate is pretty simple. Brunei real estate is excellent for conservative, risk-averse investors who prefer "Bonds", which has pretty reasonable ROI per annum, can hardly have a loss in capital; rather than "Stocks" which is high-risk, high-return.