By Joyce Koh, The Asia Business Times, July 19, 2004

(SINGAPORE) More Singaporeans are putting their money in an investment opportunity called land banking, drawn by the high returns and buy-back capital guarantees.

Over 4,000 Singaporeans have bought plots of raw land in the Canadian cities of Calgary and Edmonton, according to Walton International, a Canada-based company said to be the only firm here to offer exposure to this form of investment.

Winston Yau, managing director for the Singapore branch of Walton, sees 'tremendous growth' of about 30 per cent in the number of investors. Indeed, the company, with an eight-year presence here, appears to be on an aggressive expansion drive.

Previously located in a 13,000 square feet office in Tras Street with only about 100 sales consultants, Walton has since moved into a swanky 24,000 sq ft prime property in One Fullerton. It currently employs 300 sales consultants.

In its land banking scheme, Walton buys raw land within the city limits, keeps at least 10 per cent of the land for itself and sells the rest to individual investors. So for one unit of land, investors pay on average CA$25,000 (S$32,350) and get a title deed in their name.

Meanwhile, Walton works with planners and engineers to obtain development approvals for the land. When such approvals are obtained, the company will sell the land to developers at a higher price -- provided 60 per cent of the investors agree to do so.

Mr Yau said according to Walton's projection, the land value is expected to double within five to seven years, and returns have been about 8-18 per cent.

Investors are also given the option to sell the land back to the company at the same price they bought it for after five years, he said.

When asked if Walton -- which is not regulated by the Monetary Authority of Singapore -- would consider buying land in Singapore, Mr Yau said this would be too expensive. But he added the company is looking at buying land in the US and other 'fast-growing countries'.

On why people find this investment attractive, Mr Yau, 38, said: 'The purpose of any investment is to buy something that is solid, not speculative. And real estate is something that is real. The risk is time but if an investor is prepared to wait for three to four years, the prospects are pretty solid.'

Entrepreneur Charles Sng, 36, who forked out over CA$35,000 to buy half an acre of land last April and said he would be happy with at least 20 per cent returns, reasoned: 'Other than the foreign exchange risk, I feel this investment is relatively stable.'

'I see that there's money to be made in the development phase of real estate. So the whole point is to buy and then just sit on this investment for a few years.'

Mr Sng pointed out: 'All the tycoons in Singapore made it because they bought land on the cheap, sat on it and then it became gold. As an individual, I don't have the same kind of resources, but through this, I get to buy a small stake out of a bigger stake.'

However, others like finance officer Patricia Koh, 24, remain sceptical. She said: 'The property is all the way in Canada. Even with the land title deed, it is just a piece of paper. If something happens, how long will it take to get my money back? Who is going to absorb the blame if there is any problem with the land?'

Even Mr Sng, who described himself as having a 'medium risk appetite', admitted it would be difficult if there were any disputes. 'Since it is in a different country, it might be subject to different laws. But then again, Canada is not a cowboy town and it is quite pro-business,' he said. But Colliers International managing director Dennis Yeo said investors should do their research before putting their money into the investment. He said: 'The potential of the land is Walton's selling point. But the risks for investors who want to make a profit within the five years is whether there is a resale market for individual plots especially when the company may already have ample lots for sale.'

'The key question is how much the land is worth. Do you have enough information to tell you that the land is actually worth what the company is trying to sell you?' he added. Still, Mr Yeo said the scheme will work if every investor stays in it together, developers are interested to buy every single plot and the land eventually appreciates in value.

Questions for Discussion

1. Why is the Singapore firm investing in land in Canada?
2. What contribution are these investors making to the production of wealth in Canada?
3. The term "speculation" generally refers to the practice of buying something and holding it until its value rises. Yet Mr. Yau refers to these investments as "solid, not speculative". How is he using the term differently?
4. What are some of the risks in this "land bank" kind of investment?
5. Prices in this article are given in Canadian (CA) and Singapore (S) currencies. How would you find out what those figures are equivalent to in US dollars?