The Psychology of Property Investing: Why Smart Investors Still Make Emotional Decisions
- Stuart Chng
- 49 minutes ago
- 6 min read
Property investing is often described as logical, data-driven, and numbers-based.
After all, fundamentals always point us to rental yield, capital appreciation, cashflow and interest rates.
But beneath every spreadsheet lies something far more powerful: Human psychology.
Even experienced investors in the Singapore property market — one of the most data-transparent markets in the world — are deeply influenced by cognitive biases, fear, social proof, and emotion.
As property agents, understanding the psychology of property investing may be more important than understanding the numbers themselves. If knowing your product is half the battle, knowing your customer is easily the other half.
It is important to understand the psychology of the investor to better serve, facilitate and guide them with confidence.
As a property investor, which of these pitfalls do you think you can avoid?
1. Property Feels Safe — And That Changes Everything
Unlike stocks or crypto, property is physical. You can walk through it, touch it, renovate it. rent it out, live in it, etc. It is easy to understand and not difficult to explain.
This tangibility creates what psychologists call perceived control bias.
“Because I can see it, I understand it, and because I understand it, I am more willing to invest in it. ”
In Singapore, where home ownership is deeply embedded culturally and supported through the public housing system under the Housing & Development Board, property feels even safer.
But “feels safe” does not always mean low risk.
But any agent worth their salt will know that lease decay, policy shifts, interest rate cycles, and oversupply can quietly erode returns — even while the property still “looks good.”
2. The Fear of Missing Out (FOMO) in New Launches
It following statement may bring about a chuckle or two, but it is more often true than it is not;
"Few forces are stronger in real estate than FOMO."
We see it during:
New condo launches
Limited preview pricing
Strong take-up rates on launch weekend
Developers understand this very well. Marketing materials are sure to highlight key trigger word like “90% sold”, “Last few units remaining” or the crowd favourite, “Early bird discount”
In Singapore, this is amplified during strong market cycles and following cooling measure adjustments by the Monetary Authority of Singapore.
Have you ever heard of this Psychological trigger?
Scarcity + social proof = urgency.
Investors often justify decisions after committing, rather than before.
3. Anchoring: “My Neighbour Sold at $X”
Anchoring bias is one of the most common psychological traps in property investing.
If a neighbour sold at $1.8M, so it would be very logical to infer/believe that your unit must be worth at least that much.
But it is not that simple isn't it? Market conditions may have shifted (since the unit was sold) and your unit's layout may not be as favourable. There may also be external factors at play — interest rates may have changed.
In Singapore’s transparent transaction environment, data is available — but interpretation varies.
Investors tend to anchor emotionally to:
Past peak prices
Launch prices
“What I paid”
This often leads to overpricing or refusal to exit when fundamentals change.
4. Loss Aversion: Why Investors Hold Too Long
Humans hate losses more than they enjoy gains. The sting of a loss lingers a lot longer than the glory of a win. This is called loss aversion.
This is the reason why an investor may refuse to sell at a 5% loss, hold the property through a declining rental yield and/or ignore opportunity cost.
Because psychologically, a realised loss is typically interpreted as failure .
In property, this bias is magnified partly because transactions are public. stamp duties are high. and exit costs are significant. It isn't uncommon for investors to hold suboptimal properties for years simply to avoid admitting they misjudged the purchase.
5. Herd Mentality in Property Cycles
When the market rises, optimism spreads quickly. When cooling measures hit, fear spreads even faster.
Singapore’s property cycles often demonstrate herd behaviour:
Upgraders rush during bullish sentiment.
Investors retreat when ABSD increases.
Buyers wait during interest rate hikes.
Policy changes introduced by the Urban Redevelopment Authority or adjustments to Additional Buyer’s Stamp Duty can instantly shift psychology — even before fundamentals materially change.
Humans look to others for validation. If everyone is buying, it must be safe. If everyone is cautious, it must be risky.
This is rarely rational — but deeply human.
6. The Illusion of “Good Location”
Location is often cited as one of the key pillars of property investing. Even our very own Navis Atlas App includes more than one element of location consideration in our PrimeKey Analysis (PKA) scoring system.
But psychology shapes how we define “good.”
Investors may overvalue proximity to areas that are familiar to them, such as locations near where they grew up/went to school. Yes, they may be able to recognise
(and overvalue) the strengths of property due to familiarity but this is often done through subjective lenses and more myopic than one would like to admit. It's not wrong to be more invested in something you're familiar with, but it is catastrophic if you don't exercise the prudence and use objectivity tools to bolster your decisions.
Another common badge of honour is for properties located in districts with prestige branding.
This emotional attachment may override seemingly obvious fundamentals like:
Supply pipeline data
Rental demand realities
Demographic shifts
The brain prefers familiarity over objective analysis. This further emphasises why it is important to be armed with irrefutable and objective data no matter the circumstance.
7. Overconfidence Bias in Experienced Investors
Ironically, the more experienced an investor becomes, the more dangerous overconfidence can be.
After a few profitable cycles, investors may believe that they understand certain markets like the back of their hand, or that property always goes up in Singapore. This gumption will lead them to believe that this project will perform like the last one.
Yes, past success builds conviction — but markets evolve.
That being said, it is important to understand that new infrastructure plans, demographic transitions, and policy tightening can alter outcomes.
Confidence is necessary. Overconfidence is costly.
8. Emotional Drivers Behind “Investment” Decisions
Many property investments are not purely financial.
They are driven by by factors such as status, identity, security for children, social comparison and retirement comfort.
So it's important to read between the lines when an investor may says, "It's for yield" and identify that it may subconsciously mean, "It proves I've made it."
Understanding this distinction is crucial.
Because when identity is involved, objectivity declines.
The Future: AI vs Human Psychology
As AI tools become more prevalent in real estate, pricing models will improve, risk simulations will become clearer, lease decay is easily quantified and supply impact can be projected.
But AI cannot remove human emotion. Instead, it acts as a counterbalance.
In the Singapore property market, long-term winners are rarely those who chase hype.
They are those who understand cycles, manage emotions, stay disciplined, adapt strategically and most importantly are anchored with objective intel/data.
The best outcomes will come from unbaised data + psychological awareness and a competent agent would be able to bring the two together in a clear and concise format for his/her client using Navis Atlas.
Don't take my word for it, experience it for yourself!
Need an opinion on your property investment plans, the best buys available or help marketing your properties?
Get a 1-time free 30 min Property Wealth Planning consultation with Stuart and his partners. Schedule one right now.
A PWP consultation includes:
- An in-depth financial affordability assessment and timeline planning
- Highly relevant investment insights
- A clear and customised investment road map
- A curated list of best buys in today's market with good growth potential & minimal risks
- Selecting units with the highest potential in a new launch project
- Advice on marketing and getting a buyer for your property fast
Stuart Chng is the Managing Partner of Navis and Chief Agency District Director at Huttons and the co-creator of Navis Atlas and PrimeKey Analysis.
He adores music and can play a few instruments decently without upsetting his neighbours. When not doing so, he enjoys pillow fighting with his son and coming up with silly puns which barely amuses his wife.
Professionally, he is a licensed real estate agent, avid investor in options, stocks and real estate, team leader, speaker and columnist for several property newsletters and blogs and is often quoted in media interviews on 938FM, Channel 8, PropertyReport, PropertyGuru and other publications.
Throughout his career, he has helped many clients grow their wealth through selecting great real estate investments and managing their portfolios actively. Read his clients' reviews here.
Stuart has also coached many top million dollar producing agents from top Singapore real estate agencies. Read his agents' reviews here.
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