5 Factors : Why Singapore’s Property Market Is A Good Hedge Against Inflation
As inflation becomes a growing concern for investors worldwide, the stability of Singapore's property market has become an attractive option...
Read More
TLDR
Understanding the key factors involved in buying property in Singapore is crucial for making informed decisions. Consider your investment objectives, financial capabilities, and market conditions before diving into house hunting. Evaluate the property based on location, entry price, and urban transformation potential. Stay updated on market trends, housing policies, and urban development plans to make sound investment choices. Proper research, financial planning, and prudent decision-making are essential for a successful property investment journey.
Buying on impulse is seldom a good idea. And for a big-ticket item like a property, entering the market without doing in-depth research and analysis is downright unwise. No matter how good the investment opportunity may seem to be, it is not advisable to go in blind, so to speak. In fact, if it is too good to be true, all the more it warrants a deeper look.
So, where do we start?
Before you embark on house hunting, consider this: why am I buying this property? It sounds simple enough, and it is good to be clear-minded about why you are entering the property market.
For instance, do you plan to move in yourself, or do you intend to rent it out, if you own an existing property, what are you going to do with it?
If you intend to hold on to your existing property, be prepared to pay the additional buyer’s stamp duty (ABSD) on your second property purchase.
Be Realistic, Be Prudent
Next, what is your budget – what can you realistically afford and what would be somewhat of a stretch?
Proper financial planning and building in a financial safety net is absolutely critical because properties are illiquid and cannot be sold quickly when you are in a bind. Should you fall on hard times and need to sell or rent your unit desperately, you can be certain that it will not fetch an attractive price/rent.
Prudence is also key. If you think you can comfortably afford a $1.4 million condo, you may still not want to max out that budget, because there are other costs to consider, including the ABSD for second property (at 12% of the property price for Singaporean buyer), legal fees etc.
Then, there is the matter of home financing. Do note that the Total Debt Servicing Ratio (TDSR) of 60% and prevailing loan-to-value (LTV) limits will affect the amount you can borrow to fund your home purchase. If you already have an existing home loan, the LTV drops to 45% (or 25% if the loan tenure is more than 30 years or extends past age 65).
Remember this: property investment is a mid- to long-term commitment, make sure you have the financial holding power to tide over least 3 to 5 years.
Key Criteria When Evaluating Property Buying Opportunities
So, you have sorted out your investment objective, evaluated your financial position, and considered the possibility of using leverage, now what? Well, here comes the research and analysis.
There are a lot of information and data out there about the Singapore property market and its performance. Follow the news closely, as well as announcements regarding housing policies and urban development. Do not be swayed by emotions when it comes to property purchase; always do sufficient homework as savvy investors do.
There are 3 important criteria in evaluating property investment opportunities. It is important that each of the 3 factors are considered thoroughly as they could impact the property’s rentability and capital growth potential in the future.
1. Location
In real estate, location is paramount. Location influences desirability of the property, and this desirability then helps to boost demand, and high demand will drive pricing.
These are some main factors to think about when it comes to location:
- Central or outskirts: Is it in the city, at the city fringe, or is it in the suburbs?
- Transportation and accessibility: How far is the property to an MRT station or the bus interchange and bus stop? Is it easily accessible to main roads and the expressway?
- Neighhourhood: What are the amenities available around the property? Are there shops and food places, supermarkets, or recreation facilities such as parks or sports hall?
- Schools: What are the schools in the area? Would you consider enrolling your child to any of the schools nearby? (Note: When you enrol your child to primary school in Singapore, if the chosen school has more applicants than vacancies, priority admission will be given based on your child’s citizenship and the home-to-school distance)
- Lot/unit location: Is it on a high floor? Does the unit face the main road, or the bin centre, or does it face the pool or a park?
- Mature or non-mature estate: Consider whether there are other development sites in the area which could mean more supply of units and potential competition for buyers and tenants when you plan to sell or lease your units in the future
- Population catchment/hinterland: How big is the estate and is it in or near a regional centre where there are lots of business and commercial activities?
2. Entry Price
This relates to whether you are buying the property at market rate, below market price, or are you overpaying compared to the surrounding properties?
Overpaying will limit the upside potential, if you had substantially overpaid for a property, your future capital gain may be low or even nil – unless the property market runs up significantly over a period of time.
So, be sure to assess your entry price against the recent transacted prices of comparable properties in the vicinity, as well as the prices of transacted units within the same development.
Find out if the prices or rents of nearby properties have been climbing over the last few years, and whether the prices have gone up markedly since the project was launched?
If you are looking at a new launch project, at which stage of the launch are you buying into? Developers tend to offer star-buys at the initial stage of the launch to get the sales momentum going. You may end up paying slightly more for a unit – compared to those who bought in the first weeks of a project launch – if you buy at a later stage when the developer has already sold more than 70% of the units in the development.
3. Urban Transformation
Get acquainted with the Urban Redevelopment Authority’s Master Plan, which is a statutory land use plan that guides Singapore’s development over the next 10 to 15 years. Among many things, it shows the permissible land use, development densities, and urban transformation plans in Singapore.
If you have shortlisted some potential properties to invest in, be sure to consult the Master Plan on what are the upcoming plans for the area.
For instance, is there a vacant plot nearby that has been zoned for commercial use but is yet to be developed? Will the property benefit from large scale urban renewal/transformation initiatives, such as the Greater Southern Waterfront, or the second CBD in Jurong Lake District, or the development of Woodlands as a regional commercial hub? All these will likely have a positive impact on capital values over the long-term.
All property purchases carry some form of risks, but having done the necessary site and entry price evaluation and proper financial planning, you are likely on your way to a smoother investment experience. 👍🏻
You May Also Like …
Planning for a Future Landed Property Purchase After Selling Your BTO: Investment Tips
TLDR Transitioning from a BTO to a landed property necessitates understanding market trends, meticulous financial planning, exploring financing options, enhancing...
Read More
Top 5 Tips How to Find Your Dream Home in Singapore: A Step-by-Step Guide
Singapore, a vibrant and dynamic city-state, offers a diverse range of housing options for prospective homebuyers. From condominiums and HDB...
Read More
Buy a $1M Resale HDB or a $1M Resale Condo?
TLDR When comparing a million-dollar HDB flat to a private property of the same value, the HDB flat offers more...
Read More
Could It Be Wise to Sell Your Property After Just 3 to 4 Years?
TLDR In this blog post, the writer delves into the Singapore property market, particularly focusing on the effectiveness of quick...
Read More
Property Market: Buyer’s Paradise or Seller’s Dreamland?
TLDR The property market in Singapore post-Covid has seen a surge in HDB and private property prices, with a noticeable...
Read More
Freehold Properties vs Leasehold Properties: Which is Better?
TLDR When it comes to property investments in Singapore, understanding the differences between leasehold and freehold properties is crucial. This...
Read More
Bayshore: Reinventing the Experience of Living by the Beach
TLDR When deciding on buying or selling property in Bayshore, consider the recent developments and potential future growth. With a...
Read More
Unseen Dangers of Putting Your Money in Upscale Freehold Properties in Singapore
TLDR Luxury freehold properties in Singapore may not always be the lucrative investment opportunities they appear to be. High-end properties...
Read More
Singapore Property Price Set to Explode Upwards in 2024?
TLDR Understanding the factors influencing property prices in Singapore for 2024 can help in making informed decisions. Despite high rental...
Read More
Singapore Decoupling Guide
TLDR Decoupling in Singapore's real estate refers to the process of separating property ownership to avoid Additional Buyer's Stamp Duty...
Read More
5 Smart Techniques That Resourceful Homebuyers Utilize to Overcome Restrictions on Home Loans
TLDR When it comes to navigating the complex world of home loans and property acquisition, it's crucial to be aware...
Read More
Downpayment For Condo: How Much Do First-Timers Need In Singapore?
TLDR The blog post delves into the complexities of condo downpayments in Singapore in light of the impact of Covid-19...
Read More
Top 5 Vegetarian Restaurants in Singapore
Singapore, a melting pot of cultures and cuisines, offers a diverse range of dining options for food enthusiasts. For vegetarians,...
Read More
Which Is Better For You: A 99-Year Leasehold Or Freehold Property Tenure?
TLDR When it comes to the choice between leasehold and freehold properties in Singapore, several factors must be considered. Leasehold...
Read More
6 Must-Know Factors to Consider When Purchasing a Resale HDB in 2023
TLDR When buying a resale flat in Singapore, make sure to walk around the neighborhood to assess actual distances, check...
Read More
Is Singapore’s Property Market on the Verge of a Crash? Understanding the 5 Factors at Play
The Singapore property market has long been an attractive option for both local and international investors. However, as with any...
Read More
Resale Viewing Do’s and Don’ts: Expert Advice from a Singapore Real Estate Agent
TLDR The blog post provides valuable insights for first-time buyers on navigating the resale property market in Singapore. It covers...
Read More
Reach Your Goal of Owning a Flat Before You Turn 35 : Money-Saving Strategies
TLDR Jayson Ang provides valuable insights on money-saving strategies to achieve the goal of owning a flat before turning 35...
Read More
Exploring the Resale Condo Market? Here’s What to Watch Out For!
TLDR The impact of COVID-19 on Singapore's real estate market has been significant, leading to a surge in demand for...
Read More
