INVESTING IN SINGAPORE PROPERTY

 SINGAPORE PROPERTY INVESTMENT TIPS

By 2030, the population over the age of 80 is set to quadruple… so if you want to maintain a comfortable lifestyle now and in retirement, you’ll need to be self-funded. Investing in property is a great place to start, but as with all major financial decisions, you need to be armed with information before you take the plunge. 

Surging prices pose a challenge for the ruling People’s Action Party. Its achievements include the highest public housing rate in the world, with over 80% of the country’s 4 million residents living in government-built homes. Singapore is defying a global property downturn, fueling concerns about affordability within the city-state.

The price jumps are fueled by a shortage in supply due to construction setbacks during the Covid-19 pandemic, and demand spikes from people looking for upgrades and an influx of well-to-do foreigners. Buyers are brushing aside concerns about rising interest rates that have dented property markets from Australia to New Zealand.

The world’s hottest housing markets are facing a painful reset. Interest rate hikes do not seem to have a significant impact on new home sales in Singapore. Property prices are more supply-driven rather than sentiment-driven.

Authorities are taking notice. The government introduced curbs last year to cool home prices that surged the most in a decade. Officials also announced tax hikes on high-end properties during the annual budget this year, and plan to increase the supply of private homes.

Despite a brief slowdown, residential prices have rebounded and grew at a faster pace than expected in the second quarter, climbing 3.5%.

Wealthy locals and high-earners moving to the city-state are pushing up prices. Singapore’s rent surged the most among 30 cities globally in the first half, tying with New York. The nation said last month it would try to woo highly paid expats with a new visa.

Don’t Believe the Hype

Always refer to facts and figures and not the hype surrounding the property or, especially, your own hopes and emotions. Before you dive in, do your research based on the two golden rules and work out if you have sufficient funds to hold onto a property for at least a few years.

Check Surrounding Value

For the most part, units on the same block will share the same problems and advantages. If you’re five minutes from the train station, so’s your neighbour. So when it comes to price, always check listings in the same general area. There may be other variables  but you’ll at least get a sense of the price range.

Enter At The Right Price

When it comes to choosing the right property, the star architect’s brand name or even the location is not as critical as the right entry price. This means cross-checking a property’s price against surrounding properties’; if it is lower than its neighbours, that means you’re taking less of a risk and have the potential to make more of a profit.

Popularity Counts

Besides the affordability angle, a property’s popularity is also a key consideration. It has to be sizable enough, be located in a reasonably well-known area and have a strong publicity push. When the market goes up, these are the properties whose prices will double or triple up faster.

 Look For Uncertain Times

The difference between newbies and “real investors” is that the former will wait for good times to invest while the latter craves market uncertainty. If the market isn’t good, there will be buying opportunities and interest rates will have to stay low. It can’t go up when the market is down because businesses will have problems and the government will not allow this to happen. As long as you have done your calculations and are not speculating, then you can take advantage of these opportunities.”

Monitor Interest Rates

For investors, home loan interest rates should factor into the buying decision. For example: During the past decade, typical home loan interest hovered around 1.7% (frequently falling to 1.3%). Now consider what happens if an investor uses their Central Provident Fund (CPF) savings to cover such a loan: CPF grows at 2.5%, which means it grows faster than the interest of the loan. It’s almost as if some investors have been borrowing for free.

The home loans market also affects the return on investment. Buy property when the home loans market is at a peak (say 4%), and the capital appreciation of the property gets swallowed by the high interest. For owner occupiers, this isn’t really a factor (you buy when you need to, whatever the home loans market is like). But if you’re thinking investment, look beyond property prices, and weigh in property loans as well.

Make Your Money Work Harder For You

Shrewd investors carefully formulate exit plans: when to sell their property. For example, if today a private property has exceeded its 2007 peak price, investors should seriously consider selling. They should take this opportunity to cash out their profits and they will probably be able to buy more properties. Do not be emotional and just hold on to the property.

Damon Nagel, managing director of property investment advisory firm Ironfish, recommends that investors who adopt a long-term view and strive to build a balanced portfolio will have the most success. Nagel’s three golden rules for investing in property are posted infra:

1. Have a clearly defined strategy

From the outset, adopt a clearly defined strategy and aim to build a portfolio that will meet your objectives. Property investment can be broken down into three distinct phases – growth, consolidation and income realisation – and your objectives will determine the strategy and the types of property in which you choose to invest.

2. Invest where investment is being made

Property in areas where significant infrastructure investment is being made is likely to enjoy strong capital growth and be attractive to renters. “In South Australia, for example, we have hubs where new infrastructure is being built or is earmarked for future investment,” he says. “Look closely at these areas for their long-term potential.”

3. Minimise your time managing your investments

Establishing and managing a property investment or investment portfolio shouldn’t consume all of your time or impinge on your work and social life. “It should be as passive as possible,” Nagel says. “Consider how you get set up your property portfolio in a manner that allows you to almost forget it. This can be achieved by investing in low-maintenance properties and by engaging a competent property manager.”

One final tip? Don’t follow anyone’s advice unless they can walk the walk. “I advise investors to steer clear of advice from people who don’t have their own property investments,”

“The best time to have started building a property investment portfolio was 20 years ago – the second best time is today”.