The Lion City is quickly coming under everyone’s radar as the city to look out for. Its pursuit to become the world’s first “smart” city is making its government and inhabitants embrace the digital age like no other. In many of its surrounding countries, a higher number of people live in rather poor conditions with unsophisticated housing. But here, the capacity in terms of public sector housing is quite vast. More than 80% of its residents, which amounts to a little over 3 million, live in affordable and decent houses. What’s more? Morgan Stanley predicted that the property prices in Singapore will double(!) by the year 2030. This makes it a really hot time for property investment in Singapore.
Things to Keep in Mind When Buying Property
Property investment isn’t child’s play. You invest a huge chunk of your money and time and as such, deserve the best that you can get. You should be careful and thorough in your research and then, only then hand over your money and sign the contract.
1. Invest in property which gives you maximum leverage
Many people prefer to borrow loans from the banks when they think of investing, usually paying 20% of the down payment, the rest being funded by the latter. How does this help? Imagine that your rental yield is low. Through OPM, this will still help you earn a high return on your investment. OPM is Financial Leverage in which you profit using somebody else’s money. A complete research is needed to take advantage of this.
2. Rent the property instead
Research found that Singapore’s Property-Price to Annual-Income ratio is 25.38, implying that residents have to at least work 25 years to pay off their mortgage. Hence, if you stay on your property then it’ll actually be a liability. This makes renting a better bet for you. When looking for properties, you should compare its yearly rental yields with the purchase price. Leasehold properties give more yield compared to freehold properties because of their purchase price. But, you do need the government’s approval if you’re a Permanent Resident looking to rent out their apartment.
3. Landlord Friendly
The real estate outlook in Singapore is landlord friendly, giving lot of room for contractual negotiations, in terms of deposits, rent, termination clause, etc. The government will hold the landlord accountable for his tenant’s legal residential status and as such, the latter should ask for proper documentation of his tenants.
4. Tax Payable
Property tax is payable in advance, on 31st January and is calculated by applying the tax rate to the yearly value of the property. Failure to do so would impose a 5% penalty.
Tips for the Right Investment
1. Knowing the right price. You should be aware of the correct valuation of the property that you are interested in. Check the age and condition of the property before finalizing the deal.
2. Spend time understanding the Singaporean market and its dynamics. This will help you make better decisions.
3. Pick the right mortgage plan that suits you. Find out whether medium-term or long-term investment work for you. Retain your ability to pay off your bank mortgage.
4. Keep a broad perspective. Try to see the actual potential of the property, use your vision.
5. Invest in good property consulting services. Most of us lack the experience and the expertise for property management especially in a foreign country.
A huge real estate investment awaits you in Singapore. However, it is important to proceed with caution. Ensure you acquaint yourself with all the relevant dynamics of this industry before taking the plunge.