Real Estate Investments in Singapore: 2022 Guide
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Successfully making investments in real estate in a country like Singapore could mean many new opportunities for investors. Take a look at this guide to know more.
If you’re looking to start investing in properties like condominium development or residential developments in Singapore, this is the right place.
In Singapore, real estate and residential property investments are not uncommon.
In fact, it is one of the most sought-after methods of earning a lot of money through a systematic yet straightforward process.
Taking in-depth information from sources like Property Soul and the PropertyGuru Editorial Team53 Properties, this article will cover everything you need to know about real estate investments in Singapore.
Why invest in Singapore?
It is a known fact for many Singaporean long-term investors and short-term investors that the moment they buy a property, they can expect its value to increase rapidly, faster than what is experienced in the rest of the world.
So many people buy real estate in Singapore to ultimately financing of property at a high price in the future.
This margin is often vast, so you can easily make a lot of money by investing in the proper housing and real estate.
According to the January 2022 Asia Pacific Investor Intentions Survey by CBRE, Singapore is third on the list of an ideal locations in the Asia Pacific for real estate and property investments across borders.
The government of Singapore has much to be credited for in this regard.
Starting from the systematic and progressive way they handled the 2020 pandemic while the rest of the world was suffering financially to keep their countries afloat to the careful and well-thought-out stamp duty and lending measures set by the government, it comes as no surprise that Singapore is sitting at the top of the list for the most preferred country not only in terms of real estate investments but also a top destination for living and work.
The Schedule H Housing Development (Control And Licensing) Act was set in motion in 1989 that allowed the purchase and sale of land and buildings delivered in a sell then build STB concept.
As Singapore’s economy continues to rise and diversify, the rest of the world is ready to get in on the action and invest in the country as it is now a hub for many overseas investors.
If this isn’t reason enough, here are some more factors about Singapore that make it an ideal location for investments:
- They have a very competitive workforce
- They are well equipped with world-class infrastructure digitally
- A very negligible crime rate
- All their financial institutions are well regulated
- A very diversified country
- The country is growing at a rapid pace and expanding its name as the Central Business District
- Their political grounds are relatively stable
- They have a stable currency
Although there are many reasons you should invest in Singapore, there are a few things you need to consider before you make a significant investment.
Assembling a good group of professionals:
The first thing you need to do is to assemble a professional lineup to take care of business.
This can include hiring the best property agents in the region, along with lawyers who can help you navigate through the process of investments smoothly and seamlessly.
Hire a good real estate agent:
Real estate agents in Singapore specialize in many different fields of work, varying from the type of property, the region they cover, and the services they offer.
The end goal is to hire an agent who is well qualified and certified to take care of business as legitimately as possible. You don’t want to land in legal trouble and lose more money than you intend to earn through your investments.
It is essential to have a good network where you have your eyes and ears set on the best real estate agencies or even private workers who are professional in the field and knowledgeable in different business models.
Make sure that whoever you hire for your team is unbiased and understands all your requirements.
They should also be able to walk you through the most basic procedures, have unlimited property brochures and finish up all the application forms and other paperwork related to buying a house from the seller.
Get yourself a good lawyer:
Most seasoned investors in Singapore would recommend getting an excellent lawyer to join your professional team, one who can take care of all legalities regarding your investments.
It’s also an excellent way to show that you are a legit investor to the property seller and that you are not just some random person looking to make a quick buck.
It establishes trust and credibility on your side as an investor since matters regarding finance and other legal issues tend to be quite sensitive.
Writing up a proper contract and following the correct procedure is all possible with a good lawyer who works in your best interests.
Get a financial advisor:
Since property purchase prices typically come at a high cost, you might even consider taking out a loan from some financial institutions to pay your cash down payments.
If this is your case, you need a good financial advisor who is your trusted partner in money matters like Yearly costs for your properties.
Sometimes you might be swayed to make impulse decisions, but a financial advisor will keep you on the right track and never let you spend more than your access to cash.
They’ll also have all the inside information on your best choice when looking for a loan, such as term targets, the average interest cost, and margin of finance.
They can advise you on distribution yield and dividend yield while helping you make informed decisions about your finances.
Work on a purchase structure with your team:
When making a contract, specifically for Singaporean properties, you have something called the “Option to Purchase,” which is the offer that the property seller makes to the purchaser, which is you, to buy the property.
Have open conversations about what you require with your real estate agent and discuss all the legal matters with your lawyer before the option stage so that when you mention the “option” in your contract, it includes all the provisions you might need later in the procedure before finalizing your purchase.
After the offer is accepted, you become the sole owner of the property.
If you wish to change anything in the contract after accepting the option, you must pay the stamp duty, which can be pretty expensive.
This is why it is crucial to have your plan all laid out in detail, considering all possible scenarios before you draw up the contract and accept the offer.
Have a transparent financing plan:
If you are considering taking out a loan to make your purchases, you need to consider extensive conversations with your financial advisors.
Your advisors should be people who are well acquainted with the current capital market and thus, can give you a proper and precise valuation of the property to ensure that you are not overpaying the seller.
They can also guide you on what kind of scheme is best for the financial help you need and which financial institutions offer the kind of help you need.
Singapore also has stringent rules about what financial institutions can offer their clients for property purchases. Hence, you need the help of your financial advisors to guide you through this process.
Selecting Your Real Estate
After you have a good team of helpers at your end, you now need to choose what kind of property you want to buy. There are many options for you to choose from and different aspects you must consider. Such as:
Buying land or apartment:
You can buy land for building properties if you are a Singaporean citizen.
However, as a foreigner, you will need prior statutory approval before you can buy residential land.
You will need the help of your lawyer through this process so you can get an idea of what kind of real estate you are eligible by law to purchase and invest in.
When it comes to apartments and properties, anyone can buy them.
Unless you are making a huge purchase, such as buying the whole apartment development, you will need statutory approval regardless of whether you are a Singaporean citizen or not since it is regarded as buying the entire residential land.
Apart from this, there are a few other considerations regarding buying apartments and properties that depend heavily on the type of house, according to the authorities.
Some properties like townhouses and strata title properties may still require statutory approval.
Freehold or leasehold
Regarding tenure in Singapore, there are two types: Freehold and leasehold.
A freehold comes with an interest that is not limited by time; hence, its price is on the higher end and is more difficult to find.
The most common leaseholds are 99-year leases, but their values are not as high as freeholds.
Hence, you may find it hard to convince a financial institution to give you a loan for such leaseholds.
As-built or being built properties:
In Singapore, the most common type of properties you can find on sale are those considered as being built.
The housing developer should also have the proper certification to build a property that is more than 4 units.
The buyer can also impose a few deadlines on the developer for a TOP and the deed of the house once the sales form, like the form with intent (LOI), is in order.
There is also a notion called the sub-sale, which means that the property can be resold while still under construction.
This transaction happens between the initial buyer and the subsequent buyer, and the developer can make a new contract with the new buyer in this regard.
Singapore’s Property Market
Despite Hong Kong being the most expensive real estate city, Singapore has the highest property prices in the whole Southeast Asia region.
If you look at the resale values of such HDB flats and other properties, you’ll notice that property prices in Singapore have seen a very high upward trend in recent years.
However, this does not stop buyers and investors from cashing in on these properties and making massive purchases.
After this, these houses are usually resold or flipped and sold at an even high price.
Because of this, the government of Singapore has come up with a plan to try and stop this extremely high pricing trend and curb the prices so that more common people can afford homes.
These cool-down efforts are set in place to try and stabilize the property sales so that investors cannot make unbelievably high profits off their property sales.
In addition, the kind of property you buy will also incur different fees you have to pay the authorities in Singapore, such as the ABSD (Additional Buyer’s Stamp duty) and the LTV (Loan-to-Value) limit.
Overview of the Singapore Property
As a prosperous country, Singapore has its fair share of businessmen from all over the world.
As a very lucrative market, more investors and people in business have purchased many properties in Singapore, intending to sell them at higher prices after a few years.
However, because of the increasing rates of these properties, the government has stepped in to curb housing prices in the country.
Although investors are still making purchases, the process of flipping these properties for resale has become strenuous with the government’s new cooling measures.
How to Invest in Singapore Property
Since the new cooling measures have been set in place, property investments in Singapore, especially secondary market properties, have become more expensive and tedious.
There are a lot of additional costs like the ABSD, TDSR, and the LTV limit that incur a lot of the expenses for investors.
Fortunately, there are three ways you can invest in properties in Singapore that will bring you a good income despite the cash outflow:
Buy and sell route:
As the most common and easy route, this is an easy way to make your investments count.
All you have to do is to buy the property at the proper phase of the property cycle and sell it off later at a higher price when the market is experiencing an upward trend.
You can even flip the property by making improvements after buying the property from the developer.
This may come at additional costs, but you will also be able to sell it off for a higher price than you bought it.
Buy and rent route:
In this method, you become the landlord of the property. After you buy the house, you can give it off for rental income.
As long as you have a network of tenants ready to move in and pay your rental yields, you will always have a proper cash flow method from these tenants.
Investing in Real Estate Investment Trusts (REITs)
If you are an investor who doesn’t want to be involved in making an income firsthand, you can start investing in REITs.
These work like any other mutual fund where you pool your money with other similar investors like you and use it for investing in properties all across the globe.
Depending on what kind of REIT you invest in, you will be the investor for properties like Retail + Commercial/Office, Commercial/Office + Industrial, or anywhere between these concepts.
Some examples of well know₹n REITs are:
- REIT USA
- Phillip SGX APAC Dividend Leaders REIT ETF
- Ascendas REIT
- SPH REIT
- Keppel REIT
- Keppel DC REIT
- Blue-chip REITs
- Nikko AM REIT ETF
- Nikko AM REIT
You can also invest in Trusts like:
- CDL Hospitality Trust
- EY Finance
- Commercial Trust
- CapitaLand Commercial Trust
- Mall Trust
- CapitaLand Mall Trust
- Ascott Residence Trust
Financing An Investment Property in Singapore
There’s nothing better than securing a good mortgage plan that suits your current financial statements.
You can find different kinds of mortgages, so make sure to browse through each one with a professional and find the one package that meets all your requirements without causing any gaps in your income.
Use your financial advisor first to get an idea of how much you can afford to spend or what the best plan is for you regarding your finances.
The ultimate goal of investors buying a property and real estate in Singapore is to make substantial capital gains through these investments eventually.
Securing a good finance source is very important to investors, especially those looking for long-term, huge investments.
It would help if you initially had a good inflow of money to make a stable return on your purchase or investment.
As with many other entities that involve money, there are pros and cons to these kinds of investments.
Here are a few ways in which you can adequately finance an Investment Property in Singapore:
As mentioned before, don’t make purchases that you cannot afford.
Always consult your financial advisor before you make a massive dent in your wallet that you cannot pay off in the long run.
Not only will this ruin your reputation as an investor, but you also lose credibility and may even land in legal trouble.
The whole point is for you to have a property that will bring in a reasonable and stable cash outlay to make up for the money you invested and make a good profit.
Buy properties that are already completed:
Although it depends on the ultimate plan of the investor and the team, buying completed properties seems to be a better plan since you can directly rent it out to tenants once you buy the property.
When it comes to uncompleted properties, you may encounter instances where you have to sit through unavoidable delays and other circumstances which are never planned.
Keep track of the property cycle:
This is the reason why you need an excellent professional team.
They can help you keep an eye out on the property cycle of the region, so you will get an idea of how quickly you can resell the property or get tenants if you are thinking of renting out the property.
There are different phases in the property cycle: Value, growth, peak, and correction.
There is no right time to enter the investment market, but it is good to note that the growth phase is where many investors typically enter the market, and the peak is when the prices are at their highest.
On the other hand, although facing a downward trend in prices, the correction phase is when there are more vacancies for investors to buy properties since the investor surge has died down after the peak stage.
Can Foreigners Buy Singapore Real Estate?
Foreigners can buy real estate properties and residential land in Singapore.
However, you will need statutory approval if you plan to purchase residential land.
You may have to pay as much as SG $20,000,000 or even more if you are planning on buying a vast plot of residential land in Singapore as a foreigner.
In some cases, Malaysian banks grant at least 85% of their finances to foreign investors looking for loans in Singapore to buy property.
Regarding taxable income, foreigners also pay a lot more than Singaporean citizens. Still, when it comes solely to investors and buyers, locals and foreigners enjoy the same treatment from sellers.
Summary of the Buying Process
As we established earlier in the article, investing in real estate in Singapore is a safe bet for many investors.
Singapore is one of the go-to for many business people who want a stable cash inflow from their investments.
The good news is that whether you are a citizen or a foreigner in Singapore, you can invest in and buy real estate.
Here is a rundown of the whole process:
- Assemble a group of experts for your team
- Find out what kind of property you want to buy
- Conduct a thorough inspection
- Negotiate the prices of the properties
- Finalize the Option to Purchase (OTP)
- Secure a bank loan for property purchases
- Before your OTP reaches the deadline, exercise it and complete the payment terms
Important Factors for Real Estate Investing
Despite rising prices, Singaporean property investors are making substantial capital gains from reselling and renting their properties.
One of the main reasons for this is that Singapore is considered a very low-risk real estate investment country. This is why the demand is never low, and investors are ever ready to make purchases.
Nevertheless, you can never be too careful when dealing with huge sums of money so here are a few important factors that you need to know for real estate investments:
This is arguably one of the most critical aspects of the whole process.
Property valuation aids in the insurance, investment analysis, income tax details, and listing price.
Make sure you conduct a sales comparison, your expenses, and how much investment cash flow you will probably make from this purchase.
Location of the property
Get to know where the property is located before you make a purchase.
This will help you jot down the pros and cons of living in the area and give you a fair idea of what kind of tenants will probably rent the house.
It also lets you know whether the purchase will bring you a good yield or cash flow valuation.
Purpose of Investment
Since buying a property or real estate does not come at a small price, you need a good idea of what you are trying to achieve through this investment.
Are you going to use it for yourself, rent it out, flip it, or do a resale?
All these options have different expenses and different cash flow statements, so once you know your purpose, you can make better decisions on what to do with your purchase.
The real estate market trends
One key factor that many investors overlook is the current market trends before making purchases.
Buy low and sell high is the primary goal for all investors, but it is also essential to know the market trends and what ties are the best for you to enter the real estate market to get the best benefits.
Be wary about taking home loans
Many home loan schemes can get the better of you if you don’t have a good plan or an advisor to help you through the process.
The industry jargon itself might be enough to overwhelm you.
Make sure that you understand how the scheme works and what it means for you financially.
Existing property or properties under development
When it comes to new construction, the prices may be more attractive, but when you look at existing properties, you can start renting them out immediately.
Consider your pros and cons before you make your decision.
It’s not an unusual dream for many people to earn a good living.
Unless you are old money or already established in a high-paying job, it’s not easy to come up with tons of money in a short period.
Hence, ordinary people looking for a change in their financial life can take a chance at investing in real estate in Singapore.
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