Property investment has been the darling in the pool of investment options in Singapore. This is probably due to the economic boom that Singapore has experienced ever since its independence in 1965. The property prices in this island state have rapidly soared over the recent years, much to the delight of real estate owners.
You may have heard a lot of stories of people whose financial success revolves around investing in properties in Singapore, but it’s not as easy as it seems. Before indulging yourself in any property deals, there are a lot of things to consider.
If you are thinking of investing in a property in Singapore, here is a comprehensive guide that will help you understand the Singapore property market:
What are the different housing options in Singapore?
First and foremost, as a beginner, you need to know the different property options that this island state has to offer. Basically, we can broadly categorize these options into public and private housing.
- Public Housing (HDB flats)
The Housing and Development Board (HBD) flats are maintained and regulated by the government and offer affordable housing options to residents. They are usually located in self-sufficient housing estates that are equipped with amenities such as malls, good transportation networks (buses and trains), recreation parks, food courts, clinics, and more.
According to the HDB official website, over 80% of Singaporeans currently live in HDB flats, and 90% of them own the home that they live in. For you to be able to buy an HDB flat, you need to meet some eligibility requirements. One of the key requirements is being a Singaporean citizen or has a permanent residence.
Types of HDB flats include studio apartments, 2-room flats, 3-room flats, 4-room flats, 5-room flats, executive flats, as well as Design, Build and Sell Scheme (DBSS) flats. Also, there are executive condominiums that cater for young graduates or professional residents who want quality housing but cannot afford private property. Executive condos can be categorized as both public and private housing.
- Private housing
Private housing in Singapore can further be categorized into landed and non-landed properties.
Landed properties include:
- Terraces- These are houses that require residents to share common walls with their neighbors on both sides.
- Semi-detached houses
- Executive bungalows –These are similar to detached houses but have a minimum plot size of 15,000 square feet in prime landed areas of Singapore.
- Shophouses- These are low-rise buildings with narrow frontages but deep rears. They are quite common in Southeast Asia, and normally have shops on the ground floors.
On the other hand, non-landed properties include:
- Condominiums- Theses are high-rise developments that are equipped with state-of-the-art facilities such as swimming pools, barbecue areas, gyms, security systems, and more.
- Apartments- These are medium- to high-rise developments on small plots of land than condominiums and usually have fewer facilities.
Who are the major players in the Singapore property market?
The Singapore property market is driven by four major players. These are: the government agencies, the developers, the banks, as well as the property agencies:
- Government agencies
These agencies help to shape the government policies that affect the property market in Singapore, and hence the real estate prices. They are also responsible for implementing policies and issuing detailed guidelines. The major government agencies include:
- The Building and Construction Authority (BCA) whose primary role is to issue guidelines for infrastructure and buildings so as to create and establish a friendly built environment.
- The Housing Development Board (HDB) whose mission is to offer Singaporeans affordable and quality homes by planning and developing vibrant public housing.
- The Singapore Land Authority (SLA) whose major role is to oversee government land sales, management of state buildings and land, leases, allocations, acquisitions, as well as maintaining the national land information.
- The Urban Redevelopment Authority (URA) that prepares strategies and plans for land use in Singapore and help to implement them.
The major role of a developer is to convert land into completed properties and sell or lease them. To achieve this, they have to buy land, finance the land deal, work with architects to design the projects, work with construction companies to build the properties, market the properties, as well as obtain approvals from the relevant government authorities.
- Property agencies
These are businesses that arrange the renting, selling, and management of properties. They act as the middlemen between the sellers and the buyers, and take commissions for every successful deal.
Banks are a critical element when investing in a property in Singapore. They fund the property projects of developers as well as extend mortgages to qualified individuals so that they can buy properties. Their goal is usually to make a spread and minimize the risk of losses in the property market.
How does property ownership work in Singapore?
Before investing in a property in Singapore, you need to familiarize with Singapore property lingo, especially if you will rent out your property as opposed to selling it. Below are some common terms that you’ll hear in the Singapore property market.
- Freehold – This is a form of property ownership where the owner has permanent rights to a residence but can still rent it out for an indefinite period.
- Leasehold – This is a form of property ownership where a tenant buys the right to occupy a building for a given number of months or years. In Singapore, the length of a lease is typically 99 years.
- Strata title – This is a form of property ownership used for condominiums, apartments, and blocks.
And as far as taxes are concerned, Singapore is one of the best countries to invest in for both locals and foreigners. For instance, landlords making monthly incomes of US$1500 – US$12,000 have a flat tax rate of 15.1%. A progressive tax on the annual value of your residential property will depend on whether you are living in it or not.
Where should you invest?
You will often hear about districts 11, 10, and 9 as being the “hot areas” in terms of property investments. But what does that actually mean? Singapore has a total of 28 districts, and the value of a property varies according to its location.
For instance, the Orchard, River Valley (District 9), Bukit Timah (District 10), and Newton (District 11) are high-end traditional housing areas, while Marina Bay (District 1), Tanjong Pagar (District 2), and Harbourfront (District 4) are new and upcoming luxury areas. And for a relaxed and lower density lifestyle, Eunos (District 14), Katong (District 15), and Upper East Coast (District 16) are the most popular areas.
What are the expenses when buying a property in Singapore?
Buying a property for investment purposes is not the same as buying bonds or stocks. When you buy bonds or stocks, you only pay the investment amount required. And when you sell it, you pocket all the profits, less the transaction fees.
However, when you buy a property as an investment, many buyers will use some form of leverage to execute the purchase. For instance, if you want to buy a $1 million property, $600,000 might be borrowed from a bank. This loan will be incurring interests over the years to come.
Can you lose money on your investment?
There is usually a misconception that people cannot lose money on their property investment in Singapore. Well, this is not true; it all depends on timing. During an economic slowdown in the country, taking a direct loss on your investment is quite common. Direct loss occurs when you sell a property at a lower price than you had purchased it. According to TheEdgeProperty, 14% of property sellers incurred losses in the first quarter of last year when the country experienced a slight economic slump. So property investment in Singapore is as risky as any other investment out there.
Investing in a property in Singapore is not so easy, especially for a beginner; there are a lot of things that you have to put under consideration. All in all, the ideal property investment hugely relies on an individual’s circumstances as well as his or her goals. Whether you want to keep the property for several years and sell it or want to rent it out, the above guidelines will help you get through your first property investment experience in Singapore.