Singapore’s property market has one of the best long-term returns on equity performance out of most investment instruments available. This can be attributed to the strength of the Singapore Dollar and interest in Singapore from international audiences as not only a region to invest in, but an asset class on its own.
We know that COVID-19 has impacted property sales greatly this year. That doesn’t mean that the industry’s performance will keep declining. In fact, this analysis of Singapore’s property market outlook in Q3 2020 explains whether the market will rebound, and which areas might become popular in the near future!
Before we begin, here’s a list of questions that you may want to consider before looking for an investment property that suits your needs:
Have you spoken to your property wealth planner to understand the initial cash or Central Provident Fund (CPF) required, buyer stamp duties, legal fees and miscellaneous costs?
Have you checked your maximum loan eligibility using the Total Debt Servicing Ratio (TDSR) framework?
If you already own a property and intend to buy a second one, are you aware of the various options available to optimise your tax savings, which can add up to a significant amount especially if you're grow your portfolio?
Ready to learn about the entry signals that will improve your investment returns? Let’s jump right in.
1. Price appreciation
The performance of a property is relative to the price index of its district. The best indication of how well a property will do (how much profits you can make) is comparing how much it has appreciated against its district in the past one year. A higher demand for it could be a result of its distance to amenities, quality, maintenance, design, and facilities.
This point is more relevant to resale properties as we would be able to see its performance after it’s been built.
2. Rental yields
Good rental returns indicate that a property is highly sought-after. However, even if there are multiple projects in the same area, not all of them will have low vacancy rates and high rental yields.
We’d say that a safe bet for the rental yield in the Core Central Region is 3%, Rest of Central Region is 3.5%, and Outside Central Region is 4%.
You’ll have to read up on rental data for not just the project that catches your eye but also for neighbouring projects. But, it’s always easier to speak with a property wealth planner to get the information that you need!
3. Areas with growth potential
We know that real estate in Singapore flourishes in certain areas because of the infrastructure that’s been invested there. The values of Sengkang, Punggol and Jurong are examples of how infrastructure investments have impacted property prices.
The term we use is “growth story”, which basically means that certain lands that have been identified for new housing, integrated transport hubs or amenities will go through huge transformations.
When you sell your property that has a good growth story, this translates into profits, or if you’re buying for investment reasons - a bigger pool of tenants.
BUT, do not be reckless and invest in any property just because they are located in growth areas!
4. Entry prices
Resale property investors should look out for properties that are below the market value in order to begin their investment journey with “built-in profits”.
Properties like these are rare as they are snapped up really fast. Still, it acts as a good guide when you’re deciding how “worth it” your investment would be.
New launches will never be priced at a lower psf rate than resale properties because there is a premium that developers have to factor in, for them to assess their profit margins after paying for any costs at that point in time, such as:
Land costs (that will keep increasing because of the scarcity of land in Singapore)
Material and labour costs arising from architecture, interior design, construction (that will increase as a result of wage inflation and consumption taxes)
That doesn’t mean that new launches are not “worth it”. The upside to buying new projects is that all owners are purchasing at similar prices. We’ll need to compare them against other new projects to determine which one yields the highest profit at the lowest risk.
In short: if your property fulfills all the factors above, its investment potential will be high.
These factors have worked well for our clients, but if you’re unsure, always speak to an experienced property wealth planner to clarify any doubts. (Or, WhatsApp us for a free consultation!)
Need better clarity on what to do next? Here’s how we can help!
WhatsApp us for a one-time, free 30-min Property Wealth Planning consultation via online video call.
A PWP consultation includes:
An in-depth financial affordability assessment
Highly relevant investment insights
A customised and systematic investment road map to strategize your real estate investment journey ahead