Singapore has one of the strongest property markets in the world, prompting investors and speculators alike into opportunities to profit from the vibrant market conditions. As prices in this land-scarce country can only soar, more are looking at getting a piece of profit from investing in properties.
One thing to note here is that when you buy a residential property, you are not just buying into the unit or the residential development itself. You are buying into the property’s immediate surroundings and the neighbourhood – not just in the here and now, but also in the area’s future.
Simply put, a gorgeous apartment in an unsafe neighbourhood or highly inconvenient location may not be a sound investment bet. While your property’s prospects may brim when new MRT stations or amenities nearby pops up, your home value may stagnant or even fall when the area falls into a no renewal state over a long period of time.
Here, we discuss four important considerations that investors should mull over – preferably with the help of a reliable real estate agent – in assessing potential buying opportunities.
1. Capital appreciation and rental prospects
Generally, we know that transformation of urban spaces usually results in improved accessibility and connectivity to amenities and infrastructure both old and new – enhancing residents’ lives. This in turn enhances the liveability of properties in the area, thus driving prices up.
Often, the introduction of new amenities into the area tend to make the place more desirable and help to support prices and rental values.
Take Jurong East, for instance, which undergone major makeovers over the years, with the development of several commercial properties and new homes bringing a new lease of life to the neighbourhood.
Chart 1: Average Price of Non-Landed Resale Residential Properties in Jurong East
Source: PropNex Research, URA Realis (Data as at 23 May 2022)
Based on URA Realis caveat data, it is noted that the average transacted price of non-landed resale private homes in Jurong East has risen steadily after the completion of JCube, JEM and Westgate over the 2012 to 2013 period, followed by the opening of the Ng Teng Fong General Hospital in 2015 – the average price went up from $839 psf in 2015 to $1,219 psf in 2022 (see Chart 1).
Chart 2: Rental Volume and Median Rental for Non-Landed Homes in Jurong East
Referring to Chart 2, it is evident that as the transformation of Jurong East took form, the home leasing market almost immediately started to improve. In terms of the rental volume, Jurong East saw a spike in Q2 2017 (see Chart 2) where the number of rental contracts rose by about 64% QOQ to 355 from 217 in the previous quarter. The leasing volume continued to hover at around the 200 to 300 range ever since, higher than the 100 to 150 rental contracts prior to 2016. Meanwhile, although quarterly median rental rate ($psf per month) showed some fluctuations, it was still generally trending upwards.
With the upcoming Jurong Lake District – dubbed as Singapore’s biggest business district outside the Central Region – set to become an exciting lifestyle, business and tourism hub, investors and future residents could potentially see some capital appreciation over the mid- to long-term.
2. The blueprint for urban transformation
As mentioned above, renewal and urban transformative measures can easily determine or drive property prices. This brings us into the next point – to understand how a locale could shape up, also known as the Urban Redevelopment Authority’s Master Plan.
The plan, reviewed every years can come in very handy especially if you want to master the kung fu of being a prospective investor. Having a blueprint of the locale is always beneficial to any investments, especially for properties.
The latest iteration, Master Plan 2019 aims to create sustainable green spaces and amenities for all to live, work and play in that can support our future needs, while revitalising some of our familiar places for a more optimised land use. Some notable examples of the ongoing urban transformations include Jurong Lake District, Greater Southern Waterfront, Punggol Digital District, and the Woodlands Regional Centre.
For example, looking at the Master Plan 2019 for the area around the Bishan MRT station above, there is a site that is zoned commercial (in blue) and marked as “subject to detailed planning”. This means that a new commercial development such as offices or mixed-use project (office/retail/hotel) could potentially be built on the site in the future – to be integrated with the existing offerings in the area. If a buyer is looking to buy a home in that immediate vicinity, this detail in the Master Plan 2019 could be useful in assessing the growth potential.
In another instance, having more commercial offerings nearby could bring greater convenience to residents while having more companies set up in the new offices may boost rental appeal of homes there. By studying and understanding how the area you plan to invest in will develop and form, it will greatly facilitate your plans in investing for properties at any given location.
3. Potential future tenants and/or resale buyers
Now that you know how to study and look at the locale of the property you might want to invest in, knowing your target audience is another foresight you need to grasp. Investors will need to envision who are the potential tenants of the unit – are they going to be an expatriate family with school-going children, a young couple without any kids, or busy professionals who are single?
This visualisation exercise is always useful in helping to narrow down the locations and facilitate in drawing up a shortlist of suitable properties.
For instance, having schools within a 1- to 2-km radius attracts families with kids and young couples who are looking to start a family. Expats on the other hand may look for a property near international schools that their children could attend.
Meanwhile, close proximity to key employment nodes or industry clusters would likely appeal to working professionals, who may appreciate the convenience of living and working in the same area. In addition, being near to an MRT station is an added advantage, and units that are close to MRT stations also tend to enjoy a higher rental yield.
Thus, selecting a home with attributes that appeal to the wider masses is very important. Based on the Property Ownership Aspiration Survey 2022 by the NUS Institute of Real Estate and Urban Studies (IREUS), the key attributes which residents of non-landed private homes look for are: a spacious and functional layout, close proximity to a current/future MRT station and/or shopping centres, a master bedroom of a good size, and the reputation of the developers.
Taking note of all these points, it is best to be mindful and narrow down prospective clients yourself before you decide to invest in properties at any given location.
4. Holding power/period
Now, if you have gone through all the previous points and have decided to invest in any property – you will face this one question. How long should I hold on to my property? Or how will my holding period affect my profit?
To this, you will need to know that often, buying into an area with ongoing or planned rejuvenation efforts may not translate to immediate gains. This is because the process of urban renewal and transformation could take years, even decades. Hence, you may not see your property appreciate or you may not collect immediate gains.
What you can do is ensure that you have adequate financial holding power to weather any market volatility for at least 3 to 5 years. As real estate is a long-term investment play, it is more likely that you stand to enjoy better capital appreciation by holding the property over an extended period.
But of course, this is subject to various elements and market conditions. Sometimes, holding out properties may not be beneficial.
Here, it is also useful to consider the leasehold tenure of the property. If you are looking to hand the property to your children, you may be more interested in freehold homes. These will preserve the value of your homes and you will not face the issue of lease decay like with leasehold properties.
All in all, as with all forms of investments, buying a property involves risks. But if you have done a proper and thorough planning, it can help mitigate risks and hopefully offer a greater peace of mind as you embark on your real estate investment journey.
And alas, if you find yourself stuck in a rut even after weighing all possible options, you may need a professional’s opinion. In this case, schedule a visit with us or book a free consultation with our trusted and renowned representatives.
Lastly, don’t forget to like, subscribe and share our articles with your friends if you think our content is useful to you. And if you would like us write a review for any property projects, have a blast in the comment section below.
