Planning to buy a property? Read this first.
Ready to embark on house hunting? Singapore’s property market is hot and buying on impulse is seldom a good idea especially with so many cooling measures from the government.
If you are entering the market without in-depth research and analysis, you might end up with a property you don’t really want so never go in blind – no matter how good an investment opportunity it seems to be at the time.
Now, where do we start? Before you start house hunting, be clear about your objectives and plans. Ask yourself questions. Why am I buying this property? Am I buying it for own stay or for investment purposes? Am I renting it out? Do I own another property besides the one I’m looking to buy?
All these questions are simple enough but if this is your first property, what do you want to do with it? Or if this is your second property, are you prepared to pay the additional buyer’s stamp duty (ABSD) for your second purchase?What we can do is give you a breakdown on things you need to look at ahead of buying that property and tips to navigate through.
1. Be Realistic and Prudent
Perhaps the most important point here – your budget. What can you realistically afford and what would be somewhat of a stretch? Remember that buying a property means you are committing to home loans and a financial commitment.
This is why proper financial planning and building in a financial safety net is absolutely critical. This is because properties are illiquid and cannot be sold quickly when you are in a bind. If you happen to fall on hard times and need to sell or rent your unit out quickly, be prepared to receive news that it might not fetch an attractive price/rent.
Next, being prudent. Even if you think you can presently afford a $1.2 million condo comfortably, you would not want to max out that budget. Especially with many other costs to consider – the ABSD for second property (at 17% of the property price for Singaporean buyer), legal fees etc.
Then comes the matter of home financing. It is crucial to remember that the total debt servicing ratio (TDSR) of 55% and prevailing loan-to-value (LTV) limits will affect the amount you can borrow to fund your home purchase. If you already have an existing home loan, the LTV drops to 45% (or 25% if the loan tenure is more than 30 years or extends past age 65).
Property investment is a mid- to long-term commitment, make sure you have the financial holding power to tide over least 3 to 5 years.
2. Look Into Your Desired Property Location
In land scarce Singapore and real estate, location is paramount. Location alone impacts the desirability of the property and this in turn either boosts or slightly dips demand. And demand then drives prices directly up or relatively stagnant. (Yes, we know you’re thinking it, but no prices will not dip here).
So, when it comes to location, here are some main factors you need to think about:
- Central or outskirts: Is it in the city, at the city fringe, or in the suburbs?
- Transportation and accessibility: How far is the property to an MRT station or the bus interchange and bus stop? Is it easily accessible to main roads and the expressway?
- Neighbourhood: How is the neighbourhood like? Is the environment and surrounding a pleasant living space? How does the community look like? Are your future neighbours a cool bunch?
- Conveniences: What are the available amenities around the property? How readily available and accessible are shops and food places, supermarkets, or recreation facilities such as parks or sports hall?
- Schools: What are the schools in the area? Would you consider enrolling your child to any of the schools nearby? (Note: When you enrol your child to primary school in Singapore, if the chosen school has more applicants than vacancies, priority admission will be given based on your child’s citizenship and the home-to-school distance)
- Lot/unit location: Is your desired unit on a high floor? Does the unit face the main road, or the bin centre, or does it face the pool or a park? How much privacy do you get with your unit?
- Mature or non-mature estate: Take note on whether there are other development sites in the area. This could mean more supply of units and potential competition for buyers and tenants when you plan to sell or lease your units in the future.
- Population catchment/hinterland: How big is the estate and is it in or near a regional centre where there are lots of business and commercial activities? How concentrated or how saturated is the population distribution in the area?
3. Take Note of Entry Prices
Always be aware of market prices. This relates to whether you are buying the property at market rate, below market price, or are you overpaying compared to surrounding properties? You will not want to overpay, as it limits the upside potential of your property.
If you overpaid for a property, remember that this would affect your future capital gain – which may be low or even nil unless the property market increases significantly over a period of time.
So, remember to assess your entry price against other recently transacted properties in vicinity. If possible, check prices among transacted units within the same development. Get an idea of how prices and demand is like in the local market. This way, you will know if prices or rentals of nearby properties have climbed over the last few years, or if prices have gone up markedly since the project was launched.
For new projects, remember to take note of the stage of launch. Which stage of launch are you buying into? Developers tend to offer star-buys at the initial stage of the launch to get sales momentum going. You may end up paying slightly more for a unit compared to those who bought in the first few weeks of a project launch – if you buy at a later stage when over 70% of the units were sold.
4. Develop An Understanding on Your Desired Property
Now this should go without saying. Always visit or research about a desired property before buying. If you are buying an existing property, take time to visit the property. Your advantage here lies wherein your unit is already built and there is already an existing community so do not hesitate to visit in person.
If possible, visit at different times of the day. This gives you an all-rounded view of the unit you are buying into. Are neighbours noisy at different times throughout the day? Does the sun bake your balcony and living room into hotcakes more than you expect during the day? Is that train station your agent say is at a five-minute walk away really five-minutes away?
For those buying new projects, be clear about your property location. Try to find out the exact location build and get estimates on whether amenities developers advertise as being minutes or a short walk away are really as such. Look into artist’s impressions and site plans. Ask developer questions and remember to do your bit of research before buying.
5. Look Into the URA Master Plan
Get yourself familiar with the Urban Redevelopment Authority’s Master Plan (URA) – a statutory land use plan that guides Singapore’s development over the next 10 to 15 years. These show the permissible land use, development densities, and urban transformation plans in Singapore.
Almost every property investor in Singapore considers the master plan as a crucial investment guide and you should too, whether you are investing or buying. If you already have a shortlisted number of potential properties to invest in, be sure to look at the URA to check on upcoming plans for the area.
You will want to know if a vacant plot nearby is zoned for commercial use but yet to be developed. Or if your property will eventually benefit from large scale urban renewal/transformation initiatives – Greater Southern Waterfront, the second CBD in Jurong Lake District or the development of Woodlands as a regional commercial hub.
These will give you an outlook on whether your property’s capital values will be positively impacted over the long-term. If you are looking at underdeveloped districts, you may even want to pick up undervalued properties before the district undergoes major developments – which will drive the value of your property.
All of that said, keep in mind that all property purchases carry some form of risks. But if you have done the necessary site and entry price evaluation and proper financial planning, you are likely heading towards a smoother investment experience.
Most importantly, remember to take your time.
Never, ever rush into buying a property no matter how urgent the agent may claim the purchase to be. It is better to miss an opportunity than tie yourself down with a massive liability. While attractive, properties are not like stocks. You cannot sell it off quickly if it underperforms.
So, browse through, do your study, research, and think it over before coming to a decision. 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.
