Purchasing A Property For Investment
Many Estate Agents in Singapore like to tell their clients, “Mr Buyer, it is a great time to buy a property for investment now.” But when asked why, most of the time the reasons do not support the purchase. Being the site that aims to become your guide to Singapore Property, we look into the 5 reasons why now is the right time to purchase that property for investment.
Fact # 1 : The Unveiling of The Master Plan 2013.
The Master Plan of Singapore was last reviewed in 2008 and the focus of the Master Plan 2013 is to build townships for all ages that are green, healthy, connected, and strong in community interaction and spirit. It also aims to bring quality jobs closer to home.
The road map for the infrastructure of Singapore for the next 5 years is clearly mapped out in the Master Plan 2013. It enhances the overall of Singapore with better township planning, more residential and industrial sites and better accessibility across the island. Upon the completion of this infrastructure, which is expected to take about 5 to 7 years, the prices of property in Singapore will definitely rise. Purchasing a property for investment before the completion of the infrastructure is like investing in the future of Singapore’s economy which is stable and always advancing.
With more industrial sites being marked out near residential townships, the Master Plan 2013 coincides with the Population White Paper that was announced earlier this year. This will pave the way for more foreigners coming to Singapore to invest. The economy will spur, more jobs will be created and the demand for homes will increase. These are the factors that will benefit the property market and ensure that the Singapore Property Market will continue to see sustainable growth in the years to come.
A very good example always being used to explain the impact of Master Plans on property prices is the Icon and The Sail launched in 2003 and 2004 respectively. Their launch prices at that time was around S$600psf to 750psf, but when the Master Plan 2008 was announced, the prices went up. Today, these properties are being marketed at at least S$2500psf.
So with the Master Plan 2013, current property owners can expect to see their property prices soar. As for property investors that have property in uncompleted projects, congratulations to the increase of your property when it is completed. As for the undecided, I’m certain the Master Plan 2013 has given you the reason why you should not continue sitting on the fence.
Fact # 2 : Singapore Is Just A Little Red Dot On The Map.
We are all well aware of the fact that the most precious resource in Singapore is not water but Land. Singapore being a first world country has a land area of approximately 716 square kilometers in total has grown from a small fishing village to what it is now. As Singapore continues to advance, our land is not only sought after by locals, but also by foreigners. The number of foreign developers bidding and competing for land in Singapore has also increased tremendously over the years.
Property for investment in larger cities like London and Australia are also very popular with investors but due to the fact that they have abundant land, the demand is always lower than the supply available. This therefore limits the upside potential of property prices in these countries.
Knowing that land is scarce and the population is expected to increase to 6.9 million by the year 2030, wouldn’t it be a wise choice to purchase a property now? Should you decide to wait for more new immigrants or foreign companies to come into Singapore, you will actually be looking at higher property prices due to the increased demand.
Fact # 3 : Population of 6,900,000 By 2030
In the recently Population White Paper, the Government of Singapore announced the projected population of 6.9 million by the year 2030. With this projected population, the citizen population in SIngapore would be between 3.6 million to 3.8 million. This will mean that the number of Singapore Citizens by 2030 will be slightly more than half of the total resident population. This figure was about 91% in 1980 but dropped significantly to 61% in 2013. (Source : Department of Statistics Singapore)
In order to achieve the project population, the Government of Singapore plans to attract foreign Professionals, Managers, Engineers and Technicians (PMET) to Singapore. These PMETs are expected to be well educated, highly skilled or with skills that are highly sought after. They are also expected to be highly paid personnel that will bring their families to Singapore on their overseas deployment. They are expected to be able to purchase or rent a whole apartment for their own occupation during their stay in Singapore.
Taking into consideration that these PMETs are foreigners and will not be eligible to purchase HDB flats, their options would be to purchase or rent a private property for their own stay. Knowing that we will not hit 6.9 million overnight, the demand will slowly but consistently be streaming in and shouldn’t you be purchasing a property for investment that can be sold to this group of Professionals, Managers, Engineers and Technicians, wouldn’t your property price be rising?
Fact # 4 : Strong Economy in Singapore
Recently, the Singapore’s economy has been ranked as the most open, least corrupted and most pro-business(with low tax rates and high per-capita GDP) in the world. With such strong economy, Singapore has been named as one of the top choices to stay and invest in.
To understand the true appeal of residential as an asset class in each city, the gross rental income that investors receive in each city ‘net of gilts’ is compared. This gives a measure of residential yields across its world cities, taking the return on 10-year government bond yields in each country away from gross rental returns. This measures the extent to which real estate income is performing against the local risk environment.
Singapore, backed by its strong foundations built upon low interest rates, a stable government, sound policies, good growing economy and a safe environment to stay in, makes it the choice of a lot of investors in the South East Asia Region.
If investors in the region are drawn into Singapore to purchase a property for investment despite the high Additional Buyer’s Stamp Duty(ABSD) of 15% payable, then what is holding you back when Singapore Citizen pays a much lower ABSD on their second, third or more property?
Fact # 5 : Property Market In Singapore Is Relatively Stable
As we all know, there are 4 phases in a Property Cycle namely decline, recession, recovery and boom. Despite the negative sides of the property cycle where property prices tend to dip or remain stagnant, the property prices in Singapore tend to have an upward trend with each property cycle being able to achieve greater heights. It has always been the Government’s stand to create a healthy property market by analyzing and regulating the market whenever it deems necessary.
Taking the Lehman Brothers Crisis in September 2008 as an example, the Singapore Property Market has proven itself to be resilient enough to withstand the effects. Being part of the Government’s economic planning, regulations will always ensure that prices are maintained within a certain threshold. These regulations are used to stabilize the market and ensure that it does not crash.
With the coming housing stock of approximately 1.2 million homes expected to be ready in 2015 and 2016, many investors have stopped in their tracks, in fear of low demand, high vacancy rates and low rental yields. But statistics shows that with a ratio of 3.6 persons to every household, this current housing stock is still not going to be enough to accommodate the influx of foreigners expect by 2015.
With the Government projecting the Singapore Population to increase to 6.9 million by year 2030 and current housing stocks being insufficient, wouldn’t now be a good time for you to purchase a property for investment?
When purchasing a property for investment in Singapore, time has always been an important factor. Studying the previous few property cycles in Singapore, we can see that the prices of properties have been on the upward trend and the duration of each property cycle is getting shorter. So if you are hesitating on whether or not to purchase a property for investment, wait no longer because you know that by the time the next property cycle starts, it will never be as low as before.
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