• 5 Biggest Myths about Real Estate Investment in Singapore

    Here’s a quick comparison to help you decide.

    Jesscy Chua

    Property investment in Singapore

    Demystifying the property market for the everyday person

    When it comes to investing, there is nothing riskier than having misconceptions. In this digital day and age, a quick google search will give you a wealth of information on real estate investing — but a lot of these “insights” could not be further from the truth.

    Here are the top five myths about property investing[1] , debunked:

    Link to article 4: a first timer’s guide

    You need a lot of money to get started

    Property investment capital

    The amount you need varies widely depending on what you are investing in – whether it’s a two-bedroom apartment or a landed property with five bedrooms and two garage spaces. Most investors have average incomes and that’s not a roadblock to getting started in property investing.

    There are wise ways to make a big investment without a big capital. You could look for a joint investor, perhaps a family member or close friend, who share similar goals. You could also tap on bank loans. But if you don’t have the means for a big investment, start small. Once your investment becomes profitable, you could then sell it and invest in something bigger.

    Freehold is always better than leasehold

    Freehold property in Singapore

    Many people think that freehold is best as they get to keep the property for future generations and they are shielded from government development plans. This is only true if you purchase a conservation building. Otherwise, there are provisions that allow for the government to reclaim the land for vital infrastructure and security.

    Freehold property often ends up lasting the same as 99-year properties, simply because of likelihood of en bloc, and subsequent owners may not necessarily want to live there forever.

    If you are buying a freehold property hoping to benefit from a future en bloc exercise, the process is not that straightforward. While the reward may be huge, there are multiple stages, with each taking anywhere from one to twelve months to play out.

    Remember location and accessibility. When you consider these factors, the valuation of a leasehold is often worth more than that of a freehold. In addition, you do not have the upfront cost of paying for a freehold property.

    It’s always best to invest in local properties

    Investing in local properties

    It might sound smart but only investing locally because you live in Singapore is short-sighted. Just because the property is not in a familiar location does not mean you should discount it. Investing in overseas properties can be a good option due to lower prices, down payments, and stamp duties.

    There are positives to owning a piece of property overseas, like higher potential returns and higher rental yields, especially against the low 2-3% yield in Singapore. If you are looking for recurring and passive rental income, this could also be an attraction option. Plus, it could be a holiday home or a future retirement home.

    But perhaps the most important benefit is international diversification, which is key to any investment strategy. Diversification helps to reduce the risk of concentrating all investments in a single area and improves the risk-return profile of an investment portfolio. Investors would also be able to avoid the hefty Additional Buyer’s Stamp Duty (ABSD) in Singapore, which is currently at 12% for the second residential property and 15% for the third.

    Property prices will always go up

    Property investment misconceptions

    This is perhaps one of the biggest misconceptions about the property market[1] . Like any other investment, real estate is also prone to downturns and market cycles. In addition, the monetary value of almost anything will rise over time due to inflation, so you also need to consider the interest on the home loan and maintenance costs for example, to get a sense of whether the actual capital appreciation has occurred.

    Historically, real estate prices in Singapore have always followed an upward trend but this statement is only true if you are holding the property for a long period of time. Over a shorter time horizon, it is possible for a real estate investment to give you negative returns.

    A new launch is better than a resale

    Buying new launch property

    When considering whether to go for a new launch or a resale condo, it comes down to what you want to do with that property. With a new launch, everything is brand new – new facilities, new features and it is not likely you will have appliances or plumping that do not work.

    But the biggest problem with new launches are delays. The risk of delays or the failure of completion is something to consider, especially during economic downturns. Take for instance the Covid-19 border measures that have impacted the construction sector, leading to delays in build-to-order flats.

    In addition, a new condominium launch can sometimes be priced at a higher premium versus resale units in the same area and you will not be able to inspect your new unit before you purchase, as you are buying off a floor plan.

    With resale units, you can physically check out the property, plus there is transaction history available to help you determine capital appreciation and rental yield. You also have more room for negotiation, as you may find a seller who may be willing to let the unit go at a bargain.

    If you’d like to find out more about property investments, sign up for GEX Academy’s SkillsFuture Credit-Eligible “1-Day Effective Property Investment” Course. Learn to make informed decisions on your investment choices.

    GEX Academy is an Approved Training Provider (TP) accredited by SkillsFuture Singapore under the Singapore Workforce Skills Qualifications (WSQ) Skills Framework and an Approved and Accredited Teaching & Examination Centre for IPMA | UEN Reg. No.: 201529371H

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Jesscy Chua
Senior Project Manager

With a background in finance and real estate, Jesscy is a sought-after expert in international real estate portfolio development, market research and analysis, and investor relations. Her international consultation work has taken her to Australia, China, Indonesia, Thailand, and the Greater South Pacific region where she has managed high-level residential, commercial and industrial real estate projects. Jesscy is passionate about deepening her understanding of diverse markets and acclimatising investors by making the global, local. Jesscy holds a degree in Journalism and Communications from the Monash University Melbourne, Australia.

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