Thoughts on Property in Singapore

Personally, the thought of getting a second property for both investment and for stay (eventually) has been on my mind for quite some time.

Why I haven’t bought one

There are many reasons.

The main one is the Additional Buyer’s Stamp Duty. With the ABSD framework still in place, I have never really gotten serious about it. For Singapore Citizens wishing to buy a second property in Singapore, that’s 7%.

And that is on top of the Buyer Stamp Duty which is another 3% (altogether 10%). Not forgetting the initial downpayment of 20%. So all in all 30%.

It helps first-time buyer, but not to people looking for their second, third properties, etc.

Next is the trend. Although when it comes to market timing – I really suck at it. However, as the saying goes, “The trend is your friend”.

Looking at the above chart, I would say we are still very much somewhere near the peak. There is always a tug of war between the buyers and sellers. In the case of the sellers, nobody like to sell at a loss, especially when the loss of a million plus property could come up to 5 figures or more. In fact, the feeling of a loss is more intense than the feeling from a profit (of the same amount).

Yes, the tenant market is bad, prices are falling, Singapore economy is sluggish… but the job market has been rather resilient. We are still in the relatively early stage of a price drop.

Unemployment rate for Singaporeans improves in first quarter: Manpower Ministry (read here)

Yes, the economic slowdown and the tough leasing market has led to a jump in the number of residential properties put up for auction last year.

Nearly 80% more Singapore homes put up for auction last year by banks and distressed owners (read here)

And property developers are getting increasing creative in trying to sell their unsold units. Such as giving discounts with a stay-then-pay plan (read here), deferred payment schemes (read here), “specimen cheque scheme” (read here) or even resorting to deviations from original plan (read here), etc.

This is in view of the possible charges that the developers may incur due to the extension fees that relate to Qualifying Certificate (QC) rules and additional buyer’s stamp duty (ABSD) charges.

However, things have only started to get interesting. We are only seeing those owners with shallow pockets and not much holding powers force-selling, and smaller developers with less holding power most at risks.

Which developer is most at risk from hefty extension charges? (read here)

In short, there is no blood on the street Yet. Hence, there is no hurry. Buying a property means taking a very concentrated risk for the long term… and it pays to be patient.

 

Freehold or Leasehold

I am not really knowledgeable about property investing and when it comes to the issue of whether it be Freehold or 99 years Leasehold, I would much rather prefer the former. It saves me the trouble of thinking about the value of the remaining lease for a 99 years property.

However having said that, I think location would probably take precedent. If there is a relatively new 99 leasehold property in a superb location, it would be on my watch list.

 

Resale vs New launch

There has been much discussion about this among property buyers. I reckon resale properties are preferred because of their relatively bigger areas (older properties tend to be bigger for the same amount).

However, if I am not wrong, the value of 99 leasehold units would probably depreciate after 15 years onwards.

With resale, if you are renting out, you can start to collect the rent right away if there is an existing tenant. And the market should be well tested by then… you don’t have to guess if the development can attract tenants. You can see the actual unit and development, and there is no need to imagine or guess from models, show flats or animations.

However, you would have to start paying for the down payment, unlike new launches whereby the payment is spaced out as per the construction progress/status.

In the case of new launches, everything is brand new, state of the art (esp. if it is designed by a world renown architect). There is typically a defects liability period whereby you can ask to rectify defects. However, the actual completion date could be delayed and what is completed might not be what you have imagined.

There are many more pros and cons. As for me, I feel that bargains can be found in the resale market. More work needed to find these units.

I can live with the fact that not everything is brand new or if the design is dated, as long as the location is good and the unit layout is good (north-south facing), and not too cramped.

In my line of work, I see a lot of new projects, so it is nothing new to me… units are getting smaller, and there are more and more restrictions/regulations on new projects.

Yes, may need to spend more time and money on renovations for a resale property as compared to a new property. As long as the defects are not structural, nothing a little renovation cannot solve (within the unit).

 

Location, location, location

As we do not have a car, staying in a property next to a transport node such as a MRT station is very important. It would be even better if it is located on the city fringe, and near our workplaces or our son’s school.

 

The Hunt

Well, I haven’t really been hunting.

This is about my recent weekend trip to view a property at The Glentrees with my family. I still believe in going down and checking out the site or actual unit.

It is a 999 leasehold property, completed in 2005.

Well, it is only upon reaching the site that we realize how inaccessible the entrance of the development is from the main road. It is a long walk in from the main road (Holland Road) and Cold Storage Jelita. There is only one entrance to the development.

Nevertheless, the development is very near Henry Park Primary School.

The property was only the 4th floor (overall the development is rather low rise – I reckon 5 or 6 storey). So it wasn’t on a high floor. There were mosquitoes on the ground floor (while we were waiting for the agent, my son had 4 bites on his leg within 5 minutes). 4th storey might not be mosquito-free.

However, since the surrounding consists of landed properties and low rise developments, the view wasn’t that bad (not blocked). And there was some breeze (despite the afternoon being hot and humid).

Another issue is that a lot of the built up area of the unit consists of balconies / outdoor spaces. The resulting 2 bedroom, toilets, living room and kitchen areas are rather small.

When queried, the agent told me that the owner was selling so as to buy another unit. So I reckon he was in no rush to sell. The agent also mentioned that the unit has had more than 1 owner previously. And that the unit was always rented out by the previous owners.

The agent also mentioned that he felt that property prices will drop further in the next few years and that recently a number of developers have come up creative schemes to sell their unsold units.