Singapore is home to hundreds of millionaires, both local and foreign. For many of these businessmen, property investing in Singapore’s property market has proved to be rather lucrative throughout the years.
Property investment in Singapore is so lucrative, in fact, that prices for homes have increased to the point where the government has seen fit to step in. Cooling measures have been imposed to ensure that homes remain affordable enough for citizens to live in.
With Singapore doing what it can to curb the rise of property investors looking to make a quick buck, it may seem like property investing is a bad idea nowadays. However, there are more ways to earn money than simply buying and selling property.
Itching to learn the many ways you can invest in real estate investments in Singapore? This article will cover five topics, all of which are linked to investment:
1. Overview of Singapore’s property market
- Overview, outlook and cooling measures on the property market
2. How to invest in property in Singapore
- What you need to take note of when doing real estate investment in Singapore
3. How to calculate rental yield (gross vs net)
- The two types of yield that property investors need to know
4. How to maximize your profit from a property sale
- Handy tips on how to maximize your property investment profit
5. Where and what you should invest in
- How to uncover gems in the real estate market in Singapore
Overview of the Singapore Property Investment Market
Singapore’s property market has been quite lucrative for property investors in the past. Prices of properties could rise very high, and buyers would still snap them up. This caused a chain effect among property investors: “if people are willing to buy at high prices, I can sell them at high prices as well.”
Then came the problem: Rising prices meant that Singaporeans could no longer find suitable housing for themselves without breaking the bank. Their choices were to either relocate, or hope that a new investor would price their property at an affordable sum.
In a bid to halt the soaring prices of homes in Singapore, the government developed several laws and countermeasures against property investors. Their aim was not to bring down the prices of the properties, as doing so would only lead to a greater surge in investors. Rather, they wanted to stabilise and moderate the sales cycle, making it harder for property investors to turn a profit.
Despite this, foreign property investors are still turning to Singapore for their property investments. This is due to the fact that it is safer in Singapore than anywhere else in the region; Property prices will not fluctuate that much in response to political unrest.
You can read the following articles to learn more:
- Why Are Foreign Investors Still Buying Singapore Properties?
- One Year On: How the Cooling Measures Came and Shook Up the Housing Market
How to Invest in Singapore Property
Property investment remains one of the favourite investment methods for many Singaporeans, as you can invest long-term without worrying about short-term fluctuations. However, with the implementation of cooling measures, purchasing property has become more expensive than before.
You have to take into account the added costs of the restrictions and cooling measures. These include things such as the Additional Buyers’ Stamp Duties (ABSD), and Total Debt Servicing Ratio (TDSR). For example, Singapore citizens purchasing a second property have to pay an ABSD of 12%, and an ABSD of 15% for their third and subsequent property. Also, under the TDSR framework, the sum of an individual’s loan repayments (housing loans, credit card debt etc.) cannot exceed 60% of income.
For HDB upgraders, you should know that there is also a remission period for ABSD. The remission period of 6 months means that, if you sell the first property within six months, you can get a “refund” of the ABSD that you incurred.
Read more about these restrictions here:
- Additional Buyer’s Stamp Duty (ABSD): A Simple Guide for Property Buyers
- How Does the TDSR Affect Your Home Loan?
Fortunately, there are more ways to invest other than the buy-and-sell route, which requires waiting for an increase in property value. In Singapore, a high rental yield can net you a decent sum of passive income through rent alone. This allows you to reap a profit while still mitigating the tax costs.
If you want to learn more about getting into investments, the following guides will put you in a good place to start.
- Your Own Guide to Investing in Property in Singapore
- Property Investment Guide for Beginners
How to Calculate Property Rental Yield
There are two predominant forms of rental yield: Gross rental yield and net rental yield.
Type of yield
How is the property yield calculated?
Gross rental yield
Gross rental yield = Annual gross rental income from property / Property total value
Example: You have a $300,000 property and you charge $2,000 for rent each month.
Gross rental yield = ($2,000*12 / $300,000) * 100% = 8%
Net rental yield
This includes other expenses incurred while the tenant is living in the property such as bills and taxes.
Net rental yield = Annual net rental from property / Property total value
Rental yield is important if you intend to make a profit as a landlord. If you’re interested in renting out a home, here are some of the condos with the best rental yields in Singapore.
- Invest Smartly by Understanding Rental Yields
- For Landlords: Understanding Rental Yield
How to Maximise Profits from a Property Sale
Once you are ready to sell your property, it’s important to think of how to maximise the amount that you can earn. One of the ways to do so is to conduct your property’s valuation, which will take into account its age, location, and number of rooms, among other things.
There are many ways to increase your HDB’s value. For example, you can opt to repaint your house, remove all the clutter, or repair any leaking parts. Although they might incur a small cost, these issues, if not dealt with, may cost you an attractive deal.
Take a look at these articles to learn how to maximize your profit from a property sale.
- Use Property Valuation to Maximise Your Profit in Singapore
- HDB Valuation: How to Get the Most Out of HDB Sales
- 3 Reno-Free Ways to Increase Your HDB Flat’s Resale Value
- 5 Things Which Lower the Value of Your Home
Where and What Properties Should I Invest in?
A useful place to start looking would be to study URA’s Master Plan. The Master Plan will give you an idea of upcoming developments in different parts of Singapore.
After that, you have to consider your own finances, and plan around the best type of property that you can afford: most Singaporeans usually plan around BTOs, ECs, and resale HDBs, as they tend to be more affordable.
To learn more on where and to invest in, you can check out the links below.
- Understanding URA’s Master Plan
- Best Investment Opportunity — BTO, EC or Resale HDB
- Looking to Buy an Executive Condo as a Form of Investment? Take a Look at This Article Here.
- Latest Listings for Executive Condos
- Steps You Need to Take to Buy an Executive Condo in Singapore
More FAQs on Property Investment in Singapore
Is Real Estate/Property a Good Investment in Singapore?
There is no straight answer to this, but property investment is very popular in Singapore. Compared to stocks, it is less volatile.
How Can I Make Money from Property in Singapore?
You can turn a profit if you “buy low and sell high” (i.e. capital appreciation) and/or earn rental income from having tenants. You can also buy REITs, but that’s another thing altogether.
Can Foreigners Buy Investment Property in Singapore?
Foreigners can buy private non-landed property (condos), but not landed property and not HDB flats. Singapore PRs can buy HDB resale flats and may appeal to buy landed homes (both subject to eligibility conditions).
How is Property Rental a Good Investment in Singapore?
With the existing low interest rate environment, investing in property and then renting them out can be attractive for landlords. The monthly mortgage that you are paying will likely be sufficiently covered by the monthly rental you get from the tenant. You can learn some of the key metrics in evaluating rental properties in the guide above.
How Much Does a Home Cost in Singapore?
It depends on the type of property you are looking at. For public housing (HDB), which is more for own stay, the cost is anywhere between $90,000 (2-room) to $1m (executive maisonette). For condo, which are more common for property investing, the cost is anywhere from $600k onwards depending on the size of the unit.
For more property news, resources and useful content like this article, check out PropertyGuru’s guides section.
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