We all know that investing in a piece of property is probably one of the best investments you can ever make. However, is Singapore truly the best place to purchase a property if you’re looking to get started with property investing?
Here are 3 reasons why you might not want to invest in Singapore property, especially if you’re a first time property investor:
1) You Will Need A Lot Of Capital
It’s no secret that property is extremely overpriced here in Singapore. For the price of 4-room flat in Serangoon, you could have bought yourself a sea-view villa in Spain.
Oh, you have a 5-room flat in Bukit Merah? That could have been a 2-acre island in the Caribbean!
The property investing scene in Singapore is not very friendly to those who are just starting out. As property is very expensive in Singapore, a typical investment property in Singapore can easily cost anywhere between half a million to over a million dollars.
Did you know…
After the record breaking $1 million Queenstown flat sale in 2012, four other HDB flats were sold above the $1 million mark in 2013. The most recent sale belongs to a HDB maisonette in Bishan that was sold for $1.05 million. The amazing thing is that all these happened despite the ongoing trend of falling resale prices!
If a HDB resale flat could already fetch up to this amount, how much more would a private property cost you?
Considering there’s that 20% down payment you need to pay, anyone who is looking to purchase his or her own piece of investment property must be prepared to get set back at least $200,000.
Unless you’re extremely cash rich, investing in Singapore property is going to be a stretch.
2) There Are Too Many Restrictions
Even if you can part with that amount of money, you have to deal with the next hurdle – the government.
As property prices have been spiking up in the recent years, the government have been trying to do their job by cooling down the demand for property by putting in place many restrictions. These ‘cooling measures’ have made investing in Singapore property much harder, not to mention much less profitable.
The seller stamp duty (SSD) the government has put in place has made it so much less profitable to sell immediately, even if your property has appreciated significantly in value. Did you know that you have to pay 16% if you sell your property less than a year after purchase?
Other than seller stamp duties, there are also loan restrictions such as the total debt servicing ratio (TDSR) and the change in loan tenure limit. With the new TDSR framework, an individual’s outstanding debt repayment cannot exceed 60% of his gross income. The loan tenure has also effectively been limited to 35 years
How are you ever going to profit with measures like these in place?
3) There Are More Profitable Properties Elsewhere
Honestly, there are just so many better options elsewhere. What I’m not saying is that you shouldn’t invest in property at all, but rather, you should invest in overseas property instead.
In countries like Australia and the United Kingdom, their property scene is much more favorable to first time investors. They don’t have any of those pesky restrictions and laws. Moreover, their properties are so much more affordable!
Take a look at our neighboring country, Malaysia. If you were to do a quick search via Property Guru, you can easily see that a property in the prime location of KLCC only cost around $750SGD psf, while a comparable piece of property at The Sail @ Marina Bay would cost up to $2,200 psf!
While I’m not saying that Malaysian property is definitely more profitable, I would think that it is much more reasonable to expect the price of the $750 psf property to increase by 50% than the $2,200 psf property. Won’t you agree with me?
Thus investing in overseas property basically means easier entry and higher profits!
Of course, it would be extremely difficult for the individual investor like us to invest in overseas property ourselves. Luckily, there are many reputable property investment firms that are doing it so you can easily find out more by attending one of their investment talks.
Image Credits: stproperty.sg, simonongphoto.files.wordpress.com