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Property: Read This Before Investing in Property

by Anita Yee

Whether you’re purchasing or renovating your dream home, this thought must have crossed your mind: What profit will you make should you ever decide to sell or rent it out? And if you do decide to put your home on the market, how soon can you cash in on it? Property and rental experts share what makes your house (and renovation) a good investment.

1. Location, Location, Location
When you consider the resale value of your home, “location” is extremely important – after all, the idea is to buy an apartment, flat or house that will appeal to a large number of potential future home-buyers. Most property buyers or investors consider (buying) existing popular residential locations as they are seen as mature, established and “proven” markets, says Ong Teck Hui, national director of Research & Consultancy at Jones Lang LaSalle Real Estate (Singapore). He shares examples like Bukit Timah and East Coast as prime areas with “proximity to good schools, shops, eating places, recreational facilities, clubs and other amenities, which are factors that draw buyers to them”.

Location is really the thing to look for when buying a place for living in or for investment, agrees Maureen Li, general manager at Abiel Corporate Housing, a company that rents out furnished apartments or houses to individuals or corporations as an alternative to traditional hotels or serviced apartments.

Where a property is bought for living in, Li says certain attributes take priority, such as being close to the children’s school or to other family members. However, this may result in a “decision that isn’t entirely investment-focused”. The investment property sector, on the other hand, has a captive market with the expatriates or foreigners who take up residence in Singapore, she adds. Residences that are in close proximity to transportation (less than a 10-minute walk from an MRT station) and also to amenities such shopping malls and the central business district (CBD) – five to six MRT stops is an ideal gauge – do exceptionally well in terms of rental yield as well as resale demand and value.

2. Target Growth Areas
Seeing the bigger picture might help, too. Ong explains that “growth” areas present opportunities, as their eventual maturity would lead to favourable capital appreciation.” He cites the north-east region as an example of an area that is shaping up, with the growth of Sengkang and Punggol new towns, as well as Seletar Aerospace Park. “The government has been releasing more land in the north-east for residential development, and we see many new condominiums springing up.

Landed housing estates such as Seletar Hills have also profited from that region’s growth,” he adds. Furthermore, the creation of various clusters such as Tampines and Jurong West, for example, will greatly ease the concentration of development in some of the other areas, he adds. And if you have an idea of what the land-use blueprint is like (visit www.ura.gov.sg for more information), you’d be better placed to know what you can afford, to carry on with the lifestyle you choose. In short, where you should put your money will depend on your lifestyle needs, says Willi Ching, senior marketing director at Huttons Real Estate Group. “I have clients in Tuas who don’t see the need to live near  the city centre.”

3. Connectivity
Good transportation network coverage is a big plus, says Ching, adding that “three letters, M-R-T, increase the attractiveness of a particular area”. As part of the Land Transport Masterplan 2013’s theme of providing commuters with more connections to the places where they live, work and play, the Land Transport Authority (LTA) will be adding more rail lines and extending others – all with the intention of improving the connectivity, accessibility and coverage of Singapore’s rail network. “This plan will mean that, in the future, 80 per cent of the population will be within 10 minutes’ reach of an MRT station,” Ching adds.

On that note and referring to the Government’s land sales programme, Ong says that most of the sites recently released are in the suburbs, with a few that are “more advantageously located near MRT stations and amenities”. He adds that these sites always command a price premium of 10 to 20 per cent over mediocre locations, and tend to sell more easily and command better rentals, too. Some recent examples of projects (and their proximity to MRT stations) include Eco (Tanah Merah MRT station), Echelon (Redhill station) and Kovan Regency (Kovan station).

4. Size Matters
With an expanding train network covering most of the island, perhaps investing in a property further away from the city area – where you can get something cheaper and bigger – might be deemed a “better buy”?

That’s all up in the air, it seems. “Unless an expat (being the majority of the rental market) works at Changi Business Park or in Jurong, his general preference is to be close to his working place, that is, more often than not, in the vicinity of the CBD,” says Li. A point to note is that the profile of the expatriate who comes to Singapore has changed in recent years – from a family unit to singles and couples.

On the flip side, while recent property developments have been yielding shoebox-sized units, Li says there are expats who seek older condo units that are more spacious, well-maintained, and with decent facilities; more importantly, these older units represent better value in terms of rent. “However, this only works if  the landlord is agreeable to investing in cosmetic renovation to the interior of the unit,” she says, pointing out that in many instances, “the investment relative to the returns that one can get is very small”.

5. Should you renovate to fetch a better price?
Ching shares billionaire real estate entrepreneur Donald Trump’s sentiment: “You don’t necessarily need the best location. What you need is the best deal.” He says, “I will not pay a premium (to buy a place) that’s been done up by others because to me, tastes and preferences are very subjective.” That built-in aquarium-feature wall in the dining room or revolving shoe closet in the master bedroom may sound like a good idea to you – and only you. Potential buyers may see it as a costly burden, as they would prefer to hack it down. Ching adds: “If I’m buying my own residence, with a view to eventually selling it, all the more someone else’s renovation isn’t important.” The “savings” you enjoy as a buyer can go towards the interior decor that you want. And if the property is to be rented out, Ching feels that simple furnishing is adequate as “some tenants prefer to have their own furniture”.

6. Buy to sell, but renovate for yourself
“Many people are emotional when it comes to buying a property. They must feel good about it and cannot imagine if things were changed around, such as removing a wall to create more space,” Ching says. His encounters with potential home buyers has led to this observation:

“They like to compare and will think that ‘there might be a better one elsewhere!’ They should trust their instincts,” he says. If most of the variables are right, then buy it first and slowly put time into getting it to what you envision it to be, he advises.

 

Can you trust your property agent? Find out here.

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