As the world progresses, the ways a person can choose to invest his or her money only grow in number. In 2017, investment opportunities range from traditional ones like real estate, stocks or bonds to new-age inspirations like 3d printing, molecular engineering or renewable energies. Today, we will focus on property investing – which is one of the oldest investment vehicles in history. Is investing in property actually as simple as buying an undervalued property, renovating it, then selling for a profit? Is renting a better idea? Should you only look for residential projects, or are office and retail spaces better in terms of yield? And should you limit your investing to the geographical areas you know?
The answer to the last question is the easiest – absolutely not. You should be looking to invest in cities that are hubs for new businesses and development, where property prices are widely expected to rise in the next period. According to property news, Singapore is one of the best places on the globe for real estate investing at the moment, for a good couple of reasons:
- Although it is just a city-state, Singapore houses more than 5 million people and is the busiest harbor in the world;
- Singapore is the 3rd richest country in the world, surpassed only by Luxembourg and Qatar, and ahead of countries like Norway, Sweden, Denmark or the U.S;
- The city is in a key spot for Asian trading, and its economy is the second freest in the world, after Hong Kong;
These advantages, coupled with its proximity to huge economies like China or India make Singapore a very, very attractive destination for investors from all around the world. The city-state has become a hub for companies activating in a wide range of economic domains, such as finance, tech, renewable energy, commerce or infrastructure just to name a few. Of course, this means that living conditions in Singapore have to continuously evolve, at the same rate in which the city itself develops. Thus, the city is a prime candidate for property investment – since investors can safely assume that properties here will increases in value in the next few years and decades, and they will remain relatively easy to rent out.
Of course, property investing in Singapore isn’t as easy as looking up properties online and buying. If you’re serious about getting into the real estate market in Singapore, here are a few things you should do:
- Research the country
If your knowledge about Singapore is limited and have trouble finding it on a map, do a good amount of research on the country before investing. Start your research with the basics and work your way into details which impact the investment world – like the state of the economy, growth in the last couple of years, unemployment, trade connections and so on. Pay particular attention to legal aspects related to the real estate market, such as property taxes for buyers and renters, the laws you have to respect if you want to buy a piece of property in Singapore, as well as the rights and obligations you might have as a landlord. You can get all the latest property news in Singapore easily from major property site like PropertyGuru. Once you have the full picture, you can then understand if investing in Singapore is the right action for you.
- Research the real estate market
Do plenty of research on the real estate market in the country. For example, knowing that the average price for a square foot of property in the city center is just under 24,000 Singaporean $ is not enough. You have to know which are the up-and-coming neighborhoods, where the main office areas and universities are, where are the places most people look for rent, and how to determine if a property is correctly valued or not. You also have to understand the city’s infrastructure (transport, water, public facilities, schools and universities, entertainment areas, etc.), to figure out what the areas of interest are. The next logical step is to look at future public investments – is the city preparing to build a new high-tech neighborhood in the next few years?
- Set up a budget, investment style, and expectations
This is a classic investment hint, but it’s especially important now because you’re investing in a country you know very little about. Thus, we suggest that you setup a smaller investment budget and a lower risk aversion than you normally would, at least for the first couple of transactions you do in Singapore. Also, increase the “unexpected costs” category by at least 50% than your normal ratio, since you will miss a lot of costs and fees. Remember to setup investment style and expectations – the last rules you have to follow.
- Consider rental properties
Since Singapore’s economy and commerce will most likely continue to grow in the next years, rental properties are one of the most sought-after investments in the area. Lots of people will be looking for temporary housing in the city, for a multitude of reasons: properties are usually expensive to buy (especially for workers coming from China, India or Malaysia), the working class is very dynamic (lots of changes in technology and companies), and lots of people come here to study. All these people will be looking for properties to rent out. The average yearly yield for rental properties is around 2,5 %, not very impressive, but certainly worth considering.
- Development areas – office, logistics, residential, retail
If buying properties to rent them out is not your cup of tea, there are plenty more opportunities in Singapore. Due to the very dynamic market, there are lots of opportunities to invest in the development of real estate complexes, with a variety of destinations – office, logistic, retail or residential. While you might not have the money to construct a new office tower, buying 10% or 20% of such a business could bring you significant returns, since nearly all big global companies want to have an office in Singapore. Although investing in property development requires more capital and usually more knowledge, the results are usually better than rental properties.
- Take advantage of foreclosure markets
Singapore is one of the countries where we see a big gap between “new” industries and old ones. While people working in tech or office jobs enjoy good wages, sectors like public, manufacturing or health care don’t earn nearly as much. This impacts the housing market in a wide variety of ways, including the availability of a good number of foreclosed properties. These properties can represent a way of entering the Singaporean real estate market since they are available at a much lower price than their actual value. The only downside is that they disappear very quickly, and usually require your physical presence in the country in order to close deals fast.
- Consider investing in a Real Estate Fund
If the idea to invest in property in Singapore still tempts you, but the hassle seems to be too much, take the easy route: invest in a Real Estate Investment Trust (REIT). There are several investment funds in Singapore, built around business such as real estate development, buying rental properties and even property administration. You can quickly check the past results of these funds and figure out which one is closest to your investment strategy, and simply send your money their way. You will have to pay fees and commissions, as with any investment fund, but you’ll be free from any legal or know-how issues. Investing in such a fund only requires you to check the status of your money every few months. There are possible downsides as well – keeping your money blocked for quite an extended period (a few years, in some cases) is one of them.
Investing in Singapore’s property market certainly, has its fair share of challenges and opportunities. Understanding a country’s culture, economy and social ideas is not an easy task, and successfully investing your money in that country can prove even more challenging. However, Singapore is a place which rewards patient and diligent investors with good yields and international success. Investing in its real estate market is a great way of diversifying your assets and balancing risk, all while expecting a good return on your money. At the end of the day, it’s clear that Asian markets hold the biggest opportunities for the next few decades – and as far as Asian cities go, Singapore is the most “western.” Can you think of a better place to start your Asian adventure?