Property Fever!

Singaporeans have a longstanding love affair with property. After all, in land scarce singapore, owning a piece of land or strata land is the ultimate status symbol..

Commonly, it is viewed that the property prices will continue to appreciate over the long term due to supply issues in Singapore.

2007 is the year where we see a record enbloc sales in the domestic market. Coupled with strong influx of foreign interests in the local business environment and the upcoming IR projects locally, it seems that property prices are destined to move upwards only.

Yet, one would remember stories of people caught in the last property down-cycle that lasted 10 years! Stuck with mortgage loans way higher then valuation, these people are holding on to negative equity assets and only recently did prices shoot up enough to cover their initial purchased prices.

Since 2004, prices of government housing in central zones have shoot up. Then, to buy a HDB at valuation or below valuation was common and a dime a dozen in the resale market. Today, however, if you pay less then 20,000 SGD above valuation in cash, it is considered a bargain. In central zones, it is almost impossible to command anything less then 30,000 SGD, especially for high floor, great view, unblocked apartments. My own apartment appreciated by 40% from 2004 to 2007 alone! Not bad for only holding on to it for 3 years.

Property markets move in cycles. Since 2001, it has been slowly appreciating since the bottom was seen in the '97 crisis. But the momentum only picked up in late 2006 and speed up considerably. It started with the high end luxury segment and as more & more buyers got priced out of the market, mass market private property market segment starts to hot up. 2008 is expected to be a year where mass market property and HDB prices will continue to appreciate steadily as more buyers, priced out of the central regions, move their eyes to the near central zone, with good accessibility to amenities (near MRT, good schools and food & shopping).

Property investment has to be undertaken by people who are in for the long haul and hence do not need the liquidity of money. They also have to be prepared to hold the property for long term rental yield or for own stay should the market turn against them. Mostly importantly, the mortgage loan has to be affordable.

Resale property transactions take up to 6 months in some cases!

Things to note when investing in Singapore private property:

1) Downpayment (1% option fee, 4% to exercise the fee)
2) Obtain bank loan approval. (Typically max. is 80%. More stringent requirements are available if 90% loan is required, at higher interest rates). The balance not covered under bank loan has to be paid via CPF or cash.
3) Stamp duties 3% of purchase price less 5,400sgd if price is more then 360,000SGD.
4) Legal fees cost of 0.4% of property price
5) Valuation. Any amount above valuation has to be paid in cash (or via personal loan) and not covered under mortgage loan.
6) If you own a HDB property, you need to pay 10% property tax on the private property's annual value instead of a 4% taxation if you reside in it. Also, you are not allowed to reside in the private property while still holding on to ownership of a HDB. For renting out is still possible.
7) HDB owners cannot use all their available CPF for investment in a 2nd property. 50% of the minimum sum ( to date: ~96k) must be left behind in their CPF Ordinary Account + SRS account. The excess can be invested.
8) when you do sell your private property, normally property agents will charge the sellers 2% of the transacted price, though this is negotiable.