Residences in Singapore are notoriously expensive. Condominium prices, in particular, can be prohibitively high. For HDB flat owners who aspire to a higher level of comfort, convenience, and security, acquiring a condominium is a natural next step, often seen as a symbol of success and wealth. As an investment, condominiums seem to appreciate faster than HDB flats, thus offering greater potential for income generation.
Considerations Before Investing in a Singapore Condominium
There’s a good reason to conduct thorough financial planning before purchasing a condominium. The average price of a mass-market private condominium in Singapore is S$1,375 per square foot, while the average price for an HDB flat is S$514 per square foot. Buying a condominium could cost you over a million dollars over the course of your mortgage payments.
Generally, there are two ways to profit from a condominium investment. The first is to sell the condo for a higher price than you paid for it. This is only possible if your property appreciates in value over time. However, merely increasing the property’s value is not enough. To truly profit from buying and selling property, you must ensure the amount received is higher than your total expenses after deducting costs like the Buyer’s Stamp Duty (BSD), renovations, and maintenance.
Because property appreciation takes time, anyone looking to enter the real estate market should be financially prepared for the long term. In other words, do not expect to get rich quick in the short term. While some property investors have certainly done so in the past, you should not invest your life savings on a maybe. There is nothing worse than selling at a loss when you have no other choice, so only opt to buy a condominium when you are confident you can hold onto it without financial difficulty.
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Even so, Singapore is actually a great place to invest in a condominium. If you can navigate the property market dynamics, your future self will likely thank you for investing in a Singapore condo.
1. High Potential for Condominium Appreciation
The Singapore real estate market has been on an upward trend for the past few decades, even showing resilience during the pandemic over the last two years. From 2011 to 2021, new condominium prices in Singapore surged by a significant 63%, an upward trend that ensures condo owners will see some appreciation.
Singapore’s private property market did not slow down due to the coronavirus either. Despite a significant outflow of expatriates due to heightened pandemic restrictions, private residential prices in Singapore still rose by 5% in the fourth quarter of 2021, and by 10.6% for the full year of 2021. This marked 12 consecutive months of increases, a new eight-year high and the largest gain since 2010. In fact, this growth was so substantial that it prompted the government to introduce cooling measures, raising the Additional Buyer’s Stamp Duty (ABSD) for second property purchases and for foreign buyers to cool the heated property market and maintain affordability.
Condominiums in Singapore generally appreciate faster than HDB flats. This is because the Singapore government aims to provide affordable public housing for the masses, which means there is always a lower price ceiling for HDB flats compared to condominiums.
2. Older Leasehold Condominiums Still Have a Market
To some Singaporeans, 99-year leasehold condominiums are depreciating assets whose value will fall once the remaining lease shortens. While there is some truth to this, it does not mean that the value of leasehold condominiums declines uniformly. There are ways to maximize the returns on your investment before the 99-year lease expires.
The first way to achieve a high return on investment is to sell the condominium while the lease is still healthy. Generally, condo owners should sell their properties before the remaining lease falls below 40 years. This is because once the lease drops below 40 years, the chances of potential buyers securing a bank loan for your property become slim, and it becomes nearly impossible once it falls below the 30-year mark.
As for rental income, renting out a leasehold condominium almost always yields the highest returns. Most tenants are simply looking for a nice place for a short-term stay. By renting out a leasehold condo, you can charge a higher rent than for an HDB flat while saving about 20% on the purchase price compared to buying a freehold condominium.
3. Freehold Condominiums are Yours Forever
Freehold condominiums have their own advantages compared to leasehold ones. They do not have the issue of an expiring lease, which means they are excellent lifelong investments. With a freehold condo, you do not have to time your sale as you would with a leasehold condo or HDB flat. If you plan to settle down and later change your mind to sell the condo upon reaching retirement age, buying a freehold property is perfectly safe.
While the appreciation of leasehold condos and HDB flats will slow down rapidly after 20 to 30 years, freehold condominium prices do not face the problem of depreciation. You can even pass your freehold property down to the next generation.
4. Condominium Neighborhoods Are Still Being Developed
By 2030, the Land Transport Authority (LTA) of Singapore plans to have 8 out of every 10 households within a 10-minute walk of an MRT station. The Urban Redevelopment Authority (URA) also plans to decentralize the Central Business District (CBD) by developing commercial hubs in the heartlands.
(Related Article: Condominiums Near MRT Stations in Singapore)
For example, the development of the Punggol Digital District is expected to bring 28,000 jobs and 12,000 students to the area. These developments include the relocation of the Singapore Institute of Technology (SIT) campus to Punggol town and the development of the Punggol Coast MRT Station, which will be closer to the coastline. These infrastructure upgrades will undoubtedly help push up private condominium prices in the area for decades to come. With the upcoming Cross Island Line and the long-awaited completion of the Circle Line (finally making it a true closed loop), there will be no shortage of appreciating condominiums across the nation.
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