Houses in Singapore are notoriously expensive. Condominiums? They’re on a whole other level. Regarded as a symbol of success and wealth, buying a condo is seen as the next natural step for HDB flat owners who want more comfort, convenience and security. As an investment, condos seem to appreciate faster and thus have more potential to generate income compared to HDB flats, which forms Singapore’s public housing scheme.
Things to consider before investing in a Singapore condo
There is certainly a reason to throw financial caution to the wind before buying a condo. An average condo costs between $1,053 per square foot (psf) to $1,731 psf, compared to HDB flats which average at around $500 psf, according to a local report. Buying a condominium can set you back by more than a million dollars over the course of your mortgage payment.
Broadly speaking, there are two ways to profit from a condo investment. The first way would be to sell the condo at a price higher than its initial fee. This is only possible if your condo appreciates in value over time. It’s not just enough for your condo’s value to increase, either. To truly flip a property for profit, you’ll have to make sure that the amount you receive is higher than what you’ve spent after accounting for expenses such as Seller’s Stamp Duty (SSD), renovations and maintenance works. A full breakdown of condominium expenses can be found here.
Because it takes time for property to appreciate in value, anyone looking to jump into the real estate market should be financially prepared to hold out long term. That is, don’t expect to make a quick buck in three, five, or even ten years. While there are definitely property investment gurus who have done this in the past, you should not bank your entire life savings on something that may or may not happen. There’s nothing worse than having to extend your mortgage lease or making a loss by selling when you don’t have a choice, so only invest in a condo if you’re confident of holding onto it without financial difficulties.
All that being said, Singapore is actually a pretty good place to invest in a condo. If you can handle the heat of the property market, your future self will likely thank you for investing in a Singapore condo. Plus, stick to the end and we’ll let you in on how you can increase your chances of getting a condominium for discounts as high as 10%.
1. Condominiums have a high chance of appreciating in value
The local property market has been trending upwards for the past several decades, even showing resilience during the pandemic in the last two years. From 2010 to 2020, private property prices in Singapore rose by a whopping 53.6%. Although these figures should be taken with a grain of salt because they account for a wide range of private properties (including landed property), the general upward trend assures that condo owners will live to see some appreciation in value.
Singapore’s private property market did not slow down for Covid-19, either. Despite the exodus of foreign workers resulting from extended pandemic restrictions, Singapore’s private home prices still rose by 5% in Q4 of 2021. This marks the 7th consecutive quarter of increase and the highest growth since 2009. In fact, this growth was so significant that it prompted the government to raise the Additional Buyer’s Stamp Duty (ABSD) for second-home buyers and foreigners in an effort to cool prices and keep them affordable.
Singapore condominiums generally appreciate faster than HDB flats. That’s because HDB flats are designed to provide affordable housing for the masses, meaning that the ceiling for HDB flat prices will always be less penetrable compared to condominiums.
2. Even old leasehold condos have a market
To many Singaporeans, 99-year lease condos are depreciating assets that will have their value plummet to zero once the lease is up. While there is definitely some truth in that statement, this doesn’t mean that the value of leasehold condos will decrease uniformly. There are still ways to get the most out of your investment before the 99-year timebomb runs out.
The first way to get a high return on investment is to obviously sell the condo while the lease is still healthy. As a general rule of thumb, condo owners should sell their homes before the lease falls below 40 years. That’s because it becomes increasingly difficult to secure substantial bank loans once the lease falls below 40, and becomes virtually impossible past the 30-year mark.
That said, remaining lease means little to foreign sojourners who do not regard Singapore as their forever home. As long as your home is well maintained and in a good location, there will still be willing foreign buyers looking for a vacation home or a place to rent out while they are out of the country (disclaimer: Singapore may no longer be the foreign investment haven it once was with this year’s 30% increase in ABSD for foreigners. That said, we’re still a significant contender on the international scene).
Speaking of rent, barring the highly unlikely situation where your tenants intend to stay longer than your remaining lease, renting out a leasehold condo will nearly always yield the highest profits. Most tenants are just looking for a nice place to stay. By renting out a leasehold condo, you can charge higher rent than HDB flats, all while saving extra cash that would have been otherwise spent on a freehold.
Finally, there are signs to show that remaining lease is becoming less of a factor for home buyers. There have even been anecdotal reports of condos older than 40 years old continuing to appreciate in value, simply by virtue of their location. This suggests that more and more buyers may not be purchasing condos for the long haul.
3. Freehold condos are yours forever
Freehold condos hold their own advantage over leaseholds. The fact that they don’t expire means that they make good lifetime investments. With freehold condos, you don’t have to time your sale as much as leasehold condos or HDB flats. It’s perfectly safe for you to purchase a freehold condo with the intention to stay put forever, and change your mind to sell it off when you’re way into retirement.
While the appreciation of leasehold condos and HDB flats will rapidly slow down after 30-40 years, freehold condo prices do not face the problem of value decay. You can even hand your freehold condo to children or grandchildren, and there will always be bank loans available for willing buyers looking to get their hands on private property that they can truly call their own. Barring landed property, which are out of reach for most individuals, freehold condos are your next best bet for a stable investment that affords you the freedom to do whatever you want with it.
4. Condo neighbourhoods are not done developing yet
By 2030, the Land Transport Authority plans to have 8 in 10 households within 10 minutes of an MRT station. The Urban Redevelopment Authority (URA) also plans to deconcentrate the Central Business District (CBD) by developing business hubs in heartland areas.
For example, the developments in the Punggol Digital District are projected to bring 28,000 jobs and 12,000 students into the area. These developments include Singapore Institution of Technology’s relocation of its campus to the town and the development of Punggol Coast MRT closer to the shoreline. These infrastructure upgrades will no doubt help to buoy private property prices in the area for decades to come. And with the upcoming Cross Island Line and long awaited completion of the Circle Line (so that it finally becomes a real circle), there will be no shortage of condos rising in value across the country.
Find the right property that meets your financial goals
Many condo developers offer their units at an early bird discount which can sometimes go as high as 10%. Considering that most condos cost around the $1.4 million to $1.7 million range, this means that you’ll lock in at least an additional $140,000 in profits by purchasing a condo early.
Knowing where to find these discounts and securing them fast enough is all about having the right tools and agents on hand. With Ohmyhome’s smart data-matching technology, we can MATCH you with the right home that fits all your investment needs. Simply submit your preferences and let our algorithm do all the work. Our Super Agents will contact you via WhatsApp the moment a match is found.
Call us at 6886 9009 to get the best deals on your next investment home with any of our Super Agents or message us in the chat box at the bottom right-hand corner of the screen. If you’re on the go, we’re also available on WhatsApp at 9755 1009. Because at Ohmyhome, we’re always by your side, always on your side.