Landed properties in Singapore are in high demand for their scarcity and exclusivity, making them attractive investments. However, they entail significant financial commitment and demand careful research. This guide highlights essential considerations for your investment. 

Your Ultimate Guide to Landed Property Investment in Singapore

Landed Property Types

Understanding the different categories of landed properties is crucial for sound investment. Below are the key types you should know:

• Terrace Houses: A sequence of houses sharing common walls.
• Semi-Detached Houses: Two adjacent houses sharing a single wall.
• Bungalows: Standalone homes divided into general and Good Class Bungalows (GCBs).
• Conservation Shophouses: Governed by Singapore’s Urban Redevelopment Authority guidelines for conservation.
• Cluster Housing: These homes blend the luxury of shared amenities such as pools and gyms with the coveted privacy and space unique to landed property.

Buyer’s Profile

When it comes to landed property investment in Singapore, nationality and age are two key criteria.

Nationality

To invest in landed properties, Singaporeans have an open pathway, while foreigners face specific regulations. They must secure approval from the Singapore Land Authority (SLA), which bases its decision on two criteria: a five-year minimum residency and substantial economic contributions to Singapore.

Age

When considering landed property investment, the age factor is straightforward. Buyers should be at least 21 years of age. Exceptions can be made through trust arrangements for individuals below this age threshold.

Budget Determination

When investing in a landed property, establish your budget. This focused assessment simplifies your search, saves time, and avoids financial strain. Moreover, it strengthens your position in price negotiations, considering additional expenses like option fees, legal fees, stamp duties, and maintenance. Consulting a residential mortgage specialist can offer a sustainable budget plan.

Property Tenure

In the world of landed property investment, you’ll encounter three main types:

• 99-Year Leasehold: This is the most common type. Once the term expires, the property reverts to the original owner, either the Singapore government or a private entity.
• 999-Year Leasehold: Nearly as good as being freehold, this property type offers almost indefinite ownership and generally comes at a higher price point compared to a 99-year leasehold.
• Freehold: Owners can hold the property indefinitely, usually at a premium price. Freehold properties often have higher market values compared to their leasehold counterparts.

Property Inspection

Before making an investment, it’s crucial to conduct a thorough inspection to assess the landed property’s condition, identify potential issues, and evaluate its market value.

Property Location

Location is vital in landed property investment as it impacts long-term value and rental income potential. For personal use, a convenient location reduces transportation costs. As such, it would make sense to consider properties near amenities such as MRT stations, bus stops, schools, shopping centres, and food courts. In addition, you should also consider upcoming infrastructure projects that can boost property values. These factors more often than not will ensure profitability of an investment.

Land Titles And Caveats

When buying a landed property for investment, it’s crucial to understand two key legal documents: land titles and caveats.

Land Titles

Each landed property has a unique land title, which may include easements or covenants that limit land use. For instance, an easement might allow access to a neighbouring property. It’s wise to consult a lawyer for a thorough review of any such restrictions.

Caveats

The URA defines caveats as official records that secure a buyer’s legal claim to the property. While lodging a caveat isn’t mandatory, it’s recommended to protect your interests. The timing of a lodged caveat can be decisive if multiple claims arise. Legal assistance can be helpful in this process.

Age And Condition 

When investing in landed property, the age and condition are crucial. Older properties need more maintenance and potential repairs, including possible Addition & Alteration (A&A) work. This can mean a substantial initial cost to make it appealing to tenants or comfortable for personal use. On the other hand, newer or well-maintained properties require less work and can fetch higher rental rates. Balancing these factors helps you make informed property investment decisions.

Financing Options

In Singapore, financing your landed property investment can be done in various ways. While paying in cash is the simplest, it’s often impractical due to high property values. You can use your Central Provident Fund (CPF) savings for down payments and monthly instalments, subject to eligibility criteria. Alternatively, mortgage loans from banks or financial institutions with lower interest rates are an option, but they come with eligibility requirements and often have a cap on the loan amount based on the property’s value.

Total Debt Servicing Ratio (TDSR)

If you’re looking into investing in a landed property and considering mortgage financing, it’s crucial to be aware of the Total Debt Servicing Ratio (TDSR). Governed by the Monetary Authority of Singapore (MAS), this ratio caps your allowable debt at 55% of your gross monthly income. Enacted on December 16, 2021, this rule applies to both individuals and certain types of companies.

Spacious Living Area 

If you plan to stay in a landed property, prioritise space to accommodate a growing family and offer flexibility for work and leisure. Seek properties with well-designed floor plans and regular-shaped rooms for efficient layouts and future alterations, which is vital for long-term investment. In Singapore’s rising landed property market, securing ample floor space initially can result in long-term cost savings as property values appreciate.

Additional Considerations

When considering landed property investment, don’t overlook the impact of these two factors:

Cooling Measures

Government interventions can notably affect the property market. For instance, cooling measures were introduced in September 2022 to temper housing demand and promote prudent borrowing.

Economic Climate

A robust economy boosts household income, escalating the demand for real estate and possibly driving up property prices. Conversely, a slump leads to higher unemployment and reduced buying power, thereby diminishing demand.

Working With A Real Estate Developer 

Investing in landed property is substantial, and working with a landed property developer in Singapore is vital. They’ll provide market insights, identify properties, and simplify the development process. With their expertise and guidance in helping you make informed decisions to optimise your property portfolio’s value and potential, you are assured of a smoother investment journey.

Conclusion

Property investing can be exciting, especially for beginners looking at Singapore’s landed properties. Learn the essentials in this investment guide by Brand New Land to gain confidence in the property market and increase your chances of long-term profits.