Singapore Landed Property Investment Checklist
Landed properties are highly sought after in Singapore due to their scarcity and exclusivity, making them an attractive investment option for those who can afford them.
However, investing in landed properties is a significant financial commitment, and requires careful consideration and research before making a decision.
This guide has been created to highlight the key areas you need to look at when investing in Singapore landed properties.
Use it to make sound investment decisions and maximise your chances of achieving success in this specific market.
Types Of Landed Properties
For a start, landed properties fall under the broad definition of private properties and consist of 5 different categories. They are terrace houses, semi-detached houses, bungalows, conservation shophouses and cluster housing.
Terrace houses consist of a row of at least 3 houses sharing common walls.
A semi-detached house is one that is joined to another house on one side, with the wall being located either beside or behind one house.
Bungalows, on the other hand, are standalone houses on their own plot of land and can be further divided into 2 sub-categories – general bungalows and Good Class Bungalows (GCBs).
Conservation Shophouses (residential) are gazetted by the Urban Redevelopment Authority (URA) as conservation buildings.If you were to invest in a shophouse, it’s important that you’re aware of and follow any conservation guidelines set by the URA.
Finally, cluster housing can be considered as the condominiums of the landed world. Owners not only get to enjoy common facilities such as swimming pools, gyms and function rooms but also enjoy the privacy and spaciousness of the landed property.
There are 2 key criteria to look at when it comes to the buyer’s profile – the nationality and age.
In terms of the buyer’s nationality, all Singaporeans are eligible to purchase landed property. However, foreigners need to first seek approval from the Singapore Land Authority (SLA), before they can proceed to purchase any landed property.
Each applicant will be assessed on a case-by-case basis, and during this process, the following 2 factors will be largely taken into consideration:
- Whether the applicant has been a Singapore permanent resident for at least five years
- Whether the applicant has made significant economic contributions to Singapore during that period
A person must be at least 21 years old to purchase any landed property. If however the property is purchased under a trust, the purchaser can be below 21 years.
Before investing in any landed property, it’s important that you first spend some time determining what your overall budget is.
Having a clear understanding of what you can afford will allow you to focus on properties that are within your price range, saving you much time and effort. It will prevent you from overextending yourself financially, which will put you under unnecessary financial strain.
Your budget will also help you evaluate the financing options available to you. If you require financing, having a clear budget can help you identify options that fit within your budget and current financial situation.
At the same time, with a predetermined budget, you’ll have a better idea of what you can afford to offer when negotiating the price. This can give you an advantage when dealing with sellers, especially in a competitive market where there might be multiple buyers vying for the same property.
Besides the purchase price, you should also factor in other associated costs as well, such as option fees, legal fees, stamp duties, home insurance and maintenance bills. If you need help in this area, you can consider consulting with an experienced residential mortgage specialist, who’ll be able to evaluate your current financial situation and determine a budget that is realistic and sustainable.
Landed properties are categorised either as freehold or leasehold properties.
A freehold property is one where the owner pays for and may own the property forever.
A leasehold property can either be owned by the Singapore government or private owners. In this case, the property is leased for a certain period of time (99 or 999 years), after which it is subsequently reclaimed.
Freehold properties generally carry a higher value and are more expensive than leasehold properties.
Before investing in any specific property, it is essential that you first conduct a thorough inspection of that property. This includes evaluating the property’s current condition, identifying any potential issues, and assessing the property’s market value.
The location of the actual property is a critical factor when it comes to property investments. As it will have a significant impact on the property value over time and its rental income potential.
If you are living in? the property itself, being in a good location will save you a lot of time and money (in terms of transportation costs).
Look for places that have easy access to transport networks such as MRT stations and bus stops, and are located near amenities such as schools, shopping centres and food courts.
It’s equally important to keep an eye out for potential factors that encourage property value appreciation, such as the construction of new MRT stations or rejuvenation plans for the neighbourhood. All these will make the property more liveable, causing prices to rise as a result.
At the same time, you should also consider the surrounding neighbourhood as well. Some neighbourhoods are known for their vibrant entertainment options, while others are more peaceful or nature-oriented. Take time to reflect on your current lifestyle and personal preferences, and choose neighbourhoods that closely align with those.
Land Titles And Caveats
There are 2 additional legal documents you need to take note of when purchasing landed properties – these are land titles and caveats.
All landed properties come with their own individual land titles, and these titles may come with easements and covenants that restrict the use of the land. For example, if the property is the only means of access to another property, the land title will most likely have an easement that allows access to that second property.
While most land titles come without any easements or covenants, it’s advisable to appoint a lawyer to help you with such matters.
According to the URA, caveats are official records submitted by property buyers to establish their lawful stake in the property. Although lodging a caveat is not mandatory, it is highly advisable to do so in order to safeguard the buyer’s interests. If multiple claims are made to the property, the timing of the submission will determine who the actual claimant should be.
You can similarly appoint a lawyer to help you lodge a caveat.
Age And Condition
The age and condition of the landed property is another important area to look at, as it will give you an indication of the potential risks and rewards associated with the property.
Older properties might require more maintenance and repairs due to wear and tear, which will add to your overall cost of ownership. If the property is in poor condition, you might have to allocate a sizeable amount of money to renovate it, in order to make it more liveable or attractive to potential tenants.
The property’s age and condition can also affect its rental income potential. If the property is new or in good condition, you might be able to charge higher rental rates compared to one that’s old and in poorer condition.
In terms of available financing options in Singapore, there are several that you can choose from depending on your own unique needs and circumstances.
Cash is the simplest way to invest in any landed property. However, since landed properties are considered high-value assets, it might be difficult for you to fork out the entire purchase price in cash.
You can also tap into your own Central Provident Fund (CPF) savings to finance your property purchases, using them to pay for the down payment and monthly installments. However, you’ll need to meet certain eligibility criteria before you can do so.
Another option you can consider is mortgage loans offered by banks and financial institutions, as their interest rates are generally lower than those for unsecured loans. However, the loan amount will be capped at a certain percentage of the property’s value, and you will need to meet certain eligibility criteria.
Total Debt Servicing Ratio (TDSR)
In Singapore, the Monetary Authority Of Singapore (MAS) requires all financial institutions offering property loans to compute the borrower’sa total debt servicing ratio (TDSR), which is a ratio that represents the percentage of a borrower’s gross monthly income that is used to repay their monthly debts.
Starting from December 16th, 2021, the maximum total debt servicing ratio (TDSR) allowed for property buyers to acquire landed property is 55%. The Monetary Authority of Singapore (MAS) has mandated this rule not only for individuals but also for specific types of companies as well.
Spacious Living Area
If you and your family are planning to live in the landed property, it’s important that you purchase one with a spacious living area that provides ample room for growth as your family’s needs change over time.
A spacious property allows you to accommodate a growing family and carry out subsequent renovations if needed (e.g. creating a new bedroom), without too much difficulty.
You also have the flexibility of creating separate areas for work and leisure, a popular trend nowadays as people start using their homes as both a workplace and sanctuary.
Keep a look out for properties with well-designed floor plans, as they help to maximise the overall layout and flow of the property.
At the same time, focus on regularly shaped rooms with large floor plates, as they allow for greater layout efficiency and design flexibility to meet your growing needs.
Landed property prices in Singapore are expected to continue rising in the long run so it’s advisable to lock in more floor space from the start during the initial purchase, rather than to wait and do so later after prices have appreciated.
Besides all of the above areas, there are also miscellaneous factors that can impact the property market as a whole, which might in turn affect landed properties as well.
The 2 main ones are government cooling measures and the economic climate.
At any point in time, the Singaporean government has the power to intervene and implement specific cooling measures, which will have a significant impact on the entire property market. For example, in September 2022, cooling measures were put in place to moderate the demand for housing and encourage more responsible borrowing practices.
When the economy is thriving and households have considerable buying power, the demand for real estate tends to increase, potentially causing property prices to increase if the demand surpasses supply.
On the other hand, during an economic downturn, unemployment rates will rise leading to a decrease in household income, thereby resulting in an overall drop in demand for property.
Working With A Real Estate Developer
Property investment as a whole is a complex process, and you’ll likely make mistakes or overlook certain critical steps if you try to do it on your own.
Once you’ve taken the time to familiarise yourself with this guide, you should engage the services of a professional real estate developer or agent and work closely with that person or team, as they have a wealth of experience in the landed property market.
Real estate developers and agents will be able to provide valuable insights into the landed property market, identify potential properties, and help you navigate the complexities of the buying process from start to finish.
As a property investor, it can be exciting to invest your money into local landed properties, especially if you’re a first-time investor.
By familiarising yourself with the key areas mentioned in this guide, you’ll be able to invest in this market with confidence and maximise your chances of achieving great returns in the long run.