Invest in Singapore properties: 10 things to know for first time private property buyers

10 Important things to know for 1st time Private Property Buyer on sub-sale units

By: Daphne of www.PropertyBUYER.com.sg mortgage consultants
TEL 6100 - 0608
SMS 9782 8606

As a recent property buyer, I started my search for my ideal apartment since November last year. I began my property hunt with absolutely zero knowledge on buying property in Singapore. I do not know the legal procedure involved, I do not know the tricks used by most property agents, and I do not know which area I should start with my property hunt, just to name a few. I missed the boat in making my purchase during the period from Jan- May when the property price was low as I was hoping that the price will go down even further and obviously being a first time inexperience property buyer, I was afraid to take the plunge.

I believe there are many people out there facing the same challenge as I did when I first started my property hunt. I was lucky to have friends who are experience in the property field to provide me with sound advice. I hope that this article can provide some useful insights on things one should take note of when purchasing a private property. The information provided is all base on my own accumulated knowledge and experience when I did my own property purchase.


1) Due Diligence
Buying a property is a big commitment and requires a lot of hard work in doing your own research. Never depend solely on agent’s recommendation as end of the day , the agent’s aim is to close the deal and get the commission. Research includes surfing through various property website to read up on property related articles and checking out the available units sold.

2) Do not depend solely on one agent to look for your apartment. Nothing beats
spreading the eggs into a few baskets and doing your own search. Talk to as many agents to learn and gather insights along the way. Experiencing unprofessional agents is part of the learning curve.

3) As a private property buyer, you do not pay any commission to the agent. And you should not no matter what he or she says. This is because they earn commission from the seller.

4) Stamp duty can be paid using CPF.
Buyer will have to fork out Hard cash first in paying the stamp duty. CPF will only reimburse the stamp duty back to the buyer upon completion of the property sales transaction which will take at least two months.


5) Stamp Duty fee calculation
1st S$180K is 1%
2nd S$180K is 2%
Remaining amount is 3%.

For example: if you are buying a property that cost S$600,000, the stamp duty will be as follow:

1st S$180,000 @ 1%- S$1,800
2nd S$180,000 @ 2%- S$3600
Remaining S$240,000 @ 3%- S$7,200
Total stamp duty is S$12600

6) Bank Valuation
Bank valuation on the property you wish to buy is very important. The bank valuation will help to determine how much cash upfront you need to fork out and whether you are buying an overprice unit or getting a good deal. Never take the Singapore property agent’s claimed valuation as final. Agents do cheat on valuation. Make sure to check with an independent third party such as a Singapore mortgage consultant or your own personal banker who can help you to make sure on getting a proper and correct valuation. Different banks often give different valuation for the same unit.
7) Bank Loan
Not all banks offer up to 90% bank loan. Some bank only offer up to a maximum of 80% of 85%. Thus if you wish to buy a unit with a 85% or 90% bank loan, your choice of bank selection will be limited. Its recommended that you talk to your mortgage consultant or bankers up front on your intention to get more than 80% loan.

8) One should also compare the various bank interest rates to secure the best bank
loan. Some loan package come with lock in period and others use Sor or Sibor rates. Property agents usually ask one of their most frequent use bankers to advise the buyer on the interest rate. Often they do not help the buyer to compare the rates and package from the various banks. It is up to the buyer’s due diligence to do so. The use of independent mortgage consultant will be helpful in this aspect.

9) Ensure that you can secure the bank loan before paying the 1% option to the seller. In the event that your bank loan is not approved, you will have to either top up the differences in cash or to forgo the purchase, end up losing the 1% payment.

10) If you are buying a sub sale unit that is still under construction, you will need to
pay another S$400 to S$428 administrative charges in cash to the developer for the paper work procedure fee.

Invest in Singapore Double Bay residences: Value Analysis

Invest in Singapore Double Bay Residences: Value analysis
Contributed by: www.PropertyBUYER.com.sg

In china, most residential property comes with leases of 70 years. Let's take a look at the valuation dynamics of 99 years lease-hold properties in Singapore.


We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinance home loans, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed or fear based buying approach, we emphasize that you need to check your property home loan affordability. Check out the mortgage calculators.


According to SLA’s leasehold land premium calculation and valuation of 99 years lease hold land.

Singapore SLA 99 lease hold valuation

(Adapted from SLA’s Differential Premium valuation calculation)



SLA's valautions for 99 year leasehold properties are a structured way in which to calculate the depreciation of an existing 99 years lease-hold property which is being proposed for upgrade, re-build, renewal or re-zoning. This nonetheless forms a basis of how a 99 year leasehold property in Singapore is valued across the board if you consider that Singapore Land Authority is the Authority in these matters.

Of course, how the property is valued and what price it is being sold for may differ. SLA's valuations of such properties do not take into account the various differences in the conditions of the properties.



Condition of 20 years and 30 years buildings (Free hold and 99 years leasehold)



The conditions of 20 year to 30 years buildings are already quite poor. Most will have issues such as leaking from pipes, minor cracks, electrical systems malfunctioning and possibly other structural issues. Tenants always like new properties with new amenities. Therefore as properties age, the rental value deteriorate. And hence the price of these properties trade at a discount to other properties.


Double Bay Residences in Simei Singapore



A building consists of 2 major components

· Building cost (plus other building related costs) - ~$350

· Land cost - ~$296





Land cost for Double Bay residences - Simei Singapore = $296 per square foot per plot ratio (psf ppr)

(Source: Straits times - http://www.asiaone.com/Business/Story/A1Story20080724-78562.html)



“'A PARTNERSHIP between UOL Group and Kheng Leong – both companies linked to banker Wee Cho Yaw – emerged as the top bidder for a residential site at Simei Street 4 at the close of the tender yesterday....



The two companies’ bid, which was the highest of three bids, came to $236.1 million, or some $296 per square foot per plot ratio (psf ppr).Right now, developers can bid up to about $200-250 per square foot of potential gross floor area at most for suburban condo sites, which translates to breakeven costs of $650-700 psf. However, if construction costs continue to go up and selling prices continue to drop, there's not much else you can do except to lower your land bids. The question is what is the government's threshold for pain?' a seasoned developer said.” (http://www.asiaone.com/Business/Story/A1Story20080724-78562.html, By Kalpana Rashiwala



Building cost for Double Bay residences - Simei Singapore

According to a Straits times report published in July 2008, construction costs for medium-quality condominiums are in the $260 psf of GFA to $320 psf of GFA in Q1, 2008 and in Q2, it has increased from $280 to $350 psf of GFA range. This is in line with analysts expectations of a breakeven cost of $650 to $700 psf ppr.

"Construction cost consultancy Rider Levett Bucknall (RLB). said: 'Construction prices for medium-quality condominiums indicatively range from $260 psf of GFA to $320 psf of GFA in Q1 2008, and prices have risen further to $280 to $350 psf of GFA for Q2 2008,' it said. 'High demand and competition for limited resources, the lack of tendering capacity among contractors, sub-contractors and suppliers, and volatile commodity prices have contributed significantly to building tender price escalation,' the firm added." (Source: Straits times, http://www.asiaone.com/Business/Story/A1Story20080724-78562.html)

Assumptions For Depreciation of Double Bay Residences in Singapore: -

· Depreciate the building more slowly with the 1st 10 years depreciating less and gradually more in the second 10 years and so on.

· Depreciate land more slowly in the earlier years and then depreciate faster in the later years.



This is just an illustration and represents our views only, buyers please exercise your own judgement.

Double Bay residences Simei Singapore

In the absence of external factors, on an intrinsic value basis, double bay residences valuation could continue to drop in the years ahead. Of course, the actual prices does not necessarily have to follow this pattern if there are external factors at play.

What external factors could affect Double Bay residences value?

Developments, lifestyle, Population, etc.

Positive external factors could also be in the form of Free Hold land value in the vicinity of double bay leading to the base value of the land increasing. For Double bay, the land cost is $296 per square feet per plot ratio, if free hold land price has increased dramatically in the same area to $500 psf ppr 10 years later. Then by inference, the remainder 89 years of the lease of a 99 years lease hold property land will also increase in value. This increase in the land value could either partially offset the depreciation in the building value or completely offset it and increase in selling prices.

Sentiments

Sentiments drive up prices, leading to price distortions and anomalies. This factor is very pertinent in 99 years lease-hold investing. Developers and Singapore property agents alike have very compelling arguments promoting the sale of 99 years lease-hold properties. If enough people believe in it, the price gap will narrow between a 99 years leasehold property and a free hold property.

Government policies and changes in Differential premium

Government policies could impact the base value of future 99 years lease-hold land and consequently affect the remainder lease of any lease-hold land.

So for double bay residences in Simei Singapore, the best form of increase in value stems mostly from increase in land prices. As far as en-bloc potential, it is almost NIL if the price increase in Free Hold land is not significant and the differential premium (by SLA), is not reduced from 75% to a lower figure.

Construction cost and raw materials

If construction costs go up, a similar or new replacement property would likely be more expensive, therefore any existing buildings still in fairly good condition will therefore fetch better prices. However, if the cost of construction go down, then it would be cheaper to build more units onto the market depressing (or moderating the increase of) the prices of existing units.

So property investors can still make money from any swing up in sentiment. But if fundamentals remained unchanged, it will be more a matter of the greater fool theory.



What lessons could we learn from Double Bay Residences - Simei Singapore?

In the case of Double Bay residences in Simei Singapore, the building cost is high. And buildings do depreciate fairly quickly. Usually, buildings after 30 years would be in fairly bad shape despite whether it is safe to stay in. These properties would be practically undesirable as rental properties.

Given that the total base value of this property is 54% of the total cost of the property and that buildings depreciate faster than 99 lease hold land. This property will likely lose value quickly. The land value of this property would also along with time, lose it's value.



So Should we buy more expensive properties?

Generally yes, if you can afford it. But buy value, not price!!!

Buying a Singapore property is a personal choice as much as it is a matter of affordability. When the government made credit easily available by lowering the cash downpayment requirement, the end result is that people will have to pay higher prices for smaller properties. So there really is not much choice if affordability is an issue and you will most likely end up with smaller units. That also mean that you will not get a very good deal as small units trade at a more expensive price.

For Example, if we look at other places where the land could be $1000 psf ppr (Free Hold) and we add a luxuriously fitted building at $500 psf ppr. The building is only 33% of the total value. The total psf ppr price would then be $1500.

Assume that with a mark up, you buy it at $2000 psf ppr. In this case, the building portion of the value will continue to depreciate, while the Free hold land value tends to increase in line with inflation and/or population growth. You could be paying more, but you are sitting on valuable land which can potentially more than offset any reduction in building prices.



Expensive land stays expensive or it could even become more expensive.

And the more expensive the land, the more incentive it is to build luxuriously and beautifully in order to optimize usage in prime land. With more and more such buildings in any particular area, the vibrancy will increase, leading to better overall facilities and amenities. This creates a positive reinforcing cycle which supports the property values. In the case of building cost to land cost ratio, as long as it can be built luxuriously enough with good utility, as a rule of thumb, the lower the ratio, the better it is in keeping the value of the property as a large part in the value is vested in the land itself, while the building itself depreciates.

You can contact a Singapore mortgage consultant to evaluate home loan affordability.

Singapore property investors: Can a 99 year lease-hold condominium go en-bloc?

Singapore property investors: Can a 99 year lease-hold condominium go en-bloc?


Contributed by www.PropertyBUYER.com.sg Mortgage Consultants

What should you buy? A 99 year property or a FH/999 year tenor property?

Are you looking for yield or are you looking for overall capital gains + Yield?

Assumes that a 99 year property gives a yield of 4% while that of a Free Hold property gives 3%.

Is it still worth it? What if the fall in your property value more than offset what you earned in rental?

Say you make 20k a year in rental for 10 years (making 200k) of a $1m property and after 10 years the property value falls from $1m to $800k. Not to mention interest costs, your efforts would have come to nothing.

Let’s look at how Singapore land authority determine the value of a 99 lease hold property.

According to SLA’s leasehold land premium calculation and valuation of 99 years lease hold land.



(Adapted from SLA’s Differential Premium valuation calculation)

As you can see, 99 year lease hold land depreciate less during the first 33 years, still fetching at least 80% of a similar Free Hold land it drops off very quickly after 60 years.


How much is a 99 year old lease property worth?

Under normal circumstances, without any Singapore government policy impetus, a 99 year lease-hold property will continue to lose value until it reaches zero.

If a development (or a condo) wants to top up the lease of a lease-hold property back up to 99 years, it is still subject to SLA’s chief valuer’s valuation of the value of the proposed upgrade.

Can en-bloc happen to a 99 year lease hold condominium?

In case of an en-bloc or simply just a top-up of lease, you would have a difference in values between the existing property and the proposed new one.

So this is how SLA calculates the differential premium.

• Differential Premium = The proposed new property value – existing property value.

Under the new ruling in 2007, Singapore government takes 75% of the additional value created (Differential Premium) from the proposed upgrade or development, while the stake holders take 25% of the additional value.

Due to the depreciation of the 99 lease hold properties, the differential premium becomes higher.

When the Singapore government takes 75% of the differential premium, this means that most of it will end up as tax or fees while the stake holders only stand to gain the 25% of the additional value created from an en-bloc or top-up of lease.

And this top up of lease of a 99 years land is not a given. It is entirely subject to approval.

So are you saying that 99 year lease hold condominiums cannot en-bloc?

En-bloc activity for 99 years lease hold properties can still happen.

Scenario 1 – Top up of lease to 99 years + tear down and build a new condo: -
For example, a 99 years lease hold property was sold at $900 per sq feet per plot ratio (psf ppr). The price differential between this property and the free hold property in the same vicinity is very small when new. Say the Free Hold property was $1000 psf ppr.

30 years later, the Free hold property price is $2500 psf ppr.

• At 30 years old, SLA’s valuation rates the 99 year property at 85.4% of a Free hold equivalent property. Assuming that the market also rates the property similarly.

This means that the equivalent 99 year old free hold property is rated at $2500 x 85.4% = $2,135 psf ppr.

Say you want to top up the lease to 99 years and build a new condominium on it’s existing site, the top up value would be $2500 x 96% = $2400 psf ppr. (But 99 years leases top-up is subject to case-by-case valuation by the SLA)

Considering that you would already fetch $2135 psf ppr. If you were to tear down the building to re-build a new condo, you are likely to get $2400 psf ppr and cost of building psf ppr could be $300 to $600 psf ppr. That would mean that the cost already be $2435 or $2735 psf ppr.

So in this case, there is absolutely no impetus for the developer to build or to make an offer to the residents for en-bloc.

The only ways an en-bloc would happen to the 99 years condo are: -
• The 99 year lease hold building is in a very bad condition. The price being sold on the market is much less than SLA’s valuation of 85.4% of a Free Hold equivalent. This type of anomaly or price distortion makes en-bloc possible.
• 99 years top-up of leases is approved. (There is no guarantee)

Scenario 2 – Top up of lease to 99 years + tear down and build a new condo + Doubling the plot ratio: -

For example, a 99 years lease hold property was sold at $900 per sq feet per plot ratio (psf ppr). The price differential between this property and the free hold property in the same vicinity is very small when new. Say the Free Hold property was $1000 psf ppr.

30 years later, the Free hold property price is $2500 psf ppr. But if you double the plot ratio, that means that you could build double the sq feet of space on the same plot of land. That would mean that the potential price now is $2500 x 2 x 96% = $4,800 psf ppr.

• At 30 years old, SLA’s valuation rates the 99 year property at 85.4% of a Free hold equivalent property. Assuming that the market also rates the property similarly.

Now, with an existing property on the old plot ratio = 85.4% of $2,400 = $2,049.60.

Assuming that building cost would be $400 psf ppr to $800 psf ppr (higher for bigger buildings)

So SLA calculated the differential premium is $4,800 psf ppr (assuming the case-by-case valuation agrees with this value)

So the cost is $2,049.6 and potential value is $4,800 psf ppr.

So the differential premium is around $4,800 psf ppr - $2,049.60 = $2,750.40.

And under the new role in 2007, the Singapore government takes 75% of the $2,750.40. So the cost payable to the Singapore Government is $2,062.80.

So the cost of the renewal of the 99 year condominium is: -

$2,062.80 (payable to the Singapore government) + $2,049.60 (Existing value of condominium) + $800 (Construction cost) = $4,912.40

The cost of building, topping up the lease as well as paying the differential premium of 75% came up to $4,912.40, there is no value to be had from en-bloc in this case.

Given the high development charge of 75% for change of use or for Differential premium, it is unlikely that en-bloc can happen.

Unless there is a change of the Singapore government’s share of the differential premium from 75% to a more reasonable level.

SUMMARY OF 99 YEARS LEASE HOLD EN-BLOC POTENTIAL
So in conclusion, the capital value of a 99 year lease hold property is better obtained from increase in property prices around the property rather than waiting from any en-bloc or top-up of lease.

This would likely hold true until such time that government policies would change making residential property renewal profitable and happen.

What would you do if Singapore property agents tell you again, "En-bloc" potential indiscriminately? As a Singapore property buyer, the choice is yours. Buyers beware.

Invest in Singapore Properties: But Novice Singapore Property investors beware of Singapore Property agents

Invest in Singapore Properties: Novice property investors beware of Property agents.

Singapore Property agents cheat HDB Home buyer
Today we watched in horror another Singapore property agent attempts to cheat hdb property buyer. He asked for deposit of $1000 as money for option to purchase but gives the home buyer only an empty option to purchase form that is unsigned. (source: tv channel 8 news, 12 Sep 2009)

Article contributed by www.PropertyBUYER.com.sg (Other authors, if you wish to contribute articles, please contact me)
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About Property Buyer Contact Property Buyer for Singapore housing loan

www.PropertyBUYER.com.sg

We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinancing, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed based buying approach, we emphasize that you need to check your affordability and do your sums right. If you are unsure, we are happy to help you check.

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

loans@propertyBUYER.com.sg

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This is a time to be extremely careful, dishonest property agents in Singapore are out on the loose again. A hot property Market has the same effect as changi prison not locking opening it's gates. Yes, the effect is criminals running amok.

During a hot property market dishonest Singapore property agents run amok. They find many preys as people are generally guided by fear and greed.


FEAR AND GREED ARE DISHONEST PROPERTY AGENT’S BEST FRIEND



Fear that the Property market will run away with hefty price rises! This cuts short the thinking process, things are not thought through in detail.


Greed, in that they want to get in quickly as the market is rising, the can buy and sell at a higher price.



YET ANOTHER TRUE STORY OF DISHONEST SINGAPORE PROPERTY AGENT CHEATING HOME BUYER



Recently around late august, a novice Singapore property investor Miss Yuen came to us to get a Singapore home loan for her studio apartment. She (the property buyer, Miss Yuen) recounted her interesting encounter with a Dishonest Singapore property Agent.



Property Buyer Views clementi property Singapore


She was looking for a 2 bedroom property around 890 sq feet in Clementi. A very professional groomed and pleasant looking Singapore property agent brought her to see the studio. Miss Yuen was very keen with the property, but she had a budget of $580k. The asking price was $650k. The price is quite steep for such a small unit which also happens to be 99 years lease hold too.



Property agent assured investor that UOB can match home loan valuation



The Property agent assured Miss Yuen that banks can match $650k.



She ask us to check the valuation, we came back with a valuation of $550k and the highest valuation we got was $550k.



We told miss Yuen our customer that no matter how we push UOB wouldn't move the valuation more than $560k.



Property Investor doubts our mortgage consulting abilities



Miss Yuen started to doubt www.PropertyBUYER.com.sg Mortgage Consultant’s ability to get the best and highest valuation. She said the Property agent promised her to get bank loan for her to match $650k. Miss Yuen was very tempted to just go ahead to place the 1% deposit for the option to purchase.



Property Investor Miss Yuen gave www.PropertyBUYER.com.sg a chance to check



Miss Yuen was very busy but she still gave us a chance to respond by calling us to verify.



We told her to ask the agent to give the name of the banker who promised $650k valuation so that we can verify the information.


So miss yuen asked the property agent for the name and the contact of the banker. The property agent gave the name and number of the banker without hesitation.

She looked to real and genuine. Miss Yuen was so convinced. She even called us and she said, “I’ll have to go with the agent’s home loan suggestions, her banker can match the valuation.”


We told Miss Yuen, “Why don’t you let us check with the UOB banker to verify the information? And if possible ask the UOB banker to put the valuation confirmation in writing.”


Property buyer Miss Yuen reluctantly agreed to give us a chance to Verify

Miss Yuen was so convinced by the Property agent that she reluctantly let us go and verify it, because she didn't see a need to.

She gave us the number of the UOB banker to call, we called the banker and he told us the valuation was $540k, but that was 3 weeks ago.

We asked the UOB banker, “Didn’t you tell the Property Agent that it was $650k for that particular condominium unit?”


The UOB banker said, “Nope, I never said that. She asked me to match $650k but I told her, sorry, NO WAY! The valuers said NO. I only told her it was $540K.”

www.PropertyBUYER.com.sg, “But the property agent claimed you said, $650k valuation is matched!”



UOB Banker: “Sorry, I did not say that, I said it can match $540k, that is the maximum. I told her no way to match $650k property valuation very clearly.”



We told Miss Yuen that the Valuation cannot match $650k


She asked us, "Are you sure? Agent says her banker can match $650k property valuation."

We asked her to go verify with the banker. If he says can match at $650k, ask for an email to confirm that.

Miss Yuen checks with Dishonest Singapore Property Agent

After this encounter, we asked Miss Yuen to check with the the Singapore property agent how she had known the valuation was $650k?

Miss Yuen, “How did you know that the valuation was $650k? UOB says cannot match valuation.”

Dishonest Property agent: “Did I ever say UOB can match? Sorry I must have made a mistake, it was my colleague who told me.”


Could the Property Agent have made an Honest mistake?


How could she not know the valuation of the property she is marketing?

By now, Miss yuen was fuming. She questioned the property agent and wanted her to explain.

Before the property buyer Miss Yuen could finish, the agent quickly hung up the phone.

Miss Yuen tried to call the property agent back many times, the property agent refused to pick up the call.



Dishonest Singapore Property Agents are Armed with Bank’s application forms at Launches or show rooms



These days, some property agents are armed with the bank’s application forms at the launches. They will try to ask you to sign up and apply for a loan on the spot.

Sometimes, that bank is the only bank that can match an over-priced property, that means if you buy, you are forced to go with 1 package. In the worst case, for some re-sale properties, the prices being asked cannot be matched, that means you will have to pay a CASH-OVER-VALUATION (COV) like in HDB case. That is a lot of extra cash to cough out.

In case you did not budget for this, you will have to let your option to purchase lapse and lose your 1% deposit.



If the property is $600k, you will lose $6000 just like that.



Property agents don’t care, they will still get 50% of the forfeited deposit, plus they can market the property again. If their commission is 1%, selling the property 2 times gives them 1.5% of commission. This is a good deal. If they sell the property three times, they will get (0.5% + 0.5% and 1% on final successful sale). They will get 2 times.

For many dishonest property agents out there, they CHURN the buyers. This is because listings are hard to get, so they don’t care.

Novice property investor must be extra careful. Some Dishonest Singapore property agents look very honest and professional. Be careful of a beautiful or handsome face. And it is sometimes the more experienced property agents that are more dangerous and cunning to deal with. CEHA only does so much to certify them for knowledge, but CEHA cannot guarantee their integrity especially when the agents are engaged in conflicts of interests (both selling and buying activities).



Your loss is Dishonest Singapore property agent’s bonus.



About Property Buyer Contact Property Buyer for Singapore housing loan

www.PropertyBUYER.com.sg

We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinancing, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed based buying approach, we emphasize that you need to check your affordability and do your sums right. If you are unsure, we are happy to help you check.

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

loans@propertyBUYER.com.sg