Invest in Singapore Properties

Invest in Singapore Properties: Home loans using two borrower and Three mortgagors.

The economic climate has recovered. The recession seems a distant memory (even though it’s only 1 year ago). Many banks have relaxed credit, including banks such as DBS, OCBC, Maybank and recently HSBC, Bank of China. And from our experience and sampling working with the banks, the easing of credit from the bank is rather across the board.

Recently up until June 2009, credit was very tight. Very high barriers were set up to qualify whether to lend out money. Property buyers or investors have a tough time to get any housing or property loans approved if they are sharing a property with multiple non-related parties. Even if they are buying an investment property, many banks would require them to put up 30% down-payment. This means a 70% loan of the property valuation.

Any complicated Singapore property deals is almost impossible with extensive processing time and uncertain end-result.

Refinancing mortgages in Singapore is equally hard as property values plummeted with loans outstanding greater than 80% of the valuation of the property.

Investing and Sharing a property in Singapore

Many family members and friends tend to get together to buy a second or third property. This phenomenon is getting more common as far as our mortgage consultancy – broker has experienced.

Usually all will share in putting up the cash for the down-payment and all will become borrowers.

Recently, Property buyers have found an innovative way to borrow for your Singapore property loans.

Many of the so called “Property Gurus or experts” with property buying or investing systems or those, “How I manage to own a multi-million dollar portfolio earning $2500 a month” are also mainly using similar ways. We will delve into the risks in the later paragraphs, remember, there are no free-lunch. Many are dishing out standard generic advice, masquerading as divine investment and view of the future.


Let us now explain how it works.

One would avail cash for down-payment while the others will make their cash flow available so as to borrow large sums of funds.

For example, Property Buying amongst three people (real example, fictitious people), Oliver, Soon Huat and Kim Seng.

Do you want to know how Oliver and Soon Huat can buy a property without having CASH down-payment?

Do you want to know how Oliver and Soon Huat can buy a property without the cash down-payment?

• Oliver earns $2000 a month
• Soon Huat earns $5000 a month
• Kim Seng is a retired cousin, who has lots of cash, but no cash flow. Cash in excess of $400,000.

Property loans Borrowers

• Oliver and Soon Huat are borrowers.

Using a very relaxed criteria and barrier, they may be able to borrow up to $800,000 to $940,000 if they have no other financial commitment and are eligible to borrow over 30 years. (Maximum loan quantum is very risky, you have to assess your risks. The amount illustrated are estimates, banks have final say in actual amount of lending offered)

Based on the cash flow (salary) of Oliver and Soon Huat, they would be able to afford to buy a property in the range of $1m to $1.175m.

What is the Cash down-payment?

The cash down-payment required would be $200,000 to $235,000.

Since Oliver and Soon Huat did not have cash, Kim Seng who is retired and seeking an investment would pay the $200,000 to $235,000 cash plus stamp duty for it.

How does the Property Buyer Investment system work?

PROPERTY LOAN BORROWERS

• Oliver and Soon Huat would make available the cash flow (salary) so that they can borrow money to buy an expensive property.
• Kim Seng would pay the cash down-payment.

PROPERTY OWNERS – Mortgagors

• Oliver, Soon Huat and Kim Seng are all co-owners and mortgagors.
• The apportionment of the asset share is agreed by the property investors in private. They can do so under the tenancy-in-common structure.

Oliver, Soon Huat maxed out their Property borrowing capacity.

The Singapore property loan was based on Oliver and Soon Huat’s credit standing and cash flow.

Since Kim Seng is the Mortgagor (owner) and not the borrower, his credit assessment is not being looked at. (Not all banks allow this)

What are the risks for Borrowers and owners of such Property Investments structures?

Oliver and or Soon Huat lose their jobs, they will be unable to repay their installment if they have no savings.

The Singapore property loan – mortgage will be in default.

Soon the bank will likely serve notice to pay up to borrowers or mortgagors (owners).

Hence, the end result is, all people are liable for the loan, not simply the borrowers.

The bank will re-possess the property and put it up in the market for sale. If the sale comes short of the outstanding loan amount, all mortgagors and owners are likely to be liable. The bank may sue all three and recover whatever monies it can.

What is the RISK for Kim Seng the Financier of the property?

If Kim Seng finances the property deal and is himself involved in several such deals, he may be able to pass the cash flow requirement (because his credit and liability is not checked).

In case Kim Seng has many such properties, if One property falls through by default of payment or installment, Kim Seng will be exposed.

In addition to that,

Kim seng may be forced to pay up for any short-fall. Because if one or multiple properties default may cause a cascade of properties to fall.

These type of Singapore property buyers or investors typically rely on rental income. If rental income is not forthcoming, trouble will come very quickly.

Invest in Singapore Properties: Sibor or SOR rates

by: Property Buyer Home loans

If you are investing in Singapore properties and you want to know how safe is your cash flow? What can affect your property investing cash flow?

Rental rates can affect your revenue while the underlying Borrowing costs determined by Sibor and SOR can affect your Cost.

Which is safer? SIBOR rates or SOR rates?

In order to know the answer, we need to dwell deeper into how Sibor and SOR works in Singapore.

Setting Interest rate targets in USA and Singapore?

The USA is united from many states. There is a federal government and the state government. As the Federal government has certain rights and controls while the local government the others.

Therefore, the federal reserve uses rougher policy tools such as using interest rates to control inflation and regulate growth for the country while the local government does it's part.

Singapore on the other hand is small. The Singapore government can micro-manage. When the economy heats up and Consumer Price index (CPI) rises, instead of raising interest rates to control inflation, Singapore could raise it’s currency value against a trade weighted basket of currencies.

This reduces the prices of imports as the Singapore dollar strengthens. This has the effect of lowering inflation for Singapore citizens. However this also impacts certain industries which relies on exports.

SO DOES SINGAPORE GOVERNMENT SET AN INTEREST RATE TARGET?

Singapore’s interest rates are consistently set low. Though we are not sure “SET” is the right word. There are many factors including the liquidity of banks in Singapore which helps “SET” the interest rate environment.

Banks that are flushed with cash from depositor’s funds or it's own capital will release unused funds it into the Singapore Inter-bank market, made available to be borrowed by other financial institutions, for a small interest rate charge of course.

The rate is called, the Singapore Inter-bank offered Rate (SIBOR). This is the rate at which the banks lend to each other. Sibor is traded and published in the Association of banks of Singapore (ABS).

SOR is the Swap offered Rate also traded on the Association of Banks of Singapore.

SOR is a Swap. Swaps are basically derivatives contracts. These contracts are traded at a fairly high volume between the banks and financial institutions in Singapore.

SOR or Swap offered Rate is a benign form of Derivative which involves the US dollar and the Singapore dollar where banks trade with each other to borrow the funds. And the borrowed funds carry an interest rate. SOR is determined this way. Swap contracts behave a little like a share in a stock market.

Singapore’s interest rates are consistently lower than that of the US and that of Australia. This ensures that Gross Fixed capital formation is maintained at a higher level of which a significant portion goes into investment. Such as that of plant, machinery, software, etc. All of which could significantly enhance the long term productivity and efficiency of the Country.

Low Sibor and SOR rates drive investment driven inflation?

Singapore is not immune to inflation. However, due to the various policies tools at the disposal of the Singapore government, it can selectively target industries that are over-heating by imposing levies, taxes or restrictions while leaving the other industries which are not over-heating to continue to grow.

Thus Singapore’s micro-managed economy can maintain a higher growth rate due to long term lower interest rates driven by investments.

Australia's housing loans Interest rates are Crazy

Will Singapore’s interest rates reach the levels seen in Australia and US? It is hard to say whether Singapore will ever reach those rates seen in Australia or the USA, but on a comparative basis, Singapore’s interest rates tend to be lower than those in Australia and the USA.

Why will Singapore’s Sibor or SOR rates rise?

In most modern economies, credit is well developed. What this means is, when there are investments or economic activities, funds are being used up. For example, a project that costs $600 million may need financing of at least 60% of that fund.

That means the company who invests in that project only comes out with capital of $240 million while borrowing $360 million. Even the company’s investment of $240 million may also come from issuing shares or bonds of the company, leaving the actual capital of the investment lesser than $240 million.

In other words, investments deplete the funds available for lending into the Singapore inter-bank market. This leads to an investment activity based and economic expansion based rise of rates.

The other instance is when there are major economic shocks where we do not know how much are the banks exposed to these shocks. In such a scenario, each bank will view the other one with suspicion as they do not know whether they will get back their money if they leave lend it out. In such a scenario, the SIBOR or SOR rates move up very quickly. In such scenario, it is expected that the Singapore Government would intervene to provide the liquidity of the last resort, thereby stabilizing the market.

So it is safe to say, when investment grows, funds are sucked up because most investments are still credit driven in a developed economy like Singapore.

For Investors looking to invest in Singapore properties, it is important to understand the Singapore government's interest rate policy levers to estimate if you will be able to afford your Property loans in the coming future.

Singapore government cools Property market

SINGAPORE: The Government has introduced two new measures that will take effect Saturday to temper sentiments and pre-empt a property bubble from forming in the private residential market.

It said they will help to ensure a stable and sustainable property market.

The first is a Seller's Stamp Duty on all residential properties and residential lands that are bought after Friday and sold within one year from the date of purchase. The stamp duty will be applied at the standard ad valorem stamp duty rates for the conveyance, assignment or transfer of property.

Housing and Development Board (HDB) flats will not be subjected to the stamp duty as they are already subject to a minimum occupation period of at least one year.

The Ministry of National Development (MND) said the objective of this new tax measure is to discourage short-term speculative activity that could distort underlying prices. It stressed that it is not targeted at the purchase of properties for owner occupation or longer term investment.

The housing loan limit will also be capped at 80 per cent of the private property's value, instead of the current 90 per cent.

The 80 per cent Loan-To-Value limit will apply to all housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats, including those under the Design, Build and Sell Scheme.

Loans granted by the HDB for flats - including those under the Design, Build and Sell Scheme - will still have a cap of 90 per cent.

MND said this is because HDB flats are already subject to other criteria to prevent speculation and encourage financial prudence, such as minimum owner occupation period and restriction on ownership to one flat per household.

Explaining the rationale for the measures, MND said there is a risk that the market could overheat in the next few months, given the optimism fuelled by the economic recovery and low global interest rates.

However, it noted that the current level of speculative activity is still lower than what it was at the height of the property market boom. Overall price levels are below the previous peak.

MND warned that any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy.

The Government described the new measures as "calibrated", saying it prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed.

It will continue to ensure that there is adequate supply of housing to meet demand. Sites that can yield 10,550 private housing units have already made available in the Confirmed and Reserve List of the Government Land Sales (GLS) Programme in the first half of 2010.

This is the highest supply quantum in the history of the GLS Programme.

- CNA/sc
(Source: Channel News Asia, 19 Feb 2010)

Invest in Singapore Property carefully and avoid "Buyer" representation

Invest in Singapore property Carefully

by www.PropertyBUYER.com.sg Mortgage Consultants

Sometimes, it is often the sweetest of smiles that kills and the most beautiful faces that stabs you from behind.

We are glad that the Ministry of Home Affairs has finally appointed someone to regulate the Singapore property market. As it stands, Singapore property buyers do need some protection against unscrupulous Singapore property agents.

Many agents or agencies are openly claiming to be the Singapore buyer representatives. On the other hand, just click another link on their website, they will explain why they are also the best seller representatives.

Whether you are a first time property buyer or an experienced property buyer, it is good to know that your real estate agent has your best interests in mind as you select a home. You save all the hassle of going through the classifieds daily or surf the internet. This is a very common statement that property agents profess. Then the next moment, they are claiming to be seller representative and how they will get you the best selling prices.

But how do property agents perform?
• Do the Singapore property agents find you the best match?
• Do the Singapore property agents always seemed so positive about the ever rising property market and that the market will never fall? You feel so good about buying!
• Do the Singapore property agents say that there is en-bloc opportunity and that property is a good investment?
• How do they select the properties? From their stock of unsold properties?
• Do the property agents help you by showing you the option to purchase (OTP)? Do the agents tell you the unfair clauses in the Option to purchase (OTP) are standard clauses and that you needn’t worry?

Whose side are the property agents standing on? The seller side or your side?

Well, You can always draft your own Option to purchase (OTP) and tell the agent not to worry, just use yours.

Now, where are the facts? We would often ask them to show us the facts that property prices always appreciate and we can show you many that do not.

Do you want to know how property agents stage a nice show for you?


This is what we heard in the industry, not sure how many people other than Mr. Lim fell to this trick.

Mr. Lim found on the internet and called up a sweet looking property agent. She looked so sincere and innocent and very senior in position. After gaining his trust, she went to show him properties. After learning his needs and choice, she brought him to view properties.

Mr. Lim was surprised that so many properties that he saw, they were not ideal and did not meet his requirement. He saw 5 to 10 properties, but they were all not ideal. Then she brought out her trump card, the property she wanted to move.

Mr. Lim saw the property and Bingo. That was the closest match, maybe 80% match, it didn’t match everything, but the property agent convinced Mr. Lim that that unit is one of the best units available.

What Mr. Lim didn’t know was, what the property agent did, she kept a number of units and didn’t show it to Mr. Lim. Mr. Lim found out after accidentally calling up a few more agents out of curiosity. Surprisingly, Mr. Lim went for viewing and found much better units for cheaper price.

So what did the charming lady Property agent do to deceive Mr. Lim? Why did she do it?


The seller for the unit which was inferior was willing to pay 2% commission to the agent and it was not co-broke unit.

She only used the other other properties to show case and move her own 2% big fat commission property.

So now, the picture is fairly clear isn’t it?

We are eagerly looking forward to Institute of Estate Agents (IEA) to regulate the industry and set some ground rules.

Buying and selling agents must be separated and licensed on an individual basis, so that agents are careful not to be in cahoots with each other. Singapore Property Buyers can be more at ease if regulations are more comprehensive. Nonetheless Property buyers must always be vigilant, Buyers beware.

Propertybuyer.com.sg mortgage consultants and buyer advisors can be contacted at: -

6100 0608
sms 9782 8606

Contact PropertyBuyer.com.sg mortgage consultants

Invest in Singapore Ethics framework for Property agents - Not more exams

Head of Property agent need to focus on ethics, not exams
Article by: www.PropertyBUYER.com.sg


We applaud the creation of a regulatory body to regulate the Singapore Property agents.

The below is an excerpt from a news published by the Asiaone.com.sg on 13th Dec 2009.

"MND in October shared some details of the new regulatory framework that it is proposing for the real estate industry, which includes the creation of a new government agency to take on enhanced regulatory powers.

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.

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...
The move came as property agents here have come under increasing fire over the last few years for not having the right qualifications and for unethical practices. Minister for National Development Mah Bow Tan commented in March this year that the status quo was 'not tenable' and that the whole system was 'not satisfactory'.

Legislative enactment is expected by the second half of next year once the key elements are unveiled.

With the planned changes, agents' activities will be monitored more closely and rules enforced more keenly. For example, real estate agents will no longer be allowed to be freelancers (agents who are not contracted with any accredited agencies). They will also be prevented from representing more than one agency.

Agents must also pass an industry examination and be accredited by a new accreditation body (to be set up next year) before they can practise."

http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story20091211-185327.html

There seems to be an overly keen focus on Examinations

There is a lot of talk about agents will be monitored more closely and they cannot represent more than one agency. These protect the rights of the Agencies.

The only thing that is mentioned that perhaps have a slight influence on protecting the consumer is Examination and improving professionalism.

What is the real challenge?

Many agents are already very knowledgeable. It is not a matter of full-time or part-time. Did MND know that many of the Singapore property agent cheaters are very professional and have many years of experience?

It's just that some of these people are simply unethical.

Now, examinations will NOT solve the problem. By enforcing more and more examinations which we are afraid MND will impose, would have missed the point completely.

By having examinations, you would remove some agents from the field, this would make long time agents stronger and give them more business. This is a rather stupid and potentially dangerous way of regulating, if it really comes to that. We are hopeful it will not end up this way. Do note that some of the dishonest agents are the experienced ones.

Just like there are wolfs out there. We don't throw sheeps to the wolfs so that these wolfs will become less hungry and tame.


So by feeding a Dishonest Singapore property agent who can also be very senior and very professional (knowledge wise) by eliminating less experienced agents, this is like throwing sheep to wolves.

How can we ever satisfy their greed?

So we urge MND and the new Head of Property agent regulator to focus on creating a framework that monitors ethics and removing conflicts of interests.

Some of these agents even work with rogue mortgage consultants which are tied up with lawyers to charge property buyers more for law fees so as to get a commission.

Some of the unethical Singapore Property agents' behaviours: -

* Cheating on valuation, working with roger valuers who stick their heads out for higher valuation so as to cheat the banks.
* Lying about the property transaction and staging a show to squeeze more commission
* Illegal kick backs from rogue loan consultants which are tied to lawyers.
* Illegal kick backs from lawyers.
* Running away with cheques, giving fake identidy.
* Recommending loans where they are not expert in.
* Cornering property launches and buying them up for sub-sale.
* Cheating the selling into letting go their property cheaply. Buys the Option of purchase and then immediately transfer of nominees (names) for Option to purchase.
o This involves cheating an owner into disposing a property at below the fair value. Then the agent goes into the market to re-sell the option to purchase for easily 50k to 100k more as there will be takers.

* The list goes on.

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.

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

Contact Singapore mortgage consultants
Tel: 6100 - 0608

SMS: 9782 - 8606

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.