Invest in Singapore property: Select right property

Invest in Singapore property: Selecting the right property
Courtesy of www.propertyBUYER.com.sg
http://www.propertybuyer.com.sg/viewnews.php?article=109

There are many things to consider in property investment. Financing is one of them

First of all, let us clarify, we are NOT property agents, so we have no vested

interest in what property you select. We are merely writing this based on our

experience. We are Singapore Mortgage Brokers who help you get home

loans or to refinance your property.

Tel: 6100 - 0608 sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php


The key things to consider in Property Investments are: -

* Affordability and holding power

* Rental yield

* Capital appreciation


Affordability and Holding Power

Ideally, you should not purchase an investment that is way beyond what you

can Safely Afford.


You should also have good holding power to withstand Mortgage home loan

interest rates fluctuation as well as have enough cash flow set aside for up

to 24 months of Mortgage Home loan installment.


This is important as market condition can become volatile and the last thing

you want to do is to sell your investment property at a huge loss in a

Singapore Property market stricken with panic.


You can check your affordability with us: -

Email: loans@propertybuyer.com.sg


Rental yield and Income

Rental yield is important in a property investment. However rental yield

cannot be over-emphasized.


What is important is the Return on Invested Capital (ROIC), most commonly

referred to as ROI.

Rental yield is: -

Annual Rental divide by Property purchase price


Return of Invested Capital (ROIC): -

[Annual Rental - (Interest financing cost) - (Maintenance & Misc Cost)] divided by Invested Capital

By looking simply looking at a property investment and comparing yield can

be very mis-leading. It is similar to looking at P/E for shares. As rental prices

fluctuate, so does property prices.


Buying based only on investment yield is the of the most foolish mistakes a

property buyer/investor can make.


RENTAL DEMAND

Singapore's rental demands are mainly derived from foreign expatriates as

most Singapore citizens own their own homes.


RENTAL SUPPLY

Property stock do not stay the same, as Property Developers will likely get

first hand information from Governmental development plans in order to add

to the supply.

PROPERTY VACANCY RATE

Singapore's property vacancy rate have traditionally stayed at around 6 to

8%. This means that 6 to 8% of all private properties remain vacant.


From the recent late 2006, 2007 and 2008 experience, especially in 2008,

population grew up around 5.5% to 4.8m. The bulk of the population growth

is through foreigners coming to Singapore to work or stay. This drives the

vacancy rate downwards to around 3 to 4%. Rental prices start to shoot

upwards when vacancy rate drops to around 3 to 4% as this indicates

severe shortage.


In order for vacancy rate to go from 7% to 3% (within a year), based on the

property stock of ~ 300,000 units of private property, that is 12,000 units of

additional rental demand needs to be created.


Given that property developers are adding to the stock all the time, in 2008

forecast supply growth is around 4%.


That means for 2009, there needs to be 24,000 rental demand (within a

year) in order to SQUEEZE the rental market. Of course certain locations

will be more SQUEEZED than the others and start to rise first.


Otherwise, the rental market will remain very SLACK and without direction.

What happens when RENTAL yields go up?

When rental rates go up, the yield increase. When the yield increase, the

property prices go up.

So it is important to look at YIELD for a rolling 2 to 5 years instead of simply

the latest and most recent yield.

As an illustration, a Property with a 4% Rental yield.

In 2006

$3,000 per month or $36,000 per year ------> $ 900,000

In 2007

$3,500 per month or $42,000 per year ------> $1,050,000

In 2008

$4,500 per month or $55,000 per year -------> $1,375,000

In 2009 and Beyond???

$3,000 per month or $36,000 per year -------> $ 900,000

Given that property developers usually hold out till rental prices are good

before they launch so as to capture the BULK of the VALUE. And because

the property developers time it so well, the BULK of the VALUE created for

their company is from you and paid for BY YOU.


The average yield for SIngapore Properties is around 3 to 5%. At 4%, it

represents a 25 times leverage.

For every $100 increase in monthly rental, it leads to $1200 rise in annual

rental and hence $30,000 more for a property!!!


MAJOR RISK BUYING AT HEIGHT OF RENTAL PRICES

If you go in at 2008 thinking that a property is NOT BAD at 4% yield, it is

worth it to pay $1,375,000, you are exposing yourselves to a huge risk,

because if rental values cannot keep up or falls back, you are looking at a

$475,000 of capital loss.


WHAT IF BANKS ASKS YOU TO TOP UP CASH

And in case the banks exercise their clause to ASK YOU TO TOP UP your

equity in the home / property since the valuation has FALLEN, you will face

severe hardship!!!


CAPITAL APPRECIATION POTENTIAL

Some Singapore properties such as River Valley, Orchard road as well as

Singapore properties around District 9, 10, 11 and 15 have highly volatile

rental prices.

For example a yield of 10%, (formula 1 / 0.1 = 10) the leverage is 10 times.

For a rental of $12,000 a year, this leads to a

Capital value of $120,000


For a yield of 4%, (formular 1/0.04 = 25) the leverage is 25 times.

For a rental of $12,000 a year, this leads to a

Capital value of $300,000


So it is important to compare and get the yield from a Rolling 3 year

average, 5 year average from which to do your calculation. Otherwise you

are prone to make the "Mistakes of small numbers", by basing your decision

on a particular short span of track record of the property market and it's

possible income (rental).


Strata Title

No matter where you go, buying a condominium unit will entitle you to a

share of the land where the condominium is located. The higher the

Condominium go, the less land share you have.

As an illustration: -

Land of Estate = 200,000 sq feet

Plot ratio is 3 = 600,000 sq feet

That means that that entire plot of land builds up to 600,000 of space that

can be SOLD to public.


That can be either 3 storeys x 200,000 sq feet or 6 storeys x 100,000 sq feet

or 24 storeys x 25,000 sq feet each floor. Developers will build higher or

lower depending on regulatory requirements.


Let's say 600,000 sq feet is built into 600 condominium units of 1,000 sq feet

each.

If you own a 1 condo unit, your share of PHYSICAL LAND is only 333 sq

feet.


This is vastly different from owning a landed property where you own the lot.

Strata title risks.

Strata title land has some risks of collective decision making. For example if

80% or 90% (depending on age of property) decides to sell to an en-bloc

developer, even if you disagree, you will have to sell.

En-bloc may not necessarily be a good thing in some circumstances.

Landed Title risks

Landed title do not have the risks of Collective decision being imposed on

you. But it holds other risks. Due to the smaller cost for the government to

acquire your land under Urban redevelopment Authority's land acquisition

act, in case the government wants to build a road through your house, your

house will be forcibly acquired. And although the government pays a market

price (or so they claim) for your property, most people whose property had

been acquired has never been really happy with the compensation. And the

government do time their purchase at a time when the market values are

low, leading to home owners capitalising the losses.


Should we go as high as possible?

Typically NO. Taller buildings have a higher maintenance cost over the longer term. Not only that, you are paying more for a building rather than the Land.


Over time, the building deteriorates. And if the land's appreciate does not

offset the price drop of the aging building, the Capital appreciation could be

moderated.

Should we go as low as possible?

Yes, generally true as you own more of the "Physical Land". But if you want

to own a condominium which has less than 6 storeys high, you may miss out

on speculative demand from Foreign buyers.

6 Storey High Properties

Foreigners cannot buy landed property or property whose development has

less than 6 storeys high. This is to prevent hedge funds and wealthy

individuals from cornering and hence controlling Singapore's domestic

economy through LAND.


Singapore mortgage advisor like us to help you go through many valuations

and recommend a SAFE price to bid for your property. That drags out the

buying time.


Why work through www.PropertyBUYER.com.sg for mortgage home loans?

We help property buyers to look through each property's valuation to

establish a valuation range for any given unit. And based on that, we

recommend a bid price for the buyer.



www.propertyBUYER.com.sg is a research-focused Singapore Mortgage

Advisor that helps individuals get the best fit Singapore Home loans or to

refinance their properties, not simply the cheapest Singapore Home loans.

You can come to us for your Singapore Home Loan needs and we will do the

research work to compare all the bank's packages as well as assess the

best fit for you.

ABOUT US Contact us

Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Contact us

http://www.propertybuyer.com.sg/contactus.php

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Dishonest Singapore property agent: Wants your money

Dishonest Singapore property agent wants your money
Article by: http://www.PropertyBUYER.com.sg
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Call Them
Tel: 6100 - 0608
sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg

http://www.propertybuyer.com.sg/contactus.php

What some Singapore Property agents claim they do for you (FICTION)

- Help you sort through your priorities and concerns

- Assist in review purchase documents

- Loan counseling / qualifying

- Assist with home inspections

- Estimate closing costs, down payment and incidentals

- Check through Schools / areas / neighborhoods

- Property Appraisal

- Valuation

- And finally getting Banker Approval

Article located at: -
http://www.propertybuyer.com.sg/viewnews.php?article=108

What Singapore Property Agents actually do (REALITY)

Singapore property agents are always rushing to close deals. If you are a

foreigner, you will probably not know that. In Singapore, Singapore property

agents get their commission from the property seller. But if you are a

foreigner whose home country has a practice to pay the buying agent, they

will ask for a commission from the buyer as well.

* YOU SHOULD NEVER PAY THAT buyer commission.


The agent is hard pressed to close deals and to close it fast. It's a hit-and-run
industry and there is no reward for being honest in the Singapore property agent
business.

Most of the time, the agents claim to represent the sellers and the property seller's interests. In the very next moment, they claim to represent the Buyers and take care of the buyer's interests.


Property Seller

The best way for Singapore Property agent to get a commission is to ask

you to sell your property through them.

Property Buyer

Due to the dynamics of the market, the Singapore Property agent will only

get a split of the commission when he/she brings a buyer to see and

eventually buy a property.

Do Singapore Property agents get you the best Home Loan mortgage?

The faster they close the property purchase the better. The property agent

has no interest in dragging out the deal.


They are not dishonest in any way, it is just that they only tell you what you

want to hear to close deals. And they are just economical with the truth.


If they tell you too much, you may change your mind and decide not to

proceed. If you don't proceed, they don't get a commission. It's that simple.


So what Singapore property agents do with Mortgage home loans is the

same. They will find the higher valuation and ask you to check with the

banks. Singapore property agents will arrange the bank loans for you from

the banks that MAY NOT give the best rates and terms. Because they can

match the seller valuation.


WHY Singapore Property agents wants banks to match seller valuation?

Singapore property agents wants banks to match seller valuation

BECAUSE, this will close the gap between buying and selling price. And

when you are willing to pay much HIGHER, he/she can earn commission

from the property seller or he/she shares his/her commission with the seller's

agent.


Property agents can help you get banker approval???

The Singapore property agent is willing to bring you the bank forms to fill in

and even get in-principle approval. Why? This way, they can quickly make

sure you have a bank loan in hand and willing and ready to bid for a

property. And very possibly you have a bank approval-in-princple at a really

high valuation that will tend to lead you to over-pay for your property.


And... You will have a bank who is very very happy to match the

seller's asking price, not what they really think the property is worth.

(Banks can stretch valuations, within reason and sometimes reason can be elastic)

You are the person paying for the loan for years, if you overpay.

Property Buyer overpays for Singapore Property

The property agent pushes up the buying price to match the seller's asking

price, this way, the deal is easier to close and he/she makes the

commission.


Surely there are trust worthy and honest Singapore property agents, right?

Yes, there are. But because in Singapore, Property agents participate in

both buying and selling activities, there is a clear conflict of interests

between upholding your best interests and that of their commission.


On the one hand they say they will take care of the seller's interest and

moments later, they say they will take care of the buyer's interest. So who do

they really work for? They take care of their own interests we're afraid.


Property agents want to close deals quickly for fear of losing the deal. And this is a valid fear. Many Singapore property agents are not inherently dishonest, but the nature of the business and the lack of proper and effective regulation makes them this way.

So we would say, Singapore Property agents dishonesty is systemic in nature.


If you are willing to over-pay for your property, they are happy to close it for

you. As long as they do not give any outlandish comments, they are not

dishonest.

So Dishonest Singapore property agent don't really want you to go to a

Singapore mortgage advisor like us to help you go through many valuations

and recommend a SAFE price to bid for your property. That drags out the

buying time.


Why work through www.PropertyBUYER.com.sg for mortgage home loans?

We help property buyers to look through each property's valuation to

establish a valuation range for any given unit. And based on that, we

recommend a bid price for the buyer.


Are we www.PropertyBUYER.com.sg not afraid of losing the deals?

Yes, of course we are afraid of losing deals, but that cannot be helped. But

we strongly believe in integrity and word of mouth.


For us, we are very conservative, many times we advise our clients not to

proceed or bid at the lower range due to certain underlying factors. In which

cases, the chances of closure is small and we don't close the mortgage

home loan deal.


Why our clients come back to us the next round?

Simple, we could have done the deal but we did not because we felt the deal

was a bad deal for the buyer. That alone means a lot to many of our clients

as we saved them from over-paying for their properties.


Will the Buyers miss the boat if the market swings upwards?

Yes, there is a potential that the buyer may miss the boat on the upswing.

However we still err on the side of caution while we warn the property buyer

that they may have to bid higher than our recommended bid price if they are

in a hurry to buy the property. We also warn that If property buyer wait

longer, there is a chance they may miss out on the upswing, while there is

also a chance that they benefit from their patience by being able to buy lower.

Buyers are aware of the risks of each option.


Why we rank overpaying for Property as more serious than Missing the

upswing?

We consider overpaying for Singapore property as more serious than

missing the upswing.


Fear of Missing Upswing

The fear of missing out on a property upswing tends to be GREED DRIVEN

(though circumstances vary) and prone to emotional and irrational decision

making.

Fear of Overpaying

The fear of overpaying is conservative investing and while it is also a fear,

this fear is more prone to rational decision making. And people who are in

this category is more likely to make better decisions.

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www.propertyBUYER.com.sg is a research-focused Mortgage Advisor that

helps individuals get the best fit Singapore Home loans or to refinance their

properties, not simply the cheapest Singapore Home loans.

You can come to us for your Singapore Home Loan needs and we will do the

research work to compare all the bank's packages as well as assess the

best fit for you.

Invest in Singapore property

Starting from March 2009, we have been seeing positive news one after another. In fact the market was so bad that any news that is less bad than predicted is considered a Victory in these market conditions.

For example, if we expect a market contraction of 14%, we see a contraction of 12%, we start to say that this is the turning point.

It fails to note that the market is still falling, albeit at a slower pace.

There has also been a lot of investment in Singapore property by individuals. Many of these individuals may have missed out on the 2007 and 2008 property market rally. They are now coming to life in a market that has started to look a bit more attractive compared to 2008.

However, the market is still really bad, company's sales are down. A possible pandemic is looming. Export cuts are also likely leading to reduction in investment in Singapore.

Foreign direct investments in Singapore are likely to have fallen. Many people who are employed by export or related sectors are hit by pay-cuts, shorter work weeks as well as unemployment. In a case of escalating unemployment, we really don't see how a property market can rally too much longer.

There is a possibility that the property market may start to fall again after the high volume months or when the liquidity is being sucked up.

Therefore invest in Singapore property must be carefully weighed. You can follow a link to http://www.propertyBUYER.com.sg/contactus.php to get a better gauge of how to negotiate for a property.

Many agents are trying to close a quick deal, they don't really care about your interests, so it will be worth it to give those guys a call at 6100-0608 or 9782-8606 if you invest in singapore property