By Joe Wang
For those millennials who are aspiring to buy their first property, I am sure you heard of stories from your parents, relatives, friends and agents about the “good old days” when one can buy a property easily and make a healthy profit by selling a few months later.
If you have bought a property any time between 2001 to 2008, chances are, it would at least doubled in price by now.
There were no restrictions such as TDSR, LTVR, ABSD, SSD etc imposed on property transactions then and HDB flat owners can still buy private properties in Singapore and overseas.
I remembered entering my first showflat at a new launch at Novena in 2005 by chance. The agents were standing outside distributing brochures and invited me inside for free tea and cakes. The project was developed jointly by two prominent developers in Singapore. The response was lukewarm and only half the units were taken up. The agent was desperately trying to sell me a three room 1205 square feet unit at $900,000 by offering a $50,000 renovation package. Just fresh out of university, I was earning only $4,000 monthly then, but no worries, a banker was on site to offer me a bank loan. I could take up a 90% loan and paid only 10% as down-payment. I regretted not buying the unit. The same unit now fetches $2.5 million dollars in today’s market.
A few months later, I did buy my first property – a three room condominium in Yishun at only $470,000, cheaper than a 3 room resale flat in some popular districts today. Less than a year later, I bought another property for investment and so on and on. It was possible in those days to buy multiple properties so long you hold a decent job and have a good credit rating. Banks are more than eager to do your business with scant consideration of whether you can finance your mortgages in the long term.
Photo by Chen Hu
As Singapore’s economy picked up after post-SARS period, the property market began to heat up and was growing at more than 10 percent per annum. Property flipping, instead of investing became the vogue for speculators to make a quick buck. Ten of my friends decided to buy a new property in Marina Bay. Construction on Marina Bay Sands had yet to commence and the area was like “ghost town” with no amenities or MRT stations nearby. Who will buy such a property? It turned out the developer had cleverly marketed the project to overseas buyers and more than half the units were already snapped up during the soft launch. We took turns to queue up overnight to ballot for a unit. Each of us forked out $40,000 in cash to pay for the down-payment of a 2 room unit. Six months later, we flipped the unit and were $10,000 richer. Two room units of the project are now selling more than $2 million dollars in the market.
How times have changed. It is a completely different ball game now. If you are a fresh graduate now just entering the workforce, it is not likely you will be able to invest in Singapore’s property market. The market conditions have changed and the entry bar is raised no thanks to active interference by the government.
Singapore’s economy is slowing down. We are not going to get stellar economic growth of more than 7% yearly anymore. The rate of immigration has also been reduced, leading to low demand for housing and rental yield. The many conditions imposed on property buyers have increased the transaction costs exponentially. It is no longer economically viable or feasible to generate wealth by building a property portfolio. With ABSD of 12% for second property and 15% for third property coupled with record low rental yields, it beggars belief that one can still make a reasonable profit from investing in Singapore residential properties after accounting for the hefty stamp duties and holding costs.
A quick read on The Edge Property reveals the non-profitable property deals all come from properties bought after 2009:
Source: The Edge Property
Under such trying circumstances, it is crucial for the aspiring first time property investor to buy the right property which has good appreciation potential in the long run. The old approach of “buy, hold, rent and sell” is no longer practical in today’s market and we need to develop a different paradigm towards property investment.
Feel free to contact us using the form below if you are looking for independent property investment advice to help you kick-start your investment. Remember we have no properties to sell and we are not affiliated to any property developer or agency, so our advice is independent, fair, honest and unbiased. Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
We are also planning a series of public seminars on property investment in Singapore in the coming months, so stay tuned to our page here!
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About the Author
Joe is a property enthusiast who bought his first property in Singapore at the age of 26 in 2005. From 2005 to 2015, he built a portfolio of 6 private properties in Singapore and has since sold three of them realizing a net profit of between 60 to 100 percent. He made his first million dollars in property investing at the age of 30 and has now amassed a property portfolio in Singapore, Australia and Malaysia worth more than $10 million dollars.
Joe is a conservative long-term property investor who believes in life-long learning and education in property investing. He does not claim to be a property expert or guru, but rather an adventurer who is in the middle of an exciting journey to achieve financial freedom from his property investments.
Email Joe at: firstname.lastname@example.org