Selecting the Right Investment Properties
Singapore’s rising success as a regional business hub has corresponded with growing property values over the last 20 years. From Housing Development Board (HBD) flats to properties within the nation’s prime districts, property values have grown phenomenally, attracting investors hoping to gain a big payoff.
Given that property investment is one of the biggest and riskiest investments you can make, gaining the assistance of a professional Chartered Mortgage Analyst (ChMA) with Property Mortgage Analyst (PMA) experience will ensure you get the advice you need to make the most of your investment. However, even knowing some basic information on investing in property is highly encouraged for anyone interested in venturing into property.
Before you invest
Knowing how much to invest is an extremely important component of property investment. Never get in over your head and borrow more than you can handle. A debt service ratio, or the amount available for facilitating the payment of debt, should be around a quarter of your income. Also, keep in mind that the amount you invest in property will typically be 20% of its value, so be prepared to make a large down-payment if you wish to purchase prime real estate.
The most recognisable factor driving property values
Location is a major driver of property value. In Singapore, the presence of any of the following near the vicinity of your property will raise its value greatly:
- Retail outlets and malls
- Public transportation – especially MRT stations
- Important public facilities like parks, libraries, public recreation facilities
- Educational institutions
- Waterfronts or beaches
- Leisure and lifestyle areas – Marina Bay, Clarke Quay, Orchard Road, etc.
If your property contains several of the items listed above, you are well on your way to having the best capital growth possible. However, these areas come with a hefty price tag, so if you lack the capital to invest in a prime location, there are other factors to consider.
Look at the population
If you lack the capital to invest in a prime location, consider looking at population growth as an early indicator of where to invest. Steady increases in population mean that new properties, educational facilities, retail outlets and transportation hubs need to be established to facilitate growth.
Factor rental values
In selecting a property, staying well informed on local rental values is another important aspect you should not ignore. Rental value should fall within the 30-40% range of the average household income. However, this percentage also depends on location and whether the property is an HBD flator a condo. A professional with ChMA certification will be able to help you with this determination, as they are up-to-date on the latest values.