From an investment perspective, condominiums seem to appreciate faster and have greater potential to generate income than HDB flats.
Considerations before investing in condominiums
Before buying a condominium, it is important to plan your finances well.
The average price of a public condominium in Singapore is $1,375 per square foot, and buying a condominium could cost you over a million dollars.
Generally speaking, there are two ways to make a profitable condominium investment.
The first way is to sell the condominium at a price higher than the starting cost. This will only happen if your condo appreciates in value over time.
It is not enough to simply increase the value of your apartment. To profit from buying and selling real estate, you must make sure that you receive more than the amount you paid for it, minus expenses such as BSD, renovation and repair work.
Since it takes time for real estate to appreciate in value, anyone who wants to enter the real estate market has to be financially prepared for the long term.
Even so, Singapore is actually a good place to invest in condominiums.
1. The probability of condominium appreciation is high.
Singapore's real estate market has been on an upward trend for the past few decades, and has even shown resilience during the epidemic of the past two years.
From 2011 to 2021, the prices of new condominiums in Singapore rose by 63%, and the upward trend ensures that condo owners could see some appreciation in value.
In fact, this increase is so great that it prompted the government to introduce cooling measures and raise the purchase of second homes and foreign ABSD to cool the hot property market and keep it at affordable levels.
2. There is also a market for older rental apartments.
For some Singaporeans, a 99 year old leasehold condominium is a depreciating asset whose value will drop once the remaining lease term is shortened.
While there is some truth to this, it does not mean that the value of leasehold condominiums will decline evenly. There are still ways to get the most out of your investment before the 99 year term expires.
The first way to get a high return on your investment is to sell the condominium during the term of the deed. Generally speaking, condo owners should sell their condos before the lease is less than 40 years old.
This is because once the term of the deed is less than 40 years, the chances of a potential buyer of your home getting a bank loan become slim, and once it is less than 30 years, it becomes almost impossible.
Renting a leasehold apartment almost always produces the highest income as far as rent is concerned.
Most tenants are simply looking for a great place to live for a short period of time. By renting out a leasehold condominium, you can charge a higher rent than a condominium, while saving about 20% in additional expenses over purchasing a freehold condominium.
3. A freehold apartment is yours forever.
Freehold condominiums have their own advantages over leasehold condominiums.
They don't have the problem of title expiration, which means they are great lifetime investments. With a freehold condominium, you don't have to choose a sale opportunity like a leasehold condominium or apartment.
If you plan to settle in place and then change your mind about selling the apartment when you enter retirement, it is perfectly safe to buy a freehold apartment.
While the appreciation of leasehold condominiums and bungalows will slow down quickly after 20-30 years, the price of a freehold condominium will not face depreciation and you can even pass on your freehold condominium to the next generation.
4. Apartment communities are not yet fully developed.
By 2030, the LTA plans to have 8 out of 10 homes less than 10 minutes from a subway station.
The URA also plans to decentralize the CBD by developing commercial hubs in central areas.
These infrastructure upgrades will undoubtedly push up the price of private apartments in the area in the coming decades.