Where To Buy?
If you are at this point, there will be hundreds of choices. Fret not, for there are ways to sieve out low-risk and high-profit potential units by looking at factors that had historically influenced supply and demand.
Be guided by the 7-step framework - the more boxes a property checks, the higher the probability of profit.
Location, location, location
This is the age-old mantra to suss out valued homes. Study shows that about 6 in 10 prefer a maximum of 10 minutes walk (about 1km) to a MRT station.
Tenancy demand is also typically higher for such units due to their tenants' evergreen demand for accessibility.
With a growing number of MRT stations in Singapore, properties that are in close proximity to MRT interchanges may see higher growth potential.
TIP: You can use Google Map or One Map to find out the walking time/distance.
Size of the development
As a rule of thumb, projects of more than 200 units are recommended as the smaller boutique projects may have lesser appeal due to lower land footprint (few facilities), lesser awareness (popularity), and reduced liquidity (ease of selling).
As such, property investors have favoured larger developments as there would be more price exchanges within a development, and thus higher probability for prices to climb.
For owners who are looking at long-term homestay for their families, they may prefer smaller developments for its exclusive and tranquil living environment and less competition when using the facilities.
Type of development
There are special developments that offer unparalleled convenience and connectivity.
One example is mixed development where it offers commercial/retail options right downstairs. There is also integrated development which is mixed development that also provides direct access to a transport node such as MRT station. These are such rare gems that there are just slightly over 20 of such integrated developments in Singapore.
TIP: You can also look out for possible developments along future MRT lines such as Thomson-East Coast line, Cross-Island line etc.
Developer's profit margin
Property developers spend hundreds of millions dollars to develop a new project and its typical minimum profit margins are expected to be between 20-25% to be worth their risk.
At a new launch, developers hope to clear as many units to achieve 3 goals: (1) good media publicity, (2) a sell-through rate of at least 30% to qualify for construction loan disbursement (3) secure a 'safe to purchase' impression in the market.
Thus many would buy at the start of a launch as the its prices could be pegged lower to achieve the above goals and these prices would be gradually raised as more units get sold. Thus, the lower the profit margin today, the more likely that there could be price loading in the later phases of the launch.
TIP: Contact me for a full curated list of projects within the thinnest developer's profit margin.
Every 5 years, URA would review the Master Plan to guide Singapore's land use and rejuvenate certain areas to meet long-term goals. Based on past trends of these emerging hotspots, property prices have shown high correlation of growth when the Government invests in infrastructure of that locality.
There are major and minor growth hotspots and investors with longer investment term horizon and holding power would do best in the major hotspots where upcoming commercial, residential hubs and amenities would be completed over time.
TIP: Refer to Urban Transformations under URA Master Plan or you can contact me for the full list of current projects located in growth hotspots.
Government Land Sales
The holy grail of property investment, especially in Singapore, stems from our limited supply of land. The Government Land Sale (GLS), which is held every 6 months, is the main source for developers to replenish their land bank.
In major transformation areas, there are more unreleased plots of land that would be released in phases over time to cater for HDB upgraders and the anticipated population growth of that estate.
This pattern of releasing land sale in stages, coupled with inflationary pressures in labour and rising raw material costs, had historically resulted in higher breakeven and selling price.
Thus the more upcoming GLS of that area, the higher probability of profit for the investor.
TIP: You can find upcoming GLS sites for the next 6 months via the URA website. To know how to identify sites that are not released yet, contact me to find out the steps.
HDB MOP supply in the coming decade
This is also known as the exit strategy. BTO owners are typically the younger generation in their 20s-30s, who are gainfully employed with higher relevant skill sets.
Most may consider if they could upgrade to a condominium after they have met their HDB MOP date and are supported by the profits from their sale proceeds.
Having a large number of potential MOP upgraders may translate to higher demand in the coming years for condominium projects in that vicinity as the probability of upgrading within the same estate is often the highest. With a stronger demand, this provides upside price pressures for property appreciation.