Jan 19, 2011

The Ultimate Guide to Real Estate Investment in Singapore

Ismail Gafoor is the CEO of Propnex, one of the largest property agencies in Singapore. I came across his bio-data and was quite impressed.

Among his many achievements, Ismail holds, as an NSman, the rank of Lieutenant Colonel. He is currently the Deputy Brigade Commander of one of the SAF's infantry brigades.

This is notable especially because of his race. It's an open secret that the SAF is biased against the ideas of Malays holding senior appointments in the military.

(Actually, that's not even a secret. Lee Kuan Yew has spoken publicly about it before).

Anyway, I digress. What I really want to talk about is Ismail Gafoor's new book, "The Ultimate Guide to Real Estate Investment in Singapore".

I bought the book ($34.99 at Popular Bookstore), even though I don't expect to be buying or selling any properties in the next two or three years. The book is informative and well-written, and I feel that its useful shelf life will extend beyond a 2 or 3-year period.

At 337 pages, the book provides quite comprehensive coverage of its topic. There are chapters about HDB flats; landed properties; condominiums; property auctions; bargaining strategies; being a landlord; obtaining a home loan; understanding the URA Master Plan; evaluating a property's location; planning your budget, and more.

Highly recommended, if you're interested in real estate in Singapore.

* * * * * * * * *

Anyway, here's one interesting nugget from the book.

If you're interested in private property, you probably know that on a per square foot (psf) basis, landed property is usually much cheaper than condominiums. The question is - why?

I have always assumed that it's because Singaporeans are willing to pay the extra premium for the condo facilities. Typically, that means the swimming pool; the tennis courts; the gym; the barbecue pits; the clubhouse; the children's playground; and so on.

In contrast, a house is, well, just a house.

However, when Ismail discusses the question, he doesn't even mention condo facilities at all. (I take it that this means he would consider my view to be either irrelevant or wrong). Instead, here's what Ismail says:

"How is it possible that a space in the sky is actually more expensive than land on the ground?

The answer basically lies in the rules of land ownership. In Singapore, foreigners are generally not allowed to buy landed homes, unlike condominiums. Foreigners who desire to own a piece of land must fulfil the criteria and submit an application to the authorities, which will only be approved based on its merits."
So according to Ismail, you pay more for your condo, because you're competing with the foreigners. All these years, they've been jacking up your price.

In contrast, landed properties are cheaper (on a psf basis) because the foreigners are still kept out (not entirely, but largely) by the laws and regulations. Foreigners can buy landed properties, only if they first succeed in getting government approval.


Anonymous said...

Talking about landed properties, I remember a Sunday times article in 2004 featuring a GCB "good class bungalow" of 18,000 sq feet area tagged at only $7.5 million! At that time, property sentiments, public and private, was in the doldrums.

Today? Easily a few times that!

That's why the rich who invested in properties became richer and faster than many others.

And also why income gap can be so wide and so fast due to hot property which in turn is due to ??? foreigners!

Anonymous said...

from my observation of some properties sold in the east, it is quite easy for foreigners to get permission to buy landed property. a case of - you ask, and you shall receive. as a result, in a small landed estate that i have been observing, the prices of landed properties there have nearly tripled in 5 yrs. in fact, in one v small section of it, 5 of the 6 houses sold in the last year were bought by foreigners.

Liu Jiawei said...

Not to sound dismissive, but the "interesting nugget" you've cited is rather commonsensical. Basic economics tells us that the price of everything is dictated by demand and supply. Since demand for landed properties is artificially kept low by the exclusion of a significant segment of property buyers - foreigners, obviously landed properties would be cheaper than condominiums on a psf basis.

Anonymous said...

It may be commonsensical but perhaps not many have thought of it this way as condos in general are more 'affordable' than landed properties.

Anonymous said...

Read a different view from an property agent :-


Anonymous said...

Liu Jiawei said...
Not to sound dismissive, but the "interesting nugget" you've cited is rather commonsensical.

Just a guess, but maybe Mr Wang is saying he didn't realise foreigners need to apply for permits before buying landed properties. I suspect he understands the concept of demand and supply.

Anonymous said...

Maybe Mr Wang is pointing out that there have been so many foreigners buying condos in Singapore over the years that the market has been distorted out of shape, relative to landed property.

Anonymous said...

Or maybe he is pointing out that condo facilities possibly add nothing much to the financial value of condos. Which would be a rather interesting observation, in my view.

Anonymous said...

Actually maybe "basic economics" can't be applied here, because we are talking about two different kinds of goods.

Jiawei may be presuming that the same segment of buyers produce demand for condos and landed properties. This isn't correct. There is some overlap, but because landed properties, on an absolute basis, generally cost much more than condos, the potential buyers in the mass-market condo segment are mostly not potential buyers of landed properties at all.

Even if psf is the same, your average house is three times larger than your average condo, and therefore costs three times more.

Anonymous said...

Hi Gilbert,

I have mentioned this many times before on your blog!

Anyways, guys, you could know ownership of private landed property by district, you could go to Singapore Land Authority website and pay a small fee and report would be emailed to you within minutes.

No need for rumour mongering. Foreign ownership is really very restricted.

The market is high is because Mr Mah screwed up by releasing too little land when the population was skyrocketing!!! Too little supply and when demand was shooting up the roof.

Anonymous said...

The truth has been staring at our faces for decades. Looks like MM Lee is on the mark when he said many here are daft. Just look at how so many of them misjudge Gilbert's intentions. The one who clinch the MOST DAFT award must go to the guy who says it is commonsensical. Either he is calling MBT a liar outright because that horse said it is not the foreigners but Mr Daft said it is commonsensical, Ha. Or he is downright DAFT.

Anonymous said...

One must be really daft if he/she owns a landed property and does not know that there are restrictions on ownership.

With record numbers becoming PRs and citizens in recent years, it doesn't take a genius to conclude that landed property prices have gone up as well in tandem with non-landed property prices.

Just a few years ago, there was some deliberations on whether to loosen the restrictions on foreign ownership of landed properties. Fearing public backlash, the overt restrictions were unchanged. But, overt restrictions that remained can be overcome by facilitating the approvals. Get it?

As for the book, a few years ago when property prices were low and rental yield even lower, if one were to look for a local property guide, there was none in the bookstore. Now, we have numerous. This should be a cautionary tale here.


Anonymous said...

Didn't many Ministers said that "Singapore is unque" and needs unique rules?

We have a VERY small land mass. Should housing be allowed to become an investment or should there be a reserve mass for "roof over your head" social security before any "invesment units" be allowed to appear?

true, restricting even more land for "investments" will push the prices even higher. but it ensures that the populace has decent affordable housing, which is exactly what the PAP pioneers put priority on. Turning back on this principal and make ALL "housing" into an "investment, totally screwed everything up.

Didn't Mah vocalized a "vision" or was it a "masterplan" to have 60% (or some other magic number) Singaporeans housed in Condo or condo-like units by like 2010 or something?

Another "vision 2010" not "goal 2010"?

Anonymous said...

The myth that Singapore is short of land is .... well, another popular myth.

A plot of land 2,500 square feet big can be used to build one house which is a home to one family.

Or the same plot of line could be used to build three HDB flats per floor, meaning 30 flats if it's a 10-floor block .... or 60 flats if it's a 20-floor block .... or 120 HDB flats if it's a 40-floor block.

mr.udders said...

I'm surprised no one discussed the issue of race which you brought up.

But that's not surprising - most of your readers are Chinese, so why would the majority be concerned about the minority? That's the attitude of the rulers in Singapore, anyway.

In any case, it's not entirely fair to say that "the SAF is biased against the ideas of Malays holding senior appointments in the military".

The SAF, no thanks to Lee Kuan Yew's discriminatory policies, actively prevents Malay-Muslims from holding supposedly 'sensitive' appointments in supposedly 'sensitive' formations e.g. Commandos, Signals, Armour, Artillery, the Air Force, the Navy, etc.

Most Malay-Muslims inevitably end up being Logisticians, Infantrymen or Guardsmen in the SAF.

Also, the SAF, like many organisations in Singapore, is dominated by the Chinese, who consciously or unconsciously prevent minority race Officers from ascending to higher positions.

Something for you to consider, Mr Wang.

mr wang said...

LOL, don't look at me.

If it were possible, I think that many chinese singaporeans would like to be temporarily and officially Malay, for a certain 2-year period of their lives.

It would help them have an easier existence in the military; and they would improve their chances of getting a reduced NS liability.

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