Why location is important for property investment in Singapore

When investing in real estate, it is crucial to select a property that has the potential to maximise your returns.

An uninformed investor may opt for the least expensive property available under the mistaken assumption that it has the greatest scope for price appreciation.

But that is not the way the property market works.

More often than not, expensive properties in upmarket locations are likely to see a greater increase in prices when the market picks up momentum.

What are the attributes that you should look for in a property before finalising your purchase decision?

How is it possible to judge whether you have selected a location that will add value to the property that you are purchasing rather than take away from it?

 

Access to public transport

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How far is the closest MRT station? According to the Singapore Land Transport Authority masterplan, eight in 10 homes will be within a 10-minute walk of a train station by 2030.

But if the flat you are considering is at some distance from the nearest public transport, you can be sure that its price will be negatively affected.

On the other hand, it is highly probable that a prospective tenant will reject a flat that requires a long walk to the nearest bus stop or train station.

 

Distance to the nearest school

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Singapore's Ministry of Education has laid down an admission policy that favours children who live in close proximity to the school.

If there are more applicants than places at a particular school, preference will be given to children who live less than one kilometre away.

The next set of admissions will be for those who live at a distance that is between one and two kilometres from the school.

A wise investor would do well to make enquiries about the schools in the immediate area before finalising a purchase decision.

After all, a tenant with young children would give the highest priority to their education and would even be willing to pay a premium to live near a school with a good reputation.

 

Making the right choice

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It is important to bear in mind that zeroing in on a property and buying it is a decision with long-term implications. Transaction costs in real estate investing are high.

As a buyer, you would pay stamp duty, additional stamp duty, legal fees, fees to your real estate agent, and a registration fee. All these can add up to a sizeable sum.

When you finally decide to sell, there is another set of payments that you will have to make. Finding a buyer who is willing to pay a price that is acceptable to you is difficult enough.

On top of this, the sale process itself could take several weeks or even more.

Because of all these reasons, it is critical that you take a balanced view when you select a property to invest in. Do your homework well and don’t make the mistake of deciding in haste.

Experienced real estate brokers advise that in most cases, the former is a better buy. They reason that it is possible to refurbish a flat or carry out extensive repair work to raise the value of a dilapidated property.

But it is impossible to change its location. Investors saddled with real estate located in an area with few amenities or a flat that is situated close to a noisy intersection will find it hard to find tenants or a buyer.

 

Think ahead

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There are several reasons that could lead to a change in the value of the property that you have invested in.

If the real estate market in Singapore starts looking up, you could see a rise in the value of your flat and decide to sell, making a tidy profit in the bargain.

But prices could change for other reasons too. A new MRT station coming up in the vicinity could lead to a sharp escalation in prices in a short period of time.

A new building may come up blocking the view from your flat. Or a road project could lead to heavy traffic and noise till late at night.

It is important to do a great deal of research before committing yourself to a purchase.

 

Location matters, regardless of your budget

If you can afford to invest in an area like Tiong Bahru or Tanjong Pagar there is a strong likelihood that you will see an appreciation in the value of your investment over a period of time.

An investment in a less popular area requires you to be even more vigilant. Don’t let yourself get stuck with a property that you will find difficult to exit.

(By Ravinder Kapur)

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