Singapore Property no longer best Retirement Investment

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A new DBS research released on Tuesday (Oct. 12) indicates that property may not be the gold mine it once was for Singapore investors. Property has long been considered a safe bet for Singapore investors.

For one thing, new homes are smaller and more costly when the rise in property values exceeds the rise in personal income. That is why bigger units and condominiums nearer to MRT stations and amenities such as 33 Devonshire are highly sought after.

DBS Group Research property told reporters that the price-to-income ratio is expected to reach a multi-year high as homes cost 15 times the yearly salary of a median-income household in the near future.

For this reason, moving to a larger private property would cost a family 15 times what they earn in a year at present rates.

The number, according to Mr Tan, is the highest in 20 years. Current prices are unsustainable unless wages rise more quickly, and this indicates that families will increasingly need to have two sources of income."

There has been an increase in the price-to-income ratio, which compares the price of a home to a person's yearly income, including contributions to the Central Provident Fund (CPF).

According to the DBS study, the average property price per square foot (psf) has increased by 50% since 2010, with the rise being even more pronounced in new property launches.

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Since 2015, the price of psf has increased from approximately $1,200 to $1,800 per square foot.

But despite the greater cost, houses are becoming smaller rather than bigger, according to Mr Tan For new releases, the average size of a three-bedroom apartment has decreased from 900 square feet to 1,000 square feet.

Since more people are working from home and having their children do homeschooling because to Covid-19, families may want larger houses that will put a strain on their finances.

According to DBS data on almost 1.2 million mortgages, the typical Singaporean may spend up to 20% of their income on house loan service. For some people, this may amount to as much as half of their income.

It is those in their mid-thirties that stretch their income the farthest in order to pay their mortgage and spend less elsewhere.

If the population growth rate continues at its present rate, Singapore's population will reach its peak in 2045, based on Mr Tan's observations.

For property owners, finding renters who are willing to pay their rental rates can also be a challenge because of restrictive immigration laws.

In contrast to property, he added, alternative investments may provide better yields and liquidity.

Deals on first-class bungalows may be approaching a 10-year peak in price.

A property's yield is about 2%, according to Mr. Lee. "However, a properly managed portfolio of real estate investment trusts (Reits) may offer more diversification and higher average tax-free returns of 5 to 6 percent."

In the past two decades, the greatest investment has been the S&P500, an index of the 500 biggest publicly listed companies, therefore investors should think about investing in a fund that focuses on S&P500 equities. Property investment trusts (REITS) are next followed by private property and Housing Board apartments (HBA).

DBS's director of financial planning literacy, Ms Lorna Tan, said: "We may examine assets like Singapore stocks, bonds, REITS, exchange-traded funds, alternatives and certainly CPF savings to maximize the risk-reward from all investments.

If we reduce the amount of property in our portfolio, we'll have more money to put into other assets that may provide greater returns and liquidity in the future.

Oversea Properties in Singapore hit $5.2B in Q3 2021

In the third quarter of 2021, Singapore Overseas Property Investment amounted to S$5.2 billion. According to Real Capital Analytics, Singapore reported $5.2 billion in overseas real estate investment transactions in the third quarter of this year, a 53.9% increase over the $3.4 billion transacted in the same time last year.

Those findings were revealed in a study released on Tuesday by Knight Frank's analysts (Oct 5). Singapore has been a "major exporter of capital," according to the analysts, and has made substantial outbound transactions including Prime US Reit's $133.9 million purchase of One Town Centre in Florida in July and IReit Global's $43.1 million purchase of an office complex in Barcelona, Spain, last month.

Singapore's real estate market is also booming, as investment transactions totaling $7.5 billion were closed in the third quarter, up 58.1% from the previous year's third-quarter total of $4.8 billion.

This is a 38.7% increase over the previous quarter's $5.4 billion.

Covid-19 infection rates have risen steadily in recent months despite this, but Knight Frank believes the investment market is still on track to reach a projected transaction volume of $30 billion for all of this year due to an encouraging pace of investment deals in the first nine months of the year.

Keep up with investment market activity, we anticipate investment sales to surpass $12.5 billion in the fourth quarter of 2021 and $30 billion in total," said Ian Loh, Knight Frank's head of capital markets (land and building, collective and strata sales).

According to the study, the sale of four Government Land Sales (GLS) sites accounted for the majority of investment volume, with the Marina View reserve site fetching the highest price of $1.5 billion, followed closely by the $1 billion Jalan Anak Bukit parcel.

There may be a change in emphasis for land-hungry developers to smaller plots in other areas, such as sites with more acceptable quantums where owners are trying to sell collectively, according to the experts.

According to the experts, projects with a budget of up to $600 million but less than 600 units "may just find interested purchasers". Flynn Park's $371 million collective sale agreement, or $1,355 per square foot per plot ratio, was just sealed, and experts expect this to have a rippling effect on the collective sale market as many owners are eager to sell their aging units together.

Investment activity in the next months will be heavily weighted toward securing additional GLS parcels on the confirmed list for tender in the second half of 2021. There's also a chance that smaller, well-located sites on the reserve list may be activated when unsold private residential unit inventory decreases," the researchers said.

In the third quarter of this year, the GCB market saw a solid $452 million in sales, continuing the upward trend. Despite the decreased transaction volume compared to the previous quarter, analysts note that additional GCB transactions are presently being discussed and anticipate them to conclude before the end of the year.

Analysts have seen a rise in investor activity not just in the residential sector, but also in strata offices and shophouses, both of which are still popular purchase targets for buyers.

In the commercial and shophouse sectors, they predicted that activity would continue to move at an encouraging pace, with more premises going on the market for sale in the fourth quarter due to strong demand and active sales activity.