1. Are freehold properties star buys?
First, the capital appreciation of homes in suburban districts may be higher due to the introduction of cheaper and faster modes of transportation, such as good proximity to MRT stations. Second, prices of developments in the Rest of Central Region and Outside Central Region recorded higher appreciation.
To find properties that are value for money, buyers often lean towards certain key attributes.
Location plays a significant part in affecting the rate of return as well. In Districts 9,10 and 11, the compounded annual growth rate (CAGR) in prices for freehold, non-landed residential properties with a floor area ranging from 1,200 sq ft to 1,500 sq ft in the past 10 years was higher than the CAGR of its leasehold counterparts.
Across all districts, CAGR for prices in freehold properties were much higher than that of leasehold properties by about 1 per cent for the past 10 years except District 19, where the difference in CAGR between freehold (4.5 per cent) and leasehold (4.4 per cent) non-landed properties was a marginal 0.1 per cent.
2. New projects in upcoming regions appear to offer higher returns
Naturally, purchasing homes in areas earmarked for major redevelopment is likely to offer higher returns. Interestingly, homes purchased through the primary market enjoyed higher capital gains than homes purchased via the secondary market.
Like the Jurong Planning Area, Paya Lebar was tipped to be a place with much growth potential, and the upcoming mixed-use project, Paya Lebar Quarter, will rejuvenate the area. For secondary market near the upcoming development, non-landed residential properties near the development seemed to be more reflective of the market conditions.
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3. Areas with potential for MRT stations
Homes close to MRT stations tend to command higher premiums, as increased connectivity inevitably cuts down time spent on the commute to work and school. Hence, purchasing homes close to likely locations for future MRT stations holds high possibility of ensuring homebuyers gain additional returns.
The impact of MRT stations on housing value and housing wealth has been well studied, with a study by the National University of Singapore finding that the launch of the Circle Line increased housing values in treated zones that were within 600m of an MRT station by 8.6 per cent, relative to houses in control zones.
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4. Anticipating the relocation of good schools
Good schools have been found to impact home prices due to the 2km home-school, distance-based priority allocation rule in Singapore and anxious parents that are keen to secure their children a spot in these schools have fuelled this increase in home prices. Based on home sales figures from 1999 to 2009, a study found that the relocation of primary schools resulted in declines in private housing prices within 1-km and 2-km zones, of 2.9 per cent and 6.0 per cent respectively, six months before the actual relocation.
For the savvy parent, having a sense of a nearby school’s physical condition and whether refurbishment plans are in the works, may bode well. As for the smart investor hoping for better gains can seek homes near areas that schools are looking to relocate to. It is also worth noting that the popularity of a school can amplify the effect of a school’s relocation.
5. Star buys from mortgage sales
While speculating on the next nearest MRT station or area of growth may be good fun, a straightforward route would be to look to mortgagee sales for value homes. This underrated mode of purchase often turns up properties offering great value, even against competing properties in the same vicinity or development.
Buyers can download the listings from major agencies and visit the units. If they are interested in any of the properties, they should check with the banks whether they are able to take up the loans to finance the purchase. On the auction date, they have to physically be at the auction to bid.
Homebuyers typically have both investment and owner occupation intentions in mind. While the above propositions may shed some light on possible factors to look for when purchasing a home with higher investment gains, the returns are by no means certain. Home purchases are still largely sentimental in nature, and a collective decision is typically made with the family in mind. A home should not only fulfil one’s short term wants – more importantly, it should also fulfil one’s long term needs.
Text: Lee Jia Na for The Business Times Additional Reporting: Seah Pei Jun