Singapore housing – buying for investment?
This article examines some fundamentals of residential property investment that would be helpful for buyers.
While many Singapore residents aspire to own and live in a private residential property, there are others who wish to invest in a second property to derive rental income and enjoy capital appreciation. Therefore, it would be useful to examine how the residential investment market has changed and help buyers in their investment decisions.
Attractive returns from investment properties
Residential property investment has been popular because of attractive returns from rental yields and capital appreciation. For example, between 2001 and 2010, the Urban Redevelopment Authority’s (URA) rental index grew 55.4%, while the price index rose by 46.7%. Thus, investors would have received total returns averaging 6% to 7% per annum. During this period, the economy grew strongly at an average of 5.9% per annum, despite the downturn in 2001 and the Global Financial Crisis (GFC) in 2008/09.
Increased opportunities for investment
After private home prices bottomed in mid-2009, following the GFC, they rose strongly by 62.2% to peak in 3Q13. The sharp increase in prices led to developers “right-sizing” the units for sale so that absolute prices remained affordable to buyers. As a result, the median size of non-landed units fell from 94 square metres in 2010 to 69 square metres in 2020 for new sales. In addition, many investors bought smaller units with one or two bedrooms due to their affordable pricing.
Changing residential investment landscape
In the last decade, several factors altered the residential investment landscape.
- Cooling measures were imposed, especially between 2010 and 2013, to arrest rapidly rising prices and prevent an asset bubble.
- As a developed economy, slower GDP growth was recorded, averaging 3% per annum.
- There were increased restrictions on the hiring of foreigners to reduce dependence on them and raise productivity.
- There was a significant increase in completed supply, especially between 2014 and 2017, due to the buoyant new sales market in the preceding years.
Performance of sub-markets
Figure 1: Rental and price performance of private non-landed homes1 from 2011 to 20202
|Core Central Region3 (CCR)||Rest of Central Region4 (RCR)||Outside Central Region5 (OCR)|
|Changes in rents||-8.6%||+1.2%||-2.6%|
|Changes in prices||-0.2%||+10.1%||+32.5%|