“Location, Location, Location”
When it comes to property investments, the adage “Location, Location, Location is GOLDEN”. This is a fundamental analysis that any property investor should be familiar with! Think of it as layers of an onion, each layer of a location analysis is critical and as a whole, lays a solid foundation and basis for a profitable property investment.
To put it in another way, it is better understood as “Location within Location within Location”.
Singapore’s context (A case study)
The first layer of location in Singapore is the larger geography of Singapore. Singapore is divided into 28 districts, officially classified as Core Central Region (CCR), Rest of Central Region (RCR) and lastly Outside Central Region (OCR). Singapore is also commonly divided into segments, namely the Central Business District (CBD), Central Singapore, North, South, East and West Singapore. Each district and segment is unique in character and in terms of properties, vastly different in pricing, and positioning.
Identifying key regions of growth in Singapore is an important step in narrowing down where to put your money. One can look no further to the newspapers recently to know what is the Government plans to do in a particular area. For example, the West side of Singapore is primed for redevelopment. Lakeside properties (District 22) have thus seen prices growing when the Government introduced plans to redevelop the area. Locations where there is a major transformation planned often see an uptrend in prices over the years. (See: Jurong Redevelopment Plan)
Take a look at Jurong /Lakeside -District 22’s average PSF over the years:
While this data is reflective of the general price trends throughout the years, take special notice of the red line. Despite a sharp downturn between 2008 – 2009, there is no observable fall in prices marked by the red trend line. This upward growth trend sheds a very positive outlook in the Jurong Lakeside Region. While looking at the data in district 22, I also came across the condominium next to Lakeside MRT – Caspian, which recently TOP-ed. Lets take a look at the prices:
This is in all likelihood a bull-run for those who have bought the properties in the earlier phases of the launch. The estimated capital gain from the early buyers (or early birds) is at an average of 17.6% / year, annualized – is very significant. Would this have been a good property buy for most property investors, or was it a very good buy? The contributing factors for growth in pricing is both macro and micro.
This brings us to the second layer of location – that is, location within location. This is something we are all familiar with – Amenities, Transport, Food, Schools, Leisure, Shopping – the list goes on. In general, residential and commercial properties are affected by each contributing factor differently, but largely overlapping. Thus, the mindset approaching both classes is different. Investment vs Own-Stay, Capital gain vs Rental Yield, Short-Term vs Long-Term (or a Medium to Long Term position). In light of the recent cooling measures though, most property investments is looking at least a 4 year time-frame and up, due to the hefty seller’s stamp duty imposed on a sale of residential property (now industrial too) of 16%, 12%, 8% and 4% of transacted price (the first year 16%, less 4% yearly, down to 0% after the 5th year) from the date the OTP is exercised (simplified case).
The measure by which a property has a good location differs opinion to opinion. In all honesty hindsight is 20/20. But what if we some basic criteria and checklist to identify the right properties? Lets take a look at part 2 of choosing the right properties. [stay tuned for part 2]
An article by Jonathan Ang
(click on the name for FB profile)
source: URA, SRX