So you’re buying your first property, and you’re facing the almighty gains question: is this house going to be a goldmine? Your launchpad to mansions and caviar? Your solution to your child’s luxury needs, which are rapidly eclipsing the cost of the first moon base? Well without resort to expensive data, here’s the best way to tell:
Caveat: Property Analysis is Super Complicated
There’s a reason “property analyst” is a profession. The data is difficult to acquire, costs thousands, and involves staring at charts and indicators until your corneas catch fire.
If you want to do a proper, in-depth analysis of a property, nothing will take the place of an expert. This is a only a general set of guidelines, for people who don’t have the immense budget and data required.
1. Check Future Developments from the URA Master Plan
The URA Master Plan is basically a treasure map for property investors. By looking at government plans for each area (e.g. Jurong is going to become a business hub, Lim Chu Kang is going to look like we annexed a Vietnamese village), you can predict how property prices will move.
This is the best way to spot undervalued property: A house in Jurong West may look like a shack in Mordor right now, and be priced accordingly – but give it a few years, and it might be right next to three shopping malls and a train station. That would mean good rental income or high capital gains, relative to its purchase price.
2. Check the Reputation of the Nearest School(s)
Officially, every school is a good school. In reality, comparing my school to the one in the next district is like comparing between Queenstown remand facility and Cambridge.
Most Singaporeans care about getting into top schools. And since school registration takes proximity into account, some will pay top dollar for property near a desirable school.
The bad news is that this is often factored into the purchase price already; but never discount how much more a potential buyer will pay, if they’re truly desperate for a better shot at the school.
3. Check the Rental Income or Price of Surrounding Properties
Districts have their own median prices. Be a little more microscopic than that though – check out property listings and ads near your intended purchase. How much are they charging for rental? How much are the other people selling for?
This gives you two things. First, you’ll know if you’re getting a bargain price, or on the end of a rip-off. Second, you can check the prices of the surrounding properties from 10 or 15 years ago (ask your agent to do it if you’re lazy). This will give you a sense of how much the property appreciates.
4. Time the Purchase According to Interest Rates
The interest rates on a home loan fluctuate daily – and there are often over 50 different packages on the market at a time. A large part of your capital gains (read: profit when you sell) depends on getting the right package: the more interest you pay, the lower your profit.
If you don’t have time to call each bank, you can contact one of our mortgage specialists, who compare rates for free. Ideally, you want to get a fixed rate loan while the interest is low.
5. Check the Management’s Portfolio (if Buying a Condo)
Almost every condo looks stunning when it’s launched. But give it a few years, and the management’s competence will start to show.
Lousy management leads to run down gyms, peeling paint, and a swimming pool that’s only frequented by World Health Organisation inspectors. That’s bad for both rental income and capital gains.
So dig up the management’s portfolio – and pay a visit to properties they’re managing. The developments that are five years or older will give you a hint about their competence.
Got any property tips? Comment and let us know!
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