• Joshua Loo

Why do Singaporeans Love Purchasing Real Estate?



Introduction


Being a Real Estate agent, I need to understand the motivations for why people purchase real estate.


As a Singaporean myself, this is a question that has gone without any strong debate. It seems unusually quaint to focus on real estate as a vehicle of investment when we are presently in an era where billions can be made by having a strong following. Some dub this as the age of social media, and it’s amazing how so much money can be made with just a computer.


To some, real estate investing is an antiquated form of investment, but it still has a strong base of loyal supporters. Singaporeans of all age groups all have their reasons for owning properties. Where else in the world will you find couples opting to joint-purchase government apartments years before marriage?


Singapore properties are not cheap either. A 25% downpayment for your first private property will easily set you back six figures. Looking at other cheaper real estate markets, positive cash flow is easily attainable with a consistent rental. In the Singapore market, not only do you have to rely on rentals, but also strong capital appreciation for your property!


Speaking to any “Merdeka” Singaporean, it seems that renting an apartment is a cardinal sin as compared to purchasing one! You might be wondering if Singaporeans of all age groups are purchasing properties and not renting, how are we not experiencing a total collapse of the real estate market in Singapore already?


I’ll get to this in the following paragraphs, and to fully comprehend, we will have to go back to Singapore’s economic boom from the mid-70s till the 90s.


Past


*Disclaimer*

The following stories that I’m about to share well happened years before I was born, or young enough that I don’t understand the full gravity of the situation. I.e., I’m in my late 20s. These are stories that were shared with me by savvy clients who made their millions during the late 80s/90s. If you are from the “Merdeka” generation, you probably can relate or advise me better!


Singapore Improvement Trust


The earliest iteration of the Housing Development Board (HDB), was the Singapore Improvement Trust (SIT). to those unfamiliar, the SIT was set up by the British Colonial government in Singapore to provide for building affordable housing in Singapore.


The SIT provided a framework for overall residential land planning for its successor, the HDB.


Housing Development Board


Throughout HDBs early years, I believe three critical implementations had cemented the mindset that Real Estate is both homes/shelter and financial investment for the people.


- Home Ownership for The People Scheme (1964)

- HDB Resale Market (1971)

- Executive Condominium Scheme (1999)


Home Ownership for The People Scheme


Before this scheme was implemented in 1964, other than affluent Singaporeans, many were living in slums and squatters. HDBs pre-1964 were mostly rental units. These units were adequate in providing basic living conditions.


Providing homeownership for the general masses helped Singaporeans back then to gain a sense of belonging and security for their families.


Also, the rich were landowners, and real estate was associated with the wealthy. Owning their own houses placed Singaporeans in a positive mindset for a better future, and made them strive harder to accumulate more wealth.


Some things never do change, however, as Singaporeans back then are also lamenting about how these HDB flats are minuscule as compared to their kampongs!


HDB Resale Market


In 1971, the HDB resale market was introduced. Restrictions such as The Minimum Occupation Period (MOP) and income ceiling were to protect the main purpose of these subsidized housing.


The HDB Resale Market allows for homes to be commodified, and people were making money from their HDB flats.


Executive Condominiums


The final frontier of real estate ownership was in bridging the gap between public and private housing. The Executive Condominiums (ECs) seek to solve these challenges.


ECs are built and sold by private developers starting in 1999, and heavily subsidized by the Singapore government. This allowed for a gentler transition for previous HDB flat owners, who are seeking further improvements to their living lifestyles but still require financial assistance.


Similar restrictions set for HDB flats applies here, but once these restrictions are lifted, these homeowners are rewarded with an extremely high capital gain.



This is considered to be a hassle-free form of investment. Buy a house, wait 10 years and sell it for profit! You do not need to consistently monitor housing prices to see if you made the right decision.


What About the Private Housing Markets?


The fundamentals that were driving up the public housing market worked well in its own right but largely did not make much sense for the private housing market.


Private homeowners are generally wealthy business owners or graduates and do not have to rely on real estate to make a healthy profit. However, opportunities to make money from real estate was still present. Numerous stamp duties and property loan rules (ABSD, SSD, TDSR and MSR) were not present.

This provided an open market for the private housing market, and the ones that invested in it made A LOT OF MONEY.


One of my clients shared with me the following story.


Being a fresh-faced graduate in the 1990s, Ms Tang (Not her actual name) was sick of her daily commute from her home along Holland Rd to Raffles Place.


One day, when she was sitting along Boat Quay, she saw that there was called The Riverwalk and decided to make her first property purchase there.

Back then It was common for fresh-faced graduates to be given unsecured, no-interest loans for property purchases! She bought the property and sold it a few years later, making around ~$300k (~$450,000 in 2021 dollars).


She repeated this a few times and made a good profit, but was when she bought a condo for about a million dollars. I can’t recall which development it was, but she made double her money back from an en-bloc sale within 2 years.


This made her a millionaire easy before her 30s without any capital investment!


I asked her once what gave her the confidence to make such high stakes investments. She told me that her Economics professor had advised her that property investing was one of the surest ways to make money quick, and the best time to do so was when you are in your 20s as you have time on your side.


Furthermore, she believed that location was a top priority in property investing, no matter the capital costs. Of course, the fundamentals of what makes a development great should be analyzed in detail too.


I questioned further and said that the only reasons why she was able to make such profits were because of Singapore’s economic boom and the lack of transparency of the real estate markets back then.


She agreed and said that she was in a time where the general population relied on high yield savings accounts (i.e., 6-7% p.a). The lack of transparency also meant that good deals are always present, should you be actively seeking them.


Back To The Present


The situation in today’s markets is very different as we are facing various stamp duties post-2010, which will inevitably affect the profitability of a real estate investment. However, the strict control over real estate prices by the government in Singapore has ironically given Singaporean’s reassurance to invest in real estate.


Nevertheless, past events have groomed the current sentiments of profiting from real estate. Today, we have gone through 3 to 4 generations of property investors all with different motivations in acquiring this asset class.


Conclusion


It is not unusual for the middle class in Singapore to be owning multiple properties, the most common being owning both public and private housing each. This stems from the early days of Singapore’s independence of home ownership campaigns.


As the general population see an increase in household income over the years, we gradually see a transition from owning HDB flats to private housing, or both!


However, there are other extrinsic factors related to how your real estate investment can perform. One such correlation is towards the housing rental markets. Indirectly, home prices are affected by rental demand in Singapore.


Singapore relies heavily on rental demand from high salaried workers overseas with good housing allowances, and it is our imperative to ensure that Singapore’s economy remains resilient with consistent growth to attract them.

Moving on, I believe that a good investment property is one that you can see yourself living in. Before any investors should consider an investment property, always look beyond just the figures of your return on investment and bring in the human factors that will either make or break this investment.


Interested in finding good investment properties, and planning to move forward soon? Contact me (Joshua) at +65 96329840 or send your queries to estatemagnates@gmail.com! I love to connect with like-minded individuals!


The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee, or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.



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