New Reporter
22-06-23, 17:20
Supply is ample, yet there is value in Singapore property
Jun 19, 2023
THE United Kingdom (UK) may have more land per person than Singapore, yet suffers from a greater housing shortage.
Perhaps insufficient new homes are being built in parts of the UK because existing homeowners are able to block new housing development near their homes.
In contrast, there may hardly be any housing shortage in Singapore despite its limited land size.
Construction is constantly taking place all over the island, which may be bad for the environment. And many existing homeowners have to endure construction noise as well as fret over their views being blocked by new developments.
More homes may be needed in Singapore should the growth in number of households continue to outpace population growth. Between 2010 and 2022, the compound annual growth rate (CAGR) in number of resident households was about 1.7 per cent, versus the CAGR in number of residents of just over 0.6 per cent. Still, one can count on supply being able to meet demand.
https://i.imgur.com/iHUcSNl.png
While there can be lags due to time needed for building new homes, there appears to always be ample supply of land for housing available in Singapore.
New homes will be built on sites such as the Old Police Academy in Mount Pleasant, the former Keppel Club in Telok Blangah and the land to be freed up by relocating Paya Lebar Air Base. Many homes have also been built on land that has been reclaimed or were previously used as factories.
Amid declining interest in horse racing, the government announced plans in early June to take back for redevelopment 120 hectares of land in Kranji, now occupied by the Singapore Turf Club. Market watchers estimate that redeveloping the 120 hectare-site could yield 20,000 to 40,000 new homes.
I enjoyed the thrills and spills of horse racing from my two visits to the races at Kranji. However, housing needs probably sensibly prevail over those of the dwindling number of horse-racing enthusiasts.
In future, maybe more land occupied by golf courses or factories and warehouses in older industrial estates located near existing residential areas could be re-purposed for housing needs. Maybe some schools will shut if enrolment numbers fall, and the sites used for housing and other purposes.
Given the government actively ensures there is enough housing supply, is Singapore a poor market for investing in homes? After all, any investor may hope for demand to constantly outstrip supply in order to achieve high returns.
In the residential segment, possibly only landed homes and in particular detached homes in Good Class Bungalow Areas benefit from scarcity value.
Moreover, when resale prices of Housing and Development Board flats or private home prices surge, expect the government to intervene to help keep a lid on price rises.
Optimising land use
Nonetheless, property investors who adopt a long-term view may be happy that the government actively optimises land use.
Take an investor buying a new 99-year leasehold private home. While construction costs have risen, the majority of the purchase price of the home could be for the leasehold land.
A 99-year land lease may be inadequate for a buyer focused on legacy planning who wishes to pass down a home across multiple generations.
Still, over 99 years, it’s possible that housing demand in the country as a whole or in a particular location may plummet. Could an investor then be left facing dim prospects of a vacant home which cannot generate rental income?
Possibly not. Having a government that is pro-active in optimising land use means that if a particular use of a site loses its relevance, the said site may be re-purposed for other uses.
Sure, an owner of old industrial factory may suffer from seeing such a plant becoming irrelevant. But, the land occupied by the plant can over time be re-purposed for a higher and better use. In the process, the factory owner could reap a bonanza.
In short, land allocation to a myriad of uses is fluid. Based on needs, the proportion of land allocated for housing, healthcare, education, defence, logistics, transport, manufacturing, offices, retail, recreation, parks, places of worship and so forth will invariably change.
Singapore’s value proposition
The entry cost for property investors in any property segment here is high. Transaction and recurring costs can be steeper for homes versus non-residential properties.
While transparency in the property market here is high, there can be relative pockets of opportunity for investors who can pick the right property asset class, entry point, development or location. Additionally, some investors can secure an edge through re-positioning a property – adding value to attract a higher-paying tenant – or financial structuring such as reconfiguring financing options.
Ultimately though, property investors here are largely counting on Singapore, which is a strong “work, live and play” destination, becoming even more attractive in future.
If Singapore’s value as a destination rises, then property values here will rise across all segments.
Some affluent and protective parents are eager to help their young children buy a private home because of fears that prices will run away.
Such fears are probably unfounded, as the government has consistently shown that it can find new suitable housing sites.
Moreover, as housing is often a hot button issue among voters, expect the meeting of housing needs to continue being high on the agenda of any government.
However, having a government that meets housing and other needs via ensuring adequate supply and actively optimising land use does not make it unwise to buy property here.
Looking ahead, Singapore properties may not yield the highest returns. Meeting demand via adequate new supply, albeit with a time lag, can hinder strong and prolonged growth in rental rates and prices.
Transaction and property taxes have already risen for many property investors. Efforts to combat inequality and promote social mobility may see property owners pay even higher taxes in future.
Still, one can get peace of mind from owning Singapore property and capital gains through the rise in Singapore’s value proposition. The currency is strong, regulations are robust, infrastructure is good, and properties that become irrelevant can be re-purposed for better uses.
Ensuring adequate land supply for housing and other needs helps in building social cohesion. In turn, Singapore’s value as a destination grows because there is social cohesion.
Investors can be justified in paying princely sums to buy physical properties here despite ample supply.
https://www.businesstimes.com.sg/opinion-features/supply-ample-yet-there-value-singapore-property
Jun 19, 2023
THE United Kingdom (UK) may have more land per person than Singapore, yet suffers from a greater housing shortage.
Perhaps insufficient new homes are being built in parts of the UK because existing homeowners are able to block new housing development near their homes.
In contrast, there may hardly be any housing shortage in Singapore despite its limited land size.
Construction is constantly taking place all over the island, which may be bad for the environment. And many existing homeowners have to endure construction noise as well as fret over their views being blocked by new developments.
More homes may be needed in Singapore should the growth in number of households continue to outpace population growth. Between 2010 and 2022, the compound annual growth rate (CAGR) in number of resident households was about 1.7 per cent, versus the CAGR in number of residents of just over 0.6 per cent. Still, one can count on supply being able to meet demand.
https://i.imgur.com/iHUcSNl.png
While there can be lags due to time needed for building new homes, there appears to always be ample supply of land for housing available in Singapore.
New homes will be built on sites such as the Old Police Academy in Mount Pleasant, the former Keppel Club in Telok Blangah and the land to be freed up by relocating Paya Lebar Air Base. Many homes have also been built on land that has been reclaimed or were previously used as factories.
Amid declining interest in horse racing, the government announced plans in early June to take back for redevelopment 120 hectares of land in Kranji, now occupied by the Singapore Turf Club. Market watchers estimate that redeveloping the 120 hectare-site could yield 20,000 to 40,000 new homes.
I enjoyed the thrills and spills of horse racing from my two visits to the races at Kranji. However, housing needs probably sensibly prevail over those of the dwindling number of horse-racing enthusiasts.
In future, maybe more land occupied by golf courses or factories and warehouses in older industrial estates located near existing residential areas could be re-purposed for housing needs. Maybe some schools will shut if enrolment numbers fall, and the sites used for housing and other purposes.
Given the government actively ensures there is enough housing supply, is Singapore a poor market for investing in homes? After all, any investor may hope for demand to constantly outstrip supply in order to achieve high returns.
In the residential segment, possibly only landed homes and in particular detached homes in Good Class Bungalow Areas benefit from scarcity value.
Moreover, when resale prices of Housing and Development Board flats or private home prices surge, expect the government to intervene to help keep a lid on price rises.
Optimising land use
Nonetheless, property investors who adopt a long-term view may be happy that the government actively optimises land use.
Take an investor buying a new 99-year leasehold private home. While construction costs have risen, the majority of the purchase price of the home could be for the leasehold land.
A 99-year land lease may be inadequate for a buyer focused on legacy planning who wishes to pass down a home across multiple generations.
Still, over 99 years, it’s possible that housing demand in the country as a whole or in a particular location may plummet. Could an investor then be left facing dim prospects of a vacant home which cannot generate rental income?
Possibly not. Having a government that is pro-active in optimising land use means that if a particular use of a site loses its relevance, the said site may be re-purposed for other uses.
Sure, an owner of old industrial factory may suffer from seeing such a plant becoming irrelevant. But, the land occupied by the plant can over time be re-purposed for a higher and better use. In the process, the factory owner could reap a bonanza.
In short, land allocation to a myriad of uses is fluid. Based on needs, the proportion of land allocated for housing, healthcare, education, defence, logistics, transport, manufacturing, offices, retail, recreation, parks, places of worship and so forth will invariably change.
Singapore’s value proposition
The entry cost for property investors in any property segment here is high. Transaction and recurring costs can be steeper for homes versus non-residential properties.
While transparency in the property market here is high, there can be relative pockets of opportunity for investors who can pick the right property asset class, entry point, development or location. Additionally, some investors can secure an edge through re-positioning a property – adding value to attract a higher-paying tenant – or financial structuring such as reconfiguring financing options.
Ultimately though, property investors here are largely counting on Singapore, which is a strong “work, live and play” destination, becoming even more attractive in future.
If Singapore’s value as a destination rises, then property values here will rise across all segments.
Some affluent and protective parents are eager to help their young children buy a private home because of fears that prices will run away.
Such fears are probably unfounded, as the government has consistently shown that it can find new suitable housing sites.
Moreover, as housing is often a hot button issue among voters, expect the meeting of housing needs to continue being high on the agenda of any government.
However, having a government that meets housing and other needs via ensuring adequate supply and actively optimising land use does not make it unwise to buy property here.
Looking ahead, Singapore properties may not yield the highest returns. Meeting demand via adequate new supply, albeit with a time lag, can hinder strong and prolonged growth in rental rates and prices.
Transaction and property taxes have already risen for many property investors. Efforts to combat inequality and promote social mobility may see property owners pay even higher taxes in future.
Still, one can get peace of mind from owning Singapore property and capital gains through the rise in Singapore’s value proposition. The currency is strong, regulations are robust, infrastructure is good, and properties that become irrelevant can be re-purposed for better uses.
Ensuring adequate land supply for housing and other needs helps in building social cohesion. In turn, Singapore’s value as a destination grows because there is social cohesion.
Investors can be justified in paying princely sums to buy physical properties here despite ample supply.
https://www.businesstimes.com.sg/opinion-features/supply-ample-yet-there-value-singapore-property