Buying property in Singapore: Property risks to know

This article first appeared on The New Savvy's Buying Property In Singapore: Property Risks To Know

Investing in real estate can be very profitable.

However, like every other profitable endeavor it comes with several risks.

Here are the things you need to consider while investing in real estate in Singapore.

Property risks #1: Fluctuating prices

In Singapore, the market was previously saturated with people wanting to buy property due to the stable Singapore environment.

The demand was higher than the supply and sellers were able to set prices as high as they wish. This led to higher property prices.

The high demand and low competition trend in real estate is however reversing. Many developers are releasing new projects and supply has outstripped demand. Property prices has been slowly declining.

Any investors looking to purchase a property in Singapore have to ensure that they enter at the right timing.

Risks of buying property in Singapore

  • Investing in real estate can be very profitable. However, like every other profitable endeavor it comes with several risks.
  • Here are the things you need to consider while investing in real estate in Singapore.
  • 1. Fluctuating prices

    In Singapore, the market was previously saturated with people wanting to buy property due to the stable environment. Demand was higher than supply, which led to higher property prices.

  • 1. Fluctuating prices

    The high demand and low competition trend in real estate is however reversing. Many developers are releasing new projects and supply has outstripped demand. Property prices has been slowly declining.

  • 2. Tedious bureaucratic processes

    Singapore has strict bureaucratic processes for real estate projects. These processes are necessary in order to obtain approval for projects and fulfilling the pre-requisites before the property can be sold.

  • 2. Tedious bureaucratic processes

    Some developers tend to overlook these processes. 7 such projects with a total of 574 homes have recently been identified, including City Development's and IOI's South Beach project.

  • 3. Turnaround time

    There was a time when developers took about 43 months to complete a project due to the uncertainty in the real estate market. Now, you can now expect a project to be completed within five months.

  • 4. Legal risks

    Legal work is yet another factor you need to keep in mind. You need to follow the rules and regulations to stay clear of charges and penalties. Make sure you know the rules of property transfer and purchase.

  • 5. Mortgage eligibility and suitability

    HDB provides housing loans at concessionary interest rates to flat buyers. However, to prove your eligibility, you need to go through a credit assessment and mortgage loan eligibility process.

  • 5. Mortgage eligibility and suitability

    If you don't meet the criteria set by the HDB, you can always take the loan from private banks and other financial institutions.

  • 6. Illiquidity in the real estate market

    The price of real estate in Singapore is rising due to its high demand. So, illiquidity is only a minor risk. But it's always a good idea to be careful and do your research before you invest in a particular property.

Property risks #2: Tedious bureaucratic processes

The government of Singapore has strict bureaucratic processes for real estate projects.

These processes are necessary in order to obtain approval for projects and fulfilling the pre-requisites before the property can be sold.

However, some developers tend to overlook these processes. In fact, 7 such projects with a total of 574 homes have recently been identified.

They have the planning approval from the Urban Redevelopment Authority but lack the pre-requisites for sale.

City Development's and IOI's South Beach project are among these projects.

In fact, some prestigious project such as YTL Corporation's 89-unit development at Orchard Boulevard are also not exempt from this list.

Property risks #3: The turnaround time

The turnaround time for real estate projects is now faster than before.

There was a time when developers took about 43 months to complete a project.

This slow turnaround was due to the uncertainty in the real estate market.

Today, things have changed. You can now expect a project to be completed within 5 months.

Property risks #4: Legal risks

Legal work is yet another factor you need to keep in mind.

You need to follow the rules and regulations to stay clear of charges and penalties.

Make sure you know the rules of property transfer and purchase.

You can even consult a real estate agent or lawyer to help you out in this matter.

What type of property in Singapore should you buy

  • Buying property is a long term investment. When you're thinking of diving into real estate investment, it's better gather as much information on it as possible.
  • Just like in any part of the world, having a private property is a good decision as there are many benefits. For instance, the property cycle in Singapore over the last years indicates that there is a steady rise in real estate's value.
  • Alternatively, real estate investment can be a source of passive income. You can purchase a property and rent it out.
  • Hougang Capeview BTO flats

    BTO comes under the Housing and Development Board (HDB), Singapore. It's a responsive system, which allows Singaporean citizens to apply for flats at a location of their choice.

  • BTO flats at Sky Terrace@Dawson

    Once 65-70 per cent of the flats are booked, the construction work begins.

  • Tampines GreenLace BTO flats

    After the construction is completed, you will have to wait for some time before you can move in.

  • Pasir Ris One DBSS project

    Design, Build, and Sell Scheme (DBSS) is an incentive of the HDB system. DBSS is public housing scheme developed by private developers.

  • City View @ Boon Keng DBSS project

    The DBSS scheme offers more comfortable designs and better locations.

  • Executive Condominium

    Executive Condos (ECs) caters to young graduates and professionals who wants a property in between public and private housing.

  • Executive Condominium

    ECs are comparable in design and facilities to private condominiums as they are developed and sold by the private developers.

  • When it comes to investing in real estate, you should ask whether there is easy access to MRT stations, schools, and other essential facilities; the property can be easily resold; and affordability.
  • What are the costs involved in buying a property in Singapore? First, you have to check your stamp duty rate. Based on the market value of the property, you can compute for your Buyer's Stamp Duty (BSD).

Property risks #5: Mortgage eligibility and suitability

The Housing and Development Board (HDB) provides housing loans at concessionary interest rates to flat buyers.

However, to prove your eligibility, you need to go through a credit assessment and mortgage loan eligibility process.

If you don't meet the criteria set by the HDB, you can always take the loan from private banks and other financial institutions.

Make sure that the Monetary Authority of Singapore licenses whichever bank you choose.

Property risks #6: Illiquidity in the real estate market

As mentioned before, the price of real estate in Singapore is rising due to its high demand.

So, illiquidity is only a minor risk. But it's always a good idea to be careful and do your research before you invest in a particular property.

In a nutshell

Real estate investment has many benefits. You can buy a property and then sell it on profit.

You can even give it on rent to have an alternative source of income.

Either way, real estate is a long-term investment. It can help you plan your finances better.

It can help you improve your future. Moreover, it can be of a great help after your retirement.

Nonetheless, real estate investment has some associated risks that you need to be aware of.

These risks include prices, bureaucratic processes, legalities, and illiquidity. So, if you plan to invest in real estate, do so wisely!

Most expensive real estate markets worldwide

  • 1. Monaco

    According to the Wealth Report 2016, Monaco remained the world's most expensive residential real estate market on a square-meter basis, with US$1 million buying only 17 square meters, or 183 square feet.

  • 2. Hong Kong

    Hong Kong was the second most-expensive market, with US$1 million buying 20 square meters, or 215 square feet.

  • 3. London

    London ranked third with 22 square meters, or 236 square feet.

  • 4. New York

    New York once again ranked as the most expensive US city on a per-meter basis, with US$1 million buying 27 square meters, or roughly 290 square feet.

  • 5. Geneva

    US$1 million buys 40 square metres.

  • 6. Sydney

    US$1 million buys 40 square metres.

  • 7. Singapore

    Singapore is the 7th most expensive real estate market in the world, in the list which looked only at "prime" real estate.

  • 8. Shanghai

    According to the report, Shanghai saw the third most substantial rise in property prices last year.

  • 9. Paris

    US$1 million buys 57 square metres.

  • 10. Beijing

    US$1 million buys 58 square metres.

  • 11. Los Angeles

  • 12. Rome

  • 13. Miami

    Miami ranked third among US cities, with 6 per cent price growth.

  • 14. Moscow

  • 15. Tokyo

  • 16. Istanbul

  • 17. Berlin

  • 18. Mumbai

  • 19. Sao Paulo

    Brazil's economic crisis means that US$1 million now buys 203 square meters, or 2,185 square feet of prime real estate. That compares with 142 square meters, or around 1,500 square feet, last year.

  • 20. Cape Town

    In Cape Town, US$1 million buys 255 square meters, or 2,745 square feet.


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