Despite popular belief, in ASIA's most property-crazed city-state Singapore, Owning a home in Singapore isn't necessarily a lucrative investment.
North Gaia EC developer is Sing Holdings Limited. It was founded in 1964 and listed in SGX from 2007. The company's focus is on property development and investment.
There has been a decrease in private apartment return rates since 2011 when the government implemented steps to calm down the market. According to a new analysis by property analytics start-up Urban Zoom, specific units now offer a lower yield than Singapore's government pension plan, the Central Provident Fund (CPF), which has a minimum set return of 2.5%.
Urban Zoom uses artificial intelligence (AI) to analyse property data. According to the findings of the research, 470,000 transactions involving 300,000 private units on the island have taken place since 1995.
Researchers focused on over 110,000 units purchased and sold several times, resulting in over 160,000 transactions, to gain a better idea of returns. Taxes, legal expenses, and commissions paid to agents were not included in the analysis.
For any given buy-sell transaction pairs, Urban Zoom creator Michael Cho says: "We can compute annualised returns for every given buy-sell transaction pairs since we know the initial purchase price, the subsequent selling price, and transaction timings".
After hitting a record high of 8.8% in 2011, median annualised capital returns dropped to roughly 2.2% in 2020. More restrictive mortgage loan-to-value restrictions were implemented in July 2018, and a hike in stamp duties on second residences. These measures are combined with increasing the cost of entry for foreign buyers.
According to Mr Cho's research, although 82% of condo owners have capital gains, just 44% are predicted to yield an annualised return of more than 2.5% per year, with the majority of them having acquired their units before 2008.
Researchers found that government controls on property prices had had a significant and long-lasting influence.
Nicholas Mak, the Singapore-based director of research at APAC Realty's ERA, said the rounds of bans "didn't only dampen price hikes; they damped sentiment.". He speculated that investing in government bonds would be a better idea since they are more secure.
Amounts deposited into a CPF account are subject to the statutory minimum annual interest rate of 2.5%, or the three-month average of interest rates charged by local central banks. According to the fund's website, the regular account interest rate will remain 2.5% from January 1 through March 31, 2020.
According to the research findings, homeowners are also keeping their homes for more extended periods. From a low of 3.6 years in 2009, the median holding duration rose to 8.2 years in 2019.
Alan Cheong, senior director at Savills, stated, "With cooling measures in place, the pace of price increases has slowed to the extent where owners may need to wait longer until the value of their property climbs beyond their original entry price, including associated fees and stamp duties.". For the most part, "owners are patiently waiting for the right time to sell."