Following the recent rise and implementation of housing properties in Singapore, investors are looking out for commercial properties in the country. Singapore might be one of the most expensive places to buy land in the whole of Asia but it is one of the best in terms of land placement and foreign property ownership right. Investors are mostly foreigners and according to the Singapore Land Authority (SLA), foreigners have no restrictions on buying commercial properties in the country. They can acquire these properties by buying through companies or buying strata-title property. Some commercial property type includes retail properties, hotels and hostel, and industrial properties (factories and warehouses).
Why Commercial Properties?
An investor’s aim is basically to yield profits. What do investors stand to gain when buying such properties?
1. No additional buyer’s stamp duty (ABSD)
Buying residential property in Singapore attracts a huge additional buyer’s stamp duty (ABSD) for as high as 7% to 20% depending on your residential status but when it comes to a commercial property, investors do not pay the ABSD it saves them much money. This is a better option than the residential properties as they are overcrowded and in demand, leading to high stamp duties when purchasing one.
2. Low Prices
Most commercial prices are cheaper on average as many assume that it is more expensive than residential properties. Investors are more attracted to these properties than the residential ones which are quite expensive and congested.
3. Good Rental Yields
With the country known for having low rental yields compared to other countries like the Philippines and Cambodia, the commercial properties surpass the residential properties in terms of their rental yields. Rates average around 5%, compared to 2% – 3% for residential properties. However, the cost of maintaining a commercial property outweighs that of a residential one.
Some demerits of buying these commercial buildings or properties include
- Higher utility costs due to its versatility
- You require higher down payments before purchasing
- A volatile market due to economic conditions, inflation, etc.
The Investor and the Commercial Properties
Buying properties through a company has good benefits. For instance, the transactions are bigger compared to the residential properties. it would also be easier to cope with the financial outlay. You also get reduced taxes, easier transfer of ownership, etc.
Multifamily properties are also popular with investors, especially properties that are in prime locations. These properties tend to have high occupancy rates and can generate high rental income.
Another commercial property investors look out for is retail properties like shopping malls, gyms, restaurants, etc. Such properties are obtained through takeovers and they offer high returns. Investors can consider buying these properties in units and renovating them.
Hotels are good investment sites for investors since the country stands as a point of contact for individuals going on tours and businesses. However, it is not the cheapest option out there as prices usually start up in millions.
Industrial properties are also expensive and 60% of the floor areas need to go into industrial activities. The top floor is for offices while the latter is for general industry.
In conclusion, the allure of commercial properties in Singapore is driven by their financial advantages, accessibility, and potential for robust rental yields. While challenges exist, savvy investors are increasingly recognizing the benefits of diversifying their portfolios with these lucrative assets. As Singapore’s property market continues to evolve, commercial properties remain a beacon of opportunity for those seeking to maximize their investment potential in this dynamic city-state.
When considering commercial property investments, investors should conduct thorough due diligence, assess market conditions, and have a clear investment strategy in place. It’s also advisable to work with experienced real estate professionals and consult with financial advisors to ensure that the investment aligns with their financial goals and risk tolerance. We are seasoned mortgage consultants, bringing years of expertise to assist individuals in crucial financial decisions. We are committed to providing you with utmost clarity, ensuring you approach this significant financial investment with confidence. Choose Smart Mortgage as your reliable partner, and let’s collaborate to turn your commercial property aspirations into reality.