5 Main Reasons To Consider Buying Condo In Singapore
Press release: 23 August, 2021: The purchase of single family homes and renting them out is an investment strategy that has been used by people since the middle ages. In recent times, more and more people have been building personal portfolios of single family homes to create passive income. In the past couple of years, this approach has become so popular that even major institutions with billions to invest have implemented it as a means to diversify their portfolios, earn income and gain exposure to the red-hot Singapore housing market.
The business has been dubbed "SFR" and has seen significant growth in the past five years. Retail investors have many choices to take advantage of this trend. This includes private SFR funds and online brokerage platforms that offer single-family homes that have tenants who are already in the same location. There are also publicly traded SFR real estate investment trusts. Bringing institutional-quality rigor and property management to what had previously been a cottage industry is a positive development for retail investors. However, nearly all of the current solutions concentrate mostly on freestanding single-family homes in suburban locations and secondary and tertiary market.
Another targeted investment strategy I think could be incorporated into the construction of real estate portfolios is one that is like traditional SFR, however it has distinct advantages. That's a strategy I call "urban SFR."
Apartments in major cities are a great way to invest in SFR. This is the field that my company is specialized in. I have seen firsthand five advantages to investing in condos in cities that are experiencing fast growth.
Good Supply and Demand Inefficiencies
Condo demand is not just driven by economics but also by people's preference for housing and their behavior. Remember, the condo market at Tampines Street 62 is comprised of mainly homeowners who are end-users, not investors who's decisions are governed by math. End-user homeowners have a myriad of reasons to purchase and sell, in addition to generating huge profits. This dynamic can provide arbitrage opportunities, allowing you to profit from excess supply as well as lack of demand on the sell side.
Macro Urbanization Trends
Cities are gaining popularity at an alarming rate and it's expected that by 2050, 68% of all inhabitants will be living in cities, compared to 55 percent in 2020. This increasing trend toward urbanization will have an effect on people's preferences for housing and, I think, this will lead to cities experiencing a price increase that is greater than suburban and rural home price appreciation.
Market Liquidity
It's not surprising that it is far easier to sell a condo unit than to sell an entire building. A condo is able to be sold quickly when there is a large number of buyers who will pay the right price. Investors looking to get into the market for real estate have more security because there's less risk of liquidity.
Hassle Free Management
Full service condominiums are equipped with staff to support tenants. This is covered through the monthly maintenance fee that is included in homeowners' dues or condo fees. If you are a homeowner or landlord, having an staff on site is similar to having a house maintenance staff without the cost of hiring the entire staff. So the owners of condominiums don't need to worry about the enormous headaches that go along with maintenance and repairs in the building or physical plant issues that result from single-family houses.
Differentiated Return Streams and Potential Upside Potential
Condominiums aren't assessed on the basis income multiples (cap rate) or dividend yields. Instead, they are valued according to supply and demand along with metrics like the price per square foot. This provides a chance for enhanced price appreciation. In the same way, appreciation and income are related, so condos can provide a variety of exposures and can complement your existing investment portfolios that are geared towards income.
Although condos are a relatively easy method of investing in the future of a city's growth however, it is important to understand that it can be difficult to secure deals in the absence of a physical presence in the city. Meeting brokers, attending open houses, and participating in competitive bidding processes are all a necessary part of the process, and could seem overwhelming when you're investing from afar.
The purchase of condos in Singapore is a long-standing strategy for wealthy people looking to protect their wealth and hedge against inflation. Retail investors have the opportunity to access this type of asset, capitalize on urbanization and take advantage of the growing of cities through urban SFR.
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