Investing in real estate can be very profitable.
However, like every other profitable endeavor it comes with several risks.
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.
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.
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!