In this exclusive one-on-one interview with iProperty.com at the recent iProperty.com Expo at Marina Bay Sands, CEO of PropNex and Singapore’s leading real estate expert Mohamed Ismail Gafoor discusses the latest trends in the Singapore and Malaysia property market. He also provides valuable advice for 2 growing demographic groups in Singapore: seniors who own a house and are planning for their life after retirement, and singles under 35 contemplating their first studio home purchase.
Q. You have often emphasized that landed housing in Singapore is by far the best choice for real estate investors. Could you tell us why?
Landed property will always be a goldmine – for the simple reason that land is in limited supply, and Singaporeans will always consider owning a landed house to be their ultimate dream.
However, not all landed properties are created equal. While the government can still release sites for landed properties with a 99-year lease, the existing stock of freehold landed properties are highly limited. I would lean away from landed properties with a 99-year lease as they present unique challenges for their owners. It is much harder for leasehold landed properties to meet the criteria for enbloc, as a 100% owner consensus is required – as compared to private condos more than 10 yrs old which need only 80%. There is only a 20-25% price difference at the entry-level for freehold vs. leasehold for landed properties, but the key advantage of freehold landed homes is that it provides for perpetual ownership, making it a much better deal.
Q. What are the possible implications of the proposal to double the entry price at which foreigners can buy real estate in Malaysia?
First of all, I can certainly understand the rationale behind such a policy proposal. Just as what has happened in Singapore, the Malaysian government is concerned about a property bubble forming, and likewise they also have to address the growing public concerns on the ground about rising property prices.
In spite of this, I remain very confident that the M$1 million minimum price for foreign purchasers of Malaysian property will not be a blanket limit across all states. In particular, such a policy would not be advantageous for the state of Johor especially when the entire Iskandar project is still at the infancy stage of development. It is likely the MY$1million minimum purchase price will apply to properties in the downtown KL region, but highly unlikely for areas such as Ipoh and Malacca.
As many well-off Singaporeans have already been picking up units well above the MY$1 million mark, it will not be surprising if they remain willing to pay for a good product which is still relatively affordable, particularly given the strength of the Singapore currency. Those most likely to be affected by the higher entry price are HDB upgraders, who have been mostly buying lower-tier fringe properties.
Q. What should senior citizens keep in mind when deciding if they should opt for the LBS (Lease Buy-Back Scheme), or “downsizing” to a studio flat instead?
The LBS has the advantage of allowing seniors to continue to stay in the same flat in the same environment they have grown used to after many years. While some may be concerned about “outliving” the 30 years remaining on the lease under this program, the reality is that there are many seniors who will require specialized care at a health-care facility by that age. Hence, although the take-up rate for the LBS scheme has been low, I do see some do see some merit in this program.
However, I consider “downsizing” to be the more exciting option among the two. Downsizing to a studio apartment allows seniors to be able to completely cash-out on their existing property and use part of the proceeds to buy a smaller elder-friendly property at a reasonable price. Living in an elder-friendly community with adapted facilities (e.g.: lifts and ramps) will also provide a close-knit community where seniors can grow old together. Furthermore, having a lump sum payment in hand also gives one a greater feeling of strength and security. However, the inherent risk in “downsizing” is that seniors who do not have necessary skill or discipline to manage their funds can lose everything very quickly. Hence, deciding which option to go is very much an individual decision.
Q: What advice do you have for single working professionals under the age of 35 who are contemplating investing into a private studio flat for their own-stay?
As Singapore’s population continues to increase, it is inevitable that property sizes will shrink. Although shoebox unit sizes in Singapore are still decent compared with cities such as Tokyo and Hong Kong, it is undeniable that reduced space and high density will lead to a compromised lifestyle.
For single working professionals who want to move out of their parent’s house into their own home for lifestyle reasons, I would say that it is perfectly okay to buy studio apartment – but they really need to look out for the PSF (price per square feet) they are paying. Although the quantum of studio apartments may be low, all capital appreciation is ultimately a by-product of rental yield. Hence, the risk is that if rentals do not go up much, there is limited room for capital to appreciate. Paying high prices for an entry-level studio flat in the outlying areas could mean there may be limited scope for rental appreciation.