property investment in Singapore

The best time for property investment in Singapore is during the worst time.

Do not time the marketing for property investment in Singapore. Why? Because the worst time to invest may rise to be the best time to invest. The world has gone through a vast transition in recent years due to the pandemic and other global events. That time seemed to be the worst to buy commercial property in Singapore.

But in the thick of the pandemic, Singapore had a record-breaking ultra net worth setting up family offices in the country. Li Ka-Shing’s family office joined Singapore’s expansion wave

So, what was really going on? Keep reading.

Commercial property investors’ sentiments were low

At the beginning of 2021, Covid took a nasty turn, and Singapore was battling with the deadly third wave of the pandemic. Many retail businesses were struggling to survive. Entertainment businesses, bars and pubs were among the worst affected retail sectors. The government restricted those businesses from operating to curb the spread of the pandemic. These businesses either shut down or converted into F&Bs. 

However, there was also a time and headcount restriction in F&Bs due to Covid. People had to maintain social distance. They were encouraged to order home delivery or takeaway to not contract Covid from others. As a result, F&Bs could not cater for clients at full capacity.

Businesses were experiencing one of their lowest points. Many of them could not make enough revenue to pay their rent to their landlords. Hence, the landlords who rented their property in the hope of rental returns suffered from rent default. 

Property investment companies in Singapore were also left in a lurch as businesses shut down and vacated the places they invested in. With people’s sentiments running low, there was little chance of renting their vacant property quickly, at a good rate.

Most buyers were hesitant about property investment in Singapore

A shophouse was on clasp of bad timing but an opportunity arrived at what seemed like the worst time to buy.

A shophouse located nearby Bugis came to my attention. The unit was proposed by a corporate agent. The shophouse was vacant for more than a year. She had been trying hard to rent or sell it for months but did not get a single offer. So, she connected with me to see if I could do something.

With 13 years’ experience as a property investment consultant, I know to value real estate investment property. I have been in the industry long enough to see where the raw gems lie, even if they are not easily visible.

When I assessed the property, I saw that the shophouse was approved for F&B usage. It is a big plus for a shophouse to have an allowance to run F&B. It increases the potential for good tenants exponentially compared to non-F&B allowed shophouses. Hence, I concluded that the property had strong investment value though it was vacant at that moment.

Read 5 top commercial realty segments for investment in 2022.

The same day I saw the property, I pitched it to an Indonesian client and managed to close the deal within the very day. In fact, we offered $100,000 above the closing price of the shophouse, which was $5.5 million.

Why did our client buy the commercial property in Singapore?

When the purchase took place, Singapore was going through the circuit breaker period. International borders were closed. So, the buyer could not physically come to Singapore to make the deal. 

However, he was looking for a commercial property in Singapore to open a restaurant and bar. The features that the shophouse proposed were ideal for him. 

  • It allowed F&B operation.
  • Located in a strategic position for bar and restaurant business.
  • Vacant for new businesses to take over.

The shophouse was not being picked up by other purchasers because the sentiment was low. But it was too good an opportunity for the buyer to pass by, especially when all his requirements were met. The buyer knew that entering the deal would be a win for him. 

Did the shophouse live up to the buyer’s expectation?

You know whether it is a good or bad buy only by the post-purchase result. We also realised that the presumed worst timing of this property investment in Singapore was actually the best time when the post-purchase phases unfolded.

And this is why!

Initially, the buyer planned to use the property for his own use to open his business. But the pandemic was not showing any signs of stopping at that point. Borders were closed and nobody knew when they would open and invite foreign visitors again. That is why the purchaser was unable to travel to Singapore to materialise his business plan.

However, we could not let the property sit vacantly. It was not a good investment approach. Hence, I put up the shophouse for rental. I managed to get a good tenant who renovated the property marvellously. In fact, the renovation enhanced the property as such that its outlook got a big upgrade.

He ended up making a record property investment in Singapore!

Imagine! The shophouse, which was vacant and rotting away, was not only bought by my client in the thick of the pandemic but was also fetching appreciable rental returns. We could not expect anything more but things turned out even better!

In 1 year’s time, to our utmost surprise, a buyer offered to purchase the property for $10 million. It was almost double the price my client bought originally. Though he had no intention to sell the shophouse, he could not refuse the offer and we made a record investment.

However, we were concerned about one issue as it was a fast sale. Usually, a company with a $1 million turnover are subject to 7% goods and services tax (GST). If the authority sees a company profiting from property trading, the buyer will be subjected to a property revenue tax of 21%. 

As such, I worked with a tax consultant to mitigate the issue before it posed an obstacle for my client. We wrote to the Inland Revenue Authority of Singapore (IRAS) to explain that the client did not have any intention to sell the shophouse right from the beginning but the circumstances led him to make the decision. Finally, we managed to get a formal GST tax exemption and the client garnered twice the amount he put in the Property within 1 short year.

This story proves there is no timing in the market. You never know when opportunities will arrive. In fact, the best time to invest is during the worst time. You only have to look at what the property investment will bring you and whether it meets your requirement and budget. If you do that, you can achieve something extraordinary when everybody else is busy looking at something else. 

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