The Essential Guide For First-Time Homebuyers: How To Pick The Right Property

8 min read

Location, location, location.

Coined by Harold Samuel in 1944, this famous mantra has been uttered many times over the years whenever someone is asked about what makes a good property.

But is it really just all about location?

For example, there are properties that seemingly have it all. They can be located very near an MRT station, within 1 km of reputable schools, in the central region of Singapore, close to amenities, plus even freehold. But they don’t perform as well as you might think.

On the surface, the location of the property definitely plays a huge role. But the reality is that it isn’t always so simple or straightforward. “Reading” a property requires a certain level of acumen. Some people can look at a run-down hovel in a Geylang alleyway, and correctly pick out its hidden investment value. Others, unfortunately, can receive reams of property data, but yet still end up with mediocre property assets.

And so if you are in the early stages of looking at investing in a home, here are some of the basic things that you absolutely need to know.

While this alone won’t make you an expert (that takes experience), it can at least get you started on the right page:

The “right” property depends on your intentions for buying it

Before you even begin looking at different properties, you should be clear on your intentions. Properties that are good for investment may be wrong for pure home buyers. For example, a homeowner may not enjoy living in a noisier integrated development with a mall, even though it may have good prospects for gains.

Consider if you’re looking for:

• Genuine home ownership 
• Right-sizing
• Upgrading (e.g. selling your flat to upgrade to a private condo later), or 
• Investment (capital gains when reselling, rental income, etc.) 

This will affect which qualities you prioritise over others. If you’re a genuine homeowner, you’d be less concerned over rental yield (as you’re not intending to rent out the property anyway). 

If you’re an upgrader planning to move in five years, then you may overlook certain undesirable qualities, such as having to stay in a less connected area for the time being (especially if the price is likely to rise in the next five years, when a nearby school is completed).

It’s easier to pick a property when you have a clear idea of what you’re looking for. 

Key qualities to look for in a property 

• Accessibility 
• Amenities versus disamenities 
• Remaining lease 
• Transaction history 
• Rentability and rental yield
• Layout

1. Accessibility

On average, you can definitely expect properties near the MRT station to perform better. This doesn’t, however, mean that properties near the MRT will see better returns. 

The opening of MRT stations tends to be announced many years beforehand. As such, most developers would have priced in the upcoming station. Even the relationship between rental yield (see below) and proximity to MRT stations has been inconsistent. 

However, investors should favour properties near MRT stations because of rentability; it’s generally easier to find tenants (there’s higher rentability, even if not yield). Tenants also tend to be “stickier” and may settle for longer leases when they feel accessibility is good. 

Likewise, properties near MRT stations often attract a wider pool of prospective buyers. This makes it easier to find a buyer, which is not the same as getting better returns (as you likely also paid a premium for the property). 

This is especially so at a time when cars are going to get increasingly more expensive to own moving forward (see the latest Budget 2023 on taxes on cars and the crazy COE prices). In some sense, being located close to an MRT station would effectively “save” you money from having to spend on a car.

To gauge accessibility, note that the maximum distance most healthy adults are comfortable walking is about one kilometre. This will be anywhere from 10 to 13 minutes of walking time. Anything further than this will be considered too far from the MRT by most. 

If you’re a homeowner, remember to factor in children or mobility-impaired family members. The term “five minutes’ walk to MRT” may not apply to them.

Lastly, do remember that accessibility on a map can be very different from reality. The walking times on Google don’t take into account the terrain, like an inclined slope or even pathways that can be dangerous to traverse.

2. Amenities and disamenities

Look for the following within one kilometre:

• Groceries 
• Clinics 
• Malls 
• Schools  
• Offices (especially business parks or tech hubs)
• Entertainment (e.g. cinemas, sports complexes) 
• Parks, park connectors, nature walks 

The more of the above you can find within a kilometre, the more attractive the general location. That’s obvious enough. But we’ll let you in on what’s commonly overlooked: these places can be an amenity or a disamenity. Contentious ones to watch for are:

• Places of worship
• Hospitals 
• Airports 
• Nightlife 
• Malls, offices, and schools

An example of this would be The Ola EC, which is in front of Sengkang General Hospital – some people may like that (it’s nearby healthcare), while others may worry about ambulance sirens at night. It may also be a Fengshui thing, where the general advice is to not face the entrance of the morgue.

All of the above can introduce a degree of noise and traffic congestion. For homeowners, they are also subjective as amenities (e.g. offices near your home are not an amenity if you don’t work there, and don’t rent out). 

3. Remaining lease

Older leasehold properties are inadvisable for new investors. Investors who buy older properties often count on rental yield, as they’re trying to buy at a low price (due to lease decay), but rent at close to market value. While this is a viable strategy, it’s high risk as there’s no easy way to offload the property should it go wrong.

As such, it’s best to confine your search to properties that are no more than 30 years old, if they’re leasehold. 

This is also true for homeowners. If you buy a property in an advanced state of lease decay, you’ll have fewer options later; such as the possibility of right-sizing if your retirement funds are negatively impacted.

As for comparing leasehold and freehold properties, this is a bigger topic that we’ve covered in our previous guide.

4. Transaction history

The transaction history of the property gives you some idea of what to expect, in terms of (1) a fair price to pay, and (2) the likely returns. The transaction history should be compared with those of neighbouring units (again, within one kilometre) to gauge its overall performance. 

This information can be sourced from caveats lodged with the URA. As the data is difficult to sort, however, you can also contact us directly and we can help to provide the information. 

Generally, you’d want to know a few things from the data. What is the transaction flow like? Are there units consistently being transacted each month? Or do you see years in which there are no transactions at all?

Typically, this would be the case for smaller boutique condos of just a few units. When you are looking to buy a unit there in 2023 but the last transaction was in 2019, how would you value the new price to pay for the unit?

Likewise, it is also good to see that there have been consistent transactions that have been occurring. To be in a safer spot, you’d want to have more people that have bought in at around the same price as you, rather than for you to be setting a new record high of the development.

5. Rentability and rental yield

Rentability refers to how easily you can find tenants. Rental yield is a ratio of the annual income generated by the property, to its overall price. The two are not the same. 

For gross rental yield, the formula is simply (annual rental income) / (total cost of property) x 100. 

For net rental yield, you would deduct the other recurring expenses such as property tax, maintenance fees, utility bills, etc. from the rental income. You would also add one-off costs such as stamp duties, legal fees, and renovation to the total cost of the property:

(Annual rental income – recurring costs) / (Cost of property + stamp duties + legal fees + renovation) x 100 

In Singapore, the typical gross rental yield for most condos is between two to three per cent, or three to four per cent for compact units (510 sq. ft. or below). 

Net rental yield averages one to two per cent, or two to three per cent for compact units. 

This is now higher because of the rental market highs, but don’t expect these current yields to continue on for the long term.

If you can find something that beats this, you might be looking at a possible gem of an asset. However, bear in mind that high yields often mean low prices; and that can also happen due to advanced lease decay, inaccessible locations, or lack of amenities. These would be issues of rentability. 

For rentability, try to find out details such as:

• Past vacancies (look out for long periods when the property wasn’t rented, for which there’s no good explanation) 
• The high volume of short-term leases (this suggests tenants only see it as temporary and want to move on fast, or think they can easily bargain the price down when renewing the lease) 
• Any incidents where tenants willingly broke the lease, for reasons related to the development (e.g. fighting with the security guard). You’ll need to check if those reasons are ongoing problems.

Information on rentability is hard to dig up, so you may need to rely on a property agent for this. 

6. Layout

Sometimes, you can get everything right about a home – the location, tenure, and facilities, but a poor layout can really make or break things. After all, that’s where you will spend most of your time in any way.

In general, you’d want to consider what are the living trends today. For example, there was a time when older 2-bedroom units could go up to a size of 1,000 sq. ft. but this would usually come with a yard and utility. Today, there’s less of a need for that in a 2-bedroom unit, and you might find it to harder to sell even though the psf is cheaper (the size of the unit often means the quantum will be higher than a newer and smaller unit).

So what should you look out for?

Here are some of the key factors to consider:

• The efficiency of the layout 
• Options for future renovations 
• Dual key units
• The value of functional versus open space 
• Long term suitability 

If you want the full read, do take a look here.

To end, this isn’t a fully comprehensive list of what to look out for when choosing the right property. We will be doing a part 2 soon, so keep a watch out for that!

For added help, follow us on Stacked, where we can provide you with deeper insights into various developments. 

If you’d like to get in touch for a more in-depth consultation, you can do so here.