Chapter 1
Beginner’s Guide To Everything Singaporean Know The Ground And The Terrain
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ou might have read numerous things about Singapore – a strong economy, solid infrastructure, a stable sociopolitical environment – but that’s a bird’s eye view of the country, written to publicise the country’s positive aspects and outlook. Or maybe you have read about the chewing gum ban in Singapore, or the really, really, really (I mean it) old story of the Michael Fay caning. Either way, you won’t really gain a look into Singapore – the way the man on the street sees Singapore. Let’s go down to the street level, and understand Singapore from the time of myths and legends to the current day. (By the way, if you find the section headers funny, it’s because they come from well-loved pieces of music known and sung by every Singaporean on National Day. Don’t take their word for it if they deny it, they are probably lying.)
Singapura, Oh Singapura, Sunny Island, Set In The Sea…
Singapore Map by Administrative Divisions
Chapter 1: Beginner’s Guide To Everything Singaporean
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How this island got the name Singapura – the Malay name of Singapore – is a classic legend known to almost every Singaporean. In the late 13th century, Prince Sang Nila Utama set out on an expedition to find a place to set up a new city. As prince of Palembang, Sriwijaya (modern day Sumatra in Indonesia), he visited the Riau Islands, and soon spotted an island with a white sandy shore. Told by his minister that it was the island of Temasik (Temasek), the Prince decided to set sail to visit the land. During the journey, a sudden storm erupted, and the ship began to sink as it took in water. Upon his orders, his men began to throw all the heavy things into the ocean to lighten the ship and save themselves, but the storm continued and the ship was rocked violently by the turbulent waves. When all the items on board the ship were gone, and the ship was still sinking, a wise advisor then told the Prince that the storm was caused by an ancestor, and the Prince had to throw his crown overboard to appease the spirit and stop the storm. The Prince threw his crown into the ocean as an offering, and the storm immediately, miraculously, died down. They soon arrived on the shores of Temasek, and they began to hunt. Sang Nila Utama then spotted a strange animal with a red/orange body, black head and a white neck/chest, which disappeared into the jungle at great speed. The Prince was told that the animal was a “singa”, a lion. Deeming it as a great omen, he decided to build his new city in Temasek, re-naming the island “Singapura” – “Singa” for lion, and “pura” for city. Under the prince’s reign, Singapura became a thriving, famous city in the region. And at the same place where his palace stood when he reigned, the legend also says that the prince was buried in the Forbidden Hill (Fort Canning Hill today).
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Unfortunately for the legend, it was very unlikely for the “strange animal” to be a lion. Researchers have found out that the lions should not have arrived in Singapore yet, and it was far more likely that Sang Nila Utama saw a tiger in the 13th century instead. Now, we might never know what the Prince really saw (other researchers point out that the Prince and his men would be able to recognise a tiger and not mistake it for a lion), but the legend – and the name – has held its place in Singapore’s history. Anyway, for those adventurous souls out there, you might want to conduct an expedition à la Legend Quest, and try to recover the lost crown of Sang Nila Utama. But do make sure that you apply for the relevant permits before you start your exploration. Singapore is a stickler for permits, and if you begin your diving expedition before you get approval, you might end up in prison instead of striking it rich with the lost crown. On another note, due to the extensive reclamation of Singapore, the crown might have been buried under Sentosa Cove, a place which we will talk about in a later chapter.
We Built A Nation, Strong And Free The factually-supported history of Singapore, on the other hand, begins in 1819. With the arrival and hard work of Sir Stamford Raffles and his men, the small fishing village of about 1,000 villagers developed into a bustling British trading colony that later survived the Japanese invasion of World War II. Gaining independence in 1965, the “little red dot ” of just 714.3 km2 (check any world map and Singapore is just a red dot) has grown with a strong and stable leadership to become one of the most renowned cities in the world. How well have they grown as compared to the other countries of the world? Check out Singapore’s report card.
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1. At the very top of the list, Singapore is ranked first as the most emotionless city in the world. Stoic, stoned, or just plain ‘sian’ (the local lingo for bored), the hardworking people seem to have little to get them happy, angry or sad. Ranked by Gallup in 2012. 2. Also at the top of international rankings, Singapore scored 9.3 on the Corruption Perception Index 2010 by Transparency International. The highest score attained (which means that the country is perceived as very clean – 0 is highly corrupt), Singapore shares the top spot alongside Denmark and New Zealand. 3. Ranked by Forbes in 2012, Singapore is the third wealthiest country in the world. With all this wealth comes rising property prices in Singapore, which have been reaching heights never seen before in the country. 4. Singapore is fourth in the 2012 Forbes “Best countries for business” list. A top choice for business owners from all over the world, the strong base for business and strong economic growth leads to a supply of jobs, an increase in immigration, and a demand on property that increases prices. 5. Singapore properties are seen as the new status symbol. Due to scarcity, eligibility rules and its premium prices, owning a piece of real estate in Singapore brings an investor to a whole new level – it is the new status symbol.
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6. Singapore is the sixth most expensive city to live in, ranked by the Economist Intelligence Unit in 2013. Due to wage growth and economic optimism, this might also be the cause of why Singaporeans are emotionless. 7. Singapore is seen as a safe haven to preserve wealth against rising inflation and global economic uncertainties. Faced with economic uncertainties around the world, especially in Europe, many high net worth investors are seeking a secure place to channel their wealth in the four thriving Asian Tigers – Singapore, Hong Kong, Taiwan and South Korea. Singapore is one of the top choices for real estate investors who wish to see their wealth grow in a stable environment in the long run. 8. Singapore has one of the highest – if not the highest – rates of myopia, or short-sightedness, in the world. In a country that prizes academic achievement above everything else, Singapore has arguably one of the highest rates of myopia in the world. Environmental risk factors such as excessive reading, writing, computer use and lack of time spent outdoors – Singapore is basically a city state – mean that short-sightedness affects 28% of children as young as seven years old. When these children reach eighteen years of age, the incidence rate hits 83%. 9. On the low end, Singapore is 224 out of 224 on the birth rate list, with about 0.78 babies per woman. No, that does not mean that Singaporeans give birth to strange children, but the number is so low that the population needs to be bolstered by migrants, leading to the next ranking:
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10. Singapore is sixth in terms of the net migration rate, with 15.62 migrants per 1,000 people in Singapore. As an investor, the high migrant rate is a good thing, as it means that there will be a demand for your properties when it is put up for rent. 11. And finally, Singapore’s pull has attracted superstars. Socio-political stability, first-class education system and efficient transportation infrastructure – these are just some of the pull factors that attract foreign investors to invest here. With the security of a peaceful and enjoyable living environment, many ultimately decide to make this bustling island their home at the end of the day. Case in point – Hollywood superstars like Jet Li and Gong Li are calling Singapore their home. Strong, free, and sometimes on the top of the list for the wrong reasons (like Point 1), Singapore’s good qualities shine for investors because of its safety and stability.
One People, One Nation, One Singapore A melting pot of cultures, Singapore is primarily made up of four ethnic groups: the Chinese, Malay, Indian and Eurasian. The Chinese in the country make up about 77% of the population. Take a walk on any street in Singapore and you will see the result of this blend in the food. Densely populated by food centres – groups of stalls selling food under a single roof – Singapore food is anything but boring. The citizens of Singapore, or “Singaporeans”, share a strong bond, and it is this multi-racial harmony which makes the country a colourful and peaceful place to visit and stay in.
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You Could Take A Little Trip Around Singapore Town In 48 years of progress, Singapore has indeed come far. Known as one of the greatest cities in the world to live, work and play in thanks to its stable economy, extensive network of transportation, solid infrastructure and amazing mix of cultures, cuisine and arts, the humble village filled with just attap houses (homes with palm leaves for the roof), has bloomed into a beautiful city state with striking colonial, traditional and iconic infrastructures like Marina Bay Sands, the ArtScience Museum, Gardens by the Bay and many others. So what does this mean to you, the potential investor?
The Merlion
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It means that you are a step closer to understanding Singapore, and why everyone says it is the place to invest in. As a smart investor, we know that yields are tied to so many things; property investment is no different. Now that you have an overview of what makes Singapore a great county, let’s find out why Singapore is a great country to invest in.
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NOTES
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Chapter 2: Why Invest In Property?
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Chapter 2
Why Invest In Property? And Why Singapore?
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here is a secret to growing your wealth. The affluent know it, the happily-retired know it, and you should know it too. Here’s the secret: instead of saving your money in bank accounts and waiting for it to accumulate interest over time, channel your money into profitable investment vehicles. Wait, is that it? So easy? Who doesn’t know this? Yes my future-financially-free-friend, this is it. It’s such an easy theory to understand, but it’s difficult to execute. The masters and millionaires like George Soros, Warren Buffett, Donald Trump and Li Ka-shing have only made it because of hard work. This is a good thing, because hard work is something we can all do, and we can all learn from these investors. George Soros and Warren Buffett have made their riches through financial markets and shares while Donald Trump and Li Ka-shing are known for their property investments. But what would be your profitable investment vehicle? Stocks and Shares You become a part owner of a business. Buying shares and reinvesting the dividends into the same share has been shown to create wealth in the long term. A lump sum can be invested in many companies, but only the right shares will result in an increase in returns year after year.
Chapter 2: Why Invest In Property?
Property You become an owner of a property. The rental yield can be used to defray the costs of the mortgage, allowing you to accumulate more wealth to invest in the long term. A property investment requires a lump sum investment, but with a reasonable rental yield, most property investments in Singapore will increase in value.
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Share prices can fall close to zero even under normal conditions. You may not get your money back if the company goes broke. The value of your shares and your returns will vary from month to month.
Property prices may be undervalued, but are hardly sold at close to zero under normal conditions.
If your tenant goes broke, you can rent the property out to another tenant. The return from your rent remains the same from month to month over the period of your tenancy agreement. It is harder to recognise a scam You can view the physical property share investment. before investing. More than that, many appreciate how property investment is tangible – you can point to the building or plot of land and say it’s yours – while share investment is intangible. A friend of mine used to joke that he used to own “this bit” of a large corporation, holding up his thumb and finger with a really small space in between. Truthfully, it would be hard to convince you to choose one investment vehicle over another. It all depends on the individual, and perhaps the best idea
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would be to invest in both. But since I am here to guide you through the real estate opportunities in Singapore, let’s go with real estate.
Reason 1: The Power Of Leveraging Unlike many other investment avenues, real estate investment allows us to leverage on mortgage and other people’s money to finance the investment. Borrowing from the banks means that you do not have to pay the full amount upfront, and renting out your property means that your tenants are clearing off the mortgage for you. And if you manage to secure an investment which brings in a premium rental yield, you could even have surpluses after paying off your monthly mortgage, thus allowing you to accumulate more funds to possibly invest in more properties and diversify your portfolio. What other investment allows you to use other people’s money to grow your money? Only real estate.
Reason 2: Beyond Just An Investment Tool Unlike shares and stocks, you can actually physically use your properties for yourself and your loved ones whenever you decide to stop renting them out. In fact, there are numerous investors who end up settling down in their investment properties after years of renting them out as landlords. Of course, this also means that they are living in a home that is fully-paid, and paid out of someone else’s pocket.
Reason 3: A Hedge Against Inflation And Downturns As people are becoming increasingly aware of the fact that they are losing money by keeping their money in the banks, savvy investors know that they need to hedge against inflation and uncertain economic times. Investing in real estate gives people something tangible for the future, as properties are never worth zero, even in the Chapter 2: Why Invest In Property?
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worst market downturn. This also means that an investor is protected from the pain of going bust during a market crash – something other investment instruments cannot promise.
You Don’t Have To Be Rich People always assume that real estate investment is an avenue only for the rich, that you need to have millions in hand before you can make even more. But when we talk about stocks and shares, so many people have the impression that it is easy, cheap, and profitable. According to many investors, both professional and amateur, investing in shares is much easier than striking the lottery as they will always know a broker who will share “insider information” on the hot shares that would be profitable in the long run. They would also claim that the same broker would know and inform them of when a company would launch a new product, and make money in the future. All this means that their investment would surely hit jackpot – even with the small capital that they put in. With these investors, property is a difficult investment, because they cannot see the potential in the long run, and they feel that they do not have enough “insider information” to strike a profit. And even if they hear that a property is a good buy, they are almost always taken aback by the price. “Woah! So expensive! I can’t afford, and I cannot buy!” To these investors (and you, if it sounds like you) I want to tell you this: if you know how to buy shares based on a company’s future potential success, then investing in properties should not be difficult at all. A good property is one that is in a good location, with a strong tenant demand, and it will ultimately generate a stable cash flow.
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On top of that, the more accessible (and generally more reliable) information from Real Estate Salespersons makes real estate investment a much safer bet than many of the friends with “insider information”. In real estate, information is readily online, compiled and printed by regulators and authorities. To everything your Real Estate Salesperson says, you can actually ask for the evidence. And if you are still wondering about the finances, turn to Chapter 8, where I will show you, in detail, the various types of funding you can get for your property purchase.
Real Estate Investment In Singapore – Why Investors Choose The Lion City One of the reasons why Singapore’s landscape has progressed is due to the Urban Redevelopment Authority (URA), an arm of the government that ensures the equilibrium between economic growth and the living environment. And so far, they have been successful in creating a world-class city filled with impressive residential, commercial and entertainment facilities. Every building, from bungalows to tall blocks of flats, from small shops in the neighbourhood to shopping centres, and from industrial estates to the shopping street of Orchard Road, has been part of the plan of the URA. Zones have been marked out for future development, and what can be built, and since 1974, the plans have guided Singapore till today. If I carry on blowing Singapore’s horn, you would just think that I am simply being proud of my country. It would be easier if I just showed you Singapore from another investor’s point of view, and here’s where I introduce Mr X. A few years ago, I received a call from Australia. It was Mr X, a real estate investor who had been looking for a property that would make a great investment while he still lived in Australia. Chapter 2: Why Invest In Property?
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It was not a difficult task. After he gave me his requirements, I brought Mr X to view a couple of suitable properties. He eventually settled on a private property on the Eastern side of Singapore, where we soon secured tenants who were ready to rent the unit at $5,500 a month. When the tenancy agreement was settled, Mr X left Singapore and returned to his hometown in Australia. Within one trip, Mr X invested in a good property in Singapore, and it was already showing a profit. But before he left the country, I managed to ask Mr X why he chose to invest in Singapore when there are cheaper and more attractive properties back in Australia. His reply did not really surprise me. He said, “Making the decision to invest in Singapore is easy – it is an investment haven. They have a good structure and the taxes are more affordable than in Australia.” He isn’t the only one to say this about Singapore; many foreigners see Singapore in the same way. Each of the clients that I have served comes from different backgrounds, and each has his or her own reasons for buying a piece of real estate in Singapore, but as a group, their presence in the local real estate market is felt. Who exactly are coming to Singapore? Here is the split down on foreigners buying residential properties in Singapore from January to June 2013: Rank 1 2 3 4 5
Nationality China Malaysia Indonesia India USA
Percentage 29% 25% 18% 10% 3%
Source: URA
Altogether, foreign purchases make up 21% of the homes purchased in Singapore. When is it your turn?