Buying A Home? Here's 5 Things You Should Consider

Real Estate is considered a relatively safe investment, compared to the volatile stock market. However, it should be noted that the value of a property is also measured by its comfort. Here's the 5 things to consider before you purchase your new humble abode.

1. Tenure

While the majority of Singapore's land is state-owned (resulting in Leasehold property having a strong grip in the market), it is still important to understand the differences between a Freehold and a Leasehold property, and its implications.

Freehold

With a Freehold property, this property belongs to you and your heirs for eternity. This category is further divided into 2 sub-categories: Fee Simple and an Estate in Perpetuity.

While both still serve the same purpose (property remains under the owner's name forever), the difference is seen in the latter having several more conditions, such as allowing access to collectors and officers, and adhering to land use regulations. Any breach of the conditions will result in the property being seized. Hence, it is encouraged to check the State Lands Act for the conditions listed before making your big purchase for this type of property.

Leasehold

A typical Leasehold property expires after 99 years, which is when ownership of the property is reverted to the Government. Hence, this means that your property cannot be inherited over multiple generations as it has an expiry date.

When purchasing a Leasehold property, it is crucial to find out the years remaining on the lease. It is not recommended to purchase one that only has a few years remaining (since they are usually cheaper) because they decrease in value, and hence will have a lower resale value.

What's more, you will not be allowed to use your CPF to pay for the flat if the remaining lease of your resale flat cannot cover up till when you are at least 80 years of age. This also applies for the HDB housing loan — it will not be offered to you.

But don't fret yet — there's an option to top up your lease up to 99 years. This will cost you a fee (called a Premium which will be determined by a Valuer).

A property's tenure can have varying implications on its homeowners as stated above. Hence, it is a vital element to consider before any purchase should be made.

2. Location

This element is particularly important, given that it is a key determinant of the value of a property. For example, a house with plenty of amenities in the neighbourhood (such as shopping malls and transport systems) is likely to be a lot more expensive compared to a house that is situated further away from amenities.

The disparity in their value is attributed to the level of comfort the house's locations would bring to their residents. You would be more interested in a house with a shopping mall that is just a 10 minute walk away, compared to a house that is 30 minutes away from the only mall around by car.

However, everyone does have different priorities and interests for different amenities. For example, Jane is a businesswoman who is keen to find a property with useful transport systems. Would a property with schools nearby be useful to her? Of course not, as she has no use for such amenities.

Now if it were a family of four, having a property near neighbourhood schools would be a great benefit for the children. Hence, they would consider the property as having a greater value to them compared to other properties, and would be more keen to purchase it.

Hence, it is important to find out if the location you're interested in has the amenities you need for a comfortable stay.

3. Space

Factors like Gross Floor Area (GFA) and Plot Ratio (PR) are fundamental in your selection process when purchasing a property, and it's not just having a basic idea of how many rooms are needed.

Gross Floor Area (GFA) is the product of Land Area and Plot Ratio. It includes spaces that cannot be occupied (i.e. sub-areas) such as columns, stairways, and even the thickness of walls.

GFA= “Land Area” x “PR”

Net Floor Area (NFA) refers to the useable space in the building.

NFA = "GFA" - "sub-areas"

Plot Ratio (PR) is the maximum building height. In general, PR for residential property ranges from 1.4 to 2.8, with the former typically housing 5 storeys, and the latter surpassing 36 storeys.

While everyone has different space requirements, it is advisable to get a property that utilizes its maximum permissible GFA.

Increasing the GFA of a property after purchase will incur additional costs in the form of a Development Charge (for a Freehold property) or a Differential Premium (for a Leasehold property). As such, it is best to consider a property’s space before making a purchase.

4. Orientation

Have you wondered why units with a sea view are more expensive? Or why units facing the main road are sold cheaply? This is because the former provides an aesthetically pleasing view and a nice breeze which is valued by residents for its calming effects and sense of comfort, while the latter is undesirable due to the noise and air pollution.

Other considerations include the morning sun, facing the walkway/corridor, and the unit's proximity to the lift. A careful selection of your home’s orientation will go a long way in ensuring that you will have a comfortable and enjoyable stay.

5. Rights and Obligations

Finding out the rights and obligations stemming from ownership of a property is also important. For instance, the property might be subjected to Covenants or Easements.

Here’s a brief explanation of Easements:

An easement involves 2 properties- a Dominant Tenement (DT) and a Servient Tenement (ST).

Under a positive easement, the owner of the DT obtains a right to do something in the ST for their own benefit. For example, a pathway easement allows them to walk through the ST to access the main road.

A negative easement restricts the owner of the ST from taking certain actions on their land if such actions will affect the DT. This includes a right to light, thus barring the ST owner from building up a fence that might block sunlight from reaching the DT.

Hence, whether you enjoy certain rights or are bound by obligations depends on whether the property is a DT or ST respectively. It is thus crucial to find out if the preceding owners had any such arrangements before purchasing the property, as some of these rights and obligations run with the land.

Conclusion

To ensure that you get the best returns and enjoy a comfortable stay, sufficient thought and consideration have to be put into buying a house. After all, purchasing property is a big deal! While there might be uncertainty with such a massive decision, one thing is certain- these 5 considerations will better prepare you in your search for a suitable home!