Singapore is one of the most popular business destinations in Southeast Asia. It has a well-developed economy and a robust real estate market. For foreigners looking to invest in property, there are various investment opportunities in Singapore, in particular, commercial and industrial properties. Commercial properties include offices, retail spaces, and other business spaces while industrial properties are meant for manufacturing, storage and other industries.
Understanding the Investment Landscape.
Investing in Singapore’s commercial or industrial properties is a complex proposition experienced. To make decisions, people examine market conditions, investment objectives, and local laws. This guide looks into the benefits and drawbacks of these kinds of investment and offers practical advice to maximise your returns. We’ll take a closer look at the current property market of Singapore, the current trends & developments taking place the unique challenges & opportunity of investing for the foreigners.
Key Considerations for Foreign Investors.
One of the most vital things when investing in either commercial or industrial property in Singapore is the Additional Buyer’s Stamp Duty (ABSD). Foreigners do not have to worry about the Additional Buyer’s Stamp Duty (ABSD) when investing in Singapore’s commercial or industrial real estate. The exemption reduces the cost of investment, thus making commercial and industrial properties attractive to foreigners. On the other hand, property tax and Seller’s Stamp Duty for industrial properties are payable in other taxes and fees.
Benefits of Investing in Commercial and Industrial Property
When it comes to rental yields, commercial and industrial properties are generally better performers than residential ones. Leases are often longer, and rents are higher for commercial and industrial tenants, providing stable income.
Buying commercial property can build a diverse property portfolio. For instance, commercial and industrial property usually has a different risk profile from residential property. Also, industrial and commercial properties are good economic hedges against market volatility.
Scope for Price Growth: As Singapore expands, the requirement for commercial and industrial properties is anticipated to increase, which may result in an upward price trend.
Businesses and industrial tenants are generally more financially stable, ensuring a more stable income stream.
Tax breaks: You can enjoy tax deductions from the mortgage interest, property taxes, and depreciation.
Challenges and Risks.
The Disadvantages: Commercial or Industrial Property Investment.
Investing in commercial or industrial property offers strong returns but comes with risks every investor should understand before committing. These properties require higher upfront costs due to larger spaces and features like loading bays, machinery setups, and office facilities.
Specialised infrastructure often drives up total costs and demands greater capital outlay than residential property investments. Local investors face steeper initial expenses, as CPF funds cannot be used for commercial or industrial property down payments.
Banks typically offer up to 80% loan-to-value, but limits depend on the buyer’s financial health and profile. The Income-Driven Servicing Ratio (IDSR) applies to individuals purchasing non-residential properties, affecting loan eligibility and terms.
GST
If you buy from a GST-registered company, you must pay GST on the property’s purchase price. GST-registered buyers can claim the GST paid, while non-registered buyers must bear the full tax cost. This affects the total investment cost and should be factored into your commercial property investment strategy. If GST applies to the purchase, it also applies to the rent collected from that property.
Only GST-registered entities can charge GST on rent—doing so without registration is illegal. The GST rate increased by 1% in 2024, raising the total to 9%, impacting costs and returns.
Tenants
Commercial and industrial properties often face longer vacancy periods than residential ones. Finding tenants takes time, as businesses may require property modifications to suit their operations. Prolonged vacancies can reduce rental income and affect the property’s overall profitability. Maintaining a strong tenant-owner relationship is crucial for long-term commercial and industrial leases. View tenants as business partners, since leases are typically long-term and require cooperation.
Conclusion.
Foreign investors weighing the pros and cons may find it beneficial to consider commercial or industrial property. They offer good yields and diversification, but you should consider costs and risks carefully. Contact me for tailored advice and insights on your investments.
Contact me to explore strategic investment options in Singapore’s commercial and industrial market.
