Property Asset Progression

What is Property Asset Progression ?

Asset Progression is like playing a real-life game of Monopoly.

We start by purchasing smaller properties . As the game progresses , you trade or combine these to acquire more expensive , lucrative ones? Asset Progression is about systematically moving up the property ladder in the real world. It is the process of starting with what you can afford , watching its value grow and then leveraging that growth to step up to more valuable property as the end goal.

In Singapore's context, given the nation's limited land and ever growing demand, properties here can be likened to gold mines , when tapped correctly, yield rich dividends.

Singapore's urban planning, continuous infrastructure development and stable socio-economic landscape make its property market a magnet for appreciation. When we talk about Asset Progression, we are discussing how Singaporeans can make the most of this appreciation.

Given Singapore's escalating costs and limited space, more than just owning a property is needed. Many want to see their initial investments blossom into more significant returns . This way, one does not just secure a place to live but also ensures that their hard-earned money consistently grows in value for retirement.

The Mechanism of Asset Progression

Asset Progression is about the principle of buying properties , holding them until they appreciate in value and then advancing to higher-valued property. Think of it as climbing a ladder. With each rung ( property ) you climb, you leverage to boost your wealth. Using the value of your current property, you can often secure loans or additional capital to invest in even more promising properties.

Many started by owning a HDB Flat but progressively upgraded to private property. Some may even progress to owning multiple properties for rental income while waiting for capital appreciation in the near future

Profiting from Asset Progression

Singapore's property values, given the right conditions, naturally rise. Within a span of 5 - 15 years, well- planned investments can yield commendable profits. As mentioned earlier, an individual might begin with a HDB flat. As this flat's value increases, they could sell it to buy a private condominium . This buying, growing and upgrading cycle can lead to significant portfolio expansion over time.

Factors to consider when executing Asset Progression

1. Additional Buyer's Stamp Duty (ABSD) :

Depending on whether you are a Singapore citizen, Permanent resident or a Foreigner and the number of properties you own, the ABSD rates can vary. This is why most Singapore property investors want to avoid. Check the IRAS website for the latest ABSD rates and liabilities you may need to note.

2. Loan - to - Value (LTV) Limits

This refers to the loan amount you can take relative to the property's value. The LTV limit can affect how much down payment you need. The two considerations for LTV are :

(i) the purchaser's age and

(ii) the number of housing loans the purchaser currently has

3. Total Debt Servicing Ratio (TDSR)

This framework ensures financial prudence by limiting individual's spending on debt repayments based on a percentage of their gross monthly income. As of 16 December 2021 , the TDSR rate is 55%. Check MAS website for the latest TDSR rate and the minimum requirement you need to note.

4. Seller's Stamp Duty (SSD)

If you sell your residential property within a specific timeframe from the date of purchase , you might be liable for SSD. You may refer to the IRAS website for the latest SSD rate and the liabilities that you may need to note.

Mortgage Considerations

Below are some of the considerations that you need to take note and it is advisable to speak to a mortgage specialist to find out more and secure your in-principal approval to determine your mortgage loan size eligibility.

1. Interest Rates : Monitor prevailing interest rates, which can influence your monthly mortgage payments.

2. Loan Tenure : The period you choose to repay your loan can impact your monthly cash flow and overall interest payment. The longer, the lower the monthly instalment.

3. Refinancing Options : Be aware of the possibility of refinancing your mortgage to benefit from better future interest rates or terms.

4. Lock-in Period : Some loans have a period where you are " locked in" and might incur penalties for early repayments or refinancing. The shorter , the better. It can range from 1 - 3 years.

5. Loan quantum : This will determine your budget size and potentially save on additional lump sum payments from your savings for the purchase.

Prudence in Asset Progression

1. Market Research : Understand the current property market's dynamics and potential future trends.

2. Financial Health : Regularly assess your financial health to ensure you can manage your mortgages without overstretching.

3. Exit Strategy : Always plan how and when you might want to sell or lease the property.

4. Risk Assessment : Every property purchase has inherent risks. Recognizing these risks and deciding if they are manageable or worth taking is essential.

5. Long-Term Goals : Align your asset progression strategy with your long-term financial and personal goals.

6. Professional Advice : Consider seeking advice from property experts or financial advisors to make informed decisions.

These factors provide a comprehensive roadmap for individuals looking to delve into asset progression in Singapore, ensuring you are well-informed and prepared for the journey.