Here's how you can potentially boost your company's earnings - invest in a commercial property

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    07 January 2020

    Key Takeaways

    • Although the commercial property market is facing headwinds, pockets of opportunity still exist for SMEs looking to invest in commercial properties
    • Before buying, purchasers should review the location, lease tenure, total upfront costs, valuation accuracy and loan eligibility
    • RealCommercial app provides the essential tools to search for the right property according to your affordability, and also offers credible bank-backed property valuations

    5 mins read

     

    Are you currently renting your office? Now is the time to consider buying your own office to save on rent; rent in Singapore’s Central Business District rose for the eighth consecutive quarter in July 20191. Colliers International found that for the first half of 2019, both business parks and high-spec industrial buildings have seen increasing monthly rents driven by tight supply2.

    Conversely, this increase in rental yields presents an ideal opportunity for SMEs who are looking to diversify their investment portfolio or to increase cash flow in the long term. Besides being able to benefit from rental yields, the property can also be used as equity collateral for extra funds. What’s more, there is an additional point in favour of purchasing commercial properties: there is no Additional Buyers Stamp Duty (ABSD) as compared to residential properties.

    While current global economic conditions-from-lowinterest rates to ongoing trade tensions-have put pressure on the Singapore commercial property market, opportunities still exist.

    Buying Vs Renting
    Unsure if you should buy or continue to rent your commercial property? Use this Buy Vs Rent calculator to find out which option would provide you with greater savings.

    But the key to purchasing the right property comes down to being able to locate and secure the right unit, at a fair value, and within one's affordability.

    Read on to find out how the new RealCommercial app can be your perfect companion in your buying journey.


    1. Search for the right location

    No matter what kind of real estate you are investing in, location is always key. For example, Colliers Research recommends that investors should focus on malls with high population catchment to maximise yields. Understanding the details and amenities of each property would allow you to better assess the potential of how it might perform in future.

    RealCommercial tooltip:
    Access comprehensive listings with essential information, such as amenities, tenant mix, loading bays, to help narrow down your property search parameters.


    2. Find out property lease as it affects loan tenure

    In Singapore, lease tenure can make a difference to valuations. Most industrial leases run for 30 or 60 years, and some as low as 20 years3. Thus, it is important to find out the length of the remaining lease, as it can affect the maximum loan amount and tenure you are eligible for.

    RealCommercial tooltip:
    Assess your bank loan eligibility upfront with UOB Loan Assessment tool, so you can focus on properties based on your affordability.


    3. Evaluate your total upfront costs

    Steady cash flow is vital for any business, so it is crucial to understand the upfront costs of purchasing a particular property.

    The down payment depends on the loan-to-value (LTV) ratio (the percentage amount of the total purchase price the bank is willing to finance) you can get. LTV ratios for commercial properties are generally lower, but the ratio depends on individual circumstances and the bank.

    RealCommercial tooltip:
    Apply for UOB Business Property Loan to get up to 90% financing*, and lower your upfront payments.


    4. Ensure valuation accuracy and loan eligibility

    After deciding on your property, you will need an accurate valuation. Often businesses have found themselves ineligible for a loan too late into the buying process, as the bank has assessed a different valuation for the desired property.

    RealCommercial tooltip:
    Get credible bank-backed^ valuations instantly so that you can purchase your desired property with greater clarity and confidence.

    So, why wait? Download the RealCommercial app now to help you search for the right property efficiently and confidently. What’s more, sign up for, or refinance a Business Property Loan via the app and get up to S$2,000 cashback+!

     

    Terms and conditions apply.
    ^Subject to the full terms and conditions for a UOB Property Loan, and internal credit policies.
    +Click here for full terms and conditions.

     

    Disclaimers:

    Nothing in the RealCommercial app shall operate or be deemed to constitute a partnership or employment or agency or joint venture relationship or association between SoReal Prop Pte Ltd ("SoReal") and United Overseas Bank Limited ("UOB") nor constitute any party the agent or servant of the other party for any purpose, and SoReal shall have no authority to bind UOB or to act in the name of UOB or create a liability against UOB in any way or for any purpose and vice versa.

     

    References:
    1https://www.straitstimes.com/business/property/singapore-cbd-grade-a-office-rents-hit-10-year-high-colliers
    2https://www.businesstimes.com.sg/real-estate/escalating-us-china-dispute-will-weigh-on-singapore-retail-industrial-property-markets
    3https://www.clc.gov.sg/docs/default-source/commentaries/basorlas-table.pdf

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    Helping Singapore’s SMEs prepare for an uncertain 2020

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