Location is one of the most important factors to consider when choosing between residential and commercial property investment in Singapore. The location of a property will impact its rental income potential, as well as its resale value.
For example, a property located in a prime central business district and can be a sub-urban shop with heavy foot traffic is more likely to generate higher rental income than a property or neighbourhood with no anchor tenants.
Shops located near the Supermarket provide shoppers with a convenient place to find everything they need in one area. The selection of shops near the Supermarket offers something for everyone, making it a popular destination for the neighbourhood crowds.
F & B Unit with ample parking spaces.
However, residential properties may be easier to rent out and provide a steadier income stream, as more individuals are looking for residential rental units than businesses.
2. Rental Income Potential
Another consideration when choosing between residential and commercial property investment in Singapore is rental income and stability. Commercial properties tend to generate higher rental incomes for “hotspots” than residential properties, businesses willing to pay more for renewals and retain their loyal clients within the vicinity.
However, commercial properties also tend to have higher vacancy rates than residential properties, so it is vital to research the local market before investing.
3. Capital Gain Potential. (URA Approved Use.)
The resale Value of a property is another important factor to consider when choosing between residential and commercial investments in Singapore. You need to know the property approval of use.
We need to check for the URA approval of use/change of use is permanent or temporary.
URA Approved Use can affect the Resale Value.
For example, a shophouse approved of F & B can fetch a higher value than the neighbour shophouse that does not have F & B Approval Use.
For example, a B1 Industrial Ground floor getting the approval for the change of use from warehouse to Industrial Canteen. This means that coffee shop operators Killiney or Ya Kun can rent the property.
4. Holding Period (“Flip the Property”)
Another factor to consider when choosing between residential and commercial property investment in Singapore is capital gains potential.
While Industrial Properties have three years Holding Period, Shophouses, Offices and Retail units do not have any holding period that may allow investors to have a window of opportunity to “Flip the Property”.
5. Risk Profile
When choosing between residential and commercial property investment in Singapore, it is also important to consider the risk profile of each type of investment.
Commercial properties can be more suitable for investors willing to take on more risk and not investing properties for the first time. Commercial property investment tends to be riskier than residential property investment, as the Value of commercial properties can fluctuate significantly depending on economic conditions.
Additionally, commercial leases can be difficult to break if you need to sell or lease the property before the end of the lease term
6. Maintenance Costs
Another factor to consider when choosing between residential and commercial property investment in Singapore is maintenance costs. Commercial Property owners can be allowed to own the property more passively it will be, usually renting as it is or bare unit.
Commercial properties may also require specialized maintenance services that are not typically needed for residential properties.
7. Expert Advice
The above are some key factors to consider when choosing between residential and commercial property investment in Singapore. While each type of investment has its own unique set of risks and rewards, commercial property investment generally offers higher potential returns and is more suited for investors who are willing to take on more risk. However, it is important to seek expert advice before making any decisions, as the process of investing in commercial property can be complex.
Investing in property can be a complex process, so it is important to seek expert advice before making any decisions. A professional property agent will be able to help you understand the different factors that need to be considered when choosing between residential and commercial property investment in Singapore. They will also be able to provide you with insights into the current market conditions and help you find properties that fit your investment goals.
If you are thinking about investing in commercial property, contact a professional property agent today to get started.