Industrial Property Investment: An Alternative to Residential Property Investment

In Singapore, the typical trajectory for some home owners is to buy a HDB flat, sell it after the minimum occupation period and upgrade to a condo. Some also aspire to own a second private property as an investment property.

However, over the past few years, residential property has been subjected several rounds of cooling measures as the government seeks to prevent a price bubble in the residential property market.

Some recent cooling measures include higher Additional Buyer’s Stamp Duty (ABSD), lower Loan-to-Value (LTV) limits and tighter Total Debt Servicing Ratio (TDSR). These measures have made it more restrictive to own that second residential property.

For those that are still keen on property investment, there are still alternatives they can explore. Some such option is industrial property investment.

One of the main reasons that industrial property is an attractive class for investors is that it does not attract ABSD. On the other hand, ABSD is payable on residential property – Singapore citizens have to pay a 17% ABSD on second private property purchase and 25% ABSD on subsequent property purchases.

Another reason for considering industrial property is the rental yield. The rental yield for residential property is typically modest and can fall around 2% to 3%. But industrial property can potentially command a higher yield of 5% or more.

While there are certainly some pros of investing in industrial property, there are also other considerations to take note of when it comes to industrial property investment. For example, the usage of CPF is not allowed for mortgage payments.  While there is no ABSD, GST is payable on the sale or lease of industrial property.

You may be very familiar with the residential market, but if the industrial property scene is completely new to you, it might be wise to educate yourself in this area first.

To find out more, you can attend a course, monitor the news and tap on a network of people with experience in this area such as lawyers, property agents or mortgage brokers. Always do your homework before taking that next step.