Ravi Chandran
As commercial real estate is rising in value, getting commercial property loan is key to benefit from property investment quickly.
According to the latest RICS Global Commercial Property Monitor, property experts have seen positive movements in investment trends across commercial property in Singapore during Q4 of 2021, while owners continue to diversify the way we use office space.
The Property Monitor said that across all sectors, investment enquiries rose for the first time since Q4 2019, leading to capital value expectations rising for the year ahead. The strength of the industrial sector continues to standout, with a net balance of +49% of respondents expecting prime industrial values to increase over the next twelve months.
The outlook is also positive for prime office values, as a net balance of +21% of respondents foresee an increase during 2022 (the second successive report of growth).
Looking at the alternative sectors, respondents project an uplift in capital value expectations for data centres, multifamily residential, hotels and aged care facilities. However, capital values for student housing remain flat
As over two-fifths of respondents (+43%) believe the market to be in the early phase of an upturn, despite some impact from the latest COVID wave, respondents are more optimistic about the future of Singapore’s commercial property, with owners in the office sector looking at how to attract employees and occupiers back.
As countries learn to live with COVID, 64% of respondents in Singapore still believe an office is essential for a company to successfully operate. However, 87% of contributors report that they are seeing an increase in demand for more flexible and local workspaces and almost half (45%) have reported an increase in space allocation per desk following the pandemic; all highlighting how occupiers are making the office place safe and attractive for employees once more.
But traditional set ups are changing as 91% of respondents are seeing a re-purposing of office space. Interestingly as Singapore office space looks to be repurposed, investment enquiries from the Singapore and overseas has been increasing in recent months.
But the key to cashing-in on the appreciating property class is in getting commercial property loan.
Paul Ho, chief executive at iCompareLoan, said: “Commercial property became increasingly attractive as an investment option following the cooling measures implemented in the residential segment such as the introduction of additional buyer’s stamp duty (ABSD) in 2011 followed by an upward revision in the ABSD.”
For those of you who do not yet own a commercial property, but are renting your premises, you may want to use this commercial property rent or buy calculator for a rough gauge.
Here are 7 factors for your consideration in getting commercial loan:
- Rationale for Refinance of commercial property
If you hold a commercial property, you are likely running a business there or an investor – whether as an individual or under a corporation or investment holding company.
Any decision would probably require you to do a cost-benefit analysis.
The main reasons for refinancing or switching to a loan from another financial institution include raising cash, capitalizing on low interest rates to cut financing costs and a change in loan tenure.
- Valuation of Commercial property
It is important to be up to date on the current valuation of your property as it will determine the maximum loan and the possibility of having to top up the equity to qualify for refinancing a commercial property. Given the current strong sentiment, it is possible that it is significantly different from the time you got your original loan.
- Affordable?
Use good calculators to see if the mortgage payments on the new loan is affordable given your current salary.
- Change in credit situation
Since the last time you took the loan, has your salary/company’s results/financial position improved or deteriorated? Have you been late in payment of debt? Did you sign on to be a guarantor or taken up more debt? Do you have a tenant? What is the remaining lease? All these factors will be considered when you apply for refinancing as your credit profile will be reassessed.
- Costs
Refinance commercial property may lead to costs such as those relating to valuation, legal, etc. Look out for promotions where banks/financing companies waive charges.
- Clawback and lock-in period
Review your letter of offer and read up on the clawback and lock-in period to ensure that refinancing makes sense for you. If the switch is onerous and costly, it may not be worthwhile.
- Shop around
Once you have done your homework on the above, you can shop around for the financial institution that offers the loan package that suits you and look out for promotions.
- Documentation
You will likely be asked to provide the following in the application if you refinance commercial property. Have these ready on hand if your property is bought under a company name.
- Copy of NRIC/Passport
- Income statement and/or audited financials (corporation)
- Bank statements
- Loan account statement from existing financing company showing repayment history
- Latest CPT withdrawal statement for property to be refinanced (if there is utilization of CPF)
- Title Deed
A good Mortgage broker can assist you to refinance commercial property safely, further more, it’s free of charge as they receive a fee from the bank when a loan is completed.
If you are getting property loan, think of mortgage brokers as Supermarket assistants who can guide you on a number of brands of noodles. Talk to them about your taste, whether you want it a bit salty or sweeter, spicy or not, etc. They will find you the right noodles (bank loan) on the shelf.
