Is Today The Right Time to Enter The Property Market?
Did this ever happen to you?
Seems like home prices will be dropping because of Covid 19, US-China trade war, North Korean missiles, the Brexit and US subprime crisis. Let’s wait for the prices to drop.
Well, it seems like there’s always some sort of crisis happening every year, but why aren’t the home prices dropping?
With social media and the internet keeping us all up to date with what is happening around the globe, there will always be some sort of crisis happening somewhere!
What is important is to what extent these events affect us. Fortunately, Singapore has been a safe haven for investors due to the country’s stability.
This is one of the reasons why buyers are still flocking to Singapore during this period!
Rich Chinese snapping up luxury homes from Singapore to Sydney -Bloomberg
Bloomberg 26 May 2020
As a buyer, we want to buy the homes we like at the lowest price and when we sell, of course we want to make the most profit out of it.
So when a crisis happens, it is natural that we keep a look out for the best bargain deals or fire sales.
Pretty much the same as buying in the stock market right? Buy low sell high!
However, we tend to overlook one very important characteristic of property, that is, they are heterogeneous.
Heterogeneous means that no two pieces of real estate are exactly alike and no two pieces are in exactly the same location.
Your dream home may have this fantastic view and a few storeys down, this may be the view.
Because of this uniqueness, it is very hard to compare 2 different homes by pricing alone, even if they are in the same block.
Wouldn’t you agree that having properties of the house you like are more important than the pricing?
Now, I’m not asking you to break your piggy bank or give up your leg or arm if you chance upon your dream home.
But if you do come across the house that you really like, you should go ahead and buy it as there might not be another house of your dream on the market again.
If you decide to wait for the price to drop, somebody else may beat you to it and you’ll have to live with regrets for missing it.
Now, you may be thinking, but we have not come across a house those we really like. Should we keep searching? Yes, of course you should!
However, we do not know when you will come across your dream home.
Does that mean you will stay homeless for the next 1,5,20 years?
Now, even if you do not come across your dream home doesn’t mean you should not enter the Property market and invest in one.
If you refer to my earlier BLOG on why real estate still remains as one of the best investment in Singapore, You’ll miss out on a whole lot of profits if you sit out and wait for your dream home to come by.
Likelihood of making losses on property purchased during crisis
If the market conditions are favourable to you, definitely consider investing in a home with good capital appreciation while you shop around for your dream home.
This way, you will be able to make a good profit and put yourself in a much better position to buy the home you always wanted when you do come across it.
You would not want to see your dream home right in front of you and realise that it is just that tiny weeny bit out of your budget!
So what are favourable market conditions?
For starters, having low mortgage interest rates is one, and of course low entry price.
Well, what do you know, isn’t that right now in 2020? Interest rates had been historically low since US subprime financial crisis in 2007 and had only slowly began inching up to 2% and currently it has dropped down to around 1.3% recently.
This is pretty low considering MAS set 3.5% as the historical average interest rates for calculating how much money you can borrow.
As for the second point, there is currently more supply of new homes than demand and with the Covid 19 situation going around, prices will drop right?
Well, that is true… to a certain extent.
While there has been an increase in the properties put up for auction, the number of successful mortgagee sales had in fact decreased.
What this means is that home owners actually have stronger holding power this time around due
to the measures the government put in place to prevent the property market from collapsing.
Home owners are allowed to defer on their property principal repayment and they also have the option of taking an equity loan during this tough period to help tide them through so they are not really that desperate to sell their property.
Property developers had also been given support by the government via extension of their TOP and ABSD deadlines.
As we can see from the transacted prices since the beginning of this year, we can see that there is a strong support in the price trend to prevent a sharp drop.
These favourable conditions have shown that 2020 is indeed an ideal time to enter the property market with relatively lower risks. This period is a time for the market to pick up, recover and improve.
Having said much, on the contrary some investors and even property agent themselves felt and think otherwise.
In recent weeks with most of us being stuck at home during the circuit breaker I received many more developing questions compared with the usual property questions.
Two kinds of developing property questions….?
The first one is “I just booked a unit at new launch but unfortunately I lost my job or I have pay cut what should I do now?”
I replied, “sorry I cannot answer for you because I didn’t tell you to go and buy new launch in the first place.”
The second one is “Should I enter the property now?”
Below are my personal opinions. Which may help you to think further?
There are 3 types of people who ask this question.
1st type ,they are asking solely basing on personal reason.
2nd type, they think this is really ideal time to buy.
3rd type, they are simply looking for a good investment.
For the 1st type, they are usually buying for personal reason they may be starting a new stage in life they’re getting married waiting for a new born or they have just sold their home and looking for a new one if you’re buying for personal stay you have much less concerns just buy something that’s very affordable to you the safest purchase is still first-hand HDB BTO flats from the government because Built to Order (BTO) flats they’re highly subsidized by the government using taxpayers money the government set the price so you are buying below market value of course this is based on the fact that you don’t worry about five-year minimum occupation period and don’t think about profiting from the BTO flat because after five years your flat is subjected to the market forces like supply and demand.
But if you are buying private property make sure that it’s your first purchase, so you are not subjected to any borrowing restrictions or you don’t have to pay additional buyer stamp duties make sure that the seller sell to you at a very good discount a discount that is comfortable to you so that you can buffer against any future drop in prices and in the coming few years even if prices drop make sure that you won’t be upset about it and it’s better pay the majority in cash in case in the future the value of your property drops below the outstanding loan.
For the 2nd type, quite a number of people think that is time to buy now. It’s naive to believe that a new pandemic known as Coronavirus will be similar to SARS in terms of spread duration impact on economy and speed of recovery some people also say during the SARS period property prices in Singapore didn’t drop much but they forgot the fact that property prices during 2003 have already been suffering for years since 2001 and this time the impact of coronavirus and the economy is very different from Asian financial crisis and the global financial crisis.
In 2008 and 2009 the Asian financial crisis the impact is only limited to the Asian countries while for the latter for the financial crisis last time the industries impacted are only confined to banking and finance as the IMF chief economist said the magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes so hold your horses and avoid making any rash decision in property purchase both Knight Frank and Cushman and Wakefield expect real estate market to be badly because of deep global recession contraction in commercial real estate and fall in foreign investment especially from Chinese investors.
It’s an interesting phenomenon to see that Singapore property agencies for their ever bullish talks at all times while the global analysts already issued their warnings that only discredited the local property agencies for their out of context talks.
Some people say any time is a good time to buy but this is only applicable to property tycoons who are negotiating very big deals from business owners who are in troubles or for very savvy and cash rich investors who can obtain a good deal and negotiating everything very favourable terms on their own behalf definitely not for you and me and not for anybody buying private property for the first time. Some people also say so we buy when nobody else is buying but that’s not true!
I’ll be telling you as a fellow investor because I’m not a developer so sorry if that’s very bad news to them what I think that you can’t buy now is the new launch, if any friend come and ask me the same question I will give them the same answers so the reasons are very simple, we have to be 100 percent sure that our employment, business and investment will not be affected by this covid-19 thingy and we have financial means and holding power, even if the worst were yet to come the second reason is even if prices drop further maybe like ten twenty or fifty percent in the coming months or years so do you really don’t mind that buying now at higher prices like ten or fifty percent higher than the future value the third thing is are you fine buying under the current loan-to-value restrictions pay four percent buyer stamp duty 12 to 25 percent ABSD and potential seller stamp duty of 4 to 12 percent the fourth thing is what if after your purchase the government go and relax the property cooling measures then what happen to you if finally one day the government introduce some property stimulus measures then you don’t get to enjoy it.
The most important key reason over here, why cannot buy new launch is that you don’t even know when you can collect the key for your unit but you are still committing into the payment schedule and you have already paid the down payment it is very bad the government say that we extend six months for the completion of your project and also for the sale of all the units but they’re not saying that I’m now lifting ABSD or I’m now just like giving you a discount or rebate on your ABSD or we just you just need to pay 10% instead of 25 or 30% ABSD.
What does that mean is that all the workers right now the foreign worked are being locked up under this covid-19 thing and they cannot do any work that means if you want to do a show flat or you want to complete the construction or project you don’t know when you can do it again does that mean it is going to be six months but even after six months your works can start work.
It’s not just like McDonald’s that have been closed for some time and I can open it now and we can start doing business you have to clean up the sites before you can start work and some of the workers may have contracts already expired and then you have new workers coming in, you have to train them then when can you start work again.
There’s no date when they can complete the project and when you can really collect your key so these are some reasons why you shouldn’t be buying new launch projects now that’s what I have to cover today I hope you learn something from this article if you have any burning property question.
For the 3rd type, who simply is looking at real estate as a long term of investment and want to find out where these attractive properties are available for sale right now?
I can certainly help you on this, please email me or leave your comments below today.
Felix specializes in real estate exclusive listings, digital sales marketing and leases.
A trusted consultant to many successful property owners, perhaps the most compelling testament to his success is himself – through strategically analyzing the market and well-calculated investments, he already owns local and overseas properties
Today, as a property consultant of one of the largest real estate company in Singapore, Orangetee and Tie Pte Ltd with a reputable track record, I wish to share my strategies for financial freedom with you.
I hope to help you put in place a secure retirement plan and enjoy the lifestyle you have always desired.
To start with, I can help you identify a good value investment in today’s market. Also, I would like to advise you on the best ways of financing your property.
For instance, is paying your bank loan a good or bad debt? Also, I can help my client unlock the maximum loan from the bank even though they have a car loan.
With the proven strategies from my team, I am confident of putting together a customized and exclusive retirement plan that can set you on the road to your Financial Freedom!
I graduated a Diploma in Mass Communications with a passion for video editing and graphic design and website designing.
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