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Today is Jul 22, 2019
Ben Ong
Associate Senior Sales Director
SRI PTE. LTD.
CEA Licence No.:
L3010738A / R041385F

benong.property@gmail.com
Call (+65) 9765 4329
Buying Guide

 

Buying a private residential property in the current market condition (April 2014)

Overview

Property buyers have never been more spoilt for choice in purchasing a property, be it new or resale homes.    In almost every corner of Singapore, one is unlikely to miss big and small construction in progress, or big advertisement billboards outside barricaded land parcels. 

Though developers are quick to slowdown new sales launches this year in response to the muted demand to hold up the price,  the buyer (not the seller) is indeed the VIP (very important person) and a prized commodity to the Developer and to property agents. 

If you are seriously looking to invest in one soon, perhaps you may want to know the below five issues:- 

  1. How is the property market doing ?

     

    This question is usually a conversation-opener when an interested person speaks to an agent.   Since 2010, many rounds of government interventions have been introduced to cool runaway property prices which accelerated from the USA sub-prime crises in 2008.

     

    It was only from end-2013, when the effects of these cooling measures were felt, demonstrated from the start of a price decline, in varying degrees depending on property segments concerned.    These segments are now broadly categorized as, Core Central Region (CCR), Rest of Central Region (RCR) and, Outside Central Region (OCR).

     

    Transactions have slowed down mainly due to two reasons:- 

  • The reluctance of cash-rich buyers in paying the additional 7-10% in buyer  stamp duty when they are buying more than one property.

     

  • The implementation of the Total Debt Servicing Ratio (TDSR), which reduces the buyer’s ability to commit relatively substantial mortgage loans, through a very conservative affordability formula standardized by the Authority.  All these in the name of protecting the borrower in the event of a major financial crisis.  


    2. Is this the right time to buy ?

This is probably the most difficult question without a clear-cut answer.   This question is best answered in the individual circumstances of the buyer concerned.

 

On the one hand, public sentiments are with the thought that prices will come off 5-10% more by the end of the year, in view of the numerous supply to be launched this year.

 

On the other hand, the price range of available units within a development can be wide,  if one really look into actual development sites, proximity to amenities,  floor level, facing,  compass orientation,  interior layout, amenities within the condo,  etc. 

Generally, developments near MRT stations, amenities and good schools are resilient and therefore buyers do not mind paying a higher price.   Especially so, where development sites near those MRT stations where neighbouring development plots are not available for a long time to come.

 

Inspite of the current public sentiment that private residential home prices may come off more, there will still be buyers of the below categories:- 

  •  
    • Buyers who have been eyeing a specific development for a long time since, and chance upon an opportunity to get their long-awaited choiced home.
  •  
    • Buyers planning for their matrimonial home (or risking the marriage !). 
  •  
    • Cash-rich buyers, who rather put their money in generating immediate rental     income,   than seeing their money in the bank eroding away to inflation of      3-5% per year. 
    • There are those elderly buyers who missed out the previous economic boom and bust.     They fear if they do not buy now (to reap some investment returns soon), it could be game-over for them in this life.
  •  
    • One current essential bank mortgage loan application criteria is, the borrower must show evidence of regular income.    Some matured buyers would like to quickly take advantage of bank borrowings while they are still gainfully employed.  (It is almost impossible to take up a mortgage loan, once one becomes a self-employed, or retire). 
  •  
    • Buyers who recently was enriched by enbloc deals and downgrading. 
  •  
    • Retirees downgrading from big landed property to condos.
  •  
    • Again, despite all the public sentiment that interest rate will go up soon, the fact remains that, mortgage interest rate is still hovering between 0.95%-1.5% per annum.     So, the opportunistic buyer will still take advantage. 

 

3. Total Debt Servicing Ratio (TDSR)

Of all the staggered cooling measures since 2010, the most effective so far is the TDSR, which was introduced to tighten mortgage loan applications.

 

Before TDSR was introduced,  it was almost sure how much one could borrow from the Bank to purchase properties, and the latter could usually process a mortgage loan application within 2 working days.

 

Now, it takes at least 2 weeks, and a lot more of personal financial declarations and documentation from the intending borrower, on a case-by-case basis.

 

Property agents are now totally in no position to advise buyers on the possible loan quantum, or even if the mortgage loan will finally be successful.

 

However, with the advent of “Apps Store” availability for Iphone users,  there is a multitude of “TDSR” apps for buyers to check their affordability to taking a mortgage loan.

 

Before TDSR, buyers usually go and select their purchase unit first, then talk to the Banker.   Now,  buyers should go and get the mortgage loan in-principle approval FIRST, before they go shopping.

 

 

 4. Completed unit or, building-under-construction (BUC)  is better ?

 

It depends on the buyer’s cash position and other individual circumstances.

 

A completed unit offers immediate rental income, or availability to move-in immediately where it is appropriately needed.    But, buyer must pay in full, or be able to service the loan installment for the full purchase sum.

 

A “BUC” unit allows payment or loan installment servicing on a progressive scale spread over 3-4 years, hence less strenuous on the financing in the short term.

 

Some buyers have to opt for “BUC” units to time it so that by the time the unit is ready, they would have the ability to sell off their current home by then (where most of the purchase fund will come from). 

 

4. Should I get an agent to assist ?

 

As a buyer, you have absolutely nothing to lose in engaging an agent to assist.

The common practice here is,  buyers do not usually pay any commission to the agent.   The agent is paid by the Developer, or he/she shares commission with the seller’s agent.

 

When it comes to arranging viewings and negotiating of RESALE properties,  it can be a harrowing experience for buyers, if they do it themselves without a representing experienced agent.

 

other information which will broaden your knowledge of what will ultimately fits your budget and circumstances better. 

 

Conclusion


If history is to repeat itself since the 1970s, property prices are likely to come off, only to climb the next high in the longer term in land-scare Singapore.    Barring another major global crisis, prices are unlikely to crash due to the absence of speculators (forced out by the cooling measures) and, the Government’s ability to modify existing controls administrating internal state of economic affairs. 

So, if you are serious buyer or investor, this may be a good time to checkout the numerous choices for a bargain.

 


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