By Joe Wang
With the latest round of cooling measures taking Singapore’s already sluggish property market by storm, prices are expected to take a further hit as developers become more cautious and prudent in bidding for new land sites.
The question on the minds of many property investors: is this the right time to go into the market?
Judging from the crowd size at recent launches such as The Jadescape at Marymount, it appears that there is still a lot of pent-up demand in the market and buyers will still dip into their pockets if the price is reasonable.
A quick glance at recent launches suggest that prices are still holding up and are marginally higher than resale properties in the same vicinity:
If you are not in urgent need for a home, I suggest you wait a while longer till there is more clarity in the market.
Depending on whether you are a home owner or an investor and the region you are looking at, prices may continue to rise in some districts while declining in others.
Though prices of the OCR (outside central region) increase by a slight 0.8% in the last quarter, I believe they drop the most in the coming months due to the new 75% LTVR imposed on first time buyers who are most price sensitive. For a S$1 million dollar property, a buyer now has to pay $50,000 upfront in cast and there are not many two or three room properties below a million dollars even in the OCR nowadays.
As for properties in the CCR and RCR, prices are likely to remain stagnant or even increase as they are usually catered to rich local and foreign investors with deep pockets. So long the location is good, the property is scarce and the price is right, there will still be buyers willing to pay a premium.
It is reported lately that there it may take around five years for the market to fully absorb the almost 46,000 private residential units which will be completed by 2020. There will be a glut of properties in the coming months and coupled with tepid response from the ground, developers are unlikely to try their luck by launching at higher prices.
When Sky Habitat was launched in Bishan in 2012, prices are going for as high as $1,700 psf for some units. Three years later, the same units are being marketed at $1,500 psf.
Let us not forget that developers now have to pay an additional 25% ABSD if they are unable to sell all the units within 5 years. So four years from now, the developers will either be giving steep discounts to the remaining unsold units from these new launches, offering goodies such as renovation packages or other novel schemes such as lease-to-buy schemes.
The first three levels and the top two levels including the penthouses are usually the last to sell. If you are an investor, you should probably wait for a while longer to snap up the remaining low floor units at a bargain. If you are buying for your home stay, you will be astute to be paying the same price for a premium unit or penthouse as for a normal mid-level unit.
Based on past experience, I think developers will give further discounts in the coming months to push sales. When the Total Debt Servicing Ratio (TDSR) was introduced in 2013, buyers rushed to sign the Sales & Purchase Agreement and exercise their options to beat the midnight deadline only to discovered they had bought at the peak of the market and developers subsequently offered 5 percent to 20 percent discounts to future buyers.
It is not advisable to jump into the market right now when there are so many uncertainties. The market appears to be on the downward trend at the moment and further price corrections may take place later. Do not be tempted by offer of discounts from developers now when you do not know how big a discount they will give to future buyers to clear the remaining units.
If the developer offers 10 percent to buyers or prices drop 10 percent in a year’s time, your property will immediately become a negative asset with an outstanding loan (10 percent) higher than market value before TOP and the bank will ask you to top up the difference in cash.
Let me end with one of my favorite quotes from Warren Buffett:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
This is the time to be fearful and not greedy for a hasty decision to buy a new property now may cause you endless heartaches and regrets in the years ahead.
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About the Author
Joe is a property enthusiast who bought his first property in Singapore at the age of 26 in 2005. From 2005 to 2015, he built a portfolio of 6 private properties in Singapore and has since sold three of them realizing a net profit of between 60 to 100 percent. He made his first million dollars in property investing at the age of 30 and has now amassed a property portfolio in Singapore, Australia and Malaysia worth more than $10 million dollars.
Joe is a conservative long-term property investor who believes in life-long learning and education in property investing. He does not claim to be a property expert or guru, but rather an adventurer who is in the middle of an exciting odyssey to achieve financial freedom from his property investments.
Email Joe at: firstname.lastname@example.org