What factors should I consider as a first-time homebuyer?
Have you ever considered that the traits that draw you to a particular property are likely to be the same traits that may draw others to buy that same property in future? Hence, when considering where and what unit to buy, it is important to ask if you have an exit strategy should you need to sell the unit in future. It may seem counter-intuitive to begin with the end in mind as we usually buy a property taking in account our present needs, rather than the future. However, it would eventually pay dividends if we can consider whether a property we purchase would continue to be appealing to future buyers.
In Singapore, besides the convenience of amenities and transportation nodes such as whether a property is near an MRT station, what one needs to consider is also the age of the property. If possible, it is advisable to buy a unit that has many years left if it is a leasehold property, such as a relatively young condominium or a HDB flat that has just reached its Minimum Occupation Period (MOP). This ensures that when you need to sell the property in future, it would still remain attractive to potential buyers as it is not experiencing too much of a lease decay.
If you are considering whether there would be a good capital appreciation with buying a property, may I also suggest that you take a leaf from the ‘book’ of real estate agents. Observe what they do with property purchases. Many real estate agents will ‘walk the talk’ as they believe in good capital upside of new launch developments, and you will see them often investing in new launch units. Of course, it is not guaranteed that every new launch development will help you make a tidy profit. However, the data does show that the prices of new launch properties tend to accelerate the fastest right before TOP, and for a couple more years after that. Hence, many realtors tend to buy such properties, and will evaluate their property portfolio every 4-5 years to see if any changes need to be made. They seldom hang on to a property for many years as they understand that a property’s price will rise relatively slower with age.
Before buying a property, it is also good to seek the advice of a realtor who can help you with financial planning and advise you on what asset may be suitable for your needs and budget. Getting an in-principle approval from a bank or your Home Loan Eligibility from HDB will also help you gain clarity on the state of your finances, and whether a particular purchase is within your affordability as well as whether the monthly mortgage repayments can be managed without too much financial stress. This will also help you buy an Option to Purchase (OTP) for a property and to exercise your OTP, with confidence.
The market forces of demand and supply for the particular unit type in an estate can also help you gauge if your unit would continue to see substantial buyer interest in the future. For example, given that the location of AMO Residence tends to attract families for own stay, it would make sense to purchase a 3-bedroom or bigger unit, if one can afford it. Hence, the four 5-bedroom units and the two penthouses that are currently unsold are actually to me safe bets to purchase (even if the price quantum seems high) given that there are only 22 5-bedroom units in a development that has 372 units, and three penthouses in total too. Anecdotally, a Panorama 5-bedroom penthouse was recently sold at a record price of nearly $4 million, given the scarcity of penthouses in the development, and this example can teach us that the scarcity and limited supply of a particular unit type in a development can ensure its higher demand in future. Given that almost half of AMO’s development are 2-bedder units, we can also predict that the psf price of bigger units in the development can possibly fetch even higher than the psf price of 2-bedder unit types years down the road.
Considering whether there is any future transformation in the area in the Masterplan can also help you gauge the potential of a property purchase. Future transformation in the Greater Southern Waterfront (GSW) and in Tengah, for example, would mean that properties in these areas are likely to be even more valuable in future when the Masterplan comes to fruition. Hence, the government had the foresight to put in place policies such as Prime Location Housing restrictions for new HDB flats to prevent people from experiencing the ‘lottery effect’ with snagging a HDB flat in a prime location such as the GSW.
When one has carefully considered factors such as these listed above, then no matter whether it is a season of low or high interest rates, one can be confident about the real estate property purchase choices that one makes. After all, interest rates won’t stay high forever; they will come down with time. By then, maybe one may have missed out on buying a desired property, because an environment of low interest rates will drive demand up and supply down, and property prices will then only go uphill again.
