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Sunday, December 21, 2014

3 Reasons You Should Consider Buying A House In 2015


Its a Buyers Market (Discounts, discounts and more discounts!)

Private developers are facing the crunch from poor sales. It almost seems like we are in a, who-blinks-first-loses, stare down between buyers and developers. In this stand-off, developers are trying to get inventory (unsold units) off their hands whilst buyers are shrewdly waiting on the side for 'good deals'. 

One example recently in the news was of property developer Hiap Hoe.

The Treasure on Balmoral received its temporary occupancy permit (TOP) on Nov 1, 2012. Hiap Hoe had paid a whopping $5.52 million for a 6 months sales deadline extension. Rather than selling the units cheap (AKA Firesale), Hiap Hoe announced that it would be selling all 48 units to its parent firm Hiap Hoe Holdings for $185 million.

With the glut of developers facing impending sales deadlines, if you do your homework properly, there are already some relatively decent deals out there!

Excerpt from URA Statistics (Released on 24-OCT-2014)

"Prices of private residential properties decreased by 0.7% in 3rd Quarter 2014, following the 1.0% decline in the previous quarter. This was the fourth straight quarter of price decline".

Glut of New BTOs 

In addition to already strict property cooling measure, HDB is still continuing to release (about 3000-4000) new BTOs in non-matured estates each quarter. This will fulfill the housing requirements of young couples looking for BTO flats or folks who intend to downgrade/upgrade.

To make matters worse, the 5 Year (MOP) in the first SengKang, Punggol estates are up early this year. Many people are rushing to sell their properties, some even at a loss (ref: asiaone).

MOP - Referred to as the Minimum Occupation Period, before you are eligible to sell your flat in the open market. 

Update (17-FEB-15): The supply side pressures from held back private development launches and left-over units from previous launches will continue to hurt the market for a while.

Less competition from Foreigners

With the implementation of the cooling measures, Foreigners looking to buy any property have to pay an Additional Buyers Stamp Duty (ABSD) of 15%, while Singapore permanent residents have to pay 5% on their first property and 10% on subsequent ones*. 

*There are exceptions to this rule: For example, Singaporean married couples can enjoy a refund on the stamp duty if they sell their existing home within a stipulated period after buying their second home.

All the measures have resulted in a noticeably reduced interest in the local property market. Perhaps due to these measures specifically targeting the speculators, a segment buyers who used to chase prices up into the sky are now priced out from the market.

Short Summary of The Cooling Measures:
  • TDSR framework
     - Total Debt Servicing Ratio of 60% of your gross income*. 
*(Including the potential new loan)
  • Loan Tenure limit
     - 35 Year Maximum Loan Repayment Period
  • Loan-To-Value (LTV) limits
     - 80% (without outstanding loans). 
     - 50% (with outstanding loans).  
     - 40% (with > 2 outstanding loans)
  • Minimum Cash Down Payment
  • Stamp Duties
Down Trend Arrow
Down Trend

To explain in simple economic terms, over supply and too little demand results in a correction of prices. Although there are other factors that impact property prices in Singapore, based on the obvious trends, 2015 will be a good year to start your house hunting !

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