At last, you’ve saved enough money to turn your dream of shopping for property into reality. Is this the year you finally make the leap from renter to homeowner, possibly even a landlord? Before calling a property agent to assist buy your dream home, consider the factors that would affect your decision to shop for personal property.
Should You Be Scared of the large, Bad Property Glut?
If you’ve been browsing through land ads or articles recently, you’ve probably encountered the term “property glut” several times. But what does it mean, and what impact wouldn’t it wear your first Singapore property purchase?
1. How Many Units Are Affected?
As of September 30, the Urban administrative unit identified an oversupply of about 32,000 residential units in Singapore— both completed units and people still under construction. Over 10,000 units remain unsold in suburban neighbourhoods. Downtown properties are only slightly happier, with almost 9,000 units still expecting buyers.
2. What Caused the Property Glut?
Industry experts point to the en-bloc redevelopment fever and therefore the resulting property boom of 2017 because of the reason behind the oversupply. Back then, developers were snapping up old buildings in collective sales and reworking them into new flats. People were happy to sell their old apartments, as these deals netted them staggering amounts of cash. Developers purchased over 60 en-bloc properties between 2017 and 2018. Unfortunately, the particular demand for personal property has almost matched the developers’ projections.
3. How Long Will It Last?
About 2,500 homes are sold in Singapore each quarter. Given sales statistics, it’s going to take four years before all of the backlog residential units are finally sold.
4. How Will It Affect Prices?
The oversupply could potentially mean lower prices for both landed and non-landed units, especially in areas outside the Core Central Region (CCR). Prices in CCR districts are still expected to extend since there’s always a requirement for housing near downtown businesses and schools. But don’t expect an excessive amount of of a reduction, as developers would still get to make a profit.
5. How Will It Affect Collective Sales?
If you’re curious about reselling your range in a collective sale, you would like to require note that developers are now more cautious of en-bloc transactions, given the oversupply. After all, they need to pay the extra Buyer’s stamp tax (ABSD) penalty if they’re unable to sell all their units within the govt deadline of 5 years.
What Other Factors do you have to Consider?
Don’t rush into a purchase just yet. Lower prices are often tempting, but that’s not the sole thing to think about when buying personal property.
Mortgage Rates & the Economy
This aspect may be a win for homebuyers. Banks usually charge 2% interest on the average for housing loan packages — slightly cheaper than the two .6% offered by the HDB. These rates have remained pretty constant within the past ten years.
Did you recognize that local rates are influenced by what’s happening an ocean away? When the US Federal Reserve System sets interest rates in their country, that call also affects the interest rates in Singapore. So far, the Federal Reserve System has held off on rate hikes, which suggests rates still remain steady.
That is unless something drastic happens to the economy. Singapore’s economy is intricately linked with global events, and therefore the first year of the subsequent decade is bringing during a lot of changes. Brexit, trade wars — take your pick.
In fact, the Monetary Authority of Singapore warns about economic uncertainty in 2020, which can affect your ability to urge a loan. albeit mortgage rates stay an equivalent, your salary next year won’t be enough to hide the monthly amortization.
Government Housing Policies
First-time buyers got to remember these rules when crunching the numbers. the govt imposed several policies to avoid a possible bubble and keep prices from skyrocketing during the property boom of 2017-2018.
Loan to Value Limits
In July 2018, the govt decreased the Loan to Value (LTV) ratio limit from 80% to 75%. this suggests that homebuyers got to pay a 25% deposit for housing loans, including a 5% cash payment of the property’s selling price.
Total Debt Servicing Ratio
Meanwhile, the entire Debt Servicing Ratio (TDSR) limit ensures that debt payments don’t transcend 60% of a person’s gross monthly income. That 60% limit includes not just your home equity credit but also the other debt — credit cards, education loans, medical bills, etc. Buyers even have to buy the ABSD. the quantity depends on the buyers’ status and therefore the number of existing properties they possess. First-time individual buyers who are Singaporean citizens usually pay rock bottom ABSD rates.
Rental and Resale Market
During economic uncertainty, corporations tend to rent less foreign workers and budget conservatively for his or her housing. this suggests that landlords with expensive CCR properties may face more vacancies within the coming months. Also, renters often prefer shorter leases in order that they will move to cheaper housing when the chance comes.
In the next two years, about 50,000 resale apartments would reach their MOP (Minimum Occupancy Period). tons of property owners are going to be looking to resell or hire out their old flats, which are less expensive than brand-new units. Buyers can cash in of cheaper financing, particularly the government’s about-face on using the Central Provident Fund (CPF). This fund is now available for purchasing older resale apartments.
What Are the Key Takeaways?
Given what experts say about the important estate scene, what can homebuyers expect in 2020?
1. First-time homebuyers
As prices have the potential to dip, 2020 could possibly be the year you achieve that elusive dream of moving from a rental flat to your own house. this is often very true for those that decide to move to the Outer Central Region or buy an older flat. Buyers also will have a wider sort of housing to settle on from. able to take the leap? Here’s an inventory of the items you would like to think about before buying your first home.
2. Investors and experienced homebuyers
It’s knowing to manage your expectations. If you’re purchasing personal property as an investment tool — whether you propose to rent it out or resell afterwards — look beyond the attractive tag. Consider how the (local and global) economy, land market trends, and existing laws would affect your investment.
It may take a while for you to make a profit. Still keen on buying a property in Singapore? Find new launch projects or talk to a top property agent in Singapore to provide you with property insights and assist you with everything you need to know from calculating Buyer’s Stamp Duty, Additional Buyer’s Stamp Duty, exercising the OTP to sealing the deal.