http://www.straitstimes.com/archive/...first-20140112

YOUNG & SAVVY

Itching to buy a new home? Do the legwork first

Armed with all the data, you can make a quick decision when the right one comes along

Published on Jan 12, 2014

By Jessica Cheam


After a spectacular bull run in the past few years, Singapore's property market is finally showing signs of a "soft landing".

Headlines in the past week showed that cash premiums for resale Housing Board flats hit a four-year low last month. Median cash-over-valuation (COV) was $5,000 in December, down from $8,000 in November, according to the Singapore Real Estate Exchange (SRX) flash estimates.

This is a far cry from the peak of a median COV of $35,000 seen in January last year, when COVs in some estates such as Bishan and Queenstown even reached the $100,000 level.

Property experts are now predicting that HDB resale flat prices will fall by some 5 per cent to 8 per cent for the year.

Private home prices sank 0.8 per cent in the fourth quarter from the third, Urban Redevelopment Authority (URA) flash estimates revealed.

This was on the back of a slide in prices of suburban non-landed private homes - mass market condo units - which slipped 0.6 per cent in the fourth quarter.

This was their first slide since the second quarter of 2009 after climbing 2.2 per cent in July to September.

Some financial analysts are now predicting private home prices could fall by as much as 20 per cent by the end of 2015 in the wake of oversupply, tougher loan rules and expected rising interest rates.

Existing home owners might be less than happy, but after years of relentless price rises, the market is finally turning in favour of buyers and many will see this softening as a welcome breather.

Most will probably wait for prices to drop further.

But for those who have been waiting on the sidelines and are seriously planning a home purchase this year, I would advise getting into the market and home hunting as soon as possible.

As recently as 2009, following the global financial crisis, the property market suffered a correction. It was most pronounced in the private property market, where prices slumped some 25 per cent. In contrast, HDB resale prices largely held their ground.

My husband and I were thinking about buying a home around that time, and were put off by the high prices resulting from the 2005 to 2008 bull run.

When prices started to fall, I started hunting for homes, spending every weekend looking at units in areas we had identified.

A couple of months into this exercise, we got into an argument about whether it was the right time to buy.

It was the middle of the year, the market was still falling, but I could see signs that this correction was beginning to taper off as more buyers started returning to the market and governments worldwide moved to pump money into their economies to revive activity.

I wanted to make an offer on a home we both liked, but my husband thought I was being too anxious and wanted to wait for prices to drop further.

To cut a long story short, after a protracted debate involving price charts and a bit of emotional blackmailing, I got my way.

The next quarter, prices started to shoot up. And in fact, didn't stop for years until very recently.

We now have a home bought at a per sq ft (psf) price almost half that of the current market rate.

My husband dislikes my telling this story, mostly because he doesn't like it when I'm proved right. But I share this story because I feel strongly that with buying homes in Singapore, you have to be prepared and ever ready to strike when the time is right.

That time might not be now, but it sure looks like it could be soon. Being able to time the market and get a good deal involves your having done the legwork - this is a process that can take many months.

First, you have to make the decision on the location, which can involve many hours of weighing the pros and cons of various neighbourhoods. Then, you have to identify exactly which homes within projects or blocks in this area fall into your desired category. It also helps to research and compare historical home prices to get an idea of price movements.

At the same time, you have to do your sums to find out what you can afford, which involves the time-consuming process of talking to banks and analysing which are the best home loans for you.

This is especially important given new rules such as the total debt servicing ratio framework, which requires that lenders consider a borrower's total debt obligations (including other mortgages and car loans) before granting a new home loan.

The total debt obligation ceiling has been set at 60 per cent of a buyer's gross monthly income.

All this preparation enables you to be in a position to make an offer immediately when a home of your desired location and price comes up.

This is preferable to waiting for the market to bottom out before jumping in and realising that you are not ready to make a purchase.

After all, no one can predict when it will happen and by how much prices will correct.

The only certainty is that time and tide wait for no man, and neither does the Singapore property market.

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