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Buy a resale flat now or later? It depends.

Monday, July 14, 2014

K is unable to buy a BTO flat because his combined income with his wife is above $10,000. Currently staying with his dad, they are thinking of buying a resale flat with their first child on the way. They want to be close to his dad and have more space of their own. He wonders if he should wait for prices to bottom before buying a resale flat near his dad's.

My reply to his message:

I have to say that I don't know when the HDB resale prices would bottom. I don't think anyone does.

However, if I were to hazard a guess, I am going to say that prices will continue to fall. More BTO flats will be completed. More ECs and condos will be completed. Will happen in the next 2 to 3 years. It is just starting now.

So, the question is really how urgently you need a place of your own. If it is not an urgent need, then, waiting for a while more seems like a good idea.

In the meantime, do some window shopping first. There could be people desperate enough to sell cheap for various reasons.

Finally, when location is more important than price, then, your choices are more limited. This is certainly the case for you since you want a flat close to your dad's. If a choice unit should come along, would you want to buy or continue waiting?

Have anything you might want to share with K? Please feel free to leave comments below. Thanks.

Related posts:
1. 45 years old, get a bigger flat or invest?
2. Buying a property: Affordability and value for money.


AK71 said...

"If a property is for own stay, value could take second place. There will be many other reasons that will have priority.

"It is when a property is being considered as an investment that value for money becomes very important because the motivation is to make money from the property." AK in FB.

veronika said...

You can have both.

Properties near or in the core region will maintain their values. If they drop, it will be marginal and it will pop right back very quickly.

The next question:

buy now


buy later

AK's idea of scouting around to get a feel of the market is sensible.
Find out about:

designs / layouts
transport options
market ( wet, dry & super )

99 years or freehold depends on the budget. But either one is fine.

People say that Singapore is small.
Really? why need a car and why need to stay near parents?

If its small, getting to parents or anywhere is no sweat right?

What they mean is the domestic market from the perspective of sales.

I would think longer term and consider kindergarten for the kids, primary school and secondary schools.
Unless you want to move homes every 5 years or less.. which can be disruptive to school routines ( think bus journeys ) What? just to make another $100K?.. and buy high or live further out from work & school?

But in every instance, my friends have all moved homes at least once in the past 30 years. I think I am the only one who has stayed put in my humble HDB... its home for me till I drop dead.

Would you think me a fool who did not take the opportunity?

Julian Chan said...

I'd like to share. If your combined income is just slightly above 10k. there is a chance HDB will allow you to apply for the BTO directly from HDB.
This is a case by case review, so don't expect HDB will definitely allow. But HDB is also not unreasonable if your combined income is say ~10.1K. I am sure HDB will review your application.

pf said...

I took 2 years to come up with my criteria to buy a resale. Perhaps as a single, I have more choices.

I suggest for K to work backwards on his finances to see how much mortgage and cash flows he can get and afford for his resale.

I did some calculations. Combine income of 10k with no debt and first property, available loan is abt 600k. Taking into account most current tdsr and msr. Calculation if msr is by regulation to be 3.5% interest.

So monthly mortgage is $3k. If both husband and wife income is 5k each then contribution to cpf oa is ard 1150 each. Making up 2,300 total if they borrow max for the flat. That leaves 700 of the mortgage to be payable in cash for the family.

If K's scenario is as described above, then he can plan his cash flow accordingly. If he doesn't want to pay cash for mortgage.

With a baby along the way, cash is quite important.

If k's father stays in bishan on the NS mrt line or from Clementi to Tiong bahru on EW line, suggest to wait for prices to come down further as most likely he has to get max loan for a 4rm or 5rm flat.

If elsewhere, he might be able to get one quite quickly with less than the max loan. Heard Sengkang and Punggol flats already corrected 25%.

pf said...

Above is just a rough guide, coz there cld be other situational factors for K which I may not know to take into consideration. :)

AK71 said...

Hi pf,

You have definitely provided some pertinent points for K's consideration. He might or might not have thought of the stuff you mentioned but it is always good to hear what others have to say especially when it is a big decision like buying a piece of real estate. :)

I have also read in the papers that HDB flats in Punggol and Sengkang have come down quite a bit in prices. I am not sure if it is 25% but if it is true, 25% is a lot! Things could get worse.

pf said...

If K doesn't wanna have any cash outlay at all, then may need to look at lower mortgage or cheaper flat.

Nova said...

I am in a similar situation as K. My wife and I can't buy BTO flats, leaving us with resale HDB and condo to choose from. We have been shopping for more than 6 months and prices are still very, very high.

I agree with AK that K should start window shopping to find out more about properties around his dad's place. It helps to give him a better idea on the price, facing and layout. Who knows, K might be lucky to find a desperate seller in the process like what AK said too. But how does K determine what is a good price? I use the HDB infoweb to find recent transactions and take a discount of 5-10% off the value as a rule of thumb. Prices are heading south but nobody knows how much. The discount helps to provide a buffer and it is probably the highest that sellers are willing to accept given that it takes time to adjust their expectations. Anything more is a bonus for now.

In my opinion, K has to ask himself if money is more important or intangibles such as privacy, building his home with his wife and making his wife happy (I heard from many friends that women want their own homes and this is the case with my wife too). If the former takes precedence, then wait 2-3 years for prices to drop. If the latter is more important, then just buy now. Money can be earned but life can't be bought. Of course the 3rd option to wait awhile exists if K wants to find a balance between the two factors.

For me, I choose to buy now at a "fair value" of 5-10% discount off recent transactions because I value the intangibles more than money. It is unfortunate that i have to go into a deal with limited upside potential but being at the wrong place at a wrong time, there is little that can be done at the individual level.

Hope I'm able to help.


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