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Are you thinking of selling or buying a condominium?

Wednesday, March 4, 2015

I received two emails from readers, one about selling a condominium and one about buying a condominium. Put them together and it could generate some interesting thoughts. Have a read and maybe you will have a comment to share with us.

Hi AK,
I have been following your blog for about a year now, really enjoy reading all your posts, be it on financial related topics or simply what you had for dinner! I'm glad that you blog quite frequently so there are new posts most of the time. :)
This is my first time writing to you,  sparked off by your latest post on a reader's question on 99 year lh vs freehold properties. I have had this same question at the back of my head for some time now but never really bothered to do much about it. In my case, I own a 99 yr lease hold property ( a 2+1 BR condo) which i'm currently living in. As i bought this property sometime back, the current prices are still higher than my purchase price. However, I have been wondering if there is a need to sell this place to buy a freehold property to live in and when would it be the right time to do this? My property TOP in 2010 so it has been 5 years, i suppose its not considered old at this point. Though my preference is to stay at this current place for its location (not near mrt, just relatively convenient for me to get to work), avoid the hassle which comes with shifting, as well as the high property prices, my worry is not being able to sell the place easily in another 5 years time. Should i be looking to sell this place before it gets too old?
What would your advice be for me?

AK says:

Hi K,

Welcome to my blog. :)

If you like your home and have never thought of monetising it, then, just stay put. For me, I am never emotionally attached to where I stay. So, it is relatively easy for me to let go. ;)

You place received its TOP in 2010 but you have to remember that its 99 years lease started its countdown from the date the land was acquired by the developer, not from the date the project received its TOP. So, if it took 3 to 4 years to construct, almost 10 years of the lease are gone.

If look at your home just as another asset which you think could make money for you and I think it might be the case since you worry about not being able to sell it easily a few years later, then, I think you might want to start marketing your condo now. Oversupply situation is going to get much worse. I am sure you know.

Having said this, make sure you have somewhere to move to after selling your condo. In my case, I still had my rooms in my parents' place. If you have to rent a place, then, it might not make a lot of sense.

Best wishes,

Hi AK,
I know your position regarding property as an investment, having followed your posts these 2-3 years.
One recurring thought but have had trouble articulating is this: the current soft property market is really largely a result of government intervention. If the ABSD and TDSR were not in place, what would your guess be for the property market today?
I would think that those crazy heady days of people lining up at showrooms (and also, people asking people to queue there) would continue. Which then leads me to think that we would really be in (big) bubble territory. Now, with upcoming oversupply of flats and condos, and a rising SIBOR, it would really make sense to hold out and probably buy an apartment in 2015/2016.
I'm single, 35, and currently living with my folks. At this time, my inclination is buying a HDB resale flat. I'm not sure if it's still worth it to buy a condo and wait for capital appreciation.
Care to share your thoughts with me please?

AK says:

Hi M,

If not for the cooling measures the government put in place, I am very sure that prices of real estate in Singapore would have shot through the roof, pardon the pun. However, to be fair, prices have come down due to the ramp up in supply of both public and private housing too.

I am inclined to believe that prices will decline much more before stabilising and it will be many years before prices start moving up again. When will prices bottom? Although we estimated quite accurately when prices would start declining, it is much harder to say when they might bottom.

Something which we might be able to use as a gauge is the ABSD. The day the government removes the ABSD, then, it could be a signal that prices have bottomed. Just an idea. ;)

Best wishes,

Related posts:
1. When to buy (and sell) a private residential property?
2. Disastrous investments in the property market.


RetailTrader said...

"Something which we might be able to use as a gauge is the ABSD. The day the government removes the ABSD, then, it could be a signal that prices have bottomed."

Exactly. Don't need to do too much research. Let the government do it for you.

lzyData said...

Get these two guys together, make a deal, and AK gets the commission. Win-win-win! :)

AK71 said...

Hi RetailTrader,

We are quite fortunate to have the government we have in Singapore. They have more good points than bad. :)

AK71 said...

Hi IzyData,

If they want to meet up, I will be quite happy to make the introductions but I am not a real estate agent. ;)

Derek said...

Hi M,

It is not too long ago that I was also on a look out for a 1BR as an investment. I was single and also reaching 35. I don't know if your budget allows you to buy a bigger unit but for a 1BR, my personal view is that it has very limited capital appreciation unless you can buy at a price that is way below the current market rate. A unit way below market rate is almost difficult to find and even if there is, they will probably be snapped up by the seasoned investors.

My next thought is to buy a property to rent it out (yield) and to use the rent to cover for the mortgage. This is what agents meant by using someone money to pay for your mortgage. I wrote a post on this (search for “Tre Residences – My First Property?” in my site) and there is more than just the mortgage to pay for. I wrote the article just 4 months ago and my worst case rental is $2K/month. I think it is even less now.

1BR is still a untested market. If I buy a 1BR at $700K, do you think I can sell it at $800K in ten years? Even if I do, after deducting interest, maintenance, fees and other misc. cost over ten years, what would I be left with?

apex property investment said...

At the moment, I reckon there is no clear direction of the price of properties in Singapore. Saying that, buying a good property at a fair price is better than buying a poor property at a good price, I reckon. I propose that you look at good properties now so that it holds value in the future as a hedge as falling value is a real possibility given the current climate.

I suggest you start looking for good properties if you need a dwelling, if not, I'm sure if you eavedrop into AK's self mumbling, you can definitely pick up other investments that you can put your money into.

AK71 said...

Hi Derek and Apex,

Thanks for weighing in on the subject. Much appreciated.

Reminds me to share another blog post which is probably relevant:
Buying a property: Affordability and Value For Money.


victorlsl1 said...

agreed on removal of ABSD

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