Keep Calm and Buy a Home

KEEP Calm and buy a home
Keep Calm and Buy a Home

Cooling measures are not anywhere near its last days as stated by Minister Lawrence Wong in Parliament on 28th Feb, 2016. Instead of joining the speculation and sit on the fence, first-time buyers and upgraders could take this opportunity to realize their home ownership goals.

Cooling measures quick fact

  1. General Intention
    • To regulate property market and prevent bubble
    • To protect citizen who are truly home owners (to be).
  2. ABSD – Additional Buy Stamp Duty
    • To reduce the increased demand of investors globally
    • To discourage locals from buying more than one property
  3. SSD – Seller Stamp Duty
    • To reduce speculators and short term property flippers
    • To prevent property market bubble
  4. TDSR – Total Debt Servicing Ratio
    • To disallow individuals to overleverage on loans of all kinds
  5. LTV – Loan-to-Value
    • To disallow overleveraging property purchase (lesson learnt from subprime crisis in 2008)

Are you affected by the cooling measures?

Types of buyer (5)
Types of Buyer in a Cooled Property Market

 

First Timer

Being ‘fresh’ in the property arena, you certainly have the upper hand when there is an excess supply of properties in the market and being pretty much immune to cooling measures. In such situation, buyers who are citizens have to get prepared and seize the opportunity when a good deal arises. The first task is to do a loan assessment with the bank or HDB to have a gauge on the property price tag that is within your means. A quicker way to get an estimate is to use this tool.

Next step is to understand your eligibility and the reason for this purchase. Is it to stay in or to rent out? This will kick start a series of decisions as such location of property, timing of purchase, interior design and furnishing etc. Unless you have the time, it is recommended to consult a professional on this.

Upgrader

If your last property purchase was before 14th Jan 2011, you would have equal (or more) advantage than the first timers. Just few days back, a five-room DBSS unit at City View @ Boon Keng set a record selling price at $1.028 million. With a decent sum from the sale proceeds; upgraders can then look for bigger, more central location home or even an upgrade from public to private housings, depending on individual’s long term plan.

Even though you may have some experience from the last property purchase(s), the numerous policy changes from 2010 to 2013 will probably make your new purchase much more complicated and engaging a professional will certainly provide you a more accurate assessment. One noteworthy policy change is the TDSR that pulled the brake of property price hike in Q4 2013.

Landlord Wanna Be

Since your last property purchase, you may have accumulated cash and liquid assets that are sufficient to buy a second property without selling the current property. Together with various influence from the media and people around, you are eager to jump onto the bandwagon of landlords and possibly start a passive income flow. Unfortunately, you are 4 years too late from the start of the ABSD and 2 years behind from the start of TDSR. Yes, if you are feeling the crunch, this is what the cooling measures are put in place for. It is just the way it is.

Such measures are well-analyzed to make landlord wanna be realize that the previously attractive investment are now having a much smaller Rate of Returns and eventually force them to take a step back to reconsider other alternatives to spend their spare cash.

Investor

Most of us do not belong to this category where an additional 10% ABSD is still not a turn off. Nevertheless, most wise investors with the end goal of profits should find very little worthy property investment left as well.

What’s next?

If you are a first timer or an upgrader, good for you! The ball is in your court now! Unless you have a rich uncle that can sponsor you one as a gift let us get back to the proper, less risky and wiser approach.

  1. Understand which stage of buying process are you at now?
  2. Research and do lots of homework. Remember the days where you spent so much time deciding on which car, watch or phone to buy? You can easily do a proportional increase to get the time needed for this property purchase, based on dollar value alone.
  3. Find a good professional for advice. Be it property agents, bankers or lawyers.
  4. And finally, make sure you have fun in this process

Neither this process nor the property price retracement will be a short or simple one, just keep calm and ultimately buy a Home!

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