Should I Buy the New Launch Property Now or Wait For Interest Rate to Drop?
Before I begin, I just want to state that this is entirely my personal view based on my assessment of the market condition now. The #1 objection right now to property purchase is high interest rate.
Alot of my leads told me that they want to wait for interest rate to come down before they go into the market. I dont think this is a smart move especially if you are someone who "die die" want to buy a private property.
1. Do you know that if you buy a new launch, it will be progressive payment? So you will not suffer the full blunt of the high interest rate immediately. Say if you buy a new launch that TOP in 3 years time. Assuming it's an average of 3.5% interest rate for the next 3 years, you will be paying 35k interest for a $2m property for $1.5m loan. What this means is, you are paying additional 25k in interest when compared to the 1% low interest rate environment.
2. What if I tell you the average yearly appreciation for private property in Singapore is 4.5% for the last 20 years. That is to say if you delay the purchase by another year (to wait for the interest rate to come down), the same 2m property would most likely have appreciated by another 90k. If you delay for another 2 years, it will be 180k more.
3. Do you think property price is going to collapse or drop from now on? It's not going to happen. It's all demand and supply. Refer to this article from business times. The cooling measures do not cause property price to collapse. What the government is trying to do is to ensure a bubble doesnt form where by people start to force sell or declare bankrupt when economy is not doing well. During the Covid period, all asset class plunged except for property in Singapore. It surged!
4. I cant imagine how many people are on the sideline now waiting to enter the market when interest rate falls. Perhaps that will fuel another surge in property price. It's like crypto FOMO.
Let's not be penny wise, pound foolish. Just because you want to save that 25k in interest, you ended up paying 180k more for a property 2 years later, or worse, you get priced out entirely from the market.
Hi....its me....that's why rich getting richer and poor remains...erm....not rich :) Because the rich has the holding power...they usually have multiple asset type and they can hold when market is not in their favour......in cyclical play like properties....this is normally the time they fish for the best deal....later they sell it back at quick turnover....in fact I knew a few prop agent did that in new launches, they will get themselve a shoe box unit with low entry price...then sold it off as sub sale :p
ReplyDeleteYeah back in those days, property flipping was crazy. I wished I was born during that era so I can flip a few myself as well. LOL.
Deletenever ask barber if you need haircut. Business Times is beholden to report "bullish" article for the fear of offending Property Developer who is their main advertising contributor.
ReplyDeleteHaha, but in my case, it's the customers who come into the shop to say they want to have a hair cut. Ill start to observe the tone of BT from now onwards. Thanks for sharing your insight!
Deleteyupe... the tone observed is important. Never a day in BT/ST media reported property weakness. Everything is salad-dressed as per whim of revenue contributors. In the past, SPH has property arm, hence it is also not in their interest to report weaknesses in property market (pig can be dressed as premium turkey at BT/ST)
DeleteWith regards to point 2), do all projects increase in value? If its own stay and not for profit, make sense to wait for 2 years and buy projects that don’t increase much in value? Point 3) property surged because people wanted a bigger space due to work from home requirements, not because property is resilient? Always interesting to see property agents like you sell your koyok. Go read propertysoul.com she is debunking everything you guys say. ;)
ReplyDeleteThanks for the comments.
DeleteFirstly, i just want to clarify that it's the clients who come and say they want to buy koyak, I didnt go to them to hardsell to them. I am merely telling them don't end up paying more just because you want to save 25k over 3 years. Interestingly, for those with intention to buy and self stay, they are not too bothered with the interest rate because there is an actual requirement to move into a bigger space. It's those that are coming in with investment intention who are telling me about the interest rates are too high. At first i wanted to talk about the projects that I shortlisted for the "investors" buyers, but i realised the more I say, the more I will sound like koyak seller. So ill leave it as that.
2. Not all projects increase in value. Dont buy into over valued/hyped up projects/ulu locations without any future planning in place/mickey mouse units/small developments. You cant really expect a mickey mouse unit to appreciate much in price since there's not many buyers for it.
3. I really dont think those people who bought the properties back in 2020-2021 are buying to work from home. We are talking about new launch here. It takes years to build. How many of us are WFH now?
4. Thanks for sharing the website. I realised the author is selling books and her consultation service as well. She is also trying to sell her readers something. End of the day, there are 2 sides to a coin. It's up to you to decide which 1 you subscribe to. However, i agree with her not to buy into properties that are too hyped up. If you want to pay a high price for it because you like the ulu (quiet) location/design and what not and you want to self stay. Then go for it loh, but dont go in thinking that you will make money in the end. Truth is alot of people make money from properties and most people buy it because they are willing buyers and not because the property agent is damn good in talking. The buyers turned up ready to buy. We are talking about properties that are a few million dollars, not something that is 5 dollars/10 dollars from taobao that we can buy to just "play play".
I read some of her articles and she is obviously a very seasoned property investor with 5 properties under her name. In her article " Can you really afford that property", 1 of her advice is safer to buy when interest is high and trending down" Well obviously we dont know when the peak is though we know FED is slowing down. So, ok lah, she didnt really "debunk" anything i wrote. In fact, we are quite aligned in terms of buying at high interest rate environment and also "investable" grade properties with good characteristics.
DeleteNot all property agents try to hard sell patchy koyok one....but if you take me as one, I also no choice. I am also not collecting leads from my blog. In fact there are people who private message me to ask if i got any properties to recommend, I did give them some recommendations but didnt offer to sell it to them.
thanks for your detailed response. appreciate it and great to hear the views from your side. Sorry that I mistook you for koyok selling because most agents that I spoke to gave me this impression and from your blog post, you sounded like one. I am happy to be corrected. With regards to the agents that I spoke to, they were telling me to "sell one buy two". If i have listened to them back then, I would be seriously worried now with the rising interest rates. With regards to property that you think will increase in value, can you share it here, if you are okay with it? And why do you think they will increase your value. Thanks. :)
DeleteHaha no worries. I cant really blame you for that as property agents dont have a good image in Singapore . I also kenna whacked by the anonymous poster below to say this is the worst post ever from me. Frankly speaking , I was surprised, i thought I had much worse post. haha. And I reread my post, it does sound very koyok selling but that's because I was limited by number of words on Instagram, so I cant give the full story/context. Lessons learnt!
DeleteLike what the anonymous poster below said, all property agents will say anytime is a good time to buy. I tend to agree, but we need to sieve out the good ones. I tend to use my stock investment mentality (if you have been reading my blog, you will come to realise that I keep buying into Alibaba for the past 6 months and my guess was China reopening end of this year and I am really glad they are starting to reopen! LOL. ) on buying property investment as well. Dont waste a good crisis if you can afford it. People must be thinking since I think the property is so good, why dont I buy it? The problem I have now is I am technically not working. All my liquidity is in shares to provide me with dividend. If I move everything out to buy a new launch + ABSD, I basically have to eat grass for the next 3-4 years which is not ideal as I still have 2 young kids.
So for people who can afford, like those people who approached me. I mean if someone wants to buy a 2m property for investment, they most likely have done some of the math and come to a conclusion that yes it is a feasible route, let's talk to an agent. They arrive with an intention of buying something. I will of coz check that they are not over stretching themselves financially speaking before we move ahead to the next step of shortlisting.
I never like this sell 1 buy 2 concept unless the buyers can really afford good properties with good pool of buyers in the future. Most of the time, buyers end up with 1 bed room unit + 2 bed rooms unit and over stretching. 2 bed room for self stay, 1 bed room to rent out. If that's the case, i rather the buyer buy a 3 bed room for self stay and future proof, the rest invest in REITs. lol. What did your agent try to sell to you?
My recommendation will be as below for investment purposes. Not for self stay. For self stay, like what I said, if u like it, then go with it loh if you can afford. Again, nobody has a crystal ball, but we all try to reduce the risk of money losing and maximizing chance of making money.
1. Buy into locations with growth potential, an area that government will pump money into but it will take 5-15 years to materialize. A good example is punggol 10 years ago. Everyone hated it then. It's now 1 of the hottest OCR locations. I like to say go where the govt wants you to go, you will be rewarded, not immediately though. So tengah will be like punggol 10 years later.
Many a time people fall into the trap of buying a cheap property thinking that it is a good deal, but there are reasons why the property stays cheap.
2. If possible, 2 bedrooms or above. We need to understand who your future buyers are. Most likely from future HDB upgraders with family. Back to the point of why I dont like 1 bedroom, simply because there's really not much market for it unless for rental to foreigners.
3. If can afford, preferably RCR locations. Think of it this way, most OCR people dont mind staying at RCR locations, but it's not vice versa. CCR on the other hand, will be too pricey. Again, if got money, then why not?
4. Buy into location with more land plots coming up for sale. Preferably if you are in the first plot. They call it the first mover advantage. How do developers price their projects? Same as how the rest of us decide what price to sell our house. We look at our neighbors who recently sold their house. If your project at plot A sells like hotcakes at 2000 PSF, how much do you think developer will sell for plot B? Maybe 2200 PSF? If Plot B sells like hotcake at 2200 PSF, how much do you think plot C will sell?
DeleteApologies but i will not be specific in terms of which property like how I dont give stocks analysis or recommendations. If you have an agent you talk to, if he/she is decent enough, he will be able to give you a few recommendations. Good luck!
I think this is the worst post I read on your blog so far. Well property agent will always say anytime is a good time to buy
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