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How to be a Happy Property Buyer Part 2 | Steps to making a good private property purchase

Updated: May 17, 2020

2020 started with a bang and have brought many on a roller coaster ride.

First it was the ongoing trade war between China and USA. Despite the trade war, the market seems to rally and property sales volume and rental prices were climbing up steadily. Never mind the trade war, our local market was able to support the growth in the real estate market, confidence to buy was strong. Many were ready to take jump into the market and own a slice of the lucrative property pie.

However there are also a good number people uncertain about the trade war, sat on the fence and wondered is it the right time? And before one can find some sense of stability and certainty we were swept by COVID 19 which adds on to more uncertainty for many.

Perhaps you are thinking is this the time for me to purchase my own home?

Is this the right time for me to purchase my investment property?

The following are 5 observations/insights I have gleaned for the past 10 years which I hope to shine some light and help you gain clarity and certainty before you commit to a private property purchase.

1.Objective: Buying for Investment or Ownstay

This is the first question, you will be asked when you first step into a show flat or when you engage a buyer agent. Are you looking to purchase for Investment or Ownstay?

The most common replies are as follows...

- I want to buy something to stay, but I also want it to have an investment value.

- I want to buy something to rent out, but also might want to stay in it in future.

-I’m not sure yet.

We love to have the best of both worlds, when we purchase something, And it's normal to want to enjoy the maximum benefits and value.

Since property value generally goes up, is the distinction between buying for own stay vs investment a very important question to address?

The answer is a resounding YES,

While it’s possible to purchase an own stay property that can also have good capital gains, due to the lifestyle/life station needs of some, it might not be possible to achieve both due to budget constraints or specific needs.

As such having a clear objective is important in helping you make the most sound decision when there are many distractions. Distractions can be in the form of, hype on growth areas, hype on potential gains. Knowing your objective will help you determine what are the more pressing factors you should consider vs those that might be secondary.

The table below illustrate the different consideration in buying a property for own stay vs investment

Thus it’s important to set very clear objectives at the start of your property purchase so that you can cut through the hypes and achieve the goals that you want.

2. Finances

It is highly recommended to get a mortgage loan when purchasing a private property. This because currently the interest rate is at a low of below 2%, this means the cost of borrowing is lower than the interest you can make in your CPF. Your cash can work harder by keeping them in your CPF or other safe haven investments that can give higher than 2% yield.

Also during uncertain times like this, it would be wiser to keep more cash on hand than to throw all of them inside your property.

As such, before you commit to a purchase, always assess your eligibility of loan by getting a IN-PRINCIPAL- APPROVAL (IPA) of loan from banks. If you engage a buyer agent, your agent will likely be able to connect you to experienced bankers who can help you. If you are new to private property purchase, it will be wise to connect yourself with experienced bankers and brokers to ensure a smooth transaction.

Getting this IPA helps you decide in advance, the budget you should set aside for your purchase. This is important as you should not waste your opportunity by under leveraging or neither should you get too emotional over a certain purchase and in the case of FOMO (fear of missing out) make the mistake of over leveraging.

3. Timing

When is the best time to purchase a property?

New Condo Purchased in 2008 crisis highest profit
New Condo Purchased in 2008 crisis highest profit

According to this data the best time to purchase a property is in 2008 where the highest profit achieved.

However when you look at this research base on profits and losses recorded of properties bought and resold from 2007- Q2020, you will observe that there are also properties purchased during this period that resulted in losses.

This graph above illustrates the relationship between Property price vs GDP growth during the various crisis. While the graph tells us that in each crisis, when GDP falls, prices also falls, the irregular shape of the graph also illustrate that beyond this clear understanding there is no formula to anticipate how the degree of which the graph will move.

However if you take note of the general peaks and toughs of the curve you will note that the lows in each toughs is still higher than the previous one, as highlighted with the blue rings below.

What this means is that holding the property for a longer period will reduce the instances of making a loss.

While timing is definitely an important element in property purchase, as world events and various cooling and warming measures have an impact on property prices and cost of financing, the price which you enter into the market also plays an important factor. As seen in the previous profit and loss from matched caveats, it is possible to still make a loss when you enter into the market at the same time as those who make a profit.

The best time to buy a property is when you can afford it. That is, you are able to hold the period for the long period and not feel pressured to sell during an unfavourable market environment.

If a deal comes along, does entering today at a 10% discount vs 20% lower in 2 years time make a significant difference when the market recovers?

Buy Now vs Buy Later
Buy Now vs Buy Later

What’s the risk in return for $30k more profit?

Timing the market and potentially losing out another decade to wait for the next price correction if the property did not correct further after waiting out the additional 12 months.

That saying so, timing is unique to each individual, for some it might make more sense to wait and buy at a later time, for others now could be a right time to enter. Instead of following general trends and sentiments, it will be prudent for you to be clear about your objective and your current financial standing and life station and gauge your timing accordingly.

4. Determine the right price

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett

It is probably wiser to enter a property at a right price rather than trying to gamble on a right time.

The following are some useful gauge for right price of property

Bank Valuation

If you take up a loan, the bank valuation will be a good gauge if you are entering the property at a fair price. As the bank that is granting you the loan will be providing the bulk of your financing, the bank will need to do due diligence to ensure they are backing an asset that is of fair value.

So purchasing a property within bank valuation is a good indicator of purchase at a fair price.

Entry Price

Compare the price that you are going to pay for the property with the rest of similar property types within the same condo/estate. If you are entering the project at a much higher price compared to the rest, it might affect your profit when you wish to sell in future as your neighbours with similar offers who entered at a much lower price, can also sell at a lower price.

5. Execution

Clarity gives assurance for decisive actions.

To ensure a smooth execution of your property purchase you should do the following

1. Read a wide range of property articles and blogs from different sources

This will give you a broad perspective and balance understanding of the market. Having knowledge will help in smelling something fishy and avoid being misled into making bad purchases.

2.Attend Consumer Seminars by Property Analyst

If you are not a fan of reading too much and prefer receiving information through listening and watching, virtual Consumer Seminars are good places for you to have a sense of market movements to sharpen your property acumen.

3.Engage a trusted Buyer Agent to do this with you.

Trusted, is the key word in this. Before you decide to engage the agent, have a chat to have a sense if you like the style of this agent.

A good buyer agent, will be able to work out clear financial plans, and craft clear purchase timelines.

An experienced buyer agent can even help you with creative financial planning in your property purchase if your case is not straight forward. The agent will also likely have contacts with trusted bankers and contractors, who will save you the hassle of looking for your own which will save you precious time and money.

Hope this post is helpful in your property purchase journey! If you have a burning question hit me up at the comments section or drop me a message via the contact form.


About The Author

Chantel Teo is fiercely loyal, insatiably curious and always hungry.

A licensed real estate broker based in Singapore.

She has transacted properties with a combined value of more than $60 million, from Tanjong Pagar to Orchard to SengKang to Bukit Panjang. In the journey of helping her clients, buy, sell, lease and manage their properties, she has collected many stories and life lessons.

She writes as a form of catharsis and connection. Through her writing she hopes to share practical and useful insights as well as stories that can enrich her readers.

Buildings and houses is her passion and she has a special love for walk up apartments and buildings built before the 90s, probably because of the character, charm and history that comes with these buildings. Besides buildings that can stand the test of time, she also appreciates the cultivation of personal substance and character that endures.

One of her favourite quotes goes

“Character, in the long run, is the decisive factor in the life of an individual and of nations alike” - Theodore Roosevelt. Her belief is that good character will be a solid foundation which she builds her career and the people around her.

When she is not hustling at work, she enjoys nice coffee, hearty meals, long walks and a good read. She also has a soft spot for all things furry.


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