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SG Property options today….

GMT+8


I’ve honestly started looking into this recently as inflation was rampant. Getting an asset was a plausible consideration.

I looked around and there were really only 4 options:

  • HDB Built to order (BTO)
  • Resale HDB
  • Resale Condo
  • New launch Condo.

I would love to try for BTOs but it’s not something I’m eligible for.

Resale HDB

Next, I looked at resale HDBs in my area. I’m living in a mature estate. Most of the amenities are developed and the Town Council are honestly just maintaining it. This meant that the HDBs have at most a remaining lease of 60 years old.

Looking at the Bala curve, the property value is expected to steadily decline in property value at an increasing pace. I am not ready to buy such an asset.

This also made me aware that regardless of which HDB I buy I will be stuck with an issue of lease decay.



Source: Centre for Liveable Cities

So existing resales are out of the question, what about HDBs that have just MOP, their decline wouldn’t be as fast right? There should also be a chance for property appreciation.

That is true, but who are the sellers?

They are most likely people who have gotten the BTO “lottery” and are looking to cash out for profit. The unit is at its highest valuation and I would need to pick the best one that would still have appreciation value.

As a noob, can I avoid all the traps and find my needle in the haystack?

The other problem I have was the concept of Cash over valuation (COV) which is the difference between the sale price of the flat and its actual valuation.
This means that if the buyer is asking for $750K but the appraised value is $700K, I would have to pay cash of $50k. This doesn’t include the 25% downpayment and buyer stamp duty that must also be paid via Cash/CPF.

The most mind-boggling part to me is… yes I’ve saved money to buy a cheaper property relative to private property but my percentage cash outlay against property value is higher than a newly built due to COV.

The other pain point is that both parties agree on a price, then get the unit appraised and is only disclosed to the buyer.

When the seller knows that the buyer is waiting for OTP to lapse and is unhappy with the revised offer, the seller can choose not to reissue OTP to the buyer.

From what I understand, in this environment the units are in high demand, i.e. first come first serve. After waiting for 21 days, Seller needs to agree with the lower price and might need to wait for another appraisal unless HDB says otherwise.

We can reduce this risk by tracking the lastest transacted price of similar units. However, that only assures me that I’m likely going to pay a similar COV with other buyers

What about housing grants? Yes, I might qualify for some which I would have to pay back when I sell. It's a good-to-have at this stage.

Resale Condos

Resale Condos was more of a no brain-er cos you inherit all the same issues with resale HDB and at a more significant quantum without grants.

The only compelling reason to seriously consider is when it is Freehold 

This eliminates lease decay and is my personal dream since I really love my estate.

However, to commit to a resale property now means I have to:

  • Pay the downpayment
  • Service the full quantum of my loan at current interest rates.
  • Renovate and buy furniture
  • Source for tenants

Everything will come at a BANG. Is this really the right time for this?

New Launch

This led me to consider the most expensive option, a new launch!

New launches are not cheap, they are always at a very high psf and one wonders why they “seem” to be still selling like hotcakes.

I use the word “seem” as there are too many marketing materials out there and each launch seems to be the best deal that shouldn’t be missed.

There’s always a lot of conflict of interest (COI) and trust is a double-edged sword. Hence, it’s still challenging to find my needle in that haystack.

The benefits to new launch is:

  • Freehold launches
  • No COVs – Banks agree with the developer’s valuation, I don’t know why but ain’t that great? 
  • Progressive payments – the loan disbursed is phased and the interest expense of the loan will gradually increase at different milestones
  •  Locking in the price of the house now and not getting out-priced by inflation later
The downside to the new launch is:
  • High entry price during this uncertain time
  • You don’t get a house now, everything is your imagination
  • The bearings can be totally off even if you do a Fengshui unit selection.
  • It’s LUCK, being able to afford entitles you to a chance. It’s still up to balloting. You can only choose what is left.

Summary

In summary, all options have trade-offs so we really have to pick our poison.

Issues

Resale HDB

Resale Condo

New Launch Condo

High Entry Price

Lowest

Middle

Highest

Lease Decay

Present

Present

None for Freehold

 

None for Freehold

COV Drama

Present

Present

None

Loan Quantum

Lowest

Middle

Highest but under progressive payment structure.

Downpayment

Immediate

Immediate

Last 5% will earmarked in CPF during 15% downpayment. 

FengShui

Review after buying

Review after buying

Review before buying but subjected to development errors

Move in now?

Can

Can

Cannot

Sure get?

First come first serve

First come first serve

No - Balloting

Unit Size

Biggest

Middle

Smallest

  

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