Prices Still Likely To Rise But…
Buy now or wait? House hunters unsure which way prices will go
WITH a possible recession looming in the US, and the injection of more HDB flats and private properties into the market this year, will property prices take a breather or even head south? Those scouting for a house now will want that to happen.
Take communications manager Mah L C for example. For this 31-year-old, hunting for a flat has been a trying exercise for the last three months.
Ms Mah is getting married in March to a financial adviser.
The couple’s combined income has busted the $8,000 ceiling for subsidised housing, which means their options are limited to the HDB resale market or private housing.
But in today’s market, if you’re not cash-rich, you can forget about the HDB resale market given the high cash-over-valuation (COV) premiums sellers are asking for.
That’s the cash difference between the property’s valuation and the asking price.
Ms Mah, who is currently living in a four-room HDB flat with her parents in the central area, wants to buy an HDB flat near her parents for convenience.
She said: ‘Ideally, we’ll like to buy a new flat but we can’t because we bust the ceiling. But in the resale market, the premiums (COV) that sellers are asking for are just crazy. In the central area, be prepared to pay at least $50,000 above valuation.
Ms Mah said they’ve viewed other resale HDB flats in the central area, all with high COVs.
So the couple is now thinking of renting a flat first.
Some may say they are choosy but they have since given up their home search and are thinking of renting instead.
She said: ‘Rents may be high but it’s better than forking out such a huge cash outlay. We may perhaps rent for a year or two and wait for prices to stabilise or drop.’
This wait-and-see strategy is a gamble on property prices dipping in the next two years.
Barring any unforeseen external events, a price drop in the property market is quite unlikely, said industry watchers.
The general consensus is that property prices are likely to still head upwards, but at a more gradual pace.
ERA assistant vice-president Eugene Lim explained that the property market is driven by internal and external events.
Internal factors such as the demand and supply of homes, and excessive speculation will affect prices.
Mr Lim added that the Government is trying to contain the situation by supplying more flats and providing enough housing for everyone.
National Development Minister Mah Bow Tan announced last November that 7,000 new flats will be launched for sale in the next few months.
Said Mr Lim: ‘In order for the prices to drop, the supply must outstrip demand. But demand is expected to go up because the population is increasing. Economically, we’re stable and this will generate more confidence and more jobs.
‘Yes, more new flats will be released but it’s not meeting immediate needs and one must wait for at least three years for these flats to be built.’
WHY IT WON’T BE LIKE 2001
He doesn’t foresee a supply glut in the property market, even though more new private properties will also be completed in the next few years.
Mr Lim, however, thinks sellers would be more realistic about their pricing in the next few months.
And even if the US slips into a recession, it may not necessarily affect us in a big way like it did in 2001, which was centred on the IT industry, according to a report in The Business Times earlier this month.
A recession this time will not be IT-industry-specific and the Singapore economy is now more diversified and resilient, with domestic demand growing strongly, helped by large projects such as the integrated resorts (IR).
Continued strong growth in China and India will also help provide a cushion, according to that report.
Certainly, the upcoming IRs and Formula One will translate into more visitors and also more demand for housing here, said Chesterton International’s research director Colin Tan.
He said: ‘If you’re buying a place to live in, buy something you can afford so that there’s no fear of defaulting on your mortgage.
‘Property is a cycle. The question is when you want to exit the market? If you exit during the bull run, you’ll be fine.’
For those unwilling to fork out a premium for a place today, they can always rent a place but make their money grow by investing.
Said Mr Tan: ‘Hedge yourself by buying blue-chip property stocks. If the market is good, your stock value will increase.
‘If the market is bad, you’ll be able to take advantage of weak prices (by buying a property).’
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