According to a recent news report in the Business Times, home loans in Singapore are becoming more accessible due to sliding interest rates which moderated to 1.88% in October 2019 following recent rate cuts by the US Federal Reserve. 

Some analysts expect the 3-month Interbank Offered Rate (SIBOR), which is the benchmark for mortgages in Singapore, to remain low or drop even further this year. 

This could increase the demand for private residential properties in the city-state, with analysts predicting that between 9,000 and 10,000 units could be sold in 2020. 

While the signs point to a healthy outlook in the property market, the Monetary Authority of Singapore (MAS) in its Financial Stability Review cautioned that prospective buyers should be mindful of risks and remain prudent before entering into buying a property, taking on a mortgage, and servicing the mortgage. 

So, what are some of the risks? Below, we’ve outlined the biggest risks facing the Singapore property market in 2020.

Buying a private residential property as an investment is a tried and tested strategy to growing your wealth and achieving financial freedom. Not only can you earn passive income by renting out your unit, but the rise in your property’s value over time (known as capital appreciation), means you could make a tidy profit after selling it. But before you decide to rush out and buy an investment property, you need to follow these steps.

1. Check your finances

Buying a property is one of the biggest financial decisions of your life, so you need to have enough money saved up to buy a house. Don’t forget that you still need to set aside sufficient cash for everyday expenses like food and transport, as well as for retirement.

While you can take a housing loan to help finance a property, you still require a significant cash outlay of 20% for your down payment. That would amount to $200,000 if you’re looking to buy condominium priced at $1 million. While this might seem like a lot of money, don’t fret because you can choose to pay 5% in cash for the option to purchase and the remaining 15% in CPF upon signing the sale and purchase agreement.

Property seekers who are looking to buy a private condominium in Singapore have the option of purchasing either a new condo launch directly from a developer or a resale condo in the open market. 

This year, we could see up to 60 new launches across the island offering thousands of condo units. In addition, hundreds of resale condos are being put up for sale every month. While this leaves home buyers spoilt for choice, it also makes the buying decision harder. 

To help you make the right choice, we’ve listed down various pros and cons of buying a new condo launch versus a resale condo. 

The property cooling measures announced on 5th July has claim its first enbloc victim. 

On 26th July, Tee Land announced that it was not exercising its option to purchase Teck Guan Ville. If you recall, Tee Land had earlier won the enbloc for Teck Guan Ville (338 to 364 Upper East Coast Road), for S$60m on 28 June. Details of announcements by Tee Land can be found in the links below.

Tee Land will be losing its 1% deposit, amounting to a mere S$600,000. What would the 14 owners of Teck Guan Ville lose? A cool S$4.285m. Ouch. 

http://www.teeland.com.sg/attachment/2018062817325911569358_en.pdf

http://www.teeland.com.sg/attachment/2018072618222409495535_en.pdf

Recap of the property cooling measures announced on 5th July 2018

First time property buyers were unaffected by the higher ABSD (Additional Buyer Stamp Duty) announced, while Developers on the en-bloc frenzy were stopped right in their tracks. The authorities are clearly sending a strong message against purchasing property as an investment. 

Reduced LTV limits

However, first-time buyers were affected by reduced LTV limits, which would substantially increase the amount of upfront cash that first time home buyers would need to fork out. We think this is in response to the recent surge in property prices. Young home buyers would need to re-work their sums, and target smaller apartments. Alternatively, we think there exists much better value in purchasing resale homes compared to recent new launches. Do call us for a non-obligatory chat if you are looking to buy or sell a property. 

Everyone seems to think residential property prices in Singapore will rise in 2018. The question is, by how much exactly?

We've compiled a list of forecasts from various sources. Most analysts are predicting a 5-6% price growth in 2018, although the more bullish forecasts can reach 10%. What do you think? Let us know on Facebook. 

 What are the reasons for this bullish view on Singapore residential prices?

High government land sales prices and the much talked about en-bloc deals are one indicator of future prices. Developers who have bought their land in 2017 need to sell their new projects at even higher prices to maintain their profit margins. Often, these would be meaningfully higher than resale transactions in the area. In addition, it also signals the bullish view of developers who think they are able to command these higher prices in future. 

URA's property index declined for 15 straight quarters until 2Q 2017. This trend was finally reversed by a slight increase in 3Q 2017. As property prices declined over the last few years, many Singaporeans had decided to hold off their property purchases, without know when or where the bottom was. Now that the decline has stopped, buyers are back in the market looking for their next property. 

Comparison with overseas property markets also show Singapore to be a fairly attractive place for property investment. Especially when other markets like Hong Kong, China, London, New York, and Sydney have all seen prices grow significantly during the last few years while Singapore declined.  

In terms of new supply, the stock of private residential unsold inventory is also at its lowest over the last few years. In addition, new completions are currently expected at below 10,000 units per year for the next few years, compared to almost 20,000 units from 2014 to 2017. 

What should property investors watch out for?

Mortgage rates are one risk factor to watch. SIBOR rates have spiked in 2018, with banks raising their mortgage rates quickly. With higher interest rates, investors who borrow to fund their purchases may find it harder to service their loan repayments.

Rental market also continues to remain weak at the moment, with the slower growth in immigration. Again, this impacts buyers looking for an investment property, and they may seek better yields from other forms of investments like bonds, stocks or REITs.

How are you looking to capitalise on this expected price growth in 2018?

If you are looking for undervalued buys, do subscribe to our newsletter on our homepage to follow our property auctions!

For property owners looking to sell into this rising market, do Contact Us Form or drop us an email at sales@auctionjia.com.sg to find out how we can help you!

Source: Compiled from various news articles, reports. 

Please let us know if there are any inaccuracies or if we have missed your forecast, and we are happy to update this list. 

Where to find property auctions in Singapore?

If you are looking to buy a home but have not considered a property auction, you are missing out! While most transactions in Singapore happen through a private treaty, an increasing number of houses are sold via property auctions.

Who are the sellers? There are a variety of reasons why sellers use a property auction. Sellers could be looking to avoid ABSD on their next home purchase, or expats who have a short timeline to sell before returning home. In some situations, owners have tried to sell unsuccessfully through private treaty for months, before attempting the property auction route. Mortgagee auctions also happen when owners default on their mortgage payments and the banks look to recover their loans.

What are the benefits of buying through a property auction?

Property auctions can create interesting opportunities to purchase undervalued properties. Banks or owners may be willing to consider slightly lower prices, either to recover their loans or when an urgent sale is required. Transactions are also guaranteed to happen when the final bid price is above the reserve price, and unlike a private treaty, sellers cannot change their mind.

What are the risks of buying through a property auction?

Buying at an auction is a firm commitment and carries the same legal implications as a signed contract in a private treaty sale. Hence buyers should consult their bankers to ensure that loan financing will not be an issue. The relevant legal documents are also available for review before the auction. Foreigners must seek prior approval from the Land Dealings (Approval) Unit for any landed residential property purchase. In addition, settlement happens immediately upon winning the auction, and the buyer typically needs to give a cheque for 5-10% of the winning bid.

Where to find property auctions?

In Singapore, property agencies like Colliers, Knight Frank, JLL, and ET & Co conduct regular monthly auctions. These typically take place on a weekday at 2.30pm, and are held at a meeting room in Amara Hotel. Auctionjia conducts our property auctions online, on our website: www.auctionjia.com.sg. Through an online property auctions, buyers can now bid in the comfort of their own home or on their mobile devices, without having to take leave (or go for an extremely long lunch break) to participate in the physical property auctions.