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Tuesday, 11 August 2009

Hold firm, first-time home buyers

Patience, research and sticking to “affordable psf” should result in a headache-free home

Two Sundays ago, my editor wrote in this column about property advice his parents gave him just before he bought his first home.

He was unaware, but on the day his column was published, I took the plunge and bought my very first property with my partner.

His words obviously resonated with me: My purchase was an apartment way below $1,000 psf and under $1million, and reasonably near an MRT station by 2015.

But beyond these guidelines, I discovered that buying the first home was a lot more difficult and agonising than I had ever imagined – a process determined by so many pressures and factors.

For the longest time, the classified advertisements on Saturdays were my best friend. I zoomed in on cheap private properties because my partner and I were deemed ineligible for HDB flats (he is neither a citizen nor a permanent resident).

I pored through every single column, rang countless property agents and viewed so many apartments that one blurred into the next, and I had to start remembering them by something like the colour of the owner’s cat.

At the start of the year, I had seen some potential homes, but told myself to be patient – wait till year-end for prices to bottom out.

Well, apparently, that period of time was the bottom, and I had missed the boat.

Asking prices for properties soared as much as $50,000 to $100,000 more in just the difference of a month from April to May.

Queues started appearing at new project launches, blank cheques were being written for agents and a certain euphoria started to grip the market.

As my search deepened, the further my heart sank, for my dream apartment seemed unreachable as unrealistic sellers priced in Singapore’s economic recovery even before any evidence of it.

All through the hype, I had to remind myself not to be pressured into making a rash decision just because Singaporeans’ infamous ‘kiasuism’ for property was manifesting itself again.

One key factor which kept me grounded was this: affordability.

According to one widely used international standard to measure housing affordability, the monthly mortgage payment should not exceed 20 per cent to 30per cent of a household’s total monthly income.

Do the sums to derive your comfortable monthly outlay, ask banks to calculate from that what your total home loan is, and you get what I call your ‘affordable psf price’.

Often, you will get tired of the hunt like I did sometimes, see a nice home out of this budget and contemplate upping the psf just to get the search over and done with.

At times like these, I wanted so much to believe the usual spiel that agents give about land-scarce Singapore and how home values will always rise, even if the price you pay now seems high.

But whatever you do, do not budge from this price.

A story I was told warned me this could only be foolhardy.

During the 1997 property boom, my friend’s parents had bought a unit in the area I was looking at – a time when it was highly fashionable to invest in new suburban homes to ride the property wave – not unlike now, actually.

But when the Asian financial crisis hit the region, the property boom-turned-bubble eventually burst. The value of their property plunged more than $200 psf thereafter and has still not recovered to the original level a decade on.

With this in mind, I did more homework, studying historic psf prices of the estate at its lowest and highest levels, and made sure I bought only at a price that had potential upside.

It baffles both me and some analysts I speak to that new suburban homes in Ang Mo Kio, for example, are selling for $1,100 psf.

Where is your upside when you are already paying city-fringe prices for suburban estates?

Be firm about saying no to unrealistic sellers who like to test the market with bullish prices if they are beyond your budget.

If everybody kept a level head about purchasing properties, it would certainly help avoid turning a property boom into a property bubble as in the last decade.

No matter how heartbreaking, I said ‘no’ to many dream homes before finding one with sincere sellers who sold at a price that was a win-win for both parties.

My home-hunting journey ended only after I had made hard decisions to narrow down my options to specific projects, doing research and keeping to my affordable psf price.

As a result, National Day this year has taken on a special meaning for me because for the first time as a citizen, I have a physical stake in the country.

Our very own home: a spacious apartment set on a hill at the edge of a rainforest, a quiet, green haven away from the hustle and bustle of the city.

Finding that first home can be an exhausting experience, but also a rewarding one if you safeguard yourself against huge risks which could otherwise come back to haunt you.

Good luck with the hunt, and Happy National Day!

Source : Sunday Times – 9 Aug 2009

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