Judging from the brisk sales at launches, it appears many Singaporeans have jumped on the runaway property bandwagon.
But before you get caught up in the sales pitches and showroom euphoria of property agents cheering as each unit is sold, industry players warn that you should step back, take a breath and think twice.
This, they say applies to both HDB upgraders as well as those looking for a second property to spruce up their financial portfolio. Here are a few pointers that ought to be at the back of your mind.
1. Do your sums
It may sound obvious but it is often forgotten. Consider upgrading only if there have been significant changes in your credit profile, say, a pay rise and if your appreciating assets are holding up, said PropNex chief Mohamed Ismail.
If you’re upgrading from HDB, think about your net proceeds and what you can put into a new property to reduce your loan. Work out how much you need to pay each month. Be prudent and do not over-leverage. Consider the repayment period. Banks typically limit loan repayments to about 40 per cent of your gross monthly income.
Make sure you factor in other debts, expenses and what you need to save.
“Buy a property that will not overstretch your finances while maintaining a lifestyle of your desire,” Mr Ismail said.
Choose your home loan carefully. Interest absorption schemes may seem attractive but you may typically end up paying 2-3 per cent more for the entire property.
If you plan to rent out the property, your monthly rental should ideally cover your mortgage instalments.
2. Location, location, location
As an owner-occupier, you should think about transport options. If you’re an average HDB dweller, you would do well to choose a property near an MRT station, said Mr Chris Koh, director at Dennis Wee Group.
If you’re looking for capital gains or renting out the property, proximity to a MRT station is even more important as tenants (the foreign ones in particular) are looking for convenient public transport options to take them round the island.
Also check out which direction the unit is facing and the project’s surroundings.
3. Maintenance and other BILLS
Consider how much you will need to furnish or renovate the new apartment, advised Dennis Wee Group’s Mr Koh. Also factor in maintenance charges each month – how much more you will be paying for service and conservancy, parking and other charges.
4. Plan your interim options
Your HDB property may fetch a tidy sum now, but what about in two years when your private property obtains its Temporary Occupation Permit. Unless you intend to keep your HDB flat for rental, you should consider whether you to sell now or later.
If you choose to sell now, you need to think about where you will live in the meantime and the costs you will incur.
5. Be mentally prepared
Be aware that property prices fluctuate and prices may not return to the level at which you bought the property.
“If you can sleep through that, have really no regrets, you like the property and lifestyle, then well and good,” said Ngee Ann Polytechnic real estate lecturer, Nicholas Mak. “But don’t put everything into a private property thinking that prices will only go in one direction – up.”