Last year, 2013, our team has urged our clients to hold their purchase of residential property. Today, articles “Cash premiums for resale HDB flats fall to eight-year low in January” & “Gloomier Prospect for Property Sellers” from The Straits Times indicates that the prices of home are heading downwards, spelling a good time is approaching property buyers.
The downward trend is inevitable due to several contributing factors (but not limited to):
- Total Debt Servicing Ratio (TDSR) introduced in late June has made it difficult for buyers to get financing.
- Additional Buyer’s Stamp Duty (ABSD) may have deterred some individuals or foreigners from making purchase due to higher taxes imposed on residential properties.
- Potential Increase in Interest Rate has made buyers more cautious in making their purchases. Presently, money is still considered cheap due to low interest rate, making financing a property is still “cheap” (assuming that you are able to secure a loan). However, with possible drop in rental yield and increase in interest rate, buyers has to take into account the possibility that cost of financing might go up in next few years.
- Tightened Immigration Policy & Increased Home Supply has hampered the growth of rental yield. With increasing vacancies, rental yield is likely to be adversely affected, making it more costly to finance a property. Also, rent has yet to catch up with the increasing sales price of the property. In fact, due to the financial crisis in 2008, expatriates’ packages have also been reduced.
With the increasing number of factors affecting the capital appreciation of residential properties, the chances of property prices heading upwards are limited. In other words, the likelihood of property prices heading downwards will be higher. However, it is important to note that a plunge in property prices is unlikely if no major crisis takes place. Our government’s measures so far is to “cool the market” and reduce “debt servicing ratio”. Their main intention is to ensure stable capital appreciation. As one can see, if the prices start to fall to drastically, they could easily remove each of the “cooling mechanism” set in place to help lift the property market.
Is it time to buy a residential property now? Well, it is definitely a time for us to monitor the property market more closely, keep our eyes and ears closer to the ground now. When the time is here, we are ready to strike.
– Edwin Goh, PropertyNet.SG
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Disclaimer: This blog is written based on our views, experience & knowledge. It should not be taken to make any real estate transaction decision. While we have taken every reasonable care to write this blog, we cannot be held responsible for any inaccuracies or omissions.