My favourite fantasy topics are dragons, wizards, and property values in Singapore. No, really, some of our local myths about property make El Ron Hubbard novels look like science textbooks. To make it worse, there are any number of contractors and sellers out there who are quick to capitalize on these myths. In light of that, should you take an appraiser’s word on everything? Will your costly improvements justify your asking price? Read on and find out:
1. Convenient Public Transport is Worth Any Price
Myth: If there’s a bus stop or train station nearby, it’s worth paying any insane price. Because your rental yield or future selling price will be astronomical.
Reality: Yes, being close to public transport raises the value. However, the amount of said raise is often exaggerated. Depending on the buyers, the significance of public transport will also differ.
Buyers who can afford (expensive) private property, for example, are probably less reliant on public transport. If they can afford a bungalow, odds are they have a car. They may not even want the public transport, which might mean noise and congestion to them. As such, that bus or train stop may not add as much value as much as you imagine.
So don’t invest in a property just because it’s “within 5 minutes of XYZ station”… not unless it’s convenient to you. It’s a nice plus, but don’t overestimate how much it will add to your rent or asking price.
2. Better Interior Design = Higher Property Value
Myth: An expensive interior design scheme will add to the value of your home.
Reality: When you next meet an appraiser, look closely at his stuff. See that Doraemon sticker on his tape measure? That’s probably the closest he’s ever been, or ever will be, to art school.
Banks don’t hire art critics to do home appraisals. Your $250,000 faux Edwardian interior is lost on these people. They care about what works, and what leaks; not your gorgeous ceiling designs. Future residents may also be deficient in taste, and intend to renovate anyway.
Keeping your house well maintained will help your asking price. But draw the line there: Don’t believe anyone who claims expensive redesigns will raise your property value. The only renovations that quantitatively support your asking price are functional (e.g. rewiring so that all your power sockets work), or extensions (making the house bigger).
3. Surrounding Property Always Determines the “Standard”
Myth: The value of my home is inextricably tied to my neighbour’s. My asking price must slavishly match his, even if his house looks like a hovel from a National Geographic documentary.
Reality: To some extent, your property value will match your neighbour’s. However, there is more “give” in the system than most of us think.
For example, the condition of your home may be better than your neighbour’s. Likewise, factors such as sun glare can make a big difference. Other things to look for are:
- Ventilation – Does your house get more breeze because it blocks your neighbour’s?
- Age – Is your house older or newer?
- Time of sale – If you sell much earlier or later than your neighbour, your price can be less reflective of his
Stick to your own game plan; don’t ask your neighbour his asking price, and then obsesses over matching or exceeding it.
If your property value falls under your neighbour’s, that’s a reality you may have to accept. The sooner you do, the sooner you’ll sell and get your money. Likewise, don’t be nervous about setting a higher price than George next door; if your appraisal says you’re worth it, go for it.
4. An Appraisal is an Indisputable Fact
Myth: An appraisal is ironclad, more factual than the existence of gravity. The appraisers are able, via secret formulas, to determine the exact market value of whatever they survey.
Reality: 10 appraisals can give you 10 different conclusions. The appraisal is an estimate of the property value; you don’t have to consider it sacred.
If surrounding homes haven’t been assessed for a long time, for example, the appraisal may be off. And if the property is still incomplete, appraisers are speculating; an experienced property investor or agent can make a guess as good as theirs.
So don’t assume the appraiser is always right. Estimate differences of 10 – 15% from the appraisal. And if you’re not happy with an appraiser the bank has chosen, ask if you can get a second appraisal. At the very worst, go to another bank; but don’t be afraid to dispute a valuation.
5. Improvements Will Raise Property Value
Myth: If you pay to install a wet room / walk-in wardrobe / kitchen island, your property value will increase.
Reality: Just…no. None of the property agents I’ve spoken to have ever agreed that “Yes, because he installed a walk-in wardrobe, I instantly realized his house should be worth 10% more.”
This includes some very expensive improvements. In one case, converting a part of the house to a driveway and garage did zilch for the property value. When appraisers and owners come knocking, their attention is on things like floor space and location. Mention the improvements, and you’ll just get a polite nod.
So if you are going to make improvements, do them because you actually need them. Don’t expect them to “pay for themselves” when you’re selling.
In fact, keep all of these in mind when you’re dealing with property. There’s a lot of snake oil out there; don’t get suckered on your purchase. And if you’re getting that first home, remember to visit SmartLoans.sg first; we’ll get you a better deal.
Are there any property myths you have encountered? Comment and let us know!
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