Property

Is Now the Right Time to Buy Property?

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Vinod Nair

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Singapore property agents are permanently optimistic. Their smile is grafted on, like the Joker in a 1970’s Batman episode. Ask them if it’s a good time to buy property and their answer is always yes. It’s not untrue: since the birth rate is always positive, there’s always more people and less space. As such, property values will always appreciate. The question is, when is the best time to buy? See more below.

 

The Property Market Cycle

The property market goes through cycles. It alternates between a seller’s market (when prices are going up) and a buyer’s market (when prices go down). It’s a metaphorical see-saw: when demand is high, the prices keep going up as sellers push their luck. Eventually, prices reach the point where refugee camps start to look attractive. Buyers then hold their purchase, either getting out of Singapore or moving in with mom.

The number of transactions starts to drop, and the property market is said to be “cooling”. This happens because homes can’t be sold at their current price.

 

Cardboard Boxes
Pictured: Alternative homes are really popular in a seller’s market.

 

The Bubble Bursts

When the buyers stop buying, the sellers have to lower their price. Eventually the property bubble bursts, and prices plummet like the talent on American Idol. Saavy buyers lurk and wait for this moment, swooping in at the first signs of a price break. The trick is to wait till prices hit rock bottom, then buy at as low as possible.

In the resulting buying spree, the number of transactions will go up again. Once again, the prices for property will start to climb.

 

See-saw
See-saws: Not just for kids anymore

 

Its All in The Timing

As I’ve mentioned, most buyers want to wait until the market is “bottoming out”. That is, when prices are at the absolute lowest. In truth, there’s no perfect way to know if the price is as low as possible. But one telltale sign is if you see a spike in the number of transactions. When there’s a huge jump in the number of buyers, that’s a sign that it’s time to buy.

While your timing may not be spot on, you can’t go wrong buying undervalued property. So long as you get a price that’s under the valuation, you’re making a profit. Eventually the prices will start to climb again, and you’ll find the value of home going way past what you paid for it.

 

Soldiers with Binoculars
Extreme property buyers are…well, extreme.

 

In the 2008 property boom, this was exactly what happened. In the fourth quarter of 2008, buyers and sellers reached a stalemate. The number of transactions dipped, and sellers stopped raising prices.  In Jan 2009, prices started to drop, but buyers still didn’t take the bait. They were waiting for the downward trend to drop as far as possible.

As expected, the prices continued to drop throughout the first half of 2009. At the lowest point, buyers charged into the market. It was like a feeding frenzy in the Sea World shark tank. Singapore supposedly has an 11 year price cycle, and 2010 should have been its peak.

 

Get the Right Home Loan Too

It’s not just about timing. Even if you buy at the right time, choosing the wrong home loan can neuter any financial advantage; a high interest rate will kill that profit margin in a matter of months.  With these issues, it pays to do a little bit of homework.

If you don’t want the hassle of calling the banks, check the rates via sites like SmartLoans.sg. This website compares home loan rates from all local banks, and will help you find the cheapest loan package for your property purchase. Just enter the details of your property and your loan requirement, and their mortgage specialists will find you the most cost-effective solution.

Image Credits:
The Onion PeelerSmith-Proulx, Ashirwad, D & O DiaryCBC News

Are you just about to buy or sell? Tell us where you think the market is headed!

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Vinod Nair

I'm the founder & CEO of MoneySmart.sg. I'm obsessively passionate about entrepreneurship and the Internet. I started MoneySmart to un-complicate your money matters, and make it simpler and easier for you to understand. Because let's face it, Singapore isn't getting any cheaper to live in.