Buying a house is now a process of filtration. Buyers don’t lack information any more; if anything, they’re flooded with it. Notable features, projected rental yields, resale figures, architect names, they all lead to the same thing: A stunned buyer staring into the headlights of an oncoming truck. Property professionals know better: They stick to the simple basics of location, and don’t get distracted by:
1. Interior Design
First time home buyers are like excited puppies; you can distract them with anything. Throw them a rag and they’ll be entertained for hours. Well in housing, that rag is interior design.
Veteran property investors know better. When they go for a viewing, they keep their emotions bottled up. Usually next to an impressive collection of empty vodka bottles. These people make money because they’re jaded, stressed, and soulless. But more importantly, because they’re not the least bit moved by a nice feature wall.
Here’s some advice from Mr. Charlie Sng, procurement officer and property speculator:
“The most important things are price and location. I am not interested to hear which designer or what finishing, or granite or sandstone or whatever. The only question is: What is the surrounding value, what are the returns? End of story.”
So don’t be dazzled by design. Look at the hard numbers, and keep to your budget.
2. Early Bird Discounts
Most property developers have a sales target of 70% on launch day. In fact, anything below that is considered quite disappointing. When word gets out that a particular development had “very few” buyers, revenue plunges faster than necklines at the STAR Awards.
For this reason, developers like to offer “early bird” discounts. This ranges from direct price discounts (pay less per square foot) to absorbing certain stamp duties. But blink and clear the smoke from your eyes: These discounts are trivial compared to the 10 or 15 year commitment of a home loan. Also, no discount will compensate for inaccessible location or bad amenities.
Finally, check that all the discounts being touted apply to you. It’s not unheard of for amateur buyers to be enticed by the absorption of stamp duties, only to discover those stamp duties never applied to them in the first place. American buyers, for example, do not pay the 10% Additional Buyers Stamp Duty.
3. The Showflat
Showflats don’t resemble actual interiors. For starters, showflats are built on very expensive budgets. Unless you have an extra $50,000+ in the bank, you won’t be getting the same set-up. Yeah, this might be the only business where the display unit is 70% inaccurate.
I’m not just talking about sofa sets and lights here. Sometimes, doors are repositioned, extra windows are thrown in, and entire walk-in wardrobes or kitchen islands are installed. You might find none of these in the actual flat, so don’t base your decision on what you see.
To be sure, ask the sales staff which features are part of the property, and which are just for show. Be especially wary of sliding glass doors or balcony features, which are favourite ways to make the space seem wider.
4. Easy Rental Promises
A favourite promise by property agents is easy rental income. The loan repayment will work itself out, they’ll say, because everyone wants to rent that location. Look at the surroundings: They’re in high demand, and vacancies are filled in days.
But Mr. Sng suggests you shouldn’t be swayed by this argument:
“Of course got no vacancy. Everywhere also no vacancy if the price is right. But the question is how high can the rent be?”
Mr. Sng also feels that rental should not be the sole consideration when buying property. He feels that, even if a property can be rented at high prices, the major considerations are resale and a high COV.
“Don’t be so optimistic. When times are bad, expats will go home. Rental market is the first to suffer. Don’t just think about rent, rent, rent. Think about your holding power. No holding power, don’t buy. Don’t care whether you can make from rent.”
5. Word of Mouth Reviews
The Internet magnifies everything, including idiocy. Case in point: Large crowds of property buyers, who prompt each other into aggressively higher bids.
But the best property investors are intensely hype-averse. They’re so allergic to bull crap, they break out in hives just walking across a paddy field. And these are the people you should be looking to. Your info should be coming from H88, iProperty, or Mr. Propwise; not from Mr. Su Ka Liao next door. Preferably, get a copy of Secrets of Singapore Property Gurus for some general outlines.
Don’t jump in with the herd. When a property agent squeals that “Everyone is buying! We’re already getting cheques!” Just take a deep breath and find a quiet spot. An old Warren Buffet adage applies well to Singapore’s property market:
Be greedy when others are fearful, and be fearful when others are greedy.
(On an irrelevant note, the same adage is terrible for picking a food court).
What do you discount when hearing a property pitch? Comment and let us know!
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