Tuesday, July 7, 2009

Don’t join the herd


Source : Sunday Times – 5 Jul 2009

The property market has been picking up fast and furious since March, when 1,220 units were sold. April saw 1,214 units snapped up. And in May, 1,668 units were sold, the highest level since the property boom of 2007. Last weekend, the strong sales continued as buyers thronged the mass-market and upper-middle condo launches.

The upper-middle condo launches, with prices ranging from $1,000 per sq ft to $2,000 per sq ft, registered brisk sales. In the mass market, several developments have sold out or are nearly sold out.

Those in the property business observed that unlike in the boom years, when foreigners made up the bulk of buyers, it is mainly locals who are on this buying spree. They are drawn by the relatively lower prices and the interest absorption scheme, which allows them to pay a deposit and postpone monthly home loan payments until the project is completed.

In land-scarce Singapore, property is always a good long-term investment. So those who can afford it and are planning to live in their new homes may not have a problem. But speculators who aim to flip their units for a profit before the monthly mortgage payments kick in are taking a huge risk. The economy has not recovered yet, and may still take a while to do so, the experts tell us.

The other vulnerable group comprises those rushing into the market because they fear they will miss the boat, having seen how fast prices climbed in 2007. Developers feed their fears by announcing that they will be raising their prices. But these buyers may over-commit themselves as a result. This is so especially among young couples who believe their combined incomes can afford them the condo lifestyle. No allowance is made for contingencies such as when a spouse loses his or her job. They should not follow the herd blindly. Buy an HDB flat first.


No comments: