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Thursday, 18 March 2021

New Norm 2021: Do You Know What It Takes to Buy A Home in Singapore This Year? - MONEYSMART

The property situation right now

Even if you held off buying your home last year, you probably still kept tabs on the property market. As expected, the impact of Covid-19 and Singapore’s circuit breaker period meant that property sales dipped at the pandemic’s peak — what with in-person property viewings being halted (though it went digital), temporary closure of the HDB sales office, and so on.

Headache, right? Not to mention the financial uncertainty (a mortgage is probably the largest loan you’ll ever take, though it can be lowered).

But because there are people who either needed to get a home ASAP or saw some opportunity in the property market (as home loans interest rates fell), there was a lot of pent-up demand. So when the circuit breaker restrictions were eased, everyone rushed to buy their homes.

Although there have been construction delays (which resulted in more folks gravitating towards resale homes), HDB is looking to roll out 17,000 Build-to-Order flats this year, and private developers will continue with their new launches, though fewer than in previous years.

Smart moves to realise your home goals quickly

Owning a home can be a BIG responsibility (as well as an expensive one), so it’s important to start your home ownership journey on the right foot. To ensure that you can realise your home goals quickly and as smoothly as possible, take note of these smart moves:

1. Know how much you can afford

Buying a house is more than just looking at the listed price and dividing it by the number of months you’ll be paying the home loan for.

You’ll need to factor in other costs and fees, such as the application fee, option fee, downpayment, stamp duty, legal fees, insurance premiums (Home Protection Scheme for HDB flats, fire insurance, home contents insurance), cash over valuation or COV (any cost in excess of the bank’s valuation), and of course total interest payable. There may be more fees involved, such as agent fees or registration fees.

That’s why you need to consider how much you have on hand (includes Central Provident Fund or CPF monies, and cash), as well as the payment methods for the various costs and fees, before you can know how much you can truly afford for your property.

In addition, you may also need to check on the following:

Mortgage Servicing Ratio or MSR — this is capped at 30% of all borrowers’ gross monthly income. The calculation of your MSR is based on your loan amount and combined monthly gross income
Total Debt Servicing Ratio or TDSR — this was implemented by the Monetary Authority of Singapore to prevent people from over-stretching themselves by borrowing too much money to finance home purchases

The maths involved is quite complex, but thank goodness for technology and online calculators! Check out these nifty home loan calculators from POSB that can help you out.

Example:
Jane and her husband plan to buy a HDB flat. After paying all the relevant costs and fees by cash/CPF, the loan balance is $300,000. They opt for a 25-year home loan tenure and manage to lock in a mortgage interest rate of 1.4% p.a. for the first 5 years with a bank (because HDB’s interest rate is currently higher at 2.6% p.a.). Here’s what their monthly instalments look like for the first 5 years:

Source: POSB/DBS Repayment Schedule Calculator

As both Jane and her husband are working full-time and drawing a salary of about $3,500 each per month, this monthly mortgage falls within their budget.

2. Know what you’re looking for in a home

Once you’ve more or less determined your budget, this will inform the type of home you can afford, along with its location, size, features, amenities and so on.

For instance, if you can only afford to pay $300,000, you definitely can’t buy a private property, let alone a bungalow. And with $300,000, that’s maybe a small and older resale flat in a mature estate, or a larger one in a non-mature estate that has fewer amenities.

With your housing budget, it helps you manage your dream home expectations and realistically determine the parameters of your family nest.

However, if you’re able to afford a private property, do consider if you’re over-stretching yourself, and if you really want to hit the ceiling of your housing budget. To be honest, I’d rather opt for a cheaper home to have more monies (cash/CPF) for myself! But it’s totally up to you. Because, #goals.

3. Choosing the right home loan

Frankly, with home loan interest rates currently low, most of the banks in Singapore offer largely similar interest rates (need to stay competitive, which benefits us customers!).

But that doesn’t mean you should skip into your nearest bank and take out any home loan just to check one item off your home-owning to-do list. Be sure to scrutinise all the fine print, check for any additional fees, lock-in periods, etc.

And do keep an eye out for synergies, especially if you already have an account (savings, credit card, investment or otherwise, with the same bank.

For example, the POSB Enhanced HDB Loan offers a variety of packages for various needs, with the following benefits:

6 months FREE Home Payment Care (this protects against personal accident and sudden loss of income)
Synergy with the Multiplier Account: Increase your interest earned by up to 1.4% p.a. or S$600 annually
Upfront cash rebates/rewards of S$2,000 (for minimum loan amount of S$250,000, refinancing only) or up to S$10,000 (for the Super Cash Reward Package, with minimum loan amount of S$200,000)
Synergy with renovation loan: POSB Home Loan customers get a preferential rate of 2.88% p.a. (usually 3.88% p.a.) when they sign up for a POSB Renovation Loan

POSB Enhanced HDB Loan — Online Exclusive Promotions

CNY promo from 25 Jan 2021 to 28 Feb 2021
2-Year Fixed Rate @ 1.18% p.a. (minimum loan amount of S$800,000)
Includes: 1 free conversion after 24 months from the date of first disbursement — giving you the option to reprice your home at no cost.

Post-CNY promo from 1 March 2021
2-Year Fixed Rate @ 1.28% p.a.
Includes:

1 free conversion after 60 months from the date of first disbursement — giving you the option to reprice your home loan at no cost
Waiver of commitment fee due to sale of property — giving you the flexibility to sell your property without the worry of penalty fees
Waiver of prepayment fee(s) — giving you the flexibility to prepay your loan without the worry of penalty fees

Apply for POSB’s online exclusive promotions here.

4. Get an IPA

No, no… We’re not asking you to drink beer while waiting for your dream home. IPA in housing terms stands for In-Principle Approval, sometimes also known as Approval In-Principle, or AIP. But nothing’s stopping you from chugging your India Pale Ale if that makes your home-owning journey more enjoyable!

Having an IPA can really speed things up. In short, it’s an agreement with a bank. Based on your credit history and financial health, a bank can assess your eligibility and give a pre-approval for your home loan.

There are some things to note:

An IPA is NOT an actual loan
An IPA is NOT a commitment that you MUST take up the loan from that bank (you are free to let it lapse while you pursue greener pastures)
An IPA can be rejected or cancelled if your financial situation suddenly changes — so don’t plan major life or job changes when buying a home
An IPA typically lasts 30 to 90 days — spend this time going house shopping

If you’re buying a HDB flat, you will be asked to apply for the HDB Loan Eligibility or HLE. This letter is HDB’s equivalent of the IPA.

Applying for an IPA is quick — it takes just a day or 2 to get an IPA with POSB/DBS.

5. Know where to look

If you’re still feeling lost or don’t know how to begin, there are plenty of resources to help you online. In addition to our hundreds of helpful property articles, check out POSB’s home loans portal for more guides.

Screenshot of DBS Property Marketplace

Get even more concrete advice with the DBS Property Marketplace, a one-stop shop with a home planner to determine your home affordability, listings suited to your budget (you can save/customise searches, with automatic updates when new listings that fit your criteria are added), a treasure trove of resources and information, and tools such as the MyHome planning tool to help you work out your sums.

6. Other considerations

Being a homeowner doesn’t stop at simply getting a home. You’ll also need to do renovation work to make the house truly yours (remember the preferential rate we brought up earlier?), and you’ll need to protect your purchase and items within the house with insurance.

How about furniture? Consider getting a credit/debit card so you can pay 0% interest on monthly instalments for better cashflow. Sometimes credit/debit cards will have partner promotions as well, so you can save even more money while accruing rewards points, cashback and other perks.

There are just so many considerations when embarking on this new journey of being a homeowner. Good thing there’s lots of help and support available, so you can ride the Ox by the horns this year and fulfil your long-time dream of having a place to call your own!

This is the fourth article in New Norm 2021, a series of 6 articles written in collaboration with POSB to help young families make smarter money decisions in this new Ox year.

by Meredith Woo on 18 February 2021

Source: MONEYSMART (18 Mar 2021)

3 things worth noting about Feb 2021 HDB resale transactions, including the million-dollar flats - 99.co

February 2021 was a notable month for HDB resale transactions, setting the record for the highest number of million-dollar flat transactions in a month with 23 flats.

At the same time, resale prices have increased for the eighth straight month, despite a drop in transactions. 2,165 resale transactions were made last month, which was actually 13.4% lower than in January.

So we took a closer look at these transactions and found a few more interesting things.

The most expensive resale flat has the shortest lease

The HDB resale flat with the highest resale price in February was a maisonette in Toh Yi Drive, which was sold for $1,200,000.

Interestingly, we noticed that among the 23 million-dollar flats sold last month, this maisonette had the shortest lease period with 66 years left.

Screenshot of a million-dollar flat transaction at Toh Yi Drive — Source: HDB

This seemed like an outlier. Because in general, due to lease decay, resale flats with shorter lease periods tend to command a lower resale value.

Likewise, million-dollar HDB flats mostly had a longer lease period left of around 80 years when they were sold.

On the other hand, lease decay doesn’t necessarily impact people’s willingness to buy a flat. Rather than the lease period, they look more into other factors such as the size of the flat.

As highlighted by Eric Yeo, Associate District Director at PropNex, the majority of flat buyers during this period of social distancing focus more on flats that cater to their needs and requirements, and less on the prospects of selling them for profit in future.

“Most of the people are cooped up at home so they actually needed more space. People are also working from home, so they may need an extra room, or extra space, which actually drives up the demand in the overall resale HDB market.”

He added that the lack of bigger flats among the newer flats also drives up the demand for older units. Compared to newer flats, older units have a larger floor area.

Not all million-dollar flats are on high floors

Another common trend on million-dollar HDB flats is that they’re on the higher floors. Specifically, they’re usually found on the 10th floor and above, which tend to come with a good and unblocked city view.

But over the years, there have been a few million-dollar flats that have gone against the trend. (Like this HDB flat in Tiong Bahru.)

For instance, two flats — one at Mei Ling Street, the other at Dawson Road — that broke the million-dollar barrier last month are located on the fourth to the sixth floor.

Screenshot of a million-dollar flat transaction at Mei Ling Street — Source: HDB

Screenshot of a million-dollar flat transaction at Dawson Road — Source: HDB

An explanation for this is that the floor level may not play a huge role when deciding which flat to buy. Just like how people don’t pay attention to lease decay as much, there are many other factors at play that may have influenced the price.

“When it’s a million-dollar flat, it’s beyond just the valuation of the unit,” said Benjamin Poh, District Division Director at ERA.

He explained that while HDB gauges valuation heavily on floor level, there are other factors to note. These include unblocked views, how much renovation is needed, as well as the demand and supply of these resale flats.

At the same time, he noted that the low-floor flats are only a minority in the million-dollar club.

Resale price increases are higher in non-mature estates

The narrative so far has been that resale flats in mature estates are more popular than non-mature estates. Given the location and availability of amenities, flats in older estates tend to have higher demand, translating to higher prices.

However, over the past year, resale prices have been increasing more in non-mature estates than in mature estates. This also means that demand for flats in the newer estates is growing as they are become more popular.

Graph showing the higher price increase in non-mature estates compared to mature estates — Source: SRX

In fact, the top two estates with the highest transactions in February were the newer estates of Punggol and Sengkang. Punggol recorded 208 resale transactions, with Sengkang trailing a little behind with 208 transactions.

A main reason for the higher demand is that resale flats in non-mature estates are generally more affordable than those in the older estates. But this demand also pushes up the price, leading to higher price increases.

Another explanation is that non-mature estates are more attractive, especially to the younger generation, as voiced by Ryan Tan, Senior Associate District Director at OrangeTee & Tie.

He added that as more developments, whether it’s housing, amenities or infrastructure, are built in the vicinity in future, there’s more room for potential price growth in these newer estates.

In contrast, there isn’t much space left for more developments in mature estates.

“Non-mature estates are generally better planned with more facilities and amenities in every other cluster. This, coupled with the modern design, definitely appeals to many buyers.”

In summary

Having looked through last month’s HDB resale transactions, it can be said that not all million-dollar flats are young and on high floors. And just like how million-dollar flats are technically outliers (they’re only 1.06% of last month’s transactions), there are also a few outliers among the million-dollar flats.

At the same time, while resale flats in non-mature estates are generally cheaper, they’re also getting more and more popular, with prices steadily increasing. So be sure to take note of this if you’re thinking of getting a resale flat in one of the newer estates!

14 hours ago · 5 min read · by Virginia Tanggono

Source: 99.co (18 Mar 2021)

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