Singapore PRs: To Buy Now or Next Year?

By Moses Lemuel

/ The Edge Property |

July 15, 2017 9:00 AM SGT

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If you are Singapore Permanent Resident (PR) living in a rented apartment, chances are you might have thought about buying your own place to stay, instead of simply 'throwing away' money every month by paying rent.

After all, owning property is largely viewed as a popular move if you're looking to stay in Singapore for a substantial period of time. In addition to this, the idea of stability would probably be something you'd be looking for, especially if you're living with your family.

The question then is, when would be the best time to buy? Taking into account volatility and mixed sentiments in the market, how much you save will depend on the market outlook as well as the returns from alternative investments.

Here, The Edge Property has considered several scenarios, each focused on a different type of property, to discuss whether it is better to buy now or to be patient and wait till next year. We will start by looking at resale flats in newer estates, before moving on to resale flats in mature estates and then to private condominiums.

Scenario 1: 5-room resale flat in Sengkang

Resale flats in newer estates are typically cheaper. For example, according to the HDB website, the median price of a 5-room flat in Sengkang is $440,000. Let's calculate how much you would save if you buy at this price now versus if you buy a year later.

If you purchase a flat now, you would save on one year of rent. If you rent the same flat in Sengkang, this would equate to $23,400.

On the other hand, if you were to wait, you could potentially benefit from declining prices in a weak property market. According to HDB statistics, the median price for five-room flats in Sengkang have been declining at the rate of 1.3% per quarter from Q2 of 2013 to the Q1 of 2017. If we were to assume the decline will continue at this rate, you would be able to save $23,076 on the flat in one year's time.

In addition to this, if you were to wait, you could also in the meantime invest the money you would have paid to buy a flat now. The returns from such investments should be included in calculating how much you would be saving.

So how much would you be able to invest and earn? Aside from the 20% downpayment for the flat, the other payments that you would have to make when you buy are the interest on the bank loan (assuming 2% interest, since SIBOR has trended at below 1%), Buyer's Stamp Duty, Additional Buyer's Stamp Duty and 1% agent fee. At a conservative rate of return of 2.5% (the interest rate on your CPF), you would get a return of $2,621 on this sum, which brings your savings one year later up to $25,719.

This amount is comparable to what you would save if you buy now. Hence, there is no significant advantage in waiting. If you see a flat that you like, you should buy it before it is snapped up.

Scenario 2: 5-room resale flat in Bishan

If you're looking to buy a resale flat in a mature estate, it will then become a much more straightforward decision for you.

Let's take a 5-room flat in Bishan. Based on HDB statistics, prices in mature estates like Bishan have not changed from Q2 of 2013 to Q1 of 2017. Therefore, if you see a flat you like now, you should make your move as waiting a year would not change much for you.

Scenario 3: Condo in Punggol

If you're in the market for a condo, here's what you can consider. Let’s take a 900 to 1,000 sf condo unit in Punggol that is going for $1 million. If you buy now, you would save $30,000 in rental over a year if you are staying in comparable condo units, or less if you are renting a five-room HDB flat in a non-mature estate.

Prices for private non-landed homes in Outside Central Region have been declining by 0.7% per quarter from Q2 of 2013 to Q1 of 2017, based on the URA price index. If the trend holds, you would save $28,952 one year later. At a rate of return of 2.5%, the sum that you can invest in the meantime would potentially yield $6,511 in one year, bringing total savings up to $35,463.

This amount in savings is significantly higher than if you were to buy now, which means it might be advantageous to wait and monitor the property market before signing on the dotted lines.

Buying or waiting depends on the circumstances

We have seen that it is better to buy resale in newer estates now and to wait a year to buy a condo; while for a resale in a mature estate, there is no marked difference between buying now and waiting.

But we have only discussed the financial logic behind the decision to buy or to wait. Buying now may have an appeal that is difficult to put a price to: The ability to settle into a permanent home sooner rather than later, for example.

Ultimately, it is comes down to the individual and you will have to weigh the costs of buying now or later against the benefits, financial and otherwise. The important thing is to be aware of the options available to you and what they entail.

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