Sound advice

Our panel of real estate experts share their 2012 property predictions.

Fri, Jan 20, 2012
Home & Decor

By Stella Thng

Will the booming property market finally lose steam? Our panel of real estate experts share their 2012 predictions.

For those buying their first HDB flat or private property

If you waited to purchase your first HDB resale flat due to the high Cash Over Valuation (COV) in 2011, the good news is that the COV should fall to a more realistic level this year, predicts Patrick Ng, a senior marketing associate at Orange Tee.

This could be due to a fresh supply of resale flats that have reached their five-year mark and can be sold. In addition, the government has built more new HDB flats to ease the housing crunch - good for first-time buyers such as Patrick and his wife.

"We applied for a Build-To-Order (BTO) unit in 2011 and paid $189,000 for our 646sqf three-room flat at Boon Lay Drive, which will be ready in 2015. It is within 3km from my parent's home so we received an Additional Housing Grant (AHG) of $10,000," shares Patrick. The couple are glad they won't have to fork out any COV.

On the resale private property front, Patrick says: "This segment should be relatively quiet. Investor-sellers who hold multiple private properties may be eager to dispose of their excess units. Homeowners looking to sell may hold back and observe the market."

This wait-and-see attitude will benefit the rental market, which Patrick reckons will remain buoyant.

For those upgrading to a bigger HDB flat or private property

Don't count on a huge property crash.

Bon Lem, associate director at Write Realty, thinks that the market for all segments - HDB, condo and landed - will remain the same, with prices probably dipping just a little.

"The next batch of BTO flats will only be ready after 2013 and the pool of HDB resale flats available each year is only so much. I feel that demand will remain high, buoyed by families who need to upsize and Permanent Residents who can only buy from the resale market."

Bon feels that the government's new measures will ensure the market remains stable. "If you're selling high and buying high, you won't see much fluctuation in prices over the next two years so decide based on your budget and needs instead of expecting a major price correction."

He cites the example of a client who sold his HDB flat in 2010, expecting prices to crash in 2011 so he could upgrade at a lower cost.

"Instead, prices increased. Upgraders thinking of doing the same may not see the profits they want anytime soon."

Those on a budget who planned to upgrade to a private property but are scared off by the crazy prices may now opt for Design, Build and Sell Scheme (DBSS) flats or Executive Condominiums instead.

"Also, with the new regulations, it's now more difficult to get the bank's financing without selling your current place first."

For investors eyeing a second property

"I don't foresee the prices of private residences dipping in the coming year," says Marcia Lai, director of Faith Property Network, who believes that market sentiments will remain bullish although sales growth may slow down.

"Look at Bedok Residences: it sold 350 units on its first day at prices ranging from $1,100 to $1,300 psf," says Marcia, citing the 99-year integrated development project by Capitaland that has homes built atop a shopping mall and an upcoming transportation hub.

Tighter regulations and the high seller's stamp duty may curb speculators but Marcia notes that there are many serious long-term investors in the market.

"I see a mix of local and foreign investors willing to pay top dollar for a property near an MRT station and shopping malls, as it can command premium rental. On top of that, upgraders and those buying their first home who are put off by the high COV for HDB resale flats are also looking at private homes."

Of course, there is now an additional buyer's stamp duty of 10 per cent for foreigners, three per cent for permanent residents getting their second property, and three per cent for Singaporeans buying a third property. These latest measures should dampen prices, say analysts.

Marcia advises investors to grab a property with high rental and capital yield. "Personally, I'm keen to invest in Farrer Park Suites, a freehold development. It is near Farrer Park MRT station, City Square Mall and the upcoming Connexion, which is Asia's first integrated hub for healthcare and wellness. I believe a one-bedroom unit there can fetch rental of about $3,000 monthly."

For commercial property investors

Investors who already have two residential properties can only take a loan of up to 60 per cent for their third one, plus a three per cent stamp duty for their third property.

However, there is no such cap on commercial property investments, which is why Propnex Group District Director Kelvin Fong notices a growing interest in this market.

However, Kelvin, who owns a $450,000 office unit in Bukit Batok, warns: "The commercial property market is tied very closely to Singapore's economy and growth rate. If a recession takes place, companies will cut their rental budgets or downsize."

This is why he personally doesn't believe in investing in big commercial units costing over $500,000 as it may be hard to lease out in bad times.

"Seasoned residential investors who are used to shelling out $800,000 to $1 million for a small condo may not think twice about paying that for a commercial property but they may overlook the fact that rental yield can fluctuate during a crisis. If your rent cannot cover the interest, you will have to top up the difference in your monthly instalments."

Compared to residential properties, the value for commercial spaces does not increase as quickly, so don't count on flipping it to enjoy fantastic capital gains overnight.

Kelvin advises first-time commercial property investors to adjust their expectations: "You cannot invest with the residential property mindset, so think carefully and weigh your odds."

For foreign property investors

Local investors whose budget cannot get them a decent property here or are unwilling to pay sky-high prices have been buying foreign properties.

Malaysian properties, a hot favourite among Singaporeans, are very attractively priced, thanks to the favourable exchange rates. In addition, Singaporeans can seek financing of up to 80 per cent from banks in Malaysia.

"Personally, I won't buy anywhere I'm not familiar with or where it's too inconvenient to get to," says Benjamin Heng, associate marketing director at Propnex.

He paid RM640,000 (S$262,000) for a 450sqf studio apartment in a project called Bukit Ceylon in Kuala Lumpur, which will be ready in two or three years' time. The apartment is near a shopping and dining stretch at Bukit Bintang, popular with expats.

"I know Kuala Lumpur well, Malaysia's economy is looking good, there is great emphasis on free trade and a steady stream of expatriates working there. At RM1,400 per sq ft, it is relatively good value for money for a property in such a good location, compared to Singapore. I expect to get a rental yield of at least six per cent."

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