The Property anti thesis dilemma

Property prices works on the laws of demand versus supply. Home buyers like to buy when the interest rates are low because monthly mortgage loan servicing becomes less stressful. Property investors on the other hand, like to buy when property prices are low.

This creates a dilemma for people who are looking to purchase a property. Is it better to buy when interest rates is low or when the property price is? As they scramble for data to justify their decisions, they may face the anti thesis.

A home is a place to stay. A property purchase is to make a profit.

Which statement is for you?

Buying a property could be one of the major financial decisions in life, therefore it is perfectly normal to seek opinions from family and friends. However, more often then not, the topic about property gets you a bunch of mixed feelings and comments. With all good intentions, they too may not have gotten it right in the first place. Why?

Everyone has a different mindset when it comes to property purchase

For seasoned investors, they have specific requirements and understand what they are doing. Unfortunately, they won't tell you what's the ''right buy'' because your loss is their gain.

For home buyers, you need to have a financial plan that consists of your family needs as well as your future retirement needs. Every step is a calculated move towards creating that retirement egg.

For e.g. , I have encountered people who needed to sell their property so as to use their sales proceeds for their children's education. In other cases, for their parent's healthcare expenses; or even for business expenses. They have this self created option due to earlier planning.

Depending on financial situation, not everyone buys property for the same reasons.

Is Interest rate a friend or foe?

When the interest rate is high, paying the monthly mortgage will be tedious for some people, especially if they have fixed expenses on children, car loan, parents etc. So Interest rate is a foe. But during this period, buying will slow down, hence you have a chance to get good buys and possibly enjoy discounts on property price.

Then, after the 2 years lock-in period, you will still be able to reprice the loan at a lower amount with lower interest. Therefore, even though you bought your property at the time of higher interest rates, you can still enjoy a lower interest later on.

The foe can now be your friend too and the reverse is also true!

When Interest rates fall, will property buying gain momentum?

Since home owners form the majority who are buying for own stay, this will hold true due to the interest savings on monthly mortgage.

But here's the kicker.

When more people are buying property, the prices of property will go up due to the law of demand vs supply.

Higher demand drives up prices.

In view of this, here are some common comments:

• Let's wait till the interest rate go lower? Maybe it will hit very low.
• There is excess supply in the market with left over inventory. Let's wait for discounts.
• We can time the market.

What is the difference if you buy your property now vs later?

What we have learnt over the years is that waiting for the lowest interest rate can become a major decision making error.

As of today, the interest rate has already lowered to 2.4% for a 30 year loan so if you buy a property today, you enjoy the current prices at the current interest rates.

If you wait for a lower interest rates (which may happen), you may get to enjoy good savings on interest but as demand increases, the purchase price becomes higher for the same property. The equation below will show you how this impacts you.

If Savings on Interest < Purchase price increase = you lost money        

If your savings on interest is lesser then the purchase price increase, you would have just made a grave mistake.

What is the true supply in the market?

• Market trends:

Recent launch of Norwood Grand was astonishing with a take up rate of 84%. https://r.search.yahoo.com/_ylt=AwrOsCsLsiFnVwIA99ZXNyoA;_ylu=Y29sbwNncTEEcG9zAzEEdnRpZAMEc2VjA3Nj/RV=2/RE=1731471116/RO=10/RU=https%3a%2f%2fsg.news.yahoo.com%2fcdls-norwood-grand-achieves-84-103246718.html/RK=2/RS=vnfWvl4Zh6o49n62BBSkt3AZqlE-

The one/ two/ three bedroom units were fully sold out. This project's main target are the home owners (who are the majority)

• With an increase of population, the supply of housing must match up.

Have a read on our population statistics: https://www.singstat.gov.sg/find-data/search-by-theme/population/population-and-population-structure/latest-data

Can we time the market and predict property prices?

Unfortunately, no one has this super power, not even the economist!

• What we know is that government cooling measures add more barriers for property buyers and as a result, it widens the socio economic gaps between the rich and the average.
• There are some land plots in the GLS program that were less preferred by Developers. But for those that received many bids, launch prices increased in tandem.
• An anomaly we experienced was the strong property bull run during the Covid19 period. In uncertain times, frantic selling and downgrading by private property owners led to aggressive buying of HDB properties. People were willing to pay a hefty amount of "Cash over valuation" since they just sold their private property.

As a result, we saw the prices of public housing rise quickly where some people made money from their HDB property sales and upgraded to a Condo.

Seasoned investors also took the opportunity to snap up great value.

However, some people lost money selling their private property? Why?

Property buying is about value

Right property buying starts with the right education. To understand what is the definition of a valued property, let me help you with step by step guidance. The objective is to make lesser financial mistakes.

With that, I bring you back to the anti thesis "A home is a place to stay, A property purchase is to make a profit."

Which of the above statements speak to you more?

If you are in a dilemma, you are not alone.

Feel free to connect with me and let me help you solve the anti thesis. If you liked my article,

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