Is it the right time to buy? This is a question that agents get on a daily basis. With the ever-changing property market affected by many different factors, it gets tough for the consumers to navigate the market. Our property prices are heavily reliant on supply and demand affected by internal and external factors. Let me share a pointer from the perspective of a realtor to help you better understand the property market.
In our current market where there’s uncertainties, buyers find it hard to take action. How are the seller’s doing themselves? The private resale market is facing high replacement costs which many homeowners have decided to hold onto their properties instead. They are not in a rush to sell, and they are pricing their properties at a high to cover the replacement costs. That is why even if the private property index increases, the transaction volume is dropping.
On the other hand, developers have been observed to price their project cautiously. Developers are stressed with take-up rates because failing to clear all their units within 5 years can lead to incur a hefty 40% ABSD. Even with the option to extend the deadline, the cost is 4% – 12% depending on whether it’s the sixth, seventh or eighth year. That is why in the market today, there are many value buys priced below the average per square feet (PSF) or quantum, establishing a safe entry price.
One good example is Lentor Mansion, with their attractive pricing during launch. They have sold off all the 2 bedder units on launch day and even sold up to 75% on launch weekend. The 2 bedders were priced from $1,149,000 which were the lowest amongst surrounding projects, even lower than Panorama (Resale).
One of the key pointers of buying a property is interest rate. The interest rate follows the fluctuation of the Federal Reserves, which we are at an all-time high. The property cycle always fluctuates up and down and so it cannot be high all the way. So how does this effect our private market? Generally, people are more willing to enter the market when the interest rates are low as their monthly mortgage payments are more forgiving.
However, when the interest rates are low, the demand for property increases. With an increase in demand, the property prices will increase as well. To enter the market during low interest rates, you are most likely paying a higher entry price as compared to buying during the high interest rate. As the demand has already pushed up the price of the property.
