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Buying or selling a condo or landed home in the second half of 2022? Read this.

In our previous article, we covered how buyers and sellers can move in the HDB segment. But what if you're looking to enter the private property market? In light of rising interest rates and a looming recession, word is on the street that it's wiser to buy private property sooner than later. Should you pay any heed to this advice?

Prediction 1: New launch sales volume to fall; resale volume to maintain.

At this point, the number of units sold this year is 4,500 units, compared to last year's figure of 7,300 units. While 2021 closed at a figure of 14,679 units, 2022 is projected to do so at only 8,000 units. So things are slowing down—you get it. But what gives?

It's worth mentioning that a decrease in new launch sales volume was expected not by virtue of weakened demand but because fewer launches were unveiled this year. While this hints at a lack of new inventory for sale, it also does not help that buyers are holding back in anticipation of new launches down the line. This is further compounded by rising interest rates—the elephant in the room that is weighing on everyone's minds. How high will they climb? How will our mortgage commitments suffer?

Price sensitivity also has a part to play. Land prices have never been more expensive, and supply chain issues and the squeeze of labor supply have greatly reduced the profit margin for developers. Of course they would sell their units at a higher price, but price actualisation and acceptance takes time.

If you're buying in today's climate, we recommend being prudent with your budget. Investments, particularly in real estate, should give you a peace of mind. A lower budget can buffer concerns about rising interest rates and exposure to mortgage commitments. If you're eyeing a new launch product as a buyer with no existing property, your purchase could bode well for you. Payments are small and incremental based on milestones in construction, and the impact of climbing interest rates is cushioned. With that said, renting while buying could be expensive at this point of time.

Prediction 2: Resale volume of private homes to continue

Resale volumes in the condo and landed homes segment have been optimistic albeit slow and stead. Last year, from January to June, about 10,800 units were transacted. The same period this year, however, only saw 8,200. What does that mean to you? If, as a seller, you find that viewings seem to be tapering off, sit down with your agent to stay abreast of other listings within your condominium development. If you are pricing optimistically, you might be giving neighbors a competitive edge against you. On the other hand, if you're trading in the landed segment, the demand and supply equation is in your favor. This means you have a better shot at pricing at a premium, especially since buyers in this market—whether they're after a GCB or a 99-year leasehold—behave very differently. Still, buyers of the latter product will be exposed to the interest rate environment. After taking out a loan, the amount of cash they retain will likely be dedicated to mortgage payment or renovation expenses.

On the flipside, if you're a buyer, you should be prudent and evaluate what truly fits you. For instance, a unit that does not require renovation is likely to come with a premium. This means fierce competition and the likelihood of being outbid should you cling onto expectations of fair pricing across the market. Unfortunately, the finite supply of landed homes may dash them. If the unit is newly built, be prepared to pay over and above its valuation. Got a rigid budget? Be open to tweak your location preferences, or you might end up further from the core. If you are after a freehold unit in a prime location, however, you would have to fork out more renovation costs to keep this purchase within your borrowing limits. Say, you did an IPA today and discovered that you are eligible for a loan of S$1 million. Perhaps you could consider dropping that to S$900,000 and working backwards to evaluate what is within your means. On top of the 20-30% increase in renovation costs, longer timelines and hefty rents can add up. Remember, prudence is the keyword for the rest of 2022. With my experience as a realtor, analyst, and consultant, I can help you balance your needs and wants in plotting your next move in the private property market.


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