What first-time homebuyers should know

The ‘EdgeProp Data & Drinks: Property Buying 101’ event saw a good turnout of over 100 participants (Credit: Albert Chua/ The Edge SIngapore)

When buying your first home, should you go for an HDB flat or a private residential unit?

The key consideration, according to property consultant Ray Teo, is location. “Price is secondary,” he quips.

The value of a property, regardless of type, is strongly related to its location, says Teo, who is branch district director at PropNex Realty. A purchase at the right location will garner at least a “modest gain in capital appreciation” over time.

Teo was speaking at the “EdgeProp Data & Drinks: Property Buying 101” event held at Distrii Singapore on Aug 16.

He points out that since 2013, HDB prices in Singapore had been falling, and not until 2Q2018 was there an increase in prices, by 0.1%. However, despite the general price downtrend, HDB prices in the Cantonment area did not fall, says Teo. “A five-room flat at Pinnacle@Duxton is at close to $1 million, and units at the Cantonment area were less affected by the market conditions, owing to the good location.”

Teo: Location is always the most important factor when choosing a property (Credit: Albert Chua/ The Edge Singapore)

For properties in a good and convenient location, owners would “hold on to their units and not be motivated to sell”, says Teo. And the fewer units there are in the market, the higher the prices will be. Proximity to infrastructure such as MRT stations, and schools, especially well-known ones, is important. “It is a collection of amenities that together generate value,” he says.

Knowledge of the government’s master plan will aid in a homebuyer’s decision-making process. Teo says to have an idea whether prices will soften in the next six to 12 months, one should look at how many build-to-order HDB flats are coming on stream.

Teo cites the Punggol-Sengkang area as an example. It is estimated that there are 2,070 upcoming new units there, according to HDB data. This makes it the area with the largest concentration of new HDB project launches, with 60% of the new units to be purchased by buyers living in close proximity. “Within the 5km radius of a new project launch, it will be where most buyers are. As they are already familiar with the location, they would have no objection to it,” says Teo.

With the large number of owners selling their units to finance the new projects there, the increase in the number of units for sale in the highly concentrated area will lead to a price dip, he notes.

But Teo cautions that a value-buy at a low price does not necessarily mean a valuable asset in the long run. “Remember this principle when you choose a house: If you buy cheap, you will have to sell it cheap as well,” he says.

Returning to the poser of HDB flats versus private apartments, Teo says: “A private property, if you choose properly, will be a good investment; and an HDB unit will help in accumulating wealth for a young couple who is starting out early. There is no best answer; it depends on your needs and perspective.”

Also speaking at the EdgeProp event was Ryan Teow, head of mortgage alliance and direct acquisition at OCBC Bank. He touched on the additional buyer’s stamp duty (ABSD), in view of the latest round of property cooling measures that took effect from July 6.

Teow: ABSD is meant to ensure that property will still remain affordable for everyone (Credit: Albert Chua/ The Edge Singapore)

While how much ABSD a buyer pays will depend on the number of properties one owns, the loan-to-value ratio will depend on one’s outstanding loan, and not on the number of properties one owns, Teow points out. According to the government, the objectives of the changes in ABSD and LTV are to cool the property market and keep price increases in line with economic fundamentals. “In fact, ABSD is meant to ensure that property will still remain affordable for everyone,” he notes.

Triston Ong, founder and managing director of Asher BWS, wrapped up the evening with a talk entitled “What you need to know about whisky”.

The ‘EdgeProp Data & Drinks: Property Buying 101’ event was supported by Distrii Singapore and The Tapestry.

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