If you have followed closely on the price trends of both the private property market and the HDB resale market in 2021, you would have noticed that prices of private properties and HDB resale properties has moved up this year. On the ground, I have also observed that developers had or are intending to increase prices of the projects that they are selling.
Till date in 2021, private property price index has increased by about 5.2%. Both new launch and resale condominium transaction volume for the first 3 Quarters of 2021 has already surpassed the total transaction volume of 2020. On the resale HDB side, the resale price index has increased by a whopping 8.9% this year. The total number of transactions in the first 3 Quarters of 2021 is only about 1,671 from the total transactions in 2020. The demand of residential property is high looking at the transaction volume in the first 3 Quarters of 2021.
Buyer’s dilemma
With property prices going up over the last six quarters, this situation posed a dilemma for many buyers today. As a buyer, should I rush in to buy a property now before the prices increases some more? Or should I wait out longer for the current prices to come down? Will I be buying in at the peak price today or will this new pricing be the new norm?
What makes matters worse during this Pandemic is the restrictions placed on the maximum number of persons who can visit any condominium’s show flat or a seller’s house in each day. Thus, only limited viewing slots are available to all the buyers who are keen to visit these properties. Coupled with the current high demand from property buyers, sometimes the viewing slots are not sufficient to cater for all the buyers. This has created an urgency for buyers to make their buying decision faster and may have resulted in higher property prices.
So, as a buyer today, should I buy now or later? I will recommend that the most important thing to do before making the decision is to determine if there is a bubble in the property market right now. If there is a property bubble forming now, as buyers, we can choose to hold back from the purchase. However, if the current property prices remain affordable to the current and future buyers, then we can consider buying today before the property prices increase further. You can understand more about what a property bubble is by reading this article I wrote.
Another critical point that you should take into consideration is, what is the reason that you are buying the property. What is your objective of buying the property? For example, you may be looking to buy a property now so that you can get married and settle down in a matrimonial home. Or you may want to buy a house near your children school so that it is more convenient for your child and your family. In these two examples mentioned, there are intangible benefits and advantages of buying the house now, regardless of what is the property prices now. I may consider buying a property now to meet my life’s objectives.
Seller’s Dilemma
For most sellers, the current favorable market offers a golden opportunity for them to cash out from their properties. Depending on when they purchased their properties, most properties should have appreciated in value over the past 4 years. This could mean a tidy sum for profit for these property owners.
However, sellers today may face with the same dilemma. Should I wait out for the prices to go up some more, or should I sell right now in case the current favorable market is ending. So, when will the property market be at its peak? In my opinion, no one know can predict exactly when the property market will be at its peak. Therefore, it will be extremely difficult to know when you will be able to sell the property at the exact “peak” price.
Therefore, instead of trying to sell at the absolute peak price, you can ask yourself what is the objective that you want to achieve by selling the property? For example, if you are selling the property to fund your immediate retirement needs, then you may have to cash out now as you need the funds for your retirement. Or you see the potential in another investment asset (e.g., stocks, REITs) that will give you much better return than your current property. Then you can consider selling the property right now and reinvesting the proceeds.
However, if the objective that you are selling is just to make the maximum profit out of your current property (and you have the holding power for this property), then you should ask yourself if your property price will continue to go up? One way to do this is to analyze the property market information carefully and establishing the likelihood of potential future price increase. If you believe the market can continue to increase, you can hold on to the property longer. What if you expect the market to continue to increase and yet the prices drop? In this situation, if you have the holding power, you can wait for the next favorable market to come and sell your property. But you must have the holding power.
Conversely, if your expectation that the market prices is not going to increase further, and the current profit from selling your property is good enough, you may consider selling your property now.
How about I am selling and buying another property?
If you are intending to sell and then buy another property, you could be selling your property at a high price now and buying the next one at a high price too. We may be worried that after selling our current property, we may not be able to buy back the next property at the comparable price level.
The same consideration here; is market price too high now? Should I buy now or later? Should I even consider selling at all? Or should I sell the property now, rent for a while unit the prices come down before buying the next property?
Here again the first most important question to ask ourselves is; what is the objective of selling and buying the property. As explained in the buyer’s dilemma above, if the reason you need to sell is because you need to solve your immediate needs like you are getting married, getting near your children school etc., then you can consider selling and buying now. The key thing to do now is to understand how to sell your current property at a good price and learning to seek out and buy a property that is undervalued or with a good growth potential.
There is one more option that you can explore. Instead of selling your property, you can consider doing a decoupling on your current property, and then purchase another property.
Some pointers here before you proceed on your decoupling decision:
First, understand the risk of doing a decoupling.
Second, understand all the costs involved in the decoupling process.
Third, do your financing checks before executing the process and seek professional help before going ahead with decoupling.
Conclusion
We can never know when the property market will peak. Be it selling or buying a property today, the most important thing we can ask ourselves is the reason behind why we need to do this. By aligning your selling or buying decisions to your life objectives then you can get clarity on your decision. Once the objectives are clear, we can be confident in our decision on whether to take the next step or to hold back now.
If your decision is to go ahead with buying, remember to do your checks on your finances and ensure that you can hold out if property prices were to move downwards. You may be buying at a higher price now, but if you can hold out longer, you may still be able to make a profit. Thus having a proper property investment planning, sufficient investment time horizon together with proper risk management is important for a successful property investment.
I hope that this article has given you clarity on your dilemma. If you are still uncertain about your decision, you can always connect with me using the form below. Hope that everyone can make sound investment decisions.