To sell or not to sell...

Recently I have a few people who have sought my humble opinion on whether they should let go of their real estate while the prices are still relatively high. Well, I thought about it and this is what I think...

1) You have to determine what the subject property is to you. Is it a place of dwelling or an investment property. ie. you have more than one property.

If it is a place of dwelling then selling it at today's seemingly inflated prices might not be such a bright idea as you will be buying at a high as well. Moreover every real estate is unique and the marginal utility (or enjoyment) obtained from your current unit may not be replicated in the new unit you are about to purchase. (eg. your current house may be a high floor, windy unit with no west sun in a price central area. To "cash out" you may not be able to find a similar unit as the main reason why your current house is selling at a high price is because of it's positive features. Your new house will most probably have to be cheaper and thus have less plus points as compared to your original one)

I've always advocated buying on location which is why I've never had a good impression of places like Loyang, Punggol, Sengkang, Jurong West, Woodlands. They are just too inconvenient. You can save on money if you are willing to pay for it in time spent on commuting.

If it is an investment property then analyse what is your investment time horizon. It may be wise to let it go now as you can ease your financial burden if you are still servicing your installments. Return on investment would be higher as well if you let an investment property go early as you would not have expended much capital to pocket the gains. (ROI= Capital gained / Capital outlay * 100%)

You will also save on income tax as your 2nd property is taxed 10% on annual value whereas your 1st and dwelling property is taxed 4%. (If you have a HDB and a private property, your HDB is always considered your first property. If all your properties are private properties then the one you are staying in is your first.)

2) Do not be too eager to catch on this wave of euphoria. Every boom is higher than the one before it. The last property boom was astounding! In 2006, a 3 room HDB flat in Ang Mo Kio was valued at an average of $160,000 is now perhaps valued at $270,000 today. Singapore is increasing her population by importing foreigners. What this means is that the government is importing people who need a place to stay the moment they touch down on our island. This is opposed to if our fertility rate was rocket high. Babies take time to grow to adults who would want to purchase a home. Foreigners who make Singapore their home would accelerate this process a whole lot faster. Our government hasn't always gotten the family planning part of nation building right (remember the stop at 2 policy?). This actually translates to a lack of adequate housing for the people in Singapore. (Citizens, permanent residents and foreigners)

3) Yes property prices will most probably fall for a few quarters. However not a too drastic fall. A correction of 10-15% would be a fair amount. Just for the market to take a breather. Prices have "normalised". In 2005 many felt that $800-$900 per square foot for a leasehold property in the Marina Bay area was considered pricey. Today buyers are scrambling for it at $1500-$2000 psf. It was like when most of our parents and grandparents paid as little as $10,000 for a HDB 3 room flat. Many felt that it would never reach $50,000. It did. Then $100,000, then $150,000, then $200,000 and so on.

So if you're thinking that this peak will never come again, think again. So long as Singapore is a land scarce country, property prices will always be appreciating in the long run. If you have to let go your property in the next year or so then now is perhaps a good time to do so to lock in the current price. If not, make an informed decision before setting a reasonable price. Most people pass comments like "I can hold" or "don't have this high price then I don't sell". An efficient market and an efficient marketer will be able to sell the property in 3 months. If not, pricing is the problem. Do not say you have time to wait if you do not have at least a years worth of installment repayments in your savings. You do not want your hand to be forced on whether you have to let go of an investment of not. It is always wiser to make that decision with as little stress as possible.


Well some personal opinions on whether to sell or not to sell.

And whether to buy? well in a fair market, Singapore's property prices still have a long way to go to reach parity with places like Hong Kong.