Affordability is key in buying property

THE economic upturn and surging home prices are making communications manager Lisa Low, 34, worried.

She is aghast that she may have insufficient money for the cash-over-valuation (COV) - or the cash top-up above a flat's valuation that buyers of resale units have to pay - when she eventually locates her dream home next year.

 

<a href='http://ads.asia1.com.sg/click.ng/site=tasiaonebiz&sec=a1_biz&pagepos=1&size=300X250' target='_blank'><img src='http://ads.asia1.com.sg/image.ng/site=tasiaonebiz&sec=a1_biz&pagepos=1&size=300X250' height='250' border='0' width='300'></a>

The Bedok resident, who is single, told my paper: "Is there such a thing as affordable property in Singapore today? With skyrocketing COV, I wonder if I'm able to fork out the $10,000 to $20,000 upfront."

There are several factors that prospective home owners like Ms Low have to consider in real- estate buys, said ERA Realty Network's senior group division director Mark Teo.

Affordability is key.

Since private properties can cost up to three times more than public housing, it makes "the most economic sense" for first-time buyers who satisfy Housing Board (HDB) criteria to apply for a flat directly from the HDB.

They benefit from the subsidised prices and housing-loan interest rates that stay the same for an extended period, said Mr Teo.

Currently, the rate is 2.6 per cent per year.

Those who find mature estates like Marine Parade pricey can look at newer neighbourhoods like Punggol.

Private-property fans can turn to suburban areas, where units are priced at $600 to $700 per sq ft.

Ngee Ann Polytechnic real- estate lecturer Nicholas Mak said second-hand executive condominiums or 99-year condos are attractive too.

"Executive condos that are five to 10 years old are slightly cheaper and come with all the amenities of full-fledged condos, like carparks, swimming pools and tennis courts," he noted.

"Ninety-nine-year condos are also cheaper but they may not be as conveniently located."

Ultimately, choosing the most appropriate property depends on the amount of personal savings a buyer has between the time of purchase and their future earnings.

"As a rule of thumb, it is not prudent for anyone to use more than 40 per cent of their income to service their monthly home instalment," Mr Teo said.

But primary residences usually do not make good investments, said Mr Mak, as they are chosen for their proximity to certain schools or amenities.

A good investment property has to draw tenants, who tend to be expatriates. That means choosing districts 9, 10 and 11 - which cover areas from Bukit Timah to Orchard Road and River Valley Road - or locales that appeal to many expats.

Mr Teo suggested that investors with $1 million to spare consider condominiums in the Tiong Bahru area, which typically enjoy fairly high rental returns of 3 to 4 per cent.

Both experts will offer more tips on getting the most out of the property market at a my paper seminar on Dec 13.

Last week, the Global Property Guide reported that property prices in Singapore jumped an all-time record 14.3 per cent in the third quarter.

The HDB resale-price index grew 3.6 per cent from Q2 to 145.2 points in Q3 - a record since 1990. A Business Times report last month said Queenstown had some of the most expensive units. Five-room and executive flats there netted a median $619,000 and $712,500 in resale transactions.