You’ve probably heard, in some way or another, “You should buy a house because it’s a good investment.”
However, it’s important to consider it carefully before committing to it, even if it seems like a financial strategy. It’s not always the wise financial decision to buy a property.
Roberge, a CPF and founder of Beyond Your Hammock tells CNBC Make It that a single-family home is not a good investment. A single-family home may appreciate in value over time, but it’s not a good investment if you want to use it as your primary residence.
For many Singaporeans, purchasing a home represents a milestone in life that has been celebrated for generations. It usually involves a person’s first independent move, marriage, and, um, debt for the next 25 years.
Unfortunately, the current state of the Singapore real estate market is not encouraging, as prices have been steadily rising despite the implementation of cooling measures and the recent epidemic. The fact that homebuyers are still experiencing BTO delays makes it that much longer until they can get the keys to their unit.
Additionally, interest rates in Singapore are skyrocketing as a direct result of Fed rate hikes. That implies the cost of everything for the home, including mortgages, home improvement loans, furniture, and utilities, are also increasing.
As a result, many people who were planning to buy their first house or upgrade are now renting, buying resale flats, putting off their purchase, not upgrading, or even turning to the private housing market. And the final one might explain why private home costs have skyrocketed.
It will be quite challenging to purchase a property in 2023. Here are some suggestions to help you avoid common pitfalls before, during, and after purchasing a property.
1. Make a long-term financial plan from the start
You should start budgeting years in advance before actually purchasing a property.
Here are a few first steps you should take:
- Determine how much you can pay in cash and CPF savings by checking your bank and CPF accounts (discuss this with your partner if you’re purchasing a home together).
- Figure out the most you can spend for the home, including the down payment, the monthly payments, and any other expenditures, such as closing costs and legal fees and stamp duty.
- You should get In Principal Approval (IPA) for a mortgage from the bank before you commit to a specific house.
- Determine how much cash you will need to put down on each of the properties you’re considering and how high your monthly payments might be.
- Do your research to find the best home loan possible by comparing rates and terms.
2. Talk to other homeowners and grab an IPA
In 2021, when we’re facing so many unknowns and the pandemic hasn’t even ended yet, we may have learned a lot from the struggles of the first-time homeowners.
Ask your friends who have already made the commitment to buy a property for their advice. Investigate their area or home, inquire about remodeling, and ask for referrals to their preferred service providers.
This may all sound very nosy, but starting from scratch with no prior knowledge is never a good place to be, therefore it’s always a good idea to do thorough research.
For added assurance, it is wise to submit an application for In-Principle Approval (IPA) in the company you wish to loan for a property such as DBS, Property Guru, and etc. This can be done prior to making any concrete plans to buy a home, and it allows such companies to confirm the maximum loan amount they may be willing to extend to you for a given property. Once you have your IPA in hand, you can move through with the purchase, assured that you won’t have any trouble getting the funds for it.
3. Have a range of prices in mind when house hunting
Don’t let the quest for your “dream home” be hindered by unrealistic expectations. Since you never know when you might fall in love with a location that is a bit more or less expensive than what you originally planned, it’s best to keep your options open and your budget flexible.
You can make use of tools like property Marketplace to find your ideal home without breaking the bank. Its organized layout is what sets it apart from similar property search tools. Instead of randomly clicking around, you may search for homes that fit your criteria and price range and then save the ones you like.
4. Find ways to save money by researching online
Whether you’re conducting extensive work on a resale HDB flat, going for an intricate design, or buying new furniture, the cost of home renovation, furnishing, and other services can add up quickly.
Some Singaporean interior designers are questionable, but most are trustworthy. Make sure they fit all of these criteria and are HDB-approved.
Searching on a marketplace that only features approved interior designers and allows you to get free quotations from firms with no strings attached, is another option to word of mouth and manual examination of background info online.
To save money on home furnishings while you wait for your new house to be built, it’s smart to look for stores that offer discounts.
Opportunities can be found during the regular sale seasons or annual fairs/expos sponsored by major retailers.
To save money, you and your new neighbors may want to consider pooling your resources to get bulk discounts.
Not picky and hoping to lessen your carbon footprint? Choose products that are on display or check out secondhand shops, but be sure to inspect them well to ensure they are in good shape.
When you buy multiple items from the same store, you might try haggling with the cashier for a discount or asking about a package deal to save money.
You can also ask close friends and relatives if they know anyone who can get you staff pricing or direct discounts at local businesses. There’s a chance you may save money on a new appliance or a fancy new furniture!
Last but not least, always pay with a credit card to maximize your rebates, perks, and points!
5. Keep in mind that property ownership comes with ongoing expenses
Just because you’ve purchased a house and renovated it doesn’t mean you’ve arrived as a homeowner. There are always going to be expenses associated with maintaining a home, such as utility bills, groceries, internet service, cable, repairs, upkeep, personal care products, and more.
The cost will range from moderate to high, depending on the square footage of your home and your utilization habits. You may try to put aside between $500 and $1,000 every month for the aforementioned expenses.
Inflation and the recent electricity price hike can be difficult to manage financially, but there are ways to cut your bills and expenses
If you’re trying to cut costs as an adult, eating at home more often, looking for coupons or new customer discounts online, buying in bulk, or doing a “group buy” with friends or neighbors are some of the good options you may take.
Always think about how you may maximize the rebates, perks, and points you get with your credit cards.
6. Finally, take some time to relax
Purchasing a home is a huge undertaking that can cause a lot of stress. Realizing the full extent of the expenses may take several years.
The good news is that with preparation, the trip can be significantly less nerve-wracking. While it’s true that no major project ever goes exactly as planned, especially in the uncertain year of 2023, there are steps you can take to make the process easier.
Use the steps mentioned above to help you make smart decisions in buying a home, or if you’re not yet sure, seek professional help and personal financial counsel before buying a home.
Conclusion
Whether or not you decide to buy a house ultimately depends on practical concerns, such as the immediate need for extra space to start a family, rather than market conditions. Be careful to make wise choices that won’t break the bank.
Whether you choose to buy a house or continue renting depends on your priorities and the circumstances of your life. When making crucial decisions, make sure you’re doing so for the right reasons.