Why amateur property buyers’ seemingly good investments can turn into big regrets later? Their purchase often follows a certain pattern. Take extra precaution if you find yourself in similar situations:
1) When you are surrounded by “noises”
Everyone talks about properties. Your family, relatives, friends and colleagues all show interests in buying properties. The media talks about how hot the market is. The continuous climb in prices convinces you that you cannot buy at the same price again tomorrow. Buy immediately or you will be missing the boat. It is now or never!
2) When you have the need
You are getting married or planning to do so. Your wife just gets pregnant and she wants a new place. The tenancy is ending soon and the landlord is likely to increase the rent.
3) When you just save enough for the down payment
You finally save enough for the down payment. You can’t wait to be a proud house owner.
4) When you have extra cash
For this considerable sum of unexpected bonus, inheritance, lottery prize, severance pay or pension money, you don’t feel comfortable putting it in a saving account to earn that humble interest. You are also afraid that you will spend it all if you don’t put it into some “good use”.
A weekend visit to the showflat, an agent’s eloquent speech, a reluctance to turn down a good offer, a desire to snap the last good unit before someone else grabs it — you end up with a purchase that costs you between hundred thousands to millions.
These “desperate” buyers take the plunge without doing enough research or taking serious considerations. Many lament later of buying in a bad location, at the wrong price, from a bad developer, and above all, without much holding power.
I used to think the same way when I first ventured into properties. Share with me if you have similar experiences.
Hi, thanks for sharing your insights. You mentioned one of the common mistakes a 1st time buyer commits is to buy when he/she has the need.
Assuming you have just started a family and would need your own housing, would you rather rent and wait for prices to drop (while they may not in the near future) or are you better off buying now given the low interest rate environment and spend the money towards paying off an asset rather than an expense (rent)?
This is a question commonly faced by new couples.
Singaporeans generally believe that if you buy a place, at least you own it after you pay off your mortgage. Renting is considered as helping the landlord to pay the loan.
Personally, I believe that:
1) Your residence is not your ‘asset’ but the bank’s. Even when it is fully paid up, it is not counted in your total net worth (because you need a place to stay anyway).
2) Interest rate is a percentage that can move up anytime. In 2005, I had a loan for one of my investment properties at 0.98%, plus upfront 5% cash rebate of the mortgage amount. UOB was even offering 0% for the 1st year. Two years later, the interest rate shoots up to 4%.
3) Rent is a monthly expense, so is interest of the mortgage. The difference is that buying involves the following costs as well:
– Initial investment: 20% deposit, stamp duty, legal fee, renovation, furnishing, etc.
– Monthly expenses: mortgage, property tax, maintenance fee, etc.
You can ask yourself these few questions when making the buying/renting decision:
1) Are you afraid of buying an ‘overpriced’ property and tie down to the loan for the next 20 to 30 years?
2) When you want to move out of the place, if the prices drop, are you willing to sell at a loss?
3) If you don’t put your initial sum (20% deposit, renovation budget, etc.) into your own residence, can you put it into other investment? Can it generate a good return and help you to pay for a ‘value-for-money’ place that you found in the future?
Hope this answers your question.
i am going to be under one of these soon. 🙁
Haha! Hope this ‘self-fulfilling expectation’ won’t come true.
Really love reading yr blog, v enlightening. Wish i had read it in 1996 or 2009 🙁
I was the “desperate” one who bought one in 1996 (getting married); sold it in 2009 when break-even as I need a bigger space as kids come along. another reason to sell was many neighbours bought theirs cheaper than mine by 30% to 50%.
Currently still hunting for a home while renting. feeling quite lost.
Really v bad timing for me. was expecting another recession, didn’t expect the superpowers to print money to postpone their problems.
Still wondering when can I buy the next affordable one cos my money is shrinking due to inflation? Definitely not now, agree with u “why U can’t buy it now”.
Thanks for your comment.
Not too bad. At least you learned the lesson when you’re young when you can afford the mistake by earning the money back.
Your patience will be paid off. With a strong Singapore dollar, Singapore’s inflation is nothing compared with other countries. I’m sure that the money you saved from NOT buying during the good times is more than enough to cover the rent you’re paying now.
Good luck in your next purchase!