As much as we’ve all gotten used to the new normal in one way or another, spending a 6- or 7-figure sum of money in the middle of a pandemic wouldn’t be something on our minds. In fact, it’s most probably quite the opposite: The economy is declining, and we’re all thinking about how to save more money.
So how could it possibly be a good idea to buy property in this covid climate? What’s there to take advantage of if there is literally No. Advantage. To. Covid?
You might be surprised that Singapore has actually experienced property booms in times of economic recessions. Specifically, the Global Financial Crisis of 2008. The crisis caused property to become more affordable; coupled with the fact that many lost confidence in volatile investments and turned instead to more stable assets like property, there was a rapid surge in demand for residential property in Singapore.
Of course, living in a Covid-19 world, with its extreme measures of travel restrictions and safety protocols, brings a whole new level of unprecedented times…
…So, it’s only natural to feel like you need to think twice, even if you’re sure that buying property in Singapore is a totally logical move for you. Here are some considerations to help you ensure you’re making the right property purchase:
1. How much money are you saving from lower interest rates?
2. Will your move-in timeline be affected?
3. Do you have holding power?
How much money are you saving from lower interest rates?
Bank loan interest rates are at an all-time low, some of them even dipping below 1% at certain points of time this year. (In comparison, it was almost 2% at its peak last year, and hovered around 3-3.5% pre-Global Financial Crisis.) This is also one of the biggest reasons why industry experts, not just in Singapore but around the world, encourage buying property during this period.
This is applicable to you even if you’re planning to first take up a HDB loan to finance your HDB flat purchase. Many HDB loan takers go on to refinance their HDB loan with a bank loan, since finding a loan with a lower interest rate can help you save money in the long run. If you’re confident that the low interest rates will prevail until then, then you can benefit from it too.
Will your move-in timeline be affected?
Moving into your very own new home is exciting, but it can also be equal parts stressful in the case of unexpected delays and hiccups.
For example, because of the disruption to construction-related sectors in Singapore, some of the BTO projects that were slated to be completed in the next few years are facing delays of up to 9 months; for the same reason, up to 30 new condos are also facing the similar delays.
In this regard, you might find that it’s safer to buy a resale HDB flat or condo since the buying process, from the house-hunting to the signing on the dotted line to eventually moving in, is much shorter, which leaves much lesser room for any setbacks to happen.
Do you have holding power?
It’s largely agreed upon that Covid-19’s long-term impact on property prices would be minimal. Prices might dip or growth might slow down because of poor economic conditions for now, but this could be an even better reason to buy a home now, given the potential of a higher resale price in the long run.
The caveat? The key here is that you’ve got to be looking at things long-term. In other words, you’ll need to have holding power – the ability to finance your home, even in times of crisis, until things start trending upwards again.
Some things to consider include:
How stable is your income? People in the self-employed sector were some of the hardest hit in terms of income, even prompting the government to announce a Self-Employed Person Income Relief Scheme. Do you have enough savings (at least 6 months’ worth of your monthly salary), or diversified streams of income, that can sustain you and pay off your mortgage if you were to be affected too?
For extra income, are you open to renting out? Say, the spare room in your house? Passive rental income could be a great way to ease your financial burden. More and more Singaporeans are looking to rent, because of work-from-home demands and privacy needs, widening your tenant pool.
Thinking long-term, how will your financial situation change in the future? Are you planning to start a family? This could also mean that one of you quits your job to become a stay-home parent. Will your finances allow you to go from a dual to single-income family?
Is Covid-19 a good time to buy property?
If anything, Covid-19 has reinforced the importance of having a safe place to call home.
Ultimately, if you do find a home – be it a HDB flat or a private property – that fits comfortably within your financial means, investment strategy, and as your lifestyle, even a crazy time of a pandemic could prove to be a “good” time to buy property.