A boring Dragon Year for the housing market could be ideal for locals looking to rightsize
THERE was much energy and passion among panel members at the recently held BT Property Outlook 2024 Seminar. And the audience participation was great.
However, amid all the buzz from the event, my key takeaway was that the Dragon Year could be boring for Singapore homes.
Private home and Housing and Development Board (HDB) resale flat prices might be relatively stable in 2024, with prices possibly inching up in the low single digits.
Meanwhile, the volume of private and HDB resale homes sold may be moderate. Many new private home launches might see take-up rates of well below 50 per cent at launch weekends.
Nonetheless, a yawn-inducing backdrop could be ideal for many people who are looking to rightsize their homes. As it stands, the proportion of owner-occupied resident households in Singapore is about 90 per cent.
Think about it. Neither a weak nor a strong housing market is good for residents who hope to sell an existing home and buy a replacement unit.
Sure, if home prices fall, one could snare a new home at a bargain price. However, in such a case, one may struggle to sell one’s existing home for a good price to free up the funds to buy the new home.
Also, a local buyer may need to divest an existing home first to avoid incurring Additional Buyer’s Stamp Duty (ABSD) when buying another home.
On the other hand, when buying momentum is strong and prices are rising rapidly, one could possibly sell a home at a price that is substantially above one’s expectations.
But, home prices might rise significantly in the period between the completion of the sale of one’s home and the time of a purchase of a new home. Moreover, one may fail to secure an ideal replacement home because one could not get a good ballot number at a new private housing launch or was out-bid for a resale home.
A “Goldilocks” housing market, which is neither hot nor cold, may suit locals who are looking to rejig their residential property portfolios.
Selling a home
Prevailing market conditions appear fine for sellers whose price expectations are reasonable.
If one owns a spacious HDB flat in a sought-after location, one might join the growing number of people who sold their HDB homes for over a million dollars each.
Demand for HDB resale homes is supported by people who cannot buy HDB flats directly from the statutory board, as well as those who are looking to get a home for immediate occupation. The large price gap between private home and HDB resale flat prices also supports demand for HDB resale homes.
A private homeowner might benefit from private home buyers who are looking at resale instead of new homes because of the large price gap. In some instances, a new private home could cost over 50 per cent more on a per square foot basis versus a resale home in the vicinity.
Subject to meeting various conditions, a married couple that comprises at least one Singapore citizen can claim ABSD remission when buying a second home. Also, single Singapore citizens aged 55 and above can claim a refund of ABSD paid on the second home, subject to various conditions.
A condition for getting the above favourable ABSD treatment is that the buyer must sell the first home within six months after the date of purchase of the second property for completed property, or the issue date of the Temporary Occupation Permit / Certificate of Statutory Completion, whichever is earlier, if the property was uncompleted at the point of purchase.
With a fairly benign market for home sellers, couples and singles who buy a second home first may feel confident that they can sell their first home within the stipulated time frame.
Buying a home
One can likely house hunt over the next couple of months in a calm and rational manner, and not in a frenzied atmosphere where one feels rushed to sign on the dotted line for fear of missing out.
Some of the buying frenzy in HDB resale flats has come off due to the increase in the supply and completions of new HDB units. Possibly, one need not have to pay high cash over valuation, which is incurred when the purchase price of an HDB resale flat exceeds HDB’s valuation of the said flat.
Amid more tempered demand for new private home launches, one has better odds of securing a good place in the queue to select a unit. Also, there may still be desirable units available post the initial launch weekend at prices which are similar to the initial launch prices.
When hunting for private property in the resale market, one may have ample time to systematically view many potential prospects and arrange second or third viewings of shortlisted homes. And agents might be more patient in fielding queries.
Additionally, negotiations to close a resale deal could be less intense where there are fewer competing bidders. Also, a vendor may not suddenly withdraw a property for sale or substantially hike the asking price, which might occur in a bull market.
From a financing view point, home buyers should benefit from the adequate liquidity in the credit market here and stability on the interest rate front.
Mobility
While conditions appear fine for local homeowners looking at rightsizing, rejigging property portfolios entail considerable costs.
A home seller’s main cost is likely to be the agent’s fee. The sales commission payable on a S$2 million home is S$40,000 based on the commission rate of 2 per cent.
If a Singapore citizen then buys a S$4 million home as his first home, he incurs Buyer’s Stamp Duty of S$179,600.
Besides the above costs, moving from one owner-occupied home to another involves expenses such as legal fees, relocation expenses and renovation costs.
Still, rightsizing a home can yield huge benefits. Plenty of funds may get freed up in the process. Or one might get a much larger home to comfortably house a growing family.
As economic circumstances and household needs change, many households may look to rightsize their homes.
While the Dragon Year might be unexciting for the housing market, now could be a great time for local homeowners to act on rightsizing.
