What Hidden Costs Are There When Selling Your House?
TLDR When selling your house, be prepared to cover expenses such as outstanding home loans, legal fees, property agent commissions,...
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TLDR
The article discusses the evolving trends in the Singaporean real estate market, focusing on the affordability and accessibility of different housing options. It highlights the rising prices of private properties compared to public housing, shedding light on the challenges faced by average-income families in purchasing their dream homes. The narrative also delves into the impact of income levels on property ownership, particularly analyzing the affordability of various housing options for different income brackets. Additionally, it touches upon the social implications of widening wealth gaps due to disparities in housing markets. The article concludes by emphasizing the importance of holistic housing solutions that not only address affordability but also foster community well-being and social mobility.
Living in a snug 3-room flat, Ms. Chen and her husband have their sights set on a much loftier abode – a dog-friendly condo with secure walking areas. They’re hoping to make this move in about five years.
When they bought their current place last year, it was a resale. They didn’t want to hang around for four or five years waiting for a Build-To-Order unit. But, they’re not counting on making enough from selling their flat to cover the cost of their dream home.
Ms. Chen is a bit worried about how things will pan out. Private property prices are sky-high, and who knows what will happen when the five-year minimum occupation period for their public housing flat is up?
“Five years is a long time… private house prices have always gone up, never down. Land’s limited but there’s no cap on demand,” she observed. “Nobody can predict where prices will be in five years.”
Despite a tiny 0.4% dip in private property prices in Q2 of 2023, they’re still hitting record highs. Over the last three years, they’ve shot up by about 28%. Freshly launched condos are experiencing even higher price hikes compared to resold units.
How do we measure if a house is affordable? One way is to compare the average home price to the median household income – this shows us how long it would take to buy a house if you saved every penny earned.
In a 2023 study by the Urban Land Institute, they found that in Singapore, the average private home price was a whopping 13.7 times the median household income. For public flats, it was a more manageable 4.7.
Dr. Lee Kwan Ok, who chipped in on the study, pointed out that typically, if this ratio is over five, a city’s housing is seen as unattainable and pricey. So, while public housing in Singapore seems within reach, private housing is another story.
The study revealed that private homes in Singapore are the priciest in the region. But, thanks to Singapore’s high median income, its housing affordability isn’t as bad as some other cities. Compared to places like Beijing, Shenzhen, Hong Kong, Tokyo, and Seoul, Singapore’s housing-to-income multiple doesn’t look too shabby.
ATTAINABILITY OVER THE YEARS
Over the past ten years, there’s been a pretty big jump in the cost of condos in Singapore. According to the Urban Redevelopment Authority (URA), the price tag for non-landed properties (think condos) has shot up. But don’t worry too much, folks are earning more too.
In 2022, the average family was bringing in about S$10,099 every month. That’s a 33% increase from S$7,566 in 2012. During the same time, the typical condo price went from S$1.07 million to S$1.59 million.
Now, if we compare the price of private housing with what people earn, we see that this ratio dipped a bit from 11.73 in 2012 to 10.87 in 2015, then it slowly climbed to 13.14 in 2022.
But here’s the catch: brand new condos and resale ones don’t follow the same pattern.
The 99-SRX price index tells us that over the last decade, property prices haven’t grown as fast as the average income. But new private homes? They’ve zoomed past income growth.
“Check this out, guys. Over the last ten years, while the average income grew about 39%, the price of resale condos rose by 32% and new sale condos shot up by 74%,” says Mr. Luqman Hakim from 99.co.
OrangeTee & Tie Research & Analytics took a look at URA’s data and found that last year, a new condo came with a S$1.95 million price tag. That’s about half a million more than a resale condo, which sold for around S$1.39 million.
So, how does this affect folks’ ability to afford a home? Well, it’s gotten tougher to afford a new condo. In the last five years, the ratio of condo prices to income jumped from 10.84 to 16.06. This means an average family would need about 16 years of their income to buy a new condo.
On the other hand, the ratio for resale condos stayed pretty steady, about 11 to 12 times the average income. And HDB resale flats? They’ve been affordable for the past ten years, with the ratio staying under five.
Just remember, private homes are still out of reach for most, as they house less than 30% of Singaporeans. So, they were never really meant to be affordable for the average.
ATTAINABLE FOR INCOMES OF S$12,000 AND ABOVE
Here’s an interesting piece of info: a standard condo in Singapore, priced around S$1.6 million, is within reach for a couple pulling in about S$10,500 monthly. This is according to the affordability calculator.
Let’s dive deeper into this scenario. It assumes our imaginary couple can secure a housing loan of up to S$1.2 million, which is 75% of the property’s value. They’ll be paying it off for 30 years at a 4% interest rate. And yes, they should have stashed some cash for the down payment, legal stuff and other odds and ends.
Of course, life isn’t that simple. Many average-income families juggle car loans and all sorts of bills. Plus, we’re assuming they don’t already own a house, so no extra tax (ABSD) comes into play.
Still, this example helps us understand that owning private property isn’t impossible for about 40% of Singapore’s income earners – given their other commitments aren’t sky-high. A more realistic number might be the top 30% of households by income.
What about those with incomes just above the average of S$10,099? Executive condos (ECs) might be a good fit. One cool advantage: no need to pay the ABSD upfront.
Mr Luqman says, “We still see great options and fair prices in new sale and resale condos, including ECs. They’re achievable for households usually earning around S$12,000 and above.”
Now, new launch condos are a different ball game. Their prices have shot up since COVID-19 hit, with the average new launch condo price now closer to S$2 million. The median price per square foot also crossed the S$2,000 mark last year.
But here’s the thing: condo launches are like magnets drawing in potential buyers. Take the Grand Dunman, the only development with over 1,000 units this year. On its first weekend preview, it pulled in about 10,000 people!
And these folks aren’t just window shopping. Recent condo launches have seen solid sales, despite high interest rates and an unpredictable economy.
Take Grand Dunman, near Dakota MRT station; it sold more than 520 units on launch weekend. And Tembusu Grand? It sold 53%, or 340 out of 638 units, during its launch in early April at an average selling price of S$2,465 per sq ft.
Leonard Tay, at Knight Frank Singapore, tells us that Singaporeans with deep pockets have a strong appetite for new homes. This hunger is driven by their dreams and ambitions, thanks to growing up in a time of increasing wealth.
So who are these folks buying up property like it’s going out of fashion? Well, property firms tell us that most of them are first-time buyers, dipping their toes in the real estate pool.
Luqman has spotted a shift in recent years. It seems the people snapping up new private residential projects already own their slice of the property pie. In past times, these buyers were usually upgrading from HDB properties.
Luqman reckons this might be because people are selling off their existing private properties and using the profit to invest in new ones. Combine this with rising incomes, and it’s no surprise that new home showrooms are buzzing, even though prices are hitting the roof.
The Business Times recently reported that over 80% of the units at Reserve Residences in Upper Bukit Timah were sold at an average price of S$2,460 per sq ft. Most buyers fell in the 31 to 40 age bracket, but a good chunk was also between 21 and 30.
Luqman notes that these new condo launches are attracting more young’uns or millennials. Some experts think these younger folk have more spending money or get financial help from their families.
Luqman says, “These youngsters often have two incomes and smaller families compared to older generations, which means they’ve got more cash available to put towards property.”
Some analysts also reckon that these young homeowners might have gotten a helping hand from their well-off parents. Leonard Tay points out that while a household’s income is a key factor in housing affordability, it’s not the only source of capital.
Looking back, at least two generations of Singaporeans have benefited from the country’s growth from a developing to a developed nation. The savings accumulated mostly by baby boomers and partly by Generation X, have been used to fund their children’s dreams of owning private homes.
Tay added that families upgrading from HDB flats bought through the BTO process can use the profits from the sale after the five-year MOP to step into the private market.
Dr Lee Nai Jia, the head of real estate intelligence at PropertyGuru suggests, “In the past, a family’s climb up the property ladder wasn’t so tied to their parents’ assets. But we’re seeing this connection grow stronger.”
HOUSING & SOCIAL MOBILITY
We know that HDB flats, home to almost 78% of people in Singapore, are affordable for most folks here. So, why does it matter that we have some of the priciest private homes in Asia? After all, more people own their homes here than almost anywhere else worldwide.
When condo prices shoot up much faster than HDB flat prices, some folks might decide to put their money into private condos instead, says Dr Lee Kwan Ok. This could mean the two markets split further apart, causing an unbalanced financial situation between households.
Dr Lee Nai Jia believes it’s not just about getting a place to call your own. If the two housing markets keep growing apart, it could cause a bigger gap in society, especially between those with property-rich parents and those without, he adds.
According to him, it’s all linked to wanting a better life. So, we need to come up with housing solutions that aren’t just about being affordable. They should also help build a strong community and personal growth, he suggests.
When there’s a big difference in wealth, it can shake up society. That’s why the government is focusing on keeping our social promise and making sure public housing is accessible to everyone.
On the other hand, Professor Qian Wenlan, head of NUS’ Institute of Real Estate and Urban Studies, doesn’t think there will be a big divide. She believes most people in Singapore are mainly worried about whether they can afford public housing.
She also thinks that public housing prices could influence private property prices.
Adding more homes to the market can help control price increases in public housing, which might affect the overall property market, she explains.
In general, she reckons public housing will stay affordable for most people, particularly since the government prices BTO flats based on average incomes, not market demand.
“PRIORITISING WHAT REALLY MATTERS”
Analysts give Singapore’s government a thumbs-up for managing housing needs pretty well. They contrast it with places like Seoul and Hong Kong, where folks have a tough time finding a place to live, according to Dr Lee Kwan Ok.
Dr Lee pointed out that in Seoul, there just isn’t enough public housing. Plus, private homes cost an arm and a leg. This makes young people think twice about getting hitched or starting a family because they can’t afford a home.
Hong Kong isn’t much better. It takes ages to get public rental homes, and most people are pushed towards pricey private housing.
On the flip side, Sociologist Tan Ern Ser believes that in Singapore, everyone has a shot at moving up in life. However, he admits that the odds of climbing the social ladder aren’t the same for everyone.
He reckons that the government is doing a good job making public housing pocket-friendly and appealing. They’re rolling out new housing projects like Bidadari, Tengah, and the Southern Water Front. At the same time, they’re encouraging folks to redefine success beyond material things.
Dr Tan said, “We might not completely fix this gap between public and private housing. But we can aim to lead a fulfilling life, focusing on what truly matters: our wellbeing, loved ones, and sense of community.”
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
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