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Psst! Have you heard? According to rumours swirling on cyberspace, the Singapore government might decrease the loan-to-value housing loan from the current 80 percent to 70 percent to curb demand for private homes.
This rumour comes hot on the heels after the Monetary Authority of Singapore’s (MAS) expressed concern that a speculative bubble could form, prompting them to take possible further measures, on top of the release of land announced recently for mass market developments.
Although the government has yet to announce such possible measures, my advice to prospective homeowners is, they should assess their financial position before taking a plunge in the property market.
This means prospective homeowners have to be fairly cash rich to be able to afford not only the initial down-payment, but also the progress payments plus the ability to absorb shocks in the market.
There are two possible scenarios for such shocks.
The first is the possibility that homeowners could suffer losses should economic growth prove to be weaker than expected, resulting in a fall in home prices.
The second is the possibility that homeowners might have to pay more for their monthly installments should the economic recovery stay on course.
Bank interest rates, which are now at a record low, are helping to fuel the property market.
So should the economy recover, interest rates will also rise causing homeowners to fork out more money for their monthly mortgage.
For those of you who can only afford to pay the initial down-payment, my advice is to set aside at least 30 percent of the property price. This is to prepare yourself should the loan-to-value loan be adjusted from 80 percent to 70 percent.
The next step is to buy private homes from the secondary market which are close to receiving their Temporary Occupation Permits (TOPs).
Try hunting for homes, particularly from investors who are desperate to offload their properties, as you will be in a better bargaining position.
Happy house hunting!
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