Young couple buying a house crop

Property affordability sentiment in Singapore remains low, especially among younger buyers.  

Recent news reports have indicated that private property prices in Singapore are expected to rise this year, raising fears that some buyers including young couples may find it harder to buy a new house. However, experts insist there are still good deals in the market. 

By Romesh Navaratnarajah

Singaporean Navin Kumar (not his real name) got married about two years ago, and while it should have been a happy time for the 33-year-old trader, he faced several challenges finding a suitable marital home. The biggest issue was “finding affordable housing that is in line with the pay-scale of normal working Singaporeans”, he told PropertyGuru. 

The issue was compounded by the fact that his wife was a permanent resident, making it trickier when it came to making property decisions as the regulations are different than for regular Singaporean couples. 

“Private property prices in Singapore may have come down (from their last peak in 2013), but in general it is still expensive for the general population,” said Kumar, who turned to renting a small unit in the Tanjong Katong area in the hope that prices would drop further in the future. 

“It makes more sense to rent now unless one has the cash reserves to put down on a house. With that kind of money, one could buy something larger and with more value overseas, so I don’t feel it makes sense to spend too much money on property in Singapore.” 

While he does agree that owning a home is important, his worry is that having too much mortgage debt under the current global economic climate is risky, especially given his view that Singapore is going through a transition phase in its economy. 

Singapore properties more affordable than in Malaysia? 

Although his concerns are understandable, property experts shared that housing prices in Singapore are still relatively affordable.  

“In fact, Singapore’s housing affordability level is even better than that of Malaysia,” said Alan Cheong, Research Head at Savills Singapore. He cited data from US-based urban development research company Demographia, which revealed that Malaysia’s house prices are more than 5.5 times the median income compared to Singapore’s 5.1 times. 

“If we use the affordability index computed by Numbeo (a cost of living comparison website), Singapore ranks at No. 72 on the list of least affordable cities,” he added. By comparison, Hong Kong is ranked No. 17 while Beijing is No.3 on the list. 

That’s of little comfort to Kumar who noted that affordability is subjective. “What one finds affordable may not be the opinion shared by others,” he said. 

His concerns are shared by many Singaporeans, with recent findings from PropertyGuru’s Consumer Sentiment Survey showing that property affordability sentiment here remains low.

The issue of affordability may get worse in 2018 with PropertyGuru’s Property Market Outlook report predicting that new launch prices could be at least 5.0 percent higher than last year.

Areas most at risk of a price increase include districts 10, 9 and 15 because of their proximity to established schools and the Central Business District. 

As such, the report encouraged buyers who have been waiting on the sidelines to purchase a home as soon as possible if they find something suitable.  

Still, Cheong has a more optimistic view that if one diligently looks for a property based on the person’s set criteria, there will always be good deals.

“There are always good deals because the property market is imperfect,” he said. “It is imperfect because of the relative slowness of information flow and the heterogeneity of physical properties (no two properties are the same, even if they are in the same condominium or housing estate).”

He added that the government’s concern about social and income inequality will mean that Singapore’s housing market should remain affordable for the foreseeable future. 

“In all likelihood, they should be benchmarking price increases with household income increases in the long term. Thus, young couples should not be afraid that they have or will miss the boat to buy homes, both public and private.” 

Young couple waiting to unpack boxes

Some couples prefer to rent first as they see it as a more affordable option.

Spot the opportunities 

Ismail Gafoor, CEO of PropNex Realty, admitted that 2017 was a good time for buyers looking to purchase private property due to lower entry prices, but he noted that there are still opportunities in the market.

Eugene Lim, Key Executive Officer of ERA Realty, agrees. “Prices have just started to recover, and so potential buyers will find that prices have not gone up by a lot yet. Any price increase is expected to be moderate in view of the cooling measures still in place,” he said. 

For instance, buying an executive condominium (EC) unit would be a good option for young couples as they would be able to enjoy lifestyle amenities with a smaller capital outlay, said Ismail. 

The next EC project to hit the market is Rivercove Residences at Anchorvale in Sengkang, which is expected to launch in Q1 2018. This is likely to be the only EC to launch in 2018. 

Buyers who do not meet the eligibility requirements to buy ECs can consider the resale condominium market, “where they can purchase units at affordable entry prices, much lower than that of new launches”, Ismail said. 

“Resale properties are good buys as they are to some extent under-priced today. Buyers should take this opportunity to make a move in their purchase before prices start to increase later this year.”

Cheong added that resale condos are suitable for buyers looking at owner-occupation as they are usually larger and come with relatively lower per square foot prices. 

For those who prefer to purchase directly from developers, Ismail pointed to balance units from previously launched projects still available in the market as well as new launches in 2018 such as The Tapestry at Tampines Avenue 10 and Twin Vew at West Coast Vale. 

According to Lim, new homes require less maintenance work and are usually move-in ready, but they also tend to be pricier than surrounding developments as they are new. “Ultimately, it boils down to the buyer’s preference,” he said. 

While young couples have the option of choosing either an EC or a private condo, Lim noted that public housing is often their first choice as it’s the more affordable option and comes with government subsidies.  

But Cheong cautioned that HDB resale prices may remain flat or dip for just one or two months. “With over 3,900 units being taken off the market by en bloc sales, the weight of money looking for housing will start exerting pressure on HDB prices to begin rising soon,” he said. 

For couples who are willing to wait and are not in any urgency to move, Ismail suggests Build-To-Order (BTO) flats, which are about 20 percent cheaper than HDB resale flats. 

Don’t be picky about location 

Another important consideration for young couples is location as distance to schools and workplaces will also influence property prices. 

Ismail reckons that with the government’s ongoing masterplans in place to rejuvenate various estates in Singapore, buyers can afford to be flexible in their choices.

“What is important is that young couples should buy within their affordability and choose the estate that would allow them to commute between work and home efficiently,” he said.  

Lim noted that non-mature estates such as Punggol and Sengkang are popular among young buyers because they are relatively affordable and well-served by amenities. 

Having said that, some buyers prefer mature estates for the enhanced convenience. In addition, HDB resale buyers enjoy the Proximity Housing Grant of $20,000, said Lim.  

As for first-time EC purchases, Cheong’s advice to young couples is not to be too picky about the location because most EC units are priced significantly below private condos, and hence after the Minimum Occupation Period, there should be an increase in prices. 

“For private properties, they may wish to look at older 99-year leasehold properties that could be ripe for collective sales a decade down the road,” he added. 

For now, Kumar doesn’t plan on getting the keys to his first house.   

“Our parent’s generation found value in investing in property and making Singapore home, but I’m not convinced that is the case today. I’m quite happy renting while weighing my options,” he said. 

  The PropertyGuru News & Views   This article was first published in the print version PropertyGuru News & Views. Download PDFs of full print issues or read more stories now!