SHOULD I BUY/ UPGRADE TO CONDO NOW when the property market is so hot?
OR should I wait awhile?
Supply & Demand Situation
The value of a property is determined by the interplay of supply and demand, so let’s discuss these 2 factors.
1. Supply of private residential housing is expected to decline over the next 5 years
If the demand is around the same, but supply is lower so the price will go up as a simple logic, that’s the same reason why the property price shot up for the past 2 years due to supply dropping significantly during COVID.
Why is supply so low?
Many construction projects experienced delays during the COVID pandemic. Consequently, when the demand for houses bounced back after the pandemic, there was an insufficient supply of homes available.
2. Demand is very High.
Look at the Q42022 number below, the rental index increases up 7.4% and vacancy rate drop to 0.2%.
It’s due to demand rebounding after COVID. Locals needed larger house as many of them used to work from home already, and more foreigners came back to Singapore to work so the rent became higher. There is an increase in the number of owners buying property for investment as rental rates go up, and more people feel it is not worth paying rent and want to buy their own. When property prices rise, more buyers want to buy as they worry prices will continue to climb up.
Is it probable that the demand for housing will remain high? The answer is likely affirmative. Despite an increase in home loan interest rates from 1% to 3.5%++ in 2022, property prices are still on the rise."
It's common knowledge that keeping interest rates at such elevated levels for a prolonged period is not feasible. Consequently, it's expected that interest rates will begin to decline by the conclusion of 2023 or 2024. It's noteworthy that even with such high-interest rates, the property prices are still climbing. If the interest rate starts to drop, the red hot property market is very likely to come again.
(Please note that above is US Fed Fund rates not Singapore mortgage rate)
If you take a look at the labour market then you will know why the demand is so high, foreigners still keep paying high rent, wage growth is still good, the economy is doing well, I don’t see the demand will have any big changes other than economic recession.
In my personal opinion, if you're considering upgrading to private housing or purchasing a property for investment purposes, it may be wise not to delay until next year due to the lower supply of housing. This year could be an opportune time to enter the market, given that the home loan rates are likely to be around 4-5%. Consequently, some homeowners who are unable to meet their installment payments, particularly those who have lost their jobs in the tech industry, may be forced to sell their properties at lower prices.
If you would like to check the value of your current house: "Get Free Valuation"
If you would like to check how much you can loan, how much you can afford for your next house, or detail calculation for sell & buy please "Contact Us"