Article contributed by Dr Alan Poon.
Despite the country still being under a state of ‘emergency’, the recently concluded MCO 2.0 (with more relaxed rules for almost all sectors of the economy!) gave a glimmer of hope to SMEs in the country.
Real estate stakeholders are no different, as everyone is looking forward to a year of recovery, while anticipating a healthy trajectory ahead.
From the perspective of homebuyers, it is definitely a buyer’s market now as there are plenty of attractive deals from the primary to the secondary market, not to mention those properties which are going under the hammer (read: auctioned off!).
For first time homebuyers who are ready for bargain hunting, what do they need to look out for, before securing their dream home? Let us find out what four of these considerations are below.
1) A Buyer’s Market for Those Who Are Prepared
Good luck favours those who are prepared, as the saying goes, and 2021 might present the opportunity of a lifetime for those who are ready.
As we anticipate a recovery year for most sectors of the economy, real estate could be still trying to recover from the impact of a cautious spending sentiment by homebuyers.
This mentality is more clearly seen when incomes were either affected by job losses or salary cuts, where priorities have shifted to essentials, rather than big ticket items such as buying a house.
For property developers, this means demand has hit an all-time low, and liquidity (read: cold hard cash that's available in hand) tops the priority list whether for big or small projects.
To ensure units can be off loaded, these properties are likely to be given either a huge discount and/or attractive rebates to lure prospective buyers.
As a matter of fact, one does not need to wait until the market has reached rock bottom, or a recession to be declared: The time is NOW!
Not to forget, property overhang figures already show there is an oversupply of mismatched properties in the residential markets for a certain range of property types.
With that in mind, developers know that homebuyers could be spoilt for choice. As first time homebuyers, it is important to keep an open mindset to consider both completed and under construction projects.
Go based on what you need and can afford, as you have time on your side to decide the right one. Meanwhile, people who have been hard hit by the pandemic will turn to selling their houses for the needed cash to stay afloat.
The subsale market will present opportunities for those who have been looking for something established, and with the right skills to negotiate, some of these hidden gems can be unlocked for an immediate bargain too!
For those with a risk appetite/adventurous, auctioned properties can be an option, but bearing in mind that a caveat emptor still applies to whichever type of property we are going to buy.
The legal term ‘caveat emptor’ here can be roughly translated into: “Let a purchaser beware, for he should not to be ignorant of the nature of the property which he is buying from another party.”
2) Identify Your Most Immediate Needs
Despite the obvious choices presented in today’s market, are you buying a home because your family and/or friends are buying?
Everyone could be talking about the latest hottest project in town with great discounts, and they are supposed to become trendy, just by getting one of these!
Customary wise, our parents would want us to get a home before we get married as a form of security too.
There are plenty of reasons why anyone would want to start buying a home, BUT it is hoped that none of the above factors should be the reason behind one’s decision in making a long-term commitment.
Any purchase consideration of buying a home has to always start with the basis of a NEED. Why would you need to stay in your own property? Why now and not a few years down the road?
Are you ready to make the commitment to commute from a certain location for the next 10 to 20 years, taking into account that you could also be having different jobs or getting transferred to other places for work?
There are so many possibilities and therefore, we must always start to ask ourselves the true reason why we want to consider property buying our next step in life.
Now, generally speaking, there are at least two categories of first time homebuyers:
2a) Early starters: The faster you begin, the earlier to settle your home loan?
You are either single and want privacy by staying in a separate property from your family, or you feel it's better off paying for your own home rather than paying rent to your landlord who does not appreciate you.
Many first time homebuyers who make their first purchases are single. If you are in this category, you may want to have a proper financial plan in place.
This is because property buying could be a decision where you will eventually come to realise that paying off the home loan may not be your single most urgent commitment, as you progress in life.
2b) To settle down: Is it because wedding bells are ringing (in your head)?
Irrespective of age, many couples will want to move to a home of their choice of abode when the urge to settle down and start a new family finally arrives.
It is only right they seek to buy a house instead of moving from one to another, every other year. From afar, many may make this move if all goes well financially, but this is usually not the case.
This time, two individuals will need to discuss and form a plan in the eventual event that one loses their income, etc.
3) Evaluate Your Financials
Having discussed the above, property buying as one's own home or investment can be a pleasant experience IF and ONLY IF the numbers are right.
While the location, type and package, or layout of the property are other considerations to look at, the biggest consideration has always been about getting the RIGHT financials for the property to be purchased.
Remember, you are about to make a long-term commitment and it should give you peace of mind, rather than unwanted stress after sealing the deal.
Some of the financials that one is required to look into before purchasing a property (especially in 2021!) are the sustainability of your income, growth factors, and big plans like getting married or buying a car.
In most cases, it is advisable to put on hold other expense which are less ‘urgent’. Practising delayed gratification is a good way to focus on a property purchase.
This is, at least, until there are extra sources of income every month. It can come from either a side business or other form of income (not a windfall, as one needs a consistent income to sustain property mortgages from the bank!)
Equally important, aside from financing a housing loan, is also the available cash on hand you'd need to prepare such as for renovating the house, furniture, and the monthly maintenance fees (if it’s a strata property).
4) If It Is Too Good To Be True… Beware!
Property developers and sellers may throw in freebies and goodies for their properties, and this could be a sign of desperation to get rid of them off the market quickly.
As liquidity is of the utmost concern for these developers, solvency of the company could be in question.
Facing such predicament, some of these developments could be offered with genuine discounts. If the location and other considerations are right, this could prove to be a good buy, if it fits your criteria.
On the other hand, you may want to hold your horses and not jump right into a purchase, so that you can do further research and deeper diggings on the property developer's financials.
Due diligence as such may be tricky and tough, but it could be saving you a lot of unnecessary headaches and heartaches!
Once you sign on the dotted line and for whatever reason, the property cannot be delivered on time, your financing on the project will still proceed which will cause unwanted stress.
Be careful of failed developments due to cashflow issues, as it may lead to late deliveries. In worst case scenarios, the project could be abandoned altogether, should the developer go into bankruptcy!
As much as this may sound scary, it has happened before and in most cases, many families are affected and suffering in silence.
Property Is Still A Necessity
In a nutshell, buying a home for the first time has to be based on your needs, and not wants.
Depending on the financial readiness at a particular stage in life, you can proceed with the necessary obligation to secure your needed home for own stay, or even investment.
While it may be wise to rent first, prices of property aren’t coming down across all types and locations.
Therefore, you need to really put in the effort to do plenty of ‘headwork’ and ‘legwork’ to find the suitable property for your immediate goals.
Never rush into buying a big-ticket item based on emotions, or ‘free’ advice, which may not suit your personal financial planning needs.
Here’s wishing you a safe journey into the arena of being a rightful home owner, especially from 2021 onwards! Buy responsibly, invest safely, and cheers to your successful first home ownership ahead!
Dr Alan Poon is an award-winning international speaker, serial entrepreneur and author of the three “Good Tenant, Great Tenant” book series on tenant management. As founder and CEO of SuperiorWealth Resources, a business advisory firm specialising in real estate solutions, he is also a media influencer for his contrarian insights and market observations of the real estate industry. Feel free to connect with him at his Facebook page, or email him at email@example.com