If you are updated with the latest in property, you will know that Singapore housing prices are trending down. In fact, the private residential property index decreased by 3.83% (or 3.45% when adjusted for inflation) in Q1 2015. However, the downward shift in pricing does not automatically mean that it is a good time to buy your own space.
Buying a home is one of the greatest financial commitment for most Singaporeans. It is a long-term commitment and responsibility that you must carefully plan for. Start by determining what you can afford as well as what you need to pay for. What you can afford depends on your total income, existing debts, savings on-hand, and loan eligibility.
Upon figuring these things out, examine if you are committing to a home for the right reasons. Otherwise, you will be a victim of these extremely wrong decisions…
1. TO EXHAUST ALL THE CONTENTS OF YOUR CPF ACCOUNT
If you are thinking of purchasing a home because you can simply deduct almost all the expenses from your CPF savings, think again! You can use your CPF savings to pay for a part of the home and to service the loan but not for the monthly expenses (e.g. mortgage insurance or conservancy and management service fees). You need to have sufficient cash to pay for these ongoing payments in addition to meeting your current monthly living expenses (e.g., rent and telecom bills).
A better reason to purchase a home is the fact that you already have savings to cover for the upfront payments such as the down-payment, agent’s fees, and stamp fees.
2. TO SUPPLEMENT YOUR “STABLE” JOB
Are you fond of your current occupation? How long have you been in the organization? Are you confident that your position is stable for the next couple of years?
The truth is, you can never be 100% sure that your job is secure. You can argue that CEOs or founders of the company can keep their jobs for the longest time but then again there’s the case of the Lehman Brothers. When deciding on whether or not you shall buy a flat, consider your current job situation as well as the workplace climate. To be sure, hold off a few years and grow your savings first before making this important investment.
3. TO SATISFY YOUR NEED TO MOVE
If you love the thrill of moving to a fresh nest and constantly changing your neighborhood, you will realize how difficult it is to sell your relatively new home in a short period of time without encountering a big loss. This is because most people prefer homes with better home equity. You cannot build a high value of ownership for your flat overnight!
4. TO COHABITATE WITH YOUR CURRENT PARTNER
As Nelly’s song goes: “Lovers to friends…why do all good things come to an end?”
With relationships, you have little to no certainty about what happens in the future. You may be in the best terms now but who can really be sure that you will end up together forever?
If purchasing a flat together is your solution to fixing an unstable relationship (even if you are engaged), what will you do if your partner suddenly vanishes? Or perhaps if he or she goes unemployed after a few months? You will have to carry the burden of the mortgage and all the monthly costs on your own. This poor reason for housing commitment will affect your credit.