Few things can rival the thrill of receiving the keys to your first home. For most of us, this is probably our single biggest investment. As a buyer, how can you ensure that you pick the right home?
1. Do your sums
First, figure out how much you can afford. If you are taking a loan from a bank, at least 20 percent of your home’s purchase price must be paid in cash and/or from your Central Provident Fund (CPF) savings.
Under Singapore’s Total Debt Servicing Ratio (TDSR) framework, you can only use up to 60 percent of your total monthly income to repay all your debt, including housing loans, car loans, and credit card payments. Some financial advisors even recommend that you spend no more than 35 percent of your monthly income to pay off long-term debts such as home and car loans.
Don’t forget to factor in other costs – such as stamp duties, legal fees and property taxes – and to budget for a potential rise in the interest rates on your mortgage.
2. Find the right location
Once you’ve cleared the financial hurdles and start looking to purchase a home, keep in mind the golden rule: Location, location, location.
There are two aspects of a well-located home. First, how close it is to town – which tends to correlate to its price and how well it keeps its value. If you work in the Central Business District, staying in the city or city-fringe areas can also save on commuting time and costs, allowing you to avoid lengthy traffic jams and ever-rising ERP charges on expressways.
The second aspect is how convenient the location is to you personally. Many people prefer to stay near their parents or workplace, or in a bustling residential district with plenty of shops and services, such as Tiong Bahru.This heritage zone has been stylishly revitalised by specialty businesses, modern eateries and artisanal cafés. With its convenient location at the CBD fringe, residences here are popular among those working in the CBD.
Even within a given district, properties can vary in price depending on their proximity to amenities such as MRT stations, schools, park connectors and malls. Generally, developments within walking distance of an MRT station command a premium and retain their value better over time. It is not uncommon for land prices to rise significantly around the sites of newly announced MRT stations.
3. Decide on age and tenure
Narrow down your options within your selected neighbourhoods. First-time buyers often prefer brand-new homes, as these require less renovation. Budget-conscious buyers, however, may opt for older resale units as these tend to be cheaper.
Also consider a property’s tenure. Traditionally, freehold homes have been more popular, but recent trends indicate that this preference may be changing. Homes on a 99-year lease are mostly cheaper, hence more attractive to first-time buyers.
4. Gaze into the future
Nationwide government policies often have an impact on property prices and other home buying considerations. The Seller’s Stamp Duty imposes a levy on homes resold within four years, so it is crucial to buy with your future needs in mind.
Neighborhood redevelopment plans also influence property values. The URA’s master plan, which is released every five years and guides Singapore’s development over the medium term, is a good reference to upcoming growth areas, key infrastructure and new facilities that will be built in the near future.
Given the large capital outlay involved, there are many things to mull over when buying your first home. But with sufficient research and prudent choices, it is also a momentous experience to be enjoyed.