Many young people find property prices, including HDB flats to be too expensive. Here are some suggestions on how they can cope.
1. Rent a room first. Choose a location close to where you and your spouse work. The saving in travelling cost and time can be significant. Many people are willing to rent out a room to a newly married couple with no children.
2. Stay with your parents, if they have a spare room. They may welcome grandchildren, and can help to take care of them. Remember to pay them a rental also.
3. While renting a room, you can keep your savings in the CPF to earn interest at 2.5% per annum or invest them in a low cost index fund (such as the STI ETF) to earn a higher return. Build up the savings towards the down-payment for the property that you buy later.
4. Wait for the property price to drop, before you buy your home. In a property slum, the prices can drop from 30% to 50%. A slump can come once every 10 years or so. Be patient. The drop is likely to be more severe with condos and less with HDB flats.
5. Some people expect the next slump to be in 2015, when interest rate spikes up globally and there is a large supply of new units. I tend to agree.
6. Buy a property within 5 years of your family income and pay off the loan within 25 years (or shorter). Choose one that is smaller or located in a new town to fit your budget. Do not take the maximum repayment that you can afford now, as you have to allow for an increase of interest rate in the future.
I hope that these tips are useful to you.
1. Rent a room first. Choose a location close to where you and your spouse work. The saving in travelling cost and time can be significant. Many people are willing to rent out a room to a newly married couple with no children.
2. Stay with your parents, if they have a spare room. They may welcome grandchildren, and can help to take care of them. Remember to pay them a rental also.
3. While renting a room, you can keep your savings in the CPF to earn interest at 2.5% per annum or invest them in a low cost index fund (such as the STI ETF) to earn a higher return. Build up the savings towards the down-payment for the property that you buy later.
4. Wait for the property price to drop, before you buy your home. In a property slum, the prices can drop from 30% to 50%. A slump can come once every 10 years or so. Be patient. The drop is likely to be more severe with condos and less with HDB flats.
5. Some people expect the next slump to be in 2015, when interest rate spikes up globally and there is a large supply of new units. I tend to agree.
6. Buy a property within 5 years of your family income and pay off the loan within 25 years (or shorter). Choose one that is smaller or located in a new town to fit your budget. Do not take the maximum repayment that you can afford now, as you have to allow for an increase of interest rate in the future.
I hope that these tips are useful to you.
4 comments:
Hi Sir, if the us economy picks up around the same time 2015, will it somehow cushion this "slump", what is your opinion?
Hi Wilson,
We are in the midst of a secular bear market since 2000. 12 years & counting. The current bull move from 2009 in this secular bear market is coming to an end soon. Is been 3 years old.
2007 STI peak before great recession: 3906
2013 STI now: 3291
I agree with Mr Tan that patience is needed. It took me several hard knocks to learn about patience. Is difficult to grasp it when we are condition to fast, instant noddle, responses, results cooking etc in this era.
As for property i believe a big correction is in order. Prices just simply doesn't make any sense.
New year new hope, hope for the best for all.
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