The real estate market in Singapore is becoming more and more of a mystery to buyers and investors alike. Despite the ongoing pandemic, property prices reached record highs last year which led to the raised ABSD rates and other cooling measures introduced in December last year.
So spotting an “undervalued” home may seem challenging for buyers. An undervalued property is usually priced lower than its market value or bank valuation.
5 tips to spot “undervalued” properties
1. Study the price gap between a new and resale property in the same area
How different are the prices between a new launch and a resale home in the district you are looking at? If the gap is at least 20%, the resale property is worth looking at.
Apart from being either public or private housing, and freehold or leasehold, most homes in Singapore are priced according to their location, so a decent price gap shows that you are getting a similar property at a better value.
2. Look for older listings
Check for listings that have been up for a while. These tend to have higher chances of being undervalued as most sellers have a given time frame to sell their property.
As the deadline draws near, they might be more open to negotiation.
3. Figure out the seller’s motivation
There are often multiple reasons why a person wants to sell his or her home. They may have already purchased a new property, or they may be in financial trouble.
These sellers will likely accept lower offers and sell their properties below the bank valuation as they need to let their current one-off quickly for cash.
4. How many listings are there?
It is harder for sellers to get rid of their current place in areas with more listings due to competition. Sellers may be more willing to let their homes go at lower prices to entice buyers.
5. When is the Additional Buyer’s Stamp Duty (ABSD) deadline?
There are two ABSD deadlines to take note of.
Developers’ ABSD: Developers have to pay a 40% stamp duty on the land they build their project on. They can get 35% of that stamp duty back if they meet the conditions set by the Inland Revenue Authority of Singapore.
Some developers may sell their units at a cheaper rate close to the five-year mark as they want to avoid the extra cost. The same goes with home sellers.
Sellers’ ABSD: If you currently own an HDB flat and are looking to purchase a private property as a new home, or if you’re buying another private property, you’ll need to pay for the ABSD upfront (in cash or CPF) within 14 days of signing the Sale and Purchase Agreement.
You can apply for an ABSD remission upon selling your existing home within six months.
The ABSD rate has been raised from 12% to 17% in December last year.
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But if you’re buying a new Executive Condominium (EC), you won’t have to pay ABSD upfront. You will, however, need to sell your home within six months after collecting your keys or after it has received its Temporary Occupation Permit.
These sellers may offer a discount on the property if their ABSD deadline is coming soon.
Remember to calculate the number of years the property has left on its lease. It may seem sufficient currently, but it may become much harder to sell in the future, especially after your property turns 30 if it has a 99-year lease.
Even if you are not looking for a home right now, keep studying the property market. Higher or lower transaction volumes are usually a sign of whether the market is getting hotter or headed for a downturn. This will tell you if you should strike while the iron is hot, or to hold back for the time being.
This article was originally published on Planner Bee.