Don't overstretch to get flat in hot spot: Experts

July 10, 2007

Don't overstretch to get flat in hot spot: Experts

Go for sensible loan, location instead, flat buyers urged

By Malini Nathan & Jennani Durai


YOU can buy a five-room flat on a high floor, with a view, near an MRT station, shops and other facilities, and pay $610,000.

That is if you want to live in Clementi.

For about $200,000 less, you can have a high-floor flat with a good view in Bedok.

And for as little as $235,000 you can have a great view across to Johor Baru, if you live in Woodlands.

HDB flat buyers keen on a home with a view can pay widely varying sums for their new home. Intense interest in what your money will buy in terms of a high-floor HDB flat grew recently when a five-room flat in Kim Tian Road near Tiong Bahru MRT station sold for a record $720,000.

But financial experts say finding the right home all depends on where you want to live and what you can sensibly afford to fork out in loan repayments.

They warn that home buyers should be careful not to borrow too much just to buy a home in the latest fashionable hot spot, which could change over time in any case.

Investment firm Providend director Eleanor Ng said: 'The worst that could happen is for one to lose one's regular income source and therefore not be able to service this monthly debt commitment.'

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, also warned of the dangers of borrowing too much. 'Buy what you can afford. Although some areas may follow a vicious circle and continue to lag behind more desirable areas, one may want to focus on the flat as a home forever rather than as an investment.'

The $610,000 Clementi flat has an asking price well above recent average sale prices.

Typical five-room flats in Clementi have been fetching about $445,000, according to data from PropNex and ERA, but these sellers think their flat has almost everything that Kim Tian has to offer.

They cite the location and view of Bukit Timah Hill afforded by their 29-year-old flat.

Owner Angeline Sim, 32, also believes the flat has 'a third factor most HDB flats don't have' - condominium-like interior decor. She explained that they were asking a higher-than-average price because they had bought the flat at a high price at the end of 2001.

'We also spent around $60,000 on the renovation,' added Mrs Sim, a housewife.

A couple in Bedok are asking $400,000 for their high-floor flat with a good view. It is within walking distance of a market, schools, a swimming pool, a stadium and Bedok interchange shops.

In Woodlands, the asking price for a five-room flat is even lower. The Straits Times found a couple asking just $235,000 for a flat with an unobstructed view of the Causeway and Johor Baru.

'I am a little sad to sell because I love the view. It's so beautiful,' said owner Evelyn Chua, 33, who is looking for a bigger flat for her family.

Mr Leong warned that, while many are scrambling to take advantage of the property market's current buoyancy, basic precautions should not be forgotten.

'The recent AXA Global Retirement Study showed that Singaporeans are one of the greatest savers yet end up with the lowest income for retirement. It's because they put so much of their nest egg into their flat,' he said.

He advises home hunters to consider carefully their income relative to the anticipated monthly payments before deciding on a five-room flat.

He said: 'If we take the general guidelines that home mortgage payments should not exceed one-third of our income, then households earning less than $4,328 a month may want to consider very carefully before buying a flat priced at, say, $400,000.

'That would mean, for instance, a $360,000 loan at 2.6 per cent HDB concessionary loan rate for 30 years would translate to a monthly repayment of $1,441.'

Asked about the rising trend of sellers asking for cash above the valuation amount and buyers dipping into their savings to pay the excess, Mr Leong said: 'Unless you have spare cash to pay above the valuation amount, think carefully about borrowing through other means, like unsecured credit.'

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