Beware property boom

Friday, July 6, 2007

Beware property boom

Unmanageable mortgages can break up a family

Letter from Gilbert Goh Keow Wah

I refer to the article "Time to play it cool" (July 5). It is timely that the Government has stepped in to cool down the current property fever that is gripping the nation.

Today, the situation is not unlike what it was in 1995 and 1996, when people bought up residences and prices bordered on the ridiculous. People were queueing up, not to view the houses, but just to hand over cheques for the downpayment!

Then, Housing Board executive flats in the Bishan and Toa Payoh areas were sold for close to $700,000. Today, those home-buyers have seen prices plummet and they stand to lose about $200,000 if they were to sell their homes at current valuations.

Worse, during the Asian financial crisis of 1997 and 1998, many lost their hard-earned Central Provident Fund savings when they were forced to sell off properties because they could not meet the payments.

Some property developers also went bust during that time.

I urge Singaporeans to exercise caution. Like equities, property prices do fall when the economy takes a dip. If possible, look for a place that is within your means and always have a mortgage plan in which repayments do not exceed one quarter of your combined household salary. Anything more would be a burden if you were to be retrenched or have your monthly salary reduced for some reason.

A friend of mine had to sell off his private property when both he and his wife were retrenched within a month of each other. They got into financial difficulty and ended up getting divorced. Both were professionals and their situation has been etched in my memory. It was painful for me to see a happy family fall apart over the burden of a huge mortgage loan.

As Singapore goes into another economic upswing, let us be mindful of committing to loans.

Always be prudent and frugal, as financial difficulties can affect the harmony of a family.

It is better to have a happy family living under a simple roof, than one living in a big house laced with potential financial woes.