Condo buyer lost nearly $30k when he backed out of deal after two weeks

A Singaporean lost nearly $30,000 on a mis-timed purchase of a three-bedroom unit at the Blossoms by the Park condominium in Buona Vista.

Jun 18, 2023

A Singaporean in a severe case of buyer’s remorse lost nearly $30,000 on a mistimed purchase of a three-bedroom unit at the Blossoms by the Park condominium in Buona Vista.

The man paid a 5 per cent deposit of $115,000 for the $2.3 million apartment but got cold feet two weeks after signing the sales and purchase agreement and pulled out of the deal.

It was a costly decision: The penalty for cancelling the purchase was 1.25 per cent of the sale price, or $28,750.

The buyer – a man in his 40s who wants to stay anonymous – told The Straits Times that he did not mind paying a high price for the home at first because he had hoped to make a good profit in the future.

One of the main factors that attracted him to Blossoms by the Park was its location within the one-north research and development hub.

He had anticipated high rental demand, given the scarcity of new condominiums in the area.

The project was launched on April 28, two days after new property curbs kicked in, raising additional stamp duties for some home buyers.

On the first day of the launch, developer EL Development sold 75 per cent, or 205 units, of the 275-unit leasehold project, at a median price of $2,427 per sq ft.

Blossoms by the Park is expected to obtain its temporary occupation permit in 2026.

Although the man did not have to pay the additional buyer’s stamp duty as a first-time buyer, he was worried about the high interest rate for his mortgage.

He was hoping to sell the property if he could get a capital gain of between 15 per cent and 20 per cent after three years.

But barely two weeks after buying it, his optimism began to waver and the spectre of his investment turning into a financial burden began to loom large. After all, he had a monthly mortgage payment of about $8,000 to worry about.

He then started to look at alternatives.

“I was invited to a VVIP sale of The Reserve Residences and I saw a unit that I like, so I decided to pull out of the Blossoms by the Park purchase,” he said.

Although the new unit he bought cost a higher $2.4 million, The Reserve Residences in Bukit Timah is an integrated development and is near an MRT station and a bus interchange.

“There will be more amenities, and I feel it makes a better purchase,” the man said.

With real estate prices continuing to rise despite volatile market conditions, investors could easily overlook the risks of relying on rental income to fund a property.

Despite high interest rates and a potential slowdown in the global economy, many investors are drawn to tangible assets like property. But ignoring the risks can lead to financial setbacks and missed diversification opportunities.

Property v other investments

Mr Aaron Chwee, head of wealth advisory at OCBC Bank, noted that investors who stake their funds on properties will usually have such “illiquid” assets taking up a significant chunk of their portfolios.

Anyone thinking of this option should take into consideration the size of the asset in relation to their overall portfolio and not rely too much on a single investment, he said. They should instead consider diversifying into other asset classes and even other property types to reduce the overall risk, he added.

Assume that a buyer paid a 25 per cent down payment for a $2.3 million home and took out a mortgage of about $1.73 million – if he sold the property after three years for a 15 per cent capital gain of $345,000, his annualised return, after factoring in his loan, would work out to about 5 per cent.

But he could achieve a better return by borrowing the same $1.73 million and investing it in an equity and bond portfolio that could generate 7 per cent return a year (assuming a balanced to aggressive risk profile) when held for at least five years, said Mr Chwee.

“Currently, a globally diversified portfolio of mostly investment-grade and some high-yield bonds can yield around 6 per cent for a Singapore-based investor,” he noted.

“Bonds are typically more liquid than property as well. Reits (real estate investment trusts) are another option to consider. They are diversified, thus reducing risk, and are a hassle-free investment compared with being a landlord, since a Reit manager would either manage the property himself or sub-contract this to a property management firm.

“It is not uncommon for Singaporeans to view property investments as less risky than they are because property is tangible, but investors need to be discerning and consider a wide variety of evidence and professional analyses before making any investment decision.”

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