When the price is right

... the timing may not be, for upgraders who wantto buy private property

Historically, HDB home prices have proved more resilient, with values lagging behind the private sector.

During the 1997/1998 Asian Financial Crisis, HDB home prices only began falling two quarters after those in the private sector, where prices slumped by as much as 34 per cent in 1998.

This time, the two-quarter curse has struck again. HDB prices registered a0.6 per cent decline between the first quarter and last year’s fourth quarter, according to flash estimates released yesterday.

This is the first slip in HDB prices since the end of 2006. And it comes two quarters after average private property prices started to fall.

Upgraders should give considerable thought before jumping onto the private sector bandwagon — particularly when jobs and pay may now be at risk.

Aspirations for better homes and hefty discounts might partially explain the crowds seen at some recent condominium launches.

However, upgraders would be wise to tread carefully before taking on sizeable loans in these uncertain times.

Consider an HDB upgrader who buys a condo unit for between $850 and$1,150 per sq ft. For illustration purposes, let’s suppose he has a 3-room flat with a floor area of 710.4 sq ft at Stirling Road near Queenstown MRT. Such a flat went for $297,000 or $418.07 psf last month, according to HDB data. Neighbouring 3-roomers went for lower prices of $250,000 to $294,000 in the same month.

After selling his existing flat, he would still have to top up at least some $307,000 for a unit with an equivalent floor area. If he had stayed in a less prime HDB estate, he would have to top up even more.

Unless he is cash rich, he would probably have to take out a sizeable loan.

Upgraders buying through deferred payment schemes should think two to three years down the road when they have to start paying for their pre-sale private apartments. The price of their HDB flats may have fallen further by the time they come to sell them and their new private home may also have dropped in value by then.

Even if prices do start to turn around, HDB values historically tend to pick up after private ones start to climb.

While property could be the best investment you make in your lifetime, it could also be your worst if you don’t get the timing right.

Source: Today, 2 Apr 2009