Is location really the most important?

Don’t we all always hear “property gurus” or friends who made some money from real-estate say this “Location! Location! Location!”.
Is location truly the most important factor when considering a real estate purchase? Let’s discover today.

 

Alright, we’ll give it to you quick, short and sweet. No, we do not think location is the single most important factor. Location is all relative, what you think is good location might not be good location for others. Yes, near MRT is good location, so would that mean buying places that is not near MRT a bad decision? Our take is that, TIMING, not location is the single most important factor when considering buying any real-estate in Singapore.

Think about it for a second, property is easily the single biggest ticket item you would pay in your life. Granted, if the property you’re buying is NOT for investment, it’s for your own-stay, profits wouldn’t look so important yet. But surely, you would want the chance of making profit from it next time when selling?

As with all investments, timing is crucial.

Would you agree with me that if you bought at the down times, e.g. Ending of 2013 and sold at somewhere after 2017 (up trend) you’d make money. When you follow the market trend, location is less likely to matter as the ENTIRE market is moving UP/DOWN, so even if

you got the best location, say, ORCHARD ROAD,  the price would still go down when market trend is down.

 

Let’s illustrate how crucial timing is when buying property, probably the biggest purchase you’d make.

 

SCENARIO 1

Mr and Mrs Tan bought a resale EC in (east side) in 2013 (during the highest point in 2013), and is still in the red now in 2018 when we assessed their finances, outstanding housing loan, CPF used, cash on hand.

1. If they sell now, they’d most definately make a loss. CPF funds would flow back to their CPF account but there would not have any cash proceeds coming back.
2. They cannot sell now as they didn’t have enough cash reserves to buy another as cash on hand is low.
3. Conclusion : They cannot sell.
4. Bought at a high in 2013, cannot offload in 2018 when market is slowly picking up, unable to take advantage of this property cycle.
5. Lets assume this property cycle runs for 3.5 years (check 2009 to 2013)  At best their property would reach the high of 2013 price they bought in 2018+3.5yrs = mid 2021.
6. Total duration in the red : from 2013 to 2021 = 8 years. In these 8 years their property did not appreciate but instead dropped value. If sold at breakeven price means that they did not MAKE any money in these past 8 years. And whats more important is that they would be SELLING AND BUYING at a HIGH point again. 

They are now be caught in a dilemma

1. If they waited to the next high point to sell (they would at best breakeven, is there any point in doing that?) Without any profits, would they be able to fund their next home?
2. They had lost the chance of potential profit when buying at low (today), if they can buy today, they need not sell at the absolute high in the future, as they bought at low point, their risk level is significantly lowered.
3. To catch the next low, assuming its 3.5 years again to reach the next low from the next high, it’s a 7 year wait from now. 3.5yr up, 3.5yr down.

If only they had waited for 2014 when the market softened and slowed. If only they hadn’t bought a Resale EC some might say. All these factors play a part but you see timing is the most crucial here, as this decision might affect them years down the road and even assuming they can sell at breakeven 8 years later, is it a good decision? You get caught up in the vicious cycle of always buying/selling at the high.

And what’s more important is they missed the opportunity of buying LOW and taking profits at HIGH point.

Lets return to the main objective here, isn’t it to make profit? Buy low sell high right? The uptrend has just started. Boat still have space before setting sail.

SCENARIO 2 HIGH PARK RESIDENCES (SENGKANG, Jln Kayu area North-east)
Take for example this location, it’s not “orchard road” location, it doesn’t have extreme game changes like a high speed rail station. IF for example you had bought in 2015 (like the unit highlighted) at $807 psf in the low/stagnant period, and sold in 2018 even when the project had not even TOP, you’d have made $354,880.

WHY? HOW? That is simply because this person had bought at low, and sold at uptrend. Is location of utmost importance here? No, simply because he had seized the opportunity and decided when the trend is low.

Summary

In this post, we shown you that buying at a HIGH, would require you to SELL at a HIGH to break even or make a little amount of profit.

We had also shown you that location, while important, is NOT the most important factor to decide to buy a particular property or not. TIMING is of the essence, if you had bought at a LOW, you can sell at a LOW and still don’t lose money.

Some might argue that today’s prices is so HIGH, where got LOW?? The fact that demand had been steadily climbing up (circled in yellow) , shows us that the market had already ACCEPTED and have started transacting at today’s prices. It’s like years ago, a cup of KOPI-O is only 60 cents but now most places are $1.00 but we are still paying for it and accepted the new price. Last time $2.50 can fill one’s stomach at a coffee shop but now $3.50 would be the minimum spending for one’s meal and sometimes it might not even fill you up. One can complain about the price but it won’t make a difference to the market trend.

If you are having second thoughts like

• Aiya already missed the boat already lah…
• Wah buy so expensive, are you sure next time can appreciate more?
• Many people buy means good meh?
• Wah this location so ulu, can buy meh?
• I might need to sell first then can invest, not sure can upgrade or not?
• Hmmm I just bought a condo, but still holding onto my HDB flat. Is this a good idea?
• I agree that buying now is a good idea, but which projects? There are so many to choose from.
• I think i’d keep my HDB, buy a pte property AND pay the ABSD, because once i buy a pte property i cannot buy HDB again! Right?

Feel free to text/call us to clear your doubts about the current market trend or what’s the best course of action with regards to your property now.

Of course, it’s not all about timing, there are still the smaller details of which project is better value, new or resale, freehold or leasehold. Remember, a real estate decision you make today can impact your family years down the road. Make an informed decision. 

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