By Stella Thng

The current property market spells good news for first-time property buyers. HDB resale prices, private residential property prices and resale prices of non-landed private homes have all dipped in 2014’s first quarter. This has prompted analysts such as Propnex to predict that property prices will correct by 5 to 6 per cent this year.

With prices softening, it’s a great time to shop for a new home, but that also puts upgraders in a pickle. Do you sell your current home first before prices fall further? Or hold on so you can buy a cheaper new home – but risk your current home’s value heading southwards? What is your opportunity cost? If you are caught in the same dilemma, read on for some views from fellow property owners and real-estate professionals.

It is easier to manage finances. “Unless I have the ability to manage payment for two houses, I would prefer to sell my current property before purchasing my next, as it gives me more time and resources to consider my options,” says homeowner Jelaine Ang, 35.

She has been marketing her five-room HDB flat in the west since last year, but found it challenging to sell due to the weak market sentiment. “The current property situation was a key factor in our decision to sell the flat first before buying another.”

It’s a safer bet. You’ve sold your home… or have you? Buyers can change their minds during the cooling-off period of seven days for HDB flats, and 14 days for private properties. Even if you have enough funds to temporarily juggle both, not knowing how much your home can sell for may make it tricky to decide on a budget for your next abode.

Worse, if you’ve already bought a new home because you expected to finance that with the sale from your old place, this can send you scrambling to raise funds or to take a bridging bank loan.

We’ve heard horror stories of sellers committing to swanky new homes before selling their current place, only to find that their current property could not fetch as high a price as they had hoped. Desperate to sell, they accepted much lower offers and had to take a bigger loan from the bank to make up for the shortfall.

It’s less hassle. Polytechnic lecturer Koh Yann Ling recently helped her father-in-law sell his four-room flat in Yishun, where she lived with him and her husband, before they all moved to a new Build-to-Order (BTO) flat.

“It was a very straightforward decision. Our BTO flat was completed only recently, so we didn’t try to market my father-in-law’s place until we were sure that our new home was ready,” she says.

The family knew that if they had sold the flat last year, while the market was still bullish, they could have asked for up to $440,000, similar to what their neighbours’ units were commanding.

“However, that meant renting a place in the interim. We didn’t want to put my father-in-law through the hassle of moving twice,” she adds. They eventually sold the flat for $380,000.

Part of Yann Ling’s hesitation to cash in early spawned from an unpleasant experience a few years ago. “My parents had sold their home, but a sudden six-month delay in our new home’s handover caught us off guard. We ended up renting from our home’s buyer for a few months – fortunately, they were not in a hurry to move in, or we would have been homeless!”

Maureen Chan, who is self-employed, believes in buying first. The mother of three kids, who lives with her in-laws, says selling first is out of the question for her big family. “It isn’t worth the risk of not finding the right home in time.”

Renting a temporary home is also a no-go. “It may work for those with small families, but not for my big extended family with old folks and kids. I’d rather secure a new home first, then take my time to sell off my old house.”

Don’t forget to factor in the opportunity cost. Francis Tan, vice-president of SLP Scotia, observes that the current property market offers upgraders a great opportunity to buy their coveted home more cheaply. “Currently, there are many good buys in the uncompleted condominium market as developers clear their remnant stocks at previous land prices, with good discounts of between 8 and 15 per cent,” he notes.

If your finances permit, it may be more beneficial to buy first, then sell. Since you’ve locked in the new unit at a good price, your risks in selling your old one are moderated.”

Homeowner Alan Leo leveraged on this when he purchased a condo unit in Upper Bukit Timah during the soft market in 2007. Noticing that the market was picking up, he quickly snapped up a two-bedder for just over $500,000, while waiting for prices to go up for his HDB flat (HDB owners have up to six months to sell their flat).

It proved to be a good move; two months after Alan signed the Option-to-Purchase contract for his unit, he could have made a cool 30 per cent profit if he decided to sell the unit then. When he sold it in 2012, it fetched $1 million, double of what he’d paid.

However, there is now the Seller Stamp Duty – implemented in 2010 – which is between 4 and 16 per cent if you sell within four years. If you are planning to buy first, don’t forget about the Additional Buyer’s Stamp Duty (ABSD), which is 7 per cent for Singaporeans.

Patrick Loh, assistant vice-president of CBRE Realty Associates, says that when home buyers purchase a second property and exercise their option to purchase, if the properties are both under the home buyer’s name, ABSD will be applied.

However, if they sell their current property within six months, they can apply for its remission as soon as their buyer exercises their option to purchase. So, should you buy or sell first? There is no easy answer.

As Patrick sums it up: “Of course, it’s always more convenient to buy first, then sell. But often, it’s not a matter of preference, but a matter of financial ability to suit your convenience.” Most importantly, do your sums carefully to prevent making a costly mistake.

1. Remember the “six-month rule” to avoid paying 7 per cent ABSD tax on your new property. If you’re buying before selling your current home, don’t forget that homeowners holding two properties (whether HDB or private property) will be subjected to the Additional Buyer’s Stamp Duty (ABSD of 7 per cent for Singaporeans). However, this can be refunded if you sell your first property within six months.

2. Check your finances carefully to see if you can afford to hold both properties temporarily. Should you decide to buy first, you’ll need to have enough money. This is not just to cover the downpayment and the first few months’ of installment for the new property, but also expenses such as lawyer’s fees, stamp duty and commission to property agent.

3. Secure your loan – and the quantum you need – before buying. Of course, you can always back out of the contract. All property transactions are subject to a cooling-off period of seven days for HDB flats, and 14 days for private properties. However, that means that you will lose the deposit you’ve given to the seller.

For HDB flats, this ranges from $1 to $1,000; most sellers ask for at least $500 for HDB flats. For private properties, it is a flat 1 per cent of the purchase price – that’s a cool $10,000 for a million-dollar condo unit! If you are not confident that you can afford your new home, don’t plop down your cash and commit first, or you will risk losing a pretty penny for that moment of recklessness.