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How To Be an Eagle-Eyed Homebuyer and Find Undervalued Properties

With Singapore’s property prices at record highs, an undervalued home may seem like a rarity. These are houses where the amount you pay for is less than its market value or bank valuation.

So how do you spot these hidden gems?

Tips For The Hunt

  1. Study the price gap between a new and resale property in the same area

How different are the prices between a new launch and a resale home in the district you are looking at? If the gap is at least 20%, the resale property is worth looking at.

Apart from being either public or private housing, and freehold or leasehold, most homes in Singapore are priced according to their location, so a decent price gap shows that you are getting a similar property at a better value.

  1. Look for older listings

Check for listings that have been up for a while. These tend to have higher chances of being undervalued as most sellers have a given time frame to sell their property.

As the deadline draws near, they might be more open to negotiation.

  1. Figure out the seller’s motivation

There are often multiple reasons why a person wants to sell his or her home. They may have already purchased a new property, or they may be in financial trouble.

These sellers will likely accept lower offers and sell their properties below the bank valuation as they need to let their current one off quickly for cash.

  1. How many listings are there?

It is harder for sellers to get rid of their current place in areas with more listings due to competition. Sellers may be more willing to let their homes go at lower prices to entice buyers.

  1. When is the Additional Buyer’s Stamp Duty (ABSD) Deadline?

There are two ABSD deadlines to take note of.

Developers’ ABSD: Developers have to pay a 30% stamp duty on the land they build their project on. They get 25% of that stamp duty back if they finish their project and sell all the units within five years.

Some developers may sell their units at a cheaper rate close to the five-year mark as they want to avoid the extra cost.

Sellers’ ABSD: Homeowners that want to buy a new unit need to sell their existing home unless they are willing to foot a 12% to 15% tax on subsequent properties. To avoid this tax, they must sell their first home within six months of buying or being issued a Temporary Occupation Permit for the second home.

They may offer a discount on the property if their ABSD deadline is coming soon.

Stay Sharp

Remember to calculate the number of years the property has left on its lease. It may seem sufficient currently, but it may become much harder to sell in the future, especially after your property turns 30 if it has a 99-year lease.

Even if you are not looking for a home right now, keep studying the property market. Higher or lower transaction volumes are usually a sign of whether the market is getting hotter or headed for a downturn. This will tell you if you should strike while the iron is hot, or to hold back for the time being.

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