Experienced Agent

Mr Buyer sir, I can tell that you and your wife love this house very much. What is stopping you from buying it today?

Young buyer

I think I should wait for a while longer and buy at a lower price. In times of great uncertainties, patience is a virtue.

Experienced Agent

Indeed, you are wise beyond your age, sir. Patient may be a virtue; but I am not sure whether I should agree with you about letting go something you like so much at such an opportune time. May I ask you an obvious question? Do you like this house? If I can assure you that it is absolutely safe to own this house, would you like to know how you can own your dream house when you are younger, rather than older?

Young buyer

Like I said earlier, we will wait for a while. After all, prices are dropping across the board. I believe we can pick and choose for a while longer.

Experienced Agent

But sir, every house is different. When you miss one that you really love, you may not be able to find a substitute property that you will love as much. What if I can prove to you that after five years you will thank me for advising you to buy today? Has anyone explain to you how wage inflation will affect your housing plan later?

Young buyer

What has wage inflation have to do with buying a house now? I don’t see any wage inflation in Singapore now.

Experienced Agent

Do you agree that we are going through the worst inflation in 26 years? I bet you do. But have your wages, as well as private home prices, increased lately? No, right? Don’t you think that it is illogical when there is a massive inflation, but home prices have come down, instead of going up like other commodities? And the Manpower Ministry has recently said that it is not recommending wage increase for fear of wage inflation. Do you know how ‘wage inflation’ will affect your plan to own a home, sir?

Young buyer

I don’t know.

Experienced Agent

Once the present economic uncertainties are blown over and when the dust settles, employers will hire again, especially companies from the US and Europe. This will push wages up to the next higher level much faster than now, taking into account the massive inflation now. In short, cost-of-living adjustments and inflation adjustments will follow suit when the economy is back on track.
As far as housing developers are concerned, they will also adjust their selling prices so as to compensate for the losses they incurred now.

Young buyer

I get the picture. But why should I pay more if I know that I can pay 5% to 10% lower, given that the economy is not going to come back so fast?

Experienced Agent

You are right, sir. But how do you know which price level will be the lowest? Did you remember the 2007 bull-run market? If you do, you should remember that once the time is ripe, everybody rushed in. There is no way you can pick and choose a unit like now, because all ‘good units’ are somehow booked before you even entered the Show Room.
For you age, I strongly believe that you should take advantage of the low interest rate now and build up your cash savings. Do you want to know how it works for young couple like both of you?

Young buyer

Why not?

Experienced Agent

For a young family like yours, a property allows you to build up your wealth quickly and surely, through your monthly savings. This is because you can utilise you CPF savings, which otherwise will be sitting idly in accounts and earning very low interest, to pay for the house.
You can opt for the maximum repayment term of 30 years and choose to pay a lower monthly repayment sum. In this way, you can free up some cash for other enjoyments, but still will not compromise the wealth building through the monthly repayments.

Young buyer

I know this part. What is so different whether I buy now or later?

Experienced Agent

Do consider what I am going to tell you next.
First of all, wage inflation has not set in yet; property inflation has not set in yet; and the interest rate is still at historical low. If you buy today, I am sure you are buying at one of the lowest price point in history. So I am very sure, your monthly instalments for the next few years are going to be very affordable; and because the interest rate is low, you will get to pay back more of the principal sum, and less interest. This means your strategy of ‘creating wealth through debt reduction’ is more effective if you buy now, rather than later when the interest rate is higher.
By the time the global economy recovers, which may be in two to three years time, you will experience huge capital appreciation in this property because you buy it today, rather than later.

Young buyer

But what if in the three to five years, the property prices continue to fall? Where would I stand?

Experienced Agent

It is possible but unlikely because of the nature of our economy. Despite repeated crisis over the past decades, property prices in Singapore went ‘up and down’ and not ‘down-and-down’.
When the economy recovers, wage inflation and home prices will shoot skyward. That’s where you will be able to refinance your asset and bring out cash from the property. By then, you income would have gone up and the ratio between your wages and the costs of property ownership will drop from the initial 50% to maybe 30% or even lower. You would then be living in a very affordable property and enjoying a lot of cash from re-financing your asset.
But you will not be able to enjoy those benefits if you buy your property later because all the financial packages have time bar that will restrict you from re-financing or selling the property in the first few years of the term.

Seller

Tell me Sam, why are you suing me? Do you know that I don’t think that you work is even worth 1%?

Sam

But sir, I had done so many things for you and was the agent who brought the buyer to you. Moreover, you had agreed to the sale price.

Seller

You are not wrong by saying that. You did advertise in the newspaper on FIVE occasions and I have kept all the newspaper records. That should cost you less than $300.

Sam

But sir, it wasn’t just the advertisements that cost me money. I had conducted two Show house for you.

Seller

And how much did that cost you?

Sam

It cost me $1,000 for one Show House.

Seller

Prove it to me!

Sam

My brochures cost me $500 to print and the labour cost to distribute was $500 each time I engage workers to distribute the brochures.

Seller

Even if I don’t argue with you on this, you are still not worth so much money. What else did you do?

Sam

I engaged someone to distribute 10,000 flyers in the immediate neighbourhood.

Seller

And that cost you how much money?

Sam

I paid some polytechnic students $38 per block for ‘door-to-door’ distribution and I distributed 10,000 ‘for sale’ brochures to 100 blocks in this manner, and it cost me a total of $3,800.

Seller

I didn’t see the brochures. But, I will not argue with you on this and I take it that you did what you said you did. And what else did you do?

Sam

I answered all phone enquiries for you and qualified all prospective buyers for you before I brought them to see your property.

Seller

How much would that cost you?

Sam

That should cost me $1,000 for the past one month.

Seller

And how many prospective buyers are we talking about here?

Sam

I brought 15 groups of prospective buyers to view your property and I spent with each group about an hour on the whole; and eventually, one of them bought your property after some negotiation which I did on your behalf.

Seller

Oh, you were just bringing them into the house, walked one round and left. And how much do you think I should pay for that?

Sam

That should be around $3,000 for all the work I had done for you.

Seller

So, if I add all that together, that would be $9,000. But you are claiming $12,000 from me for all that work that I could have done myself! Let me tell you Sam, you are grossly overpaid for the work.