MANY Singaporeans who bought property last year might now find themselves in a bind as the fallout of the financial turmoil catches up with them.
The bullish property market took an about-turn, and some banks have even frozen lending altogether.
These property owners would stand to lose a lot of money if they try to sell in this declining market.
The problem is further compounded by 'flippers' who bought properties under the Deferred Payment Scheme, with the intention to flip the property when the prices go up before the temporary occupation permit is received.
While property prices can head north and reach dizzying heights during boom times, any economic turmoil can also bring about a collapse of the property market.
This can result severe consequences for the economy at large, because property values represent a significant proportion of an economy's material wealth.
Many people do not consider affordability when buying a long-term asset such as property.
They jump blindly into the market, hoping to buy a dream home before it grows out of their reach.
Others simply go in with the intention of flipping the unit in the hopes of making a windfall.
Maybe it is time the Government and estate-agent bodies implement a fact-finding process for potential home buyers, similar to what is being done in the financial and insurance industries.
Under the Financial Advisers Act, the fact-finding process is mandatory before any investment product can be sold to a consumer.
The objective is to ensure that consumers buy what they can afford, taking into account their needs and risk profile.
Buying a property involves substantial financial resources and, for the average Joe, probably a lifelong commitment to servicing their loans. Many could end up being enslaved to their property.
They could also face significant financial losses when negative equity sets in, a situation where a homeowner's outstanding mortgage loans exceed the market value of his property.
It is high time to put in place more rigorous regulations that focus on educating potential homeowners, to help them make better decisions.
