Last year this time, I have written about “The Property Market in the Year of the Goat”. It’ time we reviewed the past year before telling what we will expect in the Year of the Monkey.
Year of the Goat: Enough bad news?
The strong earth element in the Wood Goat year had posed a big challenge to the world economy. The high disturbance in the global asset market in the last six months is not for the faint-hearted.
It started with the crash of China’s stock market and the sudden depreciation of the Chinese currency. Then the interest rate hike by Federal Reserve caused the struggling of emerging markets. The year ended with steep fall of commodity prices, especially oil, amid market slowdown. And the Year of the Goat was ended with the sharp decline of stock prices in January.
Investors who were unprepared were like lambs to the slaughter. Who can blame them? Even Warren Buffett’s Berkshire Hathaway admitted that they had the worst performance since 2009.
Year of the Monkey: Who can tell what’s next?
When analysts from different financial institutions are giving diverse views on what 2016 will look like, this is a bad sign. It implies that they are simply fulfilling their duty to speak for their company, but deep down in their heart, it’s likely that they don’t have a clue either.
Anyway, those who predict what will happen or share some forecast numbers are not pledging to take back their words when they make the wrong guess. That’s why we prefer to talk about ‘observations’ here, not ‘predictions’.
What do the traits of monkeys mean for the property market?
Monkeys have a few characteristics that can perhaps give us a glimpse of the property market in 2016.
Trait 1: Smart and Intelligent
According to URA, there are 5,736 launched but unsold private residential units and a total of 23,271 unsold units from projects with planning approvals. In 2016, there will be 22,351 new units to be completed. Finding the demand to clear the new and existing stock in a lacklustre market is like mission impossible – unless developers and marketing agents possess supernatural powers to play magic tricks like the Monkey King.
Like monkeys with high intelligence, developers will be using more creative ways to push projects this year. To stand out from competition, they have to attract buyers with superior marketing, more aggressive discounts and better unique selling positions.
To avoid incurring extension charges and ABSD, developers will continue to use ‘clever’ ways to tackle projects that still have unsold units beyond the stipulated timeframe, including selling to subsidiaries or corporate buyers in bulk, or unlisting from the local stock exchange.
Advice from Property Soul:
The same applies to the resale and rental market. Owners and landlords have to be realistic about their expectations. Smart ones know how to attract eyeballs online with nice photos after home staging which drive buyers or tenants to send in their offers.
Don’t think that you can get rid of the middleman during bad times. Don’t skimp on commissions paid to property agents. Remember: When you pay peanuts, you get monkeys.
Trait 2: Curious and Adventurous
The monkey year started with the plummet of the oil prices and the Japan stock market. Lots of drama are waiting to be unfolded.
Like monkeys which are adventure-loving animals, the high volatility of the market presents many perfect opportunities for speculations. Many will be tempted to rush in and make a quick profit. Others may be curious to know whether alternative investment strategies can work. Never mind the fact that they are purely speculative. Monkey see, monkey do.
Advice from Property Soul:
1) Avoid getting your hands into any property that you can’t afford.
2) Avoid getting your hands into any investment that you can’t afford to lose.
3) Avoid getting your hands into any scheme that you don’t understand.
Trait 3: Mischievous and Cunning
Monkeys are clever. But they can use their intelligence in the wrong way.
Although monkeys live in groups, they are also known to be selfish and possessive. When a monkey finds good food, it produces sounds to warn others of a tiger so that all monkeys run away and it can safely enjoy the food all by itself – that is faking at its best.
During uncertain times, people tend to look for second incomes that appeal to the need for security. This is when deceitful high-return investments come into play.
Advice from Property Soul:
Watch out for monkey business no matter how privileged or exclusive the opportunities sound. Beware of property projects or investment schemes that promise unrealistic returns. When they cannot pay out the high dividends they guaranteed, they can only do two things: go bankrupt or run away.
Trait 4: Defensive and Well-prepared
Don’t think that the long tails of monkeys are redundant. Tails are useful for monkeys to balance themselves while climbing the trees or sitting on the branches.
Monkeys are known to use their cheek pouches to store extra food so that enemies have no way to steal it. Their two cheek pouches can store up to a full stomach’s food.
Learn how to balance your investment portfolio and build in redundancy like the monkeys. All investors need an exit plan or plan B to prepare for the worst. Be conservative and ensure that you have more than enough holding power for your property investment.
Never test the depth of a river with both feet. That is the advice from Warren Buffet when taking risks.
Advice from Property Soul:
Don’t waste time monkey around with unprofitable or money-draining properties. Don’t hesitate to cut loss if you need to. If you have to get a monkey off your back, talk to the bank first before you really need to.
“Banks will lend you umbrellas on a sunny day, but they will take them back when it is pouring.” This is my favourite line from Hanzawa Naoki, a popular Japanese television series released in 2013.
Property investment strategy in the Year of the Monkey is defensive rather than aggressive. The most important thing this year is not return. It is avoid losing money. Less is more. Risk less and fail less.
May your Year of “Monkey” be your Year of “Money”!
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