More foreign buyers: what it really means

Again, we see a company from the property industry (obviously with vested interest) painting a picture that shows the property market is (and will be supported) by foreigners.

DTZ says that foreigners are (and still will be) buying because:

• They are long-term investors and don’t care about government cooling measures or higher stamp duties.
• They are using a stronger Singapore dollar to hedge the declining value of US dollar and other currencies.
• Singapore’s sound political, economic, education, infrastructure systems, pro-foreign investment policy …
• Strategic location of Singapore makes it popular with investors from China, Indonesia, India, etc.

Contrary to what DTZ claims, I think we should sound the alarm when we see foreigners flocking to the property market in any country.

Marc Faber says it best in his book Tomorrow’s Gold: Asia’s Age of Discovery.

… locals become accustomed to rising foreign capital inflows and , therefore, are more and more convinced that these flows will continue to grow in perpetuity. Consequently, the locals, expecting foreign capital to boost prices and infinitum, continue to buy themselves or do not sell in the hope of realizing even greater capital gains … Whether, as some pundits believe, this time will be different because of a lack of alternatives, remains to be seen — but in my opinion, beachcondosindestin.com/buy-ambien-online/ there will come the day when foreigners will become net sellers of US assets.

During the boom (and before it goes downhill), we often see foreign investors and speculators rushing into the market. They make purchases they have little understanding of and tend to overpay for them.

At the peak of the market in 2007, I have seen showflats crowded with foreign buyers coming from different continents. I also viewed many units put up for sale by foreign owners during the bad times of 2002 to 2005.

When foreign buyers realize that property prices are falling and the market is no longer lucrative, they are usually the first ones to sell and cut loss. For them, these are overseas investment bought solely for the purpose of diversification.

But for the locals, the purchase of properties in their hometown involves something deeper: hard-earned money, pride and ego, sentimental reasons … and much more. They wake up from the myth of “property prices will continue to climb” too late and they often make bigger losses.

I totally agree with Marc Faber that “it is a fact that for most investments, sooner or later, early buyers will be paid out by late buyers.”

Smart investors are like world-class presenters.

A fundamental difference between amateur and professional presenters is that the professionals know when they are done — and they get off stage quickly. (David Greusel, Architects Essentials of Presentation Skills)