On October 17, National Development Minister Lawrence Wong told the press that it is still not time yet to unwind the cooling measures. Price adjustments so far have been moderate compared to the increase in prices in the past few years.
Price corrections are moderate
So how “moderate” is price adjustments? Have price corrections been “meaningful” so far?
According to URA, the Property Price Index of private residential properties have fallen almost 8 percent from their peak of 154 (based on rebased PPI) in 3rd quarter of 2013 to 142.3 in 3rd quarter of 2015.
However, based on the last bottom of 95.3 (based on rebased PPI) in 2nd quarter of 2009, prices of private residential properties have jumped 62 percent. As of 3rd quarter of 2015, prices are still 49 percent above 2nd quarter of 2009.
The conclusion is: price adjustments for the past two years are still “moderate” compared with the hike in property prices in the last few years.
Cooling measures are here to stay
There is a predictable request-response pattern here: A spokesperson from a stakeholder in the property industry comments that it’s time the government relaxed property cooling measures before it’s too late. This will be followed by a Minister’s reply through the press that it is still early to consider taking off any property buying restriction.
The message from the government is very clear: The cooling measures are here to stay – not before or after the election; not when the economy slows down; not until prices have achieved a “meaningful correction”.
When the wind changes direction
Yes, the worse has yet to come. Total Debt Servicing Ratio and Additional Buyer Stamp Duty are only the tip of the iceberg. The property industry is facing other challenges like supply glut and a soft rental market. And it is constantly under the threats of interest rate hike and another economic crisis.
Buying properties is like sailing in the open waters. When the wind and waves are in your favor, it doesn’t matter what you buy, everyone makes money. It is such a no-brainer that it is almost impossible to lose money when you buy a property and sell it when prices are on the way up.
The trend is your friend, until it stabs you in the back.
Once the wind changes direction, you try your best to stay afloat when in fact you can’t even control where the waves will carry you to.
Fancy thinking that prices can only go higher and the market will never collapse. If the wind forever blows in the same direction, pigs can fly.
Alibaba’s founder Jack Ma once said,
“First of all, a pig can fly in the wind, but when that wind dies down it’s the pig who’s going to fall to his death. Because he’s still a pig. What everyone has to think about is how to control the wind, how to grasp that wind and push yourself up. I think we shouldn’t seek the next strong wind; we should make ourselves into people that can fly at even the slightest breeze, people who can soar.”
Successful investors are measured in bear market
Allow me to write the summary by quoting my book No B.S. Guide to Property Investment:
John Templeton said that “the most successful investors are defined by their actions in a bear market, not a bull market”. Likewise, the success of property investors is not measured by how well they do when times are good, but how they perform when times are bad.
It is only through years’ of experience, the lessons of others, or the losses you made that one day you finally come to realize that buying a property doesn’t necessarily guarantee a profit at the end; that buying a property and investing in a profitable one are two separate things; that speculators and professional investors are two different species.
If there is a probability formula of finding a good deal, it may come one-third from the buyer’s insight, another one-third from the buyer’s discipline (hard work, patience, persistence, etc.), and the last one-third depending on market conditions and opportunities.
And of course, buying the right property at the right time makes all the difference here.
Remember the proposal of 6.9 m and angry reactions?
I see infrastructure investments in the making. Simultaneously glut SS until vacancy rates go high. People will then cry and beg for tenements to be filled with some monies to be in pocket and ghost towns to be habitable by humans again . Floodgates open to welcome 6.9. Goal achieved with people’s happy blessings at long last.
Just saying
Remember the proposal of 6.9 m and angry reactions?
I see infrastructure investments in the making. Simultaneously glut SS until vacancy rates go high. People will then cry and beg for tenements to be filled with some monies to be in pocket and ghost towns to be habitable by humans again . Floodgates open to welcome 6.9. Goal achieved with people’s happy blessings at long last.
Just saying
One property investment trainer (no names mentioned pls) calculated based on URA published figures (ie. exclude HDB and EC) that the impending supply of pte condo as compared with future population growth does not paint such bleak picture. In fact there’s no oversupply of condo in next 5 years.
Quite a few other trainers n reports say otherwise. Your thoughts please.
You don’t have to listen to what others say. The figures of existing stock, future supply, vacancy rate, rate of increase in population/households, etc. are all available online. You can do your own calculations.
According to URA, by the end of 3rd quarter 2015, there are 72,888 new units in the market. Another 6,296 units are ready by end of 2015. In 2016, another 27,149 will be completed. That is a total of 106,333.
Is there an oversupply? Do you own maths.
Our census shows that, from 2000 to 2010, the number of households has increased by 230,800 in 10 years’ time. Assuming that the average number of new households is 23,080 per year, even if every new household chooses to buy a private residential unit, we still need 4.6 years to absorb all the supply in the market.
Thanks Property Soul. The MND minister recently announced more BTO flats likely in 2016 to meet demand in this article: http://business.asiaone.com/property/news/more-bto-flats-likely-2016-meet-demand
Does the HDB market paint a different picture? I know when it comes to property investment, we don’t normally talk about HDB flats. But I am trying to make sense of the Singapore property market as a whole.
It just implies that new families now have more options other than buying overpriced private properties, Besides HDB flats, there are BTO flats and ECs, especially when the latter has higher income ceiling now. There are also many unsold units in EC projects.
One property investment trainer (no names mentioned pls) calculated based on URA published figures (ie. exclude HDB and EC) that the impending supply of pte condo as compared with future population growth does not paint such bleak picture. In fact there’s no oversupply of condo in next 5 years.
Quite a few other trainers n reports say otherwise. Your thoughts please.
You don’t have to listen to what others say. The figures of existing stock, future supply, vacancy rate, rate of increase in population/households, etc. are all available online. You can do your own calculations.
According to URA, by the end of 3rd quarter 2015, there are 72,888 new units in the market. Another 6,296 units are ready by end of 2015. In 2016, another 27,149 will be completed. That is a total of 106,333.
Is there an oversupply? Do you own maths.
Our census shows that, from 2000 to 2010, the number of households has increased by 230,800 in 10 years’ time. Assuming that the average number of new households is 23,080 per year, even if every new household chooses to buy a private residential unit, we still need 4.6 years to absorb all the supply in the market.
Thanks Property Soul. The MND minister recently announced more BTO flats likely in 2016 to meet demand in this article: http://business.asiaone.com/property/news/more-bto-flats-likely-2016-meet-demand
Does the HDB market paint a different picture? I know when it comes to property investment, we don’t normally talk about HDB flats. But I am trying to make sense of the Singapore property market as a whole.
It just implies that new families now have more options other than buying overpriced private properties, Besides HDB flats, there are BTO flats and ECs, especially when the latter has higher income ceiling now. There are also many unsold units in EC projects.
IMHY, You can always buy so long you can afford it ( Even in a down turn and no rental income available) , no one can time the market, i personally known a lot of regular property investors who have taken a bear view on market since 3 years back..and yet market has proven them wrong again and again…. Property should always been a long term investment , at least 10 years and above..timing market is risky
There is no right or wrong in property investment strategy, as soon as you don’t lose money and you can make good money, both in good and bad times.
Savvy investors know when to enter or exit the market because 1) they want to buy properties at great value; and 2) they don’t want to be left holding the hot potatoes because they need holding power and there’s opportunity cost.
IMHY, You can always buy so long you can afford it ( Even in a down turn and no rental income available) , no one can time the market, i personally known a lot of regular property investors who have taken a bear view on market since 3 years back..and yet market has proven them wrong again and again…. Property should always been a long term investment , at least 10 years and above..timing market is risky
There is no right or wrong in property investment strategy, as soon as you don’t lose money and you can make good money, both in good and bad times.
Savvy investors know when to enter or exit the market because 1) they want to buy properties at great value; and 2) they don’t want to be left holding the hot potatoes because they need holding power and there’s opportunity cost.
Thanks PS, I full agree with you. The downtrend is still at the early stage and will persists with short term pull backs to capture those FOMO, a very normal behaviour in any market. Your outlook will attract critics who may blame you for missing out during pull backs but the patient ones will thank you when the next big trending down wave sweep across the market. Yes, I think the next wave down till be the big one before some pull backs and the final low. We will not be able to pin-point the exact low but that is not the objective as you have alluded in past. I agree there will be better buy zones in the future.
For an average buyer who has to borrow to buy, an expansive mortgage commitment effected at the wrong time in market cycle means a lifetime of debts and financial stress especially in the face of rising interest. I applaud your good works which will help educate many average buyers to be patient and wiser.
Yes, and many will be secretly grateful that they didn’t buy in 2013.
Thanks PS, I full agree with you. The downtrend is still at the early stage and will persists with short term pull backs to capture those FOMO, a very normal behaviour in any market. Your outlook will attract critics who may blame you for missing out during pull backs but the patient ones will thank you when the next big trending down wave sweep across the market. Yes, I think the next wave down till be the big one before some pull backs and the final low. We will not be able to pin-point the exact low but that is not the objective as you have alluded in past. I agree there will be better buy zones in the future.
For an average buyer who has to borrow to buy, an expansive mortgage commitment effected at the wrong time in market cycle means a lifetime of debts and financial stress especially in the face of rising interest. I applaud your good works which will help educate many average buyers to be patient and wiser.
Yes, and many will be secretly grateful that they didn’t buy in 2013.