Property news from the media can be very confusing these days. Headlines of articles on a single day can be totally contradictory to each other.
On Monday August 14, Business Times had an article “Analysts upbeat on property, tech after Q2’s mixed earnings”. Flip the Straits Times on the same day and there’s a headline “More firms closing amid tough economy”.
Such inconsistencies make readers wonder: Is the recovery of the real estate industry independent of the economic slowdown? Should we be upbeat about the property market regardless of the tough business environment?
An unanimous media support for market recovery
Newspaper articles that talk about bottoming-out of the property market used to appear only on weekends – when there are pages and pages of advertisements of new launch, re-launch and overseas projects.
That we understand.
But recently, whenever there’s a new launch, a Chinese developer won the top bid, or an en bloc sale was concluded or listed on the market, the journalists will automatically emphasize the fact that this is another sign of bottoming-out or recovery of the property sector.
Without fail, the reports will continue with the interviews and quotes from industry stakeholders – developers, property agencies, market analysts, mortgage banks, credit firms, etc. – all singing the same tune.
On the same week on August 16, Business Times published another article “Buying momentum buoys July sales of private and EC homes”.
With aggressive marketing and positive sentiments spread by the media, another two successful new launches resulted in higher July sales volume for new project sale. The article immediately concluded that the data is “reflecting a buoyant buying momentum that analysts believe will continue for the rest of this year and the next”.
As expected, this was echoed by the quote of a property agency spokesperson who mentioned “potential buyers have likely come to terms with the prevailing cooling measures and have been prompted to act on news that a possible uptick in pricing is looming”.
Another property agency supported the argument by adding that “the recent uptrend in land prices suggests higher prices for new projects next year, many buyers are deciding to commit to a purchase now rather than later”.
After reading similar articles, we will definitely have more new launches, more property buyers, higher agent commission, higher mortgage sales, better quarterly results, more positive articles, better market sentiments, more land sales, higher bid prices, more en bloc sales … everybody is happy and SPH reports another quarter of impressive results with high net profit.
Wide guess from international media
On August 14, Bloomberg published an article “Hong Kong’s Property Shadow Leaves Singapore Developers Ahead”. Business Times and Today immediately picked up the article the next day.
Below are some statements from the Bloomberg article:
“Hong Kong home prices have shot ever higher, bouncing back from the global financial crisis and periodic bouts of government cooling, while Singapore residential prices have declined 12 percent from a peak, dropping for 15 straight quarters.
A 70 percent divergence in home prices in Singapore and Hong Kong over the past six years is due for a reversal, according to Morgan Stanley. Singapore developers score better in terms of affordability for buyers, a tight home supply, and a potential easing of policy measures.
The bank’s analysts forecast Singapore residential property prices to rise 5 percent in 2018.”
There are some fundamental faults in the assumptions and predictions in this article.
Firstly, just because “Singapore residential prices have declined 12 percent from a peak, dropping for 15 straight quarters” while doubled or tripled Hong Kong property prices still show no sign of weakness doesn’t make Singapore’s property market look more attractive.
Any asset with its value depreciated for years doesn’t necessarily mean that it will enter a boom market soon (look at what happens in Japan’s market). For prices to go up again, there must be elimination of negative factors and emergence of positive factors before turning the corner.
And who says Singapore has a “tight home supply”?
Unlike Hong Kong, we have HDB flats and the supply is determined by the government. For private residential properties, there are still over 46,000 units in the pipelines. The government hasn’t stopped releasing new sites and we have just started the new round of en bloc fever.
Lastly, what do they mean by “potential easing of policy measures”? Monetary Authority of Singapore just emphasized again on June 29 the nth time that “they remain necessary” and “easing the measures now would send a wrong signal”.
How well does Bloomberg know about the Singapore property market?
What about market data showing the opposite?
If you are not only reading news from SPH, MediaCorp or Bloomberg, it is not difficult to find conflicting property data or reports from other sources.
1. SRX
SRX Media Report for Private Resale Non-Landed – July 2017
– Private Resale Non-Landed Prices Decrease 0.5% in July; Volume Decreases by 9.7%
2. URA
Release of 2nd Quarter 2017 real estate statistics
– Prices of private residential properties decreased by 0.1% in 2nd Quarter 2017.
– Prices of landed properties declined by 0.3%. Prices of non-landed properties declined by 0.1%.
– Rentals of landed properties fell 0.1%. Rentals of non-landed properties decreased by 0.2%.
3. CNBC
– “Singapore’s residential property market is sending mixed signals. This is what they mean” (CNBC, Jun 14)
Conclusion: We really need to look for data and reports released by more “neutral” parties, especially when we are talking about buying big ticket items like properties.
How does real bottoming-out or recovery look like?
Market recovery is all about facts and figures. There is no need to look for “signs”. We are not talking about superstition or sickness here.
Below are 3 critical sets of data to prove that there is really a market recovery:
1) Higher (or at least growing) demand over supply in the market. Problem of oversupply solved.
2) Resale (not new sale) volumes and prices show “meaningful” increase for a few quarters.
3) Rental prices and vacancy rates show consistent improvement.
Still in doubt? Allow me to reinstate the characteristics of the “6 stages of a property cycle” from my book No B.S. Guide to Property Investment – Dirty Truths and Profitable Secrets To Building Wealth Through Properties.
Honestly, I don’t think the market is even bottoming-out. We are at most in between the stages of consolidating or correcting stage. And it is far too early to talk about recovery.
For what we are experiencing right now in the market, as what I pointed out in my recent blog post, this is at most a dead cat bounce.
It may sound sarcastic. But when the real market recovery finally comes, the media may shy away from reporting it or simply ignore the good news. Even buyers doubt whether the good numbers in the recent quarters are sustainable.
Lastly, if you really want to see the “signs of recovery”, go look for some cold hard data. You will surely find them far more reliable than qualitative comments from some upbeat analysts.
Did you watch my video “2018 Singapore Property Market – what developers, agents, banks and analysts are hiding from you”? Watch it now!
*thumbs up*
Thanks!
http://www.todayonline.com/business/sph-submits-s1132-billion-top-bid-bidadari-mixed-commercial-and-residential-site
They gotta drum up the momentum to be in time when they launch for this project
The 6 stages of the developer property cycle is:
Stage 1 Bidding: Submit bids for land parcels at high price
Stage 2 Winnng: Win new site at record price
Stage 3 Launching: Launch new project at high psf
Stage 4 Publicizing: Report good sales at new launch
Stage 5 Reporting: Release good quarterly results
Stage 6 Clearing: Clear unsold units before deadlines
The momentum must be continued in order to pass the hot potatoes to the buyers to avoid holding them themselves in Stage 6.
Awesome! And Absolutely Agree!
Thanks Jacky. Time will tell.
Barring external shocks, this is going to run for a while, with sentiments (and liquidity) so high. What is worrisome is that some folks are taking asymetric risks (high leverage, poor holding power) and are paying for high prices in new launches for fear of missing out.
Nothing seems to has improved in the fundamentals – poor demographics, automation, job insecurity. So this bullish turn in my opinion will run for a few quarters to abosrb pent-up demand who had been at the sidelines.
My 2 cents.
Agree with you that many people who are buying now are those who do not really have a lot of holding power. Many are first-time buyers and upgraders buying ECs and mass market condos launched in the OCR. These new projects are being overpriced by developers, have low ROI and not much potential for appreciation compared with projects in prime areas.
They think that they have waited long enough and are afraid to miss the boat. Their “fear of losing out” acts have exposed themselves to the risks of external market risk and local economic slowdown in the next few years leading to the TOP of the projects.
PG recently published the article below. I am wondering if property price really goes up by 10% next year, will the government not step in to cool it down again? After all, MAS already warned that no further cooling measure is to be expected.
http://www.propertyguru.com.sg/property-management-news/2017/8/157746/property-prices-to-increase-by-10
Just look for which “analyst” the article has quoted in the article. The local bank will definitely project a positive outlook for the property market. They have to, for the sake of the competitive home loan market.
Property prices haven’t really gone up. The government won’t be bothered. They are busy launching new sites for developers to bid at high prices.
Hi PS,
do you agree that ABSD for Singaporeans should be removed for 2nd property?
I had many friends who lamented about this ABSD and says it increases their buying price for them. But I look at it another way which is if this ABSD is not implemented, the price of the private property could actually be driven up much higher than the 7%.
What do you think?
It is difficult to say whether ABSD is good or bad. It depends on which side you are. The majority of Singaporeans don’t want to see property prices continue to climb and become increasingly unaffordable. They want the government to do something.
Investors often want the government to adopt a non-intervention policy. But if things get out of control, they are also not in the position to deal with the consequences. Afterall, the government’s rationale behind imposing ABSD is to ensure prudent investment in private properties and to avoid further growth of the property bubble so that our private property market is sustainable.
Hi, I enjoy reading your insightful articles very much. Just to share my recent observations and hope you can share your thoughts too. Seeing some recent sell-out new developments, I am inclined to believe that the market is set on recovery. The new launches I’ve seen that have done well are located in prime locations, and generally have very nice designs and layouts. In comparison, the launches that have done poorly, are either not in a good location, or if in a prime area, does not have attractive or nice designs or layouts – they do not even attract much weekend window shoppers like myself. Is there some ‘safety’ in getting a well-designed property in a good location even if we are not yet approaching correction? I am inclined to exercise restraint and follow your sound advice but the emotional side of me can’t help feeling I’ve missed out on some good deals especially being told ‘sorry all the good units are sold out’.
I never ask people not to buy. I only advise people to exercise caution when buying properties. The fact is: For savvy investors who have decades of experience in buying properties, they know how to pick good deals in any market. And they don’t have to check with me before they buy. Those who ask for advice are usually amateurs and first-time buyers/investors who are likely to make common mistakes in property investment.
There is no “safety” in buying properties near the peak of the market. You don’t have enough buffer against any market correction. If you want to be safe, you buy when no one shows any interest in properties, or things are so depressed you can see ‘blood all over the streets’.
I visited showflats of new launch projects since 2001. The ‘all the good units were sold out’ saying happened every time without fail. If the marketing agent tells you the truth that they still have tons of unsold units and you have plenty of good units to choose from, will you still be ‘afraid to lose out’ and make up your mind immediately?
Hi, thanks for your reply. Indeed, I am very new in the game and the reason I have not made any purchase is not due to prudence but simply ‘kiasi’ haha – to scared to make a move. I was almost swayed by the very positive picture the news has portrayed recently, but I come back to your blog several times to read and to think. I am buying for own family stay (‘upgrader’), so I think I will take quite some time to decide on a place to buy – by then it might be 2018 already!
Hi
Can I check if u still stand by your thoughts on this article after all the price increase and mass collective sales? Hope you can share your thoughts about this article vs the current market.
What price increase? Are you talking about that 0.7%?
I don’t have to launch any new project. I have no unsold unit to clear and no housing loans to lend to developers and homebuyers. I am not living on advertising dollars from the industry stakeholders. I have the luxury to say the truth based on the official data on supply demand and 1-on-1 talks with insiders.
It is not a recovery. It is a dead cat bounce.
Thanks for your confident reply.
For me I shared the same sentiment… but I would say the news and hype really swayed my own judgement…. Its really not easy to stay away from the Herd mindset.
🙂
You can either read those news articles with a pinch of salt or don’t read at all. Every time before a stock market crash, you also see very optimistic and bullish headlines. The market tends to make us look foolish most of the time, doesn’t it?