Have you come across a hidden gem in the property market shared by someone from the industry? Did anyone tell you that he knows the best kept secret about a high return investment project? When was the last time somebody said he has insider news and told you to buy a stock that’s going to go up?
Well, I hope you didn’t pick up too much of those top buys in the stock market recently. It looks like the bull market is changing its direction now.
Are we officially in a bear market now?
In barely two weeks’ time, the bullish tone of financial institutions and finance media suddenly turns bearish.
“Goldman Sachs: Weak stock market returns are ahead even with booming earnings“, – CNBC
“Investors are fleeing the financials at the highest rate in years” – CNBC
“Bear Market in Stocks, Weak Yuan Show China Problems Piling Up” – Bloomberg
“Trade War Hits Stocks as $8 Trillion in Bear Market: Inside EM” – Bloomberg
In Singapore, stocks tumbled to 9-month low after Trump and Xi exchanged new tariff threats. Hong Kong stock market was more seriously hit. The Shanghai Composite Index fell 20 percent from the peak.
Bloomberg saw 18 out of 24 currencies dropped. The biggest causalities were found in the emerging markets where equity gauges worth $8 trillion were at risk. The worst hit emerging countries include China, Philippines, Brazil, Pakistan, Dubai and Turkey.
Jonathan Garner, Morgan Stanley’s Chief Asia and Emerging Markets Strategist concluded, “This is a dangerous market. We now think we’re heading to an outright bear market.”
How does a stock market crash affect property prices?
Blame it on the World Cup. It is a big distraction from the financial market. In 2014, European Central Bank found a 45 percent drop in trading volume during matches. It fell to 55 percent when the home team is playing.
Blame it on the trade war. Who knows the actual scale of economic impact on the rest of the world when the two biggest countries are trying to impose more tariffs on each other?
There are more factors to blame: Fed rate hikes, escalating oil prices, rising US budget deficit …
But these are only immediate causes to shoulder the blame.
The underlying reasons, as I pointed out in my blog post “When is the next market crash?” are higher interest rates putting high pressure on the borrowers and Fed’s unwinding of its sizable bond portfolio in the open market.
How would it affect the property market?
In Singapore, equities and properties are the two most popular investment tools. If stock prices continue to slide, investors have to cover their margin calls and pay back the stock brokers. They have to dispose their properties to cover the losses in stocks.
Selling a property requires considerable time to find a buyer. After that, there is another 12 weeks to complete the sales transaction. That’s why there is a lead time of 3 to 6 months between the stock market crash and the slump of property prices.
Are you infected by the optimism of vested stakeholders?
Be it equities or real estate, there is nothing to worry if you are not overleveraged in your investments. Especially when you are constantly reminded in this blog “to be fearful when others are greedy”.
Amid mixed property market signals, I hope you still stay sensible to tell real facts from wild predictions.
We can give licences to property agencies and their agents. But we cannot regulate the fortune telling industry. There are many untrained fortune tellers in this market. They are free to approach customers and speak to the media about their market forecast based on gut feel and confirmation bias.
Unfortunately, the media is always the worst predictor of what is going to happen next. But since fortune tellers are not certified by any authority, no one will be held responsible for any consequences.
Time passes and things look up again, with mishaps of the victims bygone and mistakes of fortune tellers forgotten. The same prophecies come up once again in the market.
How did they tell you their best kept secret?
It’s nothing creative. They keep repeating three sayings to sell you rare investment opportunities and hidden gems in this market.
1. Prices will continue to go up.
This time it’s going to be different. Prices won’t come down and will only go up higher for many years to come.
Is there anything in this world that will forever go up and never go down?
Try saying this to children queuing for the giant rollercoaster or passengers preparing to board a flight. You sure can scare the hell out of them.
Remember, the only thing in this world that won’t go down is: your age. Let me add one more thing: the growing number of speculators before a market crash.
For speculators, history doesn’t have any educational value. They suffer big losses every time the market crashes.
2. This is the best thing to buy now.
Everyone understand the importance to make hay while the sun shines and to do the right thing when the tide is in your favor.
You believe the analysts have the right set of data, done their research and made logical conclusions. The developer, agency and your agent are all telling you that this is the property to buy now. Who cares to look at the raw data, run your independent analysis and come up with your own conclusion?
Singaporeans like to believe in luck: I am lucky. They are lucky. You can be lucky too. Let’s all jump on the bandwagon and make money together.
The fact is: Ordinary people have limited luck but like to believe that they are lucky. The market is a monster that makes unlucky people feel they are lucky this time, not knowing that they are going to be broke soon.
The market tends to make us look foolish most of the time, isn’t it?
3. This is going to take over the world in the future.
Many scammers are making use of our worship of fashionable technologies to talk us into buying a highly profitable future product. It is sad to see powerful future technologies invented under a good cause are being manipulated into an engine of speculation.
Cryptocurrency is a great concept before speculators rushed to join the craze that results in a big price correction.
Crowdfunding is an excellent financing platform to raise funding from like-minded people to accomplish meaningful projects. But con artists are taking advantage of the unregulated market to run scams and ponzi schemes that profit their own pockets.
Blockchain will definitely take over in the future. Last year, two proptech companies FundPlaces and Reidao use blockchain platforms to create property-backed tokens. The Monetary Authority of Singapore immediately issued “buyer beware” warnings to caution investors that such property-related blockchain platforms may be used for criminal activities.
Fintech is an indispensable word in any new financial start-up. KPMG said fintech funding in Singapore hit a record US$229 million last year. In early December, around 1,000 people lost millions to local fintech start-up SixCapital or SixCap that promised returns up to 18 percent a year.
When will investors share their genuine best kept secret?
I said this in my book No B.S. Guide to Property Investment and let me repeat it again here:
“Till this day I have yet to know anyone who really became a millionaire by joining any unproven get-rich-quick program or investing in any high-return overseas venture.
And I personally have not met any successful investor who lets slip of what new business opportunity he is currently exploring, except for the few partners he trusts.”
So don’t come and ask me what I am researching to invest next. In my blog, I will only warn you all the hidden traps in this market. If you pay a small fee to watch my “2018 Singapore Property Market Video“, I can share with you where I think the property market is heading. If you join my next workshop, I will show you how to buy a good quality unit or house in Singapore.
Like other savvy investors, investment opportunities and hidden gems are very personal and we exchanged notes with very close investor friends only.
Let me summarize three reasons why people won’t hold back their best kept secret and voice it in public.
Reason #1: When they are representing their company or their client, and receive their pay, reward and commission from them.
Reason #2: When they themselves are also following the herd, like parrots repeating what everyone is saying.
Reason #3: When they are being possessed, not by the bank after declared a bankrupt, but by some supernatural force or evil spirits.
Any more best kept secret to share in this market?
After running the How to Buy Good Quality Properties 1-Day Workshop six times, I am doing it one last time on July 21. Don’t miss it if you want to learn from my honest sharing of how to pick the best project, direction, facing, layout, fengshui, etc. in a residential property. Sign up now and see you there!
If the investment so good, then I’ll ask the “fortune teller” to enter into at least a 50:50 JV with me to invest.
So far all declined leh … Except for 1 property agent just after SARS time …. he knew good values were everywhere but didn’t have enough capital for the quality properties.
I also bought a property during SARS in June 2003. It’s very safe because every time I was the only one going for flat viewing.
Should put money aside and have a “wish list” in place. so that money can be put to good use when market direction changes.
The property market has turned. All these enbloc estates coming into the market are experiencing poor interest from developers.
Yes, you are right to mention that we accumulate more cash reserves to await another 20% fall from STI. It has already fallen about 12%. With your suggested 3-6 months time lag, we could experience a property market crash in 2019/2020.
I’m patiently waiting with glee.
Take your time. There’s no rush. The developers are flooding the market with new supply.
Even our government is not satisfied with just collecting development charges and tenure top-up fees from en bloc sales. It is launching 4 new residential sites and putting another 7 on the reserve list. There are two other “white sites” too. Altogether can build a total of 10,745 new private units. This is on top of 44,261 units in the supply pipelines.
https://www.businesstimes.com.sg/real-estate/singapore-government-keeps-pace-in-residential-land-supply-for-h2-2018
I enjoy your posts and largely agree on your stand that current property market is mostly being driven by herd mentality and commission-based agents, but I’m really curious how you would answer this very sceptical question: As much as commission-based agents are incentives to sell, are you just trying to sell your workshop and promote your website by taking a contrarian stand? It seems like you have been preaching of a crash in property market for a while (few years) which hasn’t quite materialised.
Without a rough timeline, is it just waiting for an eventual crash to take place, even if that’s 10 years later, before going, “I told you so”?
No offence intended and just sincerely curious.
Thanks for your question. I didn’t mention any crash until recent posts. However, in my blog, I’ve always been warning buyers about price correction and not to follow the herd to acquire overpriced properties, including local and overseas ones. Being unbiased and telling the truth had gained me the support of a group of followers and value investors.
Saying bullish stuff and following the market blindly can definitely get more traffic and advertising dollars. That’s why you can’t find any blogger like me in the market.
Money from writing a book and running workshops is negligible to me. I’m fortunate to have bought my properties at the right prices. Now I can do things I really enjoy doing without concerns of making a living.
Physical properties are huge ticket items, hence require much larger margin of safety than other types of investments.
I would say property reached a fair value in 2016 but in mature market like Singapore, fair value will only give you slightly higher than inflation rate going forward for capital appreciation.
And unlike blue chip companies that generate dividends, with investment properties you need to generate your own rental income to help cover costs. And that’s where you have the 2nd problem of Singapore properties — huge pipeline of new properties & drastic slowdown of E-pass foreign workers.
If you buy condos built in the last 10 years, you can also forget about getting a windfall enbloc profit in the future, unless developers see potential in building 100-storey condo blocks.
There are two factors to consider before one invests: net return and capital appreciation. The former is straightforward wirh numbers from purchase price, rental and expenses. The latter depends on when, what and how much you buy.
I always enjoy your posts vina. Keep them coming.
The property market is very much based on government-driven measures. While I think a drop in prices is possible, a crash is rather unlikely. Liquidity is also high and people may not have to sell if prices drop.
Those who need to sell in a market downturn is not the well-off but the over leveraged. Those who have the money to buy are not ‘in the mood“ to buy anymore.
Nobody want to see a real market crash. It affects not just the stock and property markets., but employment, economy and industries that we are in. Most of us won’t survive unscratched. But crash or not crash is not under our control. We can only take precautions to protect what we have.