As I was writing this blog post, Covid-19 has 6.6 million cases worldwide and over 383,000 people were killed. To distract myself from the chaotic world outside, I re-read Robin Sharma’s best-selling book The Monk Who Sold His Ferrari. As the author told us, everything happens for a lesson:
There are no mistakes in life, only lessons. There is no such thing as a negative experience, only opportunities to grow, learn and advance along the road of self-mastery. From struggle comes strength. Even pain can be a wonderful teacher.
The pandemic has taught me very good lessons, both in life and in investment.
Lesson #1: We don’t need much to live and be happy.
Things are not looking good, but there are certainly good things around:
– Under lockdown, there is no traffic jam anywhere in Singapore, Kuala Lumpur or Bangkok.
– We don’t find any air or noise pollution from traffic, construction, road works or factories.
– My family has never been so appreciative of the dishes I cook for lunch and dinner.
– With exercising and home cooked food, I have reached my ideal weight and fitness level.
– Last month I only spent $113 (no typo here) on my credit card bills.
Since the implementation of circuit breaker, time was surprisingly easy to pass with my loved ones at home. Exercising, preparing meals and playing with my younger daughter nicely occupied my time every day. As the author said in The Monk Who Sold His Ferrari, happiness is nothing more than a state of mind that you create by the way that you process and interpret.
Before the outbreak, I wouldn’t have imagined that I could be contented with such simple life. Now I doubt whether things I used to do (putting make-up on, dressing up, eating out and going for appointments) and places I used to visit (shopping malls, restaurants and sports centre) are really necessary.
Lesson learned: When our habits have changed, the office, retail, F&B and entertainment scenes will never be the same again.
Lesson #2: You can choose to be in denial or face the reality.
After closing for two months, developers and property agencies still have no clue when sales galleries can be re-opened again. CEA advised property agents to embrace the new normal and go online for property viewings and transactions. The irony is: Brokerage business is built on human touch and trusting relationship.
Some developers and property agencies told the media that they have sold many new units to buyers who bought without visiting the showflats. If that is true, does that mean they are fine with continue shutting down the sales galleries later in Post-Circuit Breaker Phase Two and Phase Three? If the new sales business is so good, why the URA data shows that Singapore new private home sales plunge 58% in April, even before deducting the returned units the following month?
Have you ever bought a new or second-hand car without test-driving it? Will you buy or rent a home based on virtual viewing without going down for inspection? How reliable are virtual viewings of uncompleted properties or second-hand homes? Will you commit a hundred-thousand or million-dollar purchase and a 25-year loan after watching a 5-minute promotional video? Have you seen any virtual showflat or property video showing blocked views, strange layouts, water leakages, floor scratches or wall cracks?
There may be some buyers who take that leap of faith. But they are the minority. They are definitely not the practical and rational buyers and tenants like you and me.
There is an interesting comment from the CEO of a local property agency that I read in an EdgeProp article dated April 30:
Those whose jobs are secure and whose businesses are considered essential services are likely to be in a position to proceed with a new home purchase. They include civil servants, those working in the healthcare or medical supplies sectors as well as supermarkets, food and delivery services.
I don’t know how many of us are business owners or senior management of supermarkets, companies making face masks and ventilators, or from food businesses targeting only the consumers. But with my husband working in the healthcare sector, I am very sure that home purchase is the least thing on the minds of healthcare workers now.
Pharmaceutical sales reps cannot visit clinics. Few patients are seeing GPs unless they are very sick. Specialist doctors are postponing consultations and non-life-threatening surgeries but are still paying high rents. Healthcare workers working in government hospitals have stable income but are too stressed to think about anything non-essential. Those working in the healthcare sector to proceed with a new home purchase now? Dream on.
While some property marketers are still in denial and continue to live in their own world, others have chosen to face the reality. Knight Frank Auction is actively marketing some distressed sales of penthouses in prime districts. A 27-unit boutique project in Tanglin is going for fire sale. The developer of 38 Jervois is giving away 13 to 24 percent discount to avoid paying Additional Buyer’s Stamp Duty approaching the 5-year deadline. There are also online ads of other uncompleted condo projects offering new discount packages to attract potential home buyers.
Expect to see better discounts and more fire sales in the market in the coming quarters. There is no hurry to buy. Patience is the key in home purchase. Lesson learned.
Lesson #3: Nobody owes you a living.
Singapore’s economy depends very much on international trading, consumption and investment. These are all badly affected by country lockdowns across the world. As Singapore’s fourth largest trading partner, US reported an unemployment rate of 14.7 percent last month. The total number of unemployment claims over the past 11 weeks has surged to 42.5 million. Multinational companies that have resorted to global layoffs include Uber, Airbnb, Boeing, WeWork, Hyatt, HSBC, Deutsche Bank, Rolls-Royce, Nissan, Renault, IBM, Hewlett Packard, General Electric and Chevron.
After the Singapore government announced Jobs Support Scheme for local employees, employers are holding on retrenchment to benefit from the 75 percent wage subsidies while saving on the severance packages. Despite this, the Monetary Authority of Singapore said the country is still expecting rise in job losses caused by the Covid-19 crisis.
Lesson learned: The real recovery of the global economy cannot depend solely on temporary government grants or QE infinity. It must come from actual consumer spending.
No one owes you a living during a crisis. Last week, Singtel announced its 4th quarter net profit falls 25.7 percent and proposed a dividend of 5.45 cents per share which is almost halved of the payout distributed a year ago.
In early April, more than 3,000 Hong Kong investors demanded HSBC to reinstate its scrapped dividend payout for 2019 by removing compensation of top management for a year. Many retirees in Hong Kong are living on dividends from the 155-year-old banking giant which pays dividends for 74 consecutive years without failing. It is impossible for HSBC to pay dividends now because all UK banks such as HSBC and Standard Chartered are cancelling all payouts now to comply with the Bank of England’s request to exercise prudence in the midst of Covid-19.
Lesson learned: The incident is a wake-up call for many who invest in stocks for the long-term. We cannot live solely on the dividend payouts of blue chip companies in our retirement. Listed companies have absolute right to cut back on dividends or stop paying dividends to shareholders altogether.
Lesson #4: Bad times are the best time to see through someone.
When we sense something is not right, we tend to stay put and hope that the problem can be solved on its own. Why rock the boat If everything else looks fine? If it ain’t broke, don’t fix it. But once the shit hits the fan, we are forced to face it head-on. It is when we see people in their true colors.
A recent article in Mothership.sg titled “Covid-19 exposing how much landlords squeezing tenants in S’pore” revealed some the dirty tricks deployed by landlords during Covid-19:
– Instead of passing the government’s property tax rebate 100 percent to the tenants, they created their own special “conditions” to rebate only the “eligible” tenants
– Delayed and time-staggered payments across months
– Offered rent-free months instead of lowering rents, thus keeping rents artificially inflated
– Imposed gag orders on tenants to keep Terms and Conditions in tenancies confidential so that tenants cannot complain to the authorities or let the media know
With the outbreak of coronavirus, Singapore Airlines (SIA) cut its capacity by 96 percent after grounding 138 of 147 planes. Their share price falls to 30-year low. To tie over the bad times, the national carrier announced that it would raise $8.8 billion by issuing rights and another $3.5 billion from a 10-year Mandatory Convertible Bond (MCB) issue, with 295 rights MCBs for every 100 existing shares owned. Each of the rights can be exercised at $1 for every MCB.
This week The Straits Times disclosed that, although the rights issue of SIA shares has been fully subscribed, but the rights issue of MCBs was undersubscribe. The balance $1.41 billion or 40.4 percent of unsubscribed MCBs are to be taken up by Temasek.
To the shareholders’ surprise, most SIA directors have chosen to let their MCB rights lapse without exercising them. Some took up neither the rights shares nor the MCBs. An SIA spokesperson explained that the SIA directors act in their personal capacity as shareholders, and we do not comment on their individual investment decisions.
The SIA fundraising announcement in April did help to save the company’s share price from a free fall. The issue of shares and MCBs was marketed as an attractive offer to entice the subscription from shareholders. Who would have thought that the board directors themselves would think otherwise.
Meanwhile, a co-founder of troubled Singapore sofa maker HTL just agreed to buy back the company. Mr Phua Yong Tat has taken money from his own pocket to save his company which is on the brink of bankruptcy. Because Mr Phua truly understands Nassim Taleb’s belief that companies who can’t eat their own dog food don’t have skin in the game. Lesson learned.
What lies behind you and what lies in front of you is nothing when compared to what lies within you.
And no matter what you are experiencing in your life right now, trust that all is good and unfolding in your best interests. It may not look pretty, but it is exactly what you need to learn for you to grow into the person you have been destined to become.
– Robin Sharma, The Monk Who Sold His Ferrari
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Fully agreed!
Can’t see peaks if don’t learn at troughs
Exactly. In fact, the bad times often teach us more compared with the hay days when we are blinded by easy money.
The news reports that privat home sales in May were up by 75% from April.
Of course April sales were a low base and y-o-y sales were still down by almost 50% but I’m still puzzled why anyone would even consider buying a house in the second month of a circuit-breaker/lockdown and in the face of the deepest recession Singapore has faced since its formation.
Is this just another case of the developers and property agents gaming the numbers to fit their narrative? What is going on?
I also saw that article. It was really suspicious. The URA data release schedule of “Private Residential Units Launched and Sold by Developers” is next Monday June 15. The URA data is based on what the developers report to the authority, though they do nothing with the “number of returned units” every month. Now somebody claims they have earlier data and the media publish it. Did they release figures based on caveats in May which are lodged after exercising the option? Or did they make up the figures for PR purpose? We should let this agency and URA comment.
I have attended a few of the webinars by the top agents. They are trying very hard to convince their viewers to buy their new launch. They are trying their very best to push Treasures which is a 2000+ units condo. My questions is if everyone buy new who is the person to buy resale?
Actually, if you really need to buy now, I don’t understand why you buy new launch when resale projects at the same location offer so much better value for money, except you are helping the agents make a few more percentage of commission by buying new launch. Years down the road, your unit will be a resale anyway. The only difference is you bought at much higher psf price and need to wait very long for its value to go up.
New launch has much higher chances of capital appreciation and developer help to stage up the prices, they say. Resale has much lower chances of earning, as the resale buyer is buying at a higher price than the owners that bought from the developer, simply put both are not at the starting line.
Those agents are playing with some people’s scarcity mindset. Wealth is never a zero-sum game. When you buy a property, you should think about whether you can make money when you sell it. Whether the previous owner make or lose money (or make or lose how much money) has nothing to do with you. If you buy a new launch at the “future price” of $2,000 psf now, how long do you need to wait until the market price of $1,500 psf in that area to catch up with yours? If developers have to sell new projects at higher prices to cover their record-high land costs, and agents are desperate for the 3 to 5% or higher commission from developers compared with 1% from resale, that’s their problems, not yours. Why let others’ problems become your problems at this difficult time?