The title of this post is inspired by one of the readers who ordered my new book Behind The Scenes of The Property Market online. He asked in his e-mail when he would have “The Sins of the Property Market” delivered to him.
I immediately sent him the book because any delay would be a sin. Besides, he is most likely a loyal follower of my blog who got the idea from my old blog post “The 7 deadly sins of Singapore property buyers”.
In fact, he is 100 percent correct that my new book is not about the scenes, but the sins of the real estate market. It is about the sins of the consumers (including the homebuyers and investors) and the industry stakeholders (namely the developers, agents, banks, analysts and media).
Sin #1: Buy spokespersons’ interpretations of property data
URA just released March’s data on “Prices of private residential units sold by developers” last Thursday (Apr 15). Immediately, we have a new wave of confusing property headlines flooding the local media: “High-end condo sales surge as March new home purchases double”, “New Singapore private home sales soar in March; buyers zoom in on posh condos”, “Luxury home sales rose 10-fold in March” …
• Anyone can recall that developers have sold 1,217 new units during festive season last December and 1,633 new units this January? But they only managed to clear 1,296 new units in March, despite a few new launches and attractive discounts from “not so new” projects. So is new home sales surging or slowing in March last month?
• Why is it surprising to see new sales doubled from 645 units in February to 1,296 units in March? How many homebuyers and agents are free to buy and sell homes at sales galleries during Chinese New Year?
• Isn’t it a no-brainer that more new launches from developers will result in more new sales in that month? Which month do you think will have more new launches and higher sales, March 2021 or March 2020 when we were busy stocking up food, masks and hand sanitizers?
• If “buyers zoom in on posh condos”, why is Irwell Hill Residences in District 9 only 50 percent sold even with an attractive price of $2,500 to $2,700 psf? This is even lower than its counterparts launched 14 years ago in 2007. If high-end condo launches are selling like hot cakes, why The Atelier has to be shelved after moving just 4 units launched a month ago?
This is a free market, and you are free to interpret the data to your advantage.
The secret language of statistics, so appealing in a fast-minded culture, is employed to sensationalize, inflate, confuse, and oversimplify … But without writers who use the words with honesty and understanding and readers who know what they mean, the result can only be semantic nonsense.
– Darrell Huff, How to Lie With Statistics
Sin #2: Buy before it’s too late!
Last Friday (Apr 16), Channel NewsAsia published the article “Analysts expect private home prices to rise further on tight supply and strong demand”.
The agency spokespersons commented that the number of unsold new units is now between 21,000 and 22,000. “If buyers want to wait for the next batch of launches … they must wait two to three more years.”
Wow, demand is strong and supply is tight. New units are selling fast. Better buy NOW before they are all gone!
The vested spokespersons are playing the common tactic of toying with Singaporeans’ biggest weaknesses: kiasu and FOMO. As desperate homebuyers, if we are not vigilant, we will easily trust the media and succumb to the sin of herd mentality. The prolonged pandemic works here as a catalyst to make us irrational, impatient and desperate.
Care to know and dare to hear the truth?
• No more project to pick if we don’t buy now? According to URA’s March data on “Prices of private residential units sold by developers”, there are still 19 new projects with close to 3,000 units queuing to be launched soon.
• Unsold units are fast depleting? For a good year, the market can absorb about 10,000 new units. After adding 3,000 units to be launched to the 22,000 unsold units, we still have 25,000 new units waiting to be absorbed this year. Early buyers will flock to sales galleries to contribute to first weekend sales. But what happen afterwards? Many “not-so-new” projects launched back in 2018 and 2019 still have outstanding stock to be cleared. (“How well are developers’ new projects selling?”, PropertySoul.com)
• Need to wait for two to three years for new batch of launches? According to URA, as of Q4 2020, we have 49,307 units in the pipeline (42,976 under construction and 6,331 under planned development). These are the projects with planning approval. Adding another 3,476 EC units in the pipeline, there are 52,783 units altogether. The total number of TOP units flooding the market is 11,049, 17,178 and 14,860 units in the year 2022, 2023 and 2024 respectively. If you buy from newly launched project now, you still have to wait for at least four years for handover of your new home.
Aren’t we tired of vested industry stakeholders in those equally vested media telling us to buy all the time?
The difference between brokers in Singapore and other countries is: The former only repeat the same sales pitch and tell everyone any time is a good time to buy, until even the most gullible audience find them unconvincing.
On the contrary, real estate professionals in other countries are not overly dependent on marketing new projects. They act more like stock analysts: Sometimes they tell the media that prices are going up so better buy now. Other times they say the market is turning sluggish so better sell before it’s too late. This is to ensure that there are enough people buying and selling in the market. Above all, they can present themselves as neutral and insightful real estate professionals, rather than looking like parrots repeating the same few words all the time.
Sin #3: Buy the infallibility of the media
How is Singapore Press Holdings (SPH) doing for the first half of the financial year ending March 31, 2021? Revenue from the media segment fell 23.9 percent. Media advertisement revenue and newspaper print advertisement revenue dropped 27.9 percent and 28.8 percent respectively. However, total revenue only dipped 4.2 percent. It was saved by $15.4 million from property rentals and $15 million from the government’s Jobs Support Scheme using taxpayers’ money.
Although the Media segment accounts for 46 percent of SPH’s revenue, its profit is only a negligible 2.3 percent of the group. On the other hand, the Retail & Commercial segment (including residential properties) and Student Accommodation segment occupy 37 percent and 8.5 percent respectively of its total revenue. But a combined profit of the two segments contributes to a lion share of 79.5 percent of the company’s total profit.
With almost 80 percent of profit coming from developing, renting and managing properties locally and overseas, is SPH still a press company or a real estate company?
SPH doesn’t have the same luck for local and overseas property projects. According to the SPH FY1H2021 financial report, the Woodleigh Residences jointly developed by SPH and Kajima is only 62 percent sold (421 units) as at 22 March 2021. By now 28 months have passed since they sold the first 30 units during its first weekend launch on 11 November 2018. How many more months does SPH need to clear the rest of the 255 units?
As I pointed out in my new book, always question what the media tells you. Understand the conflicts of interest and ask yourself how neutral the media and its content can be.
According to the 2019 Edelman Trust Barometer Global Report, in Singapore the overall level of trust in the media is a disappointing 56 percent. Obviously, the local media has far more work to do to win the trust of the public.
How can the media be accurate about the market when their interviews and quotes are from spokespersons with vested interests? How can the journalists be honest about the facts when their property articles are next to the new launch ads? How can the industry stakeholders be genuine about giving advice when they put their interests first, and the buyers’ interests last?
It seems that as long as the industry stakeholders and the media are keen to show the public that there is still strong buying interest in new projects, as readers, we don’t have a choice but to continue reading property articles in a celebratory mood.
Sin #4: Buy and regret
There are three very important things that we all need to face in life. But unfortunately, they are not taught in school.
1) How to be a good husband/wife and father/mother
2) Personal financial management
3) Home purchase
Schools assume that we can learn these three things from home. But realty tells us that this is often not the case. Many parents either have no idea or aren’t doing very well themselves. It is not easy to find a good model to follow.
If we can have sex education in school, why can’t they teach us how to save, spend and invest in class?
Most teachers have not worked outside the school. They are also not well-versed in terms of managing money, buying homes or doing investment. They only tell us that we can’t make money from fellow classmates. And our little business ideas are killed that way.
Whatever we can’t learn at home or in schools, we lack the necessary knowledge. We are going to stumble and make mistakes sooner or later in life.
Another bigger problem is our ability of individual judgement.
We may not have the freedom to pick which kindergarten or primary school to go to, what kind of friends to mix with, sometimes not even the subject we study in university or the profession we choose in life.
When we finally have the right to make our own decision, it may be to buy a home. It is the most expensive big ticket item we purchase in our lifetime. This new-found freedom is frightening. We can’t say let me check with my parents, my teacher, my supervisor, my manager, or our CEO first. We need to take full responsibility for our choice.
That is the reason why buyers and owners are looking for the “sign” to buy or sell. That is why people go around asking free advice from those so-called industry experts and property gurus. That is why they sign up for my consultation service for clarifications, suggestions and reinforcement.
If rule number 1 of property investment is to close the door of loss so investors won’t lose money, rule number 1 of homebuyers is to avoid the chance of regret so owners won’t have buyer’s remorse.
If you say you are unsure whether it is a good time to buy, your agent will reassure you that the best time to buy is now. If you don’t know whether you can afford the property, your agent will use some calculation tool to show you how affordable it is.
There is a high chance that you will regret it. There is a possibility that you will regret it and cancel the deal, lose your deposit, or end up losing money on properties. And you will probably be the next regretful buyer sending me an e-mail to share another story of buyer’s remorse.
Food for thought
When buying a home, having the money is a prerequisite but it is not all. You may have money but you don’t have the industry knowledge. You may have money and industry knowledge but you don’t have the experience. You end up picking the wrong property, buying at the wrong time and paying the wrong price.
Of course, there are good and bad people in every profession. I am fortunate that I don’t have to report to a boss in a property company, please advertisers to earn their marketing dollars, or market properties to make a living. I am thankful that I have the liberty to call a spade a spade which I always consider a privilege. Whenever people pay for my books, workshops, online courses and personal consultation service, I know very well that they are paying for my honesty and the trust they have in me. And this is priceless to both parties.
If you need advice on property matters or residential properties in Singapore, you can check out my personal consultation service.
My new book Behind The Scenes of The Property Market is now available for preview and order online. You can also check out my online courses.
Your article came at the correct time to remind us to fact check these headlines again. The headlines are pushing up prices and I find many resale hdb being snapped up at record prices. I recently went to view an old hdb with 63 years lease balance asking for 100k above the most recent transaction in feb 2021. Same size, same type and almost the same floor. I decided to continue renting than to saddle myself with a huge loan which I may regret in the next year or so.
You are right. Good for you. When you see desperate buyers rushing to greedy sellers, you know it’s time to hold your horses and sit on the fence no matter what others say.