What happened to buyers who overpaid at new launch?

This blog post will share with you the bloody truth of buyers who overpaid for their homes at new launch. We will also look at condominiums that once set new price record in their respective district during launch and how they are doing now.

Caution: This is not another feel good article about Q2 economy grows 14.3 percent or profit jumps 37 percent, compared with historical lows during last year’s circuit breaker in Q2. It won’t excite you with stories on new price record for million-dollar HDB flat, new project launch or government land sales. Only read this if can stomach another sad truth during this prolonged pandemic.

Buy Pasir Ris at $2,000 psf?

Developers and agents were exhilarated to see Pasir Ris 8 selling 85 percent of units over the launch weekend. It was reported that prices were revised up seven times on the same day from $1,400 psf up to S$2,000 psf.

As consumers, there is no way we can verify the truth behind all these property news reports. But I do admire the bravery of homebuyers who take the plunge during this time, and their leap of faith to pay $2,000 psf for Pasir Ris.

To me, the location Pasir Ris immediately sounds the alarm. My past experiences told me that, for some reasons, I had to wait longer for buses, trains and taxis whenever I was in Pasir Ris. The worst thing to tell a taxi driver at the airport is the fact that you stay in Pasir Ris. And regardless of the new stations they are building for the new MRT lines, they can’t relocate Pasir Ris closer to the central of Singapore.

When nearby condominiums in the same district are currently selling at $1,100 to $1,300 psf, what sort of fool will buy Pasir Ris at $2,000 psf? With that price, you might as well buy private projects in the prime districts. Many reasonably-new condominiums in district 9 and 11 don’t even cross $2,000 psf. Mind you, Sentosa seafront condominiums are only selling at $1,300 to $1,700 psf these days.

Also, I have written a report on integrated mixed-use development some years back. For several reasons, I won’t buy a home with residential blocks above a shopping mall.

Perhaps the buyers commit under the persuasion or pressure of their agents. Maybe they get high being part of a new price record. But how many years do they have to wait for market prices in that district to catch up with what they have just paid?

When hot projects become hot potatoes

These days one of my pastimes is to go through the caveat records to see what, where, when and how much buyers bought at different projects that can end up in losses.

From my experience, it is difficult to copy other people’s success by adopting the strategy they claim they deployed. But it is much more practical to use other people’s failure as a mirror to reflect the kind of mistakes we can avoid repeating.

– Behind The Scenes of The Property Market

Some projects seem to have their value frozen over time. There is no price appreciation regardless of any increase in the property price index. Other projects have their highest price already achieved at launch. Then prices depreciate year after year with no end to it. These projects can have their first launch dated back to the year 2007. I am not surprised. Many buyers who bought properties in the mid-1990s took 20 years to breakeven.

Let’s look at two examples of condominiums launched in 2012/2013 and obtained their TOP in 2017. Hopefully, we can learn something from these early bird buyers.

1) eCO in Tanah Merah

Last month, my friend went to see a eCO 2-bedroom unit. The owner bought at close to $1,400 psf during its launch in the last quarter of 2012. Almost nine years later now, the recently transacted prices for two bedders are still between $1,200 to $1,400 psf. This is despite countless desperate homebuyers rushing to buy homes in district 15 and 16 to live a healthier life under the threat of Covid-19.

When we check the exact transacted price of that unit during launch, we see why the owner insisted on a selling price figure. He just wants to cover his purchase price and part of his transaction costs. We know it will take him some time before he sells his home. (Read my blog post in 2012 “The fear of losing out (part II: eCO showflat)”)

2) The Trilinq in Clementi

The Trilinq was open for sale in February 2013. Their 538 sq ft 1-bedroom units were launched at an average price of $1,650 psf. That was a new high in Clementi at that time. Before it obtained TOP in 2017, prices of one bedders dropped to slightly above $1,500 psf. Fast forward to 2021, they are still being transacted at similar price level. This is despite the fact that the property market is still doing well these days.

Note that not all 2013 new launch buyers suffer losses. If you are lucky, prices can stay the same for the past eight years. It is not a big problem if you have extra cash, not in a hurry to sell, and don’t mind paying the initial transaction costs, as well as maintenance fees and property taxes over the years. But for me, I would rather put my money in other assets with better return and capital appreciation.

3) Prime district projects

Remember enthusiastic buyers who snapped up new luxury projects amid the enbloc craze in 2007? I can vividly recall these launches were red-hot at that time with lots of “pent-up demand”. The year 2007 saw 14,811 new units sold by developers, mostly in the Core Central Region. In 2020, developers sold only 9,982 new homes. The number was 9,912 in 2019. Gone are those good old days.

The bigger the bubble, the bigger the casualty. This is what happened in the prime districts. I have written a recent post about what happened to high profile projects launched in Newton, Orchard and Sentosa back in 2007 (Read “When a fling becomes a thing”). After fourteen years, their price drop today is not too much if you have deep pockets. The paper loss is 20 to 30 percent on average.

Overpaid for Johor new launch

Losses from buying Singapore prime properties in 2007 are nothing when comparing with Singaporeans who bought Johor homes launched mainly in 2013 and 2014.

These high-end projects were marketed by Singapore property agencies with the right positioning – landmark in Johor, icon of Iskandar, tallest residential towers in Southeast Asia, etc. The Sultan of Johor also invested there and bought the penthouse so it can’t be wrong. Mystery shoppers aka property agents proudly shared in property forums how they just booked two or three units in the same project. Buyers congratulated each other and ended their thread with “welcome to the gang!”, “wait for prices to jump! huat ah!” …

Don’t laugh. Singaporeans trust what they read, no questions asked. And they buy when they feel good.

I am not going to repeat what I have shared in my earlier blog post “4 lessons we learned from buying homes in Johor”. This is a property blog. Let’s put aside discussions on the Malaysia political scene or currency depreciation. We go straight to the top few Johor projects which are once super popular among Singapore buyers. They were purchased for weekend homes, retirement or investment. What happened to them now?

1) Prices dived

The Astaka was launched from RM1,300 and up to RM1,488 psf. A recent mortgagee sale unit is asking for merely RM545 psf. What a deep dive of 60 percent in value! Similarly, prices of R&F Princess Cove have fallen from RM1,300 psf to RM650 psf. Country Garden @ Danga Bay is also selling half price from RM1,200 psf to RM600 psf. Landed homes like Horizon Hills have prices dropped 40 percent since its launch.

These high-end homes are built for foreign buyers mainly from Singapore and China. Since the outbreak of Covid-19, they are empty like ghost towns. Rental rates have been lowered substantially but there are no takers. Under prolonged lockdown in Malaysia., property sales by individual owners or auctions are not possible. With 20,000 Covid-19 cases a day, no one has any idea when buying and selling can resume again, not to mention when and where prices will reach bottom.

2) Security concern

Another headache for owners whose properties have been left empty is their susceptibility to break-ins … it was reported that police had arrested two men for breaking into houses at Taman Bukit Indah, a suburb where foreigners have been known to invest in property. Johor police added that the pair had specifically targeted vacant homes whose owners were in Singapore due to the border restrictions.

“How Johor’s residential property market has been hit hard by COVID-19”, Channel NewsAsia, 12 June 2021

Burglaries targeting homes with owners who are based overseas are real. In the mid-1990s, many Hong Kong people bought luxurious homes in the South China region. One day when these Hong Kong owners went there, they were greeted by a shocking sight: Their vacation homes looked more uncompleted than projects still under construction: Not only all the furniture and appliances were gone. All the windows and doors were also missing. Apparently, the locals have been practicing reduce, reuse and recycle since the 1990s. The victims asked the same question: I thought we have security guards and police around?

Food for thought

Li Shangyin (李商隐) is my favorite Chinese poet from the Tang Dynasty. Before his times, there is no better poet. After his death, no one has ever surpassed him. He could play with a few magic words and create the right atmosphere effortlessly. He could use legends and metaphors seamlessly to describe our dilemmas in life, especially after making a wrong decision. A good example is the legend of Mid-Autumn Festival with Chang-Er being trapped in the moon – a space adventure experienced well before the recent space travel talk.

What impressed me the most is: This great poet could precisely depict our dilemma in a pandemic that happens more than a thousand years later. In his famous poem 无题 (Untitled), he revealed our out of hand situation under border control, quarantine restrictions, battered economies and investment losses. Allow me to end this post by changing a few words of his poem. The derivative work best describes what happened to buyers who overpaid at new launch, especially in Johor.

相见时难别亦难
抗疫无力百业残
春蚕到死丝方尽
蜡炬成灰未止蚀

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