Do you buy properties with a scarcity mindset?

Fear is a much more powerful sales strategy than greed. It doesn’t matter whether you are creating needs, doing negotiations or closing deals. If you know how to play with the FOMO phobia and manipulate the scarcity mindset of the other party, your chance of winning is high.

That is why property agents tell you that you must make that buy decision right away. If you are slow, the good units will be gone. Because you hesitate, another buyer just takes up the last unit.

It doesn’t matter whether you are doing the right thing or making the right choice. What’s important here is whether you grab something or go home empty-handed.

“When I was a freshman in college, a lecturer spent his first lesson explaining why girls should put our emphasis on dating over studying while in college; and focus on marriage over career when we start working.

‘If you girls can’t get hold of a guy in your four years here, you’ll probably never be attached and will end up on the shelves forever.”

I still remember vividly how his statement caused a stir among the girls in class. I’m sure that many would go home wondering whether we should seriously consider someone, even though he might not be our type.”

– “The ‘now or never’ sales pitch“, PropertySoul.com

How people are haunted by their scarcity mindset

Singapore is a competitive place that has instilled a narrow mindset in some people. Our education system can make people grow up thinking that life is all about grades, rankings and competitions. They are being trapped in a life with endless comparisons with others.

Some believe that all good things in life are scarce and limited in quantities. They think the world, including money, is a zero-sum game. If you lose, I win. This is a typical scarcity mindset.

We’ve simplified a feeling of scarcity to encourage people to comply, to get them to buy more stuff (before it’s all gone), to work even harder (because someone is going to overtake you), and to live in fear. It leads to panic buying and hoarding.

– Seth Godin, The Practice: Shipping Creative Work

Unfortunately, growing up with a zero-sum perspective is like a horse wearing blinders, it limits the field of view for opportunity. For me to win, you must lose. Taken to the extreme, everyone in the world is your competition. There is only so much money to go around and if you don’t take what you can, someone else will get it.

As you begin your career, this point of view causes a scarcity mindset. There is never enough money to go around. At work, she got a raise so I can’t. Immigrants are taking our jobs. Foreign nations are taking our jobs. Robots are taking our jobs. Technology is evil. Everyone is the enemy. Every day you live with this outlook, your life grows more and more stressful. Your life is reduced to a dog-eat-dog world filled with misery and despair. It is hard to have a positive outlook if this mindset has been drilled into you your whole life.

– Jay Samit, Future Proofing You

How our local media project a “Uniquely Singapore”

When the whole world is under immerse pressure of inflation, rate hikes and a looming recession, our local media turn a blind eye and project to us a picture of “Uniquely Singapore”.

For a second, I am almost convinced that Singapore is an independent and self-sufficient country. It is strong enough to strive on its own regardless of global headwinds.

1. COE premiums crossing $100,000

Just extend the COE bidding interval from two weeks to three weeks. The accumulation of bids from 21 days immediately sees COE premiums cross $100,000. in the last round of bidding result. The media quoted motor dealers that they do not expect COE premiums to come down significantly.

Like it or not, if you want to buy new cars, you better do it now before COE prices go up further. Those who bid too low must wait for the next round. So better place a higher bid or end up with nothing.

Simply repeat this trick from time to time. Let the scarcity mindset of car buyers and dealers contribute to the self-fulfilling prophecy of “higher COE premiums every month”.

2. New private home sales hit 6-month high

The same strategy is applicable to the private residential new launch market. After the new cooling measures last December, developers held back launches for months. They waited till May to release two big projects. The next month our local media are happy to announce that “Singapore new private home sales more than doubled to 1,356 units in May”, “New private home sales in S’pore hit 6-month high as tighter supply trumps cooling measures”; …

We could assure the editor that no reader read the line “developers rolled out three times more new homes”; last month. No one will ask why Singapore’s new private home sales only doubled but not tripled last month.

Spokespersons from property agencies couldn’t miss the opportunity to make us believe there’s “pent-up demand” and “supply crunch”. As usual, it was followed with free advertising for a long list of new projects waiting to be launched.

Also, readers were told that “the number of new homes purchased by foreigners jumped 58.5 percent”. last month. Never mind the actual number of transactions is a humble 53 units in April and 84 units in May (It’s actually 64 units or 11 units more than April if we exclude the 20 CanningHill Piers units bought by a Chinese national).

URA data show that there are 6,900 unsold units including ECs in the market. Among them are 3,471 launched but unsold units. Many projects were launched back in 2018 and 2019 and are approaching TOP soon. To lessen developers’ burden of ABSD payment to the government, homebuyers please go pick up these “unsold units out of Singapore’s new home supply crunch”. A property portal uses half transaction data and half extrapolated data to show that resale prices are climbing for 20+ consecutive months. Buy now before it’s too late!

Don’t let others play with your scarcity mindset

Sometimes I received enquiries for my personal consultation service when the buyers were being pressed by their agent to buy a particular new launch now or regret later. There are people who lamented that they missed the chance to buy a particular project.

It is interesting that some Singaporeans treat buying homes like bidding for limited editions of a red-hot new product. They behave as if they are fighting with others for limited offers in a private sale. Think panic-buying of food and groceries in supermarkets during the pandemic.

Dr Chan’s home buying tips

Singaporean Dr Chan Yan Chong (曾渊沧) is a renowned long-term investor based in Hong Kong. I like how he sums up the reason why he is so successful in property investment while others fail.

“買樓從來不是說誰夠眼明手快，而是誰夠心思慎密，誰夠眼光。”

(“Buying properties is never about who are being fast, but who are meticulous and insightful.”)

If you are cautious and miss the opportunity to buy that “good unit”, let it be. When you have enough time to think through, you will know what you are really looking for. Next time you can make a better purchase decision.

The fact is: If you don’t buy this time, there are plenty of good buys waiting for you in the future. If you miss buying something, you lose nothing. Because your money is still in your pocket. But if you buy the wrong thing, your hard-earned money is forever gone.

My two-cent home buying tips

I have encountered countless times of such situations: The agent told me that another buyer was considering the same property, so I’d better act fast. Or the other party also offered the same price, if only I could raise my offer.

I would reply without hesitation, “It’s fine. Let the other party take it. I can wait.”

Above all, I only bought resale homes. Because buying second-hand properties need to go through price negotiations. The process takes time. So I can have more time to think through before making the final decision. On the contrary, prices are fixed and non-negotiable for new launch projects. Deals are closed fast. It is so fast that buyers have no time to think and are likely to regret later. Worse still, there are too many agents and buyers in the sales gallery. Under herd mentality, it is too easy to fall for the trap of kiasu or FOMO, especially for those with a scarcity mindset.

Shifting from a scarcity mindset to an abundance mindset

The only way to prevent us from falling into the scarcity trap is to shift away from a scarcity mindset to an abundance mindset. All good things in life are not scarce and limited. Rather, we can create new ones, add value to them, and grow them in abundance.

Similar to money, properties exist in abundance. There is an ample supply of new homes in the pipeline. And there will be continuous supply of new sites and new developments in the market. You will find good deals out there if you know when and where to look for them.

Property is not a zero-sum game. If others win doesn’t mean you lose. Likewise, when others lose does’t mean you can win. When you buy a resale unit, you are not helping the first owner to make money. How much money the seller is making is none of your business. Your concern should be whether you will lose money next time. Focus on the deal.

Think win-win in all property deals. Uphold your honesty and integrity under all circumstances. No one need to lie or cheat to survive.

Unlike the equity market, the housing market is unlikely to collapse overnight and recover the next day. It takes time for the correction and recovery of a property market. As long as you still have the need and the money, you won’t miss the boat to buy.

Good deals are like MRT trains. You always have the next train coming soon. There is no need to be kiasu and desperately dash inside the train compartment when the doors are closing. Have patience and discipline, and you will find the right opportunity to buy.

– Vina Ip, Behind The Scenes of The Property Market

Shifting from a scarcity mindset to a crisis mindset

Last week, I went for the house viewing of a bank sale property in my neighborhood. An online check shows that the last owner bought the house recently last April. The renovation inside is still work in progress.

How could it be repossessed by the mortgage bank in just one year’s time? Did he buy under the scarcity mindset last year? Why did he miss his loan payments when interest rates were still low? Was he in a personal financial crisis?

By coincidence, I also found a new listing of a condo unit in CCR selling very much below valuation. The unit was just acquired in January last year. A check on the unit’s purchase price tells me that the owner is suffering at least 20 percent loss, on top of buyer’s and seller’s stamp duties, legal fee and agent commission.

We won’t know the real reason why the two owners were forced to part with their property. The recent Bitcoin market meltdown, frozen withdrawal of cryptocurrencies and massive selloff of US stocks are enough to make our heart skip a beat.

We don’t have to wait for cryptocurrency prices to crash to realize that the crypto market is a bubble. There is no need to wait till US tech stocks to tumble to see that their P/E ratio is too high. It is too late to wait for the big correction of property prices to know that their valuations are pumped up by cheap money all this while.

We often make the mistake of overvaluing the present but undervaluing the future. Nassim Nicholas Taleb said human nature is not programmed for Black Swans. We behave as if unexpected crises do not exist.

Food for thought

A recent Bloomberg article “The man who helped create Singapore’s housing boom is getting worried” is an interview with Liu Thai Ker. Mr Liu used to be the chief architect of Housing & Development Board. His advice at the end of the article has left much food for thought.

“I would say, keep the housing price rising steadily and not in a crazy way. But how to make that transition — I think we need some economists’ advice. Because now it has gone crazy. If you suddenly control it, I don’t know what negative effect there could be. We need an economist to study it. But my wish is that we would go back to something more steady, so that our property price remain more predictable.”

“When we first started, our economy was behind Manila, Yangon and Ho Chi Minh City, so we had a crisis mentality. Our first-generation political leaders feared for our survival. And now we appear to be very successful — and we are — but I personally feel that as a tiny country without resources, we must insist on maintaining the crisis mentality in order to survive. The crisis is still lurking behind our successful appearance.”

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.