The most honest property developer

Which is the most honest property developer?

In 2012, former CapitaLand chief executive Liew Mun Leong urged the government to regulate the building of shoebox apartments. He criticized shoebox developers for wasting Singapore’s limited land. Besides, these homes are “almost inhuman” and not good for the welfare of the family.

Apparently, Liew himself grew up in a one-bedroom apartment, with nine sleeping in the corridor. He knew too well how it feels squeezing in a tiny place. However, it’s only after what we have been through during the pandemic that many realized the importance of personal space.

Sing own praises and we will believe it?

Singapore’s annual new private homes sales has tumbled from over 13,000 units in 2021 to about 6,500 units in 2023. New projects that used to be 100 percent fully sold during the first weekend before mid-2018 were down to 20 percent sold these days.

Yet, spokespersons from developers and agencies told the media that their projects were selling well, with sales within expectations.

Rate hikes coupled with cooling measures are holding back potential buyers. Hoping some will continue to pay top prices for new homes, the vested industry stakeholders repeat in every property article about “high liquidity in the market” and “strong demand from homebuyers”. Never mind the fact that they are probably the only ones who are still optimistic about the market.

Read some highlights from the recent Business Times article “Prime condo sales, prices drop in H2 2023 following ABSD hike”.

“For the whole of 2023, there were 198 prime condo deals worth S$1.7 billion – a 33.4 per cent decline from the S$2.5 billion posted the previous year. The 2023 tally was also much lower than the 298 deals recorded in 2022, and 479 deals in 2021.”

“Prime condo prices consequently fell 6.6 per cent to S$2,302 psf in H2, from S$2,464 psf a year ago, as sellers lowered expectations on price premiums.”

“Some S$2.1 billion worth of landed homes was sold in H2 2023, down 26 per cent from H1. For the whole year, total sales came in at S$5 billion, about 18 per cent lower than in 2022, and 51.5 per cent less than 2021’s record high of S$10.2 billion.”

“Just two Good Class Bungalows (GCBs) were sold in H2 2023, from eight deals in H1. The GCB market recorded 10 sales in 2023, half of the 20 GCBs sold in 2022, and substantially lower than the 60 sales in 2021. The average unit land price tumbled 42 per cent to S$1,712 psf in H2 2023 from the S$2,952 psf in H1 2023.”

Developers all hat and no cattle?

Singapore developers are obviously not practicing what they preach.

The government’s 40 percent ABSD slapped on developers is terrifying. However, there must be ongoing work for staff in their companies. Developers have no choice but to join hands to spare the risk when bidding for new sites.

In 2023, only 8 out of 32 properties put on the en bloc market were successful. Furthermore, most were commercial projects. Residential collective sales totaled $574.3 million, down 69 percent compared with 2022. Even mixed-use and commercial deals fell 15 percent to $1.53 billion.

Similarly, government land sales continue to meet with few and low bids. For instance, the Lentor sites were selling at lower price per square foot in every release of new site. There were 14 GLS sites awarded in 2023 which was the highest since 2012. Despite this, total residential deals totaled $10.3 billion was still 13.3 percent lower than 2022.

“Early this month, we have the first government land sale in 2023 (beside the private assisted living site). Unfortunately, the Lentor Gardens tender only received one bid. The bidding price was even lower than pre-pandemic level.

In July 2021, GuocoLand beat eight competitors to win Lentor Central site at $1,209 psf. Two years later, this time GuocoLand had no competitor and bought the Lentor Garden site at $985 psf.”

– “Why private home buyers aren’t buying now”, PropertySoul.com

Which honest property developer dare to tell the truth?

The major difference between Singapore and Hong Kong developers or agencies is: The latter will tell people the property market is bad and don’t buy now. Of course, their intentions behind could be:

1) To speak the truth to gain trust from the public rather than treating them like idiots;

2) To reinforce that the market is challenging so hopefully the government can relax buying restrictions or lower stamp duties; or

3) To put pressure on the sellers so they are willing to lower their asking price for the agents to close the deal.

Last month, the land tender for Tung Chung site in Lantau Island received only one bid. The winning developer Sino Land is a big supporter of the government. However, it is likely that the develeoper will withdraw the bid under high interest rates. After all, six sites have been withdrawn land sales in Hong Kong last year.

When asked why he chose to stay on the sidelines for the Tung Chung site, Chinese Estates founder Joseph Lau (刘鑾雄) replied bluntly,

“Even if I have money, I won’t dare to buy properties now. It’s better to keep money in my pocket. Doing business must calculate cost and profit. Whether you are selling fishballs or properties, you only do it if there is return.”

Lau is one of the richest billionaires in Hong Kong with an estimated fortune of US$13 billion. He is well-known for his straight-talking style. With his wealth, power and age, he always speaks his mind without giving a damn what other people think.

Buyers who returned units are stupid like pigs?

In his latest press conference, Lau commented openly about his ex-lover making a silly mistake in property investment and forfeiting her deposit in a luxury project.

“Others have money to full pay (pay the property’s full price in cash with no loan). She’s not. She paid 10 percent deposit and another 15 percent tax to the government. Other buyers are wealthy wives who paid the full price for The SouthLand. But she’s not. She has no brain. How to close the deal like that? She is as stupid as a pig. Such a blockhead!”

He may sound mean. But he is right.

Unlike its highly regulated counterpart in Singapore, Hong Kong property prices have been climbing leaps and bounds for 15 years consecutively. It is common sense that the higher prices rise, the lower they fall.

To buy luxury properties in a boom market, leveraging is not part of the game. With a rich husband or lover paying for a prestigious apartment in full, it doesn’t matter whether valuation drops after completion or interest rates go through the roof. With a housing loan, the title of the property is under the name of the mortgage bank. But after full pay, the title of the property is under the name of the buyer.

Three years ago, Lau’s ex-lover bought four units of The SouthLand at a total price of HK$140 million (S$23.8 million). After dropping the deal, she lost her 10 percent deposit of HK$14 million (S$2.38 million). Don’t forget that she has also paid the government 15 percent additional stamp duties – a hefty HK$21 million (S$3.58 million). When she dropped the deal after valuation plunged, the developer sold her returned units to new buyers with a 20 percent discount.

In other words, she lost S$6 million for nothing – except all the transaction expenses and those negative media reports.

Who benefited the most from the deals?

In Singapore, according to the URA data, in 2023 every month buyers are returning 33 to 64 newly bought units at the sales galleries. These buyers need to pay the developer 25 percent of the booking fee or 1.25 percent of the property’s price. After pocketing the fine, the developers resell the returned units to new buyers.

Lau’s descriptive word pig may not be halal friendly here. Let’s call these buyers the victims and the developers and agents the winners of the game.

Nonetheless, the overall winner is always the government.

Compared with first-time buyers, buyers buying for second or subsequent homes are paying 20 to 60 percent more for ABSD for the same property. In the future, they can break-even only if the property’s value appreciates at least 30 to 70 percent on top of all the property taxes and expenses.

Think Singaporeans and PRs required to pay a $150 daily levy or a $3,000 annual levy to enter the casinos. Except that property buyers are asked to pay 20 to 60 percent of their stake as levies before they can gamble. That means even before they start to play, they already lose 20 to 60 percent of their stake.

This is like paying for COE before we are allowed to drive a car. The amount is paid in full ten years in advance with no option of installments. The government controls the COE quota while we bear the risk of COE price fluctuations. The latest price of open category COEs finished at $106,388. As a result, dealers holding last October’s $158,000 open category COEs decided to let them lapse. What about those who bought individually? After paying $50,000 more for the same thing, do they receive a thankyou letter or loyalty points from LTA?

Buy stocks, not properties?

Despite being a developer, Lau told people to buy equities now, not properties.

“For those who have the financial power and capability, many good (Hong Kong) stocks are now offering high dividends above 6 percent. You buy them cheap now and dividends will go up to 15 percent in 3 to 5 years’ time (when stock prices go up).”

“If Fed continues to raise rates, high interest rates will make life difficult.”

“If the property market collapsed, it would not be easy to save.”

Get what he said? Luxury or prime property prices are supported by foreigners’ money, rich Chinese’s money and cheap or easy money. When all these income streams disappear, what is left to support the market?

On the other hand, whether equity prices go up or down, day traders and value investors alike can make money from the stock market. In contrast, can buyers make money from the property market when home prices go south?

Food for thought

Another straight-talking property tycoon is CK Assets’ 95-year-old Li Ka-Shing (李嘉诚).

Three years ago, Li already warned businesswoman and investor Solina Chau (who is director of the Li Ka Shing Foundation) what’s going to happen. He gave her seven words: “山雨欲来风满楼” (The rain from the mountain is about to come. The wind is sweeping through the tower.) In other words, a big storm or a major crisis is on its way.

Li repeated this every day until Chau was afraid. He reminded her to take extra caution in her investments. When asked about the timeline of the crisis and when it will end, he only answered in his Teochew dialect: “自己顾自己” (You take care of yourself. You can’t help anyone and nobody else can help you.)

These are the words from the mouth of another honest property developer. Try to digest his words and learn from his wisdom. As the Hong Kong people say, he is putting money into your pocket.

Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.

You can watch the recording of the presentations at the 2023 Mid-Year Singapore Property Review and Outlook seminar.

The video 2023 Singapore Private Home Market is available for viewing here.

If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.

My book Behind The Scenes of The Property Market is available for preview and order online.