Thursday, September 20, 2007

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Smart Buyers, 10 Reasons to wait....

1) Supply is Increasing Rapidly
If you wait, chances are you'll be spoilt for choices.
According to URA's data, there'll be a supply of 65,400 residential units by 2010.

(Source: URA)

In addition, the GLS (Government Land Sales) programme for 2008 Q1 will add another 8250 units. The government has assured Singaporeans that it will continue to review the GLS to meet demand.

Add that to HDB's Ponggol 21 plus, Dawson Estate and the many design and build flats that will give private condo a run for its money; and you'll see the reason to wait. What about those enbloc sales which will come back in manifolds their orginal number. To give you some sense of the quantum, I've seen site which used to be just a bungalow housing one household being turned into a 30 storey high building with some 50 units. Why should 10 people rush for 1 flat when there are so many coming. Buying property is a long term commitment and it's definitely worth waiting for even it means a few years.

(What Singaporeans have to say about the GLS (government land sales) programmes? Are Singaporeans confident that the property supply in the pipeline will take the heat off the property market? Join the Smart Buyers forum.)

2) Global Outlook Uncertain
Despite the recent drop in Fed rates, US subprime problem which has now spreaded to Europe will continue to loom in the years ahead. The uncertain outlook is clearly spelt out in the roller coastal stock market. Most market watchers have conceded now that there is more than a 50% chance that US will go into a recession. A number of them are of the view that the recession is likely to last for years.

Oil prices are climbing to a level that warrants concern too, so have commodities. This has brought about one of the biggest inflation rate ever seen. Singaporeans are going to feel it increasingly more painful in their every day life. While most are still optimistic about our jobs, it is possible that a global recession can take a toll on our economy and hence, our employment.

If you buy at a very high price with a huge mortgage, you may not be able to hold through any such disaster.
Join the Smart Buyers Forum

3) Asking Prices Near 1996's Peak

Many sellers are now asking prices near the 1996's peak and even, beyond. At such prices, any rational person will see that there is little upside left. If you plunge in now, you'll be making transaction record for future sellers to ask for even more. For sure, it won't go up forever and you may just be the last one holding the hot potatoe.
(Have something to say about this? Click here.)

4) Capital Appreciation Limted
If you are looking for capital appreciation, calculate your odds against the impending supply and bear in mind that more than 90% of Singaporeans already own their homes and are in no urgency to buy if prices are not right.(If there's a genuine urgent housing need, how come the market was so quieet just about a year ago?) Furthermore, Singapore is a mature economy and property value cannot be expected to rise like before.
(Have something to say about this? Click here.)

5) Rental Yield Limited
Even at today's peak rental, yield is just about 4-5%. In the long run, increasing supply and the government's concern over losing competitiveness will most
certainly put a downward pressure on it. The optimists may argue that with the completion of the IR, our expat population is set to grow and hence, rental yield.
Take a closer look at this argument. Firstly, our expat population is still largely from the third world countries and generally cannot afford the high rental that landlords are looking for to justify their property investment. Secondly, while the IR may create a good number of jobs, they are not going to be high paying for most.
(Have something to say about this? Click here.)

6) Market Correction Imminent
There are some signs that a market correction is imminent. The first sign being the dwindling transaction volume. En bloc sales in particular have dwindled into a streak. The graph below shows that the number of private residential units sold in Q4 2007 drops drastically as price index climbs towards 170, just about 10 points below the historical 1996's peak. This may indicate buying resistance as more and more people are priced out of the market.

Last Updated on 3 Feb 2008
OCBC Investment Research analyst Winston Liew said,'A correction is going to take place.' Asking prices, which went up by the hundred thousands in the last few months, have either stayed put or showed sign of waning. New launches especially the smaller ones are seeing much slower take up. It seems that all those wild speculators and frantic buyers who have been chasing the price up in the past few months have suddenly gone, as quickly as they have come. Developers, real estate agencies and all those who have a vested interest will continue their attempt to talk up the market. The truth is prices will not go up forever. Read the signs yourself.
(Have something to say about this? Click here.)

7) The 10-Yr Property Cycle
The property market is cyclical. It is an established behaviour. The last time the market went down was 1998. There was a supply glut then. Now we see a supply shortage, with developers building frantically to cash in on the demand. It doesn't take a lot of intelligence to see what's next in the cycle.
(Have something to say about this? Click here.)

8) Less Risk Buying Completed Units
As you wait, more residential units will be completed. It's far better to buy what you can see than try to imagine from some floor plan. Believe me, you don't want any rude shock for something that costs you your life savings and more.
(Have something to say about this? Click here.)

9) No Urgency to Buy
More than 90% of Singaporeans already own their homes which means that for most of us, there is no real urgency to buy. So why rush in at this rocket-high price?!
(Have something to say about this? Click here.)

10)Heed to the Minister's Advice
"Stand back and let the others rush. If you want to follow the crowd, you must be prepared to take higher risks." was the advice of Mah Bow Tan.
(Have something to say about this? Click here.)

With all said, I must conclude that the fundamentals for housing demand in Singapore are still strong. Barring any unforseen catastrophe, Singapore's econcomy is set to grow in the forseeable future. The influx of expat workers will continue to grow with job creation, particularly with the completion of the Integrated Resort. Property will still make good investment. You'll just need to wait for the right one at the right price.
(Have something to say about this? Click here.)


Anonymous said...

You missed the boat and try to talk down the market so you can buy right??

Smart Property Buyer said...

Wrong and Right.

Wrong, I didn't miss the boat.In fact, I got on a pretty nice boat in the middle of 2006.
I bought this FH condo in a nice neighbourhood for just about
$400 psf. It's currently gone up to about $800 psf. But it's
such a nice place, I decided to call it home for good. It's
not for sale.

Right, I'm trying to talk down the market so I can buy another
one. As if I'm that powerful.

Making you envious is not my point at all. I just wanted to
share the lessons I have learned through my years of buying
and selling property.

The lesson I learn is that to be smart property buyer, you
must resist following the crowd. Instead exercise your
own judgement and wisdom.

In 2006, the resale market was practically a dead town. People
were so pessimistic about the mass market that few would
buy even when properties were going at half price. Most didn't
read the signs of the already steep rising rental nor the
record breaking enbloc sales. Real estate agents I spoke to then
insisted that the rise in property price in the high
end market would never spread to the mass market.

Then suddenly in early 2007, the market took an upturn, and people
started chasing the price up to double what it was just a year ago. It's

Frankly, even after what I have experienced, it's not easy to run against the herd.

Anonymous said...

spot on.

Most of the house owners are just followed the crowd and rumor.

With US economy is now in deep trouble. some still argue the Singapore economy is fundamentally strong and able to decouple from US. This make me laugh. They are simply so naive. Singapore is a very globalized trading country. Anything wrong with US (biggest export market), Singapore will feel the heat.

I am patiently waiting for more bad news to come out. Overly optimistic could easily turn into deep pessimistic.

BTW, don't you all feel funny that bosses of CDL/Capital Land seems to take every opportunity to talk up the market. They have never done that last year. what is their motives ? to let folks like you and me, make some profit ? haha :-)

Smart Property Buyer said...

That's the power of the media. With reports after reports about the millions of dollars pocketed by owners in enbloc sales, it is hard for the rest of us not to want to gamble for a piece of the property pie. Greed and envy can cause even the most rational person to lose his reasoning.

US subprime problem is yet to manifest its losses in the year ahead. Now, it's everybody's guess how bad it's going to be. Even the bankers aren't completely sure of their CDO exposure. We're already feeling some heat... our industrial production has declined for this quarter. And the stock market is on yoyo every day. As far as our property markeet is concerned, I think the speculators are washing their hands off henceforth.

Understandably the developers and real estate agencies will want to talk up the market. And they've the media at their disposal. Singaporeans must learn to read in between the lines and think for themselves.

I remember Goh Chok Tong (when he was PM ) said this in the 1996 peak that 'increase in property price just cause a transfer of money from the people to the govt and developers ... developers need to be rewarded so as to keep them buiding ... money in the government's hand can be redistributed.' Guess who's sufferring? Those Singaporeans who paid sky-high prices for their properties. Many of my friends are still slogging to pay the mortgage for their million dollar property.

Singaporeans must really think for themselves: Just how much are these properties really worthed? Is it enough for one to slave to them for the rest of their life?

Anonymous said...

Good job. Love to read your writings.
I too am very patient when it comes to properties, looking at events in terms of quarterly or yearly time frames.
Those people that get flustered by day-to-day developments in the overhyped media will most likely end up buying out of fear.
Take a step back and relax, don't rush.

Smart Property Buyer said...

It's that lesson that inspires me to write this blog.

I simply hate to see other fellow Singaporeans get lure into property bubble that may cause them to end up with a lifetime misery.

Oct10 said...

Me again (Oct10).

I remember the mid-90s frenzy only too well. Crazy period, and the first half of 2007 was becoming just like then. In fact it was even crazier than now: Big car COEs went pass $100K at one point!

This time round it will be interesting to see how the market pans out. I'm interested to see how pricing readjusts itself assuming no economic shock like in 97. Economic shocks that bring about job losses will definitely cause a market crash, like the last time.
However, assuming no economic shock this time (not a given, of course), and people are generally able to service their mortgage and are unwilling to cut loss by selling below their cost, then it will be an interesting to see how price drifts along.

Smart Property Buyer said...

Nice to hear from you again. Do visit often, and get your like-minded friends to chip in their two-cents too.

An economic shock is really not totally inconceivable. The US subprime problem is yet to manifest its effect on the global economy. I'm for caution. My advice: Invest only if you've the holding power.

IAmInNoRush said...

It has been more than 6 mths since your last entry. I just read these comments today and find them all very useful. Thanks for your time.

Smart Property Buyer said...

Dear iaminnorush,
Look like I found my long-lost friend. Like you, iaminorushtoo.

Nice to hear from you again, do visit often or join the Smart Buyers Forum .. it's a fear battle over there.

Anonymous said...

Advice/Feedback is much appreciated.

I'm deciding between buying (for own stay):
1. 99-leasehold (6 yrs old) studio (667sq ft) at $480K ($719 psf) in Sengkang
2. Freehold studio (TOP end 2009) studio (452sq ft) at $450K ($995.5 psf) in Tanjong Katong area

I don't foresee I'll stay there forever since I like to move around every now and then.

QUESTION: Should I go for a unit that is spacious, cheaper but with less resaleability OR smaller, more expensive but with more resaleability?

Smart Buyer said...

Dear Anonymous,
I'd definitely go for the freehold property.

In your situation, I assume you don't really need the space, I'd think a more "stable" property is better. In the event that the property market goes into a doldrum for long period of time, a freehold will allow you to hold the property until you see daylight. There'll be a flood of 99years leasehold properties in the market by 2013, by which time your 99 yr LH property will be more than 10 yrs old and I believe would be faced with a lot of competition should you decide to sell then.

Just my thoughts. Ps exercise your judgement.

Best wishes.

Besides, Tanjong Katong is a better location than Seng Kang, and like most people say, property is about location, location, ..

Anonymous said...

Dear Smart Buyer,

Thanks for your feedback. That was how I felt too, but reluctant to buy at such a high price of $1,000psf. I will definitely need to evaluate and prioritize these factors - resaleability, value-for-money (psf), size, and location. How would you rate them in order of importance in this uncertain market?

Undecided :|

Smart Buyer said...

Dear Undecided,
You've good reason to be undecided. There are strong signs that indicate price is heading south. Frankly, I wouldn't pay $1000 psf either. But then, different people have different needs.

Don't exactly understand the factors you have laid down. For me, as a property investor, I look at the ROI vs risk of property investment compared to other investments.

Do consider carefully.

I'm not really a die-hard property buyer. Property investment comes with a lot of intangible headaches that only people with the experience can understand.

Anonymous said...

Dear Smart Buyer,

Those factors based on my own requirements of an inexperienced buyer. This purchase is primarily for own stay, and secondary, investment. The unit at Tanjong Katong that I'm eyeing is a sub-sale, which makes the price higher. I'm just trying to balance the rational and emotional factors during the purchase. Thanks for your advice.


Smart Buyer said...

Dear Undecided,
Home buyers like you do have a more difficult decision to make than investors. For investors like me it's clear that it makes more sense to invest elsewhere than investing in Singapore property at the current price level now.

Home buyers have to consider the high rent they've to fork out every month. So the arguments I put forward here which are largely for would-be investors may not apply well for home buyers. Even home buyers, there are different needs. Some desperately need the space to house their family, others may be concerned about good views, and yet others, the affordability.

You are the best person to understand your needs. I don't think I'm in the position to advise you on which factors are most important. My best advice to you is buy within your means.

Good luck.

Anonymous said...

Hi Smart Property Buyer, I'm glad to have visited your blog and come to senses on whether to invest in the property now or later ......
Recently, I've been to several new projects and my observations is that there're more agents than the customers. I came across a young couple which I felt "Sorry" for them. They were being persuded by the agent in signing the option to purchase on the spot. I've overheard something like ..... "Oh !! Both of you can loan for $8XXK with your income and your age...., you can take this unit and the developer is offering 10% rebate on any new purchase, the offer only valid for 1 day and etc....) Then I saw the agent clapping their hands in congradulating the couple in "making the right choice" .....
As we've seen that more and more bad news is coming from the US and European countries .... Just this morning, I saw the news saying that Japan is in the recession now ..... With all these news, I've made up my mind to wait-and-see. Famous quote "What Goes Up will Come Down .... "

Smart Buyer said...

Dear Anonymous,
I had my blunders too. You can read about it in the following post:

I cannot honestly see what real upsides there are in investing property now. I won't do it and so I won't ask other people to do it.

Yes, I confirm that: "What goes up will come time".

My best wishes to you.

Anonymous said...


your comments seem to refer to condo sales. what is your take on landed property at this stage. good time to buy or not?

Smart Buyer said...

Though I think that landed property price may show more price resistance than condos esp 99 LH, if the economic downturn becomes prolonged and severe, it'll eventually impact all segments in the property market. Well, I'd want to remain watchful of the evolvement in the global economic front. Just my opinion ;)

Anonymous said...

Interesting and informative thread you have here. I am interested in getting an apartment in The Clover. Depending on the level, I have been offered units at about $730/psf.

With the uncertain economy, would you consider this 99-yr unit a bargain? Or should I wait and hope that the price drops further? I would like to get a unit in this estate because of the proximity of good schools.

Smart Buyer said...

Dear Anonymous,
No, I do not consider it a bargain. I bought a surburb 99 LH condo from the developer in 1998 (during the crash of the Asian Financial Crisis) at $3xx psf and guess what, the price dipped further than that in the later years. I sold it end of last year for a small profit. To think of all the troubles of leasing the unit, including furnishing, maintaining and running after tenants for payments, I think collecting blue chip dividends is a much easier way to get the same returns.

If I were you, I'd wait. Since I'm not you, I cannot decide for you because you may have other priorities that are very different from mine. I can only share my experience with you.

Good luck

Anonymous said...

Dear Smart Buyer,

I am a first time Home buyer. I am looking at buying the 1 bedroom/Studio at The Sail @ Marina Bay. Currently it is in negotiation (OTP) for SG$1250 psf for the apartment sized at 592 sf @ the 8th Level (Not much of a view).

I am sharing it with my partner, hoping to sell it with a profit after staying there for 3-4 years -when the IR is up and running, we hope to sell it at a profitable price. Currently our we are fortunate to get a 90% Loan from DBS...3% for 35 years.

I am currently aged at 25 yrs old. Unexperienced and in need of an experienced invester's advice. PErhaps you can help me out?


1st time Buyer

Smart Buyer said...

Dear first-time Buyer,
1. Go through the Property Buying Checklist.
2. Do an honest analysis of your risk profile e.g. your job security. h.
3. Consider the other scenario that you are unable to sell the unit at a profit in 3-4 yrs. Bear in mind that the PM has said this recession is likely to last through 2009 and follow by years of slow growth. What would be your situation then?
4. Measure the value of your property based on its ROI rather than betting on IR.

Best wishes

Anonymous said...

Dear Smart Buyer,
Thinking to sink in some $ on the property. Any idea how much psf Valley Park (River Valley)cost during low time?

Smart Buyer said...

Project Name Project Type Street Name District Floor/Land
Area *(sqm) Price ($) Price ($psf) Date of Option
ASPEN HEIGHTS Condominium 261 River Valley Road 9 147 1183000 747.65 19-Apr-04
ASPEN HEIGHTS Condominium 261 River Valley Road 9 105 888000 785.69 06-Apr-04
YONG AN PARK Condominium 329 River Valley Road 9 319 2550000 742.64 08-Apr-04
URBANA Condominium 1 River Valley Close 9 137 1495960 1014.45 31-Mar-04
URBANA Condominium 1 River Valley Close 9 123 1159945 876.12 18-Mar-04
URBANA Condominium 1 River Valley Close 9 97 931660 892.31 18-Mar-04
URBANA Condominium 1 River Valley Close 9 137 1465753 993.96 18-Mar-04
YONG AN PARK Condominium 327 River Valley Road 9 289 2150000 691.15 19-Mar-04
YONG AN PARK Condominium 327 River Valley Road 9 319 2520000 733.9 08-Mar-04
VALLEY PARK Condominium 479 River Valley Road 10 126 1000000 737.33 08-Mar-04
VALLEY PARK Condominium 475 River Valley Road 10 150 1070000 662.71 17-Mar-04
VALLEY PARK Condominium 479 River Valley Road 10 113 918000 754.73 29-Dec-03
VALLEY PARK Condominium 483 River Valley Road 10 80 680000 789.68 18-Dec-03

Anonymous said...

Hi Smart Buyer,

I would like to seek your advice on buying pte property now or 10-15yrs later for retirement in Spore. I am a Sporean married to a foreigner and am now living overseas but intend to come back to Spore in 15 yrs' time after my hubby's retirement. We are actually thinking of buying a pte property for retirement, but the question is buy now and rent it out or wait till retirement then buy 15 years later. What do you think the pte property markets will be in the time span ? Will property in Spore be always on the upward trend (albeit a bit of corrections here & there) and thus make a property in 15 yrs' time more expensive than it is now ? Thanking you in advance. Greenhands

Smart Buyer said...

Dear Greenhands,
1. The difficulty with investing in property for retirement is you don't know when you really need the money. What if you need to sell your property in a down market? My advice is have enough cash before you invest in property. (Having to borrow from the banks is a NO,NO during retirement.)

Friends of mine who bought properties during the 1996-peak all told me that they'd not make money even if they sold their property during the 2007-peak, more than 10 years later! The arguement I'm trying to put across is that if you enter the market at a peak or near peak, you may very well never live to see your property investment turn into a positive equity in your lifetime. Hence, you should aim to enter the market at the lowest point possible. On how to watch for the bottom of the market, you may want to follow the Singapore Property Forum. There are many wise buyers there.

Best wishes.

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Dear visitors:
Your comments are most welcome!

The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.

Smart Buyer :)