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Singapore Property Investment: Bad investments are made in Good Times

Bad investments are made in Good Times

By: km
Posted: 10-10-2007

In 1993, my partner and I bot 2 commercial properties in shenton way at the average px of $810psf. 2 yrs later in 1995, (the peak), an agt called to offer me $1600 psf, my partner told him $1700 psf as we need to pay the capital gain tax, guess what happen?, we finally sold the property through the same agent at $1510 2006, some 11 years later.

Why didnt we sell at $1600 in 1995??, because we were collecting very good rental, enough to pay the bank and still have money to spare, it make sense to keep for long term. Mistake !!!. because rental fell, interest went up. The following years saw the rental falling yr by yr, interest went up and during the currencies crisis, it went to some 8-9%, hence the rental wasnt enough to cover the bank installment.
Dont worry, we have a contigent plan, sell one unit to repay the loan for the second unit. Wrong!!, there was no buyer, even at $1200psf, then we try $1,000 psf, no takers. we did a refinance, which mean that we extend our payment tenure, in other word, we just ensalve ourselve for another few more years. Tenants were hard to get, meanwhile, the rental wasnt enough to cover the installment and we have to top up abt 4k per month. we pray that the unit remain tenanted and when there is any vacant period, we need to top up $8K per month. In 2005, or early 2006, we put out our property for sale at $1,000psf, no reponse, no taker. Only in late 2006, the same agt got a buyer for us at $1510 psf, we let go one unit, "As planned ", use the proceed to repay the other loan.

You guys may think that we still make money, Yes, we do. But imagine, your offer px of $1600 drop to at one time, $850 psf. When I reflect on this experience, I feel that one should unload property during the good times, where rental are high. The rental may not stay high for long as our govt will keep watch on it. It is during the high rental period that sellers are able to get the price they want. Property is an illiquid asset, it takes time to sell and when the mkt is bad, you will be struck with it for as long time.

Many of my friends are jumping in now, thinking that property px will keep going up at this pace, 40% per yr. I have tried my best to warn them, but if overdone will make me sound like a sour grape. Waki, Waki... Yes, the prospect of the spore economy may be good, or very good, but the current prices have already factored in all the possible beautiful stuff abt spore happenings. So what if those happenings come true?, it has been factored in already. BUT if, anything happen and derail the beautiful dreams of future spore, good luck to the buyers who jump in.

Looking at the subprime problem, it is definitely a bad news that will take time to filter down. The falling US$ is another problem that will hit the US economy. China and HK property and share mkt are 2 big bubbles.. Beware !!

"Bad investments are made in Good Times"

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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.

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