Saturday, February 9, 2008

About this Blog

Smart Buyers Collection:I foresee a correction of 20% from here.

Smart Buyers Collection is a collection of words of wisdom by various Singapore property watchers.

By: dell
Posted: 28-10-2007

The sharp rise in the property market during the last 12 months was partly fuel by the enbloc sales, speculators and of course there are the geniune buyers who are worried abt missing the boat.

It is beyong doubt that the DPS plays a impt role in the developer's sales as buyers only need to pay up 3 yrs later. With this remove, it is just like stocks, when the brokers removes the T+4, just like the recent UniAsia, the buyers will have to pay upfront when buying, the prices will fall, if not collapse.

When the developers offer DPS, they are indeed paying for the interest incurred and hence build the cost into the prices. At 4% per yr, for 3 years, the interest playable by the developer would come up to 12%.
Without DPS, the developers, with the saving of some 12%, can afford to give a discount of that amt . It would be very logical to see Prices of the new development without DPS dropped by at least 10%, if not 15%.

The developers business is to buy land, build them and sell at a Profit. Buy low sell high, buy high sell higher.. they do not mind buying land at high prices IF they can sell their properties at higher prices.. as long as they can make money.

Now, with the removal of DFS, the govt is sending out a Strong signal that they are serious abt stabilising the property mkt. Minister has mentioned that there may be more measures to come. Capital gain tax, reduction of the loan quantum to 70%, extra stamp duty if sold within the few 1-2 years, etc..

Now, being a developer, one would be worry abt the Future demand and hence more willingly to lower their prices to dispose of the remaining units. Visit a showroom this weekend and next, you will believe it. When the developers start cutting their prices, it will more or less bring down the avrage px of the property.

Next, the resale mkt will be affected with the lowering of prices by the developers. Lets say, developer A cut their prices by 10%, it would be logically to presume that the resale properties at the nearby developement will also fall by 10% if not more, otherwise buyers would buy directly from developers who may throw in more freebie.
Currently, there are many speculators who are caught with many units, waiting to unload. When they see the developers reducing their prices, they will start to panic and unload theirs. One thing for sure, until these speculators or Spec-vestors clear their holdings, they will Not commit more units. Some of my speculators friends have voice concren and will be sellling their units, even at breakeven prices. These were the 'Wholesales" buyers for the developers, they come in and grab 5-10 units without a blink. with these group of "Wholesalers" gone, the developers may find sales dropped as they are dealing more with "retail" customer who come in and buy 1 unit at a time.

When the sales at the new development is slow, the confidence will drop, buyers who are worry abt missing the boat will now hold and wait. When the developrs cant sell their units as fast they have done so in the last 2 years, they will consider abt their Bidding of land or enbloc properties. They will now bid at lower prices than before and may stay out completely until they sold out their current stock.

Without the high prices offered by the keen developers, the enbloc craz will die down. some enbloc may have to reduce their expectation in order to secure a buyer. The hugh capital gain reaped by the enbloc will be reduced, hence the enblocer will not be willing to pay high price for their replacment property.

There will be a Domino Fall just like the spiral up in the last 24 months. Now, it is just the beginning of the Domino Fall...

Worst is that more supplies are coming out in the next 24 months and the promise by the govt to introduce more measures if required to curb the sharp rise in property prices.

I foresee a correction of 20% from here.


Post a Comment

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 :)