Friday, May 16, 2008

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Bull vs Bear : Singapore Property Outlook

Excerpt of forum exchanges between Bull and Bear.
(Background info: The Singapore Property market saw an all time peak in price in 1996 but the market crashed by 40% to 50% during the 1997 Asian Financial Crisis. 2007 saw the next peak in property price. For the full forum, ps visit this thread at Singapore Property Forum.)

Bull wrote:
I think comparing the current property with 1996 is a mistake. The current price holding strong and not going down with any bad news.

Bear wrote:
1996 should be compared with 2007 when property price was hitting the roof and transaction volume was strong.

2008 should be compared with 1997.. the beginning of the Asian financial crisis (2008 saw the US financial crisis).

2008 looks much more threatening than 1997. In 1997, it's just the Asian financial crisis. Today, it's the world that's threatened by a deep recession with the combination of high oil price, food shortage and the US financial crisis. It's going to be much worse than 1997.

Bull wrote:
The current price holding strong and not going down with any bad news.

Bear wrote
Back then (1997), developers did not drop price significantly until mid 1998 ( a year later after the Asian Financial Crisis erupted) when they could hold no more. Even big boys like Far East and CDL caved in. Similarly, you'd expect developers to hold until next year or so before you can expect them to really drop prices significantly.

The 1996 bull run was much longer starting all the way from the early 1990s. The bull run in 2007 lasted only for just about a year (at least for the mass market). Developers may have made much less profit during this cycle or some may not even have recovered the waiting cost during the long duraction of the market downturn from early 2000s to 2006. We can see that they've trying to gain loss ground dring this upturn but unfortunately, it didn't last. Plus the construction cost and hence, the holding cost of developers is increasing ... go and figure it out,

There are already clear signs that the current price is beginning to melt. Developers have reported drastic drop in earnings, recent launches were like dead towns ...

Bull wrote:
Reason 1 (for continued uptrend):Govt always "announce" a lot of master plans which mostly prop up property price for long time because most of them are very long term
plan. Including IR, MRT, Jurong E and paya labar etc.

Bear wrote:
This helps but Singaporeans are more concerned about the coming recession. If they can't hold through the recession, all that rosy master plan is of no good to anyone.

Bull wrote:
Reason 2 (for continued uptrend): Strong rental market from enblockers and foreigner.

Bull wrote:
Rental market was also strong back then (1996). But when recession eventually hit (in 1997), expats went home and left property owners with vacant properties and high mortgage to pay. Banks started to ask for top-ups as property valuation fell. Property owners were squeezed from all sides, some didn't survive.

Look carefully around you, we're beginning to see signs of that.

Bull wrote:
Reason 3 (for continued uptrend): Thousand of cash rich enblokers stay sideline watching property market very closely every day and night. They are real ready buyers waiting to buy even a little drop in price.

Bear wrote:
Enblokers are probably the only reason why property price hasn't dropped until now. But they're limited in number and if they're not stupid, they'll better opportunities ahead. Anyone the market cannot be sustained by a small number of enblokers for very long.

Bull concluded:
So, its really different from 1996. Property never go down in Singapore at least another 10-15 years. Only one reason for the property price to drop : NO Job, NO/Less/Unstable Income. Any comments?

Bear concluded:
That's your guess as much as mine.

Personally, I think we're heading for a prolonged, severe recession of a scale we've not yet seen before.


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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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