Thursday, September 18, 2008

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Property Investment Advice: Property Price always go up in the long term?

Here is an enlightening look at this widely established wisdom:

"It is the median property price that will go up steadily with economic growth in the long run. But peak price, not necessarily, cos the subsequent peak/s maybe lower than the previous one .. Plus you have to add your mortgage cost and consider time value of money. E.g. if you bought a property in 1996 peak, the value of your property today is most likely still below the price you bought in 1996 in absolute term. Add your mortgage interest, the actual amt you'd have paid may be double. If you sell it now, it probably fetches about 70% of the price you paid in 1996, but that 70% is worthed still today than 1996 given the high inflation now, that's the time-value of money has declined. So buying at a property peak could see your asset condemned to a life sentence of being a negative asset."

(The graph below shows the private property price index from 1990 -2008, with an "imaginary" graph drawn in red to represent the trend of the median price)Property_Price_Index_Graph_1960-2008_superimposed-median-price.gif
From the graph above,
"You will see that the 2000 peak was below the 1996 peak, so that supports my proposition that peak price may not necessary be higher than the previous one. The 1996 peak is a sharp, anomalous spike. Here's the warning: The current developer's price is well-above this spike. Try drawing a graph for the median price, superimposed on this graph, you'd see that the current price level is destined to moderate. Btw, we are in another financial crisis now. According to economists and bankers, it is the worst in a century. So it's definitely worse than the Asian Financial Crisis. We may only be at the beginning of it. "

Posted by Anonymous at the Singapore Property Forum

May also want to read:
History of Singapore Property 1960 to 2008
HDB Resales Price Index 1990-2008: Graph & Chart
Buy or Not Buy: How to decide amid mixed market signals
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life


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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.

Smart Buyer :)