Tuesday, December 2, 2008

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Where's the Property Bottom? Property Buyers' Discussion

Forum discussion on "Where's the Property Bottom" extracted from the Singapore Property Forum:

Derrek wrote:
"While I realise that catching the bottom of the market requires luck more than anything else, there is no harm in trying to improve the odds, is there?

I'll start first. Please feel free to chip in and/or correct me if any of the information presented is inaccurate.

All of us have thrown out numbers about how far we think the market will fall, from 20% to 60%. I would like to suggest that we standardise the discussion by referring to the Private Residential Property price index:

Current Index (based on Q3 2008 Figures)
Index uses Q4 1998 as benchmark. i.e. Index = 100

Overall : 173.3

Landed : 158.8
Detached: 167.4
Semi-D : 150.2
Terrace : 154.3

Non Landed: 176.7
Apartment: 182.0
Condo : 174.0

The million dollar question is: Where do we think the index will drop to?

Will it go below 100? That was the level largely due to the Asian Financial crisis. Although the signs are that this crisis is larger and more widespread, it does not automatically translate to the PPI falling below 100.

For starters, from what I can see about the methodology, the PPI captures absolute numbers, not numbers adjusted for inflation (pls enlighten if I am mistaken). Does that mean that any estimates (guesstimates) will also have to consider median/mean (debatable which is a better measure in this case given we are looking at private property prices) incomes levels currently vis a vis 1998?

There are so many factors to consider, and I look forward to having a healthy online discussion about it. "

Ferrari wrote:
"Let me be your first visitor to comment. I think index-wise will take a long time to drop due to the time lag between the actual buy/sell decision point (usually option to purchase) to the time coveat lodge and finally to be calculated into the index. Also, index usually take into consideration only those property that have transaction. For those without any transaction, it will only 'dilute' the actual price movement. Anyhow, I think the index will drop below 100 if crisis will to prolong (which I think it will be the case)."

Anonymous wrote:
"I don't know where exactly is the bottom but I think next year is very, very likely to be worse than this year. So I think it pays to wait to see how next year goes."

Smart Buyer wrote:
"Derek, indeed, this is the time to discuss about the property's bottom. Impossible as it is to identify exactly where the bottom is, it's still a constructive and helpful discussion.

I agree with the view that next year is very likely going to sink further. Beyond that, there's no visibility.

Here are some pointers to signal the bottom:
1. After 3 to 4 quarters of recession
2. High unemployment rate
3. High vacancy rate
4. High bankruptcies
5. Property & Bank stocks plunge
(ps add to the list)

Only point 5 has happened. "

May also want to read:
Fire Sale: Owners Dump Condos
The days of Cheap, Easy Credits chasing after property is OVER!
When the bubble of greed and fear burst, guess who suffer?
Property Investment Tip: Don't put all your eggs in one basket
HDB Resales: West Sees Highest Price Increase


Anonymous said...

It will be all the "Ds" for next year:
defaults, depression and possibly dooms(economically and humanly), declines in spending, drops in stocks value, diminution in real assets,etc
Do you think private property prices can still be resilient? Days of reckoning for speculators, developers and the profiteers are finally reaching its shores in Singapore. Major cities have dropped to competitive level compare to Singapore and are still dropping. Singapore is still high, clumsy in costs, uncompetitive, private condominiums unsighty, badly designed and crowded? Many will able to get away because they have reaped so much these years.

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