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Disastrous investments in the property market: Lessons (Updated 5 July 2018).

Sunday, December 28, 2014


History doesn't repeat itself but it rhymes or so they say.

Apparently, people are flocking to showflats to buy condos now and they are likely to be at it until midnight.

Many property agents are definitely enjoying a feeding frenzy as buyers panic buy.

Why the panic buying?

ABSD is going up 5% and LTV is being tightened as well.

New rules kick in at midnight.

Yes, the government has come up with another round of cooling measures.

In recent years, I have said that private real estate prices in Singapore are too high and that it does not make good financial sense to think of them as good investments for income.

Vacancy rate is still very high and in some places like Geylang, rental rates have fallen by as much as 25% due to a glut in supply.

Buying and thinking that prices can only go up is speculation and with the enormous price tags of private real estate here, it is big time speculation.

I have also blogged that unless we have deep pockets, it is best to avoid.

Still, many people are throwing caution to the winds but beware how it could get blown back as a nightmare to hit us in the face.

People rarely make money buying real estate in a market euphoria but they usually make money buying when Mr. Market is depressed.

This certainly has been my experience.

The Government has raised Additional Buyer’s Stamp Duty (ABSD) rates as well as tightened the Loan-to-Value (LTV) limits for Singapore citizens and permanent residents, in order to “cool the property market and keep prices in line with economic fundamentals”.

With immediate effect, the ABSD rates will be raised by 5 percentage points for all individuals, and 10 percentage points for entities, said a joint statement issued on Thursday (July 5) from the Ministry of Finance, the Ministry of National Development and the Monetary Authority of Singapore.

There will be no change in ABSD rates for Singapore citizens or permanent residents buying their first property.

Previously, the LTV limit for a buyer’s first housing loan is 80 per cent, or 60 per cent if the loan tenure is more than 30 years or extends past age 65. This will be cut to 75 per cent, or 55 per cent respectively. 

Similarly, the limit for a second housing loan will be reduced from 50 per cent to 45 per cent, or 30 per cent to 25 per cent if the loan tenure is more than 30 years or extends past age 65.

Read full article here:

I read in The EDGE that there will most likely be "a new level of pain" for landlords of residential properties in Singapore next year because rents and prices of properties are sinking while vacancy rate continues to rise.

Regular readers would remember that I said that the writing was on the wall in 2011 and that there was too much euphoria in the air as people just kept flocking to condominium showflats and buying into every new launch there was until a year and a half ago when the 8th round of cooling measures with stringent TDSR was introduced.

Some of us might remember this report in The Straits Times:

Some home buyers rushed to submit mortgage applications to banks last Friday night before tougher rules on home loan financing kicked in at midnight.

But a day after the Government's move to tighten home loan financing, the overall effect was muted as only a small segment of buyers are likely to be affected, agents and mortgage consultants told The Sunday Times yesterday.

Developers said it was business as usual at show-flats and they still managed to sell a few units yesterday.

The Monetary Authority of Singapore (MAS) said on Friday that banks have to use a standardised set of guidelines to assess property buyers' ability to borrow. It also plugged a loophole that let buyers dodge tighter loan-to-valuation limits on their second and subsequent properties.

The restrictions apply to loans with an application date on or after June 29.

As a result, some buyers hurried to submit loan applications before the Friday midnight deadline. A significant number of these were buyers at J Gateway, which reportedly sold all 738 units at its Friday launch.
The Sunday Times understands that OCBC received a surge in loan applications on Friday night after the MAS announcement. 

(Source: The Straits Times, 30 Jun 13)

These buyers probably would not have been able to obtain bank loans with the new measures which are there to encourage financial prudence. 

I won't be surprised that some of these buyers had bought multiple properties too. 

This "kiasu" mentality that is born from greed is likely to be the downfall of more than a handful of such "investors".

In the last few years, I continually warned that we must be cautious about buying residential properties in Singapore in order to avoid wealth destruction unless it is a BTO flat or an EC or we have spotted a great value buy.

New launches usually have priced in future price appreciation. 

Have you wondered why a new project is almost always much more expensive than the surrounding condominiums? 

Is it only because the land cost is higher? 

So, it is difficult for buyers to make money from these purchases in a short time of a few years unless the euphoria continues. 

It is a game of musical chairs and the music (i.e. euphoria) will stop.

J Gateway

484 sq ft shoebox units in J Gateway sold for as high as $1,774 psf in July 2013. That is a price tag of $858,616! 


Nope. 99 years leasehold. 

Yes, we know that Jurong is a promising location as our government has plans to develop it into a more robust regional centre but it just doesn't make much sense to me to pay so much for the place now. 

If that is not pricing in future price appreciation (the price would probably only make sense many years down the road), I don't know what is.

So, in the next few years, these buyers would have to service their housing loans (in an environment of increasing interest rates) and hope for the best, bearing in mind that there will be no rental income as the condominium is being built.

Now, with mortgagee sales (i.e. properties foreclosed by banks) rising and some expecting them to rise to 2008-09 levels as distress spreads from luxury condominiums to outlying areas, people who have been waiting for a meaningful correction in prices before making a purchase are going to be amply rewarded for their patience. 

Things are likely to get worse.

"Newly completed condos, including shoebox apartments in the suburbs and on the city fringe, have also popped up at auctions as mortgagee sales in recent months.... some investors holding on to multiple units may have difficulty servicing their mortgage or unable to secure tenants in their newly completed units. Collier's Ng believes, however, that mortgagee sales of upscale apartments in the prime districts will continue to dominate the auction scene. " Source: The EDGE, 29 Dec, page CC9.

Evidently, there are areas which are going to be worse off than others and if you are thinking of buying an investment property for rental income, I have said before that properties in the RCR would be more resilient and the data has supported this but, remember, if you overpay, you won't do much better at all. 

"... the leasing market is going to be more challenging in OCR and CCR, notes JLL's Ong. He sees condo units in the city fringe or RCR faring better. The city fringe is close to the city and yet more affordable. Rental decline in RCR so far has been the mildest." Source: The EDGE, 29 Dec, page CC2.

When I said that the government is determined to bring down the prices of residential properties in Singapore and warned that we should not underestimate the political will of the country's leadership, there were still many optimists out there saying that demand would stay strong enough to prop up prices. 

Recent speeches by Minister Khaw Boon Wan and DPM Tharman Shanmugaratnam indicated that prices are still too high. 

The cooling measures are staying in place.

Some might remember this from October 2013:

Alan Cheong, head of research and consultancy at Savills Singapore, made his case last Friday at Carlton Hotel marking Singapore Management University's (SMU) homecoming celebrations for its Master of Science in Applied Finance programme.

"I think barring external shocks, property prices, residential prices will stay elevated," he said.

Mr Cheong argued that a fundamental concern that there will be an oversupply of homes come 2015 is not the case at all.

"The reason is in Singapore; it is a situation of undersupply."

Source: ST Property

There are many lessons in this blog post and not to ask barbers if we need a haircut is only one of them. 

It is good to refresh my memory from time to time.

Related posts:

1. Selling a private property just got harder. (2011)
"This development is likely to hasten the weakening of private residential real estate prices which is something I expect to become really evident in 2014 or 2015.  "

2. Leverage up and buy investment properties? (2012)
"... it is obvious to me that the government is sending a clear message that they want property prices in Singapore to lower in the next couple of years.."

3. To rent or to buy: Rule of 15. (2013)
"For a while now, we see people buying real estate in Singapore and being quite happy with rental yields of 2+% to 3+%. This is acceptable really only because of the abnormally low interest rate environment. It won't last."

4. Ask these questions when buying properties. (2014)
"... for the more adventurous ones in our midst, please think again and again before handing over that cheque when temptations find their way into our mailbox."

5. Affordability and value for money.
"... we should remember that it is not about "affordability", it should always be about "value for money".


Unknown said...

Hi AK,

I share the same views with you regarding the outlook of our property market for the next two years due to the supply glut and tightening policies. However, I am not sure when we can expect a bottom?

"not to ask barbers if we need a haircut" is indeed a useful lesson I will keep in mind, thanks.

AK71 said...

Hi Anion,

If you are into charts which I think you are, then, there are signs you can look out for. OK, I am being cheeky here. ;p

Of course, it is not easy to call the bottom. We only know prices have bottomed after the fact. :)

As long as we know we have not overpaid, I guess that is good enough. Take care of the downside and the upside will take care of itself. Oh, always be saving some money and have a war chest ready. ;)

SMK said...

When they are no longer happy with rental yields of 2 - 3% and start to give up and sell off, I suppose, barring an upturn in interest or lowering of attractiveness of singapore, it would be time to accumulate after the sell off abates.

AK71 said...


I have an inkling that people who have holding power will hold on. The more marginal buyers will be the first to give up or forced to give up.

However, as interest rates rise as they are bound to, debt servicing burden will increase and more people might throw in the towel and prices could decline more rapidly. The government might lift most of the cooling measures then, I think, as the market goes cold. I might start looking for an investment property then.

I don't feel happy about paying an ABSD of 7% and I am not happy with yield of 2% to 3%.

Mao Mao said...

Some people intentionally chose to over leverage and they jolly well know they could wiggle their way out by appealing to friends/relatives/MPs/Government for help. After the storm is over, they will survive with dual/tri private properties. Is this mentality fair to others who had played the sensible cards?

Whowillbe said...

Hi AK71,

People who are very bullish about Singapore real estate have their logic premised on the scarcity of land and the population growth. It is something like this.

"Last night at a very interesting seminar the key note speaker talked about scarcity of land in Singapore, he also talked about reclaiming land from the sea and building dormitory cities in Malaysia... all very informative, but then my favorite the hard facts- Singapore is aiming to increase
its population, so lets stick to round figures and postulate that-

Current population 5 million
Desired population 6.5 million
Household size 3.5 people/unit
Housing Development Board units in pipeline 50,000
Private condos in pipeline 80,000

Therefore to house the extra 1.5 million people we will need an extra 425,000 units but there are only 130,000 in the pipeline leaving a shortfall of 295,000 units!

Now let's enter the realms of developer fantasy and imagine an average unit sells for $400,000 this means an unsatisfied desire for $1,180,000,000,000 now lets take 25% for a developer yield... $29,500,000,000!

Okay that's enough for now with figures like that, anyone who wasn’t already heading for the classifieds is now

Next week- some solutions! Mostly impractical and some ridiculous so let me know if you have any ideas.

- See more at:"

Well I don't buy the argument because at the end of the day, the locals must be able to afford the properties. I feel that these people have ignored the policy risk. There's no way the government will allow the property prices to rise to stratospheric levels. Yes there will be times when prices shoots up but that's simply because there will be a lag time before appropriate policies are drawn up to arrest the rise.

The good thing about having such strong government intervention is that they too will not allow property prices to fall to ridiculous levels as it will affect many people.

Singapore is unique as it is a City-State with no hinterland. Cities like London and New York can have very expensive real estate and while the native Londoners and New Yorkers will be resentful, just like us Singaporeans, but they still have a choice to move to the suburbs or a neighbouring state like New Jersey and still will find themselves in their own country. For us, we will have to move to Iskandar!

While I take the view that the governement will still grow the population but it will not repeat the mistake of neglecting the infrastructure. I believe that they have learn their lessons and are building ahead. So my view is that there will be excess supply before demand comes in and therefore prices will stay soft before recovering.

That's my crystal ball view.

AK71 said...

Hi MaoMao,

Yikes! Is this true?

I don't know of anyone like this. However, I do know of people who had to sell some of their properties in order to stay afloat in past crises. I might have blogged about them, I cannot quite remember.

AK71 said...

Hi Whowillbe,

Thanks so much for sharing your thoughts which incidentally resonate with me. :)

The point about a hinterland is well written. Even Hong Kong has Shenzhen and although the "One Country, Two Systems" policy is still in force, they are in the same country. Singapore is disadvantaged in this instance, I have always felt.

I do not wish to move to Johor Bahru and I think most Singaporeans feel the same way but some might have to explore the option eventually. I know some who have moved there and rented out their flats in Singapore but they are mostly ethnic Malay. It is easier for them to integrate with the local community there.

I have always though that Singaporean Chinese are disadvantaged in some ways. The Chinese in China don't think we are the same as them. Some told me before that we are of the "Same race but different category." That is being brutally honest.

So, I don't think I will be moving anywhere. I will stay in Singapore as long as I can afford to but with my shoebox apartment in the RCR more expensive than a comparable apartment in New York City now, I wonder if it would remain affordable for me to stay in Singapore 20 years later.

Sorry, I digress. Gloomy morning.

SMK said...

Don't worry so much.
you should be able to.

And it remains to be seen if singapore remains attractive to foreigners (capital inflows or jobseekers)

There are competing cities, neighbouring countries may develope faster culturally and economically, singapore may change politically.

numerous reasons.

The other side of the scenario is if should singapore become less attractive(less jobs and poorer prospects), how will the current young parents (future elderlies) feel about either being left in singapore while their children and grand children venture abroad OR having to follow them?

Far fetch I know.

but over the past 20 years, we have had policies fixing past miscalibrations, and short term developments(esplande then the IRs) buying us 10 years here and there.

Rival cities are not going to sit by. We are lucky we had good urban planning but new cities can be created anywhere convenient (silicon valley). Hope they don't figure it out.

AK71 said...


Yes, the country's leadership has got it mostly right so far and that is to stay a step or two ahead of the competition.

What we have built might be unique to Singapore but it won't stay unique for long. Look at Dubai International Airport and how it compares with Changi International Airport. Ideas cross borders easily.

Although it might make life harder for some segments of society, if Singapore is to continue growing, inflation cannot be avoided. The alternative of a stagnating or contracting economy and deflation has to be avoided as it is much worse.

So, we have to make sure that the people are paid wages that keep pace with inflation but that will make us less competitive. It is a problem that is more problematic than most. It is not like expanding the canals because incidents of flooding have gone up due to climate change.

On an individual level, all we can do is to make sure we have taken steps towards achieving financial security. Then, take steps towards financial freedom. However, financial disasters could still happen. The common word here is "financial".

However, if despite our best efforts, things still go wrong, at least we know we have done all we could. Such a possibility is no excuse for not doing the right things.

Oh, dear. I am really feeling gloomy this morning like the weather.

Thanks for the encouragement. :)

Whowillbe said...

Hi AK71,

I agree with SMK. You are already very well prepared for the future. If you have to struggle, this means the future of the country is really very bleak.

With the sort of political system that we have here in Singapore, it is in the interest of the incumbent party to ensure that the policies serve the majority of the people. So as long as we as individuals are industrial and also work smart, we should be fine. So that's my macro view of the policies.

However the bigger question is whether Singapore can stay ahead of the competition.

I personally feel that we are sorely lacking in innovation and creativity.

Even though students of today question more, but the quality of the questions leave much to be desired. It seems as if they ask questions because good students ask question. So to be a good student, they ask question. Aiyo.... got form but no substance.

The old generation of students, though they may be shy of asking questions but they do more thinking in their head.

There's simply too much intervention. Parents need to learn to let go. Teachers also need to learn to let go.

At the end of the day, most of our students will go on to our local universities and polytechics but the intense competition amongst ourselves seem to be doing more harm. Intense studying effort but not enough risk taking aptitude.

Exams fail won't die want.

AK71 said...

Hi Whowillbe,

Thanks for the affirmation. :)

I also think that I have done all that I possibly could have done to make sure I do not become old and destitute. However, I am a worrier at heart and I don't think there is a day of my life I don't worry about things.

I also worry about how many people are there who wish to destabilise the system. I worry about how many people are there who think that the CPF is a bad idea. I worry about how many people are screaming "Whose money is it anyway?" when talking about unlocking the national reserves.

I think we can see some of my worries from the things I blog about. Yes, terrible.

Although I have what looks like a substantial passive income stream from my investments in stocks, I still keep an emergency fund that is the size of 24 months of my routine expenses.

Why? Some might ask. In fact, a few might even make snide remarks about this. Well, they don't know me and the financial and emotional scars I have, do they?

As for the youngsters, they are lucky to be born into an environment that is relatively more comfortable. In a more comfortable environment, there will be a lot less hunger and in more ways than one.

So, I feel that programs to educate them about our country's past and how things were no always so rosy is a good idea. They must understand not to take things for granted and that things could go from good to bad quite quickly. -.-"

Rebel said...

Mr AK,

Have a sugar donut and a hot cuppa tea.

I worry alot too. But i can only control the little portion in the grand scheme of things. So, i focus on building my financial castle with a dragon in the moat.

AK71 said...

Hi Rebel,

That is so nice of you! Thank you. :)

I don't have a sugar donut at home but I just had toast with honey baked ham, pineapple and cheese. Maybe, I should blog about it. ;p

darren said...


For property buyers on the sidelines who are looking for the "right" time to enter, would the govt undoing the cooling measures be a good sign that the time is right? i.e., let the govt do the "research" for us?

Whowillbe said...

Hi AK71,

I'm not sure whether have you ever shared your emotional and financial scars before.

You did write about you making some losses in the past but just bits and pieces but nothing that really reflect the situations and environment that shared you. If you did, can you point me to the posts/comments but there weren't, then maybe you could consider sharing your journey with us.

Regarding our mistakes, I always like to say that we know that we have truly learn from them (mistakes) when we are able to talk and share about them because the shame that resulted from those mistakes has lost it's hold over us. It also shows that we have embraced miatakes/failures as part of our journey in life.

Somehow as humans, we have subconsciously accepted and believed in the lie that we are perfect. Otherwise why are we so afraid of mistakes/failure if not for the view that they (mistakes/failures) will chip away at our supposedly perfect image. Alas if only we can see that we are born imperfect and we are on the journey to becoming better as a person and that journey involves mistakes/failures.

Okay sorry for the rambling. ☺️

Whowillbe said...

Hi AK71,

Anyway talking about people being angry with government and wanting to have CPF monies returned.

Actually I was used to be quite upset with the government but it's more so due to the injustice which I felt was meted to people who had different political views from the incumbent. I admit that this always naturally colored my views towards policies and institutions like CPF.

But I guess as I became more financially savvy, I start to see the wisdom behind CPF and also as I see more and read more, I start to understand why G (government) does certain things.

So while I would still like to see a closure to past issues, I also see that certain things take time and not to throw the baby out with the water.

AK71 said...

Hi RetailTrader,

Hahaha... I thought of that too. It would be sign that things are pretty frozen by then. No more cooling required. LOL.

It would also be necessary before I buy another investment property because I am not happy with having to pay hefty ABSDs. ;p

AK71 said...

Hi Whowillbe,

I have some deep seated insecurities which I can never be rid of. I have provided glimpses of these in my blog before. They are, of course, very piecemeal in nature and scattered.

I cannot remember where they are exactly. I do remember that I also shared in the comments sections of a couple of other blogs' but I have never really blogged about these insecurities in their entirety. I try not to relive those years.

OK, I will be brief, I hope. My family almost went bankrupt when I was entering my teens and our financial hardship lasted many years. Those years left a mark on me.

I hinted about the financial hardship my family went through in a few blog posts before and a couple of these which I can remember are:

With some difficulty, AK says good-bye.
The secret to avoiding financial ruin.

My family learned then first hand that banks are fair weather friends and I developed a strong aversion for debt. I try to avoid borrowing money for anything where possible.

Sleeping in the living room of a 3 room flat for some years as a teenager was a humbling experience too. It was awkward too.

I learned early on in life how finances could go wrong so badly and so quickly and how not having enough money was a terrible thing, how being indebted was much worse.

Living with the constant threat of losing whatever we had left was very stressful but my parents tried to give us as normal a life as they could. I don't know how they did it.

Those years of financial hardship left me with scars and I believe that anyone who had similar experience will always have shadows haunting them.

"Do I have enough money? Maybe, it is not enough. What about my parents? Do I have enough to take care of them? What about my younger siblings?"

So, I tend to overcompensate. I tend to save as much money as possible. I put away much more in my emergency fund than what some people think is necessary. I do this although, financially, we became more comfortable as I graduated from university and started working.

I craved greater financial security and certainty. The CPF-SA was a natural candidate and I blogged about how I transferred funds from my OA to my SA in the first few years of my working life and that was almost 20 years ago.

There are many clues littered throughout the blog about the way I think and why.

Of course, I don't expect anyone to piece all the clues together to understand AK the giam siap fellow but, surprisingly, some readers do seem to understand me quite well. Maybe, they have had similar experience. I don't know.

I know there are cynics. I know there are sceptics. Many tell me to ignore them. I tell myself the same thing. However, I would appreciate some kindness. If they cannot be kind, at least try not to be unkind. Is that too much to ask for?

I just realised I was holding my breath all this while as I typed this. Sigh. LOL. OK, I will stop here. :)

Whowillbe said...

Hi AK71,

Thank you for your sharing. Indeed we are all shaped by the events that occurred when we are young.

While you may say that you still feel very insecure financially but your step of going into part time shows that you have learnt to let go a bit?

I guess you must have also found as you have achieve a certain degree of financial freedom, a greater desire has entered in, ie to help others and thus the reduction of working hours. You are moving up Manslow's hierarchy. 😃

I believe that you are a man of character. Not saying that you are a perfect man but a man of sound character. Why? Because you espouse sound values and you practice them and are consistent.

I have a friend who was also born in a less well to do environment. He shared that he was often hungry when he was young. So because of this, he is very driven in making more money. He loves his family, including his extended family and will splurge in them. He once said that he wants his kids to grow up playing at neighborhood playgrounds so that as they mixed with the heartlanders, they will grow up grounded.

He also do quite a bit of charity work. But the problem is that he will often talk about his charitable acts. He also likes to post pictures of his possessions on social media. So all these create a very jarring picture. In fact it gives an impression of a man who does good not for the good itself but for himself. So then the form is observed but the sustance is questionable.

So why I share this? Is because I have been following your blog and found you to be consistent in your message and you are also willing to address your areas of inadequacies.


AK71 said...

Hi Whowillbe,

You slept late last night? I slept at 1.30am. Fellow insomniac? I shall need a nap this afternoon. -.-"

Your praises leave me worried. I now worry if I would be able to walk through the door to leave my room later. Feeling a bit top heavy. ;p

Thanks for the kind words but I am just a person who doesn't have any towering ambition or many wants in life. I have also been lucky and more good things than bad happened to me in the last 2 decades or so.

Of course, I always say that if we do the right things, the right things have a better chance of happening to us. So, I try to help luck a bit. :)

You are also right to say I have learnt to let go a bit in life and in more ways than one too. Although I still worry about money sometimes, I am less tight fisted with money now. Well, in the last few years, actually.

I still need my "security blanket" though. ;p

Also, quite honestly, when I started life as a working adult, I set a target for myself to retire by age 45 and I blogged about it too, if you remember.

To retire by age 45, start with a plan.

It was a lofty target at the time but now that it is within sight, I want to share with others that with a bit of luck it can be done.

So, everything is going to plan. I am the sort who plans everything and I can be quite obsessive. No way to let go when it comes to this aspect of my life. :(

There is definitely still room for improvement, for me to be a better man. I hope that I will continue to do your positive assessment justice. Thanks so much for the pat on the back. :)

Whowillbe said...

Hi AK71,

I think there's a part of you that feels so tired of trying to make sure everything is in control. So tired that you wish that you could just let go.

Actually we are already very blessed. We have resources that others could only dream off and yet we are worried about the what ifs.

Really what's the worst that could happen? You have already done all that's humanly possible to ensure a firm foundation. If your worst nightmare comes true, you will still be able to come true and perhaps there's a greater being up there who wants to pass the message that He is the one who's truly in control and just trust Him.

AK71 said...

Hi Whowillbe,

Are you a trained psychologist? I think I agree that you will do well in a sales position. You can read people quite well. Maybe, too well. Spooky! -.-"

Thanks for the reminder though. I appreciate it. :)

Whowillbe said...

Hi AK71,

First time someone thinks that I am a trained psychologist. Now that you made a link between reading minds and good salesmanship, I hope that I don't get manipulated by such salesmen in future, to buy into things that I don't need. Lol.

I'm an ESFP so maybe that explains why I can sense and feel better than most guys.

When I was young, I do not want to see beggars or destitutes, not because I am heartless but because I will be very affected. I will think of them for days and wonder why are they in that state and why am I so blessed to be not in that state. I guess I feel too much but as I grow older, I also mature in my worldview and this helped to temper my feelings.

Anyway coming back to property, I met my mortgage banker for some refinancing matters and as we talked, he shared that quite a number of people who failed to meet the TDSR requirements are due to them rolling over their credit card debts. He also mentioned that his younger colleagues are aiming for private or EC for their 1st residence.

Prior to the tightening of car loans, my colleagues after a few years of work were driving cars like VW, Volve, BMW, Merc. Quite scary.

Actually to be fair to them, my 1st place of residence was non HDB. However it was bought in 2003. I l bought it not because the whole world was buying ECs and private, but because I was going to get married soon and the market was down and non HDB was really value for $. However there was still a sense of trepidation after we signed the sales agreement. My friends asked me whether have I considered the interest that I have to pay etc.

Heh it was really much easier to in a crowd of wrong but to be right alone.

But the last 4 years, I refused to invest locally as the prices were just ridiculous and yet I have friends purchasing apts that cost up to 2.5M.


qook said...

The last true "bottom" in the singapore property market was around 2004-2005, I reckon. Even then, it was a combination of many factors: dot-com bust, 9-11, then SARS, tsunami, and a spike in interest rates. Even despite the global financial crisis, property prices only dipped about 25%, and only very briefly. It wasn't enough for me on the sidelines to enter the market, and frankly prices shot up before I could blink. Unless there is another major world event, I don't think property prices will correct significantly, but I don't wish that situation to happen to anyone as that would likely mean our economies would be in trouble and people may be losing jobs, etc.

Timing is everything in property cycles, but sometimes time is not on your side if you are ready to enter the market but it is at a peak :\

AK71 said...

Hi Whowillbe,

I also bought properties in 2003 and 2004. Before that, I wasn't really interested primarily because I didn't have enough financial muscles and I would have had to borrow heavily which I felt uncomfortable doing.

I managed to pay off the loan of my first home in less than 4 years of getting my keys. Some might think this silly but it gave me peace of mind and it felt good to have the title deed in my hands. :)

As for buying properties in the last 4 years, I would say that if we are able to find a property that is undervalued, we might still want to buy it. I actually bought my current place 2.5 years ago when I decided it was relatively undervalued. Even with the expected decline in prices, I do not expect the market price of my apartment to fall below my purchase price. Well, crossing fingers.

Of course, if we cannot be sure whether the property is undervalued or not, then, it probably is best to simply go with the cycle and look again when Mr. Market is suffering from depression like in late 2008 and early 2009. That was when I bought another property. Less work to pluck low hanging fruits, for sure. :)

Deciding that the euphoria in the property market would come to an end, they were all sold 3 years ago. So, my exposure to the property market has reduced dramatically.

As for cars, I had a rule that I should not borrow more than $20,000 for any car I bought. The loan should not stretch for more than 3 years. The monthly payment would work out to be about $600 or so a month.

It just doesn't make sense to borrow heavily to buy what is basically a consumption item and a depreciating one too. I understand that a car is a necessity for some people but they should keep an eye on the numbers.

I have always felt that cars should not be bought with borrowed money. Finally, 4 years or so ago, I managed to do this when I bought my current car. I downsized and after trading in my old car, I topped up $40,000 in cash. I blogged about this too.

So, my car is an asset (although a depreciating one) and not a liability. Yes, I know what some people will say about leveraging on cheap debt again. LOL. I did what gave me peace of mind again.

Told you my aversion for debt is quite strong. -.-"

OK, I think I am more talkative than normal tonight. LOL. Apologies. ;p

AK71 said...

Hi qook,

A 25% decline in price from the peak would be good enough to do some shopping, I believe, bearing in mind that it is difficult to buy at the lowest price in any down market. :)

If prices should decline another 20% from here, they would be back to GFC levels (in some cases). I think that should be a good time to do some bargain hunting if we have the financial ability to do so. :)

qook said...

Thanks AK, nothing for me to do now except store power and wait for a correction, which may not happen until my mid or late 30s. If you don't mind sharing, did you buy your properties from resellers or direct from developers? I wasn't very successful finding a deal from individual sellers during the GFC as most had holding power...

AK71 said...

Hi qook,

I bought all my properties from developers who were pretty desperate to sell at the time.

As long as we find anyone, developer or individual sellers, who are desperate to sell, we are likely to get better deals.

Now, although most developers have pretty strong balance sheets, there will be those who do not wish to pay penalties to the government for having unsold stock. So, we see some slashing prices in efforts to move unsold stocks. This could gain momentum especially if we remember that they do have debts to service too and increasing interest rates will affect their bottom lines too.

If developers don't sell their development properties, they have no income unless we are talking about developers who have recurring income streams. ;)

AK71 said...

Recent headlines suggest an oncoming storm - as property prices come down, speculators are clearing out the market, leaving banks holding the bag.

In the case of Marina Collection in Sentosa Cove, lender UOB is suing the developer and several homebuyers after 37 out of 38 units there defaulted. Now, rising interest rates only seem to add to the gloom - since the start of the year, three-month SIBOR, a benchmark most mortgages are tied to, has risen almost by half to 0.65 per cent.

Even before that, the Monetary Authority of Singapore (MAS) said the housing non-performing loan ratio rose for the first time in three years, ticking up to 0.4 per cent in the third quarter of 2014.


AK71 said...

EC prices might fall to 2011 levels.

A land parcel for an executive condominium (EC) development attracted relatively large number of responses at the close of the tender on Thursday (Feb 12), but the top bid received was the lowest in three-and-a-half years.

The Housing and Development Board (HDB) said it received seven bids for the EC land parcel at Woodlands Avenue 12. Hao Yuan Investment submitted the top bid of S$103.79 million, which works out to S$2,992.17 per square metre of gross floor area.

Nicholas Mak, Executive Director for Research and Consultancy at SLP International, said the top bid by Hao Yuan, at S$277.98 per sq foot per plot ratio (psf ppr), is the lowest since the tender for the EC site at Punggol Way that closed in July 2011 at $270 psf ppr. That site was subsequently developed into Twin Waterfalls EC.

The EC to be built of the Woodlands Avenue 12 site will likely have a break-even price of S$600 to S$640 psf, he added.


Babe In Total Control of Herself said...

Different investment instruments different pros n cons.
Some believe property is always better than stocks n vice versa.

AK71 said...

"SC Capital Partners, which booked a loss from the sale of Singapore apartments to Blackstone Group LP in January, said prices in the city state need to drop another 30 per cent... Prices need to drop by 20 to 30 per cent to make residential investments attractive again..."

The Business Times, 15 June 2015.

AK71 said...

“The tipping point is global interest rates. When will the US and other global economies raise rates back to normal? If we can’t see this happening in the near future, expect more gradual price declines for many, many more quarters,” said Suntec Real Estate Consultants’ Mr Tan.

SLP’s Mr Mak also said that the prolonged period of low interest rates has contributed to a slow price decline, “as some owners are not pressured to sell their investment properties despite the low returns”.

“If the mortgage rates were higher, more property investors could be forced to sell and exit the market,” he said.

“There will come a point where the discussion is no longer about interest rates and investors’ holding power, but about the lack of rental income due to the vacancies,” said Century 21’s Mr Ku.

“This will hit people who buy (property) with cash to make mortgage repayments, but to a greater extent, people who buy with the expectation of using rental income to service those repayments.”

At 8.9 per cent, official data shows the vacancy rate for private residential units at a 16-year-high, nearing levels seen in the aftermath of the 1997 Asian financial crisis.

Based on a March report by property firm Colliers, the number of mortagee sales – at 70 in the first quarter of this year – have reached levels registered during the 2008 global financial crisis.

Century 21’s Mr Ku said that the fact that the total stock of vacant private homes is at an all-time high – in the midst of a weakening global economy – is troubling in itself.

Mr Ku added it had been relatively easier to clear previous housing gluts in the 2000s, partly because Singapore’s population boomed as the country opened up to immigration and foreign investment, via tourism and financial services. “Today, we face limits in opening our markets any further.”


Kevin said...

Hi AK,

Some residential owners have turned to innovative ideas like turning their residential unit into multi-tenanted for illicit activities and some turning it into a "hotel" for better yields.

Reminds me of Cache Logistics Trust multi-tenanted strategy. :P

AK71 said...

Hi Kevin,

Some solutions investors have thought of are anti-social and some are clearly illegal. Unfortunately, ugly behaviour is quite common and could get more so as vacancy rate continues to rise with ample supply now and new completions in the next two years.

AK71 said...

According to the latest Urban Redevelopment Authority (URA) data, there were 29,197 vacant private homes out of 348,080 available units around Singapore in Q4 2016 - a vacancy rate of 8.4 per cent.

While not as high as the 8.9 per cent in Q2 2016 - a 16-year record at the time - R'ST Research director Ong Kah Seng said it is still cause for concern.

He said the drop in vacancies may be due to landlords cutting rentals to attract tenants. "This is not backed by solid leasing and economic fundamentals," he added.

The Q4 2015 and Q4 2014 vacancy rate was 8.1 and 7.8 per cent respectively.

It did not help that last year, there was a large supply of private homes - an estimated 20,000 units were completed last year, compared with the 18,971 units in 2015 and 13,150 units in 2014.

Said Mr Ong: "High vacancy rates in 2016 are overall propelled by a combination of factors - substantial new private residential completions, and continued muted leasing interest amid crimped or no housing allowances by many foreign professionals."

International Property Advisor chief executive Ku Swee Yong said the rapid increase in dwelling units is not matched by population growth. "The reason is simply oversupply," he added.


AK71 said...

Private apartment owners who rent out their apartments or rooms on a short-term basis on websites like Airbnb may soon be flouting the law.

Parliament passed a new law on Monday which makes it illegal for such home owners to rent out entire apartments and rooms for less than six months, unless they have permission from the Urban Redevelopment Authority (URA) to do so.

But the URA is studying the option of creating a new category of private homes that will be allowed for short-term rentals, said National Development Minister Lawrence Wong on Monday at the debate on the Planning (Amendment) Bill in Parliament.

If created, the new category can apply to existing properties, as well as new residential sites that may be designated specifically for the building of short-term rental properties.

The new law will also limit the number of unrelated tenants in private apartments to six, down from the currently allowed eight. Apartments that are rented to more than six unrelated tenants will be treated as dormitories and would require URA's approval.

"Private residential properties should not be used for other purposes without planning approval, as there is a need to safeguard the living environment of residents in the neighbourhood," said Mr Wong.

The changes to the law come on the back of growing complaints regarding short-term rentals last year. The URA received 608 complaints in 2016, 61 per cent more than the 377 complaints in 2015.

The new law will allow the URA to "make sure that the issue does not worsen further", Mr Wong said.


AK71 said...

Raymond Ng:
Property investment can be profitable (rental + capital gain)... it mainly depends when to you buy during the property cycle.

It is usually more difficult to profit buying when everyone else is rushing to buy. I made money from my properties because I bought when Mr. Market was feeling depressed. It is important not to throw in everything including the kitchen sink. It is hard to say if things could get worse or not.

Sau Yee Fong:
That's right. With a condo costing $700K and more, it could be too hard for a middle-income to stomach an investment loss.

One hard knock and they are out and sometimes for good... :(

AK71 said...

UPDATED: 5 July 2018.

ABSD is going up 5% and LTV is being tightened as well.

AK71 said...

Fanning the flames of panic!

“Hurry! New ABSD rates take effect at midnight! Take advantage before prices increase!” one of the posts prompted.

Some time during dinner hours on Thursday (July 5), the mobile phones of property agents across the island lit up with text messages and calls.

Some were frantically arranging with their potential clients to seal property deals, others were sharing pictures and videos taken at showrooms, which were packed with people.

On Huttons Asia’s Facebook page, four posts went up depicting the bustling scenes at three different showrooms for 99-year leasehold condominium projects: Park Colonial near Upper Aljunied Road, Stirling Residences in Queenstown and Riverfront Residences in Hougang.


AK71 said...

Panic buying at showflats after new cooling measures!

Crowds of potential buyers flooded showflats across Singapore shortly after new cooling measures were announced on Thursday (Jul 5), in the hope of avoiding a hike in stamp duty or tighter loan limits.

Several showflats extended their opening hours until 11.59pm on Thursday, with some developers even bringing forward their launches by a couple of weeks.


AK71 said...

Siew Mun Kwan says...
FOMO? Why rush?.

If property prices go down then you buy..

Unless you worry u cannot borrow from Bank as the LTV is now 75%

Serendib said...

Upfront I'd like to state that I've been waiting for years to buy a property as I felt that prices had risen well above fundamentals - even during the period when they fell between 2013-2017.
Like many here, I wonder if there will come a meaningful reduction in property prices which will make it attractive to buy.
I'd like to play devil's advocate here for a bit. What if that major correction never comes?
What if the government, just as it has been putting in place measures to prevent a surge in residential prices, also acts in a falling market to prevent a major fall in values?
Here are some possible ways:
- for developers/corporate owners who are defaulting on their debt, the changes implemented under Section 210 and 211 of the Companies Act last year grant them the ability to file for protection from their creditor banks (just like what Hyflux is doing now; and what almost every offshore marine company did).
- for private home owners defaulting on their debt: the regulators could encourage lenders to restructure their debts (eg. allowing owners to reduce/suspend loan principal payments for a certain period) instead of enforcing on the mortgage.
Both measures would result in far fewer distress sales in the market than would occur in a bad market, thus holding up values.

AK71 said...

AK71 said...

Hi Serendib,

I do not know whether a meaningful correction in prices will come and if it does come, when?

I only know that if it does not offer value for money, I don't buy.

I try to keep things simple for my simple brain. ;p

AK71 said...

Raymond Ng says...

Property is cyclical hence there is high and low.

Major correction will come. The only unknown is when. So timing is important.

But hor, the property price is always uptrend in the long term. You can verify the property index over last 30 years, the lower high and higher high. I think this is mainly due to inflation.... land, material and labour always goes up.

AK says...

Just hope that Singapore doesn't suffer a lost decade or two like Japan and more recently the USA.

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