Friday, December 18, 2015

OCBC Property Report

This is just a quick post about a property report by OCBC which I just read.

To quickly summarize, they are forecasting a price drop over the next 2 years of about 10% due to oversupply and rising interest rates. Interestingly they are explicit to point out that although they do see removal of government policies given a deep enough correction, that would not be the all-clear sign and the trend would still be a bear market.

I have to agree with them on that point, which of course real estate agents would not like to hear. Many people believe that the government policy has been the overriding cockblock to rising property prices, but I don't think so. I think it was just the finishing blow. Removing the easing wouldn't restart the bull market, neither would snapping your fingers. However, it does set the stage and prepare the property market to recovery once the bear has finished its run.


Their chart about which policies could be eased is very good in my opinion. I do think that the TDSR will be here to stay, and that is actually the main limitation for most people, as it should be.

Personally, I don't see the problem with ABSD and I would prefer if the SSD was even stricter and longer so that it will prevent speculation and reflect real consumption. But that's just me, and I'm slightly mad.

While OCBC notes that high-end property prices in Singapore is showing "value" relative to mass market, I postulate that the mass market segment is still slightly batshit crazy. Recent launches of MM private homes is $1400 psf. Zhun bo? Can I raise my hand now to interject that there are plenty of freehold property that is under $1000 psf? As an investor, I don't see how such property would be a good investment. The argument is different as a homeowner. Just how much are you willing to prepay for your housing expenses?

I still find that a lot of people are confused about property as an investment or an expense.

Anyway, I do believe more firmly now that we are in for more exciting times in the property market. And as you know, I only get excited when I see things are going down.

My own place by end of 2017? Fingers crossed!

4 comments:

  1. There are variables such as location, age and design as well that could affect the price of freehold wildly. Personally to me freehold is for the future generation or could be a curse as well.

    ReplyDelete
    Replies
    1. Hi Cory,

      I think freehold is really for your beneficiaries. I can imagine how a parent might feel he is getting some "value" if he can find a FH with a slight premium to a similar LH. This means that when he passes on his assets, it will not have had its value decay as much over time, while of course only benefits the beneficiaries.

      However, since I have no beneficiaries, that thought hasn't come to play in my decision factors yet, haha.

      Delete
  2. Freehold is overrated, unless you actually own the land.

    ReplyDelete
    Replies
    1. Hi owq,

      I think the choice between FH and LH comes down to legacy planning. Most of the people that I talk to hands-down prefer a freehold property to bequeath to their (imaginary) children. However, many of these people also hold heavy whole life insurance for the exact same rationale. (personally I think its borderline delusional, but who am I to tell people how they should spend their money?)

      Personally, because I have no children or beneficiaries yet, why would I pay a premium for an asset that I won't benefit from fully? Exactly, I wouldn't. That is why I need to constantly remind myself of the notion that people with no beneficiaries getting freehold property or heavy whole life insurance are really "counting their chickens before they hatch".

      In that sense, freehold is overrated to me, even if you actually own the land. However, to about 95% of the people I talk to, freehold is one of their prime considerations that can trump one property over another. If it matters to you, you pay the premium for it. If it doesn't matter to you, you shouldn't pay the premium for it.

      Delete

Observe the house rules.