Wednesday, March 4, 2015

Thoughts on the Singapore Property Market

As a Singaporean living on this sunny island for so many years, I am still perplexed about this insatiable desire and attraction to property, especially for investments. Hell, Singaporeans will even flood and disrupt overseas markets

If no one else can see the glaring double standards with this parallel of Singaporeans using FINANCIAL capital to undercut overseas markets to the HUMAN capital present here to undercut our local labour markets, I shake my bloody head. Of course, it's okay if we do it and not okay if others do it, RIGHT? /sarc

Anyway blatant hypocrisy aside, everybody knows that the Singapore property market is under pressure, which is probably part of the reason why people are looking at overseas markets instead. If you didn't know about our local market, then ta-da, now you do. Thanks to Singapore Property Cycles for their sexy graph.


I know some people are getting itchy here and now, especially the younger people in my generation, those who are looking for their own residential property to actually live in. "If I don't buy now, it will never be this cheap again!", they exclaim.

You know, I really hate it when people advise, "There is never a bad time to buy property, property is always a good investment in the long term". Well, newsflash, most things are good investments over the long term. Pay a stupid price, and you'll get bad returns, regardless of the underlying investment. Of course, it's always the people that already own properties or property agents that say such things. Maybe it's a biased view for personal comfort and vested interests? No, it can't be, people are not that self-serving..... right?

I don't know if you know, but propertyguru is one of the most viewed websites in Singapore, and for good reason. There is a wealth of information on there. It is basically the SGX of the property world. 

Off Topic rant: Why people need property agents when the market is so much more transparent compared to 20 years ago is beyond me. Fear of paperwork? But heck, what do I know? I'm just a silly 25 year old who has never owned a property or made any transactions in my life. I mean, all I know is the information that I read from notes used to teach potential agents to pass the Real Estate Salesperson (RES) exam. I'm not done yet, but rest assured I will be your most knowledgeable un-qualified real estate salesperson-wannabe that you will know. As consumers dropping a bomb of money taking up an insurance policy or buying a house, it is in our own best interest to know what is going on. If we choose to outsource that work to someone else, be prepared that their actions may not reflect our best interests. At the end of the day, nobody cares more about our own money than ourselves. 

Anyway, in the real world, I am seeing the cracks spreading. As a serious potential homebuyer, every week I go onto propertyguru and I am keeping a seriously close eye on the properties that I might eventually buy. Since volume is gone because of lack of transactions (bid = offer), I have no choice but to look at the next best information available to me, which are the offers. Of course, the bids are unknown, but it is safe to assume that they are below the offer, if not, there would be transactions.

My totally unscientific and informal research has yielded me some interesting results. Since I've started monitoring the data seriously last year, some trends have emerged:
  • Number of listings have been increasing
  • Lowest selling price has been dropping
  • Average selling price has been dropping
  • Lowest rental price has been dropping
  • Average rental price has been dropping

Lack of transacted volume might hide a lot of things to the people who don't know where to look for telltale signs, but I am seeing and hearing the silent cries of desperation.

Perhaps I am imagining things, or the projects that I am focusing on have been more subject to speculative buyers who are the current owners, hence more desperation, but it seems to me like many are on the edge of breaking down.

Rental vacancies are increasing, and let me assure you, they will continue to increase. Some projects have so many units that tenants can just bargain for the best price and the best units. And they will get it, because half the entire project are owned by people dying to get a tenant to DEFRAY their costs. People now aren't even looking to turn a pretty penny. Many just want to breakeven. On the rental front, there are many more pragmatic and panicky landlords who will happily undercut the greedy ones trying to retain their rental asking price. With supply grossly outstripping demand, I don't see rental going up for a while.

A certain property that I have been watching just saw capitulation. The recent transaction shows that the transacted PSF price is almost 20% lower than the current offers listed. Either this seller was caught with his pants down and had to sell at a massive discount because of an unfortunate event, or the rest of his neighbours are living in a fantasy delusion that they still can sell their units for such a premium. I would also like to fantasize that the reason is the latter. We can all fantasize together, about each other, oh yeah baby.

I think that my previous prediction of 4Q 2015 to 1H 2016 would present an opportunity is still valid. Take solace in the fact that many empty property owners are now bleeding out without tenants. How long can they tahan? I don't imagine that their pockets are infinitely deep.

Perhaps this really is the bottom of this property cycle "correction" and I am too greedy, thick and stubborn to see it. I might miss this bottom, but you know what? Like most unmarried Singaporeans my age, I live at home with my parents, meaning that I can continue squatting for free and I can save my housing expenses (be it rental or mortgage) so that I have bigger firepower the next time around. I am now just sitting on my hands and building up a strong cash position to outbid the other knife catchers to the piece of property that I have my eyes dead set on, once it starts raining properties.

I would like to reiterate my stance that I do not think an actual physical property is as good of an investment compared to REITs if you are looking at it from a total returns point of view. But I do understand that the flexibility of having another property and the options that it can bring to investors and their families can be a large intangible factor that drives people that direction. Whatever floats your boat, whatever floats mine.

To those not interested in buying a property during the eventual property down cycle, then perhaps looking at the local property counters could be another place where opportunity might be available, which I think CIMB has done a good job listing them in their report

Anyway, this isn't a blog post to convince sellers that the property market will get worse. This isn't to convince buyers that they should wait. This isn't to tell property agents that their jobs are totally redundant. Trust me when I say this, there is no hidden agenda or silent call to action to do anything.

This is just me trying to wrap my head around all the property related thoughts in my head and spit it all out into words so that I can see if I am truly insane or not. 

8 comments:

  1. Hi GMGH

    I am also on the hunt for something so I read your posts on property with great interest. Having gone thru the process of buying a home, I would say apart from doing research what helped me immensely was going for many, many viewings of properties. A unit may look good on paper but nothing beats going down to see it, if you can put aside the time, going down to see see look look, observe the surroundings and how shockingly different the units in the same development can be (different stacks, how well the previous owners upkeep their place) plus the things you can learn from just talking to the agents can give you quite a good "return" on your time.

    It was funny how my number 1 choice unit on paper (after spending copious time researching) simply evaporated into "condemned" status once I actually went down to see it.

    ReplyDelete
    Replies
    1. Hi RetailTrader,

      I have done almost all the research that I can do on paper and surveyed the location and surrounding areas. The last thing I've yet to do is actually physically visit a unit of the project! I have been thinking about doing it, so I guess I will do it soon!

      I need to read up on property viewing tips. I want to know how to play my hand when meeting the agent and owner and also viewing the property. Not sure if I should play the role of eager goondu (let them drop their guard) or the unimpressed investor (no BS, straight talking). Any tips on that front?

      I really appreciate your comment and advice, thank you very much! Wish you all the best for your hunting as well!

      Delete
    2. Hi GMGH

      No problems at all.. property is a big interest of mine (after trading of course haha).

      Re your question on the agent - Actually after going for so many viewings, I think what you have to do is just make yourself likeable (so the agent doesn't condemn you and refuse to deal with you) but don't show too much interest in the unit (so the agent doesn't think you are a sucker who can be pushed to make a high offer). Really from the agent's perspective, they do many so viewings a day and you are just one more person to them. They won't really remember much of you UNTIL you make an offer haha. After going for two or three viewings, you will become more and more "lao jiao" and will eventually know what are the questions to ask them. It's actually very fun (to me at least :P)

      Re property viewing tips nothing has helped me more than buying over a resale unit and going through the renovation process. Through that you learn about all the issues that can crop up when you buy resale, and it's very useful for you to identify the small things here and there to look out for, if your intention is to buy resale. If you are buying new, you need to be able to visualise well because there is no physical unit to view and it is not my preference. I like "what you see is what you get".

      Signing up for transactional data, e.g. Squarefoot Research, is a gem because you can get to know how much the current owner bought the unit at. Your research cannot be complete without this tool.

      Delete
    3. I think I will get data once I am much closer to making the transaction, never thought about that though! Data would definitely help! Thanks RT for all the info you shared!

      Delete
  2. Hi GMGH,

    Thanks for the informative post. I started out looking for a property for rental yield but now I'm looking for a home. Although priorities have changed, affordability is still the key.

    I encouraged you to visit the physical unit or any show flat but find a agent that you can trust or at the very least feel comfortable with. I visited the show flats a total greenhorn (still am) and I'm glad my cousin (an agent) was there. It ia a good opportunity to open your ears and eyes like a radar to see and hear what people are asking.

    All the best GMGH, RT and other home buyers in buying our desired property.

    ReplyDelete
    Replies
    1. Hi Derek,

      Yes, affordability is important! I'm planning to write a post about the difference between affordability and value. I will take yours and RT's advice to heart and start planning visits to the units soon! Huat ah!

      Delete
  3. Hi, GMGH
    Why don't you invest on Malaysia property market? I heard that upcoming event Property Investment Convention 2015 will held on 8th & 9th of August, in Intercontinental Hotel Kuala Lumpur, which is to provide you the latest property market trends and fantastic investment strategies if you attend the event. If you are interested to know more about PIC 2015, click Property Investment Convention

    ReplyDelete
    Replies
    1. Hi Detective Conan,

      First, I am do not really trust Malaysia as a country to respect my rights as a property owner.

      Second, rules and regulations can change overnight to suddenly limit my returns and also restrict my exit strategies.

      Third, currency risks is huge. SGD/MYR only goes in 1 direction.

      Fourth, I do not believe in the long-term prosperity of Malaysia the rate things are going.

      Fifth, the risk/reward is simply not attractive enough. There are still plenty of other places that have much better alternatives.

      Delete

Observe the house rules.