Is Now The Right Time To Invest In Property?

(22-04-2012, 09:29 AM)pianist Wrote: i am afraid correction may never come...as home ownership over not just 1 but 2 or more houses is a deeply entrenched mindset in this part of the world.

What goes up must come down...
It's a cycle.

If buying properties for investment, we cannot be emotional about it, just have to be prudent. Entry price of a property will determine the rental yield, ROI.

Just think back to 1997 or the recent 2008...it's clear enough, corrections exist and they are VERY REAL!!!

How to benefit from them, OR be taken advantage of, depends on the individual investor.

Be prudent! Not emotional!

For those who believe that interest rates are the key determinant of property prices in today's climate, a short history of 3-mth SIBOR going back to 1987. I believe this is the rate most mortgages are pegged to. Either this or the SOR.

  3-mth SIBOR 1987-2011.xlsx (Size: 509.84 KB / Downloads: 11)

(Sorry, the tinypic website that helps to load pictures doesn't seem to work, so viewers will have to download the excel file. Data is taken from MAS.)

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My view is that the government will only be truly concerned if a majority of the populace looking to buy their first home cannot afford it. This majority is likely able to qualify for BTO units and that's why the government is ramping up BTO launches, and using that to quell the masses.

Those still participating in today's richly-priced private residential markets are either investors of a second property or more, or high earners buying their first homes because they cannot wait. The former definitely does not warrant the government's protection. As for the latter, perhaps there is a widely-adopted assumption here that they can afford a little setback if their foray into the market doesn't work out well in future; i.e. their earning power should enable them to ride out tough times even if they are sitting underwater on their properties in a few year's time. So all in all, since today's market participants do not really need the government's protection, I hesitate to say that they will introduce any significant price-curbing measures soon.

There is also another psychological reason why the government is unlikely to intervene significantly. If prices get too carried away and a major correction is likely or necessary to bring the market back to equilibrium, the reason for the correction will not likely come from the government. This is because they would not want to be seen as the one who takes the punch bowl away from the investor class. No one wants to be the party pooper, and our government particularly prides itself in being business-friendly. This is an ironic outcome but understandable.

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I realize also that they may be another class of people who might want/need to participate in today's residential property markets - those who are ineligible for BTO, low to middle wage earners, but genuinely wanting to buy a first home for themselves. This would include singles, and Singaporeans with non-citizen spouses. However, these two groups of people, historically, have not been able to catch the attention of our government. I guess the best choice for them would be to rent a place for the time being, while waiting out the property cycle.

Got in and out at the right time for me. Went in in 2009, got out 6 months later in 2010. Didn't make a tonne of money though, although to be honest, half a tonne was good enough for me.

(22-04-2012, 11:49 AM)brattzz Wrote:

(22-04-2012, 09:29 AM)pianist Wrote: i am afraid correction may never come...as home ownership over not just 1 but 2 or more houses is a deeply entrenched mindset in this part of the world.

What goes up must come down.
It's a cycle.

Not quite agreeable.........Food & Transportation costs have never seem to come down.
In the 70 , 1 cup coffee only 15 cts, 1 plate 'wan tan mee' only 30 cts.
in 80 coffee 30 cts and a plate of mee $1.00,
in 90 coffee 50 cts and mee $1.50 - $2.00,
in 00 coffee aro 60-70 cts , mee increased to $2.50..$3.00
Now 10 coffee 90 cts- $1.00, mee cost you $3.50 - $4.00.
Will inflation, halt here...never.

Has the world stop printing money?...printing of money in actual fact is robbing the savers... i mean those holding hard cash.

Dun mistaken, ppty will not correct..my take it will...the cycle pattern has changed...those too kiasu might miss the boat...1 thing unique about ppty is that the next peak will be higher than the current peak....WolfT san doing the right thing no harm sitting on pile of cash.

(21-04-2012, 11:32 PM)Musicwhiz Wrote:

(21-04-2012, 11:23 PM)koh_52 Wrote: So long interest rate is rock bottom, inflation will keep on rising...

The problem is that everyone expects interest rates to remain at "rock bottom" until at least 2014, as the Fed has already indicated it will not raise rates too quickly as it wishes to stimulate economic growth.

But one factor which no one can anticipate is inflation - if inflation rises too quickly in the USA the Fed will be forced to hike rates earlier than expected. This will result in the party here ending earlier than expected too.

It's truly a case of buyer beware, I guess.

Likely the Fed will raise interest rates before 2014, but difficult to project Spore housing loan rates?

Developers are smart to build shoebox apartments as they are "more affordable" though the psf is crazy. Fancy paying $1700 psf for an 99 yr leasehold apartment in Bishan's Sky Habitat? If an investor buy with cash, after netting off mthly condo maintenance charges, you'd probably get a yield of 2 %. And the rental income is also taxable, but admittedly the 1% housing loan is sweet so it's better to borrow.

In 1997 Asian crisis, my apartment price dropped by a third but doubled by 2007. In 2008 subprime, the price dropped by a third again but abt doubled again now, in just 4 yrs. Try to figure out if this is a bubble?

Spoke to a few property agents, all are holding 1st.

My view for ShortTerm
Property price has to come down, else Pappies will be in deep Sh** in next GE. Looking at the number of BTOs and landsales gahment is rolling out.

Even developers are aware that the bullish sentiment cannot be sustained for long, hence the turnaround time is so much faster now after bidding process, followed by launching.

Guess what, you see more developers advertising on TV during prime hours now, using Mediacorp artists During the seller market, do you see these type of advertisements?


LongTerm
It is back to the basic.
- Supply and Demand
Little Red Dot is so small, how many people can it accomodate? Will the growth ripple to JB with so much land available?

- Land is scare in SG
In the long run, it will make $$$


For me, prefer to stick with stocks now. Will only shop for a property during a crisis.



OCR vs CCR
Which will be a better option? For property, it is always location location location. But CCR is really pricey.

I just came back from Katong Regency showroom this afternoon. Today is the 3rd day after its soft launch on Thursday and there are less than 6 or 7 small units (all about 500sqft++) remained unsold out of all the units in the planned 3 towers.

Seems like a lot of buyers think it is the right time to buy.

Compared to sky habitat which is 99 years leashold, this katong regency freehold seems a more worthy punch.

[Image: sghouseholdsbalancesheet1997-2011.jpg]

Chart above (from http://www.mas.gov.sg/resource/publicati...-FINAL.pdf - pg49/91) is a graphical representation of table I posted earlier.

Cash (blue segment) + CPF (green segment) exceeds Household Debt (black line) thru the years, with the surplus increasing over time and growing to a ratio of about 2X by 3Q2011. (This is in contrast to many other countries where the situation is the reverse, ie in deficit.)

Note that if the financial markets crash, cash and cpf will not be affected (even as the other parts of the balance sheet will definitely be). Also if interest rates increase, household debt outstanding will also not be affected (even though servicing of non-fixed rate debt will be).

Hence on a macro level, this huge surplus shows the degree of financial firepower available to cause more asset (and consumption) inflation.

On a micro level, the cash and cpf is, of course, not evenly distributed across the population. Many of us may not realise the situation on the macro level or we are too frugal and prudent ourselves to think that this surplus could cause more asset and consumption inflation.

(22-04-2012, 01:18 PM)D123 Wrote: I realize also that they may be another class of people who might want/need to participate in today's residential property markets - those who are ineligible for BTO, low to middle wage earners, but genuinely wanting to buy a first home for themselves. This would include singles, and Singaporeans with non-citizen spouses. However, these two groups of people, historically, have not been able to catch the attention of our government. I guess the best choice for them would be to rent a place for the time being, while waiting out the property cycle.

Actually for this group of people, i also think the best option is to rent. Many people consider renting as a waste of money, but if they take up a loan to buy a house, they are also wasting money on interest.

A VIP letter received from a developer recently, it states

15% discount
3% Special Incentive
2% Labour Day Discount
Stamp Duty Incentive
1% Loyalty Discount

Direct 21% Discount + Stamp Duty Incentive for a loyal customer. Does it just a norm in property marketing? or it is an indicative sign to long properties?