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If you think the private residential market here will soften fairly sharply over the 2 - 3 years, how can one construct a "short" for this view? Likewise for a view on Singapore industrial.
I doubt shorting the banks or developers would be effective in providing the same pay off.
To take a step back, funds which were bearish on US subprime going into 2008 could express their view using ABX index or derivative structures. So was wondering how to do so for the above.
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You are really an evil person for having such thoughts. Do you know that many young singaporean families struggle to pay off their housing loans? What would happen to them when the housing market collapses?
The government will never allow such products to be sold on the market. And if I find out any banks attempting to structure such a financial product with the aim of paying off investors in the event of a collapse in the residential market, I will promptly report this matter to the MAS.
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This is the dilemma of residential - one group uses it as a basic necessity, another uses it as investment/speculation. I wouldn't say it is evil, just like those who trade commodities like sugar / corn. If they drive prices up and people go hungry, I agree that the govt should intervene. But from an investor point of view they are only trying to make money.
We choose the vehicle to make money, like for me I will never buy Genting shares because I do not believe in profiting from others' "losses" and human weakness in terms of gambling. However, I have no problem buying other shares on the cheap, when the "counterparty" is panicking and dumping them in fear. Am I profiting from his loss? Hmmm. Warren Buffett's advise to "be greedy when others are fearful, and be fearful when others are greedy" - is that profiting from others as well? Ethical? Moral? I suppose when one invests in shares, one should be ready to take losses or ride out downturns, whereas people who buy property for a roof over their heads, may not be ready to suffer that loss.
Anyway, back to property shorting, I agree with propertyinvestor that the govt should not allow shorting of residential. But residential market is not homogenous. To some, it is a basic need, to others it is an investment, to others, it is a status symbol, and for some, it is part of their estate to bestow to children. Since govt allows foreigners to own landed (but limited to Sentosa Cove), maybe they can compartmentalise a "luxury" segment and allow derivatives or shorting?
Just thinking aloud.
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30-10-2012, 06:55 PM
(This post was last modified: 30-10-2012, 07:08 PM by natnavi.)
(30-10-2012, 04:25 PM)newyorkcityboy Wrote: If you think the private residential market here will soften fairly sharply over the 2 - 3 years, how can one construct a "short" for this view? Likewise for a view on Singapore industrial.
I doubt shorting the banks or developers would be effective in providing the same pay off.
To take a step back, funds which were bearish on US subprime going into 2008 could express their view using ABX index or derivative structures. So was wondering how to do so for the above.
Hi newyorkcityboy,
Any reasons why you would think that "the private residential market here will soften fairly sharply over the 2 - 3 years"?
In my own view, with so much liquidity in the market and with such low interest rates, I do no think that that the market soften or drop till 2014.
By the way, are you trying to do recreate what Michael Burry did? He did it by shorting mortgage backed security.
(not vested)
I have to agree with snowcap that shorting the Singapore private residential market is not evil. Shorting is useful.
From Wiki
"noted investors as Seth Klarman and Warren Buffett have said that short sellers help the market. Klarman argued that short sellers are a useful counterweight to the widespread bullishness on Wall Street, while Buffett believes that short sellers are useful in uncovering fraudulent accounting and other problems at companies."
Drawing parallel to the residential market, shorting will balance any widespread bullishness in the Singapore residential market.
(not vested)
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Im bearish in property because now people seemed so bullish. There seemed to be a prevalent view that "this time, it's different". Unlike last year when everyone thinks that property will crash in 2012, that's when it wouldnt crash.. But now...
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Thought people are already shorting? They sold and rent, wait and wait for years, property still never come down!
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(31-10-2012, 12:16 AM)violinist Wrote: Thought people are already shorting? They sold and rent, wait and wait for years, property still never come down!
The shorting under discussion is more of "Contra Selling" via derivative product.
Your type of shorting is helpful to market, but not the "Contra Selling" type 
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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(31-10-2012, 12:16 AM)violinist Wrote: Thought people are already shorting? They sold and rent, wait and wait for years, property still never come down! Yes, this is a good strategy if you want to take a bearish position on the market. However, it requires that you already hold at least one property.
For those not already holding any, or for those who want to sell something they don't have, I think there is no way currently. Which may be a good thing for the stability of the residential market in general.
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(30-10-2012, 04:25 PM)newyorkcityboy Wrote: If you think the private residential market here will soften fairly sharply over the 2 - 3 years, how can one construct a "short" for this view? Likewise for a view on Singapore industrial.
I doubt shorting the banks or developers would be effective in providing the same pay off.
To take a step back, funds which were bearish on US subprime going into 2008 could express their view using ABX index or derivative structures. So was wondering how to do so for the above. Hi newyorkcityboy,
I did also wonder on how one could construct a portfolio that is "short" residential property in Singapore.
Unfortunately, I don't believe there are publicly traded derivatives available for our developers. Off-hand, I guess the "best" way would be to short the shares of developers that are highly leveraged and have mortgaged most of their investment properties to the banks at low initial floating rates to get cash for additional land acquisitions. A combination of a decline in property prices and a general rise in interest rates could cripple these developers. But like what you said, the payoff would not be as effective as holding a derivative with a much larger notional amount. Also, not all developers can be shorted (at least from the CFD-available counters in with my broker).
Just my 2 cents as I did get a little inspired by Michael Lewis' book...
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(30-10-2012, 05:43 PM)snowcap Wrote: ... Since govt allows foreigners to own landed (but limited to Sentosa Cove), ...
This is a common misconception. Foreigners, if approved by the relevant authorities, are ALLOWED to own landed properties not just in Sentosa Cove; there is just fewer restrictions in Sentosa Cove ownership. Check this SLA page for details:
http://www.sla.gov.sg/htm/ser/ser0306.htm
There is also a link to an FAQ in there. The existence of the FAQ on foreign landed property ownership and the kind of questions in it seems to suggest that approval is more common than most believe. According to an earlier CNA report, rate of foreign land ownership hovers around 3.5% (of what, that wasn't elaborated):
http://www.channelnewsasia.com/stories/s...74/1/.html
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