View Full Version : Get out while you could
Secretariat
16-06-13, 07:00
(I am posting the following, solely to share my observations of the marketplace, and obviously have no intention to start a debate ala Yowetan's or Mr. B's. Those of you who understood where I am coming from, knew that I left the active participation of this forum, and so take this posting however you like it.)
The recent stock and bond sell-offs, when studied with the currency movements at the same time, to me they revealed the following:
- That the markets appeared very nervous of the prospect of more QEs, especially for Japan. After 5 years of QEs, with benign inflation rate in the general economy, more questions have been raised about the effect of more QEs. What happened in Japan has been illustrative.
- That the fund inflows to a country, over the last 5 years, could well not be from the US, but primarily from Japan, Britain and Europe. This was illustrated by the weakness of USD during the recent sell-offs.
For the Singapore property, my observations for the landed sector:
- More landed developers are marketing their projects at competitive prices. Especially so for boutique developers who acquired the lands 2 years ago.
- More selling from semi-d owners, when compared to just 3 months ago.
- More and more buyers are apparently HDB upgraders. Now, there is nothing wrong to upgrade the housing from an HDB, because the price psf for landed is still competitive when compared with the launch price of a new condo. However, when you are a landed investor, when seeing enquiries more and more from HDB upgraders, a red flaf would come up.
Cheers!
(I am posting the following, solely to share my observations of the marketplace, and obviously have no intention to start a debate ala Yowetan's or Mr. B's. Those of you who understood where I am coming from, knew that I left the active participation of this forum, and so take this posting however you like it.)
The recent stock and bond sell-offs, when studied with the currency movements at the same time, to me they revealed the following:
- That the markets appeared very nervous of the prospect of more QEs, especially for Japan. After 5 years of QEs, with benign inflation rate in the general economy, more questions have been raised about the effect of more QEs. What happened in Japan has been illustrative.
- That the fund inflows to a country, over the last 5 years, could well not be from the US, but primarily from Japan, Britain and Europe. This was illustrated by the weakness of USD during the recent sell-offs.
For the Singapore property, my observations for the landed sector:
- More landed developers are marketing their projects at competitive prices. Especially so for boutique developers who acquired the lands 2 years ago.
- More selling from semi-d owners, when compared to just 3 months ago.
- More and more buyers are apparently HDB upgraders. Now, there is nothing wrong to upgrade the housing from an HDB, because the price psf for landed is still competitive when compared with the launch price of a new condo. However, when you are a landed investor, when seeing enquiries more and more from HDB upgraders, a red flaf would come up.
Cheers!
Hi, your message is very confusing. More demand from HDB upgraders suggests a strong support base for landed isn't it? People might be looking for more space simply.
But for me, why more landed owners are selling has little to do with the demand and supply. Leave it up to landed owners to comment if they wish.
Get out of what? :confused:
Cash - Because many more QEs are going to devalue the cash?
HDB - Because many upgraders are going to sell their HDBs to stay in semi-Ds and this will create a glut in HDB and cause price to crash?
....more sellers meaning people are panicking? ...or are they cashing in to reinvest? If I have a property bought at $1m and am staying in it....now its worth $3m....should I just sit on the $2m appreciation or should I cash in, and buy 2 properties? So that I can get some revenue from my 2nd property? If its the latter...there will be increase in demand for PC if more landed owners are thinking the same way.....and Semi-D being much fewer and even more rare in the pipeline...would the price tumble?
Tony Blair
16-06-13, 08:21
Those waiting to buy say market may crash soon.Don't buy.
Those waiting to sell say market will chiong .Don't sell.
So if you have money jus buy.No money jus keep quiet.:cheers2:
Well said ...
end of the day ... you can shout all you want ...
if you have no money to buy car or houses ... no car or houses to sell
you are are just out of the game
Those waiting to buy say market may crash soon.Don't buy.
Those waiting to sell say market will chiong .Don't sell.
So if you have money jus buy.No money jus keep quiet.:cheers2:
Only speculators or overleveraged ones need to worry.
(I am posting the following, solely to share my observations of the marketplace, and obviously have no intention to start a debate ala Yowetan's or Mr. B's. Those of you who understood where I am coming from, knew that I left the active participation of this forum, and so take this posting however you like it.)
The recent stock and bond sell-offs, when studied with the currency movements at the same time, to me they revealed the following:
- That the markets appeared very nervous of the prospect of more QEs, especially for Japan. After 5 years of QEs, with benign inflation rate in the general economy, more questions have been raised about the effect of more QEs. What happened in Japan has been illustrative.
- That the fund inflows to a country, over the last 5 years, could well not be from the US, but primarily from Japan, Britain and Europe. This was illustrated by the weakness of USD during the recent sell-offs.
For the Singapore property, my observations for the landed sector:
- More landed developers are marketing their projects at competitive prices. Especially so for boutique developers who acquired the lands 2 years ago.
- More selling from semi-d owners, when compared to just 3 months ago.
- More and more buyers are apparently HDB upgraders. Now, there is nothing wrong to upgrade the housing from an HDB, because the price psf for landed is still competitive when compared with the launch price of a new condo. However, when you are a landed investor, when seeing enquiries more and more from HDB upgraders, a red flaf would come up.
Cheers!
Well said.... view appreciated...
Btw,someone from the other side must be dying to write something to counter it. Anybody who doesn’t agree, just share your different view here…. I see not problem to have another round of debate…there were hundreds already…
All readers benefit the wide/different/up-to-date views and opinions, help them to decide/sense the real current/future market with their common sense/homework.
Only time will tell. However, it is not wrong to say the boom cycle is coming to an end. Everything is cyclical and properties has had its days.
P.S - I am also vested and not coming from a MTB angle.
phantom_opera
16-06-13, 11:14
recent routs ?? I feel good as I can cherry pick Asians stocks n bonds while holding my properties till 2019 .. inflation will be 3pc GDP growth 2.5pc for next few years, China will also slow to 5pc but dun expect recession lah
phantom_opera
16-06-13, 11:18
when nikkei at 8000 during earthquake ppl say doom, say until nikkei nearly doubles, djia also same
meanwhile developers just keep buying lands n sell projects taking calculated risk
even Far East is aggressive again lol
princess_morbucks
16-06-13, 12:14
(I am posting the following, solely to share my observations of the marketplace, and obviously have no intention to start a debate ala Yowetan's or Mr. B's. Those of you who understood where I am coming from, knew that I left the active participation of this forum, and so take this posting however you like it.)
The recent stock and bond sell-offs, when studied with the currency movements at the same time, to me they revealed the following:
- That the markets appeared very nervous of the prospect of more QEs, especially for Japan. After 5 years of QEs, with benign inflation rate in the general economy, more questions have been raised about the effect of more QEs. What happened in Japan has been illustrative.
- That the fund inflows to a country, over the last 5 years, could well not be from the US, but primarily from Japan, Britain and Europe. This was illustrated by the weakness of USD during the recent sell-offs.
For the Singapore property, my observations for the landed sector:
- More landed developers are marketing their projects at competitive prices. Especially so for boutique developers who acquired the lands 2 years ago.
Mabbe the big boys know something that we don't.
- More selling from semi-d owners, when compared to just 3 months ago.
Are these owners upgrading or downgrading?
- More and more buyers are apparently HDB upgraders. Now, there is nothing wrong to upgrade the housing from an HDB, because the price psf for landed is still competitive when compared with the launch price of a new condo. However, when you are a landed investor, when seeing enquiries more and more from HDB upgraders, a red flaf would come up.
Cheers!
I get your point.....when the masses start buying something, then....according to Warren Buffet, we should start fearing.
"Be Fearful When Others Are Greedy And Greedy When Others Are Fearful” - Warren Buffett
Thanks for the insightful post, Secretariat.
Happy Fathers' Day to all!
Mabbe the big boys know something that we don't.
Are these owners upgrading or downgrading?
I get your point.....when the masses start buying something, then....according to Warren Buffet, we should start fearing.
"Be Fearful When Others Are Greedy And Greedy When Others Are Fearful” - Warren Buffett
Thanks for the insightful post, Secretariat.
.
Happy Fathers' Day to all!
Last point: many ask, but how many really execute? I don't have numbers, but from what I know, not many.
thomastansb
16-06-13, 12:49
In mid 2011, the stock market also experienced a minor fluctuation. Minor ups and downs are common. In the same fluctuation, US stock drop, I can't remember, like 750 or 1000 points in a single day. That is the limit it DOW can drop in a single day. So many people are saying equity and property doomed already.
Stocks drop about 20 to 25% within 2 months. Property drop about 3 to 5%.
After that, property went up 10 to 20% from 2011 till now depending on district.
I still don't understand why people are saying property will drop soon. You will never know when it will drop and how much it will drop. It might be until 2017 or 2020 before a 20% drop. Or maybe banks start failing end of 2013. Who can predict....
phantom_opera
16-06-13, 13:06
after khaw say must make sure senior citizens can rent out hdb flats, I have decided to hold till the next MND minister as khaw will guarantee my hdb rentals
kenobi wan no match for dark side, our last hope is young sky walkers
I like the dark side. Lol
it is well known fact that interest rate supports these buying these days....so in asia when u hear china slowing, europe not out of the woods, then means what?
interest rate will be low for a while to spur business activities.....and in the end, also prolong the property cycle.:2cents:
In mid 2011, the stock market also experienced a minor fluctuation. Minor ups and downs are common. In the same fluctuation, US stock drop, I can't remember, like 750 or 1000 points in a single day. That is the limit it DOW can drop in a single day. So many people are saying equity and property doomed already.
Stocks drop about 20 to 25% within 2 months. Property drop about 3 to 5%.
After that, property went up 10 to 20% from 2011 till now depending on district.
I still don't understand why people are saying property will drop soon. You will never know when it will drop and how much it will drop. It might be until 2017 or 2020 before a 20% drop. Or maybe banks start failing end of 2013. Who can predict....
phantom_opera
16-06-13, 13:47
reduction of QE means SIBOR will rocket... all the bears pls continue to think this way ;)
princess_morbucks
16-06-13, 14:10
reduction of QE means SIBOR will rocket... all the bears pls continue to think this way ;)
Reduction of QE mean SIBOR will increase.
Total removal of QE means SIBOR will rocket.
They may or may not reduce QE, but I don't think they will remove it totally.
The world can't take it.
Reduction of QE mean SIBOR will increase.
Total removal of QE means SIBOR will rocket.
They may or may not reduce QE, but I don't think they will remove it totally.
The world can't take it.
The world would rather you and me die of inflation, than deflation.
Reduction of QE mean SIBOR will increase.
Total removal of QE means SIBOR will rocket.
They may or may not reduce QE, but I don't think they will remove it totally.
The world can't take it.
who say remove QE SIBOR will rocket?? :D
Title should change to: Get in while you can :D
From title already know this guy is obviously lost. He doesn't know where he is (inside or outside). so why are people guessing what he means? why make it so complicated. Prepare bullets. Price down go in. Price up or hold or sell. Why response to kajunk puteh remarks?
http://www.forbes.com/sites/jamesgruber/2013/06/15/can-world-afford-higher-rates/
:2cents:
can the world take a higher interest rate environment...:)
who say remove QE SIBOR will rocket?? :D
phantom_opera
16-06-13, 15:24
many banks may go bust if deflation or high cost of debt hits with little margin for error
that's why central banks are so pro inflation n zero rates
From title already know this guy is obviously lost. He doesn't know where he is (inside or outside). so why are people guessing what he means? why make it so complicated. Prepare bullets. Price down go in. Price up or hold or sell. Why response to kajunk puteh remarks?
Human also choose to hear what they believe.... Ignore what they disbelieve...
Kajunk puteh.... i like to eat.
One thing for sure, many landed put up for sale now.. especially those 99 yr lease TOP in the 90's.
Reason is simple, their children have grown up and moved out... no point for an old couple to stay in such a big house... another reason is they have broke even or make some profit from selling...
Only speculators or overleveraged ones need to worry.
Major speculators seem gone.
Now maybe left those real 'stayers' and upgraders. …And surviving agents actively in this forum who are serving those people, at the same time looking after their rice bowl.
title should be don't go in if you can :D
super exorbitant price and lousy quality and workmanship :doh:
Human also choose to hear what they believe.... Ignore what they disbelieve...
Kajunk puteh.... i like to eat.
Hope you really eat it.
Don't just said you believe and no action.
It is equate to you don't even know what you are eating.
[QUOTE=Komo]title should be don't go in if you can :D
QUOTE]
Nice advice.
Hope you really eat it.
Don't just said you believe and no action.
It is equate to you don't even know what you are eating.
Thank the advice.
After 7 CMs and still people buying, what does this show?
1. They have no money, that is why they buy.
2. They have too much money, don't know what to buy.
3. They have lot of money in the Bank and don't like to earn interest because the interest is going up, they like to pay more mortgage interest instead.
Before the CMs SGD 100,000 can buy 4, 2 Bedroom at Southbank. Down 5% under DPS, if only I have brought 4 instead of one.
I want to borrow more from the Bank, but after 7 CMs even LTV 40 (40% loan) the Bank want me to pay up in 6 yrs.
phantom_opera
16-06-13, 17:02
quantum remains affordable, low
ltv ensures strong buyers
how to crash ?
Quantum remains relatively affordable. But sizes of units have shrunk a lot. We now have Mickey Mouse 3 bedders.
Office Boy is back !
Let me contribute some observations from the ground!
Many of the people here shout crash shout chiong also no use you got to see if on the ground to feel the pulse of the market. What you see today is what the index will be in a few months' time. That is how the so-called experts pretend to predict the market accurately.
If you dont know who is Barbarella or Lulu or Leticia, then you probably missed another boat! Recently showflats have been kept busy, units at the dont know where it is KAP got KAP-ed until not many left for the actual launch itself! And Lulu sold more than 50-60% of the units @ BK!
People are buying, there are ALOT of reasons to buy. We seems to be at a corner of "you miss this time round, your next next next & next generation CMI already". So many parents are buying for their (hopefully filial) kids! Using the first time buyer benefit to lock in a PC while prices are still within range.
Even Ang Mos are spotted chit chatting with Barbarella @ BK! Not trying to get her to go home with them, but which unit to buy!
I "predict" June sales will be healthy. Also, Retail units will see a strong upward cheong quite soon. I cant tell u exact details, except for you guys to think about our abangs across the Causeway and how they are getting a small stake in Sg.
All the Best! My wish is for all forumers to make lotsa money!
Dont ask me to spiak Pu-Tong-Hua, coz my Chinese very poor!
But I certainly dont mind my place being 3 mins away from MRT, so does Leticia!
DKSG
Quantum remains relatively affordable. But sizes of units have shrunk a lot. We now have Mickey Mouse 3 bedders.
..just visited White Haven....4-bedder.....is WOW 947 sq ft..........very big....still almost 100 units sold out of 120 plus...after 2 weeks.
phantom_opera
16-06-13, 20:12
now ang moh is everywhere, just saw one at EC hse cutting hair for 10sgd, bedok mall
boy boy school bag very heavy luckily 3mins walk to mrt make me laugh
thank u bro DKSG on real time technical momentum update, namaste
princess_morbucks
16-06-13, 20:41
From title already know this guy is obviously lost. He doesn't know where he is (inside or outside). so why are people guessing what he means? why make it so complicated. Prepare bullets. Price down go in. Price up or hold or sell. Why response to kajunk puteh remarks?
Hi, btw do you know the TS?
TS, from previous posts, is a developer.
He buys old landed houses, rebuilds them, and sells them.
So he should be in tune with the property market.
I am sure he will be waiting to acquire more old landed houses should there be a crash.
So I believe he knows what he is saying.
Hi, btw do you know the TS?
TS, from previous posts, is a developer.
He buys old landed houses, rebuilds them, and sells them.
So he should be in tune with the property market.
I am sure he will be waiting to acquire more old landed houses should there be a crash.
So I believe he knows what he is saying.
I was thinking he wants his entry price to be lower. If I were a developer, I won't tell my competitors that a crash is coming because they will get ready their cash and start to monitor the grounds more closely. I will just sit back quietly and watch for the right moment to move in.
princess_morbucks
16-06-13, 20:49
I was thinking he wants his entry price to be lower. If I were a developer, I won't tell my competitors that a crash is coming because they will get ready their cash and start to monitor the grounds more closely. I will just sit back quietly and watch for the right moment to move in.
I think he doesn't view us as competitors, because most of us here are not developers.
He is here as a fellow forummer, and out of goodwill, expressing how he thinks the near future will be and is giving us food for thought.
I think he doesn't view us as competitors, because most of us here are not developers.
He is here as a fellow forummer, and out of goodwill, expressing how he thinks the near future will be and is giving us food for thought.
I recall a big developer just 2 or 3 years back mentioned that the mass market condos would not do well but after a few months went ahead to buy a piece of 99LH land to build mass market condos.
Hi, btw do you know the TS?
TS, from previous posts, is a developer.
He buys old landed houses, rebuilds them, and sells them.
So he should be in tune with the property market.
I am sure he will be waiting to acquire more old landed houses should there be a crash.
So I believe he knows what he is saying.
...nowadays very competitive...everyone wants a piece of the cake.....developer also can get priced out or begin to outgunned by those who have bigger appetite for risks....I am not saying he lacks bullets but others could be more daring to chiong...
Secretariat
17-06-13, 05:43
I was thinking he wants his entry price to be lower. If I were a developer, I won't tell my competitors that a crash is coming because they will get ready their cash and start to monitor the grounds more closely. I will just sit back quietly and watch for the right moment to move in.
This is a typical cynical comment from this forum that makes any contribution to any subject rather pointless. And yet, it could come from someone who has made over 5,000 posts in Condosingapore.com.
Was the word 'crash' mentioned in the original post?
If you could get out now of a property investment, then it is only because you are sitting on a profit. If you are sitting on a profit, and decide not to get out, then it could only because either you continue to see the markets favorably, or due to greed.
The markets do not work the way you described at all. I could buy high and sell higher too.
When one is in the markets, vested, the sensible thing to do is to look at the markets from the outside.
When one is out of the markets, divested, the sensible thing to do is to look at the markets from the inside.
Only then, an objective assessment could be made. The markets are bigger than anyone, they are monsters so to speak; nothing of what you and I wrote on a forum could change where they want to go, the direction.
Agree?
If so, then why not talk about the content of a posting, instead of writing cynical remark of the author of a posting?
Cheers!
Secretariat
17-06-13, 07:05
Hi, btw do you know the TS?
TS, from previous posts, is a developer.
He buys old landed houses, rebuilds them, and sells them.
So he should be in tune with the property market.
I am sure he will be waiting to acquire more old landed houses should there be a crash.
So I believe he knows what he is saying.
Buttercarp?
As we all should know already, the CMs imposed by the government have altered the market dynamics of property investment in Singapore. When you buy, there is the buyer duties that affects proper buying decision-making. More so when you sell, the seller duties that tends to delay a selling decision.
In other words, for both the buyer and seller, they are encumbered by the CMs. I wrote in fair details what these mean, in threads started last year.
But, everything being equaled, for the landed sector, the buyer and seller bahaviors should be closer to the true market dynamic. I would just give an example, when you buy a new condo launch, it is almost the case that the unit you are buying is not available for consumption until its TOP in 3, 4 or 5-years later. And also the cashflow outlays run accordingly to the pace of construction.
In the landed sector, it would generally take under a year for a buyer who bought a unit for rebuilding to consume. Cashflow outlays would exhaust within that year. So, although still encumbered by the CMs, his window of selling is wider when compared with a new condo investment.
When we consider the timeframe of 2009 to now, the URA statistics would show you the price growth of landed outpaced the condo sector. The price growth of the condo sector primarily happens when developers raised the launch prices over the years, and the buyers of these condo are then locked in these prices.
In other words, it is a situation where a project first priced at for example $1,200 psf and then another project next door would be priced at $1,400 psf, and so the buyers of the first project would assume an implied profit of $200 psf. On paper.
The true test is when the floodgate of TOPs opens, what would be the real market pricing. Would the buyers of the first condo able to realize the $200 psf implied profit in an open market.
Coming back to the landed sector, over the last 6 months or so, in true transacted records published in URA, the hottest price growth appeared for land plots of 1,500 psf +/-. The game of lower quantum appeared in the landed sector.
Now, previously in any market conditions (up or down cycle), land plots of these sizes could never command a price premium. Why so? It is simply because landed living is all about space, the garden etc. So, the premium appears could be because of the change in lifestyle etc, but it would be interesting to sell if the premium stays in the next down cycle.
Today, generally, the price difference between a rebuild and consumed terrace and semi-d, both of reasonable land size and in move-in condition, is about $1 mil. The terrace is about $3.3 mil, the semi-d about $4.3 mil. This price-gap is narrow, in my view. It appeared that the price growth in higher for terrace, over this period, when compared with the semi-d. I mentioned that the the price growth of a terrace of smaller land plot is higher than a normal sized plot.
When more semi-ds are selling, because of competition, especially in less favorable market condition, one would expect $4.3 mil to get closer to $4.0 mil. Correspondingly, this would exert a pressure to the price growth of the terrace segment.
Cheers!
Thanks for the detailed explanation. My sense is there will be more new citizens coming in to support the prices.
Buttercarp?......
But, everything being equaled, for the landed sector, the buyer and seller bahaviors should be closer to the true market dynamic. I would just give an example, when you buy a new condo launch, it is almost the case that the unit you are buying is not available for consumption until its TOP in 3, 4 or 5-years later. And also the cashflow outlays run accordingly to the pace of construction.
In the landed sector, it would generally take under a year for a buyer who bought a unit for rebuilding to consume. Cashflow outlays would exhaust within that year. So, although still encumbered by the CMs, his window of selling is wider when compared with a new condo investment......
are you talking about TOP effect (increase price by 20%) of new condos?
so if condo ready for consumption in 4 years, price up by 20%.
by same measure, rebuilding takes a year, so landed faster for consumption, price up by 20%.
i get your point about this.
i dont get your point about how cashflow outlays translate to window of selling?
princess_morbucks
17-06-13, 10:14
Just thinking to myself after reading Secretariat's post.
If a person is deciding which to buy - a condo which has just been launched, or an old landed which he will do A&A.
New condo = 4 years to TOP, by that time buyer can sell without incurring SSD.
This buyer does not need much cash as it is progressive payment over 4 years.
New landed house = 1 year to TOP, buyer has to have the means to finance the loan which will usually start soon after he buys the house as it is progressive payment.
He cannot sell the house in the next 3 years without incurring SSD,so he is unlikely to sell it within the next 3 years and in these 3 years he has to pay his monthly mortgage.
So in order to buy the landed, the buyer has to be financially "sounder" than if he were to buy the condo which is just being launched.
However if this same buyer was a speculator, he may chose to buy a few condos which is just being launched, since his cash outlay is less than if he were to buy something that is already or going to be TOPed soon.
The first batch of people to be affected by the 3 year SSD which was implemented in Aug 2010, would be able to sell this year in Aug 2013 without having to pay SSD.
The next batch of people affected by the 4 year SSD which was implemented in Jan 2011, would be able to sell in Jan 2015.
Let me add my 2 cents worth.
1) The success of developers pushing up the PSF price these days is purely down to shrinking the average unit size rather than people getting richer etc. Some like to call them MM, other call it practical and efficient layout.
2) The reason why we are seeing super high growth in landed property prices is because in URA price chart, they do not track rebuilding or A&A cost into the function. So for example, if someone buy a $2m landed, spend $1m to rebuild and sell it for $4m. URA will track it as making 100% profit is instead of 33.3%. And this has sort of created the euphoria that there are so much money to be make in landed property.
3) If you noticed the modern landed property, they are all build to the maximum the plot ratio purely to deceive themselves or potential buyer that average psf is very affordable relative to condo.
So the question is in 10 of 15 years down the road, when these modern (sometime ugly) landed properties are due for a complete A&A or rebuilding. Who is going to buy such landed property where there are no room to play the psf averaging game, and neither can you split the unit into smaller plot or sell dual key landed property.
4) Using a conservative condo rental yield ratio of $1m value = $3k rental, the average cost of consumption for a $4m landed property will be around $12k per month, or about $400 per day, excluding utilities, taxes etc etc.
So my question is, how many landed property owners in Singapore can actually afford to say no to $400 additional DAILY allowance , when they retire?
5) There has been many talk about landed property owner are all damn rich and holding power etc. However if you study the report on household income, average earning of landed property owner is only around 25K per month. Not much more than what condo dwellers are earning actually. Which mean, when there is an economic shock, the landed property will be the first to break because of the fast cash burn rate
6) Lastly, one will need to look back into the history to know that landed property prices are not invincible. Every time there is an economic shock, price will break faster than anything else, due to their large quantum and limited buyer pool.
http://img824.imageshack.us/img824/7669/uraq113.png
TS is right that now is a good time to exit the landed property market for investors or for owners who are planning to downsize or downgrade. Perhaps thats the reason why property big wig at Wingtai and SC Global are putting their property in the market recently.
--------------------------------------------------------------
PS. this is only worth 2 cents, so just read and dont ask questions.
Secretariat
17-06-13, 11:37
Just thinking to myself after reading Secretariat's post.
If a person is deciding which to buy - a condo which has just been launched, or an old landed which he will do A&A.
New condo = 4 years to TOP, by that time buyer can sell without incurring SSD.
This buyer does not need much cash as it is progressive payment over 4 years.
New landed house = 1 year to TOP, buyer has to have the means to finance the loan which will usually start soon after he buys the house as it is progressive payment.
He cannot sell the house in the next 3 years without incurring SSD,so he is unlikely to sell it within the next 3 years and in these 3 years he has to pay his monthly mortgage.
So in order to buy the landed, the buyer has to be financially "sounder" than if he were to buy the condo which is just being launched.
However if this same buyer was a speculator, he may chose to buy a few condos which is just being launched, since his cash outlay is less than if he were to buy something that is already or going to be TOPed soon.
The first batch of people to be affected by the 3 year SSD which was implemented in Aug 2010, would be able to sell this year in Aug 2013 without having to pay SSD.
The next batch of people affected by the 4 year SSD which was implemented in Jan 2011, would be able to sell in Jan 2015.
The lower cash outlays to play the condo property segment is a modern development. Or I should say, a monster created by the CM policies. Last year, I wrote a thread exploring why this has been so.
If you are in the Option market, then you could relate to this better.
Once upon a time, an investor entering the property market would equip with the bare minimum play money. Which is the 20% cash outlay to fulfill a housing loan requirement. An amount that he is prepared to lose should the market continued to fall.
To add to the Princess's comment, for landed it took not more than a year to get a rebuild. At the 2nd year onwards, the landed could be consumed.
By consumption, the owner could choose to:
- Rent it out. Even for the miserable yield, he could still obtain a rental income of $6,000 pm, sufficient to cover the mortgage.
- Live in it, which means that he has the option to obtain rental income from his other property.
Cheers!
Secretariat
17-06-13, 12:26
There have been lengthy debates on what is the true price growth for landed, given the way how URA calculates the RPI.
Typically:
For an original terrace purchased in 1Q 2010 (when the stock markets were already rallying from the Credit Crunch's lows), it would cost about $1.8 mil for a rebuild.
Land cost being $1.2 mil, construction cost $0.6 mil.
Today, it could be sold at $3.3 mil.
(To reemphasize, these are typical figures.)
This gives us:
Gross profit of $1.5 mil.
Price growth is $1.5 mil / $1.8 mil = 83%. The widely published figure by analyst is 65%, so there are differences in Land Cost and Construction Cost.
URA calculates as ($3.3 mil - $1.2 mil) / $1.2 mil = 175%.
Profit over capital deployed (assuming 20%) is $1.5 mil / $0.5 mil = 300%.
Now, the interesting part.
What is the asking price of a similar land today; say the neighbor's which is still in original condition?
About $2.4 mil, which is 100% above the $1.2 mil land cost that has been rebuilt.
So, out of the Gross Profit of $1.5 mil, $1.2 mil could be attributed to the increase of land cost and then $0.3 mil being the developer's profit.
(And the developer/owner has had the opportunity to consume the rebuilt from the 2nd year onward, as I wrote previously).
Does the developer's profit increase substantially when a rebuilding max out the land plot ratio? That is, for people who maximize the build-up, could they expect a substantially higher profit.
Very marginal.
At least from the bank's perspective. For a buyer asking for financing of a landed purchase, the bank would give an indicative price that it is willing to support without even looking at the property. The bank valuation comes after a loan is signed, which is more of a formality of the loan processing.
So, it is crucial to know the bank's indicative price before signing the OTP, especially so when exercising the OTP. Otherwise, the buyer would need to come up with cash should the bank refuses to lend above the indicative price.
Cheers!
Just thinking to myself after reading Secretariat's post.
If a person is deciding which to buy - a condo which has just been launched, or an old landed which he will do A&A.
New condo = 4 years to TOP, by that time buyer can sell without incurring SSD.
This buyer does not need much cash as it is progressive payment over 4 years.
New landed house = 1 year to TOP, buyer has to have the means to finance the loan which will usually start soon after he buys the house as it is progressive payment.
He cannot sell the house in the next 3 years without incurring SSD,so he is unlikely to sell it within the next 3 years and in these 3 years he has to pay his monthly mortgage.
So in order to buy the landed, the buyer has to be financially "sounder" than if he were to buy the condo which is just being launched.
However if this same buyer was a speculator, he may chose to buy a few condos which is just being launched, since his cash outlay is less than if he were to buy something that is already or going to be TOPed soon.
The first batch of people to be affected by the 3 year SSD which was implemented in Aug 2010, would be able to sell this year in Aug 2013 without having to pay SSD.
The next batch of people affected by the 4 year SSD which was implemented in Jan 2011, would be able to sell in Jan 2015.
I think you nailed it there....these days, it takes finacial clout to venture into property construction, small players will find the SSD a big hurdle to handle as one must be able to wait out the 4 yrs before sellling without having to incur additional cost....especially one who buy old landed and hope to make capital gain. From an investment point of view there is no reason for owners to dispose their old landed at a low price and allow otehr people to rebuild and make money out of their property.
I can understand Hygenix speculation about such developer who find it to their benefit to talk down the market...as they may be small scale boutique developers...what they need to a few owners panicking and offload by such talk.
princess_morbucks
17-06-13, 13:30
I think you nailed it there....these days, it takes finacial clout to venture into property construction, small players will find the SSD a big hurdle to handle as one must be able to wait out the 4 yrs before sellling without having to incur additional cost....especially one who buy old landed and hope to make capital gain. From an investment point of view there is no reason for owners to dispose their old landed at a low price and allow otehr people to rebuild and make money out of their property.
I can understand Hygenix speculation about such developer who find it to their benefit to talk down the market...as they may be small scale boutique developers...what they need to a few owners panicking and offload by such talk.
But from another thread, it was discussed that licensed developers don't need not pay SSD when selling residential properties developed by them.
Non-licensed developers may be eligible for remission of SSD only if they are registered companies or businesses, and lawfully carrying on the business of housing development.
But from another thread, it was discussed that licensed developers don't need not pay SSD when selling residential properties developed by them.
Non-licensed developers may be eligible for remission of SSD only if they are registered companies or businesses, and lawfully carrying on the business of housing development.
....but licensed developers need to pay taxes on profit.....
princess_morbucks
17-06-13, 18:00
....but licensed developers need to pay taxes on profit.....
That is true as it is considered their income.
Whether they manage to sell earlier or later, lower or higher price, they will also be taxed.
They cannot escape taxes on profit in any circumstances.
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