Property market sentiments?

[gfoo]

Yes, to all doubters here, please do not underestimate the amount of pent-up home equity coming from HDB dwellers.

Unlike in stocks, where you can take calculated risks and invest in tranches on the way down, in property most people only have 1 shot and they have to time their entry right.

These HDB upgraders have shrewdly avoided the market run-up in the previous years and are now carefully timing their entry to buy the mass market condos. I honestly think they got their timing right.

In other words, this time it's really different.

Yes you're prob right. HDB upgraders is a force to reckon with. But are they buying right? Missing the boat and buying blindly seems to be in play here. They are buying stories of 'close to MRT'; minutes to Orchard; fringe of city; 'be part of the Core Central Region!' etc etc. Almost everywhere in Singapore by 2013 will be 'close to MRT', and everywhere is minutes to town.

Paying $800psf for the chu kangs and $900-1000psf for balestier/woodleigh/sm is irresponsible use of hard earned equity.

[wqmai]

Property is still a good hedge against inflation in Singapore. This is not my own conclusion but according to research from NUS. You can check what happen to property prices in Singapore during the 1st and 2nd oil shock back in 1973/74 and 1980/81. But I agree with you that metal & commodities are BETTER but not every Singaporean knows how to trade that.

I do agree that property in the long run is a good hedge against inflation. If you can afford the 20% downpayment, why not?
E.g. D15's freehold studio appartment is about $460k. Even if the price continue to drop, how much it can drop? Almost impossible to drop to $350k.

Buy and rent out. People now asking for abt $2000 per mth rental. You just ask for $1500, sure got taker. $1,500 sld be enough for monthly installment and maintenance fee. Even 10 yrs later, you sell back at the same price as you bought, you are still gaining.
No need wait for the bottom, you may not see it. E.g. During the recent stock run-up, my friend was waiting for the stock market to bottom at STI 1200. Wait and wait and in the end, he enter the market at about STI 2200 points.

The last bottom in end 2001 or 2002, STI is abt 1200. Since this recession is worst than 2001, why the stock market bottom at 1400 instead of 1200? So why should the property bottom at pre-2005 prices?

I felt that if you really wanted to invest in a property, now should be a good time. If property prices drop, just hang on. Or you want to enter when the property prices is much higher like my friend who wait until STI 1200 is really not achieveable then he entered at STI 2200?

To each his own.

[gfoo]

Property will perform well in inflationary environment. The spike in 1980/81 is due to 2nd oil shock.

thanks jk, let me clarify. Yes in normal inflation and even mild inflation, property may do well. But what we are fearing is mass inflation or even hyperinflation. When the dollar collapses and triggers this off, property as an immovable store of value does not serve as wealth.

in mild inflation, you have the sense that things are getting more expensive, but you won't really feel it. In mass, things are worse, and you start buying only things you really need. in hyper, everyone's fxed unless you own a goldmine.

mass and hyperinflation signals the breakdown of the division of labor, and many market practices that we are used to. the psychological effect is almost similar to deflation. In zimbabwe, a loaf of bread costs 0.1g of gold, and that's all that they are accepting. everyone will be more concerned about putting food on the table than 'close to MRT', 'next to CCR', 'my condo guard is Chinese, yours is bahyee'.

the only time one really benefits from mass or hyper is your $1m loan, if on fixed interest, can prob be paid off with a single gold coin by then. The rest of your gold coins will be used to barter for daily necessities and food, assuming your neighbours don't find out and kill you for it.

[wreckwrx]

Yes, to all doubters here, please do not underestimate the amount of pent-up home equity coming from HDB dwellers.

Unlike in stocks, where you can take calculated risks and invest in tranches on the way down, in property most people only have 1 shot and they have to time their entry right.

These HDB upgraders have shrewdly avoided the market run-up in the previous years and are now carefully timing their entry to buy the mass market condos. I honestly think they got their timing right.

In other words, this time it's really different.

I think we must be very careful here because there are segments of HDB dwellers that are indeed struggling to make ends meet, getting red bills stuffed in their letter boxes and having red paint and O$P$ signs splashed all over their doors and corridor...

But there are also a segment of HDB dwellers with dual incomes that have very low debt obligations, savings in the bank, sitting on capital appreciation and no immediate threat of losing their jobs. In fact if you put aside the HDB address, a lot of these folks have the same profiles as private property owners in terms of their education level, career prospects, outlook towards life etc... And these are the guys that are upgrading.

[wreckwrx]

Yes you're prob right. HDB upgraders is a force to reckon with. But are they buying right? Missing the boat and buying blindly seems to be in play here. They are buying stories of 'close to MRT'; minutes to Orchard; fringe of city; 'be part of the Core Central Region!' etc etc. Almost everywhere in Singapore by 2013 will be 'close to MRT', and everywhere is minutes to town.

Paying $800psf for the chu kangs and $900-1000psf for balestier/woodleigh/sm is irresponsible use of hard earned equity.

If paying $900-1000psf for a condo in balestier is irresponsible, then paying $700k for a DBSS flat would probably be deemed as criminal....

[jitkiat]

Mr gfoo is worried about hyperinflation like Dr Doom. He may be right, may be I should increase my debt level to millions b4 hyperinflation wipe me off.

The greater of two evils

May 7th 2009
From The Economist print edition
Inflation is bad, but deflation is worse




MERLE HAZARD, an unusually satirical country and western crooner, has captured monetary confusion better than anyone else. “Inflation or deflation,” he warbles, “tell me if you can: will we become Zimbabwe or will we be Japan?”
How do you guard against both the deflationary forces of America’s worst recession since the 1930s and the vigorous response of the Federal Reserve, which has in effect cut interest rates to zero and rapidly expanded its balance-sheet? On May 4th Paul Krugman, a Nobel laureate in economics, gave warning that Japan-style deflation loomed, even as Allan Meltzer, an eminent Fed historian, foresaw a repeat of 1970s inflation—both on the same page of the New York Times.

There is something to both fears. But inflation is distant and containable, while deflation is at hand and pernicious.

Dragged down by debt

Fears about deflation do not rest on the 0.4% decline in American consumer prices in the year to March. Although this is the first such annual decline since 1955, it is the transitory result of a plunge in energy prices. Excluding food and energy, core inflation is 1.8%. Rather, the worry is of persistent price declines that characterise true deflation. With unemployment nearing 9%, economic output is further below the economy’s potential than at any time since 1982. This gap is likely to widen. House prices are not part of America’s inflation index but their decline is forcing households to reduce debt (see article), which could subdue economic growth for years. As workers compete for scarce jobs and firms underbid each other for sales, wages and prices will come under pressure.



So far, expectations of inflation remain stable: that sentiment is itself a welcome bulwark against deflation. But pay freezes and wage cuts may soon change people’s minds. In one poll, more than a third of respondents said they or someone in their household had suffered a cut in pay or hours. The employment-cost index rose by just 2.1% in the year to the first quarter, the least since records began in 1982. In 2003, during the last deflation scare, total pay grew by almost 4%.


Does this matter? If prices are falling because of advancing productivity, as at the end of the 19th century, it is a sign of progress, not economic collapse. Today, though, deflation is more likely to resemble the malign 1930s sort than that earlier benign variety, because demand is weak and households and firms are burdened by debt. In deflation the nominal value of debts remains fixed even as nominal wages, prices and profits fall. Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. That undermines the financial system and deepens the recession.



From 1929 to 1933 prices fell by 27%. This time central banks are on the case. In America, Britain, Japan and Switzerland they have pushed short-term interest rates to, or close to, zero and vastly expanded their balance-sheets by buying debt. It helps, too, that the world has abandoned the monetary straitjacket of the gold standard it wore in the 1930s.



Yet this anti-deflationary zeal is precisely what alarms people like Mr Meltzer. He worries that the price of seeing off deflation is that the Fed will be unable or unwilling to reverse itself in time to prevent a resurgence of inflation.


Fair enough, but inflation is easier to put right than deflation. A central bank can raise interest rates as high as it wants to suppress inflation, but it cannot cut nominal rates below zero. Deflation robs a central bank of its ability to stimulate spending using negative real interest rates. In the worst case, rising debts and defaults depress growth, poisoning the economy by deepening deflation and pressing real interest rates higher. Central banks that have lowered rates to nearly zero are now using unconventional, quantitative tools, but their efficacy is unproven. Given the choice, erring on the side of inflation would be less catastrophic than erring on the side of deflation.



That said, there is a legitimate concern that when the time comes to raise interest rates, the Fed may hold back because of political pressure or fear of fracturing financial markets. The Fed was too slow to raise interest rates after its deflation scare in 2003. Yet that is best addressed by strengthening the Fed. Barack Obama should nominate credible, independent people to the two vacant seats on the Federal Reserve Board, and bat away suggestions that the 12 reserve-bank presidents, who are not confirmed by Congress, lose their say in monetary policy. Congress should let the Fed issue its own debt, which would give it scope to tighten monetary policy without disorderly sales of the illiquid private debt it has taken on.


Affirming the Fed’s political independence and equipping it with better tools would help the central bank combat inflation when the time comes. It would also lessen the risk that it tightens prematurely just to demonstrate its resolve.

[gfoo]

If paying $900-1000psf for a condo in balestier is irresponsible, then paying $700k for a DBSS flat would probably be deemed as criminal....

lol, you're being nice. paying 700k for a dbss is moronic, bordering on being a retard

[gfoo]

Mr gfoo is worried about hyperinflation like Dr Doom. He may be right, may be I should increase my debt level to millions b4 hyperinflation wipe me off.

aiyah, for every deflationary article there is out there, there is another on inflation. this debate will never end lah.

but i think the message we should be getting across is - if you want to buy now, by all means, but please buy right.

Don't bring a badminton racquet to a tennis court simply because tennis is the 'in-thing' but one can't afford a tennis racquet.

[cheerful]

I think we must be very careful here because there are segments of HDB dwellers that are indeed struggling to make ends meet, getting red bills stuffed in their letter boxes and having red paint and O$P$ signs splashed all over their doors and corridor...

But there are also a segment of HDB dwellers with dual incomes that have very low debt obligations, savings in the bank, sitting on capital appreciation and no immediate threat of losing their jobs. In fact if you put aside the HDB address, a lot of these folks have the same profiles as private property owners in terms of their education level, career prospects, outlook towards life etc... And these are the guys that are upgrading.

Quite rite to qualify in this manner ... not sure though how GS came up with that magic indication 5% .... guestimate?

Maybe when analysts look at numbers, they try to justify the current trends that we are witnessing, & somehow interprete the numbers in the way that sound "explainable"?

[cheerful]

aiyah, for every deflationary article there is out there, there is another on inflation. this debate will never end lah.

but i think the message we should be getting across is - if you want to buy now, by all means, but please buy right.

Don't bring a badminton racquet to a tennis court simply because tennis is the 'in-thing' but one can't afford a tennis racquet.

Yah, how to play tennis with badminton racquet??

I have read in other threads similar remarks about those xxx places selling at this price, so yyyy locations should sell like that or +/- .... it's pretty hard to define what's rite. What is affordable to oneself is of cuz important.

[jitkiat]

Quite rite to qualify in this manner ... not sure though how GS came up with that magic indication 5% .... guestimate?

Maybe when analysts look at numbers, they try to justify the current trends that we are witnessing, & somehow interprete the numbers in the way that sound "explainable"?

I know someone sold off Execute Apartment HDB in 2006 at a loss to buy condo. HDB sold at 435k, condo bought at 900k. Now, the same E.A. is 575k and the same condo is still about the same price.

[wreckwrx]

Quite rite to qualify in this manner ... not sure though how GS came up with that magic indication 5% .... guestimate?

Maybe when analysts look at numbers, they try to justify the current trends that we are witnessing, & somehow interprete the numbers in the way that sound "explainable"?

Probably tried to retrofit the numbers to match current trends....

[august]

If paying $900-1000psf for a condo in balestier is irresponsible, then paying $700k for a DBSS flat would probably be deemed as criminal....

or marymount at 900 to 1k psf lol

not criminals, just suckers

[cheerful]

I know someone sold off Execute Apartment HDB in 2006 at a loss to buy condo. HDB sold at 435k, condo bought at 900k. Now, the same E.A. is 575k and the same condo is still about the same price.

Huh? So how does this translate into 5% ... or you now on a diff topic?

[Alexis]

I'm trying to find the 5% in the Goldman report. The closest I found is this paragraph:

"...driven by HDB upgrader demand in the mass end of the market as affordability has improved. As take-up activity is maintained, we expect supply to be gradually drawn down, leading to a mild price increase of 5% in 2010E."

Jitkiat, where is the "5%" that you mentioned?

Quite rite to qualify in this manner ... not sure though how GS came up with that magic indication 5% .... guestimate?

Maybe when analysts look at numbers, they try to justify the current trends that we are witnessing, & somehow interprete the numbers in the way that sound "explainable"?

[cheerful]

Don't know leh ... that number has been quoted a few times liao & I was searching high & low for the 270K too ... maybe it's derived from some calculations?

I can only see this on page 9 of the report:

"On our estimates, the average home equity of households in owner-occupied HDB flats is S$190,000 or 2.3X annual household incomes. For 5-bedroom or bigger flats, the predominant upgrader pool, the average home equity is almost 20% higher than the average HDB home owner at S$230,000. To put this into perspective, this equity covers
about 30%-35% of the purchase price of a mass-end apartment, and is more than sufficient as a down-payment plus surplus. If only a small portion of the 270,000 units of 5-bedroom or larger HDB home owners decides to upgrade, we expect that the potential unsold supply—some 42,387 unsold units to come onstream in (2009-2013E)—would be gradually absorbed. The number of 5-bedroom or larger flats is six times the total unsold supply in the private market."

....

[jitkiat]

I'm trying to find the 5% in the Goldman report. The closest I found is this paragraph:

"...driven by HDB upgrader demand in the mass end of the market as affordability has improved. As take-up activity is maintained, we expect supply to be gradually drawn down, leading to a mild price increase of 5% in 2010E."

Jitkiat, where is the "5%" that you mentioned?

Sorry, looks like is my mistake, here is the closest:

If only a small portion of the 270,000 units of 5-bedroom
or larger HDB home owners decides to upgrade, we expect that the potential unsold
supply—some 42,387 unsold units to come onstream in (2009-2013E)—would be gradually
absorbed. The number of 5-bedroom or larger flats is six times the total unsold supply in
the private market.

=> Basically, may be about 30% of 42,387 unsold units are mass market condos affordable to HDB upgraders, which translates to about 5% of 270k.

[apple3]

Don't know leh ... that number has been quoted a few times liao & I was searching high & low for the 270K too ... maybe it's derived from some calculations?

I can only see this on page 9 of the report:

"On our estimates, the average home equity of households in owner-occupied HDB flats is S$190,000 or 2.3X annual household incomes. For 5-bedroom or bigger flats, the predominant upgrader pool, the average home equity is almost 20% higher than the average HDB home owner at S$230,000. To put this into perspective, this equity covers

about 30%-35% of the purchase price of a mass-end apartment, and is more than sufficient as a down-payment plus surplus. If only a small portion of the 270,000 units of 5-bedroom or larger HDB home owners decides to upgrade, we expect that the potential unsold supply—some 42,387 unsold units to come onstream in (2009-2013E)—would be gradually absorbed. The number of 5-bedroom or larger flats is six times the total unsold supply in the private market."

....

At last Cheerful bring back the onus.

My focus is only to illustrate to Kiat that a 5rms hdb sold do not translate to a purchase on a mass market condo.

And as per usual, Kiat pour out property guru been the top hit, goldman, index, etc and before sunset, the 2 camps engage again. How beautiful, I simply love this forum.

PS: Kiat, don't need to pass the bucket to goldman, how many times have you been talking abt your re-sale HDB thingy you know better. But on the least you apologise for your mis-fire.

[wreckwrx]

I love this forum too....

One topic can yield multitude of views with some bordering on extremism and others just plain ludricous and if you can navigate through the flame baits, there's actually quite a lot of info to be had.

[blackswan]

The question is how much worth are these reports or analysis when only a couple of months ago that Citi, CS and a few other houses are predicting massive price decline......and now that when prices are up, they change their tune in favour of price appreciation now.

So again the question.........what's the worth in this kind of research?

Goldman called for a SuperSpike in oil last year to USD$200bp, yesterday, they are calling for USD$ 85.

In just slightly below one year, they have cut their target but a massive 56%. does it mean all the fundamentals, market factor changes so drastically........

[Tony Blair]

All these analysts and fund houses are wayang party goers.Rongeng left and right depending on whims and fancies.What spews out from the anal -ysts you should treat like dung.

[blackswan]

That's my point.......

If you happen to talk to fund managers nowadays, they will tell they are mildly bullish, blar blar blar......and then they will add "other the other hand.....blar blar blar...."

So at the end, completely no direction and no conviction..............and they expect you to place your money with them.

Luckily not all are like that but really need time to sieve out the good ones........

[wreckwrx]

All these analysts and fund houses are wayang party goers.Rongeng left and right depending on whims and fancies.What spews out from the anal -ysts you should treat like dung.

Same goes for the rating agencies.... surprised that none of them got thrown into jail yet....

[blackswan]

At least they know that biz will not be as usual with Congress and European Regulators breathing down their neck........

Lets see how long will Warren Buffet hold on to his Moody's stake.

Remember one bro once mention that for an agent, they will tell you that "now is the best time becos its near to blar blar blar, the location is the best, the price is the best and the development is the best you can find in the market"

But dun really blame them as they are just doing their job to earn their dole, me just need to make sure me jump with eyes open.

[Alexis]

Sorry, looks like is my mistake, here is the closest:

If only a small portion of the 270,000 units of 5-bedroom
or larger HDB home owners decides to upgrade, we expect that the potential unsold
supply—some 42,387 unsold units to come onstream in (2009-2013E)—would be gradually
absorbed. The number of 5-bedroom or larger flats is six times the total unsold supply in
the private market.

=> Basically, may be about 30% of 42,387 unsold units are mass market condos affordable to HDB upgraders, which translates to about 5% of 270k.

And what about the other 70%?? Absorbed by condo upgraders and landed upgraders??

I know you're bullish. I'm bullish too.

But if you keep doing what you have been doing, you'll lose credibility (if you haven't already).

Moreover, we don't know how "seasoned" a property investor you are, but I can assure you there are some here who are definitely very seasoned, give very good analysis and they try to be fairly balanced in their views. At the least, they don't twist facts and misquote reports.

[cheerful]

Do some of you feel that sometimes these analysts try to explain things only on hindsight (but with a slight bent in forecasting)?

Actually in real research hor ... I thot a researcher always begins with a hypothesis statement. If a hypothesis is proven to be otherwise because of the outcome of a research, you don't change the statement (coz that's not right/ethical in certain context). Actual findings should be reported, & a different conclusion may be drawn. But in property or financial kinda research, analysts just look at the trend, then try to find 'explanations' from the numbers ... they may hit the right note at times, but also may be drawing a not-so-fair predictions ...

This above may sound irrelevant ... not exactly related to those kinda churned out by research houses specialising in properties, stocks, etc. etc. ... but anyway, wat the heck ... this forum already got some irrelevant topics creeping in ... giving us all broader perspectives liao mah

[jitkiat]

And what about the other 70%??

I know you're bullish. I'm bullish too.

But if you keep doing what you have been doing, you'll lose credibility (if you haven't already).

Moreover, we don't know how "seasoned" a property investor you are, but I can assure you there are some here who are definitely very seasoned, give very good analysis and they try to be fairly balanced in their views.

I am a seasoned stock trader but not a seasoned property investor but I believe both stock trading and property investment share common techniques and insight. Honestly speaking, so far I only read about mr apple3's analysis and balanced view and I have not seen anybody else contributed anything even close to the Goldman Sach report. Those who already bought will say "buy buy buy", those who are desperate to buy will just quote all kind of negative news to try to talk down the market. So, if you have better interpretation & analysis about the figures provided by GS report, do share in this forum.

[Localite]

Market is going up up up. Many people are in denial....but at some point they will jump into the bandwagon. While there is varying sentiment whether the economy will recover as a U or V, there is agreement that it will recover just soon. So does it make sense to wait or buy. Many buyers are adopting a buy now attitude and sellers are withdrawing their sale or raising their prices.

[HP65]

Market is going up up up. Many people are in denial....but at some point they will jump into the bandwagon. While there is varying sentiment whether the economy will recover as a U or V, there is agreement that it will recover just soon. So does it make sense to wait or buy. Many buyers are adopting a buy now attitude and sellers are withdrawing their sale or raising their prices.

I actually hope more sellers will withdraw their units, especially the better units so that I will be able to buy these better units at a lower price next year.

I maintain this rally is good as it will weed out competition.

[novel]

Property is still a good hedge against inflation in Singapore. This is not my own conclusion but according to research from NUS. You can check what happen to property prices in Singapore during the 1st and 2nd oil shock back in 1973/74 and 1980/81. But I agree with you that metal & commodities are BETTER but not every Singaporean knows how to trade that.

Biz Times:

HDB upgraders have their say in muted market

They comprised more than half of those who bought private homes in Q1
By KALPANA RASHIWALA

(SINGAPORE) The first quarter of this year saw a major trend reversal. HDB upgraders bought more private homes than those already living in private properties.
Fifty-six per cent of caveats for private home purchases in Q1 were lodged by buyers with HDB addresses, up from a 43 per cent share in the previous quarter. The last time this figure breached 50 per cent was in Q3 2002, when it was 52 per cent.
Market watchers note that the pick-up in HDB upgraders’ share in Q1 came amidst the launch of mass-market projects like Caspian near Jurong Lake and Double Bay Residences in Simei as well as the relaunch of The Quartz in Buangkok. Such entry-level 99-year leasehold condos cater to HDB upgraders.
Property consultancy DTZ highlighted this trend in its analysis of caveats from URA Realis as at May 29. The reason behind this could be the pent-up demand from this segment of buyers who had been priced out of the private residential property market during the bull run in 2007.
Another important factor was the narrowing price gap between public and private homes, which resulted in private properties becoming increasingly within reach of HDB upgraders. ‘With cash proceeds from the sale of existing HDB flats, the upgrader needs to borrow only about 50-60 per cent of the value of the new private property,’ estimates DTZ’s head of SEA research Chua Chor Hoon.
Knight Frank executive director (residential) Peter Ow also credited the rise in proportion of HDB upgraders to developers offering a combination of attractive pricing and interest absorption schemes (IAS) for projects. ‘IAS helps tide these buyers until their new condo is completed and when they can sell their existing HDB flat,’ he explained.
‘At Double Bay, which we marketed, we saw many buyers in their 40s currently living in HDB flats nearby,’ Mr Ow added.
DTZ’s analysis showed that the highest proportion of buying (in URA Realis’s 14-year caveats database) by HDB upgraders was in Q2 2002, at 81 per cent.
Generally, HDB upgraders’ share of private home purchases tends to be higher when private residential prices are falling and come within their reach. And when property prices are shooting up, their share of purchases ebbs.
During the 1998 Asian Crisis, for instance, HDB upgraders’ share hovered between 51 and 65 per cent per quarter, against a much lower share of 33-40 per cent in 1995 when prices were spiralling up.
Again, during the recent property bull run in 2007, their share was pretty low at 21-23 per cent, before starting to rise again last year when the property slump began.
DTZ also compared some buying preferences of HDB dwellers and private property owners who bought private homes in Q1. Some 88 per cent of total purchases by those with HDB addresses were under $1 million. In contrast, 40 per cent of buyers with private addresses invested in homes that cost $1 million and above. HDB upgraders also bought mostly smaller apartments.
Some 92 per cent of private homes that HDB dwellers bought in Q1 were outside prime districts 9, 10 and 11. And for those HDB dwellers who did pick up private properties in prime districts, 68 per cent were for units below 1,000 sq ft. Based on caveats lodged in Q1, the most popular projects for those with HDB addresses include The Caspian, The Quartz, Alexis and Double Bay Residences.
HDB dwellers accounted for 57 per cent of the total 227 caveats lodged for Alexis and for 75 per cent of the total 458 caveats for Caspian.
DTZ’s Ms Chua reckons HDB dwellers’ share of private home purchases may ease in Q2, when sales activity permeated to the mid/upper-mid segments where more buyers have private addresses.
Knight Frank’s Mr Ow said the proportion of HDB upgrader buying will vary depending on the profile of property launches or relaunches in the months ahead.

BUt the real picture if you see the chart, overall property sales drop compared to the previous 3 years.... relying on HDB upgraders will not boost up property market