Property Market in Singapore – June 2016

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In Singapore, real estate is an asset class that every investor simply cannot ignore. Singaporeans love property. Period.

The reasons are obvious: small island with limited land, open workforce with many expats supporting a healthy rental market, resilient economy that’s plugged into the word economy, relatively rich populace compared to our immediate neighbors, legendary stories of those who have made their fortunes in property.

Property currently makes up a substantial part, albeit a separate part, of my overall portfolio. I currently own 2 units – a public HDB flat as well as a private condo. I have kept my property debt at a very manageable level: the HDB is fully paid for, while the condo monthly instalment is very very comfortable. I always think that most people (based on anecdotal evidence), tend to put too much of their personal investable equity into their 1st house.

That’s understandable. Afterall, your first house is special. There’s a lot of emotion attached to buying your first house. Understandable, but IMO, not necessarily wise. If you caught the start of a property bubble, great. But if you caught the peak, and having the bulk of your investable equity locked in a supposed investment, that has a compounded negative effect that’s there even many years down the road.

On top of that, most people stay in their first house. That means it’s hardly considered an investment. You don’t get rent. That’s kinda like buying a company with zero cashflow and zero profits and hoping the next guy comes along to offer to buy the company at a higher price than yourself. The “Greater Fool” theory of investing.

But that’s another story altogether.

I’m currently, as I believe many others are, waiting and getting primed to buy another private property for investment. So the key question is, is it time yet?

To answer this question, I believe one has to look at the global macro picture. Afterall, major changes in our Sg property market has inevitably been due to global conditions. This chart says it all:

48) Singapore PPI.jpg

1997: Asian financial crisis

2001: September 11th terrorist attacks

2008: Great financial crisis

As evidenced above, since the mid 1980s, our local property market has experienced 3 major corrections. The most recent gentle slide, in comparison, has been really mild.

Why the difference? The main reason is that the previous 3 crashes are caused by global events. They are much greater in severity, and the tools that the government has to mitigate the crash is limited in it’s efficacy.

Afterall, we are plugged into the global economy. A worldwide or regionwide crisis will hit our local property market heavily, regardless of any supportive measures.

In contrast, the recent slide since 2013, has been self imposed. Even after 11 consecutive quarters of slides, we are still substantially higher than the previous peak in 2007/08.

The best period to capitalize would have been the recent steep drop in 2008. This is because worldwide, policy makers responded with aggressive monetary stimulus, resulting in an equally steep rise, all in a very short period of time.

I wished I capitalized on this. Everyone says property is all about location location location.

I beg to differ.

Property is all about timing timing timing.

Policymakers all over the world are determined to keep printing money to prop up economies that’d otherwise tank. All this liquidity is flowing down to equities, property, bonds and anything investible. Hence the dropping yields everywhere.

How does this end? I have no idea. And when I have no idea, I usually try to find similar historical situations. They may not end in exactly the same way, but history has a way of repeating itself.

The problem is, there is no precedent. US debt has ballooned to all time highs. Never in the history of mankind has US debt been higher.

If you take away the drug supply for a drug addict, he suffers from withdrawal symptoms. If you give him his drug supply, he constantly needs higher and higher dosages to maintain the same high. But what if you could actually really afford to give him higher and higher and higher doses? When does it end? Assuming the drug supply is unlimited, and the drug has no way of directly killing the addict, this can go on and on and on till infinity.

Of course, it does mean that at some stage, the drug addict would have to have an impossibly large dosage to maintain the high. Similarly, if this keeps up, a loaf of bread one day may cost $10k. Hypothetically, and an exaggeration of course.

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IMHO, the risks of entering the property market right now outweigh the potential benefits. Sure if money printing continues, the inflationary pressures are there. But the government has already indicated it’s determination to limit the inflow of capital into our property sector. It’s not wise to fight against policy.

The potential downside though, could be enormous. A GFC of the previous magnitudes would make for a very painful lesson if one invests right before it.

Don’t forget property is a leveraged investment. Unless you are paying in full in cash.

I’m still patiently sitting on the sidelines. As an added precaution, any property that I’d potentially be interested in, must be:

  1. Limited to my field of expertise. This means it’s likely to be a residential property only, and within the CCR of D9,10 and 11. I just find it easier to be very knowledgeable about a smaller area, rather than having more options.
  2. Distressed assets. Very distressed assets. Sellers-who-need-committed-buyers-within-a-fortnight type of sales.
  3. Unique. The property must have a certain unique point that appeals to the emotion. A unique feature, a one of a kind view or simply one of the few orientations or apartment types within the development. (eg. a 2br unit in a development with mostly 3brs)
  4. Comparatively low maintenance. I think of a property investment the same way I would for investing in a company. The rent would be the cashflow, and the initial capital outlay would be what I invest in the company, with the bank loan as leverage. So in many ways, the assessment is similar to a leveraged buyout of a company. Maintenance, on the other hand, is a recurring cost. It’s necessary, but it adds to the strength of the tide that you are swimming against. Maintenance that is moderately high even, makes it a strict no no in my opinion.
  5. Prepare a larger initial downpayment. Why stick to a 20% downpayment? For safety, I’d be prepared to make an even larger initial downpayment instead of taking on more loans. The larger the capital sum needed for the purchase, the larger the initial downpayment should be. It’s better to self assess, and set a reasonable sum, as opposed to letting the rules dictate what you should do.

I kinda failed to capitalize on the previous downturn. It’d be a real shame to miss the next one.




  1. Hi Thumbtack Investor,

    Interesting read to see your thoughts. I hear a lot of murmurs that the property bottom is in and people ought to get back into the market. Might be because of the 50% sales in the recent Gem Residences launch. However, it doesn’t seem like it to me.

    I’m with you that it’s more about timing rather than location. A rising tide lifts all boats, as does a property boom to almost all districts on our red dot. I too am waiting on the sidelines, but to purchase my 1st property home. I’m hoping for a low price so I can lock in a low housing expense, rather than looking at it for future capital gains (which would also be likely if the property is bought cheap enough).

    Do you have any particular catalysts in mind that would trigger the property market to decline? Also, do you have any other things that you are looking at to help you mark the property bottom when it is in? Finally, do you have any forecasts as to when you think a buying opportunity would present itself?



    1. Hi GMGH, for the 1st property home, I’m assuming you’ll be staying in it. In which case, unless you are someone with substantial means, I’d suggest buying something that is very very well within your means, as I mentioned in the post.
      IMHO, the trend in the past 1-2 yrs has saw relatively strong demand in the mid-tier or mass market segment. The main reason is the relatively palatable quantum size, anything below $1.5mil still has demand as the bulk of the market can afford that. It is my opinion that it would be a mistake, or at least not an ideal investment, to go along with the crowd. GEM residences is definitely within this segment. So I’d be either not buying at all, or be looking at the higher end segments where the quantum is larger (>$1.5mil). The data shows that this segment has suffered the most.
      On a bigger scale, I think it is very hard to find any particular catalysts and try to predict whether it’ll fall further, or try to catch the absolute bottom. It is even harder than trying to catch the bottom of a company’s share price, as at least in that instance, there are financials to look at.
      Instead, I think for property, one has to look at global macro conditions. The last few busts are all related to global macro factors as mentioned, and there’s nothing the gov can really do except to have measures to mitigate to a certain extent. So the question is what are the global macro events? I’d be the 1st to admit that I’m no expert on this, but IMO the situation now is such that the risks far outweigh the potential +Ves. Which of these are most likely, and of these 3 situations, which would have the most detrimental consequences if you are caught on the wrong side:
      1) Policy makers have room for money printing, continues to print money for several yrs to come without a bust, and the property market continues to shoot up? (don’t forget the gov will further try to cool if this situation materialises)
      2) The market trends flat. prices don’t go up or down too much for a long time. There’s such a precedent for this in Sg market
      3) The next GFC and markets tank hard.
      I’d argue that 3) is a real possibility with the current conditions.
      If one is buying for own stay though, you may not have the luxury of waiting as opposed to investing. So the only option is to be very conservative and buy something that is very comfortable.
      Try to limit your emotions when buying.
      On a personal note, I bought and stayed in a HDB for several yrs even though I could (and wanted!) afford private. The prices have more than doubled since then, even after accounting for the recent slide.


      1. Wow, thanks for the thoughtful and detailed reply!

        Yup, it will be for my own stay. I plan on getting a 1 bedder which would be able to suit me well, unless I get married and start a family. I feel that you are right, the lower quantum projects still have demand and volume, but the real area for potential juicy deals are in the higher segments! However, that’s a bit out of my league now, haha!

        I’m actually also anticipating a global macro issue cropping up soon. Fortunately, I am in not hurry to purchase for my own stay yet. I don’t see as much pain in the markets as I would hope for, so it’s not tempting at all yet.

        I’m well below 35 and not married, so I can’t get a HDB, although I would very much like it! Mmm, I shall continue to monitor the property markets. Thanks for sharing!


        1. If you’re well below 35, not married, and have no real rush to buy, then just wait for a global macro event to wipe out the demand.
          It’ll come.
          Even if it takes 2 years, the quantum drop would be well worth the wait.
          IMHO though, I don’t think the 1 bedders are good buys. Oxley Holdings made a killing selling these shoebox apartments but now the mini bubble has burst. The shoebox apartments were attractive because of the low quantum, relatively high yield. However the tenants who want these apartments are no longer around in the same numbers.


      2. Yeah, I’m waiting and trying to hoard cash! Upsides in the market seem limited and less likely compared to downside risks now.

        Actually, the problems in the shoebox segment as well as low quantum are the 2 things that seem attractive to me. I’m hoping I can get a steal from fed-up investors who have realized that the rental demand for such units are bad!

        If not a 1 bedder though, what would you be thinking about?


        1. well IMHO, 1stly, a “steal” in this current market may not be a steal if you zoom out and look at the big picture.
          So my view is that the macro picture is such that it’s still not remotely near an ideal time to buy anything, 1 bedder or not.
          2ndly,and more importantly, the thing about property units is such that after a bubble, an oversupply takes a long time to adjust. This is because many of these 1 bedders were bought as investments. There was no real demand i.e. there werent many singles or couples (who do not plan on having a family soon) lining up to buy these units. Many ppl were buying because the low quantum + rental yield>interest rate, and that is a way to leverage (via bank loans) and your real ROI (considering the leverage) would be pretty attractive. And that’s not including capital gains.
          But unfortunately, when these conditions turn, no more capital gains and the interest rates are rising fast, suddenly there is no more demand from investors. The units can change hands at consistently lower prices, and with different owners, but they don’t disappear. You had X number of shoeboxes and they are not going to fulfill the needs of a family of 3 or more. This X number is out there, and without investors, they are all waiting for genuine ppl to stay/rent. Your primary demand (if investors are gone) are the genuine singles, expats etc. The units do not go away, but the demand does.
          You may try to bottom fish in the shoebox segment, but IMHO, it is hard to see good capital gains unless:
          1) The investors return. Aka capital gains, house prices increase
          2) Sudden increase of demand. Aka suddenly there are several singles, working expats who genuinely want a shoebox to stay in.
          Both of which I think are unlikely scenarios in the near to mid term.
          I’d still stay away in the shoebox segment.
          Again, as I said before in some of my posts, I’d rather invest knowing there’s a certain forseeable demand, or if a particular business is generating real CF, rather than rely on someone coming along to pay a higher price than me. (the greater fool theory)


    2. Yeah, I agree with you fully about the X number of shoeboxes out there that isn’t just going to disappear and how the real demand is much much lower than what shoebox investors perceive. It wouldn’t be a stretch to conclude that prices of such units ought to be much lower. On the back on property cooling measures, it really forces out real demand for shoebox units if they are being bought for own use. Even overlooking the silly pricing, the factors needed for shoeboxes to look good as an investment today are just not there in my opinion.

      I feel that some shoebox projects still have downsides of 20-40% from current prices even after already somewhat coming off its highs. I was hoping higher interest rates could force investors to let go with the treat of higher interest repayments and lower or even negative ROI… if they even have a tenant. That’s just wishful thinking on my part.

      If you could hazard a guess, how much would you think a MM shoebox that has corrected should command in psf? Or perhaps, the price that would become attractive enough for you to give it a second thought given the cheaper price? Since you’re familiar with property, I would like to see what kind of pricing would make a more experienced player become interested. Then I would know when I might have to start jostling with the bigger players, haha!


      1. Hi GMGH, whats a “MM shoebox”?
        It is hard to fix an exact psf without stating a particular development as different developments would have different psf, aside from all the other factors such as the property climate, the location, the furnishings and condition done up by the previous owner, the urgency of the seller etc.
        I would like to emphasize that I’m not the “experienced player” that you think I am. Like I said, I have only 2 properties, 1 being a HDB. In fact, I find it hard to analyse properties as they don’t have audited “financial statements” like companies.
        So in this regard, aside from the strategies I wrote in the post (eg. limiting to a certain D9,10,11), I think the best way is to look at the past data. In other words, the analysis has to be retrospective. (unless you can predict the next GFC)
        What I’d do is to find the last property crash, which is in the late 2007 – 2008 region, and compare the selling psf to previous transactions during that period of time. You’d find that most developements are still trading at psfs much higher than in 2008, so options are limited currently. I’d only consider the unit if the psf reaches that of previous transactions (for the same floor, orientation etc) as in 2008. In this way, you also have a natural margin of safety (MOS) from the inflationary environment.
        I’d also be looking at the bargain bins to bottom fish. There has been quite a few mortgagee sales, and a few real “firesales”. Esp in the shoebox segment where some investors could’ve been tempted by the ROI and bought aggressively in recent years.
        Again, I’d just reiterate that IMO, global macro conditions are still the key, and I am generally pessimistic. Which is why I’d still wait.
        On a related note, for couples who intend to use property for investment, I’d suggest buying the 1st property under a single person’s name. With the ABSD etc, that frees up the 2nd person to buy another unit. So that’s something you might want to consider, just in case you are thinking of buying together with your other half


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