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It’s been a while since my last post.
Today, let’s talk about this real estate report from Property Guru.
I almost vomited out my breakfast after reading how these self-proclaimed authorities give “golden advice” on property cooling measures removal for the general public.
I hope you reading it after, will not cleanse your breakfast/lunch/dinner contents from your stomach.
Will it be the next Property Boom or will Skynet rule the world?
Probably Skynet… with it’s armada of Terminator Robots!
I’m just kidding!
Email From Reader:
As you know, I’m a guest contributor for Mr. Propwise (Singapore Property Weekly). The reader emailed Mr. Propwise on a question regarding one of my original posts in March 2016, “What Is Going To Happen To The Property Market In Singapore?”
The edited post re-appeared on Mr. Propwise and Yahoo News as, “Is it Time to Jump in to the Singapore Property Market?”
In a recent speech at the Committee of Supply debate, Minister for National Development Lawrence Wong said,
“I think we should take comfort that we are moving forward from a position of strength. Despite our limitations of size, we are still far from saturation. There are still many possibilities for urban development and transformation.”
The government has already stated their stand for land use. And it is not the first by any means. Land use for our little urban landscape has been dictated and planned out years before in the White Population Paper and URA Concept/Master Plan – if you have been reading them.
In short, there’re no land shortage on our tiny island. Enough land has been set aside beyond 2030 for residential, commercial, industrial, military, parks and greenery, and more important land usage for greater economic development.
I’ve always cautioned about believing in the dangerous fallacy property is always a good long term investment because of “limited land”.
You all know me from my massive posts. If you want sweet words, look elsewhere. I have no silver tongue. I have humility and fear from past experiences and background. My years in the trenches…
Size doesn’t always matter — and I’m here to prove it.
I’m most-well known for my massive blog posts, but today I want to do something different.
Today, I wanted to go short.
I’ve been investing in real estate for 15 years now, and these are 10 most impactful lessons I’ve learned, succinctly summed up in ten quick sentences (with a few semi-colons included because I’m a cheater).
Everything I’ve Learned About Property Investing in 10 Powerful Sentences
Buyers who are tempted to buy or speculate prime properties on the illusion it’s discounted today should read this first.
Read even if you’re not considering prime properties. The context is important for any real estate considerations.
Some “experts” are suggesting maybe now is a good time to look into prime properties. Those who said so are living in the past. The others are just ignoramus.
Any of them actually grew up or owned properties in these expensive areas during the early 1980s to 1990s Singapore? Have they witnessed the locality’s past developments and infrastructure?
I kept getting the sense that I was reading some horrible episode of Scooby-Doo where the villain prolongs his victory speech and reveals his methods over and over, only to be foiled by revelation.
There are many so-called experts in the real estate world from “Get-Rich-Gurus” to real estate agents. Many professionals in the real estate field have vast knowledge of the industry but have NOT the subtlest idea how to invest in real estate.
The fictional movies of James Bond is familiar with many – a character made up by a FAILED British spy. The movies just weren’t the real world.
And similar analogy is market predictions versus real world investing.
We know property prices have gone down, albeit an 8% dip since the peak of 2013.
There’re plenty of arguments from “experts” (mostly against) if the Singapore Property Market will indeed face another round of severe price correction – low price levels as seen in the 1997 Asian Financial Crisis, the economic stagnation period between 2002 and 2005 and 2008 Global Financial Crisis.
The arguments suggest prospective buyers who are eagerly waiting on the side-lines are looking for answers in the wrong place.
Some arguments have the audacity to suggest buyers, instead of waiting for the “impossible” scenario of a bloody market, they should take advantage of (somewhat) “discounted” prices by developers who are desperately clearing stock today.
In a far, far away land, there’s a town called Lemon Tree…
In Lemon Tree, you open a stall selling lemons.
Your cost of each lemon is $1. If you sell a whole lemon for $1.50, your gross revenue is $1.50 and gross profit is $0.50 per lemon. Nothing to boast about.
You wisely decide there’ll be better profits selling by the slice than a whole lemon. Therefore, you slice the lemons into 6 slices and sell each slice for $0.50 each.
This has effectively increase your gross revenue from $1.50 to $3. Your gross profit has gone up from $0.50 to $2. Now, we’re talking…
Later, you realise the lemon can be sliced further into 10 slices instead of six and if you lower the selling price to $0.40 per slice, you’ll make $4 revenue and $3 profit. Sounds “WOW!”
In each instance of price inflation people paid exorbitant amounts for lemon and lemon slices that shouldn’t have been worth anything like the going price.
The cost of a lemon rose from $1 to $1.50. This time, 10 lemon slices will give a lower profit of $2.50 instead of $3 the last time.
There were lesser buyers to sell to and lesser profit margins to be made.
You have to do creative selling to boost flagging profits.
Instead of 10 slices, you decide to slice the lemon into 20 slices and sell at a lower selling price of $0.30 per slice to entice more buyers. Doing this will give $6 revenue and a gross profit of $4.50. “A business sage!”
For buyers, the quantum price of a lemon slice may have gone down 40% (from $0.50 to $0.30) but the size of each lemon slice has also shrunk 70%!
It’s no longer a lemon slice. It’s “bits & pieces”… of a lemon.
Offer 8% discounts to sweeten the deal. Create a ton of hype marketing for your lemon slice and watch the buyers flow in!
A $0.30 lemon slice is “sweeten” to $0.276. Your gross revenue is $5.52 with a gross profit of $4.02 for 20 slices. Hey look! More profitable than selling 10 slices at $0.40 each!
Ever visited the lemon markets where you see chickens and chickens only pecking the ground and lemons are as plenty as chicken eggs?
For Lemon Tree in bad times, a BIG slice of lemon can be bought for as low as $0.20 each!
Simply put, prices today in Lemon Tree are set artificially low for a bigger mass market of “financially-impaired” lemonade drinkers eager to own an exclusive piece of lemon slice.
It’s a perfect example of how the world and the economy operate. The fools work, slave and buy garbage, while the so-called winners enjoy “the good life”.
About two years ago, on this very blog, I began to pound the table a property market correction was imminent in Singapore. All the signs were there- frothy valuations, (Price – Rent ratio greater than 24) record low interest rates, a sputtering economy, as well as various property segments like industrial and commercial that are, by all metrics, ridiculously overvalued.
There are more listings out there, and more buyers are waiting until they make the plunge into private home ownership. The market has transformed from a seller’s market to more of a buyer’s market, but we haven’t seen much price declines yet. The latest figures show only 8% fall in the private residential market since the peak of 2013. The bottom line is the property market isn’t doing too badly.