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iProperty Asia Property Market Sentiment Report H2 2016 is Anything But

Always – Be sceptical. Be suspicious. Be different.

Avoid mob behaviour.

Adopt a strong independent thinking and fight the urge to simply follow the actions and thoughts of others.

After 15 years to this very day, these investment philosophies have helped create an impassable shield for my investments; defending against relentless onslaughts from heavy weights of the real estate industry who get obscenely rich from the common man.

As they say, those who control the markets (mob) rule. If you are a small player but sharp, somehow you’ll profit. The rest just get by and hope to survive it. Most are swallowed regardless.

There’s a Chinese saying, “当局者迷, 旁观者清.”(dāng jú zhě mí, páng guān zhě qīng ) –

“The spectators see more of the game than the players.

This proverb points out that a person involved in a matter usually does not have a comprehensive overview of it due to too much concentration on gains and losses, while the onlookers, who have a calmer and more objective attitude, have a better grasp of what is going on.”

Hidden Sales Agenda?

iProperty Group Ltd, a leading real estate portal network in Asia, has released its Asia Property Market Sentiment Report H2 2016 (APMSR H2 2016).

The 200 page report covers respondent’s sentiments for property markets in Singapore, Malaysia and Hong Kong.

I read the iProperty market sentiment report on Singapore many times with much interest and scepticism as it reek suspicions of a cleverly hidden sales agenda by the industry.

It’s not surprising to say the sentiment report may just be another “yellow journalism”.

  • Sponsored by heavy weights and profit-vested interests of the industry to boost fledging real estate sales;

  • To achieve the industry’s personal agendas, bias dogmas are spread to masses for mob behaviour and social conformity.

What caught my frustrations?

  • The “sentiments” revealed by the survey have somehow underwent “selective choice-pickings” to readers in a way to sensualise private real estate ownership but ignore “risk” and “hard-realities”.

OR/AND

  • The “sentiments” indeed represent what potential buyers are thinking. If this is so, it’s saddening to say respondents are generally investment-foolish and misinformed on what’s true and what’s not.

 One Major Incongruent of “Sentiment” Data (Singapore):

  • …. while 69% of respondents own the property they live in, with the mortgage fully paid.

  • Majority of respondents (77%) have between 1 and 5 years left for their loan repayments.

  • 79% live in “private” residences.

  • 54% of respondents reside in prime district of D10.

The first segment on the demography report raises the largest questions to any wise readers.

Most people getting into private real estate are not coming from a business background but from a 60-hour 9-to-9 collect-a-pay-check-crowd.

From the survey, a “60-hour 9-to-9 collect-a-pay-check-crowd” seem so able to afford an expensive property in a prime district and yet … have their mortgage fully paid in such short periods.

It went on to suggest “Most Singaporean respondents have been residing in their current abode for 6–10 years (70%)”, and a majority of them have “very little years left on their loan repayments”.

These claims seem a bit too far fetch in logical reasoning and financial sense.

From the survey data, we can deduce respondents have very likely bought their properties between periods 2006 – 2010.

The relatively young age group for 55% of respondents (41-45 years old) raises further questions - how it is financially possible for any relatively young group of property buyers (55%) with only middle-household annual incomes between $140,000 – $180,000 to afford expensive prime properties much less clear off big monthly mortgages with short loan tenures?

Buyers who own properties in prime areas have net-worth (excluding primary residence) in excess of $5 million and up. They represent business owners and high-level CEOs.

And therefore really rich prime property owners are NOT your 60-hour-9-to-9 collect-your pay-check-crowd labouring in middle management which 57% of respondents are in.

The respondent’s marginal annual six-figure household income suggest further incongruences. Buying an expensive prime property on such a paycheck only proves respondents’ reckless spending than financial prudence.

If a young buyer in his/her twenties bought into public housing direct from HDB in the low market of the mid 2000s, we can believe he or she will very likely have almost fully paid home by now. Buyers of these flats will be in the age range of their late thirties to mid-forties today.

However, the survey clearly states “only 15% respondents own public housing”.

If we look back to the low property market-cycle between periods 2003 to 2006, many properties including public housing can be bought on the cheap.

Before the 2007 peak, a freehold private property fetch as low as $425,000 in 2003.  In early 2006, a brand new 3-bedroom property can be bought in the low price range of $650,000 to $700,000. In 2005, $385,000 can buy you a re-sale 5-room HDB flat in Bishan.

Many of these buyers will have low remaining mortgage repayments today.  But low mortgage repayments do not necessarily equate to a less mortgage tenure balance.

Without major financial assistance from families, it’s nearly impossible for younger buyers to consider taking on a short 10-15 years of mortgage loan tenure at the beginning of their careers coupled with starting family commitments. Much less for an expensive prime property.

There’re further evidences to support this from period 2003 to 2006:

  1. The government roll out red carpets to entice buyers to return to the sluggish property market. One red carpet is the 90% loan-to-value and another is the only-interest -loan repayments.

  2. Banks are more relaxed on lending rules unlike today.

  3. The economy was in recession. Many young buyers in their late twenties to thirties then have hardly enough cash for a large down payment given starting life commitments and job insecurity.

  4. Homeowners will see it unwise to plough a huge amount of limited cash resources into an illiquid asset.

No matter how inexpensive property prices are between the periods 2003-2006, newer properties in prime locations still command price premiums of $1.5 million and more.

If the property was bought at $1.5 million dollars with a short loan tenure of 15 years, it will cost a buyer a hefty $100,000 in annual outgoing loan repayments.

If it was a 50% down-payment, it will cost a buyer $750,000 in upfront down payment alone.

If buyers bought the property in the mid-2000s, they were barely out of their early 30s and this period was in economic recession.

Let’s look at the other possibility. A respondent/buyer may have bought the property in 2010. By 2010, property prices have risen rapidly from the mid-2000s. A D10 property cost $2 million to $3 million and upwards.

This makes the claims “1-5 years left on loan repayments” and “fully-paid mortgage” even more ambiguous and absurd.

The Gordon Gecko “Greed is Good” attitude:

  • A large 81% of respondents look to purchase their next property in the prime areas of D9 and D10.

  • 85% of respondents look forward to capital growth prospects.

  • 59% of respondents support removal of ABSDs for locals.

Purchase of prime properties - If your aspiration is making money on property inflation, then it’s not a very noble aspiration.

Removal of ABSD for locals and foreigners – We have no time for moaners lucky enough to have access to rich family wealth or an inheritance or as high-income earners – to own homes worth upwards of $2million and bellyache as if the government’s imposed property taxes is the 21st Century equivalent of burning Robin Hood at the stake for robbing the rich to give back to the poor.

15 inexplicable reasons for respondents/survey’s ambiguity and incongruence:

I may be shooting blanks. But I am personally highly dubious about every of the data churned out by this survey.

1. Either the survey or/and respondents have woven a fictitious account of real mortgage repayment loan balance.

2. The survey is no more than another sales propaganda churned by the industry to push for more sales in the current market slowdown.

3. With fledging sales, tight cooling measures and a decline of foreigners buying into District 9, 10 & 11, the industry deploys alternative marketing tactics to target “rising upper-middle classes and their lofty aspirations” to fill in sales gaps.

4. Ghost-respondents are “paid” to do survey.

5. Respondents maybe no more than “Members of the lucky Sperm Club” with access to rich “Mom’s & Dad’s Bank.

This “lottery-birth” group certainly do not represent the entire market in general.

6. From claims of “fully-paid mortgages” in such short time, respondents very likely own D10 prime properties through an inheritance. This again does not truly represent the market in general.

7. Respondents are “rich by appearances” and make reckless financial/investment decisions.

8. The survey data presented to public are not 100% factual. Vested interests lie behind manipulations of numbers and facts to hook unwitting readers.

9. The survey’s editors fail to double-check respondents’ claims to match actual ground realities before releasing findings to public.

10. “Mortgage-fully-paid”/ “1-5 years left on loan repayments” is no more than a marketing ploy to sensualise private real estate as “The” must-get-retirement asset.

11. Claims that a majority of “ground sentiments” (59%) supported to have ABSD removed for locals seem a tad too convenient in the lieu of the industry’s constant push for its removal.

12. The survey claims a majority of “sentiments” prefer property portals, magazines, real estate agents and property seminars as “top preferred source of info”.

If the sentiments are true, it is shocking to hear these buyers have very limited independent thinking.The same age-old misinformation often dished out to unknowing masses that property is a long-term viable investment and safer option than other investment.

13. All investments consist of two main components: risk and reward.

But all real estate investment “teachings” that I know of consist of only one component: reward.

Where’s the “Risk”?

14. “93% of respondents consider to invest in overseas property.” Why are we not surprise this sentiment appears so conveniently in the survey?

It is the profit interest of the industry to push for overseas sales with the recent dearth of local sales due to tight local cooling measures.

Despite the many inherent dangers and complexities of investing in foreign markets, overseas property deals are pushed and marketed to the “9-to-9 and 9-to-6 collect your pay-check crowd” despite them having little or no business background with zero local knowledge and connections.

15. A marketing agenda for the 3 popular overseas property markets.

In ranking preference according to the majority of sentiments are Melbourne Australia (99%), Iskandar Malaysia (90%) and United Kingdom (86%)

If indeed many buyers have invincible ignorance to put their feet in these overly-common markets, I strongly advise everyone else to stay out of them.

Always Read Between the Lines

Readers may think I’m overly suspicions and sceptical.

However, the multi-billion dollar real estate industry is a notoriously avaricious industry and a Darwinian organisation gone mad.

Only the fittest survive.

My survival to this very day cannot be taken easily for granted without being cautious and sceptical and suspicious of vested parties with personal agendas.

There’s a lot of misinformation. Now, with social media, there’s even more. I think real estate ownership is both great and terrible. It’s great that people get wealthy if the graph is up. But it can mess up regular people’s finances terribly if the graph go south and they often do.

There are some popular real estate trends people are getting hurt buying or investing. Some buyers are investing into certain property and look smart doing it because they are one in 10,000 [people] who are not predisposed to losing money buying this thing. Not smart, but with enough luck, some people could just walk away from that sort of deals.

The other people, though (9,999 people), they’re not any financially wealthier because of it since they realised (or may not realise) they are the cows who got milked and skinned.

Whether the “sentiments” of the report are true or not, I have one key advice for anyone seeking investment profitability - Besides having an extensive knowledge of the investment itself, have the gumption to do the exact opposite what majority of the market does.

Here’s another Chinese proverb, 前怕狼, 后怕虎 (qián pà láng,hòu pà hǔ) - Fear the wolf in front and the tiger behind.

The goal is to read between the lines. When you are desperate to see results, you are vulnerable. When you are in such state “they” can get to you and take advantage. You have to take responsibility, realize and protect your hard earned money.

Nobody is going to do that for you.

 

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To your investment success,

 


About the Author

Gerald Tay Author, entrepreneur, professional investor and loving father, runs crei-academy.com with a tongue-in-cheek approach to property investment - and himself. He is widely regarded in the industry as 'The Common-Sense' Investor. Gerald writes with passion and straight-forwardness, disclaiming wild claims and impractical investment strategies behind lies and ignorance pervasive in the property industry for vested interests. His well-known statement, "All I did is to value my investments with science, logic and common sense.'

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