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Six Reasons It’s STILL A Terrible Time to Buy Property

“My name is Elmer J. Fudd, Millionaire, I own a mansion and a yacht.”

 

1. Because property prices are still dangerously high for mass market homes.

(Outside Central Region/OCR) Taking the base point (100) at Q1 2009, prices in the CCR have grown +30 percent, +42 percent in the RCR, and +60 percent in the OCR.

Since the peak of Q3 2013, prices of mass market homes fell a measly 5.5 percent. Properties in the OCR are still overpriced. Mass-market home prices haven’t dropped as much as those for luxury housing. Rental incomes are falling and vacancy rates are rising.  A huge oversupply is casting dark clouds on the horizon. Current property prices are ridiculously beyond good rental fundamentals.

The bottom is still far from sight even though vested powers claim it will happen in the next 3 to 6 months. If you believe certain words, you believe their hidden arguments. When you believe something is right or wrong, true or false, you believe the assumptions in the words which express the arguments. Such assumptions are often full of holes, but remain most precious to the convinced.

While new home sales have dropped significantly, prices have stayed relatively high due to developers’ holding power.

That said, there is still room for further decline of property prices in the OCR. Investment opportunities to arise over the next couple of years when prices decline further.

My last purchase of Singapore residential property was in mid-2012 and then the policies came in. I won’t be re-entering the Singapore residential market until I see a further decline in prices. Prices need to drop by about 20 per cent to 30 per cent to make residential investments attractive again…. NOT a measly 5.5 percent!

2. Because interest rates are STILL low and rising, like now.

Property prices rose as interest rates fell, and property prices will fall if interest rates rise with a weakened economy.

The way to win the game is to have cash on hand to buy at a low price when others cannot borrow very much because of high interest rates and debt servicing ratio. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive property or believe in the fallacy of  “affordable” property at a time of low interest rates (and rising) and high prices like now is a mistake.

It is far better to pay a low price with a high interest rate than a high price (or the “affordable” fallacy) with a low interest rate, even if the mortgage payment is the same either way.

3. Because government property curbs are here to stay indefinitely.

Like it or not, life is a game of cards. Life is not a matter of holding good cards, but sometimes, playing a poor hand well.

Others are betting on a removal of the curbs – Moral decisions are always easy to recognize. They are where you abandon self-interest. And self-interest is prevalent where money is concerned. Never for once believe the real estate market and it’s cronies of capitalism has your financial interest at heart. They don’t. It’s your money they are after. Trust everyone, but cut the cards.
I don’t see the government removing property curbs for the next two years. With interest rates on the way up, there will be pressure. The policy is working, there is no reason whatsoever for the government to relax it.

When stringent property curbs are here to stay, this only means property prices are still HIGH.

4Because you’ll never hear anyone says lower property prices.

The three legs of the sales & marketing propaganda tripod are desire, data and doubt. Accuracy and honesty have little to do with it…desire brings the participants together. Data sets the limits of their dialogue. Doubt frames the questions.

The “wealth effect” from property price appreciation is irrefutable. Consumers tend to spend more when there is a bull market in widely held assets like property or stocks, because rising asset prices make them feel wealthy. The notion that the wealth effect spurs personal consumption makes sense intuitively. The more consumers borrow and spend, the more profits the big boys make.

It is necessary that YOU be forced deeply into debt and consumerism, and therefore forced into slavery, for the banks and other giant machineries of capitalism to make a profit. If you manage to avoid any debts, they lose control over you. Unacceptable to them. It’s all a filthy battle for control over your labour.

This is why you will never hear the government or anyone else in power say that we need lower property prices. They always talk about “affordability” or price “correction” but what they always mean is debt-slavery.

5. Because 1,110 dumb lemmings found watching and waiting is torture.

If a man paints a target on his chest, he should expect that sooner or later someone will loose an arrow on him. If you go around telling the whole world how filthy rich you are, sooner or later you’re going to be robbed.

The problem with property buyers who act like lemmings – They become obvious targets for clever marketers.  From overt consumerism to investment greed, there’re no shortages of them. Take all the fools out of this world and there would not be any fun living in it, or profit. And profit is certainly almost guaranteed…But to wise men only.

In today’s property market, how does a seller of real estate use human weaknesses to sell and profit?

Clever marketers see profits in human weaknesses:

  1. Desire is infinite, ability to fulfill those desires is limited
  2. A pervasive need for market predictions and constant action
  3. Humans are born with a susceptibility to that most persistent and debilitating disease of intellect: self-deception.
  4. Buyers ignore the fact that larger commercial powers wait at the edges of their activities, powers that could swallow them the way a slug swallows garbage.
  5. All wealth suffer a recurring problem: Wealth attracts pathological personalities. It is not that wealth corrupts but that it is magnetic to the corruptible. Such people have a tendency to become drunk on greed, a condition to which they are quickly addicted.

Human weaknesses shown in the latest property launch near Seletar:

The Solution – Sell, market and lure ‘desperate’ buyers with under $1,000 per-square-foot on average condominium units to beat TDSR. (Total Debt Servicing Ratio)

The Outcome – 1,110 lemmings rushed to snap up smaller units with empty cheques and balloting. 78% of project is sold within the weekend.

The Profits1,400 small unit apartments are cramped into pigeon-size holes to juice every single dollar-profits out of every available space possible! Pigeon-size spaces fit lemmings anyway.

Who profits?  - Sellers of real estate and their cronies of capitalism.

Will buyers lemmings profit? – They might get lucky on bread crumbs.

This new successful sales model will soon be copied by other developers. As long as foolish lemming buyers keep up the hype, hysteria and delusion, sellers will continue to ride on them. The market gets overly crowded and you certainly don’t want to be the person to be trampled on.

Watching others get rich during boom times while you don’t is terrible enough. Waiting to get rich is more hellish than watching others get rich. Lemmings want it now and that’s why they are prime sales targets for times like today.

6. Because we may have even greater financial crisis than September 2008.

That much is already baked into the cake.

Real wealth isn’t built by chasing fast triple digit gains with options or penny stocks. Or flipping properties. Real wealth is built by using a solid, long-term sustainable strategy – slow-cooker way.

Look for falling oil prices and another scare in China to spook the really dumb and inexperienced speculators out there, followed by a series of growing defaults like in 2008, but worse. They’re also kidding themselves if they think they can stop everybody from selling their stocks. (Look at China)

And expect the global crash that follows to be even more brutal thanks to all the financial manipulation in the system.

But even beyond global stock bubble, housing bubble, fracking bubble, and pension problems, there are signs of economic destruction across the world.

The air has been let out of China’s stock market. Not so for its bubble real estate market. When it tanks, “the greatest bubble in modern history” suggested by many economists – will follow with much more devastating impacts there and globally.

Commodity prices are down across the board to the detriment of the world’s emerging markets.

Long-term interest rates are rising despite global efforts to suppress them with continued stimulus.

Europe is enlarging the black hole of Greece by funneling even more money into it.

The euro zone as a whole has an unemployment rate over 10%.

Japan is caught in a downward spiral where more people are dying than are reproducing.

Chaos is erupting. And despite efforts to stop the global economic system from melting down, free market forces are finally starting to show governments and central banks who’s in charge.

That’s the simple, bitter truth of it.

Inaction for now is the best action for any savvy buyers and investors.

Many are tuned in to the devastating market forces ahead. Others like myself have sounded the alarms. (I’ve sounded the property alarm since mid-2012)

Those who are listening will be the best prepared. Those who have been VERY patiently waiting on the side-lines and preparing themselves to take advantage of the coming crisis will be best rewarded.

For the buyers of today, I wish them luck.

But enough substance, now for the humor part.

Everyone wants to be Elmer J. Fudd, the popular millionaire looney toon character featured with Bugs Bunny.

Just how dumb or ill-informed does one have to be in chasing wealth, here’s how buyers of today’s property can convince themselves that they are going to get rich.

Repeat after me; “My name is Elmer J. Fudd, Milwionaire, I own a mansion und a yacht.” Again! “My name is Elmer J. Fudd, Milwionaire, I own a mansion und a yacht.” Keep going, if you can be convinced that the market is on your side, you can be made to believe ANYTHING!

Right Elmer?

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To your investment success,

Gerald Tay

 


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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