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Property Must Crash (see graph)

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  #1 (permalink)  
Old 18-10-2008, 11:30 PM
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Default Property Must Crash (see graph)

URA has released the Q3 2008 flash estimate of the price index for private residential property. It showed a decline of 1.8% - the first decline in 4 years.

[Update 24 Oct: URA has released the full Q3 statistics - private residential property prices registered a decline of 2.4%, a bigger decline than what the flash estimate showed.]

Chances are property prices are going to decline for many more quarters.

After a spectacular 2007, Singapore (and probably the rest of the world) has swiftly entered into recession. A minister has warned of job losses. Banks have stopped hiring and a couple have even started retrenching staff. Retail has slowed and the media is now talking about how people can tighten their belts in these bad times.

Notably, property developers are scrambling to launch as many projects as possible before prices plunge further. (BT, Oct 18, 2008)

My prediction 7 months ago failed to come true. I stand corrected. But as experts say, past performance (i.e. my past performance) is not indicative of future results.

So let me try again.

The following image shows the URA price index graph (blue) superimposed over the Straits Times Index graph (pink). The scales of both graphs have been adjusted such that their time axes match.

Interestingly, by adjusting the vertical scales and without breaking either graph, the peaks and bottoms of both graphs are able to meet at the same levels, with property exhibiting a lag of about 1 to 2 quarters.

Evidently, property has a long way down to catch up with the stock market crash.

I say, condos will be much more affordable in 6 to 12 months' time. Maybe about 20% to 40% cheaper?

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  #2 (permalink)  
Old 20-10-2008, 11:07 AM
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Default 2967

if the increase in number of ads on the classifieds are any good indicators to go by, the market is now supply heavy.

a further study into the buyers makeup for the last few years will reveal some distrubing findings. it doesnt take a rocket scientist to figure out that foreigners have been the net buyers.

translate the global crisis which is unfolding from the US to Euro to Asia, it is not unreasonable to expect a decrease in demand for Sg properties.

how long before the market can pick up? noone really knows. if any does, do some thinking. nothing is for free.

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  #3 (permalink)  
Old 21-10-2008, 12:00 PM
this time it's diff--
Posts: n/a
Default 2980

I disagree that property prices will crash. This time it's different. We now have the F1 and YOG and are building the IRs and MBFC. Our banks are well capitalized. Our government is competent. MM Lee even said we're in a GOLDEN PERIOD!
Prices may go down, but definitely not crash.
And don't forget that land is scarce in Singapore.
This time it's different.

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  #4 (permalink)  
Old 22-10-2008, 02:02 PM
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Default 2989

i think that it is overly optimistic to believe that prices will not go down at least another 15 to 20% (does this not constitute a crash?)

golden period? singapore is officially in a recession. if i'm not wrong, we are the only developed economy to officially make that announcement. MM lee's statement was made a year ago, before the markets started to tumble. agree that the projects you mentioned will be positive for the country in the long run and will boost the economy, but this is more for the long term health of the country and will hardly spruce up demand for property (apart from making land even more scarce perhaps? but again...long term!)

i worry about how the removal of the deferred payment scheme is going to impact prices. we could have a falling knife. why? property prices have clearly been slowing and have already come off on a QoQ basis. IF prices come off further in 2009, those who bought their apts at the peak of the boom may witness a sharp fall in the value of their properties fall even as they have to return the remaining 80% of their mortgage payments. 3 issues from here:

1) with borrowing limits super tight, it will be extremely hard to borrow the money. additionally, are banks willing to lend out more money than the collateral that they will receive is worth (i.e. the condo which is now 30% cheaper)?

2) ok, if owners can't come up with the money, now what? they rush to sell their units. but no one is going to be buying because a) no loans available b) the guys who have the ability to pay higher % of cash are probably going to wait for further falls (and maybe their money is down the drain in the stock market anyway)

3) what about the new supply that is about to come out?

on a yoy basis, prices are still high. so, it is possible owners are going to begin letting go of their units soon.

by the way, i am bearish on the market...
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  #5 (permalink)  
Old 23-10-2008, 12:43 AM
same ol' same ol'--
Posts: n/a
Default 2995

to this time it's different,

if you examine all the past bubbles when they're developing and bursting very soon with hindsight, a lot of participants of the bubbles always says: this time it's different.

i guess we humans doesn't change much since the 1600s.

no offense,just stating some facts.
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  #6 (permalink)  
Old 23-10-2008, 03:03 PM
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Default 3000

To same ol' same ol':

I had a little chuckle and grinned to myself as well when I saw those four words >> this time it's different

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  #7 (permalink)  
Old 23-10-2008, 10:41 PM
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Default 3002

plain cold sarcasm..
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  #8 (permalink)  
Old 27-10-2008, 08:32 AM
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Default 3035

Beware, housing crash indeed is coming and will be fully felt in 1 year time.

- already, distressed sales from buyers losing their shirts in stock markets, FX markets are starting to appear.

- People talk about Casinos developments like a magic pill. who will visit these casinos once it is built, when ppl have already lost their jobs? maybe hardcore gamblers do.

- Current demand of housing is coming from influx of foreigners employed in the service cyclical industries (retail, banking) When economy goes down the toilet, they will packing back homes. Rental will come tumbling down soon.

- defered payment scheme has led many to enter into property transactions without a thought that they will eventually for a bank loans. Up to 80% of new condo purchases for past few years (until SG gov prohibit this) are bought via this scheme.
Many of these do not eventually qualify for a bank loan and will be panic to get out of the market to get losses as soon as condo prices drop by 10-15%.

- increased participation of leveraged players (i.e. hedge funds) in Singapore real estate. A massive de-leveraging process is taking place around the world, as liquidity is died. No more funding, no more credit. Banks are scared of lending out especially to real estate investments(or rather speculations) as they repaired their balance sheet, and also inter-bank cost of funding is high. Once these leveraged players collapse in next few months, you will expect distressed sales coming up soon

Previous banking crisis last around 2-3years, so get out of the property market if you can now.
Conserve the cash and invest when it reach bottom when there is blood on the street (i.e. distressed sellers dominating 40-50% of sales in mkt)
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  #9 (permalink)  
Old 02-11-2008, 08:47 AM
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Default 3110

I hope you are right! then we can all cash in a house at a heavily discounted house
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  #10 (permalink)  
Old 04-11-2008, 03:38 PM
this time it's real--
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Default 3134

Here's proof: Blue chips are now selling at half price. You find me a property that's selling at half price. Can't find? Because this time it's different.
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