Exploit the Recession
 

If you have the good fortune of remaining unscathed by the recession, perhaps you should turn aggressive and try to take advantage of it instead.

First, make sure you have set aside enough money to cover 1 year's worth of your family expenses, just in case.

Then invest the rest. Take advantage of the recession.

Now is the time to buy. If you buy now, you are buying low. (See also past articles on buy low sell high and buy low sell high 2.)

The stock market is now hovering at a level that is lower than 50% from its peak. Consider buying blue chip shares. All of them have fallen drastically in value though many of these businesses are still extremely sound and well capitalized. Examples of such shares can be found here. And if you don't have your own online trading account, what's stopping you? Just ask around to get started.

Yes, buy blue chips and hold for the medium term. I would hold until the next stock market euphoria, whenever it might be.

The property market is also in the middle of a crash. If you have a few hundred grand (or more) in your "opportunity" fund, I recommend you also start looking around for a second or even third property. If you do not have such spare money, you can also consider upgrading from your current HDB to a condo - try to get one in a good location and I personally prefer freehold condos to leasehold ones.

The value of your properties will go up when the economy recovers.

Suppose you paid $200k and borrowed $800k to buy a $1m house, and managed to rent it out to cover interests and expenses. If the house is sold at $1.4m a few years later, you would have tripled your initial $200k investment!

Good luck!

Remember: if you buy now, you're buying near the bottom.

http://www.salary.sg/2009/exploit-the-recession/

4073
 

i think you are overly optimistic. Property market in Singapore is nowhere near the bottom. We are seeing a reversal from the peak in Sep08, and judging from past historical trends a bottom in 6 months is a bit too early. Besides, rental business is not as rosy as before. Breaking even on monthly installments can be tricky.
Second, US, EU, Asia, the crisis came in three waves. We are in the last zone, hence any recovery is going to be laggard. If you are talking about buying into US Financials, perhaps i might agree, however blue chip SG counters is too optimistic.

4074
 

I agree with PP that property has not yet bottomed. I would wait.
But for stocks, I have already started my attempt to catch the bottom by buying in tranches over several months. Still buying.
I would sell when the market sets record highs again. Could be in 2011-2012.
We'll see.

4078
 

It may not be easy in Singapore's context to use the rent to cover your bank loan. Last time I rented a 3-bedroom condo unit for only $1250. I think the owner can't even break even, let alone he/she still had to pay for the maintainence fee, which is not a small sum.

4079
 

Hi catch the bottom,

record highs in 2011-2012...unlikely.

This recession is kinda severe...maybe in 2014-2015 for record highs.

4080
 

I don't think property is anywhere near low enough yet. If you think seriously about it, the economy is in worse state than anytime in the past 15 years, so it is not unreasonable to think that we need prices to move back to 2001 or 2005 prices before they can even be considered attractive.

At the moment we have only seen some roll back of the excesses of the past two years (i.e. we are not even back to the pre-boom prices yet). The thing now is to keep your powder dry and wait.
The sellers will have to blink first someday.

Furthermore, this not not a V shaped downturn. An upturn when it comes, is not going to be sudden and sharp. Probably more of a U shaped downturn, when the economy hits bottom, it will stay there for sometime before it starts to recover, so there is plenty of time.

So whatever you do, DON'T BLINK FIRST!

4082
 

i agree that's it's not bottom yet, even with stock price this low, remember cheap can be always cheaper. properties have not gone back to pre-rally level yet too.

i'll wait if i have the extra ammunition, unfortunately i need those to survive through the winter days... :(

4085
 

I do not believe anybody can predict the bottom. You buy when there is a significant discount from the peak. You sell when there is a significant increase from the bottom.

Means if you pay $100 for something and it appreciates to $180, sell, regardless whether it will go to $200 or not because you already profit. When it comes down from $200 to $120, buy, regardless it will go down to $100 or not, because you already bought at huge discount.

Most people wants to buy the the lowest ever bottom and sell at the highest ever peak. They want to be fortune teller. Predict? Why not go casino play big/small?

4097
 

wow u r giving a very bold advice

4130
 

Catching the bottom requires luck as well as analysis. I completely agree no one can predict the bottom exactly.

However, I also completely disagree that the bottom is here. Defintely not so for property, and not so for stocks as well.

My reasons: The macro economic environment. The stock market has tanked since its peak in Dec 07, many stocks look attractive now. However, I think that pricing the stocks based on performance over the last few years without factoring in the economic scenario the world is facing is risky. As for the property market, if we use the stock market as an indicator, it still has a long way to go.

PM Lee mentioned that discussion now has turned from V-shape or U-shape, to U-shape or L-shape. I don't know where he got his information from, so I won't accept it blindly.

However, the reality is that the engines that normally fuel economic growth in Singapore are currently stalling. i.e. Exports

Why not take a "wait and assess" approach for the next 6 months? I really can't see the whole world turning around by early next year, not with all the news that is available, either by local or foreign media.

Can you?

4148
 

I do not think that freehold condos make a better investment than leaseholds, unless perhaps in the very long term.

We must know that since this definition was set for leaseholds, no properties have exceeded, or even come close, to 99 years. There is no precedent as yet as to how the government will handle leaseholds that are nearing end of life - for all we know you simply pay a small premium to continue (ala COE extension for cars)

Besides, even leaseholds can go en bloc (provided you buy those that are not ancient) as can be seen not too long ago when a 30 year old leasehold went for an en bloc sale.

Within the next ten/twenty years, as Singapore becomes more and more populated, property prices will be more evenly distributed due to scarcity of land - eg a leasehold in Jurong or Sembawang can have a chance of going en bloc nearly equal to that of one in Newton (with maybe 70 years left)

my 2 cents, thanks

4153
 

The property market is also in the middle of a crash. If you have a few hundred grand (or more) in your 'opportunity' fund, I recommend you also start looking around for a second or even third property. If you do not have such spare money, you can also consider upgrading from your current HDB to a condo - try to get one in a good location and I personally prefer freehold condos to leasehold ones.

middle of recession, and recommendation is to buy property?

4155
 

Not buy immediately, but start looking.
My recommended strategy is to buy low and sell high. So when better to buy than during a recession?
See also my lament on why people were flocking to buy at the height of the boom (or near it) in 2007.
Thanks for the chance to clarify.

4158
 

No worries. We all learn from mistakes.

4185
 

Start shopping around for property units, but DON'T BUY YET.
A recent UBS report says "we expect mass market and prime residential property prices in Singapore to decline by 20-30% and 40-50% respectively from their peaks in mid-2008 to a potential trough by mid-2010. It thus constitutes another 15-25% and 30-40% decline from the current prices for mass market and prime residential properties, respectively."

4598
 

I agree with Bottom?. No one knows where the bottom is. Are we at the bottom of the property price index? Probably not. Rentals are done sharply Q1 2009, and likely to head further south, thereby dragging down prices further. HDB valuations are going to head south as well, all the people who bought properties after June 2007 on the deferred payment scheme are still having nightmares knowing there is nothing they can do but sit and pray. But I swear, if you are thinking of buying a property for investment and you have not yet started looking around and doing your sums, but just sitting around talking down property prices, you are one of those people who only know how to talk, and will probably not have the guts to put your money where your mouth is when the time comes. Always remember for any given property cycle, or even any single development per time period, only ONE buyer will get the lowest price, and everyone else is a 'loser' for not buying at that price. This person probably didn't even aim to be the lowest priced buyer. he or she probably just thought, good price, good upside, I buy now. That's all. Focusing too much on the downside (ie being all negative) and you may well miss out totally when the boat floats again and you are still looking for the bottom. Don't just be just a theory expert, start looking now if you are interested.

This is what rich people has been doing all along to expand their wealth simply because they have more than enough liquid assets like cash, fixed deposits to cover the next 10 years of their living expenses.
Although no one can catch the bottom but most definitely can know where the general bottom and top lies using certain clear metrics like equity risk premium of STI.
But most average Singaporeans, especially lower-middle and even middle-middle income with bills here, there and everywhere can only look and see the opportunity pass them by as they simply don’t have excess cash that can hold on to investment grade blue chips for more than 2 years.
“Set aside enough money to cover 1 year’s worth of your family expenses, just in case.”

The rich get greedy and get burnt, like Oei Hong Leong. It’s been said that recessions are game changers. Some move down the ranks and some move up. If you had been prudent and live within your means, you can move up by buying low during this game changing period and selling high during the “good times” when eveyone feels like an investment guru. I know, cos I moved up a few notches doing this.

Just browsing the archives.

If someone had followed this piece of advice in 2009, he/she would indeed have had paid $200k (pre-cooling measures) and borrowed $800k to buy a $1m house, and probably managed to rent it out to cover interests and expenses. And likely the house is worth $1.4m now!

we know how accurate this turned out!

Yep, looks like the property cycle may be turning the corner again. At least the stocks are falling now.

Get ready to shop.

I bought a condo unit for own stay in 2009 at 900k, now it is worth 1.6m.
My buddy was the champion. He bought a unit at the lowest, at 600k, and now worth 1.5m.

Ya, i totally agree. I have a million SGD in 2009 and I bought three properties one month between each other and it is at the suburbs. I bought at around SGD 500K each and now each worth SGD 1.2M. I paid 20% downpayment and use HDB as collateral bcos bank refused lend so much. So SGD 300K turned out to worth SGD3.6M, a 12 times profit. I bought SGD500K in shares and profits though less, but still decent, they have roughly doubled or tripled, worth SGD 1.5M. Totally, my 1M at start turn to 5.1M in 5 years. Thanks Obama for your cheap money. If I am US citizen, I surely vote for you.