Property Prices Have Crashed (see graph)

After seeing the two weeks consecutive plunge in the stock market, today i cut my spending by half. In the past, I spend about SGD 40plus for weekend meal, today I am spending SGD 10plus. I am saving money automatically. Maybe this is human nature, flight or fight response. Nothing stop me from spending money. I still have a good job, stable income, healthy body and family. However, seeing the situation in US, Europe and the imminent economic recession on China and the rest of Asia, I am starting to save. Save for the rainy days. My subconcious mind is working on its own way.

Will this affect the economic? I duno. Will many people follow suit? After hearing the news from the stock market and the huge rise in gold. I duno. I am just preparing myself for rainy days.

I visited KL last week. Newspaper there said about 14 trillion was evaporated from the market. Many billionaires fortune was shrunk by few hundred millions. A figure that I could never imagine.

Can US continue to print money? How much more can US afford to allow their currency to devalue? How long will the citizens remain quiet? Will there be riots? It is already happened in UK, Greek, Spain, Pakistan, Arab countries and many more will follow suits.

I feel sad for the situation now. I knew many people have bought sky high properties, max out their credit card, doctors, lawyers, accountants.. Yea, it's bad. But that's how the world works. Money flows from one pocket to the other, or evaporate in thin air.

May god be with you, property speculators.

Originally Posted by Unregistered

that's what the Amercians are dreaming then as well. They always and have always thought that property will continue to rise. What now for Fannie Mae and Freddy?

Having real examples just at the other end of the globe is not preventing us to think likewise. Perhaps we should be more prudent in managing our sums again.

There are some truth in Tony Tan and Khaw Boon Wan's words where they commented that things won't be moving well half a year to 3 yrs from now. Even whilst looking at the global markets, the corporate profits are not moving back to pre-2008 levels. But property prices have soared way past previous records. Shouldn't that be shuddering?

No, property can stay irrational longer than people can stay solvent.

A layman's observations.

Arguments for a bullish property market
1) Singapore is tiny, no where to expand
2) High liquidity, due to ultra low interest rates. Likely to remain low as long as Fed keeps interest rates low (Fed pledged to keep it low until 2013)
3) Strong Singapore Dollar vs weakening USD, GBP, Euro. Rich foreign investors, may park their money in Singapore assets e.g. property. Appreciation of SGD assets vs their home currencies defends their wealth. Moreover SG property has +carry.
4) Immigration. The government is likely to continue the FT policy, or at most, moderate it a bit to appease unhappy Singaporeans. Population to continue increasing.
5) SG has a relatively stable government. Safety may be attractive to investors


Arguments for a bearish property market
1) Large bubble in recent years. Property prices increased 30% in two years, this is madness. Historically, when the market goes parabolic, its time for a correction.
2) Overpriced properties relative to income. People taking on too much debt. Unsustainable situation. Already discussed by other forumers.
3) Stock market correction and volatility. Property market lags stock market by 3-6 months. Should the stock market continue to fall, this will affect the property market. Fall in property values, will result in margin call and forced selling, driving down property prices
4) Increased supply of private properties and HDB in upcoming years 2013-2015.
5) Risk of recession. Singapore will certainly be affected by worldwide recession, if and when it occurs. FTs will return to their home countries (population drop, decreased rental yield, less renters), people will lose jobs and their ability to service housing loans + margin call will decrease property prices (forced sell).

Personally, I'm bearish. Its only a matter of When it will occur.

It's not parabolic. It's exponential.

It's 30% in 2 years but 100% plus increase in 4 years, throughout Singapore...

After hearing PM Lee ndp 2011 speech, I am a liitle bit more bearish as
- 25k of hdb flats to be built in 2012
- tighter control of FT with higher salaries floor
- salary ceiling raised for BTO flats and executive condos mean that more people of that income segment may stop looking at resale flats/suburban condos and wait for these supplies to come.

CDL CEO also expects condos without proximity to MRT to drop in prices. For someone whose vested interest is in selling properties, this is brutal honesty.

China is tightening credit, Europe facing fiscal mess, US economy still going through rough patches. Once crisis hit, contagion spread, sgd will weaken, SOR will shoot up (even fed maintains low USD interest rates) as liquidity dries up with capital exiting singapore.

This is the perfect storm that shrewd investors are waiting for to enter and scoop up the cheap buys.

Originally Posted by Unregistered

After hearing PM Lee ndp 2011 speech, I am a liitle bit more bearish as
- 25k of hdb flats to be built in 2012
- tighter control of FT with higher salaries floor
- salary ceiling raised for BTO flats and executive condos mean that more people of that income segment may stop looking at resale flats/suburban condos and wait for these supplies to come.

CDL CEO also expects condos without proximity to MRT to drop in prices. For someone whose vested interest is in selling properties, this is brutal honesty.

China is tightening credit, Europe facing fiscal mess, US economy still going through rough patches. Once crisis hit, contagion spread, sgd will weaken, SOR will shoot up (even fed maintains low USD interest rates) as liquidity dries up with capital exiting singapore.

This is the perfect storm that shrewd investors are waiting for to enter and scoop up the cheap buys.

Everyone knows there's an up cycle and a down cycle. The million dollar question is when the down cycle will come and when it will reach the bottom.

Originally Posted by Unregistered

Everyone knows there's an up cycle and a down cycle. The million dollar question is when the down cycle will come and when it will reach the bottom.

... and that's a question no one can answer. Think its well established that the market can stay irrational longer than one can remain solvent.

As an investor, the key question is, in the face of imperfect information and without the benefit of 20-20 hindsight, do you buy now hoping for an uptick on the back of excess liquidity, or do you stay out expecting a downturn ?

As a rational person, I would chose the latter. As mentioned, I could live with my choice (assuming I was proven wrong) a lot better if I stayed out for rational reasons rather than jumping in when all rational signs were advising otherwise.

Remember, no one can know for sure one way or another. We can only play the cards as best we can based on probability and hope for the best.

Originally Posted by Unregistered

... and that's a question no one can answer. Think its well established that the market can stay irrational longer than one can remain solvent.

As an investor, the key question is, in the face of imperfect information and without the benefit of 20-20 hindsight, do you buy now hoping for an uptick on the back of excess liquidity, or do you stay out expecting a downturn ?

As a rational person, I would chose the latter. As mentioned, I could live with my choice (assuming I was proven wrong) a lot better if I stayed out for rational reasons rather than jumping in when all rational signs were advising otherwise.

Remember, no one can know for sure one way or another. We can only play the cards as best we can based on probability and hope for the best.

for property, i'm staying out. but for stocks, i'm nibbling at blue chips, $10k at a time. if the stock i bought falls another 50%, another $10k will get me double the number of shares.

averaging down is generally a bad idea, but i'm targeting blue chips. these are companies with very good fundamentals and lots of cash.

moreover, as you said, with imperfect information, it's impossible to catch the bottom. maybe i have already bought at the bottom.

Originally Posted by Unregistered

for property, i'm staying out. but for stocks, i'm nibbling at blue chips, $10k at a time. if the stock i bought falls another 50%, another $10k will get me double the number of shares.

averaging down is generally a bad idea, but i'm targeting blue chips. these are companies with very good fundamentals and lots of cash.

moreover, as you said, with imperfect information, it's impossible to catch the bottom. maybe i have already bought at the bottom.

The best instrument to effect this strategy, provided you really like the stock and are comfortable buying it over 1 year, is the accumulater (also dubbed "i kill u later" by disillusioned investors). It's a good instrument if applied selectively.

But personally, as long as the European debt crisis stays unresolved, I'd like to stay cash heavy. The effect of the Lehman crisis was a massive transfer of leverage from private sector to public sector (from govt bailing out their financial institutions).

The public debt saga we are seeing now has not fully played out yet. We've only seen nibbling at the edges of the problem ie central banks agreeing to support Italy and spain by buying their bonds. The fundamental problem of high debt to gdp, persistent deficits, has not been solved. And there is no simple answer, as Italy and Spain's economies are stagnant and there is little political will to raise taxes un a democracy.

So we are still operating in pretty choppy waters, and I'd be careful.