Do Property Prices Always Recover and Go Up Higher?

By Property Soul (Guest Contributor),

Recently, there were reports on units in high-end condominium projects being sold at a big loss. As property buyers, we often hear from developers and property agents that property prices will always go up in the long run.

Does the property market always manage to recover, with prices going higher than the previous peak? Is it true that any time is a good time to buy? Below is an abstract from my book No B.S. Guide to Property Investment about one of my real-life property stories and the lessons learned.

Bought a unit in a seafront condominium

In 2003, I bought a unit in a seafront condominium. When it was under renovation, two neighbors staying at the units above mine dropped by for a chat. They both bought their place first-hand from the developer.

“Do you mind telling us what price you paid?”

I told them the amount.

“Oh, that was more or less what we paid for last time.”

“Which year did you buy your place?”

“It was 1984. Do you know about their launch at that time?”

“I don’t know. I was still in primary school in 1984.”

I did a search of the old newspapers. I found that the condominium was selling in a depressed market that year. My two neighbors weren’t overpaying at all.

It was amazing that, almost twenty years later, despite inflation and after all the ups and downs in the economy, we were back to the launch price!

Who said prices can’t go back twenty years? They don’t just go back, they can even go back to where they started from.

Prices can’t drop lower?

Between 2002 and 2004, my strategy was to buy rental properties at fifteen percent lower than the last transacted price. In that way, I still had a fifteen percent buffer in case prices dropped further. And once the market recovered, I could sell them at any price and still make a profit.

I did make money. But I was wrong. How could I know that prices couldn’t drop another fifteen or twenty percent?

Many people who bought in 1995 held on to their overpriced purchase. They struggled through the recession in 2001, SARS in 2003, the downturn in 2004… Every time when they thought the bad days were finally over, a more severe storm came.

J. Anthony Boeckh, author of The Great Inflation, told what happened in some US states after the sub-prime crisis:“In general, prices nationally have dropped back to the level of the cost of building a new dwelling, which includes land acquisition, building costs, and profit for the builder.”

Will exponential growth happen again?

Prices of landed properties in Singapore have increased 75 to 100 times in the last fifty years. But can they rise at the same rate in the next fifty years?
I doubt so.

In the 1960s, Singapore’s infrastructure, economy and social stability were very different from today. The ease of borrowing and the pool of eligible buyers were also very limited.
In the last fifty years, Singapore has evolved from an emerging country to a developed nation. It is with substantial improvement in our economy and living standard, coupled with easy financing, that housing prices can climb to where they are today.

Markets that achieved high growth in the past cannot guarantee continued growth. On the contrary, it could imply that the boom may soon be over. Once the fundamentals are changed, the trend will be reversed.

There are many countries that used to have a strong economy. Then they experienced recession. Some managed to recover and grow again while others have remained weak since.

Although history often repeats itself, there are also things in history that, once they are gone, are gone forever.

When, or will it ever, recover?

There is a saying that, in each property cycle, prices always surpass the previous peak to reach an all-time high. This happened several times in the history of the Singapore property market. But the question is: When?

The commodity bull market which started in the early 1930s was surpassed only by the bull market in the 1970s. Just look at gold, there was a very long period of depressed prices after its collapse in 1980.

Amid spiraling property prices in the 1980s, many Japanese believed they would never be able to afford it if they didn’t buy now. Many borrowed huge housing loans that could only be paid off by their grandchildren. The bubble that burst in the late 1980s started two lost decades in Japan.

This is how Marc Faber described a major market collapse, as compared to a minor correction:

Major manias occur very infrequently. Once they burst, they shake an entire generation’s faith in the object of speculation … while mini manias may take place every few years … a major mania will represent the final stage, or culmination, of a long-term secular up-trend which may have lasted 10 to 25 years.

What are the lessons learned?

Only invest if you have the answers for the following questions:

  • Can you see any upside in the fundamentals in the foreseeable future?
  • How long do you think you can wait to see profit from your property investment?
  • Do you have the holding power to wait till the next Bull Run?
  • Will you see a recovery before your retirement (and at least live to see that happen)?

The next time you want to ask when a good time to buy is, take the hint from investor Jim Rogers:

Bottoms in the investment world don’t end with four-year lows. They end with 10- or 15-year lows. You do not buy unless it is cheap and unless you see positive change coming within the next 2 to 3 years.

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3 Reasons You Shouldn’t Pay Off Your Home Loan Early


For many people, being chained to a property loan is like being in prison. Forget about quitting your job or going on an unpaid sabbatical, because there are home loan repayments to be made for almost the rest of your life.

So being able to finally pay off your property loan early can feel like being released from jail for good behaviour. Why wouldn’t you want to free yourself from the burden of making loan repayments forever? Well, here are 3 good reasons it might make financial sense not to pay off your loan early.

You can invest the cash at a higher rate of return
While a home loan is probably the biggest loan you’re ever going to take in your life, it’s also the cheapest in terms of interest. Try asking the neighbourhood loanshark for a 1.5% interest rate and you’ll either be running for your life or patting him on the back as he howls with laughter.

If you’ve got $100,000 left on your home loan at an interest rate of 1.2%, it makes more financial sense to invest $100,000 at a higher interest rate than to use it to pay off your loan now. Even a conservative investor shouldn’t find it too difficult to get a return of over 3%, which is significantly higher than what it costs you to borrow that money.

Conversely, if you pay off the $100,000 (and we’re not even counting the repayment fees that your bank might charge you), you’d be sacrificing that amount you would have earned by investing the $100,000 minus the amount you would have paid in interest to the bank.

Not that this amount is offset a little by the extra money you would save due to no longer having to make loan repayments. But this amount is going to accrue gradually over a long stretch of time, and might not necessarily translate to equivalent investment gains.

You can put the cash to better use
Your home loan may be a pain to pay off, but always remember that it is relatively cheap. Even if you’re not about to invest the money you would otherwise use to pay off your home loan in full, you might be able to find better ways to use it—ways that can pay off somewhere down the road.

For instance, let’s say you’d like to further your studies by taking a degree course overseas. You could either:

Choose to redeem the remaining $100,000 on your 1.2% interest rate home loan and then take up a study loan for $50,000 at 4.5%, or
Hold off on paying off your home loan and use the cash to pay for your studies in full instead.
Redeeming your home loan would lead to your paying $1,050 more in the grand scheme of things.

And given the fact that furthering your studies could increase your income later on, you would be placed in an even better financial position by holding on to your home loan and using the money to educate yourself instead.

You have mortgage insurance
If you’ve paid for mortgage insurance, you actually have less of an incentive to pay off your mortgage early. You see, when you take out a home loan, you’re running the risk that if you should get retrenched, fall ill and be unable to work or (choy!) die and the home loan instalments don’t get paid, you or your family are going to be placed in the unenviable position of having the property swallowed up by the bank.

However, when you have mortgage insurance, should something unfortunate happen to you you’ll get a cash payout that will cover the rest of your home loan installments. That means there’s actually very little risk that you will default on your loan.

So if one of your reasons for wanting to pay off the loan now is that you don’t want to risk losing your property to the bank somewhere down the road, having mortgage insurance reduces this risk considerably.

In fact, should something actually happen to you somewhere down the road (choy!), you’ll regret having spent all that money trying to pay off your home loan earlier.

One Last Thing
If you are trying desperately to pay off your home loan early because you feel the interest rate you’re paying is too high, that may not be such a good idea (for reasons stated above). However, there is an alternative and that is to refinance your home loan to a better package. You don’t have to jump through hoops just to get one, and that’s where the MoneySmart Refinancing Wizard can help. Make sure you’re not overpaying for your house and put those savings to better use.

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Property Update (28 April 2015)

How will Asia react to Japan’s new foreign policy? |

JAPAN : John Lee, adjunct associate professor, School of Social and Political Sciences at University of Sydney, explains why the Asian region, excluding China, will likely welcome Japan’s new foreign policy.


Prices of completed apartments and condos up 0.2% in March: NUS index |

SINGAPORE : Prices of completed non-landed private homes in Singapore rose 0.2 per cent in March over February, according to the National University of Singapore (NUS) flash estimate released on Tuesday.

The sub-index for Central Region (excluding small units of up to 506 square feet or 47 square metres) rose 0.1 per cent in March.

Central Region is defined by the university’s Institute of Real Estate Studies (IRES) as districts 1-4, including the financial district and Sentosa Cove, plus the traditional prime districts 9, 10 and 11.

The sub-index for Non-Central Region (again excluding small units) rose 0.3 per cent in March.

Islandwide prices of small apartment and condo units eased 0.4 per cent, however.

IRES also published the revised index values for February, which showed overall prices falling 0.2 per cent from January, a gentler decline than the 0.3 per cent drop it earlier estimated. Read more here >>


Singapore’s growth supported by G3 recovery, offset by slowdown in China: MAS |

SINGAPORE : The growth of the Singapore economy will be supported by a firmer recovery in the G3 countries but offset by China’s slowdown, said the Monetary Authority of Singapore on Tuesday.

“A firmer recovery in the G3 will provide a broad-based boost to the external-oriented sectors of the Singapore economy,” said the MAS in its April macroeconomic review.

G3 comprises the US, Japan and the eurozone.

The G3 is forecast to grow 1.9 per cent in 2015, up from 1.3 per cent in 2014. The US is expected to grow 2.9 per cent, Japan one per cent and eurozone 1.5 per cent. In 2014, the US grew 2.4 per cent, Japan had zero growth and eurozone grew 0.9 per cent.

“However, the extent of the uplift will be capped by developments in specific markets and industries,” it said.

Uncertainties include a slowdown in China, corporate realignments in the IT industry and continued weakness in the oil-related transport engineering sectors due to a downshift in oil and gas exploration.

China is slated to grow 6.9 per cent in 2015, down from 7.4 per cent last year. Read more here >>


Asia Property Markets Benefit from 2014 Private Equity Funding Activity |

ASIA : According to CBRE, the Asia Pacific real estate private equity fund environment totaled $14 billion in 2014, its highest since the global financial crisis (GFC), though still well below the $28 billion peak recorded in 2007. CBRE is also predicting that 2015 will continue to see a positive environment for fund raising, though does not expect further significant increases given that 2013 and 2014 were both very active years. 2014 saw fund raising by 42 APAC private equity real estate funds, an increase from previous years driven by the ongoing demand for access to the region.

CBRE predicts that the majority of raised funds will translate into direct real estate investments in the region in the coming year, helping to drive up the turnover of overall capital activities by 5% in 2015.

Asia Pacific remains a major focus for international investors, with an increasing number of new groups looking at the region for the purposes of portfolio diversification and long-term investment. However, it remains challenging for cross-regional investors to invest directly in Asia Pacific due to the lack of transparency in many markets and their lack of experience in the region. Investors are therefore channeling their capital to these newly formed funds.


Read more here >>


Global Property Investors’ Focus on Europe Intensifies in 2015 |

EUROPE : According to a new report by Cushman & Wakefield, European real estate is set to stay firmly in the spotlight for global investors with a resulting two-year window of high activity and attractive relative pricing driven by improved property investment supply, portfolio restructuring, rising prices and the impact of quantitative easing.

Their report, Capital Views – The Allure of Europe, says while activity has spread rapidly around all corners of Europe from the core, on to the South and now towards Central Europe, global money has lagged behind, staying close to the biggest hub markets. The UK, Germany and France took three quarters of all global money in Europe in the past year for example. According to Cushman & Wakefield, this is now changing however, Southern Europe in particular coming on to the global radar. Spain for example is now the only country other than UK to draw capital from all global regions. This change is expected to accelerate in 2015 as global investors turn to more new markets across the region.


Read more here >>

8 Things to Know Before You Hire a Contractor


Contractor Stephen Fanuka shares what he wishes his clients knew before hiring him — and after he’s taken on the job.

1. Don’t expect perfection — expect quality.
The most unrealistic expectation a client can have is that the job will be perfect. There’s no such thing. Painting and tiling and brickwork aren’t done by machine. They’re done by craftsmen — who, yes, are human.

2. Your contractor is making judgments from the moment he steps in your home.
This is like a first date — the first time a contractor meets a client, we size up who they are, how they conduct themselves. What’s their personality like? Are they hot-tempered? Dismissive of your suggestions? If they deal with you this way right off the bat, there probably won’t be a second date.

3. … but they know you’re making judgments, too.
Clients want to be sure you are responsible and fully involved. They want us to be attentive, direct, honest, courteous. In other words: We should be someone they won’t mind seeing every day for six months or longer.

4. Good negotiators can get a better price.
Get more than one bid. Start with the highest-end contractor, the best-stuff-money-can-buy guy. Ask him for a detailed proposal. Take that proposal and copy it, leaving out the costs. Pass it out to subsequent contractors you interview and ask them to fill in the costs. This will give you a good idea of what the job is worth. But be cautious: The lowest bid isn’t usually the best.

5. Safety is your responsibility, too.
Do a simple gut check: Do you want this guy in your home for the next year? Find out if your contractor is licensed. Ask them to show you the license. Make sure they carry liability insurance, so if one of their guys falls off a ladder and breaks his neck, you’re not sued. Likewise, if they cause any damage to your property, you won’t have to pay for it.

6. Feel free to hire subcontractors — but don’t go over your contractor’s head.
Contractors are like agents, always looking for fresh talent. Let’s say you happen to know a terrific painter who’ll do you a favor on price. Most contractors won’t mind that kind of limited subcontracting, especially if you throw a small managerial fee their way.

7. Be nice to the crew.
One simple thing clients can do to make my life easier: Allow the crew to use your bathroom. You’d be surprised how many clients ask us to go to the nearest gas station or diner. Make the work environment comfortable. If it’s 97 degrees, we’re remodeling an attic, and the client won’t let us turn on the AC — that’s cruel. Also, maintain an air of diplomacy and good cheer. Wait 15 minutes before you discuss anything that’s really upsetting you.

8. Pay attention to the warning signs.
Is the contractor usually late? Do you make several calls before he gets back to you? Does he delegate the job to one of his crew? Is he careless about keeping the job clean? Know when to draw the line. This is your home after all, not a construction site.

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There’s a Secret Apartment Hidden Inside the Eiffel Tower


This Parisian apartment may not have all of the chic amenities you’d expect from a French pied-a-tierre, but it definitely has the best view: The City of Lights, as seen from top of the Eiffel Tower.

When designer Gustave Eiffel finished his tower in 1889, he built himself a secret apartment on the third level, almost 1,000 feet above Champ du Mars. In Eiffel’s time, the small room was filled with wooden furniture, colorful patterned wallpaper, and a grand piano. The apartment also held a small laboratory area, which the designer outfitted with the time’s most high-tech scientific equipment.

If you’re jealous, get in line. When Parisian high society learned of Eiffel’s private hideaway, they began begging him for the chance to rent it out, even for a day. No luck: He allowed no one else to use the space. Even today — 92 years after his death — the tradition continues, with the apartment only rarely opening for public view.

Learn more information at Atlas Obscura.

pic-150428-feature-eiffel2   pic-150428-feature-eiffel3     pic-150428-feature-eiffel4    pic-150428-feature-eiffel5    pic-150428-feature-eiffel6

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Property Update (27 April 2015)

City of Chengdu is emerging as a hot spot for investments |

CHINA : More than half of the world’s Fortune 500 companies are represented in the city of Chengdu and it is in the midst of a construction frenzy to become an economic powerhouse.


Another Bishan maisonette flat goes for more than $1 million despite declining resale flat price index |

SINGAPORE : Despite the declining resale flat price index, an executive flat in Bishan has sold for more than a million dollars this month.

The 149sqm executive maisonette in Blk 192, Bishan Street 13, changed hands for $1.05 million, according to the Housing & Development Board’s online data.

Built in 1987, the two-storey unit between the 22nd and 24th floors, has 71 years left on its 99-year lease.

Another maisonette at Bishan St 22 sold this month was priced at $812,000. The 146sqm unit is between the 7th and 9th floors.

Bishan is known for its record-beating HDB flat prices, but it now has competition from Pinnacle@Duxton. Read more here >>


PH Banks tighten rules on property loans |

Philippines – Banks tightened anew their lending standards for commercial real estate loans in the first quarter, a Bangko Sentral ng Pilipinas (BSP) survey showed.

“The net tightening of overall credit standards for commercial real estate loans was attributed by respondent banks to perceived stricter oversight of banks’ real estate exposure along with banks’ reduced tolerance for risk, among others,” the BSP said.

“In particular, respondent banks reported wider loan margins along with stricter collateral requirements and loan covenants for commercial real estate loans. At the same time, respondent banks also cited reduced credit line sizes and shorter maturities for this type of loan,” the central bank said.

This is the 11th consecutive quarter that banks tightened their lending standards for commercial loans, based on the quarterly Senior Loan Officers Survey conducted by the BSP.

Latest central bank data showed banks’ exposure to real estate increased 21 percent to P1.221 trillion last year from P1.006 trillion in 2013. Read more here >>


KL-Singapore rail link may miss 2020 deadline by two years |

SINGAPORE : Keen travellers from both sides of the Causeway may have to wait a little longer for the multibillion-dollar high-speed rail link between Kuala Lumpur and Singapore as the project could be up and running some two years later than its original 2020 target.
According to sources, 2022 may now be a more realistic deadline for the completion of the mammoth project estimated to cost nearly RM40 billion (S$14.9 billion) as there are many “big moving parts” that have yet to be ironed out, rendering the 2020 deadline a tad too ambitious.

“This (the delay) is not necessarily a bad thing. It’s a huge project. More time is needed to sort some aspects out so that it can take off smoothly,” a source close to the project told The Business Times.

It is also understood that the engineering, procurement and construction (EPC) contract for the project – dubbed a “game changer” as it will cut travel time between Kuala Lumpur to Singapore to 90 minutes – may be awarded on a negotiated basis, although a firm decision on this has yet to be made. Read more here >>


Penang real estate market is HOT |

MALAYSIA : Iskandar usually gets the headlines in the Malaysian property story but Penang’s real estate market has had a bumper year.

Prices have surged 17 per cent from 2013 to the end of last year, according to a Credit Suisse report, easily exceeding the Malaysia-wide rate of 11 per cent.

The region accounted for 9 per cent of properties sold in 2013, making it the country’s third-largest market behind Klang Valley and Johor. Ms Christina Lau, head of marketing and sales at Malaysian-listed property group Eastern & Oriental in Penang, credited the strong performance in part to the policies of the state’s government.

She cited the Penang Paradigm, a 10-year development blueprint released in 2013 that focused on three elements of development: economic dynamism; liveability and sustainability; and social development and inclusion.

Additionally, Penang had been successful in carrying out its plans through public-private partnership, said Ms Lau. She also highlighted initiatives to improve the state’s infrastructure, such as the RM27 billion (S$10 billion) Penang Transport Master Plan.
This aims to overhaul the state’s transport system by building highways and improving public transport. The area’s good economic prospects have played a part as well. Read more here >>

3 Things You Need to Know About Buying Property Near an Upcoming MRT Station


By Joanne Poh |

With property prices falling like a coconut above your head, you may be lured into thinking that any deal is a good deal right now. Whether you’re looking for property that offers the greatest value for money right now or are concerned about future rental yields, you need to know just how having an MRT station nearby affects the price you pay now, and how good an investment the property will turn out to be later on.

1. Expect to pay at least 10% to 15% more
If your new property is located up to 400m from an MRT station that’s about to be built, in general you can expect the price to get jacked up by about 5% to 15%.

The stage at which you purchase the property also affects the price you pay, as homeowners tend to increase their prices in two stages:

  • Once URA announces the new MRT station, homeowners in the vicinity generally immediately increase their their prices by 5% to 10%.
  • Between the time the MRT station is announced and when it’s almost completed, many sellers will lower their prices if demand isn’t high.
  • In the year before the MRT station is completed, prices rise again by 5% to 10%.

Be especially wary of new developments, as developers are likely to have paid a huge sum to secure the land and will be only too happy to pass on the cost to you.

If you’re looking for a property close to an MRT station, you’ll want to pick one that’s close to a future MRT station that is still rather far from completion as prices will be at a premium if the station is going to be up and running in 6-12 months.

2. High prices don’t necessarily translate to high rental yields
Many people rush into buying property near impending MRT stations thinking that if the prices are high, this must be a good investment, right? Well, yes and no.

You have to understand that price increases are set by private sellers and developers before the MRT station is built, as a result their guess is as good as yours as to how much rents will actually increase.

Unfortunately, there’s no formula for determining exactly how high your rent will go. In general, rents tend to fall during the construction phase, because an expat who’s in Singapore for 2 years is not going to pay more to hear drilling and endure congested traffic for the entire duration of his stay.

You will generally see an appreciable increase in rent only once the MRT station is completed. Even then, the actual premium landlords enjoy will vary. Many factors can work to lower the rent tenants are willing to pay, including:

  • Distance from the MRT: anything that’s more than a 400m walk away is usually considered too far, especially given the wonderful weather here;
  • MRT line to workplace: if your tenants have to change lines twice just to get to work at Raffles Place, the MRT station beside the property isn’t actually adding a lot of convenience to their lives;
  • Socioeconomic factors: your area and property type will influence the type of tenants you get, some of whom will not be that thrilled that they’re close to an MRT station. If you’re renting out a massive penthouse on prime land, your buyers will be more concerned about whether there’s somewhere to park their Ferrari than the fact that there’s an MRT station nearby. As a general rule of thumb, the greater the public-to-private housing ratio in your area, the more likely property prices will be affected by proximity of MRT lines.
  • Noise pollution or loss of privacy: Sometimes, being too close to an MRT station can be a curse rather than a blessing. If the tenants are forced to listen to “Doors closing, please stand behind the yellow line” every second of their waking lives or subject themselves to the prying eyes of commuters staring into their homes, don’t be surprised if they prefer to pay more to stay one block behind.

3. Know which areas are good
Analysts have high hopes for properties close to stops on the upcoming Thomson-East Coast Line such as Bayshore, Marine Parade, Amber and Bedok South.

However, price increases are unlikely to be as sudden before, due to the fact that there are now far more MRT stations than there were when the North-East Line and Circle Line were first announced, as well as the URA having allowed for lots of breathing space with its 10-year timeline.

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