• Gerald Tay

Property Buyers Are Buying On Unsubstantiated Assumptions

Updated: Feb 13, 2020

I started my property investment journey since 2001.

A majority of my millionaire wealth today is accumulated from my property investment successes in the last 18 years. I've personally experienced and weathered 1997 Asian Finacial Crisis, Dotcom Bubble burst, 9/11, SARS and 2008 Global Finacial Crisis.

I bought properties when no one wants to buy and sold when everyone is buying. It's a simple success formula!

But why then do many investors and buyers seem to do likewise today and especially so in the past 7 years?

Reasons - herd mentality, ignrance and believing in far too many assumptions that hold no water.

‘Expert’ Investment Opinions/Comments in the Media Are Always Right.

It’s always puzzling to know why journalists and buyers often love asking buying and investment advice from the very people who has self-vested interests for profits: – Property Developers, property agencies, property salesman, property investment companies, etc.

The press at large though often tend to play on it for the sake of news in today’s very “noisy” media circus.

Lately, some interesting media comments from ‘property experts’:

“By 2020, projected prices would not differ substantially; however, rent on investment may provide a healthy gross yield, caveated between four to six percent per for astute investors.” (‘Expert’ with a large well-known local property agency, marketing a recently new launched condo)

On another recent new launch property,

“The strong demand for ‘XXX’ is reflective of its premium location…., which demonstrates the value and potential price appreciation of this locale and its surroundings.” (Property Developer who sells the project).

These ‘experts’ made similar euphoria comments in the media before the panic of 2008’s global financial crisis, then property prices plunge.

“We expect the office sector to remain resilient. Investment sentiment to remain positive in 2008, given continued economic growth.”

“Prices unlikely to fall yet…”

“Private residential property sector for 2008 will continue to perform well.”

“Price index for 2008 is predicted to grow in the region of 15 to 18 per cent.”

If you look back to the previous years, hardly any (in fact none!) of these “experts” predicted any financial crisis and property downturns. Their predictions were always up and positive, like flipping a coin, to their own side of interest!

Property is a Good Long Term Investment

No investment is a good long term investment if you bought into the high.

I believe it is getting harder to justify the “dream” of strong capital growth as in the previous years, particularly with recent properties bought in the higher price brackets.

My view is that in the coming years, with an already matured and a peak Singapore economy, property investors and home buyers who bought a high price today, could be disappointed by the capital growth of their properties in the years ahead.

The Rich becomes rich through real estate

The rich don't buy property to become rich. They never do unless you are a big-time property developer.

The rich holds 3% or less of property in their entire asset portfolio. (Source: Forbes) The majority of their assets and wealth are in their business and company stocks.

Compared relatively to ordinary folks, if the Rich's real estate portfolio suffer severe losses, it's only 3% or less.

S'pore land is limited so prices can only go up

Land is only of the MANY economic factors that may or may not impact property prices.

Even so, our land supply is plentiful and most importantly PLANNED AHEAD - at least for the next foreseeable 20 years and beyond, given the many initaiatives by URA and MND to increase our land supply for a sustained economy.

Historically, (Singapore’s) property prices have been rising steadily through the decades, weathering through some of the toughest economic challenges and regulatory curbs.

That's true.. only to a certain extent. If you have bought into property in the peak years of 1996-1998, 2000, 2002, 2007-2008, 2013-today, you'll either be barely breaking even or sitting on financial losses.

The window of great opportunity for good property invetsment returns in Singapore is extremely small: 2- 3 years at most.

After that, it's all downhill. Many of my peers failed to capitalise on the 2003-2006 property growth window.

In fact, many potential buyers stayed away from these great opportnities due to poor economic conditions due to fear. However, if they've bought a property in those opportunity years, they'll have been sitting on great financial benefits today.

Made worse, those who have missed out on the window of opportunities are trying to get themselves into the game by buying into the high of today. Not very wise....

Timing-the-Market” and “Luck” once rule the property market, but real investment skills will rule in the future.

I’m no “expert” and neither do I try to be one. All I did is value my investments with logic, rather than follow the crowd and listen to claimed ‘experts” whose investments contribute little to his net worth.

There’s an old saying: “Never trust those who have nothing to lose.”

If you believe a projected 6.9 million future population and addition of MRT lines will fuel property “value” growth by 2030, you get short sighted.

Buyers who is patient enough to wait out for the close/bottom of market (not sure when yet) will profit from area-specific opportunities in future.

Buyers who bought at “priced-in” future prices today will be seeing meaningless buys.

We’re in year 2019. Today’s smart phones are the size of our palms and getting smaller. From 1970s to 1980s, hand-phones are the size of one-litre water bottles – without the smart!

Technology evolves quickly and so does the markets. It certainly does not take an expert economist to know the high growth years as experienced by our parent’s generation are bygone years.

Neither are we to see one-litre water bottle smart phones on the streets!

Man change, and they like to think that the world changes with them. It does not. It merely tolerates them and continue to follow its own, arcane revolutions.

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