At Property Peaks, Don’t Buy


Condo units sold during the 1996-1997 property peak are now selling at below their launch prices. This is reported in yesterday’s Straits Times. But in the report, no one stated the obvious:

You are taking a big risk if you buy at a peak.

The ST article listed 3 freehold properties that are still “under water”. The Chelsea Gardens at Walshe Road is now selling at an average of $1,508 psf, almost 21% lower than its launch price of $1,900 psf. Similarly, Gardenville (also at Walshe Road) and Avalon (Anderson Road) are selling at around 16-17% below their launch prices.

Among the 4 leasehold properties listed in the ST article, the worst performing one is Bishan 8. It is now selling at only $802 psf, which is 27% lower than its $1,100 psf launch price!

We are now again seeing record propery prices. If you buy now, and let’s say you are as unlucky as the Bishan 8 sellers, you could also make a 27% loss.

Don’t be like this couple.


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  1. But property prices can never go down in Singapore. Sarcasm aside, it’s hard to tell a top, but I know A LOT of people are selling right now.

  2. you know a top when the news media say that property prices are at new highs, HDB is releasing unprecedented land sales and government is implementing cooling measures.

    in 1990s, the government also created the executive condos for the sandwich class among other cooling measures, and not long after, the property market went into tailspin and a long long slumber with a forgettable dead cat bounce in the early 2000s.

  3. Even though property prices might be returning to the 1996 period. But the income of people in Singapore now is at a much higher level as compared to the 1996 period. I think that there is still room for prices to go up further in the short run, given the fact above and the robust economic outlook in Singapore.

    Given the higher purchasing power of people today and the very fact that prices has not return to the 1996 peak period (see article above), once again, I conclude that there is room for increase.

  4. How about comparing within District.
    ie, D9 1997 peak to 2007 peak to 2010 px.

    You will get a more meaningful comparison.
    For every loser you mentioned of people trapped in 1997 peak price, there will be winners of people who bought in 1997 peak price.

  5. Just to share, I bought my previous property in 2000 near the last peak. It is a private property in Sengkang. We bought it to stay and during the last 10 years, the price declined by 30% during the lows in 2004 but we finally sold it this year at a profit of 30% (around $200K).

    We effectively stayed free for 10 years and still earned a net profit of $140K ($200K profit less $60K interest).

    On hindsight in 2000, when we bought the property it was also during a mini peak. We had to queue overnight to buy our place. The situation is quite similar today, where the property prices are peaking. But we still made money despite buying at the last peak.

    It is difficult to time the market especially if you are buying to stay. My advice is just to buy a place that you can afford to service the instalment comfortably without overstretching. It does not matter if prices fall, as long as you are not under pressure to sell, the loss will not materialized. When our property price fell 30% by 2004, we did not feel any pain, it was just a home to us.

    We upgraded to a larger home recently which i bought a few year back. We recently also bought another private property for investment. It is a property very near an MRT just 4-5 stops away from the city, it is a 99 leasehold property and we bought it for abt $1050psf and it will TOP in 3 years.

    We did our sums and calculated that we can easily service the loans for the new investment property purely through the rental given the good location even if rental yields declined or interest rate rise to 3%. We committed the 20% deposit and took a 25 year loan for the rest and we figured that even in worse case the price of the property did not increase in 25 years, we would have made 3-4X of our equity invested because the rental income would have covered the month instalments.

    We also parked another 20% of the total purchase price in liquid assets to cover the possibility of negative equity top-up by the bank and also any periods where we have no tenants.

    I think it is difficult to time the market, when markets were low in 2009, we kept looking but did not press the button fast enough. Most buyers keep expecting market to go lower when markets are coming down and when markets go up, they hope that the market will come back down. Ultimately, they don’t make any decision.

    I think the Singapore property market has fundamentally changed since 1997, Singapore is now a more cosmopolitan city with buyers from China, India, Malaysia and Indonesia. Will prices drop in the medium term, most likely it will, but no one can guess when.

    What happens when prices drop? I will buy another property in a good location.

  6. >Singapore property market has fundamentally changed since 1997, Singapore is now a more cosmopolitan city with buyers from China, India, Malaysia and Indonesia

    singapore has to strike a balance between overly “cosmopolitan” and affordability. so what if singapore becomes more multicultural when prices go beyond what the general population can afford? it’s already hardly affordable for young couples looking to buy their first property. do we want to follow japan’s footsteps where a single housing loan is serviced by 2 or even 3 generations?

  7. Inflation at 3.9% on

    Hard, I think most properties nowadays are not catered towards the general population rather towards whoever can pay the highest.

    Don’t take it personal, if you are a property developer, you’ll probably do the same.

  8. then the general population should just fade away. in the words of Ms Poverty, “it is more profitable for (one) to die now.”

  9. “singapore has to strike a balance between overly “cosmopolitan” and affordability.” Absolutely! I work in a MNC and we are seriously considering of moving our office to China because housing & living costs have risen so much that is becomes unsustainable to attract employees here.

  10. anything that goes up too much will have to come down.we heard people saying at last peak in 1990s that ” property in sin wont come down as sin is small..look what happened.use your brain

  11. I think most people don’t understand the power of leverage here.

    Say if you bought a property for $100 and you paid $20 in deposit and the rest of $80 is in debt.

    In a 10 year period, you rented out the property and assume that you have been able to cover the monthly instalments mostly through rental income and you have paid down 50% of the loan in 10 years, ie $40.

    If you sell the property today say at a 20% loss, ie $80. The cashflow to you is $80 (proceeds) – $40 (principal paid) = $40. Your investment in equity is $20 and therefore there is a gain of 100% (ie $20), this is despite the property falling 20% in price.

    This is the power of leverage, obviously leverage back fires if you cannot service the loan or there are no tenants or the bank calls on the negative equity. Therefore, location is very important and it is essential that the property needs to be rented out.

    Obviously my assumptions are very simple but this is just an example.

  12. James, your example is a good illustration of the power of leverage, but unfortunately it’s too simplistic and ignores several important factors.

    One, stamp duty – you immediately incur a “loss” of about 3% upon purchase.

    Two, legal fees, agent fees and other overheads – can be quite significant.

    Three, interest rate. At 3% pa, assuming in your example that it’s a 20-year loan, you would not have paid down 50% at the end of 10 years. Instead, you would still owe about 57%. There goes another 7%.

    Four, and most importantly, it’s almost impossible now to take a 20-year loan and yet collect rental enough to cover the mortgage installment, condo mgmt fees, repairs and other misc expenses. Unless, unless your condo is 99-year leasehold, in a superb location, you got a great discount when you bought it, and you found a not-too-informed tenant who’s willing to pay way beyond market price.

  13. a gain of 100% over 10 years seems considerable, but it’s only 8% per annum. even 200% over 20 years is just 13% per annum. some good stocks can give you both high dividends and good capital appreciation can do the same, WITHOUT leverage (i.e. less risk, depending on how you look at it). examples include starhub (8% yield) and jaya holdings (12.8% yield) at current prices.




  14. Thanks guys…I think you have made fair points. In terms of example, yes it is too simple. I have done a fairly detailed analysis myself and am fairly comfortable with the risk as I have set aside another 20% ofthe purchase price invested the preference shares which I can liquidiate if I need to pay up the negative equity.

    In addition, who is to say that in the next 10 years property price will not have another new peak. Property price has always surpassed the peak. My own experience has been as such as I bought my property in 2000 and still manage to come out with a decent profit.

    I am again not comparing this to equity, I have allocated about 50% of my portfolio to stocks and 25% in property and 25% in cash which I intend to use whenever I see opportunities in the market, for example during the recent correction I bought about $50K of CRCT at 1.08 which has appreciated to over 1.20. However, I would like to get to a position where 40% of my investments are in property and 40% in stocks and 20% in cash.

    In terms of timing the market, seriously it is difficult to get second guessing, when prices are low, everyone expects it to go lower, in 2009 and in 2006 when prices were low did you guys go into the market to buy? It really depends whether you can take a long term view and whether you think you have a good location.

    Sure I think property prices will go down by how much and when, nobody knows. It is basically impossible to time the bottom which essentially everyone thinks they are smart enough.

  15. James, you said:
    “Say if you bought a property for $100 and you paid $20 in deposit and the rest of $80 is in debt.

    In a 10 year period, you rented out the property and assume that you have been able to cover the monthly instalments mostly through rental income and you have paid down 50% of the loan in 10 years, ie $40.

    If you sell the property today say at a 20% loss, ie $80. The cashflow to you is $80 (proceeds) – $40 (principal paid) = $40. Your investment in equity is $20 and therefore there is a gain of 100% (ie $20), this is despite the property falling 20% in price.”

    I think the above is inaccurate. The cash proceeds should be:
    $80 (selling price) – $40 (loan paid) – $20 (down-payment) = $20
    But you still owe the bank $40 on loans, so you’re still with a loss of -$20.

    Or am I missing something?

  16. “$80 (selling price) – $40 (loan paid) – $20 (down-payment) = $20”

    The load paid is “free” because your tenant was sort of paying on your behalf, right? So you need to add another $40 (rent collected) to your calculation.

    So $20 is the profit.

  17. Yes, it should be:

    Proceeds ($80) – Outstanding loan ($40) – Deposit ($20) = net cash profit ($20)

    Return on investment = Net profit ($20)/Equity ($20) = 100%

  18. This is an unrealistic scenario. Trying to cover monthly installments entirely with rental income, yet doubling your money in 10 years despite taking capital losses on property? Fat hope..

    You’ll need a very high (at least 5% or more) net rental yield for this to happen. That means a gross yield of 7-8%. And also pray that mortgage interest rates will stay low.

    (Note: net rental yield = rent after deducting maintenance fees, repairs, agents’ commission, property tax, income tax and also some allowance for 1-2 months vacancy every 2 years while searching for a new tenant)

    At current prices, average gross rental yields are only around 3%. Which means you’ll have to top up cash every month to pay for a place that someone else is living in!

    On top of that, when you finally sell the place, depending on the capital loss, you may not be able to fully recover your initial 20% deposit + cash topped up for monthly installments, after repaying the loan.

    So I honestly don’t know why people still think property is a good investment right now? It seriously sucks in terms of yield and there’s a high probability of capital losses too.

    If you need a place to live in, no choice, have to buy now. But if you don’t, you’re better off putting your money into equities or bonds. Or even high-yielding currencies (e.g. AUD).

  19. Inflation at 3.9% on

    Simple, property is not a good investment, but it’s a good speculation 🙂

    Pay 10 or 20 percent down, and hope there is a greater fool. It worked for one year since 2009 till now and many years before that.

    The problem is the greater fool. He gets stuck holding the entire structure and since he is a fool, ……………

  20. Don’t forget to take into account new risks such as flood in Singapore. If your property is in flood-prone areas such as Bt Timah, Orchard and Telok Kurau, it may be hard for you to find a tenant. It doesn’t help that Sunday Times published a 3-quarter submerged car on its front page yesterday.

  21. once everyone starts doing it, it’s no longer good speculation because you eventually start to run out of fools to sell to….

  22. The property market in Singapore almost sounds like a big Ponzi scheme! 🙂 I just rent a place for now, live cheaply and save my money to buy better value property in my native Holland!!

  23. Actually, almost everything is a ponzi scheme no? Why should a house bought yesterday for some price increase in value overnight? People point to inflation, but there are many types of inflation, some of which are ponzi (see the U.S. subprime market). People also point out the scarcity of land, bla, bla, bla in Singapore, but if it’s inherent, what explains the occasional price crashes over the last 10 years or so?

  24. True, especially if you consider the 99 year leasehold-scheme here in Singapore… How can an old apartment with fewer years lease left, be much more valuable?
    This only works if Singapore keeps importing people, but as we see now this is stretching the society to a breaking point and can’t go on indefinitely…

  25. MNC : China and HK is 70yrs lease.

    Anyway, I agree ppty might be fairly valued right now. Means if you buy there, don’t expect any upside since most sellers are already pricing in future gains into the selling price.

    But why can a old 99LH be more valuable? Well, it is because income levels have been rising in tandem with inflation. In 1990, a fresh graduate might be earning $2k, now, they might be earning $3k. So, property prices should increase 50%. But, because loans are stretched to the max globally and they now use income-service ration, a leverage effect is applied and property prices now need to be min. 100% higher than it was in 1990.

  26. True, but the main problem in Singapore is that income levels have NOT risen in tandem with property prices.
    The perception seems to be that Singapore will grow itself out of this situation. But the problem with that argument is most real estate being built is not for the masses. This is not affordable housing for the middle class. These are high-end condos with limited rental yield potential. How many expats get a full benefits package nowadays? Most of my expat colleagues come here on local contracts now because of the sluggish job market in western countries…

    I wonder how much of Singapore’s GDP growth is construction. And if they stop construction, the GDP growth will go negative quickly. That’s not going to happen because here, people are rewarded at almost every level of government for making their economic growth numbers. The easiest way to do this: put up another building. So Singapore is really hooked on this sort of heroin of real estate development. This has already lead to a hidden oversupply of condos, just look at the Sail in Marina or Icon. Both TOP a couple of years ago but many units are still unoccupied.

  27. don’t worry, they will massively import more foreigners – unskilled, semi-skilled, highly skilled ones, blue collar and white collar, lock stock and barrel – immediately after the elections. this, along with never ending construction work, will boost our GDP numbers to the roof.

    to exploit it, just buy government linked stocks.

    for those in lower middle class, or the “masses”, take care. maybe buy toto or 4D. good luck.

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  29. yes, i really hope pap survives the next election unscathed… we really need the foreigners to help boost our economy, otherwise who’s gonna rent our condos????

  30. foreigners buy condo these days, they don’t rent anymore. That’s why property prices are increasing much faster than rental rates.

  31. yes, that’s ok too. rich foreigners buy our condos, we make money. poor foreigners rent our condos, we make money. Only the poor folk lose out.

    Let’s hope the poor do not get smart enough to vote our our dear PAP.

    More Lift Upgrading programmes and Drainage Improvement Works and National Day Parades to keep them all happy and cheerful.

  32. “rich foreigners buy our condos, we make money. poor foreigners rent our condos, we make money.”

    That is the myth that developers, property agents and the government wants you to believe. Put your money in condos and there will always be a foreigner who can buy/rent the place.

    Have you seen how sluggish the rental market is or how many empty completed condos there are?
    Check out what happened in Ireland:

    This could happen here too!!!

  33. ireland should learn from singapore. just massively import foreign workers and they’ll get their property to boom like no tomorrow. easy!

    (actually, i think the irish aren’t that stupid to let that happen, unlike us stupid sinkies.)

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