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vip
04-07-14, 17:05
http://propertysoul.com/2014/07/04/fishing-at-the-bottom/

Fishing at the bottom

July 4, 2014

(Below is an article extracted from my book No B.S. Guide to Property Investment – Dirty Truths and Profitable Secrets To Building Wealth Through Properties (http://propertyclubsg.com/resources))

A friend of mine is puzzled why I keep warning others to beware of buying overpriced properties in an overheated market.

“Didn’t you make your bucks from people who bought recklessly at the last peak of the market?”

“If all buyers are so cautious, where can you find good deals next time when the market crashes?”

I was speechless. You won’t go warning the fish about the bait when you also want some fish for dinner.

And I did make my first bucket of gold buying cheap from owners who bought at the last peak of the market, and reselling their properties later with a decent profit.


Pick only the best

I love to shop in a buyer’s market. But that doesn’t mean that I just buy anything there.

It is true that there are many owners who are forced to sell during a difficult time. Yet I can’t buy from all of them.

I prefer to buy from an investor who sells to cut loss, rather than from an amateur who is forced to sell his home. Although both have bought at the wrong time, you can easily tell from an investor’s place that it is chosen with market insights and experience; while the amateur’s place is most likely not a good choice — a bad project, a poor location, an odd layout or a wrong facing.

Do your research well in advance. When the market is bad, go in and buy things for far less than what they are worth. And pick the good ones only — those with top quality, the best location and good rental potential.

There are two reasons why you should be picky when fishing at the bottom:

1. If prices dip further, with more good bargains on offer, you will regret that you haven’t chosen the best.

2. Once the market recovers, the prices of good properties will pick up earlier and faster than the rest of the market.


How to tell it’s the bottom

Nobody can tell what will happen to the market next. But you can tell when the market is bottoming-out when:

1. You see very short listings of properties for sale in the paper and property sites.

2. You call up property agents and they have all the time in the world for you.

3. You are the only one who comes for the viewing and the owner begs you to buy.

4. You talk about property, and people look back in pain or in contempt.

5. The market is gloomiest, everything looks depressed and everybody is pessimistic.

Jim Rogers said, “Successful investing means getting in early, when things are cheap, when everything is distressed, when everyone is demoralized.”

(Just earlier this week, a reporter from Straits Times asked me whether I would consider buying now in a buyer’s market. I immediately corrected her that I didn’t think it is a buyer’s market yet. It is at most a market slowdown. I told her that I would be more conservative because I don’t want to see prices drop further after my purchase. Read article Home prices continue to dip in Q2 (http://www.propertyclubsg.com/wp-content/uploads/2014/04/ST_Jul214.jpg).)


Be patient

To invest against the property cycle, you must have the patience to wait.

Great investors like John Templeton advocate buying at the point of maximum pessimism. You must wait until the ninety-ninth person out of a hundred gives up. Buy only when all signs of funds (whether hot money or hard-earned money) are drained from the property market.

Similar to buying undervalued stocks, buy after a major market correction. Look for undervalued properties and wait for the market to recognize their true value. When you buy way below the fair market value, the risk is lowered substantially.

Have financing ready before you need it so that you are able to act promptly when a good opportunity swings by.


Buy low and hold

In a bear market, it is important to buy with a buffer. Even if you are buying at the bottom you must be prepared for prices to drop further.

Try your best to bargain for a safety margin of 15 to 40 percent below the current value of your target property. And always keep a positive cash flow from the monthly return of your property.

You don’t have to follow my strategy to buy at the bottom. You may just look for a value buy. Use your own strategy and go for it. You might benefit from your niche purchase with less competition and earn a higher profit.

Allthepies
04-07-14, 18:56
my only advice now is for those without any properties, now is the good chance to buy buy buy... : )

Arcachon
04-07-14, 19:03
Got the same feeling when I was in 2006, why people not buying with all the announcement, waiting for Durian to drop........?????????

invigorated
04-07-14, 20:01
my only advice now is for those without any properties, now is the good chance to buy buy buy... : )



Thanks for the insightful sharing Vip.

I dont feel that it's a good time yet as prices by some developers have still held firm. Like what the article mentioned, pessimism isn't fully felt in the market. But then again, if you find a unit that you really like and don't mind the possibility of future price cuts then..

Think past buyers of sky habitat, panorama and interlace..

Wynyard
04-07-14, 20:41
But hor, vip says market not at bottom yet leh, analysts also predict price will correct at 20% by next year. :confused:

Wunderkind
04-07-14, 23:26
You heard about the Hunger Games.

Have you heard about The Great Waiting Games ?

We have an interesting situation today.

There are genuine first time buyers who desire to own a private property, but do not want to be suckers who buy today and the price of their property fall tomorrow.

There are also buyers and investors out there who are waiting for the CMs to be removed to plunge into the market.

There are also sellers who for one reason or another , will only off-load their properties at a profit or breakeven if they are desperate.

It seems like everyone is waiting. Buyers and Sellers.

The reality is that in the next 2 to 3 years, a glut of private properties will come on-stream and interest rates will go up.

It is obvious that the market will have a soft landing in 1 to 2 years time.

Maximum pessimism will hit the market in two years' time when the combination of higher interest rates, supply glut and low rentals ( the triple whammy effect ) ignite the "perfect storm" .

The key question is when the government will step in to do something about it before the soft landing becomes a avalanche.

Buyer waiting. Seller waiting. Government also waiting.

leesg123
04-07-14, 23:42
Well, while waiting foe the so calld corection,many owners would have collected rentals already. Also, interest rate should have minimal impact to most pte prop investors as our loan is pretty low due to cooling measures.
You heard about the Hunger Games.

Have you heard about The Great Waiting Games ?

We have an interesting situation today.

There are genuine first time buyers who desire to own a private property, but do not want to be suckers who buy today and the price of their property fall tomorrow.

There are also buyers and investors out there who are waiting for the CMs to be removed to plunge into the market.

There are also sellers who for one reason or another , will only off-load their properties at a profit or breakeven if they are desperate.

It seems like everyone is waiting. Buyers and Sellers.

The reality is that in the next 2 to 3 years, a glut of private properties will come on-stream and interest rates will go up.

It is obvious that the market will have a soft landing in 1 to 2 years time.

Maximum pessimism will hit the market in two years' time when the combination of higher interest rates, supply glut and low rentals ( the triple whammy effect ) ignite the "perfect storm" .

The key question is when the government will step in to do something about it before the soft landing becomes a avalanche.

Buyer waiting. Seller waiting. Government also waiting.

Good house
05-07-14, 00:31
Have being hearing crash coming every year since 2009.
So many expert saying the same thing.

Kelonguni
05-07-14, 00:56
You heard about the Hunger Games.

Have you heard about The Great Waiting Games ?

Buyer waiting. Seller waiting. Government also waiting.

Govt not totally waiting. They are doing something in the background.

It should be flat going forward.

teddybear
05-07-14, 12:16
But Tharman says no crash, so how can correct by 20%? Contradicting words from analysts! :beats-me-man:


But hor, vip says market not at bottom yet leh, analysts also predict price will correct at 20% by next year. :confused:

Kelonguni
05-07-14, 12:42
But Tharman says no crash, so how can correct by 20%? Contradicting words from analysts! :beats-me-man:

It's very simple. Most analysts and politicians think there is a 10 to 20% dip, which is not considered crash as most owners already have paid 20 to 30% upfront.

A crash will be some 30 to 40% decline which might require banks to take safeguard actions against some owners, triggering stagnancy or further decline.

walkthetiger
05-07-14, 12:59
It's very simple. Most analysts and politicians think there is a 10 to 20% dip, which is not considered crash as most owners already have paid 20 to 30% upfront.

A crash will be some 30 to 40% decline which might require banks to take safeguard actions against some owners, triggering stagnancy or further decline.

...20%, 30% or 40%...all up to individual how they see it...gov can always say there is no crash, even you think there is... It is all up to the majority what they are wishing...gov listens to them...

teddybear
05-07-14, 19:30
Then may be ask Tharman to be more transparent and define what % drop then he consider a "crash"?


...20%, 30% or 40%...all up to individual how they see it...gov can always say there is no crash, even you think there is... It is all up to the majority what they are wishing...gov listens to them...

teddybear
05-07-14, 19:32
A crash should be when the property market price is below the loan, which is why since most properties mortgage is 80% of LTV, thus 20% is taken to be the threshold for "crash". However, you may want to ask Tharman to define what % drop before he consider a "crash"?


It's very simple. Most analysts and politicians think there is a 10 to 20% dip, which is not considered crash as most owners already have paid 20 to 30% upfront.

A crash will be some 30 to 40% decline which might require banks to take safeguard actions against some owners, triggering stagnancy or further decline.

Kelonguni
05-07-14, 20:11
A crash should be when the property market price is below the loan, which is why since most properties mortgage is 80% of LTV, thus 20% is taken to be the threshold for "crash". However, you may want to ask Tharman to define what % drop before he consider a "crash"?

Politicians craft their words carefully. There is no way you can corner him to give you that specific %. Moreover, despite the best intentions, his predictions CAN and MIGHT be wrong, and the precise change can differ across different property types.

walkthetiger
05-07-14, 20:20
Politicians craft their words carefully. There is no way you can corner him to give you that specific %. Moreover, despite the best intentions, his predictions CAN and MIGHT be wrong, and the precise change can differ across different property types.

Also taking advantage of unclear words...there is no absolute precision

walkthetiger
05-07-14, 20:52
A crash should be when the property market price is below the loan, which is why since most properties mortgage is 80% of LTV, thus 20% is taken to be the threshold for "crash". However, you may want to ask Tharman to define what % drop before he consider a "crash"?

Haha..If next time I see him I will check with him....hahaha

Strata
05-07-14, 21:11
A true crash is when financial crisis hits again and everyone start loosing their job. Most buyers have enough ammunitions as long as the job and share markets are stable. Cooling measures will not crash the market pse; at most it just price correction. Everyone thinks not worth to sell and buy, it will cool down the market sentiment. This will only affectthose short term investors.

Kelonguni
05-07-14, 21:20
A true crash is when financial crisis hits again and everyone start loosing their job. Most buyers have enough ammunitions as long as the job and share markets are stable. Cooling measures will not crash the market pse; at most it just price correction. Everyone thinks not worth to sell and buy, it will cool down the market sentiment. This will only affectthose short term investors.

Current cooling measures won't cause a crash of course given current situation.

But freezing measures can cause a crash. Consider if properties are subjected to same financing rules for cars.

But of course no modern govt will do this in the right mind.

Arcachon
05-07-14, 21:30
Then may be ask Tharman to be more transparent and define what % drop then he consider a "crash"?

A crash is where no developer tender for GLS.

walkthetiger
05-07-14, 21:33
Current cooling measures won't cause a crash of course given current situation.

But freezing measures can cause a crash. Consider if properties are subjected to same financing rules for cars.

But of course no modern govt will do this in the right mind.

young men, interesting...freezing measure vs current measure... hope you able to differential ...Teddy should able to give you a straight answer, what he thinks is happening...

boonlaysg
05-07-14, 22:02
The reason why prices have not come down much is becos like what some have said, the govt has only remove speculative demand in the market. there is no real pressing reasons for sellers to sell. those that are desperate to sell are those who have individual reasons or problems or issues...lost a job,...retiring, or lousy facing or layout and have a hard time finding tenants etc...So the desperate owner is keen to sell at a lower price as buyers these days turn more picky. but once that particular unit is sold, other buyers who are keen to buy the better units in the same development at the reduced price or lower will discover that not many good or normal units are selling at the lower price. that is why price have only eased a little. The price will truly trend lower if it becomes a market problem where many people are looking to dump their houses...such a market event has not occurred yet...so for buyers looking to fish at the bottom, you really have to pray hard this event happens,..else price is just going to move down a little or even sideways..in fact the recent cooling measures have made the SG property market more steady going forward...so for those looking at the longer term, it is actually a good time to start looking now....

Yuki
05-07-14, 23:06
The reason why prices have not come down much is becos like what some have said, the govt has only remove speculative demand in the market. there is no real pressing reasons for sellers to sell. those that are desperate to sell are those who have individual reasons or problems or issues...lost a job,...retiring, or lousy facing or layout and have a hard time finding tenants etc...So the desperate owner is keen to sell at a lower price as buyers these days turn more picky. but once that particular unit is sold, other buyers who are keen to buy the better units in the same development at the reduced price or lower will discover that not many good or normal units are selling at the lower price. that is why price have only eased a little. The price will truly trend lower if it becomes a market problem where many people are looking to dump their houses...such a market event has not occurred yet...so for buyers looking to fish at the bottom, you really have to pray hard this event happens,..else price is just going to move down a little or even sideways..in fact the recent cooling measures have made the SG property market more steady going forward...so for those looking at the longer term, it is actually a good time to start looking now....

I agree too.

And now that property developers have predicted and know the market mood, they will most probably cut the sizes to reduce the over price...even if they bid lower, I doubt they will decrease the psf by a lot.

Real crash will only happen due to unforeseen event. i.e. black swan events? which can happen anytime; be it in an uptrend or downtrend market.

And I am kinda irked at how the property "experts" kept praising that coco palms successful because the developer has reduced and cut their prices.

They are selling a shorter lease what. If shorter lease then lower price makes sense isn't it? Or I am too naive and missing something here??!

So what I am curious is what kind of job is the vip holding that makes her so sure that she is able to pay the rents and not worry about losing her job?

And qns to those rushing in only if there is a real crash; you sure your job not threatened when such a thing happened?

vip
05-07-14, 23:54
Quoted from my blog post http://propertysoul.com/2010/09/17/property-market-to-drop-50-in-1-to-2-years/
(http://propertysoul.com/2010/09/17/property-market-to-drop-50-in-1-to-2-years/)

"I think the duration of a slow market is more important than the percentage of the fall.

Looking back, the property market plunged end of 1998 during the Asian financial crisis (44.8% drop from peak). But the market climbs to a new height shortly in 2000 Q2.

Everyone remember the gloomy property market starting 2nd half of 2000. Although the drop is less than 20%, it is not until 2007/2008 that those holding onto their properties can offload with a windfall which is long overdue."

Growing from a developing to a developed country, Singapore has never seen a major or 'real' crash in the property market in its entire history.

Marc Faber say in his book that there is a difference between a mini and a major mania. The former, once burst, does not lead to widespread economic damage. After a sharp but brief sell-off, the market uptrend will resume. On the contrary, a major mania seldom happens. But once burst, it can last 10 to 25 years and shakes an entire generation’s faith in the object of speculation, as seen in Japan’s property market in its lost decades.

Yuki
06-07-14, 00:27
Quoted from my blog post http://propertysoul.com/2010/09/17/property-market-to-drop-50-in-1-to-2-years/
(http://propertysoul.com/2010/09/17/property-market-to-drop-50-in-1-to-2-years/)

"I think the duration of a slow market is more important than the percentage of the fall.

Looking back, the property market plunged end of 1998 during the Asian financial crisis (44.8% drop from peak). But the market climbs to a new height shortly in 2000 Q2.

Everyone remember the gloomy property market starting 2nd half of 2000. Although the drop is less than 20%, it is not until 2007/2008 that those holding onto their properties can offload with a windfall which is long overdue."

Growing from a developing to a developed country, Singapore has never seen a major or 'real' crash in the property market in its entire history.

Marc Faber say in his book that there is a difference between a mini and a major mania. The former, once burst, does not lead to widespread economic damage. After a sharp but brief sell-off, the market uptrend will resume. On the contrary, a major mania seldom happens. But once burst, it can last 10 to 25 years and shakes an entire generation’s faith in the object of speculation, as seen in Japan’s property market in its lost decades.

For those people who wishes and prayed very hard for the property prices to crash 40% or more...than I wonder when that happens

1) will you be able to hold your job? If not, still got money to pay?

2) will it be even worthwhile to even invest in property when that happens? Does it mean Singapore no longer considered investment worthy?

3) If the crash is due to the major mania scenario painted above, most likely the widespread economic damage has been inflicted. By then how long will the economy take to recover? or does it even will recover at all?? 10 years? 20 years? or what?

It takes a lot of guts and risks to still invest when that happens.

Yuki
06-07-14, 00:49
And fishing at bottom most probably means you can't buy to rent n hoping rents can cover your mortgage... Most probably the market so bad that most can't rent out.

So you're likely to buy to hold..N holding for unknown period of time..since market so negative... It probably means takes a hell long time.

sandbox
06-07-14, 21:54
Think gov has already anticipated the supply glut and interest rate rise next few years. That's why many people say they will open the floodgates again after election year. :scared-4:

darkseed73
07-07-14, 13:50
Think gov has already anticipated the supply glut and interest rate rise next few years. That's why many people say they will open the floodgates again after election year. :scared-4:

That's if they win the election.

Yes, that's what I believe too.

After next election 6.8 million target will be filled.

All these flats and houses they are building is not for "current" situation. They are trying to avoid what happened previously of ppl come in before houses are built.

The signs are all there, expanding of roads, more efficient transport, more houses, more new towns all pointing to increasing our population to 6.8 million. That is also why govt is not removing the CMs, to keep pricing controlled before election and let it fly again after election.

Timing is important but rock bottom? There maybe some fire sale (due to personnel reason) but don't think that's what the govt is planning.

pod
07-07-14, 14:20
Just my opinion.. u might not agree with the relevance or my own theory.

Crash is when car coe drop to $20k...

Generally people now is still very cash rich and they can afford to hold.

Put it simply, people still have big disposable income on hand.:rolleyes:

seletar
07-07-14, 19:29
The govt will not reduce or remove the CMs until home prices have dropped significantly and interest rates have risen.

Singapore's private debt for both corporate and consumer is huge and the loans are still growing, while deposits are shrinking. The Fed's tapering is on schedule to end QE by Nov 2014, and US interest rates are expected to increase 6 months later in mid 2015. It's only a matter of time before the current low mortgage rates start rising.

seletar
07-07-14, 19:38
According to CIMB, the year-on-year decline in domestic deposits revealed in Singapore’s May banking statistics has not been seen since the SARS epidemic in 1Q03.

“A worrying trend that appeared in May is that DBU deposits shrank (-0.8% mom, -0.2% YTD), led by an outflow of fixed deposits. We have to go back to as far as Mar 03 (SARS) to find a yoy decline in system deposits. As loan growth continues to outpace deposit growth, DBU LDR is up (May:111%, Apr:109%), so is S$ LDR (May:84%, Apr: 83%),”

A shrinking deposit pool is worrying as banks will have to compete aggressively for a shrinking pie, hiking up funding costs for all. The concern is accentuated with the new LCR requirements, especially for the foreign banks who need to offer attractive rates to compete.


http://sbr.com.sg/financial-services/news/chart-day-look-how-fiercely-loan-growth-outpacing-deposit-growth-in-singapor#sthash.SXpPkkPA.dpuf
Published 04 July 2014

Chart of the Day: Look at how fiercely loan growth is outpacing deposit growth in Singapore banks

http://sbr.com.sg/sites/default/files/news/dbu_3.JPG

http://sbr.com.sg/sites/default/files/news/dbu_1.JPG

Singapore banks may be dealing with one of the biggest problems since 2003 as loan growth stomps on deposit growth in May.

According to CIMB, MAS banking data for May showed healthy YTD DBU loan growth of 4.1% (Apr: 2.9%), broadly in line with the banks’ guidance of high single-digit to low-teens loan growth for the full year.

Here's more from CIMB:

The 1.1% mom loan growth was led by business loans (+1.6% mom, +6.3% YTD), building and construction loans (+1.1% mom, +3.1% YTD) and mortgages (+0.7% mom, +2.5% YTD). Meanwhile, consumer loans shrank 0.2% mom and 0.2% YTD as demand for car loans and share financing continue to fall.

Deposits shrank, LDRs crept up. A worrying trend that appeared in May is that DBU deposits shrank (-0.8% mom, -0.2% YTD), led by an outflow of fixed deposits. We have to go back to as far as Mar 03 (SARS) to find a yoy decline in system deposits.

As loan growth continues to outpace deposit growth, DBU LDR is up (May:111%, Apr:109%), so is S$ LDR (May:84%, Apr: 83%).

A shrinking deposit pool is worrying as banks will have to compete aggressivelyfor a shrinking pie, hiking up funding costs for all. The concern is accentuated with the new LCR requirements, especially for the foreign banks who need to offer attractive rates to compete.

If higher rates merely poached time deposits from the local banks, it would not be a worry. However, recent CASA packages suggest that the local banks are equally wary of CASA slippage.

seletar
07-07-14, 19:43
http://sbr.com.sg/economy/news/singapore-faces-credit-meltdown#sthash.qOe5ZXIu.dpuf
Published 02 July 2014

Singapore faces a credit meltdown

http://sbr.com.sg/sites/default/files/news/debtgdp.PNG

Debt levels higher than the US pre financial crisis.

Singapore and other Asian countries are facing an economic crisis of the same proportions as the US financial meltdown that put the world’s economies to its knees. Singapore and many Southeast Asian countries have already surpassed US debt-to-GDP ratio. There is no sign of that growth slowing down. This is eerily similar to the financial conditions that pre-dated the American collapse, and economists are deeply concerned.

According to Duncan Woolridge of UBS, “China, North Asia, Hong Kong, Singapore, Thailand, and Malaysia stand out based on levels of leverage alone as at risk. This trend appears unsustainable and a reversal on the horizon should be expected, though we do not claim to know the exact day that will unfold.”

Here’s more:

Liquidity risk matters as much as leverage. UBS expects the Fed to hike 25bps in mid-2015 and raise Fed Funds to 1.25% by end 2015.

Countries with current account deficits, high loan to deposit ratios, or completely open capital accounts should find it difficult to grow deposits fast enough to sustain the current pace of credit growth, in our view.

Aggressive reform is urgently needed, in our view, unless exports can bail out the region. Unit labor costs (ULCs) have been rising because of weak exports, which is mainly a function of weak DM economic growth.

Asian policies generally aim to prevent unemployment from rising and to sustain wage growth when exports slow. They have largely succeeded at this, but the result is rising ULCs and that means real effective exchange rates appreciate.

That's ok as long as DM demand recovers soon, exports return to strong growth, and ULCs stabilize. However, we still think that export growth on a volume basis will remain perhaps 40-50% below pre-crisis even assuming better exports to DM going forward.

This means no relief for ULCs and real exchange rates should appreciate, but of course they cannot appreciate ad nauseam without a loss of competitiveness and trade deficits.

teddybear
07-07-14, 19:55
Singapore economy going to crash? :eek:


http://sbr.com.sg/economy/news/singapore-faces-credit-meltdown#sthash.qOe5ZXIu.dpuf
Published 02 July 2014

Singapore faces a credit meltdown

http://sbr.com.sg/sites/default/files/news/debtgdp.PNG

Debt levels higher than the US pre financial crisis.

Singapore and other Asian countries are facing an economic crisis of the same proportions as the US financial meltdown that put the world’s economies to its knees. Singapore and many Southeast Asian countries have already surpassed US debt-to-GDP ratio. There is no sign of that growth slowing down. This is eerily similar to the financial conditions that pre-dated the American collapse, and economists are deeply concerned.

According to Duncan Woolridge of UBS, “China, North Asia, Hong Kong, Singapore, Thailand, and Malaysia stand out based on levels of leverage alone as at risk. This trend appears unsustainable and a reversal on the horizon should be expected, though we do not claim to know the exact day that will unfold.”

Here’s more:

Liquidity risk matters as much as leverage. UBS expects the Fed to hike 25bps in mid-2015 and raise Fed Funds to 1.25% by end 2015.

Countries with current account deficits, high loan to deposit ratios, or completely open capital accounts should find it difficult to grow deposits fast enough to sustain the current pace of credit growth, in our view.

Aggressive reform is urgently needed, in our view, unless exports can bail out the region. Unit labor costs (ULCs) have been rising because of weak exports, which is mainly a function of weak DM economic growth.

Asian policies generally aim to prevent unemployment from rising and to sustain wage growth when exports slow. They have largely succeeded at this, but the result is rising ULCs and that means real effective exchange rates appreciate.

That's ok as long as DM demand recovers soon, exports return to strong growth, and ULCs stabilize. However, we still think that export growth on a volume basis will remain perhaps 40-50% below pre-crisis even assuming better exports to DM going forward.

This means no relief for ULCs and real exchange rates should appreciate, but of course they cannot appreciate ad nauseam without a loss of competitiveness and trade deficits.

invigorated
07-07-14, 20:33
Just my opinion.. u might not agree with the relevance or my own theory.

Crash is when car coe drop to $20k...

Generally people now is still very cash rich and they can afford to hold.

Put it simply, people still have big disposable income on hand.:rolleyes:

Coe dips are guided by the supply and demand of coe certs. When I bought my car years back, coe was very low as govt was loose on car population. Housing market pretty much as healthy.