http://propertysoul.com/2014/04/22/t...operty-prices/
The resurrection of property prices
April 22, 2014
The past Easter holiday celebrates the resurrection of Jesus Christ from death on the third day, a critical belief in Christianity.
By coincidence, the past Easter holiday also marks the resurrection of the purchase price for a private property bought in the mid-1990s by a friend of my father-in-law.
I am not surprised that it takes him almost 20 years to break-even. I just wonder how many people are comfortable telling others how long it takes for their overpriced property to ‘return to life’ again.
Why PPI can be deceiving?
The Property Price Index (PPI) does show that the property price peak in 2nd quarter 1996 is surpassed by a new high some time in the middle of 2010.
However, PPI is an index that only shows the average price of all caveats lodged when buyers exercise their Option to Purchase. It monitors the general price movement of all private residential properties, but hides all the deviations from the average PPI.
PPI includes all the transacted units from property new launches sold at ‘future prices’ by the developers. It also encompasses resale units from relatively new projects that are able to sell at higher prices.
There are relatively few transactions from projects that are 15, 20 years or even older. Afterall, with so many new launches coming up every quarter, who care to recall such old development?
What goes up must come down
It is naïve to believe that prices can rise indefinitely. The market never goes up or down forever. It is destined to change course at a certain point of time.
Nothing can defy the law of gravity: If you drop a ball from a height, it will bounce back from the ground and reach for the sky again. And the higher it bounces, the nearer to the point you will see the ball falling again.
Forget the sales talk about how property prices can only go up, how property market always prospers in the long-term, and how this time it is going to be different.
The Japanese property bubble that burst in the late 1980s started two lost decades (and still counting). The question is: How long are you prepared to see the resurrection of your purchase price?
How history repeats itself
Many people are asking: What will happen to the Singapore property market?
If you want to understand the financial market and how it will turn out next, don’t study economics or finance. You should delve into history. For history doesn’t only show you how to read the present, it also tells you the future from the past.
Don’t just look at the name and date of a historical event. Read the details. You will find that there are many lessons to be learnt because there are so many up and downs in the history of the property industry.
If the history of Singapore is not long enough to show you enough examples, look outside the country. Look at what have happened in the property market in any country in Asia, US or Europe.
If the property market has not given you too many hints, you can look outside real estate to study the history of different market bubbles. We have experienced many industry booms in our history: the railway industry in the 1840s, the commodity market in the early 1970s, the technology stocks in the late 1990s, and the US housing market in the 2000s. But somehow these booms all developed into speculative manias, before they finally collapsed and caused an economic upheaval.
Technology evolves over time. Things change in the long run. But the ignorance and greed of human nature remain the same.
Once you understand the past, you can explain why things are where they are now. Once you know what is going on at present, it is not difficult to tell what will happen in the near future.
Stay calm, be intact
I am not a doomsayer. But please keep in mind that:
When the market is hot, there is no need to be too excited. Likewise, when the market is gloomy, it is not necessary to be too pessimistic.
Buy new launch projects before prices go up again?
All overseas properties promise handsome profit?
Any time is a good time to buy property?
Property prices will always go up?
Property is a safe investment for the long-term?
Whenever you hear people making these statements, you don’t even bother to argue.
You just keep quiet and smile.
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Originally Posted by Ringo33
