To start off this post, I am going to give you a quote by Warren Buffet that I have heard a billion times.
“Be fearful when others are greedy and greedy when others are fearful.”
– Warren Buffet
When it comes to investing (whether in property, stocks, etc.) in general, the usual consensus is that the best time to enter the market is during a crisis.
Here is a chart that shows the price trend from year 2001 to 2019.
Three major events were highlighted in the chart:
1) SARS (2003 – 2005)
2) Global Financial Crisis / Swine Flu
3) Major Property Cooling Measures In 2013*
*ref: https://www.mas.gov.sg/news/media-releases/2013/additional-measures-to-ensure-a-stable-and-sustainable-property-market
*ref: https://www.mas.gov.sg/news/media-releases/2013/mas-introduces-debt-servicing-framework-for-property-loans
Examples of profitable transactions in different developments for those that bought during market uncertainty caused by crisis or new major cooling measures:
If you are considering whether to take action in today’s market, it would be a good idea to know how to take advantage of the current market uncertainty and seize this rare opportunity to get a good deal.
With all the news about the COVID-19 virus and how it is pushing the world economy into a recession that is deeper and more painful than initially expected…
Opportunists are asking this age-old question:
“Is it the right time to enter the property market?”
By now you should be convinced that we are in a crisis.
After all, Singapore is dedicating nearly $55 billion to combat the coronavirus!
Source: https://www.straitstimes.com/politics/singapores-aviation-and-tourism-sectors-most-badly-hit-by-coronavirus-pandemic-dpm-heng
And we have not even touched on what is happening globally.
In fact, for many businesses, it is more about survival rather than growth.
Of course, when job security is at stake, the last thing on people’s minds is to buy properties.
This is precisely why an opportunity arises!
Remember the quote I shared at the start of this article?
“Be fearful when others are greedy and greedy when others are fearful.”
– Warren Buffet
Let’s be realistic though.
This crisis will not last forever.
At a certain point, there will be a recovery in market sentiments.
Consumers will start to consume again which ultimately causes asset prices to recover.
No one knows for sure when this will end but my gut feel is that market confidence will start to return when the cases start to decline heavily or a vaccine/cure is found.
This is why if you are thinking of entering the market, you should at least start to find out how you can do so in the least risk possible as soon as possible.
Otherwise, when the major news outlets start to report a steady drop of new cases, or when vaccines and cures have been developed, the recovery phase would have already begun.
When that happens, buyers may start to return ferociously partly due to pent-up demand.
Just like what happened in China.
Source: https://www.scmp.com/business/article/3077639/chinas-housing-market-springs-back-life-sales-30-major-cities-triple
The implications are not just in terms of prices but sellers will also be less willing to negotiate as compared to now.
So are we trying to say that NOW is the right time to enter the market?
Yes… And No.
We are very careful when we talk about timing.
While timing does play a role, it would be close to impossible for anyone to time the market.
We have met many home owners and buyers that have tried to time the market and they always tell us this, “We should have bought back then”.
The truth is this: Finding the right price is more important than finding the right time.
(By the way, we touch a little on this concept in our FREE EBOOK)
When we decide to purchase a property, the key thing is to look at the margin.
Let me give you an example of this concept by using this development called Seaside Residences.
Based on our calculations, the breakeven price would be around $1422psf and if we also factor in a 15% profit, the expected prices should be around $1635psf.
Now whenever we talk about new launches, many of our clients will tell us that resale properties are way cheaper.
We totally agree.
Just look at the price comparison with other resale condos in the same vicinity during Seaside Residences launch in 2017:
However, cheap is one thing.
The question you should ask yourself is whether you can see a margin for price growth.
Here are some Seaside Residences transaction prices that were done in the April 2017 period:
We can see that there are units sold at around $14xx psf.
In your opinion, is this a good price to enter?
Remember, that we mentioned the breakeven price for Seaside Residences should be about $1422psf.
Do you see a margin?
Now let’s look at the prices for Seaside Residences in 2019.
The prices ranged from $16XXpsf to $22XXpsf.
If you bought a 1000sqft unit at $1400psf and sold it at $1600psf, you would have easily made $200k in just 2 years!
But how about those that bought at $22XXpsf?
We are not saying that they can’t make money.
They just have to sell at $24XXpsf…
What am I trying to say by showing you the above example?
Many of our clients that we have spoken to actually do not understand how the developers work and how they manage their pricing.
Just look at the Seaside Residences example that I showed you.
The buyers that took action and bought when everyone was fearful made the MOST profits.
On the other hand, the buyers that waited were the ones that PAID most of it.
Which buyer would you prefer to be?
Instead of trying to time the market, your focus should be on finding properties that have the RIGHT ENTRY PRICE.
Conclusion
If you are interested to find out more on how the Singapore property prices work, click here to read our previous blog post: https://letstalkproperty.sg/what-causes-the-ups-and-downs-in-property-prices-since-2012/
We hope that this blog post is useful for you and can give you a fresh perspective on property investments.
Wondering if it’s the right time to buy, sell, or wait it out?
These decisions can be tough, and there isn’t a one-size-fits-all answer.
But don’t worry, that’s where we come in!
At Let’s Talk Property, we are here to provide clarity to you and guide you step-by-step in your real estate journey!
Whether you’re a first-time buyer or a seasoned investor, we hope to partner with you to create a clear plan that’s tailored to your unique needs and provide objective guidance to help you make the best real estate decision.
So, if you’re looking to buy, sell, or just want to chat about your real estate options, we’re here for you!
With our extensive on-the-ground experience, you can trust us to provide a top-notch real estate experience that’s both informative and stress-free.
Do contact us for a sharing session!
Speak With UsTill then,
Let’s Talk Property
Dillon @ 9389 1992
P.S If you have not downloaded our FREE eBook on how to be retirement-proof through Singapore property, you must download it! Click HERE
**Latest update on 10 May 2020:
The Straits Times actually wrote on our property question of the day:
“Is the pandemic a good time to buy a property?”
ref: https://www.straitstimes.com/business/invest/is-the-pandemic-a-good-time-to-buy-a-property
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