Comments, opinions and an occasional ramble
The mad housing market
I’ve been doing some window shopping in the HDB resale market lately and it certainly takes a first hand experience to know how crazy the market is becoming.
In the area that I’m living in, sellers are demanding at least $30,000 above the valuation price of the unit. I’ve heard that some are asking more than $50,000. I think the media reports about record breaking HDB resale flat prices are breaking the brains of the average Singaporean. It seems to me that many homeowners think that they too can sell their units for a record sum too.
Excuse me, but if every seller thinks that way, what profit can anyone make? Let’s say I own a HDB flat now and I now manage to con someone into buying it for $30,000 above valuation. Does it mean that I earn $30,000 just like that? No. The reason is simply because everyone else in the market is refusing to sell unless it’s $30,000 above valuation. So what if you manage to sell? Are you going to put the money in the bank and pitch a tent along East Coast beach for the next 2-3 years, waiting for the property market to cool?
Seriously, this entire madness in the housing market is doing nobody any good. As always, when the economy appears to be red hot, the brains of ordinary folks appear to be thoroughly fried as well. They don’t seem to realise that since prices are generally high, even if they manage to sell at a high price, they have to end up buying at a high price too, unless they can move in with another relative or, if they can stand it, live a tent for a few years.
I’m not prepared to pay that kind of cash over valuation that all the mad sellers are currently asking. I’m going to explore alternatives to minimise the amount I am going to pay for a new home and then patiently wait for the market to come crashing down. I’m then going to demand $30,000 BELOW valuation. 
| Print article | This entry was posted by Aaron Ng on 22/07/2007 at 2:47 pm, and is filed under Ramblings. Follow any responses to this post through RSS 2.0. You can leave a response or trackback from your own site. |
about 4 years ago
Nice read!
about 4 years ago
Aaron,
Looks like the only winners are those who sell and go live in malaysia!
Frankly I don’t think we have “gone mad” yet. You are probably too young to remember 1996….that was one heck of a hot market. My cousin paid $780K for a leasehold condo thinking it will go up foreever. Next think you know is the economy went into recession, her husband’s pay was halved (yes halved, the boss told him take or leave) and for the next few years they struggled.
I believe the market will go up further then come down.
Why not buy new flat from HDB directly, with the grant and all that it should be quit alright.
You never consider bunking in with your family or her family first?
There is a simple secret to buying property and I’ll let everyone in on it. Property prices in Singapore is closely correlated with GDP growth. If you plot the housing prices against GDP, you will see the close correlation.
See the graph here:
http://app.mti.gov.sg/data/article/353/doc/ESS_2001Q1_PropertyIncome.pdf
Every cycle when the property market gets hot, the Property price index will go above the GDP line…then it comes back to hug the line later. So as a strategy don’t buy when property prices are above the GDP line.
Our recessions/slowdown are not hard to predict either, if I’m not wrong there should be one later this year. You can tell each slowdown ahead by looking at the electronics export.
http://singaporemind.blogspot.com/2007/07/illusion-of-wealth.html
Yes our electronics exports have fallen off the cliff. and if you look at Intel’s earnings report + Motorola, it paints the same bleak picture.
Why does our economy look so strong? ….Steroids! Our economy is pumped up by the M3 money supply expansion (see the chart in my blog)….watch the M3….once the pump is gone…say goodbye to our MM Lee’s Golden Period….
about 4 years ago
You qualify for direct purchase of a new flat from the HDB. Why do you want a secondhand one? If you are looking at location, HDB has regular sales programmes in mature estates, with units near the MRT stations going at lelong prices. Have you checked them out?
http://www.hdb.gov.sg/fi10/fi10200p.nsf/DefaultHome/HomePageInternet?OpenDocument
And, remember to tell me when you want to sell you house at at least $30K below valuation. I chope first.
about 4 years ago
Your article reminds me 10 years ago when we had an election in early 1997. I remembered I went to hear the (only, I guess) independent candidate Chia See Teck (spelling may be wrong… wonder how is he going?) talking about the then crazy property market. He also used the similar example like yours, saying that when we sell high, but we have to buy high for another house… unless we buy a smaller house to earn the extra cash, but is that an upgrading or downgrading?
And, few months after that, for all we know, everything start crashing down… things only seem to get better recently. However, it seems like a deja vu thing to me.
I’m not sure how long this ‘good’ time will last, it may last for a few more years before something happen again.
about 4 years ago
the singapore property market is definitely bubbly
http://sophiesworld-sophiesworld.blogspot.com/2007/07/spores-bubbly-property-market.html
about 4 years ago
Hello, if the property market is hot, how can the seller avoid selling it high? If the selling price is not high, then how can the seller afford to buy an alternative accomodation? Wake up, quit whining.
about 4 years ago
Sourketchup,
Of course I understand that the seller cannot avoid selling it high. But how many sellers are selling high because they genuinely need to move? Many of them are selling to try and make a profit. I have viewed a couple of units where the sellers are genuinely interested in moving or selling the house for good reasons and not out to make profit. Their asking cash over valuation is a third to half of what others are demanding. I can’t think of any other reason other than greed as to why people are demanding to sell high. I might make the exact same comment as you did if I didn’t experience it first hand myself.
about 4 years ago
Hi Aaron, my apologies.
Yes, it is now a sellers’ market. As they would say,’when people are buying, sell. When people are selling, buy’. Of course, it is easier said then done for some of us.
You may consider renting somewhere tolerably out of the way to ride out this madness, or as you had put it, stay with your parents for now. I know having parents means there is no ‘er ren shi jie’ (world of two). But consider the benefits of having extra hands (and tired brains) when the little ones come along.
about 4 months ago
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