Tan Kin Lian's Blog: Drop in home prices

Tuesday, April 03, 2012

Drop in home prices

In a downturn, home prices can fall by one-third. This has happened in America. It could happen in Singapore.
http://www.cnbc.com//id/46930173

7 comments:

Miko said...: Hopefully, the correction of home price will come soon likes you said. See the ridiculous BTO price set by HDB recently....; April 03, 2012 2:01 PM
Spur said...: Bloomberg just reported that average house in US has dropped by 34% from the peak in 2006 till today. A serious property recession is a long-drawn affair, with false starts and many minor ups & downs in-between.

In Singapore's last major property recession, private property dropped 40% from 1996 to 2003. It was only in Q2 of 2004 that our private properties bottomed out, stabilised and slowly recovered.

The most important thing for property buyers is not to lose their jobs and be able to continue servicing their mortgages. Else it's you die your business.

Property is not like liquid stocks where you can have 15% or 20% moving stop-loss, and sell off instantly. By the time property price drop 10-15%, the economy will already be very bad and very few buyers or tenants. Opportunist vultures will offer to buy your property at 25-30% discount. You want?

And if your property is the only residential property, then it's worse. You cannot even do a quick fire-sale at 15-20% discount. You will be tied down with family considerations and also emotional baggage.; April 03, 2012 10:34 PM
ron said...: The property market in Singapore is very unique.

A)Almost 90% of land is owned or controlled by the Gov.

B)HDB prices affects the market and HDB is a Gov agency.

C)There is limited land

These are undeniable facts.

Unlike USA/Australia/Canada or even Hong Kong, property prices here will remain high.

Yes, if we track history, prices have gone down before. But they did not stay suppressed for long.

Tweaks here and there refloated the market:

A) CPF rules relaxed for funding of private property (1991)
B) Singles can buy HDB
C) HDB owners can also own private property ( until lately)
D) Loans made easier
E) Estate duties abolished

The last item allowed many people to lock their wealth into properties since they could avoid paying high duties after they died.

This singular item alone will attract people to park cash into property.

Of course prices will move down but with these unique tweaks, and I believe more will come from the Gov, the market will remain stable.

There is too much at stake to allow a prolong depressed property market.
Just make sure you can hold out for as long as 3 years. And that is after 2014 because the USA has already committed to low interest rates till then.. with the ECB promising loans with low rates till 2016.

Unless a war breaks out in Malaysia, Indonesia or Philipines, all will be predictable.
War beyond 10 hour flight time from us have zero impact on us.; April 03, 2012 11:32 PM
Weng Mao Fa said...: "In Singapore's last major property recession, private property dropped 40% from 1996 to 2003...." (10:34pm)

During those days, a 1950sqf Jambo flat costs $200k or lesser,
a 4-room flat costs $60k or lesser. A 99 year leasehold condo unit costs $400k.
Most Woodlands residents have least worry if downturn again in future.; April 03, 2012 11:43 PM
yujuan said...: Singaporeans think the safest asset investment is bricks and mortar, other asset classes come second, perhaps the previous financial breakdown of 2007 does contribute this mindset. The Govt, being the main landowner in Singapore, gleefully play along with it, who wan to kill off the golden goose that lays golden eggs.
But the safest investment could become the worst investment if timing is not right, and you have to wait long long to come out of negative equity, long enough not to bankrupt you. Only the most conservative, kiasi and kiasu people would place all their money in property.
A very good example is Springleaf Home Developer. The Lims are traditionally the most conservative Developer in Singapore, but in 1996, joining the crazy property chase at that time, invested in a huge piece of land in Upper Serangoon Road to build condos, placing all their family's financial resources to bet big. Then the Asian Financial Crisis suddenly hit, and everything collapsed like pack of cards, and the Lims of Springleaf never recovers to this day.
This is food for thought, timing to all investments is the key.; April 04, 2012 12:16 PM
michael13 said...: The PAP government's policy of asset enhancement especially in the case of the HDB property which is like 'riding a tiger not knowing how to get off without being eaten.'

On one hand, some group of the property owners enjoy the good appreciation in value over the years, but on the other hand, many young couples or the lower/lower middle income group of Singaporeans find the sky-high prices are simply beyond their reach. A very big dilemma for the ruling PAP. Pray that 'Hero Khaw Boon Wan' will succeed in his magic game of striking a good balance - A Real Miracle!

Overall, the property market has no doubt, reached its peak. Some analysts expect another 15% to 20% of decline in price in the next 5 years. How accurate they are is anyone's guess.; April 05, 2012 3:08 PM
Michael said...: Does not matter, this is a matter of sucker market . If there are no sucker around during the recession, prices will fall until a sucker starting appearing . This is how things works. If prices start falling 5 % , and y don't sell, well , you can wait until it falls 15 % and 20 % before y start to regret for not selling .; July 30, 2012 9:18 PM