Ep #24: Singapore Property Market #10YearChallenge (Part I)

good afternoon thank you for coming here
for my presentation and support me on a Saturday afternoon this ten year challenge
is also called 2009 versus 2019 challenge it is very simple you
post a photo of you in 2009 versus a photo of you next to it in 20 9 so
that’s why we have this ten year challenge for some people who would like to step
up the challenge they might get a 20-year challenge or 30 year challenge
photo this is what our Minister has done because he believed that he had the
same beautiful smile so I’m going to show you mine by the way I also have a
1989 one but because it is so similar to the one in 1999 I think is redundant so I just put this over here so I look very healthy ten years ago
but this is not the case because in 2009 somehow I was in this company in the
top management team and a year later they have the financial crisis and there’s
a lot of cost-cutting restructuring and layoffs I was so stressful that every
day after work I would go to this Hort Park to go for a run because I have a husband
and a toddler at home I don’t want to bring all the negative emotions and
stress home so I have been doing running so much for that year that by the end of
2009 I joined the Standard Chartered Marathon I run a full marathon under
four and a half hours today in this presentation we’re going back to 10 years
time to look at what the property market is like back in 2009 during the
financial crisis and then you’ll see the challenges of the developers and the home buyers
and stakeholders during that time for people who have bought the new launch
projects in 2009 what happened to them now
and we look at during the bad times the hard-hit and the resilient
properties at that time and then over the last ten years which are the projects that are
most hard-hit or the most resilient in the last ten years then we look at now
in 2019 what is the property market like have they learned a lesson
from the last ten years after the bankruptcy of Lehman Brothers it kick-started 2 year subprime crisis I like this movie the big shot
it’s about the financial crisis why it started the causes during that time and
at the end what happened after that five trillion dollars in all the investments
and money have got and then eight million people lost their jobs plus six million
people lost their homes and it’s just in the US in Singapore the situation is
not much better our property transactions in one year’s time from the peak of 2007 it
dropped all the way the volume dropped 65.8% and prices have fallen 21 to 25
percent when I look at transactions of all the prices during that time that real
prices drop 21 percent but PPI at that time from the peak have dropped 25 percent but we’re not talking about individual markers for the luxury
market for the high-end market actually prices have dropped 30 to 35 percent let’s look at what had happened during the worst time that’s first
quarter of 2009 and what happened last quarter as you see we have very boring
figures to show in last quarter because there’s not much change in both property
prices and rental here but if you look at the first quarter 2009 our
private residential property prices have dropped 14 percent followed by offices 12
percent industrial 10 percent and retail 4.2 percent and it is
just in a quarter rental is not better you see offices have dropped in a
quarter 10.7% forwarded by private residential 8.5, 5.6 industrial and retail another 3.3
so this is very bad in just one quarter’s time
very scary to see how much prices and rental have dropped so what happened to
the developers and home buyers at that time during the peak of 2007 in the last en bloc craze actually we have 150 in a year of closed deals in en bloc but before
the onset of the financial crisis we managed to close only 7 deals after
that the number is zero for the number of new sales in 2007 we have 14,811 that sets the record for the new units sold in
that year after that the whole year of 2008 we only managed to clear 4200 units if
it’s not bad enough if you look at the luxury market this is whole list of
projects that’s available at that time so this table is from The Straits
Times as of November 2008 you see that we have 2200 units
launched at that time half of them are and unsold what are the challenges of developers
actually not all developers are making losses at that time why because remember a
lot of big developers they have bought their land at very low price during
2005 2006 at that time and then they launched it during 2007 so they managed
to make a very handsome profit but not for people who just bought in 2007 and
have to launch immediately after the onset of financial crisis so what did they
do in 2009 they give a lot of discounts discounts level is easy 20% and you can
go up to 50 percent if you remember correctly at that time during chinese new year
they give hongbao hongbao i’s not your $50 one it’s $1,200 hongbao if you buy during the Chinese new year time and then they also waive the
legal fees and the stamp duties then of course there are a lot of other gimmicks as well some developers they resort to selling the projects in bulk for
example the Quartz which is sold by the Guocoland the Malaysia property developer they managed to sell off one big bulk of 160 units of the Quartz to
a company that cleared the rest of the units by giving just a 10% discount
A lot of developers at that time they just postponed the launch or they cancel or
delay the construction why because they know construction costs
are going to go down during the bad times so there’s no point continue to build it
because after you build it you have to launch you see so that’s why they simply stop
or postpone the construction of the projects some of the developers what
did they do with those land sites that they bought at sky-high prices during en bloc they just stopped rebuilding and then they continue to lease our all the
units so those projects they leased out after en bloc without rebuilding at
that time include Grangeford, Leedon Heights, and also Lucky Towers they’re all the
luxury projects and in the prime districts some of them of course they
try to pull back from all these en bloc deals one of them is the famous one is Cairnhill Heights developer is Jewel 1 what they did is that 20 days before the
completion of the deal they back out they’d rather forfeit the deposit of 2.2 million of the 44 million deal then take the risk what happened to
Cairnhill Heights 10 years later in 2018 they managed to sell it en bloc to another developer at 76 million dollars which is not bad because they
sell it right before the introduction of the new cooling mashes because they sold
it in April in 2018 what happened to home buyers some home
buyers have bought the projects or the properties at the peak of the market
in 2007 because there is a time lag between the time the bank
approved the loan to the time of the disbursement so that’s why in between
anything happened who is going to bear the cost the risk is the home buyers so
the banks asked the owners to top up the difference between the low valuation
and the purchase prices in cash so it is lower loan to value right now so and the
prices have dropped but if you decided to forfeit the loan or you don’t want to buy
now because prices have dropped the risks have increased or you have no money
to top up the difference there’s also cancellation fee from the bank loan
which is 1.5 percent of the loan approved by the bank and there’s also penalty
charges because the developers they can forfeit whatever that you have paid to
them and they have the right to sue you bad developers at that time they can
sue you they can also charge you the late payment charges and by the way
late payment charge is 2 percent above the prevailing lending rate of all
the three major local banks at that time but there are actually good developers at
that time what they do is that for example you know the Centris right it is at
in the Boon Lay area above the Boon Lay MRT they just TOP during the
financial crisis at that time there are 600 plus units and the developer and the
agency ERA both f them they organized a roadshow for all the owners
and to help them to help all the owners to find a loan so they have the fee
because local banks there have a road show to make sure that most of them can
get a loan because developers don’t want to lose these buyers as well you
know where to find so many new buyers if they forfeit it and there are other
solutions offered by the developers for example some of them help you because
they have a leasing arm like Far East for example so they help you to list your
property so that you had some cash on hand to pay off the difference or some
of them have deferred payment scheme deferred payment scheme that
means they don’t have to pay now or you pay interest only loans so that you
don’t have to forfeit whatever that your pay don’t have to cancel your whatever
your loan or to give up your purchase some of them had a very cute method of
changing from bigger units to smaller units because now you’re unable to
secure a big loan so some developers actually help you to change from a
bigger for example you bought 3 bedroom now is two bedroom or one bedroom
so that you’re able to afford it but I think this round is a bit difficult
because most of the buyers during the last round of launch maybe they all buy the
shoebox units or one-bedroom units this is the smallest in the whole project so
in case anything happened I think this method will not be able
able to do anything this time because they can no longer change for a smaller
size unit okay during the bed times the government stepped up to help
so don’t complain about the government too much because during critical
moments we still need the help of the government what the government did 10
years ago is that it’s actually bringing forward the annual value assessment so now the annual value of properties are lower so you’ll be able to pay lower property taxes and they also give out a one off property tax rebate so it’s 40
percent like for example if you are owner stayed property instead of four
percent you just pay 2.4 percent if you are renting it out instead of 10 percent you
only pay 6 percent in 1999 1998 the last Asian financial crisis is
only 15 percent but to be fair during 1998 our government actually spent a lot of money trying to
save the Singapore dollar so 15 percent is not bad for developers there are also
some uplift measures to help them for example the one-year extension for land
develop within six years now the developers they can keep the land for
seven years for building another thing is that the extension charges after
two years they give another two years so is 2 + 2 so in case the developer need that they can actually lease out the units for four years so it’s 2 + 2 so some developers actually complained at that time why didn’t you waive off instead of extension but I think something is better than nothing for
them okay let’s look at people who bought at the bottom of the market during
the subprime crisis what happen to these projects right now and have you
wonder why people still have money to buy during the crisis do they still have a job
who are still able to afford to buy at that time they are the survivors of the
crisis you know those who are most hard hit by the crisis that time are those
people who are rich people who are able to buy during the 2007 at the peak of the
market those people who have big investment in equities in businesses in properties
and those are hard hit people like you and me we can’t afford to buy that
time maybe during the bottom of the market you find great bargains and
then we go in to buy provided that we still have a job and during the bad times the government would be spending more money that makes sense right if everybody is poor to
stimulate the market the government spend more money so that’s the time the
government announced that Jurong Lake District project at that time so you see
that in especially HDB market in the Jurong West area that Jurong West district the HDB flats actually increased the prices increased a lot for the whole year in
one year’s time Jurong West HDB 3-room flats prices increased 19.4% and
the 4-room flats increased 14% while the five moon flats also increased 9% which
is amazing is much much higher than all the other districts and that’s the
effect of announcing a new development a new project at that time and
it is not too bad for the public housing market because the HDB market
the prices still go up during that time why because during bad times people will be
downgrading their homes so the best selling ones are the 3-room flats of HDB because five executive rooms and five room flats the owners tried to downgrade to four rooms and three rooms so prices of three room flats actually stand very firm during that time and then you see prices of HDB they still managed to go up all the way
until the peak is 2nd quarter of 2013
till it levels off and reach a plateau for the last few years so those HDB owners they still managed
to upgrade because they managed to sell their homes and upgrade to condos
which is not too bad at that time what are the new launches you can recall ten
years ago is double bay residences in Simei Capsian Livia and Alexis in
Alexandra Road wow you look at the prices so affordable but do you know that
people at that time they still complained that wow during the bad times they
still sell at these kind of prices you know who will go and buy but a few years ago
when prices have gone up to 1,600 1,800 per square foot even
in the RCR region people still think that this is reasonable why because
we’re this boiling frog effect we think it’s justified for developers to charge at high
prices because they purchased the land at record high prices so we have to help
out we have no choice but during the bad times you see wow these kind of prices
I don’t think it’s low because it doesn’t look affordable during the bad
times so this is very interesting you know high and low it’s just a
psychological thing you look at these prices you think wow you know where can you
find these kind of prices but at the time people do complain that it’s very
high and that developers had to further lower the prices even at this
level okay what happen to those people who bought at that time for those
projects so I do a comparison using 99.co researcher tool to look at all the
condos versus condos top-2012 2013 why because it took a
few years time for the projects to be built and to TOP so after we search we
find that most of them top in 2012 to 2013
for those new projects launched during 2009 so the red color bar is the prices of
those projects launched during 2009 and competed 2012 to 2013
so look at it you’ll notice that the prices perform on the
whole lower than all condos but during the good times it is higher which is
very interesting so another reason is that people who bought at very low
prices it’s much easier for them to sell at lower price why because they have a
very high margin to play with for example properties I bought during 2002 to 2006
I can sell like pie or 5 or 10 percent lower than my neighbors I’m still very happy
because of my margin is very high you see I still make a profit so it doesn’t matter so maybe that’s the reason why prices can let go at lower prices but
if the owners managed to sell at the time prices and the profit margins
are really very high and it’s very profitable so do consider it when times
are bad if you have the money you have the bargain you have you have the
means to buy it you go ahead do it

Leave a Reply

Your email address will not be published. Required fields are marked *