How Many Opportunities Have You Lost While Waiting For Prices To Drop?

Timing Doesn’t Affect Prices

If you have read all my earlier blog articles, I place a lot of emphasis on the correct product to buy. Instead of the time of the purchase. The reason is simple. The timing itself never affects prices. Only the primary factors during that time do. Sounds complicated? I always like to use the misconception that some people think money is the root of all evil. In reality, money itself is just a resource that you can use to buy another person’s time in today’s society. It is the love of money that is the root of all evil — not money itself.

Is It True That Now Is The Best Time To Buy Real Estate In Singapore?

As a real estate agent, most people will think we are here to make a fast buck and push sales. Our objective at the end of the day is to line up our wallets rather than helping clients. Most of the time, every single agent out there will tell you that now is the best time to buy, no matter which year it is. They will say that if you missed this opportunity, it would never come back again. Of course, most people don’t believe this, and if you happen to look at the URA property price index, there is a price trend. And in this trend, the price index will go up and down. Now, when you look at the graph, suddenly it does make absolute sense that buying at the right time is critical. After all, how you make money is to buy low and sell high right?

Source: URA. Singapore’s Property Price Index

The Illusion That Timing Is The Most Important Factor When Entering The Market

Although the property price index shows you all the ups and down in Singapore’s property market, it doesn’t tell you the entire story. Assuming you are an entry price investor who is looking for good deals and waiting to enter the market nine years ago. You would have never bought anything since then. You would still be waiting for prices to fall, and that’s when you come in and scoop up all the good deals. Some people call this buying when there is “blood on the streets” or buying when no one is buying. So the question is this, were there any opportunities you have missed out all these years if you have adopted this strategy?

Are You Sure Timing Is Not Important?

Today’s URA property price index is around 150. If you take a ruler and draw a simple line, there are some years that the property price indexes are higher than that of today. Using this as a reference, any property purchased during this time will likely warrant a loss or maybe only breakeven. These “unprofitable” years range from 2010, 2011, 2012, 2013 to even 2014. So, the question is this, can you buy something during these years and still make a profit today? The answer is yes. Because like I mentioned earlier(and in all my articles), timing is not the main factor that affects prices. The correct product is far more critical. To show you how much these owners made, I will be compiling a list of new launches that were sold since 2010. I will not be revealing the entire condo list. If you are keen to find out more, do contact us so that we can meet up with you to share this info with you.

Of course, you might have purchased something else that have appreciated much more in value. I am just using this as an example to show why the right product supersedes timing all the time.

Are Buying Properties During This Time Highly Unprofitable?

1. 2010 (Condo In The West)

The initial owner bought this unit in 2010 at the price of $1.074 mil. A couple of months ago, he sold it for $1.35 mil. Over the holding period of 9 years, he made a profit of $276,000. This gain works out to be 25.69% or a 2.86% yield over these nine years.

Source: URA, SRX.

2. 2011 (Condo In The Centre Part Of Singapore)

Same story but slightly different profits, this owner bought the condo in 2011 at $1.424 mil. Earlier this year, he sold it for $1.69 mil. In these eight years, he gained a total of $266,000. The profit works out to be around 18.68% or a 2.33% yield over eight years.

Source: URA, SRX

3. 2012 (Condo In The West)

2012 was an exciting year. The property price index was almost doubled than the index back in 2009. From a timing perspective, all your alarms bells would have gone off. How can you buy a property at such a peak price and still make money? However, let’s take a look at this example. The owner purchased this condo at $775k in 2012. He disposed of it in May at $955k. Total profits were 180k. This translates to a gain of 23.22% or a yield so far at 3.32%. Not too shabby for someone who has “supposedly” bought at peak prices.

4. 2013 (J Gateway)

I have dedicated an entire article on this study. Do read my blog post on “Was J Gateway A Good Buy?” if you have not done so already. Some people during that time said that buying this condo was a stupid decision. Others noted that the buyers were like sheep who had no clue what they were buying. Well, look how that turned out.

5. 2014 (The Panorama)/ 2015 (Principal Garden)

I have covered both of these condos in my article on the comparison of the capital appreciation of new launches versus resale condos. Generally speaking, most new launches appreciate more than their resale counterparts.

6. 2016 (Condo In The Eastern Part Of Singapore)

Due to the seller’s stamp duty, the example for the 2016 condo is more on a paper gain basis. The effects of the capital upside were due to the price increment by the developer. So instead of a direct profit calculation, the unit I use was on the same stack but a different floor. The one that was bought in 2016 was on a much higher level! Using the latest price guide as a reference, the 2016 owner made a paper gain of $151,000. Translating to a 15% capital upside or a yield of 5.01% within these few years!

Source: URA, SRX

7. 2017 (Condo In Core Central Region)

The 2017 condo is covered in my article on “Waiting For The Price To Drop. Is This A Good Strategy?“. To a lot of people, the condo in question has all the hallmarks of a “not-worth-it buy”. The price is too high, tenure is leasehold, and the developer has plenty of units left after the initial launch. Is it worthwhile buying something like this? Well, history proved otherwise.

8. 2018 (Plenty)

With the effects of the latest cooling measure on the 7th of July 2018, some people think that the housing market will collapse. A year later, we have sales volume at its highest. During this time, the prices of some new launches have already gone up several times.

Summary

Unlike most real estate agents out there, I do not like to push customers and force them to make a decision when it comes to purchasing a new home. Instead, I educate by showing real-life examples such as these. Are there people who lose money buying the “wrong” product during this time? Yes, there are! Are there people who suffer losses purchasing a condo at the “correct” timing when the property price index is low? Yes, there are! Is there a similarity between all the condos I have listed above? Yes, there is! To find out what is the reason why these condos make money, contact us today, and we will be happy to share our findings with you.

Article contributed by Jerry Wong

Jerry Wong is a realtor with Huttons Asia Pte Ltd. He loves coffee, cookies and condos. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home or make that capital upside in just a matter of months. Buy Jerry a coffee, and he will meet up with you on a 1 to 1 session to share the following

  1. How certain factors affect real estate prices. (Using historical transactions as references)
  2. Applying lessons from history to determine if a condo has the potential for upside or not. These condos can be those under construction, resale or the very one you are staying in right now.
  3. Or prepare the toughest question you have on your mind! If it is interesting enough, the answer will be in a blog post and shared with everyone!

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