All You Need to Do Is to Join The Dots
The thing about predicting the future is that nobody can predict the future. I wrote about “How To Predict The Future And Time The Property Market” on 14 June 2019, when the property market was seemingly hot. Some people were sounding the alarm bells for a market crash. Interestingly enough, the same alarm bells are ringing today.
While we all can learn lessons from historical events, it is still far more important to understand the relationship between a catalyst and the unfolding events. This relationship is something I have highlighted repeatedly since I wrote my first article. Since then, I have made a few “predictions”. Let’s take a look at them and how they turned out.
“Prediction 1”. Exchange Rate of SGD to MYR and IDR. Short Answer: SGD Appreciated.
One of the main reasons why foreigners (from Malaysia and Indonesia) continue to purchase Singapore properties despite the stamp duty is due to the exchange rate.
On 15 March 2019, the exchange rate between the Singapore Dollar and the Malaysian Ringgit was 1 to 3.03. Most people thought that the exchange rate was already very high. However, something that goes up does not mean it has to go down. Today, the exchange rate is 1 to 3.48. Same with the Indonesian Rupiah, back then, it was 1 SGD to 10,535 IDR. Today, it is 1 SGD to 11,632 IDR. Will it continue to go up? It all depends on the catalyst today. If you ask me and use today’s information as a reference, this exchange rate will continue to increase over time. The thesis behind this movement is still the same as what I have written earlier.
SGD to MYR. Source: Google.
“Prediction 2”. Don’t Buy When Nobody Is Buying. Don’t Be A Contrarian Just For The Sake Of Being a Contrarian. Short Answer. FOMO May Not Be Wrong
Many people like to quote Warren Buffett when it comes to investing, and you should adopt a contrarian approach. They will tell you that the best investment is done when nobody is buying. “Be fearful when others are greedy”, “Don’t blindly follow the herd”, and you should always purchase real estate when the market crashes. Well, here are a few examples of some new launches that were seemingly high in psf and still managed to fetch even higher prices. Like the very first article I wrote on J Gateway, following the herd, after all, seems to be an excellent idea. However, I must caution that following the herd for the sake of following the herd is a terrible idea. You must have your thesis and completely ignore outside noises in your decision-making process.
Mad Rush At Riverfront Residences, Park Colonial And Affinity At Serangoon. Source: https://cos.sg/blog-post/buyers-snap-up-over-1000-units-at-three-projects-in-one-night/
Massive Queue Snaking At Riverfront Residences. FOMO at Maximum Level back in 2018.Source: URA, Propnex Investment Suite.
Another Launch with Maximum FOMO. Park Colonial. Source: URA, Propnex Investment Suite.
Third Launch with Maximum FOMO. Affinity At Serangoon. Source: URA, Propnex Investment Suite.
Being a contrarian and buying something undervalued with blood on the streets may not be a good thesis. I did warn about purchasing undervalued properties with elastic demand. The issue about these properties is that when nobody is buying them today, there is a possibility that nobody will be buying them tomorrow. If nobody is buying them, prices will never recover. Here’s an example of an investment-related residential property where the demand is highly associated with a purchaser who can afford two or more properties in Singapore. Needless to say, if the Additional Buyer’s Stamp Duties remain present, it is tough for these properties to recover in value.
OUE Twin Peaks. Source: URA, Propnex Investment Suite.
“Prediction 3”. Value Investing is Outdated. Short Answer. Not Everything Cheap Is a Good Buy.
Buy low, sell high. The logic is straightforward. All you need to do is to purchase an asset that is worth $1 at $0.50 and then resell it later back at $1 when the prices go up to $1 to profit. However, the problem is that things are more complex in reality because the intrinsic value of an asset can change over time. Sure, you can purchase a distressed property at $0.50 today. However, as time progresses, the valuation may head towards what you pay for. This concept applies to all forms of assets, and I did highlight my concerns on Meta Platforms back in 2022. Meta Plaforms is a beloved stock among value investors, and the stock price recovered to higher levels today. That said, I still have significant concerns, and this can be clearly shown in their revenue chart with quarterly growth at decade lows. Will the company change and evolve later on and find methods to increase its revenue growth? Time will tell.
Meta Revenue Chart. Source: https://www.macrotrends.net/stocks/charts/META/meta-platforms/revenue
On the other hand, purchasing something at the current valuation may not be a terrible idea. When Woodleigh Residences first entered the market, most people thought that the development was overpriced and it was a product you would never be able to make any money. However, Something expensive does not mean someone else will pay an even higher price in the future. It is all about anticipating future demand.
Most People Thought The Woodleigh Residences Would Be An Overpriced and Terrible Investment—Source: URA, Propnex Investment Suite.
“Prediction 4”. Will COVID-19 Also Crash The Singapore Property Market? Short Answer: No.
Out of so many countries, some are better managed than others. Singapore is a country that did very well in handling the COVID-19 crisis. When that happens, funds, investors, and high net-worth individuals realise that Singapore is a stable place to park their assets. When this liquidity came into Singapore, prices of real estate went up for both rentals and purchases. With so much liquidity in the Singapore property market, prices can only go up. The Singapore government is even forced to implement additional measures, and the cooling measures are at the harshest levels so far.
“Prediction 5”. Oversupply of New Condos Will Crash The Market. Short Answer: No
Sure, there will always be a time when we see several launches with many unsold units. That is what we are seeing today. However, does that mean an oversupply, and the market is starting to correct itself? What is more important is to understand the future demand instead. Take the case of Treasure at Tampines back in 2020. During that time, it would seem that the entire market was unable to absorb all the units in the market, and developers would be forced to cut prices to keep the market afloat. However, you have to note that in addition to controlling the liquidity entering the property market, the Singapore government is also the source of land supply. With both tools at work, what would be the possibility of an oversupply issue?
Treasure At Tampines Recent Transactions. Source: URA, Propnex Investment Suite.
“Prediction 6”. Option Reissues Cause Property Prices To Rebound. Short Answer: No.
When property prices rebounded in 2020, some people assumed the rebound was fake, and the demand was artificially inflated due to the reissuing of options by the developer. I did highlight the rationale behind the option reissue and why they are not a significant reason behind the property demand. Today, option reissues are no longer a topic with prices higher than that of 2020.
Property Price Index in 2023. No Relationship Whatsoever With Options Reissue
“Prediction 7”. Timing Never Affects Prices. Only The Catalyst During That Time Does. Short Answer. The Property Market Did Not Crash.
At any given point in time, there will always be some people waiting for real estate prices to fall. In theory, in a higher interest rate environment, liquidity is supposed to be harder to come by to prop up the real estate market. While property prices have collapsed in various parts of the world, prices are still holding up in Singapore. Why? Well, there are a myriad of factors other than interest rates that affect prices. Yes, history will only repeat itself, provided all the factors during that time are precisely the same.
What’s Next Then? What’s The Future Going To Be Like?
Ultimately, nobody can predict the future. The only thing you can do is to understand the various catalysts, join the dots and see how these relationships will work out in the future. Sometimes, things may go in your favour. Other times, they may not. However, if you do have a clear understanding of what is going on, you will be able to react accordingly and make better decisions. And hence, “predict” the future.
Article contributed by Jerry Wong
Jerry Wong is a versatile professional, serving as a realtor at Propnex Realty and contributing his interior designer expertise at the award-winning ProjectGuru. With accolades in both realms, Jerry’s passions extend beyond his work, with his greatest joy in facilitating connections between individuals and properties, deriving immense satisfaction from helping clients achieve their goals.
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