Every week we flip the local newspapers and we get advertisement after advertisement of overseas properties. Increasingly, Singaporeans are looking overseas to place their monies in bricks and mortar. Why is there such a trend and will this trend taper off? I personally doubt so and here are some of my reasons why.
1) Singapore property prices are too restrictively high.
We are at a point whereby almost every residential property in Singapore has already broken almost every record. With prices in places like Sengkang and Punggol reaching figures like $1,500 per square foot and beyond, it is difficult to substantiate where the potential profits or yields are for the people who have invested in real estate in such areas. Surely not everyone who buys a property in such far off areas do it just for self consumption. Moreover I would always tell my clients, "wouldn't it be nice to have the property that you are living in appreciate in value?" You can still have your cake and eat it in property investment. It is just a matter of timing, patience and just plain common sense.
2) The government is determined to cool the property prices.
Investing in Singapore real estate has come to a point whereby every few months the government would step in and intervene with a cooling measure. What happened to the "invisible hand"? Adam Smith must be turning in his grave! Investing in real estate locally is challenging if there is a new measure every few months. Moreover, foreigners are hugely discouraged in investing in real estate in Singapore with all the additional stamp duties that are levied on them. From the looks of it, these policies will be here to stay for the short to medium term.
So what do investors do? Sit on the sidelines. Place their monies in the bank and suffer the debilitating effects of inflation? The Singapore economy is still going strong. The technical recession did not come and just a while ago the forecast was raised for Singapore's GDP in 2013 and 2014 to 3.8% and 4% respectively.
http://www.mas.gov.sg/news-and-publications/surveys/~/media/MAS/Monetary%20Policy%20and%20Economics/The%20Singapore%20Economy/SPF/Survey%20Writeup%20Mar2013.pdf
This will serve as a good read for those interested in knowing more about where the Singapore economy is heading.
So, no recession in the near future bar an economic catastrophe of some sort. Then what is going to happen to the Singapore property market?
In my opinion, prices of residential properties will take a slight dip. The debt servicing measures are effective and measured the cool the market. In some instances, almost to a standstill. (Good luck to those who have purchased places like Sky Habitat at $1,600 per square foot and above.)
So where do people who want to and have the money to invest go to?
Simple,
The overseas market.
1) Prime property prices in neighbouring cities like Kuala Lumpur, Bangkok and Tokyo are much cheaper.
Affordability is always key. It doesn't matter whether a Ferrari is selling half off, I cannot afford the half off! Buying something at a bargain may be a stretch for some people but when it comes to something affordable in terms of absolute pricing, people will jump in. This is what developers are employing in Singapore. Market a property in terms of low absolute price. Studios in far off outskirts in Singapore like in Pasir Ris are going for prices in the range of SGD$600,000. For half of that price you can get a unit in the heart of Bangkok where the financial districts are situated and likewise in Tokyo, you can get something with a guaranteed rental yield for about a third less. Would it be fair to say that investing in a prime property in Shinjuku at SGD$400,000 is more risky than purchasing a condominium in Punggol at over a million Singapore dollars? I fail to see where the demand is going to come from for properties in places like Punggol. Rental demand is non existent. Demand from buyers should be sporadic since supply in such areas are in absolute abundance and yet more and more houses are being developed in that area.
2) Our Singapore dollar is very strong.
Nuff said. You can feel it when you shop in Bangkok or travel to Malaysia for a meal. The Yen too has dropped like a rock. We Singaporeans are getting a hefty discount when we purchase Japanese property. A 20% discount of what Yen used to be. Will it get weaker? I guess so. For how much longer? I am unsure. The Japanese need the Yen to be low to make their exports attractive. However, when the Olympics inch closer, I would think this "weaker Yen to attract people to Japan" policy will stop and be replaced with "the Olympics will attract people to Japan much more than a weak Yen policy."
3) Air travel is very cheap.
With the advent of cheap air travel, the globe is getting smaller. Buying a property overseas is not as far fetched as it used to sound. We can scoot (no prizes for guessing my favourite budget airline!) over to neighbouring countries at very low air fare!
4) Cities like Tokyo, Bangkok and Kuala Lumpur are safe.
Well, they are safe in that order in my opinion. Tokyo being the safest. Yakuzas don't rule the land for your info! Places like Tokyo are clean, efficient and very very safe. You can walk in the streets in the middle of the night in Bangkok with little worry.
5) Potential capital gain is higher overseas.
With prices in central Tokyo at very very affordable levels (barely 70% the price of a studio in the off core central region in Singapore), Toyko has more upside to come. Perhaps more than Singapore based on current price levels. Not to forget, The Tokyo Olympics is coming in 2020 and the Japanese government has approved 2 casinos. (Flashback to Singapore's 2 integrated resorts and what it did for the economy and property market)
Bangkok is going to have a night race to rival that of Singapore's. This will again put it in the spotlight. Not that it needs the spotlight. Bangkok is already the world's top tourist destination!
Couple all these reasons with the very very affordable prices of properties in these cities, it is not difficult to understand why the demand has shifted overseas!
Keen to invest? Make sure you do your research and buy from someone you trust!
Yours Sincerely,
Daryl Lum
www.daryllum.com
www.daryllum.blogspot.com
Friday, December 13, 2013
Thursday, April 12, 2012
Paying the right price for a property
Recently there has been a lot of commotion caused by the apparent pricing of the soon to be launched condominium, Sky Habitat, in the heart of Bishan Central. The sub urban 99-year leasehold development is to be priced in the rage of $1,700 - $1,800 per square foot of built up area. This should include spaces such as balconies and air con ledges which are not really habitable area. Then let us take a step back and think... how did we get to this point whereby a sub urban condominium can command such a price usually reserved for properties in our prime districts? The main reason?
Herd instinct.
A wise man once told me. An investment should be made cold blooded. No emotions. Pure facts and figures.
Fact:
A suburban condominium selling at $1,700 - $1,800 per square foot is rather expensive. A property at The Sail @ Marina Bay was recently transacted at $1,699 per square foot. If a relatively new 99-year leasehold property right in the heart of Singapore's financial district is sold at a price lower than one in Bishan, the figures do seem a little too odd to ignore.
The option on this property was done in January 2012. Which is not too long ago.
Fact:
The development is about a couple of tens of meters from Bishan MRT station. The actual fact remains that Bishan is still about 8-9 MRT stops from Singapore's business district (City Hall and Tanjong Pagar MRT stations). With that being the case, would Centro Residences, next to Ang mo Kio MRT, be a better buy? It is about 10-20% cheaper and it will obtain it's TOP much earlier than Sky Habitat. I never thought the day would come whereby I used Centro Residences as a comparison as a cheaper alternative. That day has come.
Fact:
Bishan 8 is the closest condominium to Bishan MRT (North-South line). That is the line that gets you to City Hall and Tanjong Pagar. It is also less congested around the entrances of Bishan 8 as compared to the roads around the entrances of Sky Habitat. The likely scenario is that prices of Bishan 8 are likely to go up due to the euphoria generated from the launch of Sky Habitat. Certain units in Bishan 8 went for $929 and 949 per square foot in recent months. Yes the project is older and the design is less appealing than the new Sky Habitat but if it is location that you yearn for then Bishan 8 is your buy! New is never a reason more than a feeling. Every condominium will grow old someday. For a matter of fact, buying a completed project would mean that you are using your purchase now rather than have your money locked up in a certain place awaiting for something which you hope will be as beautiful as what you imagined it to be. Suddenly, Bishan 8 looks appealing.
Fact:
You are locking your money in something that you can only physically own 3-5 years later. With the regulations, this will add one count to your residential property count in your calculation of your buyer's stamp duty and your loan eligibility quantum from the bank. Is it such a fantastic buy that one should commit himself to this development thus potentially forsaking his chance to invest in any other property in the near future? Will there be no other better purchases and that you are sure this is going to be the best project for you/ Hard to tell where the market will go. It is rather resilient but there is perhaps more downside currently than upside.
Fact:
Freehold landed (in the same district) is cheaper. It may not be the same lifestyle as compared to a condominium but then speak to the really rich and most (not all) will tell you that landed is the better buy due to Singapore being land scarce. Condominiums are springing up all over the place and supply is rather overwhelming these days. If you are willing to pay up to $1,800 per square foot for 99-year leasehold air space, shall I interest you in a freehold landed property selling for about $900 - $1,000 per square foot for land space. Oh in addition I shall throw in all the air space above your land as well. Even after you renovate the place, your cost may not reach the same per square foot cost as Sky Habitat's.
Fact:
The property market may be nearing it's peak. I am not saying this because I want the property prices to drop. I have a few properties myself and a drop would not make me feel good. However, for the sake of the next generation. We need prices to remain affordable and appropriately priced. Hope is what drives people to strive for. If you are going to price a 3 bedroom apartment in Bishan close to $2 million, how is the 5 room flat owner in Bishan ever going to afford such a property? The valuation of a 5 room flat is about $600,000. It is a difference of about $1.4 million. It is perhaps too much of a premium to expect Bishan flat owners to afford the upgrade.
However, the development will still sell well. (this is my guess. I may be wrong. We shall see)
Reason:
Some Singaporeans have reached a level whereby they value aesthetics and snob appeal of something over any other practical alternatives. There is a reason why a $5,000 Chanel or Gucci (hope I spelt them correctly) bag will sell when a $30-$50 alternative is available. There is a reason why people splurge on a flashy Ferrari or any other sports car for that matter. It is to show their neighbour that "hey! It's expensive and impractical but I can afford it!" The Singapore market has evolved over time and some Singaporeans value design and aesthetics higher than good value for their money.
Reason:
The developer will have a strong sales force with pushy tactics. There will be "early bird discounts", knocking 10-20% of their list price. They will tell prospective buyers that the discount is for the weekend launch only. If you delay your decision, the price will not be there in the near future. This is prevalent in most of such showrooms. Urgency is created and deals are closed. Let us not forget that the showroom will be extremely grand. This is to invoke the senses to urge the buyer to bring out the check book!Let us not forget that the design of Sky Habitat is rather unique. Perhaps some buyers think that they are willing to pay for such extravagance?
Whatever it is, it will be interesting to see how this landmark project does over the weekend. This is a landmark project in terms of pricing and in terms of design. Barring any governmental rulings and a financial meltdown these few days. Sales figures may surprise a few.
"If you buy things you do not need, soon you will sell things you need" - Warren Buffet
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Herd instinct.
A wise man once told me. An investment should be made cold blooded. No emotions. Pure facts and figures.
Fact:
A suburban condominium selling at $1,700 - $1,800 per square foot is rather expensive. A property at The Sail @ Marina Bay was recently transacted at $1,699 per square foot. If a relatively new 99-year leasehold property right in the heart of Singapore's financial district is sold at a price lower than one in Bishan, the figures do seem a little too odd to ignore.
The option on this property was done in January 2012. Which is not too long ago.
Fact:
The development is about a couple of tens of meters from Bishan MRT station. The actual fact remains that Bishan is still about 8-9 MRT stops from Singapore's business district (City Hall and Tanjong Pagar MRT stations). With that being the case, would Centro Residences, next to Ang mo Kio MRT, be a better buy? It is about 10-20% cheaper and it will obtain it's TOP much earlier than Sky Habitat. I never thought the day would come whereby I used Centro Residences as a comparison as a cheaper alternative. That day has come.
Fact:
Bishan 8 is the closest condominium to Bishan MRT (North-South line). That is the line that gets you to City Hall and Tanjong Pagar. It is also less congested around the entrances of Bishan 8 as compared to the roads around the entrances of Sky Habitat. The likely scenario is that prices of Bishan 8 are likely to go up due to the euphoria generated from the launch of Sky Habitat. Certain units in Bishan 8 went for $929 and 949 per square foot in recent months. Yes the project is older and the design is less appealing than the new Sky Habitat but if it is location that you yearn for then Bishan 8 is your buy! New is never a reason more than a feeling. Every condominium will grow old someday. For a matter of fact, buying a completed project would mean that you are using your purchase now rather than have your money locked up in a certain place awaiting for something which you hope will be as beautiful as what you imagined it to be. Suddenly, Bishan 8 looks appealing.
Fact:
You are locking your money in something that you can only physically own 3-5 years later. With the regulations, this will add one count to your residential property count in your calculation of your buyer's stamp duty and your loan eligibility quantum from the bank. Is it such a fantastic buy that one should commit himself to this development thus potentially forsaking his chance to invest in any other property in the near future? Will there be no other better purchases and that you are sure this is going to be the best project for you/ Hard to tell where the market will go. It is rather resilient but there is perhaps more downside currently than upside.
Fact:
Freehold landed (in the same district) is cheaper. It may not be the same lifestyle as compared to a condominium but then speak to the really rich and most (not all) will tell you that landed is the better buy due to Singapore being land scarce. Condominiums are springing up all over the place and supply is rather overwhelming these days. If you are willing to pay up to $1,800 per square foot for 99-year leasehold air space, shall I interest you in a freehold landed property selling for about $900 - $1,000 per square foot for land space. Oh in addition I shall throw in all the air space above your land as well. Even after you renovate the place, your cost may not reach the same per square foot cost as Sky Habitat's.
Fact:
The property market may be nearing it's peak. I am not saying this because I want the property prices to drop. I have a few properties myself and a drop would not make me feel good. However, for the sake of the next generation. We need prices to remain affordable and appropriately priced. Hope is what drives people to strive for. If you are going to price a 3 bedroom apartment in Bishan close to $2 million, how is the 5 room flat owner in Bishan ever going to afford such a property? The valuation of a 5 room flat is about $600,000. It is a difference of about $1.4 million. It is perhaps too much of a premium to expect Bishan flat owners to afford the upgrade.
However, the development will still sell well. (this is my guess. I may be wrong. We shall see)
Reason:
Some Singaporeans have reached a level whereby they value aesthetics and snob appeal of something over any other practical alternatives. There is a reason why a $5,000 Chanel or Gucci (hope I spelt them correctly) bag will sell when a $30-$50 alternative is available. There is a reason why people splurge on a flashy Ferrari or any other sports car for that matter. It is to show their neighbour that "hey! It's expensive and impractical but I can afford it!" The Singapore market has evolved over time and some Singaporeans value design and aesthetics higher than good value for their money.
Reason:
The developer will have a strong sales force with pushy tactics. There will be "early bird discounts", knocking 10-20% of their list price. They will tell prospective buyers that the discount is for the weekend launch only. If you delay your decision, the price will not be there in the near future. This is prevalent in most of such showrooms. Urgency is created and deals are closed. Let us not forget that the showroom will be extremely grand. This is to invoke the senses to urge the buyer to bring out the check book!Let us not forget that the design of Sky Habitat is rather unique. Perhaps some buyers think that they are willing to pay for such extravagance?
Whatever it is, it will be interesting to see how this landmark project does over the weekend. This is a landmark project in terms of pricing and in terms of design. Barring any governmental rulings and a financial meltdown these few days. Sales figures may surprise a few.
"If you buy things you do not need, soon you will sell things you need" - Warren Buffet
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Monday, March 05, 2012
$1,000 household income, enough to afford a HDB
If I were the Prime Minister, I would be infuriated at how certain members of parliament have haphazardly spoken in defense of the finance minister's comments that a household income of $1,000 would be enough to fund installments for a HDB flat.
I love the way Miss Josephine Teo actually says that "They don't necessarily know that there are grants available from the HDB that will make the actual size of the loan for purchasing these houses not very big."
Well Miss Josephine, you may not necessarily know a few things.
1) Your assumption is based on the fact that the low income household earning $1,000 can set aside $100 to $200 a month for housing installments throughout the whole loan tenure. You assume that they can take a loan of 20 to 30 years, thus stretching the installments thin to fit into their monthly expenses. This is assuming that all goes well in the family. There are no unexpected events such as a family member falling severely ill. You also assume that the breadwinner will be able to be employed throughout the assumed loan tenure of 20 to 30 years. You also assume that there is no handicapped person who requires special care in the family. What if a child is born premature or with a pre-existing medical condition? Can a $1,000 income support this situation and yet still fork out $200 for housing installments? Please note that this is not realistic as the assumption assumes all other things to be constant and I believe that you know that life is anything but that.
2) Your assumption is also based on the fact that the flat to be purchased is a 2 room flat with only one bedroom and one hall. I believe that you have failed to realize that Singaporeans do yearn to own larger units. Also, 2 room flats seem to be segregated from the larger flat types. There are 3-room flats mixed with 4 and 5 rooms within the same block but 2 room flats seem to be segregated into a cluster of blocks with only that flat type. Are we trying to create a divisive society? Let us not only focus on housing our people. Let us focus on housing our people decently as well. For a family of 4 to squeeze into a 2 room flat, I feel we can do better. Let us not always compare ourselves with places like Hong Kong and say that our houses are big. We are a unique society with unique people. The government at times is employing a "you see, we are so much better off" stand when they want the people to be appreciative of what they have and a "we must do this if not we will not progress" when they want to implement policies which have already been written in stone but the mandatory public consultation did not receive positive feedback. (flashback to the building of the two casinos and the relaxation of the immigration policy)
3) You also assume that everyone spends a similar proportion of their income on food, transport and daily necessities. Data may show that we, on the average, spend a certain proportion of our income on things like transport. However, if you were to think about it, if a household earns $1,000, sets aside $200 for housing installments, $100 for utilities, this leaves $700 for everything else. If there are two studying children and each of them take up $100 a month in school fees, transport and food, we are left with $500 for household expenses and transport for the breadwinner. Please note that there is no "cheaper" transport for the breadwinner to go to work. He cannot go up the MRT and say that he is earning $1000 a month and expect to get a free ride. He has to pay the exact same fare as the banker or lawyer who is earning in excess of 10 times his income. The low income earner cannot go to NTUC and expect to pay less for a carton of milk or a bag of rice. The lower income groups spend a larger proportion of their incomes on daily necessities and transport. Let's face it, majority of us eat the same type of rice, drink the same type of milk, use the same type of toothpaste. However, to some of us, a tube of toothpaste may not be very significant but to some they are spending a large about of their income on such items.
4) The government always tells it's citizens that we as a nation need to save up for a rainy day. We must always guard our reserves. We citizens follow what the government has planned. That is the macro way of looking at things. Then what about the micro perspective? Do these lower income families not require a buffer of their own? Do they not require savings for rainy days? Do they not require insurance coverage to protect the dependents from the loss of that $1000 household income? The state does not and will not provide handouts in the form of social security. DPM Tharman has stated that he does not want a first world social state as it will run us into first world debt. How else can the lower income prepare themselves for the unexpected other than saving and purchasing insurance? Can they then afford it?
5) The government wants to help the needy but at times does not know how to do so. I heard of a story of a mildly retarded lady who failed to sign up for her GST credits, Progress Package and other handouts by the government. She had no idea that she was eligible for such handouts and she did not even know that the government was handing out such goodies to the whole population. Someone kindheartedly brought her to a meet the people's session to appeal as the deadline had long gone. The appeal failed and the reason was that there was enough time for her to complete the registration to receive the handouts. Obviously this person did not pursue the matter. It is like going to a restaurant. The one who makes the loudest noise usually gets served first. Usually to increase the chance of a successful appeal, one has to know which door to knock on and this requires a certain level of intellect and this lady did not have this attribute.
Gone are the days whereby HDB flats cost a small multiple of a person's monthly salary. There were times when $8,000 could buy a flat when people were earning $400 a month. That translates to approximately 2 years of income. Now, a 3 room flat will set the buyer back in the region of $320,000. Assuming an annual income of $20,000, that is 16 years of income.
Moral of the story? The best social safety net would be to lower HDB prices. Minister Khaw, it is all up to you now...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
I love the way Miss Josephine Teo actually says that "They don't necessarily know that there are grants available from the HDB that will make the actual size of the loan for purchasing these houses not very big."
Well Miss Josephine, you may not necessarily know a few things.
1) Your assumption is based on the fact that the low income household earning $1,000 can set aside $100 to $200 a month for housing installments throughout the whole loan tenure. You assume that they can take a loan of 20 to 30 years, thus stretching the installments thin to fit into their monthly expenses. This is assuming that all goes well in the family. There are no unexpected events such as a family member falling severely ill. You also assume that the breadwinner will be able to be employed throughout the assumed loan tenure of 20 to 30 years. You also assume that there is no handicapped person who requires special care in the family. What if a child is born premature or with a pre-existing medical condition? Can a $1,000 income support this situation and yet still fork out $200 for housing installments? Please note that this is not realistic as the assumption assumes all other things to be constant and I believe that you know that life is anything but that.
2) Your assumption is also based on the fact that the flat to be purchased is a 2 room flat with only one bedroom and one hall. I believe that you have failed to realize that Singaporeans do yearn to own larger units. Also, 2 room flats seem to be segregated from the larger flat types. There are 3-room flats mixed with 4 and 5 rooms within the same block but 2 room flats seem to be segregated into a cluster of blocks with only that flat type. Are we trying to create a divisive society? Let us not only focus on housing our people. Let us focus on housing our people decently as well. For a family of 4 to squeeze into a 2 room flat, I feel we can do better. Let us not always compare ourselves with places like Hong Kong and say that our houses are big. We are a unique society with unique people. The government at times is employing a "you see, we are so much better off" stand when they want the people to be appreciative of what they have and a "we must do this if not we will not progress" when they want to implement policies which have already been written in stone but the mandatory public consultation did not receive positive feedback. (flashback to the building of the two casinos and the relaxation of the immigration policy)
3) You also assume that everyone spends a similar proportion of their income on food, transport and daily necessities. Data may show that we, on the average, spend a certain proportion of our income on things like transport. However, if you were to think about it, if a household earns $1,000, sets aside $200 for housing installments, $100 for utilities, this leaves $700 for everything else. If there are two studying children and each of them take up $100 a month in school fees, transport and food, we are left with $500 for household expenses and transport for the breadwinner. Please note that there is no "cheaper" transport for the breadwinner to go to work. He cannot go up the MRT and say that he is earning $1000 a month and expect to get a free ride. He has to pay the exact same fare as the banker or lawyer who is earning in excess of 10 times his income. The low income earner cannot go to NTUC and expect to pay less for a carton of milk or a bag of rice. The lower income groups spend a larger proportion of their incomes on daily necessities and transport. Let's face it, majority of us eat the same type of rice, drink the same type of milk, use the same type of toothpaste. However, to some of us, a tube of toothpaste may not be very significant but to some they are spending a large about of their income on such items.
4) The government always tells it's citizens that we as a nation need to save up for a rainy day. We must always guard our reserves. We citizens follow what the government has planned. That is the macro way of looking at things. Then what about the micro perspective? Do these lower income families not require a buffer of their own? Do they not require savings for rainy days? Do they not require insurance coverage to protect the dependents from the loss of that $1000 household income? The state does not and will not provide handouts in the form of social security. DPM Tharman has stated that he does not want a first world social state as it will run us into first world debt. How else can the lower income prepare themselves for the unexpected other than saving and purchasing insurance? Can they then afford it?
5) The government wants to help the needy but at times does not know how to do so. I heard of a story of a mildly retarded lady who failed to sign up for her GST credits, Progress Package and other handouts by the government. She had no idea that she was eligible for such handouts and she did not even know that the government was handing out such goodies to the whole population. Someone kindheartedly brought her to a meet the people's session to appeal as the deadline had long gone. The appeal failed and the reason was that there was enough time for her to complete the registration to receive the handouts. Obviously this person did not pursue the matter. It is like going to a restaurant. The one who makes the loudest noise usually gets served first. Usually to increase the chance of a successful appeal, one has to know which door to knock on and this requires a certain level of intellect and this lady did not have this attribute.
Gone are the days whereby HDB flats cost a small multiple of a person's monthly salary. There were times when $8,000 could buy a flat when people were earning $400 a month. That translates to approximately 2 years of income. Now, a 3 room flat will set the buyer back in the region of $320,000. Assuming an annual income of $20,000, that is 16 years of income.
Moral of the story? The best social safety net would be to lower HDB prices. Minister Khaw, it is all up to you now...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, February 29, 2012
The weakening of our Singapore society
Extremely interesting report on Channelnewsasia.
There is a saying that the rich are mostly rich because they step on others to get there. This report really proves this point.
http://www.channelnewsasia.com/stories/featurenews/view/1185668/1/.html
Perhaps it's time we take the kindness movement seriously...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
There is a saying that the rich are mostly rich because they step on others to get there. This report really proves this point.
http://www.channelnewsasia.com/stories/featurenews/view/1185668/1/.html
Perhaps it's time we take the kindness movement seriously...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Saturday, February 11, 2012
HDB prices. Set to fall?
Looking at what the government is doing, I would say a very strong "yes, HDB prices are set to fall." Not just cash over valuations (COV). In general, prices should moderate.
Let us look at this matter objectively. In 2010 and 2011, certain Singaporeans paid COV figures in the tens of thousands and even past a hundred thousand for flats in estates such as Pasir Ris, Sengkang, Punggol, Yishun, Jurong West, etc... Basically outskirts. How did this happen? There was a shortage in supply to meet the growing demand. Let us assume a 5 room flat in Punggol with a valuation of $500,000 and the buyer pays $50,000 cash over valuation. Assuming he takes a bank loan instead of a HDB loan, he would have to fork out 5% of the valuation in cash ($25,000) and another 15% of the valuation in CPF monies ($75,000).
Simply put, the figures to buy a 5 room Punggol flat is staggering.
Cash: $75,000
CPF: $75,000
Repayment for 25 years (Assuming 3% interest rate for prudence sake): $2,133.92 monthly.
Assuming the house needs renovation, the cash outlay would increase by another $30,000 to $50,000.
Is it worth it for such a location? What if 25 years do not go by trouble free? Can you rent the property out? Is it worth it to pay so much COV for a property?
Many Singaporeans fail to understand the purpose of the valuation. It is the market value which financial institutions will base the property upon. Paying COV means that you think that the market is wrong about the value about the property you are buying. You indirectly are telling the valuer, "Hey! You got this wrong!"
In essence, those who paid high COV figures for HDB flats in suburban areas got it terribly wrong.
Pricing is always about demand and supply. I remembered not too long ago, I could count the number of models for brand new HDB Build-To-Order (BTO) flats in HDB Hub with the fingers on the palm of one hand. Today, the BTO models are over crowding HDB Hub. There is insufficient space such that they had to clear a reception counter and even seats near the enquiry desks to place the models. I assume that there are more than 30 BTO models in HDB Hub. Where are all these situated? In places like Punggol, Jurong, Hougang, Tampines. The cost of a 4 room flat can be as low as SGD $200-plus thousand.
Like they always say. A picture says a thousand words...
Now who paid $500-plus thousand for a Punggol flat?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Let us look at this matter objectively. In 2010 and 2011, certain Singaporeans paid COV figures in the tens of thousands and even past a hundred thousand for flats in estates such as Pasir Ris, Sengkang, Punggol, Yishun, Jurong West, etc... Basically outskirts. How did this happen? There was a shortage in supply to meet the growing demand. Let us assume a 5 room flat in Punggol with a valuation of $500,000 and the buyer pays $50,000 cash over valuation. Assuming he takes a bank loan instead of a HDB loan, he would have to fork out 5% of the valuation in cash ($25,000) and another 15% of the valuation in CPF monies ($75,000).
Simply put, the figures to buy a 5 room Punggol flat is staggering.
Cash: $75,000
CPF: $75,000
Repayment for 25 years (Assuming 3% interest rate for prudence sake): $2,133.92 monthly.
Assuming the house needs renovation, the cash outlay would increase by another $30,000 to $50,000.
Is it worth it for such a location? What if 25 years do not go by trouble free? Can you rent the property out? Is it worth it to pay so much COV for a property?
Many Singaporeans fail to understand the purpose of the valuation. It is the market value which financial institutions will base the property upon. Paying COV means that you think that the market is wrong about the value about the property you are buying. You indirectly are telling the valuer, "Hey! You got this wrong!"
In essence, those who paid high COV figures for HDB flats in suburban areas got it terribly wrong.
Pricing is always about demand and supply. I remembered not too long ago, I could count the number of models for brand new HDB Build-To-Order (BTO) flats in HDB Hub with the fingers on the palm of one hand. Today, the BTO models are over crowding HDB Hub. There is insufficient space such that they had to clear a reception counter and even seats near the enquiry desks to place the models. I assume that there are more than 30 BTO models in HDB Hub. Where are all these situated? In places like Punggol, Jurong, Hougang, Tampines. The cost of a 4 room flat can be as low as SGD $200-plus thousand.
Like they always say. A picture says a thousand words...
Now who paid $500-plus thousand for a Punggol flat?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, January 18, 2012
Who caused the ridiculous "cash over valuation" in the HDB market?
I think minister Khaw has got it all wrong in his last statement. He mentioned that it was not the permanent residents (PRs) who caused the cash over valuation (COV) for HDB flats to sky rocket. Instead, it was the private property purchasers who are primarily the cause for such a phenomenon.
Dear Mr Khaw, despite all the good you have done since taking over as minister for national development, you have failed to grasp the basic economic principles that govern how a market should and will behave. It is not only in 2010 and 2011 that we have Singaporean private property owners coming in to compete with HDB dwellers for their next HDB flats. Singaporean private property owners have been doing it since the day they could. They have been doing it for the last decade and the previous one as well. So why then the big jump in COV? The answer is plain and simple minister Khaw.
1) Lack of supply.
There is simply not enough flats built in the last few years to match demand. I believe this will cause multiple buyers to target the same few flats especially if the flats are in good, prime locations. Look at what is happening in the build to order (BTO) scene. Before, there were too few BTO flats are the prime locations were oversubscribed. If buyers could bid with cash instead of opting for a ballot system, let me assure you that the bids would be as high as COV figures in the open market. Just look at where the certificate of entitlement (COE) is heading now that there is a downward adjustment in vehicle growth. Let me assure minister Khaw that if supply had been adequate in the first place, COV will never reach the dizzy heights of today.
2) Failure of the "asset appreciation" policy.
One of the worst policies of all time. It was to ensure a steady growth in HDB prices so that, in theory, HDB dwellers could monetize their flats in future for a higher price than what they paid when they bought it. To appreciate the asset, the only way was to cut supply. Everyone is made to feel that the HDB flat is an asset to them and some started thinking of HDB flats as investments. In fact, to have a title deed to the flat would not make sense to me as the HDB flat is just ownership of a lease from HDB to reside in that dwelling house for a period of about 99 years or whatever is left of it. HDB flats were passed off as investment grade properties when they were not and thus everyone, PRs and Singaporean private property owners alike, saw this as an opportunity to make money.
3) Huge influx of foerigners.
Ok, so what if the PRs were not the main culprits? Indirectly they were. People saw HDB as a sure way to get great rental yield. Suddenly there were so many foreigners flocking into Singapore. They all needed homes to stay in and some Singaporeans and PRs who were eligible to purchase a flat but did not do so before, did so now. Rental for a 3 room flat could fetch approximately $24,000 per annum. A 3 room flat was in the region of $300,000. This would mean a rental yield of about 8%! This is extremely good return for such a small capital outlay. Why then would a person in a right investment frame of mind ever pass up on such an opportunity? If rentals were less attractive, I am pretty sure many people would not have dipped into their bank accounts to purchase HDB flats. Even though there is a minimum occupation period, some rent their properties out despite the possible penalties if caught. The returns are too attractive to be ignored!
Perhaps the minister should ponder about these points as well?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Dear Mr Khaw, despite all the good you have done since taking over as minister for national development, you have failed to grasp the basic economic principles that govern how a market should and will behave. It is not only in 2010 and 2011 that we have Singaporean private property owners coming in to compete with HDB dwellers for their next HDB flats. Singaporean private property owners have been doing it since the day they could. They have been doing it for the last decade and the previous one as well. So why then the big jump in COV? The answer is plain and simple minister Khaw.
1) Lack of supply.
There is simply not enough flats built in the last few years to match demand. I believe this will cause multiple buyers to target the same few flats especially if the flats are in good, prime locations. Look at what is happening in the build to order (BTO) scene. Before, there were too few BTO flats are the prime locations were oversubscribed. If buyers could bid with cash instead of opting for a ballot system, let me assure you that the bids would be as high as COV figures in the open market. Just look at where the certificate of entitlement (COE) is heading now that there is a downward adjustment in vehicle growth. Let me assure minister Khaw that if supply had been adequate in the first place, COV will never reach the dizzy heights of today.
2) Failure of the "asset appreciation" policy.
One of the worst policies of all time. It was to ensure a steady growth in HDB prices so that, in theory, HDB dwellers could monetize their flats in future for a higher price than what they paid when they bought it. To appreciate the asset, the only way was to cut supply. Everyone is made to feel that the HDB flat is an asset to them and some started thinking of HDB flats as investments. In fact, to have a title deed to the flat would not make sense to me as the HDB flat is just ownership of a lease from HDB to reside in that dwelling house for a period of about 99 years or whatever is left of it. HDB flats were passed off as investment grade properties when they were not and thus everyone, PRs and Singaporean private property owners alike, saw this as an opportunity to make money.
3) Huge influx of foerigners.
Ok, so what if the PRs were not the main culprits? Indirectly they were. People saw HDB as a sure way to get great rental yield. Suddenly there were so many foreigners flocking into Singapore. They all needed homes to stay in and some Singaporeans and PRs who were eligible to purchase a flat but did not do so before, did so now. Rental for a 3 room flat could fetch approximately $24,000 per annum. A 3 room flat was in the region of $300,000. This would mean a rental yield of about 8%! This is extremely good return for such a small capital outlay. Why then would a person in a right investment frame of mind ever pass up on such an opportunity? If rentals were less attractive, I am pretty sure many people would not have dipped into their bank accounts to purchase HDB flats. Even though there is a minimum occupation period, some rent their properties out despite the possible penalties if caught. The returns are too attractive to be ignored!
Perhaps the minister should ponder about these points as well?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Saturday, January 07, 2012
What it takes to be a politician in Singapore
If I were Lee Hsien Loong I would be scratching my head as to what my fellow politicians will come up with. Well let's wrap up an eventful last few months for Singapore politics.
1) Tin Pei Ling saying "I don't know what to say?" Which makes me wonder whether she uses this phrase when she speaks in Parliament.
2) Seng Han Tong passing a remark that came off as him intepreting that Malays and Indian workers in SMRT have a poorer command of English as compared to the other races in Singapore.
3) Now Grace Fu posted a comment on her Facebook page commenting about the recent pay cut.
Let me make this clear to these people:
I do not expect you to earn peanuts. I believe that politicians are to be paid handsomely and I believe the recent cuts in pay are fair and reasonable. However I would like to point out to these people that Singaporeans just wish for them to be politically correct. Not to pass comments that will infuriate sections of the electorate. Everyone has an opinion about something but you cannot just do something as and when you like if you are in that position.
Let me put this in perspective. Soccer players are paid millions of dollars a year. Many are living the lives that we the common folk could only dream of. Yet we have Zidane, who is carrying the hope of an entire nation, headbutting an opponent in a World Cup final. We have players like John Terry having an extra-marital affair with the wife of his own team mate. In normal circumstances if I were playing soccer with some friends, playing rough with my opponent would not cause a national backlash and having affairs is something that happens in every society. However, if you are in the limelight, please behave yourself. I can get piss drunk on a Friday night and post it on Facebook. What would the world think if the prime minister did the exact same thing? Unable to swallow this fact? Perhaps politics is not the right path for a few of our politicians.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
1) Tin Pei Ling saying "I don't know what to say?" Which makes me wonder whether she uses this phrase when she speaks in Parliament.
2) Seng Han Tong passing a remark that came off as him intepreting that Malays and Indian workers in SMRT have a poorer command of English as compared to the other races in Singapore.
3) Now Grace Fu posted a comment on her Facebook page commenting about the recent pay cut.
Let me make this clear to these people:
I do not expect you to earn peanuts. I believe that politicians are to be paid handsomely and I believe the recent cuts in pay are fair and reasonable. However I would like to point out to these people that Singaporeans just wish for them to be politically correct. Not to pass comments that will infuriate sections of the electorate. Everyone has an opinion about something but you cannot just do something as and when you like if you are in that position.
Let me put this in perspective. Soccer players are paid millions of dollars a year. Many are living the lives that we the common folk could only dream of. Yet we have Zidane, who is carrying the hope of an entire nation, headbutting an opponent in a World Cup final. We have players like John Terry having an extra-marital affair with the wife of his own team mate. In normal circumstances if I were playing soccer with some friends, playing rough with my opponent would not cause a national backlash and having affairs is something that happens in every society. However, if you are in the limelight, please behave yourself. I can get piss drunk on a Friday night and post it on Facebook. What would the world think if the prime minister did the exact same thing? Unable to swallow this fact? Perhaps politics is not the right path for a few of our politicians.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Friday, December 30, 2011
Politics versus Economics
Recently developers have been sounding out to the government that the recent cooling measures are going to hurt an already frail economy and could spark a downward spiral for property prices. There has also been speculation that the government would remove these measures if property prices were to correct too much or if the economy were to contract drastically. To me, I feel that these measures should and would stay.
This is not about economics anymore. From day one, property prices were determined by political factors more than economic ones. Then minister for national development, Mah Bow Tan, embarked on his "asset appreciation" policy and wanted public housing to be seen as an asset which would appreciate over time. It did not matter that prices escalated out of control and beyond the reach of people. If economics played a part, the cooling measures should have been implemented from the onset of the bubble in 2009. Nothing was done and minister Mah allowed property prices to appreciate in a dramatic fashion after the financial crisis in 2008.
Next up was the use of social media. Politics in social media was liberalised. Singaporeans could discuss about politics and political groups could use sites such as Facebook and Twitter to spread their propaganda. Out came the opposition and they highlighted the problem of housing to all Singaporeans, young and old. It caused a great awakening and people realised that this spike in prices could not go on forever. Housing was one of the core topics in the general election of 2010.
Finally, the last straw to the PAP was the loss of a great comrade Mr George Yeo. Not only was he an able foreign minister, he was, to me, a possible candidate to take over as Prime Minister when Mr Lee Hsien Loong were to step down. This shocked the PAP and they had to do something. They realised that the past years were filled with mistakes in policies and that the unhappiness on the ground was spreading. Old guards like Lee Kuan Yew, Goh Chok Tong, Wong Kan Seng and Mah Bow Tan stepped down from the cabinet and finally our PM Lee Hsien Loong could assemble a cabinet which he could truly call his own. The PAP is now more consultative than authoritative.
Thus I would politely remind an association like REDAS that property prices have their ups and downs. Just because the government is trying to cool it down does not mean that you can throw economic rationale to the measures implemented. If REDAS truly cared about economics, why didn't developers feel that something was weird with our property market when they were making obscene amounts of money the past few years?
Typical upper elite class behavior. Only make noise when things don't go their way. They seem to forget that they had it very good for the last few years.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
This is not about economics anymore. From day one, property prices were determined by political factors more than economic ones. Then minister for national development, Mah Bow Tan, embarked on his "asset appreciation" policy and wanted public housing to be seen as an asset which would appreciate over time. It did not matter that prices escalated out of control and beyond the reach of people. If economics played a part, the cooling measures should have been implemented from the onset of the bubble in 2009. Nothing was done and minister Mah allowed property prices to appreciate in a dramatic fashion after the financial crisis in 2008.
Next up was the use of social media. Politics in social media was liberalised. Singaporeans could discuss about politics and political groups could use sites such as Facebook and Twitter to spread their propaganda. Out came the opposition and they highlighted the problem of housing to all Singaporeans, young and old. It caused a great awakening and people realised that this spike in prices could not go on forever. Housing was one of the core topics in the general election of 2010.
Finally, the last straw to the PAP was the loss of a great comrade Mr George Yeo. Not only was he an able foreign minister, he was, to me, a possible candidate to take over as Prime Minister when Mr Lee Hsien Loong were to step down. This shocked the PAP and they had to do something. They realised that the past years were filled with mistakes in policies and that the unhappiness on the ground was spreading. Old guards like Lee Kuan Yew, Goh Chok Tong, Wong Kan Seng and Mah Bow Tan stepped down from the cabinet and finally our PM Lee Hsien Loong could assemble a cabinet which he could truly call his own. The PAP is now more consultative than authoritative.
Thus I would politely remind an association like REDAS that property prices have their ups and downs. Just because the government is trying to cool it down does not mean that you can throw economic rationale to the measures implemented. If REDAS truly cared about economics, why didn't developers feel that something was weird with our property market when they were making obscene amounts of money the past few years?
Typical upper elite class behavior. Only make noise when things don't go their way. They seem to forget that they had it very good for the last few years.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Monday, December 12, 2011
What drives the market?
The latest set of cooling measures seem to be rather harsh but personally I feel it's the right step to take to make Singapore a home for Singaporeans.
The past few days I have been bombarded by my clients as to where the market would be heading. There are a thousand and one reasons as to whether the market will go up or down. However I think all reasons boil down to one main reason.
SENTIMENT
Not too long ago, majority of analysts, developers, home buyers and owners, real estate agents all thought that Singapore market was going to become more and more expensive. We live in a land scarce country and thus prices must increase. Thus buying a property is a sure bet to securing a healthy profit a couple of years later.
What a difference a few months make. Today analysts are singing to the tune that market is going to correct. One analyst from Standard Chartered even forecasted a 30% drop in home prices in the next few years.
Let's then look at what happened. In mid 2010, analysts predicted that markets had already peaked and will rise slowly in 2011. The market did not peak in 2010 and instead peaked in mid 2011 at a level 16% higher than the last property peak in 2007. We underestimated the magnitude of the property boom. This time round analysts are generally betting on a 10-15% correction. I believe that we will again underestimate the market.
Sentiment drives the market. Regulations set by the government help fuel the sentiment, be it positive or negative. The last minister in charge of national development set out policies which caused the shortage in supply and thus it fueled the euphoric sentiment that came along with a recovering economy and record low borrowing rates. Thus the ridiculous spike in real estate prices. This new minister is more people-centric and listens to public feedback about Singaporeans wanting to own affordable properties. Sentiment was that market had peaked and will come down in the near future due to the global market turmoil. His policies, which will serve Singaporeans well in the long run, will fuel the negative sentiment, causing prices to correct deeper than what we expect.
Oh well, prices are too expensive in the first place. A correction will be good and healthy and will NOT destabilize the economy. Property prices are not going to halve. This is just a wake up call for everyone not to over commit themselves. In the long run, lower prices will mean more affordable housing for the people in Singapore.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
The past few days I have been bombarded by my clients as to where the market would be heading. There are a thousand and one reasons as to whether the market will go up or down. However I think all reasons boil down to one main reason.
SENTIMENT
Not too long ago, majority of analysts, developers, home buyers and owners, real estate agents all thought that Singapore market was going to become more and more expensive. We live in a land scarce country and thus prices must increase. Thus buying a property is a sure bet to securing a healthy profit a couple of years later.
What a difference a few months make. Today analysts are singing to the tune that market is going to correct. One analyst from Standard Chartered even forecasted a 30% drop in home prices in the next few years.
Let's then look at what happened. In mid 2010, analysts predicted that markets had already peaked and will rise slowly in 2011. The market did not peak in 2010 and instead peaked in mid 2011 at a level 16% higher than the last property peak in 2007. We underestimated the magnitude of the property boom. This time round analysts are generally betting on a 10-15% correction. I believe that we will again underestimate the market.
Sentiment drives the market. Regulations set by the government help fuel the sentiment, be it positive or negative. The last minister in charge of national development set out policies which caused the shortage in supply and thus it fueled the euphoric sentiment that came along with a recovering economy and record low borrowing rates. Thus the ridiculous spike in real estate prices. This new minister is more people-centric and listens to public feedback about Singaporeans wanting to own affordable properties. Sentiment was that market had peaked and will come down in the near future due to the global market turmoil. His policies, which will serve Singaporeans well in the long run, will fuel the negative sentiment, causing prices to correct deeper than what we expect.
Oh well, prices are too expensive in the first place. A correction will be good and healthy and will NOT destabilize the economy. Property prices are not going to halve. This is just a wake up call for everyone not to over commit themselves. In the long run, lower prices will mean more affordable housing for the people in Singapore.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Thursday, December 01, 2011
The erosion of our social core
A client of mine recently could not complete the purchase of her new flat because she did not have sufficient funds in cash to fork out for the cash over valuation and down payment. Usually these monies are to be handed to the solicitor acting for the purchaser so that the solicitor can make the payment to the sellers. It was of no fault of mine that she did not have the money. She required about $10,000 worth of cash to complete the sale of her property. A few weeks ago she had collected a hefty cheque of more than $60,000 as profits from the sale of her flat. I told her to keep the monies and remember to set aside sufficient monies for the completion of the flat she purchased. She agreed to do so as well.
How then did this amount disappear in a matter of two weeks? Very simple, she had squandered it on the casino. She knew she needed this money and yet she was tempted to place all of it at the gambling tables of our very own casinos.
When the government built these "integrated resorts" they promised us that there was going to be barriers for Singaporeans to enter their premises. A few years on, the "integrated resorts" are experiencing extraordinary profits. The foreigners which we were supposed to attract are coming in but then who are the ones actually playing at the tables? Singaporeans. Let's all wake up to the fact that these are casinos and stop trying to dress them up merely by renaming them "integrated resorts". Other than the $100 levy, the government has not tried anything significant to educate Singaporeans about the ills of gambling. Buses were allowed to pick Singaporeans from heartland malls and were only halted after a public outcry. I also wonder how many Singaporeans are aware that we have a National Council on Problem Gambling (NCPG)? If our casinos are truly designed for foreigners then why is it that there are more entry points for Singaporeans and Permanent Residences than for foreigners? Why not have an opt in option rather than an opt out option? What we should have is that every Singaporean and Permanent Resident should be excluded by default from entering the casinos. If anyone wants to play, he has to apply and obtain a permit. This hassle will deter a quite substantial group of people and it will also sound alarm bells to the families of people who have a gambling addiction. The reason why the government opted for the current system? Profits.
I have a friend who has lost his whole hairdressing business due to the massive debts that he chalked up at the tables of the casinos. Let's face it. $100 is not a significant amount. I have clients who have had to sell multiple properties just to fund their gambling addiction.
It is a multi billion dollar industry. However, to me, the economic benefits that come along with it do not outweigh the social ills that is affecting our nation.
I'm very sorry but the government has taken the very very low road this time round.
Singapore is a land where there are no shortcuts. Everyone works hard for a living. The casinos are eroding the very social core of our society.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
How then did this amount disappear in a matter of two weeks? Very simple, she had squandered it on the casino. She knew she needed this money and yet she was tempted to place all of it at the gambling tables of our very own casinos.
When the government built these "integrated resorts" they promised us that there was going to be barriers for Singaporeans to enter their premises. A few years on, the "integrated resorts" are experiencing extraordinary profits. The foreigners which we were supposed to attract are coming in but then who are the ones actually playing at the tables? Singaporeans. Let's all wake up to the fact that these are casinos and stop trying to dress them up merely by renaming them "integrated resorts". Other than the $100 levy, the government has not tried anything significant to educate Singaporeans about the ills of gambling. Buses were allowed to pick Singaporeans from heartland malls and were only halted after a public outcry. I also wonder how many Singaporeans are aware that we have a National Council on Problem Gambling (NCPG)? If our casinos are truly designed for foreigners then why is it that there are more entry points for Singaporeans and Permanent Residences than for foreigners? Why not have an opt in option rather than an opt out option? What we should have is that every Singaporean and Permanent Resident should be excluded by default from entering the casinos. If anyone wants to play, he has to apply and obtain a permit. This hassle will deter a quite substantial group of people and it will also sound alarm bells to the families of people who have a gambling addiction. The reason why the government opted for the current system? Profits.
I have a friend who has lost his whole hairdressing business due to the massive debts that he chalked up at the tables of the casinos. Let's face it. $100 is not a significant amount. I have clients who have had to sell multiple properties just to fund their gambling addiction.
It is a multi billion dollar industry. However, to me, the economic benefits that come along with it do not outweigh the social ills that is affecting our nation.
I'm very sorry but the government has taken the very very low road this time round.
Singapore is a land where there are no shortcuts. Everyone works hard for a living. The casinos are eroding the very social core of our society.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Thursday, November 24, 2011
Facing up to reality
Every dog has it's day and certainly the Singapore property market has had it's days for the last three years. The market has gotten a great rally and prices are way ahead of the last peak in 2007. However, with the Europe debt crisis and the slowdown of the Chinese economy, Singapore seems to be affected as well. The property market is taking a hit and volumes have come down. As a real estate salesperson, I have felt the slowdown in terms of the number of appointments I have. However, buyers in the market are generally sincere and there are still sellers who are willing to let go at reasonable prices and thus deals can still be concluded. To be frank, the last two to three months have been my best months in terms of sales figures for the whole of 2011.
However, what will happen when almost all those who need a house have made a purchase? What happens if prices take a dip and sellers decide it is not worth their while to try to get a good price for their properties? What if sales volumes drop drastically? This time round, there probably will not be a quick rebound off recessionary lows. The main drivers of global economy, the US, Europe and China are facing problems of their own. Whatever is said, Singapore is definitely NOT immune to a global slowdown. The mere fact that the government is warning of a possible slowdown would mean that they have already seen some figures before we have and it does not look too rosy.
Just recently, my CEO spoke to me about maintaining one's bottom line. ie. keeping costs low. I realise that this is a very important concept lost by many out there. When times are good, some may spend lavishly on their lifestyle. They splurge on cars, branded goods and holidays. To them, summer is 24 hours a day, 7 days a week, 52 weeks a year and will never go away. Prudence is a concept lost by salespeople. I fear for those who have over-committed. Instead of upgrading our debt during the booming years, we should be downgrading our commitments.
Only time will tell who can stand the test of time. Times will be leaner but then for those who are willing to persevere and work hard, they can tide through the winter that is the upcoming economic downturn.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
However, what will happen when almost all those who need a house have made a purchase? What happens if prices take a dip and sellers decide it is not worth their while to try to get a good price for their properties? What if sales volumes drop drastically? This time round, there probably will not be a quick rebound off recessionary lows. The main drivers of global economy, the US, Europe and China are facing problems of their own. Whatever is said, Singapore is definitely NOT immune to a global slowdown. The mere fact that the government is warning of a possible slowdown would mean that they have already seen some figures before we have and it does not look too rosy.
Just recently, my CEO spoke to me about maintaining one's bottom line. ie. keeping costs low. I realise that this is a very important concept lost by many out there. When times are good, some may spend lavishly on their lifestyle. They splurge on cars, branded goods and holidays. To them, summer is 24 hours a day, 7 days a week, 52 weeks a year and will never go away. Prudence is a concept lost by salespeople. I fear for those who have over-committed. Instead of upgrading our debt during the booming years, we should be downgrading our commitments.
Only time will tell who can stand the test of time. Times will be leaner but then for those who are willing to persevere and work hard, they can tide through the winter that is the upcoming economic downturn.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, November 16, 2011
Is the market slowing down FINALLY?
http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_734143.html
Really interesting to note that new private home sales are down 15% for the month of October. As a real estate salesperson, I do feel that the sentiment of buyers in general are one of "wait and see". No one knows what is going to happen to the global economy. Europe may or may not implode, China may have a hard landing and the US recovery story may not be as buoyant as earlier anticipated. If new private home sales are down 15%, I would encourage home seekers to take a closer look at the URA website to get a feel of the resale home market. Volumes have been diminishing since the first half of this year.
I personally feel that prices have run ahead of fundamentals. This then comes to my point. Paying in excess of $900 per square foot for a 99-year leasehold property in Punggol may not make much sense. Reason being that a 3 bedroom apartment with an average size of about 1000 square feet may translate to a price of a million Singapore Dollars. Which then brings me back to the point of "how many people can afford a property higher than today's prices?" My fellow graduates are not making tons of money. Most of them are earning salaries of about $4,000 to $5,000 a month at the age of about thirty. A loan of $800,000 would set them back about $3,000 a month thereabout depending on the interest rate. How much more can prices increase such that they can sell it for a profit in future? $1,500 per square foot for a unit in Punggol? With about 80 plus years left on the lease? What will the typical buyer say about the purchase he made today?
"For own stay. So high or low it does not matter to me".
My response, "I bought my car for own use. I am glad I bought it when it was 50% the price of a similar model today."
No one can guarantee that the house they buy today will be last house they will ever live in. Buying for own stay is the worst excuse for the financial suicide that buyers are getting themselves into these days.
This is a property boom of epic proportion. Prices have skyrocketed since the lows in January 2009. A mere two and a half year time frame has brought us to the dizzy heights of today. For those who jumped in without much thought, I pray that this boom is not a bubble in disguise.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Really interesting to note that new private home sales are down 15% for the month of October. As a real estate salesperson, I do feel that the sentiment of buyers in general are one of "wait and see". No one knows what is going to happen to the global economy. Europe may or may not implode, China may have a hard landing and the US recovery story may not be as buoyant as earlier anticipated. If new private home sales are down 15%, I would encourage home seekers to take a closer look at the URA website to get a feel of the resale home market. Volumes have been diminishing since the first half of this year.
I personally feel that prices have run ahead of fundamentals. This then comes to my point. Paying in excess of $900 per square foot for a 99-year leasehold property in Punggol may not make much sense. Reason being that a 3 bedroom apartment with an average size of about 1000 square feet may translate to a price of a million Singapore Dollars. Which then brings me back to the point of "how many people can afford a property higher than today's prices?" My fellow graduates are not making tons of money. Most of them are earning salaries of about $4,000 to $5,000 a month at the age of about thirty. A loan of $800,000 would set them back about $3,000 a month thereabout depending on the interest rate. How much more can prices increase such that they can sell it for a profit in future? $1,500 per square foot for a unit in Punggol? With about 80 plus years left on the lease? What will the typical buyer say about the purchase he made today?
"For own stay. So high or low it does not matter to me".
My response, "I bought my car for own use. I am glad I bought it when it was 50% the price of a similar model today."
No one can guarantee that the house they buy today will be last house they will ever live in. Buying for own stay is the worst excuse for the financial suicide that buyers are getting themselves into these days.
This is a property boom of epic proportion. Prices have skyrocketed since the lows in January 2009. A mere two and a half year time frame has brought us to the dizzy heights of today. For those who jumped in without much thought, I pray that this boom is not a bubble in disguise.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Friday, October 21, 2011
The gap between the "haves" and the "have nots"
It's been a long while since I've blogged. I have been travelling a fair bit. Visited Thailand and parts of China. I must say that it is good to be back home in Singapore.
Anyway, I have a few burning matters which I must blog about! First and foremost would be Mr Khaw's speech in parliament. Since I am a real estate practitioner, I must first take interest in his speech.
1) Getting a home for the first time home buyer.
This is very important! The first time home buyer makes a large chunk of the people in the market looking for homes. Be it resale or build-to-order. Do not think that the first time home buyer does not have cash on hand. I have many first time home buyers who can turn to their parents for a helping hand to fork out that $50K-$100K cash over valuation for a resale HDB flat. Most parents want their children to live near them. This may take some heat off the resale market. For the next year, cash over valuations should come down, there will be fewer scenarios whereby viewings will be packed with 5-10 groups of buyers vying for the same flat and eventually prices should ease a little. Reason why prices won't crash? These build to order flats are usually in far flung areas like Punggol or Jurong West. Places whereby the estate is less mature. The mature estates like Ang Mo Kio, Bedok and Clementi are the places where the parents of these first timers live. If the parents and children want to stay near each other, they will still have to go and dip their hands in the resale market to buy flats in these mature estates. Moreover, there are some first time home buyers who may want a home with close proximity to central areas and since they are well paid working executives, they will not mind forking out more for a resale flat.
My solution: The minister spoke about building the Bidadari estate. I would advise him to do so as soon as possible. Also, to cater for more BTO projects in highly matured estates. I am sure that there can be sites to be found in these mature estates. Then, if land is limited, build higher HDBs to really maximise the land use. I am sure I can find land available in places like Ang Mo Kio for HDB redevelopment. Why does Far East have to build Centro Residences to be the marquee of Ang Mo Kio? Ang Mo Kio is a predominantly HDB estate. Why not build a Pinnacle like structure in Ang Mo Kio? 60 storeys is just nice. The parent living in the block nearby can easily spot his or her child's home. Talk about family bonding. Think about it Minister Khaw. Create a HDB icon for a town to be proud about on-route to solving our housing shortage problems.
2) Catering for the needy. Those who fall between the cracks.
I feel that more can be done. It is not Singaporeans making noise for the fun of it when we mock about throwing money to the Youth Olympics or when we go big on Formula 1 but yet we should give more back to those in need. I believe the special housing grant does help but then by how much? The maximum the special housing grant can go is $20,000 and that is for households earning less than $1,500 a month. Moreover, this is for those who would like a 2-room flat.
Based on this pyramid, the Ministry of National Development is the most important ministry there is for Singaporeans.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Anyway, I have a few burning matters which I must blog about! First and foremost would be Mr Khaw's speech in parliament. Since I am a real estate practitioner, I must first take interest in his speech.
1) Getting a home for the first time home buyer.
This is very important! The first time home buyer makes a large chunk of the people in the market looking for homes. Be it resale or build-to-order. Do not think that the first time home buyer does not have cash on hand. I have many first time home buyers who can turn to their parents for a helping hand to fork out that $50K-$100K cash over valuation for a resale HDB flat. Most parents want their children to live near them. This may take some heat off the resale market. For the next year, cash over valuations should come down, there will be fewer scenarios whereby viewings will be packed with 5-10 groups of buyers vying for the same flat and eventually prices should ease a little. Reason why prices won't crash? These build to order flats are usually in far flung areas like Punggol or Jurong West. Places whereby the estate is less mature. The mature estates like Ang Mo Kio, Bedok and Clementi are the places where the parents of these first timers live. If the parents and children want to stay near each other, they will still have to go and dip their hands in the resale market to buy flats in these mature estates. Moreover, there are some first time home buyers who may want a home with close proximity to central areas and since they are well paid working executives, they will not mind forking out more for a resale flat.
My solution: The minister spoke about building the Bidadari estate. I would advise him to do so as soon as possible. Also, to cater for more BTO projects in highly matured estates. I am sure that there can be sites to be found in these mature estates. Then, if land is limited, build higher HDBs to really maximise the land use. I am sure I can find land available in places like Ang Mo Kio for HDB redevelopment. Why does Far East have to build Centro Residences to be the marquee of Ang Mo Kio? Ang Mo Kio is a predominantly HDB estate. Why not build a Pinnacle like structure in Ang Mo Kio? 60 storeys is just nice. The parent living in the block nearby can easily spot his or her child's home. Talk about family bonding. Think about it Minister Khaw. Create a HDB icon for a town to be proud about on-route to solving our housing shortage problems.
2) Catering for the needy. Those who fall between the cracks.
I feel that more can be done. It is not Singaporeans making noise for the fun of it when we mock about throwing money to the Youth Olympics or when we go big on Formula 1 but yet we should give more back to those in need. I believe the special housing grant does help but then by how much? The maximum the special housing grant can go is $20,000 and that is for households earning less than $1,500 a month. Moreover, this is for those who would like a 2-room flat.
Average Monthly Household Income* | SHG | Flat Types Eligible For With SHG |
Not more than $1,500 | $20,000 | 2-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats |
$1,501 to $1,750 | $15,000 | 2-room or 3-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats |
$1,751 - $2,000 | $10,000 | |
$2,001 - $2,250 | $5,000 | 3-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats |
* Based on average of 12 months
I would think that the majority of applicant should fall under the SHGs of $5,000 or $10,000. This may sound like the government is giving a generous handout but there are a few problems. Why only in non-mature estates? Also, the grant is too little to make a significant impact in their monthly installment. A $10,000 grant broken down in a 30 year loan based on HDB's concessionary rate is about $40.03 per month. Basically the grant serves to lower the monthly installment of the applicant by $40.03. This is almost the conservancy rate for a 3 room flat. I would think that more can be done. If the SHG is insufficient, we must think of more constructive ways to help the needy.
My solution: I believe that since we are talking about increasing the rental flats, could we instead build such flats with the option of the occupant purchasing the flat after a certain period of time? The occupant can have the option of renting the flat from the government first. Perhaps at a nominal rate of about a hundred dollars. However, he is not allowed to make major changes to the structure of the flat since on paper he is the tenant. He is also not allowed to apply for a car park lot as on paper, he has a low income and thus should not have a private vehicle. If he wanted to own the property, make changes to it or have a car lot, he must buy it from HDB at a certain price. The good thing about this system is that we identify the problem, help those who need a place by renting one to them and then hopefully when some start buying over their flat, it will spur others to follow suit.
3) Other groups will be tackled by 4 years.
This is a really dangerous statement. By other groups I would say that Minister Khaw meant the second timers and the HDB upgraders and people aspiring to own private property. Basically I would deem him telling the middle and upper middle class to "hold on" while he settles the first timers and the needy. I really took PM Lee's parliament speech well. He mentioned that we should all have a stake in the country. I would think that he meant that if we all have something to work for, we would be purposeful citizens of Singapore. Basically the gap between the haves and the have nots is getting wider. It is dangerous to have a segregated middle class. A middle class who is well off to live comfortably but have little means to move up the social ladder. The middle class who is stuck in his HDB even though he dreams of owning a condominium or landed property one day. The middle class who has seen his 5 room flat price spike from $400,000 to $600,000 only to find that his dream condominium has risen from $800,000 to $1.6 million in that same period of time. This middle class is well educated, many working professionals with household incomes of about $10,000. The social immobility is startling. I can forsee that the gap between the middle and upper class will only get wider. As an inclusive society, we have to solve this problem together with the two previously mentioned. The middle class is educated, well connected to mass media, affluent enough to enjoy some form of luxury like a personal vehicle. Moreover, with our country's good education system, this group of people is growing. I have friends who seem to resign themselves to never owning a private property or are purchasing private properties overseas. Why then are we letting this educated and affluent group of people place stake holds in other countries when we can let them do so in our own country? Is the current level of private property prices affordable?
Let us take a look at an analogy. A loan of about $650,000 for 25 years at 3% interest would cost about $3,000 a month in installment. This breaks down to $100 a day! I recently went to Bangkok and stayed in a 5 star hotel (which incidentally is larger than a shoebox apartment in Singapore) and I paid $100 a night! Basically if private property prices continue to rise beyond fundamentals, and I believe they are beyond affordability in some categories, then why not just live in a hotel with room service, no hassle of paying electrical and water bills? Imagine a 3 bedroom 99-year leasehold property in Kovan is costing about $1.4 million. The monthly installment for such a suburban property is going to be about $5,000 a month once interest rates start rising!
My solution: The property cooling measures should stay for a long time to come. (sorry developers and REDAS) We need them to stablise prices. To further moderate this overheated property market, much more land should be released. The introduction of a property gains tax should be done. Singaporeans taxed a certain rate, permanent residents and foreigners a higher rate. This tax should be implemented on PRs investing in HDB properties as well. PRs should also not be allowed to rent out their HDB flats.
Hopefully my message gets across to the minister somehow.
To quote Maslow's hierarchy of needs...
My solution: I believe that since we are talking about increasing the rental flats, could we instead build such flats with the option of the occupant purchasing the flat after a certain period of time? The occupant can have the option of renting the flat from the government first. Perhaps at a nominal rate of about a hundred dollars. However, he is not allowed to make major changes to the structure of the flat since on paper he is the tenant. He is also not allowed to apply for a car park lot as on paper, he has a low income and thus should not have a private vehicle. If he wanted to own the property, make changes to it or have a car lot, he must buy it from HDB at a certain price. The good thing about this system is that we identify the problem, help those who need a place by renting one to them and then hopefully when some start buying over their flat, it will spur others to follow suit.
3) Other groups will be tackled by 4 years.
This is a really dangerous statement. By other groups I would say that Minister Khaw meant the second timers and the HDB upgraders and people aspiring to own private property. Basically I would deem him telling the middle and upper middle class to "hold on" while he settles the first timers and the needy. I really took PM Lee's parliament speech well. He mentioned that we should all have a stake in the country. I would think that he meant that if we all have something to work for, we would be purposeful citizens of Singapore. Basically the gap between the haves and the have nots is getting wider. It is dangerous to have a segregated middle class. A middle class who is well off to live comfortably but have little means to move up the social ladder. The middle class who is stuck in his HDB even though he dreams of owning a condominium or landed property one day. The middle class who has seen his 5 room flat price spike from $400,000 to $600,000 only to find that his dream condominium has risen from $800,000 to $1.6 million in that same period of time. This middle class is well educated, many working professionals with household incomes of about $10,000. The social immobility is startling. I can forsee that the gap between the middle and upper class will only get wider. As an inclusive society, we have to solve this problem together with the two previously mentioned. The middle class is educated, well connected to mass media, affluent enough to enjoy some form of luxury like a personal vehicle. Moreover, with our country's good education system, this group of people is growing. I have friends who seem to resign themselves to never owning a private property or are purchasing private properties overseas. Why then are we letting this educated and affluent group of people place stake holds in other countries when we can let them do so in our own country? Is the current level of private property prices affordable?
Let us take a look at an analogy. A loan of about $650,000 for 25 years at 3% interest would cost about $3,000 a month in installment. This breaks down to $100 a day! I recently went to Bangkok and stayed in a 5 star hotel (which incidentally is larger than a shoebox apartment in Singapore) and I paid $100 a night! Basically if private property prices continue to rise beyond fundamentals, and I believe they are beyond affordability in some categories, then why not just live in a hotel with room service, no hassle of paying electrical and water bills? Imagine a 3 bedroom 99-year leasehold property in Kovan is costing about $1.4 million. The monthly installment for such a suburban property is going to be about $5,000 a month once interest rates start rising!
My solution: The property cooling measures should stay for a long time to come. (sorry developers and REDAS) We need them to stablise prices. To further moderate this overheated property market, much more land should be released. The introduction of a property gains tax should be done. Singaporeans taxed a certain rate, permanent residents and foreigners a higher rate. This tax should be implemented on PRs investing in HDB properties as well. PRs should also not be allowed to rent out their HDB flats.
Hopefully my message gets across to the minister somehow.
To quote Maslow's hierarchy of needs...
Based on this pyramid, the Ministry of National Development is the most important ministry there is for Singaporeans.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Tuesday, October 04, 2011
Market turmoil
I have a great solution for the current market turmoil. Please stop all the intervening in the market. The problem with the west is that the future of the political party making the policies are dependent on the economic furtunes of the country. I'm sorry but they are making policies not for the good of the people of their country but for their own benefit.
Market is really weak. Be it in stocks or property.
The solution to the current financial crisis? The market is smart enough to make a solid rebound once we hit the bottom. Thanks to the western countries, it's going to take some time.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Market is really weak. Be it in stocks or property.
The solution to the current financial crisis? The market is smart enough to make a solid rebound once we hit the bottom. Thanks to the western countries, it's going to take some time.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, September 21, 2011
Singapore Condominium Market
Perhaps condominium owners should be a little fearful. There are many projects obtaining their TOP soon. The condominiums that I have on hand have really slow take up rate and yet owners in suburban leasehold properties are asking for in excess of $1200 per square foot.
To quote a seller of a 99-year leasehold condominium in Kovan who called me, "Property how to fall? The government bringing in a lot of China people! In one to two years time, Kovan condominiums will be worth more than $2,000 per square foot! I ask $1,500 per square foot only!"
Yeah right... Good luck to him. Based on my records, I believe he has been trying to achieve this price since the start of 2011.
When markets are moving up, us real estate practitioners will feel it. The converse is true as well. If I tell you the market is quiet, I believe I can feel it better than he can since I'm in it on a daily basis.
It's like me advising Sebastian Vettel as to how to pilot this...
The AWESOME RB7 car!!!
Anyway, there will only be ONE champion in 2011...
I'm eagerly awaiting the Singapore Grand Prix...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
To quote a seller of a 99-year leasehold condominium in Kovan who called me, "Property how to fall? The government bringing in a lot of China people! In one to two years time, Kovan condominiums will be worth more than $2,000 per square foot! I ask $1,500 per square foot only!"
Yeah right... Good luck to him. Based on my records, I believe he has been trying to achieve this price since the start of 2011.
When markets are moving up, us real estate practitioners will feel it. The converse is true as well. If I tell you the market is quiet, I believe I can feel it better than he can since I'm in it on a daily basis.
It's like me advising Sebastian Vettel as to how to pilot this...
Anyway, there will only be ONE champion in 2011...
I'm eagerly awaiting the Singapore Grand Prix...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Thursday, September 15, 2011
An European who knows common sense
http://www.channelnewsasia.com/stories/afp_world_business/view/1153203/1/.html
The world is topsy turvy.
In Singapore, our inflation is at an all time high. Yet our interest rates are at an all time low. This encourages more borrowing and investment. Thus pushing UP or maintaining inflation.
Thanks to the US and Europe for flushing the world with money. There is nothing we can do. In Singapore the rich will probably get richer and the poor will probably stay where they are. If you are asset rich your assets will most probably have appreciated by a huge margin.
Please everyone... no more economic policies for the insane.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
The world is topsy turvy.
In Singapore, our inflation is at an all time high. Yet our interest rates are at an all time low. This encourages more borrowing and investment. Thus pushing UP or maintaining inflation.
Thanks to the US and Europe for flushing the world with money. There is nothing we can do. In Singapore the rich will probably get richer and the poor will probably stay where they are. If you are asset rich your assets will most probably have appreciated by a huge margin.
Please everyone... no more economic policies for the insane.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Tuesday, September 13, 2011
"Kancheong" Buyers
Recently I had a buyer ask me when property prices will fall off their recent highs. I replied, "When people like you are less 'kancheong'"
For those who do not understand, I am telling the buyer to calm down. Not to panic. The market will correct but as to when it will correct? It depends on buyers. If buyers still rush into the market, the market will inevitably rise. Why then am I so sure that the market will correct? Just to name a few reasons...
1) Prices do not reflect fundamentals. Singapore is moving towards a technical recession. is. two consecutive quarters of smaller growth as compared to the previous quarter. Though it can be argued that this is because of the extremely stellar growth figures posted in the first quarter of 2011 and the next few quarters cannot keep up with such figures, we still must realise what a technical recession will have on overall general sentiment.
2) Interest rates have only one direction to move and that is up! Currently we are at historical all time lows. Banks are flushed with cash and need to lend at rates close to nothing to get rid of excess cash. Perhaps the Singapore economy was more resilient than what we expected it to be. Resilient package did a little too much. Inflation is really high currently, financing is cheap, the economy has overheated due to too much governmental intervention.
3) Singapore should be moderating the rate we import foreigners. Despite whatever is said about the benefits of foreign talent, I still support a "Singaporean first" policy. If PM Lee is true to his word, and I believe he will be so, then the influx will moderate, demand for housing will fall, rental rates will ease thus lowering rental yields. Prices of property should come down. Anyway there are too many Singaporeans holding more than one property.
4) The most telling reason there will be a slowdown is because of the circus that is happening in Europe. You may have heard of a German television show mocking Singaporeans for drinking reused water (NEWater) and taking temperatures before we enter a building (SARS period). Well perhaps they are a larger joke. The Eurozone is not going to hold. Greece will most probably default and there is little Germany can do to prevent it. The Eurozone was doomed to fail from day one. How can a country forsake it's economic sovereignty when it is an independent state. Imagine Singapore, Indonesia and Malaysia merging to form one currency. The beauty of capitalism is that everyone in the system must be responsible for his own economic decisions. I'm sorry but the Euro is an extremely flawed system and the Europeans must learn to pay for things through savings rather than borrowing.
Hopefully I am right. We have had a great run up in property prices. There should be a period of consolidation.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
For those who do not understand, I am telling the buyer to calm down. Not to panic. The market will correct but as to when it will correct? It depends on buyers. If buyers still rush into the market, the market will inevitably rise. Why then am I so sure that the market will correct? Just to name a few reasons...
1) Prices do not reflect fundamentals. Singapore is moving towards a technical recession. is. two consecutive quarters of smaller growth as compared to the previous quarter. Though it can be argued that this is because of the extremely stellar growth figures posted in the first quarter of 2011 and the next few quarters cannot keep up with such figures, we still must realise what a technical recession will have on overall general sentiment.
2) Interest rates have only one direction to move and that is up! Currently we are at historical all time lows. Banks are flushed with cash and need to lend at rates close to nothing to get rid of excess cash. Perhaps the Singapore economy was more resilient than what we expected it to be. Resilient package did a little too much. Inflation is really high currently, financing is cheap, the economy has overheated due to too much governmental intervention.
3) Singapore should be moderating the rate we import foreigners. Despite whatever is said about the benefits of foreign talent, I still support a "Singaporean first" policy. If PM Lee is true to his word, and I believe he will be so, then the influx will moderate, demand for housing will fall, rental rates will ease thus lowering rental yields. Prices of property should come down. Anyway there are too many Singaporeans holding more than one property.
4) The most telling reason there will be a slowdown is because of the circus that is happening in Europe. You may have heard of a German television show mocking Singaporeans for drinking reused water (NEWater) and taking temperatures before we enter a building (SARS period). Well perhaps they are a larger joke. The Eurozone is not going to hold. Greece will most probably default and there is little Germany can do to prevent it. The Eurozone was doomed to fail from day one. How can a country forsake it's economic sovereignty when it is an independent state. Imagine Singapore, Indonesia and Malaysia merging to form one currency. The beauty of capitalism is that everyone in the system must be responsible for his own economic decisions. I'm sorry but the Euro is an extremely flawed system and the Europeans must learn to pay for things through savings rather than borrowing.
Hopefully I am right. We have had a great run up in property prices. There should be a period of consolidation.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Sunday, September 11, 2011
Downturn: What it means
Interestingly, this article was extracted from The New Paper. In my opinion, a tabloid magazine disguised as a newspaper for daily circulation.
http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story20110909-298691.html
I find it weird that I have friends thinking of getting into the current market for speculative reasons. It is wiser not to play with fire. Didn't we graduate from the same place? Patience may save you quite a handsome sum of money.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story20110909-298691.html
I find it weird that I have friends thinking of getting into the current market for speculative reasons. It is wiser not to play with fire. Didn't we graduate from the same place? Patience may save you quite a handsome sum of money.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Friday, September 09, 2011
The rich need help?
Developers have had a good run. Many of them have increased their wealth many fold. Now that market seems to be slowing...
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1152072/1/.html
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1152072/1/.html
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, August 24, 2011
Inflation is still a problem
Singapore's CPI is up 5.4% on year!
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1148618/1/.html
Yet at this point in time our exports are weakening due to strong Singapore Dollar. I have mentioned it before, we need a change from our exchange rate policy. Basically we do not interfere with interest rates. We combat inflation by strengthening our Singapore Dollar. Yet interest rates are at an all time low! Finance Minister are you listening? Of course not, I'm a nobody to him. Perhaps I should go to my elected president to air my views?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1148618/1/.html
Yet at this point in time our exports are weakening due to strong Singapore Dollar. I have mentioned it before, we need a change from our exchange rate policy. Basically we do not interfere with interest rates. We combat inflation by strengthening our Singapore Dollar. Yet interest rates are at an all time low! Finance Minister are you listening? Of course not, I'm a nobody to him. Perhaps I should go to my elected president to air my views?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Tuesday, August 23, 2011
Luxury home prices in S'pore down 1.7% in Q2
Interesting report...
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1148502/1/.html
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1148502/1/.html
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Friday, August 19, 2011
Singapore is NOT immune to a global crisis
I've had really stubborn people saying that Singapore is immune to any external shocks especially with regards to any impending financial crisis. Me being a real estate practitioner, I get this comment often from sellers of properties who ask for ridiculous prices for their properties. They often have the notion that Singapore is a land scarce city state with fundamentals so sound that even a slight correction in property prices is unthinkable. Instead, they see the pace in the increase of prices moderating. ie. prices will still rise in the short, medium and long term but at a slower rate.
Then comes a reality check.
Singapore is the fifteenth largest trading partner of the United States.
Source:
http://en.wikipedia.org/wiki/Economy_of_Singapore
What this means is that even though we think that the rise of China and India can shield us from any slowdown from the United States, it is important to note the vast size of the US consumerist economy.
The US makes up 28.90% of the world's consumer market
Source:
http://www.rediff.com/business/slide-show/slide-show-1-worlds-25-largest-consumer-markets/20110729.htm
In contrast, China makes up 5.29% and India makes up 2.12%. What this means is that the US is almost 4 times as large a consumer than both China and India combined!
Will there be a scenario whereby the United States and Europe go into a recession and Singapore continues to boom? I do not think so.
Then why the huge rise in asset prices the last three to four years? My answer would focus on three main reasons.
1) The extremely low interest rates made it very attractive for home buyers as most buyers calculate "monthly payments" rather than use a "what if interest rates were much higher" analysis before committing to a propety.
2) Excess foreigners due to lax government policy
3) (HIGHLY OVERLOOKED) Window dressing of the economy before a very important general election for Singapore in May 2011. Usually in the year or two before a general election, especially when the ruling party requires to garner support, money will be pumped into the economy so that everyone is doing well and the feel good factor will contribute to populist support for the government. I believe that if this was not done, we may have had an even bleaker election result for the ruling People's Action Party.
Recession soon? Possibly. Correction in asset prices in Singapore soon? Most probably.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Then comes a reality check.
Singapore is the fifteenth largest trading partner of the United States.
Source:
http://en.wikipedia.org/wiki/Economy_of_Singapore
What this means is that even though we think that the rise of China and India can shield us from any slowdown from the United States, it is important to note the vast size of the US consumerist economy.
The US makes up 28.90% of the world's consumer market
Source:
http://www.rediff.com/business/slide-show/slide-show-1-worlds-25-largest-consumer-markets/20110729.htm
In contrast, China makes up 5.29% and India makes up 2.12%. What this means is that the US is almost 4 times as large a consumer than both China and India combined!
Will there be a scenario whereby the United States and Europe go into a recession and Singapore continues to boom? I do not think so.
Then why the huge rise in asset prices the last three to four years? My answer would focus on three main reasons.
1) The extremely low interest rates made it very attractive for home buyers as most buyers calculate "monthly payments" rather than use a "what if interest rates were much higher" analysis before committing to a propety.
2) Excess foreigners due to lax government policy
3) (HIGHLY OVERLOOKED) Window dressing of the economy before a very important general election for Singapore in May 2011. Usually in the year or two before a general election, especially when the ruling party requires to garner support, money will be pumped into the economy so that everyone is doing well and the feel good factor will contribute to populist support for the government. I believe that if this was not done, we may have had an even bleaker election result for the ruling People's Action Party.
Recession soon? Possibly. Correction in asset prices in Singapore soon? Most probably.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Monday, August 15, 2011
London Riots
Recently there has been absolute anarchy in England. Riots everywhere. Good thing Singapore is not such a country whereby hooligans ply the streets. Whatever the reason, it is plain stupid to use violence to solve matters. Japan was devastated by an earthquake, England is being devastated by it's own people.
Click on link to view scenes of the violence...
http://www.cnbc.com/id/44059635?slide=1
It is fortunate to be living in Singapore...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Click on link to view scenes of the violence...
http://www.cnbc.com/id/44059635?slide=1
It is fortunate to be living in Singapore...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Thursday, August 11, 2011
Proud to be Singaporean...
Weird... Watching the national day parade actually makes me feel really proud to be Singaporean. I have always reiterated the point to my fellow Singaporeans that this is home. I could not picture myself living anywhere else.
Majulah Singapura!!!
Anyway, I found a really cute kid reciting the Singapore pledge in Mandarin... Future member of parliament?
Oh yes, and for the benefit of those who need to know the English version.
Just some comic relief to take the heat of an ever falling stock market.Happy Birthday Singapore! Let's move forward together!
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Majulah Singapura!!!
Anyway, I found a really cute kid reciting the Singapore pledge in Mandarin... Future member of parliament?
Oh yes, and for the benefit of those who need to know the English version.
Just some comic relief to take the heat of an ever falling stock market.Happy Birthday Singapore! Let's move forward together!
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Friday, August 05, 2011
Crazy buyers
I am really shocked at how Singaporeans spend their money. It is not just the everyday items like buying clothes or spending on posh restaurants. It is the fact that many Singaporeans are paying ridiculous amounts of money for big ticket items like cars and property. A brand new 1.8 litre Honda costs about $130,000 today when I paid $70,000 for the same car 4 years ago. Public housing or HDB flats are going for insane cash over valuations (COV). Sellers are commanding COV premiums and yet buyers are forking out what the sellers are asking. It is now rather normal to have a Sengkang flat commanding in excess of $60,000 COV and yet there will be takers for the flat.
This then brings me to think carefully. Are Singaporeans that rich? Are businesses doing that well that everyone's pay has gone up by such a large amount to be able to afford such prices? I look around and then I just don't get it. Everyone seems to be making about the same amount of money 3-4 years ago. Businesses are doing better than in 2008 but are perhaps at pre-recession levels. Why then the abnormal level of optimism? Why is everyone so sure that incomes will remain at this level? That property prices will only continue to increase. Cars can only get more expensive. I am not trying to be a wet blanket but I do not believe that this boom can continue forever.
So where did this huge wave of money come from? To understand what is happening in the world, I would suggest reading and watching this article and video from CNBC.
http://www.cnbc.com/id/43268061
It is about "quantitative easing" in the US. This basically translates to flooding the economy with money to try to jump start a dead economy. Basically it applies to the US because their economy is in a very bad shape right now but then it should have no business with places like Singapore when we are seeing our economy skyrocket and everything is getting more expensive. However, because our economies are interlinked, money that is being pumped into the US economy is inadvertently being pumped into ours. What can we do? Nothing much. Is there a problem with this? I believe so. Because of the large amounts of money sloshing about in our economy, banks are lending at insanely low rates. At times with interest rates of as low as 0.2% per annum!
What I am trying to tell everyone is that the boom may be induced by the west. Their economies are doing poorly and money is being pumped into the system. It is merely flowing over to us. Is the stock market overpriced? Most probably so. Companies are doing well because money is coming in for investments. Everywhere you turn there are construction cranes, road works, cabling, upgrading and development of buildings. Why should companies not turn a huge profit? Is the Singapore property market overheated? Most probably so. There are Singaporeans committing to properties as though it is a sure way of making money. Quite a good number hold more than one property. The common excuse? "For investment". Like any investment, there are risks involved. Property investments are risky if you buy in at a historical high and that is where we are currently.
Recently the stock market has not been too kind. Stocks have been falling. I have a few remisier friends who still believe that the market can be played. My advice to the rest is that if you do not know what is going on, best thing to do is to shut yourself out from the stock market. The stock brokers will not want to hear this. They are like doctors prescribing you medicine wanting you to feel better but not curing you forever. They want you to visit the market often as they make money from activity.
There is still money to be made but I do not know when and where is the peak. Truth be told, I think we are in the midst of a bubble. I just do not know when it will pop.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
This then brings me to think carefully. Are Singaporeans that rich? Are businesses doing that well that everyone's pay has gone up by such a large amount to be able to afford such prices? I look around and then I just don't get it. Everyone seems to be making about the same amount of money 3-4 years ago. Businesses are doing better than in 2008 but are perhaps at pre-recession levels. Why then the abnormal level of optimism? Why is everyone so sure that incomes will remain at this level? That property prices will only continue to increase. Cars can only get more expensive. I am not trying to be a wet blanket but I do not believe that this boom can continue forever.
So where did this huge wave of money come from? To understand what is happening in the world, I would suggest reading and watching this article and video from CNBC.
http://www.cnbc.com/id/43268061
It is about "quantitative easing" in the US. This basically translates to flooding the economy with money to try to jump start a dead economy. Basically it applies to the US because their economy is in a very bad shape right now but then it should have no business with places like Singapore when we are seeing our economy skyrocket and everything is getting more expensive. However, because our economies are interlinked, money that is being pumped into the US economy is inadvertently being pumped into ours. What can we do? Nothing much. Is there a problem with this? I believe so. Because of the large amounts of money sloshing about in our economy, banks are lending at insanely low rates. At times with interest rates of as low as 0.2% per annum!
What I am trying to tell everyone is that the boom may be induced by the west. Their economies are doing poorly and money is being pumped into the system. It is merely flowing over to us. Is the stock market overpriced? Most probably so. Companies are doing well because money is coming in for investments. Everywhere you turn there are construction cranes, road works, cabling, upgrading and development of buildings. Why should companies not turn a huge profit? Is the Singapore property market overheated? Most probably so. There are Singaporeans committing to properties as though it is a sure way of making money. Quite a good number hold more than one property. The common excuse? "For investment". Like any investment, there are risks involved. Property investments are risky if you buy in at a historical high and that is where we are currently.
Recently the stock market has not been too kind. Stocks have been falling. I have a few remisier friends who still believe that the market can be played. My advice to the rest is that if you do not know what is going on, best thing to do is to shut yourself out from the stock market. The stock brokers will not want to hear this. They are like doctors prescribing you medicine wanting you to feel better but not curing you forever. They want you to visit the market often as they make money from activity.
There is still money to be made but I do not know when and where is the peak. Truth be told, I think we are in the midst of a bubble. I just do not know when it will pop.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Tuesday, August 02, 2011
A survey on real estate sentiment
S'pore property prices may continue climbing: survey
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1144363/1/.html
Interesting how such a trivial survey can make the news. Well, we live in a media saturated society. I believe market will be flat with a very small upside to prices. I too agree that the economic downturn later in 2011 will not materialize. Just a guess.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1144363/1/.html
Interesting how such a trivial survey can make the news. Well, we live in a media saturated society. I believe market will be flat with a very small upside to prices. I too agree that the economic downturn later in 2011 will not materialize. Just a guess.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Where has all the money gone to?
The rich poor divide is getting wider...
Now where did all that money go to?
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
TAAA DAAA!!!!!!!!!!!!
I used to hold Las Vegas Sands shares. It is traded on the US stock exchange under the symbol LVS. I bought it at about USD$9 and sold it off for USD$42. It netted me a very handsome profit. Why did the stock run up so significantly? Basically Las Vegas Sands runs a couple of casinos, namely one in Las Vegas itself, Macau and most prominently, Singapore.
The gaming market is huge in Asia. LVS eanrs about 95% of it's income from the Asian market and Singapore is poised to profit from this, apparently...
http://www.reuters.com/article/2011/07/27/sands-earns-idUSL3E7IQ50L20110727
Or will we actually...
If setting up a casino was as simple as we made it out to be. Personally I do not think we were and we currently are still not ready for two casinos. The social problems will far outweigh the economic benefits that come attached to setting up the two integrated resorts. Now what actually happened?
1) The building of the casinos actually caused an unreal spike in building activity. This caused a spike in construction costs across the board. Manpower was being directed to the building of not one but two very major integrated resorts. Let us be clear on this. This was something Singapore had never embarked on before. I do not think many Singaporeans understand the magnitude of what happened.
2) The building of the casinos caused an acute shortage of raw materials such as steel and sand. Thus pushing up prices of such raw materials. Since building residential properties also required similar raw materials, this escalated the costs of developing buildings and what developers did was to pass on the costs to the end buyers since they could command prices in a country whereby there was an acute housing shortage due to the lenient immigration policy.
3) The building of the casinos caused a huge wave of extreme optimism in the region. Singapore was seen as the darling of Asia. Not just South-East Asia but the whole of Asia. It was the "in" place to be. Property prices were expected to escalate after the completion of the casinos and thus sellers demanded more, developers increased their prices, buyers rushed in. Just to jump on the bandwagon before prices escalated even further.
The news read that Singapore achieved record economic growth. The reality is that the negative aspects of the two casinos will not be fully felt by our community till a much later date. We are already suffering from the highly inflated economy and historically high property prices. I would like to reiterate what Senior Minister of State (Information, Communications and the Arts and Environment and Water Resources) Grace Fu had commented.
Grace Fu voices concern over effects of casinos
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1143734/1/.html
I have a couple of people whom I know who have a gambling problem. Increasing the entry fee will not be much of a deterrence to them. The $100 will only stop those who are interested to go in and take a look "for fun".
Mercenary as it may seem, we cannot do much to right the wrongs of such a drastic policy to welcome two casinos into our country. Money was made from the casinos. The gambling addicts got poorer, the poor are still poor, the middle income people are not any richer in terms of real income.
Only the super rich have made significant increases in their wealth.
Oh and did I leave someone out?
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1103967/1/.html
Sorry PM Lee, I support you wholeheartedly but I just do not agree with going the low road of setting up two casinos in our beloved Singapore.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Now where did all that money go to?
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
TAAA DAAA!!!!!!!!!!!!
I used to hold Las Vegas Sands shares. It is traded on the US stock exchange under the symbol LVS. I bought it at about USD$9 and sold it off for USD$42. It netted me a very handsome profit. Why did the stock run up so significantly? Basically Las Vegas Sands runs a couple of casinos, namely one in Las Vegas itself, Macau and most prominently, Singapore.
The gaming market is huge in Asia. LVS eanrs about 95% of it's income from the Asian market and Singapore is poised to profit from this, apparently...
http://www.reuters.com/article/2011/07/27/sands-earns-idUSL3E7IQ50L20110727
Or will we actually...
If setting up a casino was as simple as we made it out to be. Personally I do not think we were and we currently are still not ready for two casinos. The social problems will far outweigh the economic benefits that come attached to setting up the two integrated resorts. Now what actually happened?
1) The building of the casinos actually caused an unreal spike in building activity. This caused a spike in construction costs across the board. Manpower was being directed to the building of not one but two very major integrated resorts. Let us be clear on this. This was something Singapore had never embarked on before. I do not think many Singaporeans understand the magnitude of what happened.
2) The building of the casinos caused an acute shortage of raw materials such as steel and sand. Thus pushing up prices of such raw materials. Since building residential properties also required similar raw materials, this escalated the costs of developing buildings and what developers did was to pass on the costs to the end buyers since they could command prices in a country whereby there was an acute housing shortage due to the lenient immigration policy.
3) The building of the casinos caused a huge wave of extreme optimism in the region. Singapore was seen as the darling of Asia. Not just South-East Asia but the whole of Asia. It was the "in" place to be. Property prices were expected to escalate after the completion of the casinos and thus sellers demanded more, developers increased their prices, buyers rushed in. Just to jump on the bandwagon before prices escalated even further.
The news read that Singapore achieved record economic growth. The reality is that the negative aspects of the two casinos will not be fully felt by our community till a much later date. We are already suffering from the highly inflated economy and historically high property prices. I would like to reiterate what Senior Minister of State (Information, Communications and the Arts and Environment and Water Resources) Grace Fu had commented.
Grace Fu voices concern over effects of casinos
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1143734/1/.html
I have a couple of people whom I know who have a gambling problem. Increasing the entry fee will not be much of a deterrence to them. The $100 will only stop those who are interested to go in and take a look "for fun".
Mercenary as it may seem, we cannot do much to right the wrongs of such a drastic policy to welcome two casinos into our country. Money was made from the casinos. The gambling addicts got poorer, the poor are still poor, the middle income people are not any richer in terms of real income.
Only the super rich have made significant increases in their wealth.
Oh and did I leave someone out?
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1103967/1/.html
Sorry PM Lee, I support you wholeheartedly but I just do not agree with going the low road of setting up two casinos in our beloved Singapore.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, July 27, 2011
Foresight vs Shortsight
Resale flat prices are alarmingly high. They are at an all time high in fact. Recently I brokered an executive maisonette flat in Bishan for $90,000 above valuation. The valuation was priced at $690,000 and thus the flat was transacted at $780,000. The offer came in during the very first viewing. This actually made me wonder, are flats really that short in supply? Do we really have that serious a supply and demand imbalance? The answer to these questions is an astounding YES!
I had 23 groups of buyers and buyers who were represented by their agents we came to the property. The house was not done up and extensive renovation was required. However, it was one of two executive maisonette flats on sale in Bishan and thus it was rather rare.
As the option was being filled in, I pondered as to what the buyers would have to go through. A 25 year loan for $552,000 (80% of valuation) at 3 % interest would mean a monthly installment of $2,617.61! This would have to run on for the next 25 years. For public housing, I find it ridiculous. Moreover, the buyer has to for out $90,000 cash over valuation, $34,500 in cash down payment and $103,500 in CPF down payment. On top of that the buyers will need an extensive renovation on the property and estimated that it would cost them about $80,000 to do up the place to their liking. Throw in another $10,000 for furnishing and the total cash that the buyer would have to spend on this property is a whopping $214,500!!!
I find having to spend $214,500 worth of cash on public housing is ridiculous...
Let's all please remember, when you buy a HDB, you are owning the lease on the property. When you buy a private property, be it landed or condominium or apartment, you are owning the title of the land either as land itself or in strata title. This is a very big difference and this discussion will be left to a later post.
Now then, our current Minister for National Development has come out to say this....
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1142742/1/.html
and I quote
"National Development Minister Khaw Boon Wan said it will take 3 to 5 years to "substantively resolve" the problem of high resale flat prices and for prices to stabilise."
Why then was this problem not singled out by the previous cabinet? It was already glaring. The asset appreciation policy was never an actual plan. It was conceived as a cover up for a flawed policy. One of lax immigration and poor housing supply planning. The two created a very good mix for escalating flat prices.
I am sorry but I believe that our ministers are and were paid a handsome sum of money to conceive policies that would benefit Singaporeans. Therefore we must have ministers with FORESIGHT, not SHORTSIGHT. I am a flat owner and I would like to say that I do not care if the value of my flat goes up or goes down. This is because I cannot monetise it.
Let's just say that I believe it is mainly this flawed policy that made our Prime Minister Lee Hsien Loong give an apology during the last election.
Let me first state that I believe that PM Lee is perhaps the right person to lead Singapore forward. However, the same cannot be said for some of the policy makers who came up with weird policies in the last 5 years.
All I have to say to the policy makers who made our PM give this apology, shame on you! What have you done?
That was about 2 years ago. Today, flat prices are still higher than ever, suburban condominiums are commanding in excess of $1,000 per square foot for leasehold developments. Banks are offering easy financing with interest rates close to zero, people are spending huge portions of their salaries financing their houses with the belief that Singapore can remain prosperous forever and they can keep their jobs always.
Dearest Minister Khaw, please be someone with foresight. We do not need to see the problem before reacting. We can take evasive measures before it becomes too late. (a HDB flat valued at SGD$1 million soon?)
Do not be a doctor who prescribes medicine for a patient when he is sick. Instead give the patient an inoculation to prevent him from getting the flu in the first place.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
I had 23 groups of buyers and buyers who were represented by their agents we came to the property. The house was not done up and extensive renovation was required. However, it was one of two executive maisonette flats on sale in Bishan and thus it was rather rare.
As the option was being filled in, I pondered as to what the buyers would have to go through. A 25 year loan for $552,000 (80% of valuation) at 3 % interest would mean a monthly installment of $2,617.61! This would have to run on for the next 25 years. For public housing, I find it ridiculous. Moreover, the buyer has to for out $90,000 cash over valuation, $34,500 in cash down payment and $103,500 in CPF down payment. On top of that the buyers will need an extensive renovation on the property and estimated that it would cost them about $80,000 to do up the place to their liking. Throw in another $10,000 for furnishing and the total cash that the buyer would have to spend on this property is a whopping $214,500!!!
I find having to spend $214,500 worth of cash on public housing is ridiculous...
Let's all please remember, when you buy a HDB, you are owning the lease on the property. When you buy a private property, be it landed or condominium or apartment, you are owning the title of the land either as land itself or in strata title. This is a very big difference and this discussion will be left to a later post.
Now then, our current Minister for National Development has come out to say this....
http://www.channelnewsasia.com/stories/singaporelocalnews/view/1142742/1/.html
and I quote
"National Development Minister Khaw Boon Wan said it will take 3 to 5 years to "substantively resolve" the problem of high resale flat prices and for prices to stabilise."
Why then was this problem not singled out by the previous cabinet? It was already glaring. The asset appreciation policy was never an actual plan. It was conceived as a cover up for a flawed policy. One of lax immigration and poor housing supply planning. The two created a very good mix for escalating flat prices.
I am sorry but I believe that our ministers are and were paid a handsome sum of money to conceive policies that would benefit Singaporeans. Therefore we must have ministers with FORESIGHT, not SHORTSIGHT. I am a flat owner and I would like to say that I do not care if the value of my flat goes up or goes down. This is because I cannot monetise it.
Let's just say that I believe it is mainly this flawed policy that made our Prime Minister Lee Hsien Loong give an apology during the last election.
Let me first state that I believe that PM Lee is perhaps the right person to lead Singapore forward. However, the same cannot be said for some of the policy makers who came up with weird policies in the last 5 years.
All I have to say to the policy makers who made our PM give this apology, shame on you! What have you done?
That was about 2 years ago. Today, flat prices are still higher than ever, suburban condominiums are commanding in excess of $1,000 per square foot for leasehold developments. Banks are offering easy financing with interest rates close to zero, people are spending huge portions of their salaries financing their houses with the belief that Singapore can remain prosperous forever and they can keep their jobs always.
Dearest Minister Khaw, please be someone with foresight. We do not need to see the problem before reacting. We can take evasive measures before it becomes too late. (a HDB flat valued at SGD$1 million soon?)
Do not be a doctor who prescribes medicine for a patient when he is sick. Instead give the patient an inoculation to prevent him from getting the flu in the first place.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Monday, July 25, 2011
Singapore's June inflation up 5.2% on-year
Proves my point entirely.
Buy a saving plan from an insurer and receive about 3% returns on your money. Inflation is 5.2%. The value of your dollar is still falling.
Buy term and invest in properties and stocks when market cools down.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1142873/1/.html
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Buy a saving plan from an insurer and receive about 3% returns on your money. Inflation is 5.2%. The value of your dollar is still falling.
Buy term and invest in properties and stocks when market cools down.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1142873/1/.html
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Friday, July 22, 2011
Super low interest rates!
I was recently working on a new project launch by Far East Organisation (FEO) in Pasir Ris. It was a mass market leasehold condominium priced at about SGD$850 per square foot on the average. Sales were brisk due to the fact that the price was rather attractive and also, FEO staff are really good sales people!
Anyway I was shocked when I heard of the financing package that the local banks were giving my client. They were offering 0% + the 3 month inter bank offer rate (which at that time was 0.2%). This rate would stay till the project was completed, which in my estimation would be another 3-4 years. Although this super low interest rate assisted me in closing my clients, I really am failing to see how the government is encouraging financial prudence and yet allowing the banks to entice clients with such low rates. Banks themselves are taking on too much risk with such a move. All this for the sake of maintaining loan volume.
Why the reason for such low interest rates?
Our Monetary Association of Singapore (MAS) uses our Singapore Exchange rate to regulate inflation. What it means is that if things get too expensive, they will raise the value of the Singapore Dollar to make our imports cheaper and our exports more expensive.
What is the problem then?
I thought about it for a while and then I realised something. The US is now embarking on an exact opposite path as Singapore. They are flooding the market with US dollars and thus the US dollar is dropping in value. If I were a developer I would not want to develop anything in the US. If I built anything, the value of my property will drop in value. If I spent USD$10 million to build a building, I am not sure the value of my building will hold. What if the US government wants to drop the value of the US dollar by another 10-20%? This would mean that my building would be worth much less over time. On the other hand, the Singapore dollar seems to always be going UP. As a developer or investor, I would want to build something in Singapore. In future when the Singapore dollar appreciates, it will add onto the profits that I will already be earning.
I build with cheaper raw materials and sell high because I sell in Singapore dollar and Singapore dollar goes up.
versus
I build with expensive raw materials and sell low because I sell in US dollar and US dollar goes down.
Thus the government is trying to lower inflation but in actual fact it is encouraging more people to demand for Singapore denominated assets because the value of the Singapore dollar is always going up.
How to solve the problem?
MAS has to understand that it cannot only use the exchange rate to fight inflation. It has to regulate the interest rates between banks. Perhaps a change in policy please. Finance minister are you listening?
Some videos to explain a little about what is happening in the US and between banks.
http://video.cnbc.com/gallery/?video=3000026496
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Anyway I was shocked when I heard of the financing package that the local banks were giving my client. They were offering 0% + the 3 month inter bank offer rate (which at that time was 0.2%). This rate would stay till the project was completed, which in my estimation would be another 3-4 years. Although this super low interest rate assisted me in closing my clients, I really am failing to see how the government is encouraging financial prudence and yet allowing the banks to entice clients with such low rates. Banks themselves are taking on too much risk with such a move. All this for the sake of maintaining loan volume.
Why the reason for such low interest rates?
Our Monetary Association of Singapore (MAS) uses our Singapore Exchange rate to regulate inflation. What it means is that if things get too expensive, they will raise the value of the Singapore Dollar to make our imports cheaper and our exports more expensive.
What is the problem then?
I thought about it for a while and then I realised something. The US is now embarking on an exact opposite path as Singapore. They are flooding the market with US dollars and thus the US dollar is dropping in value. If I were a developer I would not want to develop anything in the US. If I built anything, the value of my property will drop in value. If I spent USD$10 million to build a building, I am not sure the value of my building will hold. What if the US government wants to drop the value of the US dollar by another 10-20%? This would mean that my building would be worth much less over time. On the other hand, the Singapore dollar seems to always be going UP. As a developer or investor, I would want to build something in Singapore. In future when the Singapore dollar appreciates, it will add onto the profits that I will already be earning.
I build with cheaper raw materials and sell high because I sell in Singapore dollar and Singapore dollar goes up.
versus
I build with expensive raw materials and sell low because I sell in US dollar and US dollar goes down.
Thus the government is trying to lower inflation but in actual fact it is encouraging more people to demand for Singapore denominated assets because the value of the Singapore dollar is always going up.
How to solve the problem?
MAS has to understand that it cannot only use the exchange rate to fight inflation. It has to regulate the interest rates between banks. Perhaps a change in policy please. Finance minister are you listening?
Some videos to explain a little about what is happening in the US and between banks.
http://video.cnbc.com/gallery/?video=3000026496
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
Wednesday, July 20, 2011
Scarce land in Singapore
I do a fair bit of landed property sales and I always get sellers telling me that landed prices will always hold because land is scarce in Singapore. Moreover, I get people who are living in places like Serangoon Gardens telling me that the estate is full of eateries and amenities and thus should command a very high price. I thought about this "landed property is the most valuable form of residential real estate in Singapore" idea for a good few months. I was thinking whether this was true or not. I was driving around Orchard Road a couple of days ago and it finally struck me what sort of property I should aim for when (and not if) prices fall during the next property correction.
The most valuable land is the land in the central region of Singapore! ie. properties in and around Orchard Road.
Let me explain why it is much better to go for a condominium in Orchard Road rather than a landed property in a suburban area.
1) Location is always the key. There will always be a demand for properties in and around the heart of Singapore. Be it the central business district (CBD) or our nation's prime shopping belt. Compare this to a landed property in the far outskirts of Singapore like Loyang, Sembawang , Woodlands or Jurong. There are landed properties in these areas calling for prices of more than SGD$1,000 per square foot for land. This to me does not make any sense. Add up all the land in such areas and compare that to the very scarce amount of land in and around Orchard area. You will realise that properties in and around the heart of Singapore are much more valuable than perhaps a landed property in Loyang.
2) To the people living in places like Serangoon Gardens. Such an environment can be replicated. The shops, the eateries, the banks, the cafes, all these were planted in the estate. The intrinsic value of the property is still not about location. Getting to the CBD is still a chore thanks to the constant jam on the CTE expressway. Basically the environment is man made. I would say that the establishment of Orchard Road and Raffles Place is more organic. Where else to place the headquarters of banks, companies, our best eateries, top hotels, flagship stores but in the heart of our nation?
My point is that places like Orchard Road are valuable because they are in the heart of a bustling Singapore. The fastest growing economy in Asia. (Though this may change after the last round of economic data just released). Few in Singapore will find getting to a place like Orchard Road as inconvenient but the people staying in Jurong may find getting to places like Hougang rather out of the way and vice versa.
While this happens in "ulu" places like Loyang
http://singaporeseen.stomp.com.sg/stomp/3552/4124/199852
Let us answer the question of where is the most valuable property in Singapore. (Notice I did not mention the type of property.)
It is right at the heart of Singapore!
I would much rather own a 2-3 bedroom apartment in District 9 than to fork out in excess of SGD$2 million for a landed property in the outskirts of Singapore! (Note: You can find a 2-3 bedroom apartment for about the same price as a landed property in the suburban area of Singapore)
Now why then are people paying about $1,000 per square foot for leasehold properties in places like Hougang?
Weird...
If they are willing to buy as these prices, as a real estate agent, my clients are willing to sell...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
The most valuable land is the land in the central region of Singapore! ie. properties in and around Orchard Road.
Let me explain why it is much better to go for a condominium in Orchard Road rather than a landed property in a suburban area.
1) Location is always the key. There will always be a demand for properties in and around the heart of Singapore. Be it the central business district (CBD) or our nation's prime shopping belt. Compare this to a landed property in the far outskirts of Singapore like Loyang, Sembawang , Woodlands or Jurong. There are landed properties in these areas calling for prices of more than SGD$1,000 per square foot for land. This to me does not make any sense. Add up all the land in such areas and compare that to the very scarce amount of land in and around Orchard area. You will realise that properties in and around the heart of Singapore are much more valuable than perhaps a landed property in Loyang.
2) To the people living in places like Serangoon Gardens. Such an environment can be replicated. The shops, the eateries, the banks, the cafes, all these were planted in the estate. The intrinsic value of the property is still not about location. Getting to the CBD is still a chore thanks to the constant jam on the CTE expressway. Basically the environment is man made. I would say that the establishment of Orchard Road and Raffles Place is more organic. Where else to place the headquarters of banks, companies, our best eateries, top hotels, flagship stores but in the heart of our nation?
My point is that places like Orchard Road are valuable because they are in the heart of a bustling Singapore. The fastest growing economy in Asia. (Though this may change after the last round of economic data just released). Few in Singapore will find getting to a place like Orchard Road as inconvenient but the people staying in Jurong may find getting to places like Hougang rather out of the way and vice versa.
While this happens in "ulu" places like Loyang
http://singaporeseen.stomp.com.sg/stomp/3552/4124/199852
Let us answer the question of where is the most valuable property in Singapore. (Notice I did not mention the type of property.)
It is right at the heart of Singapore!
I would much rather own a 2-3 bedroom apartment in District 9 than to fork out in excess of SGD$2 million for a landed property in the outskirts of Singapore! (Note: You can find a 2-3 bedroom apartment for about the same price as a landed property in the suburban area of Singapore)
Now why then are people paying about $1,000 per square foot for leasehold properties in places like Hougang?
Weird...
If they are willing to buy as these prices, as a real estate agent, my clients are willing to sell...
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
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