Source : Today - 30 Oct 2008
There may be many good buys available at the height of the fear cycle
AS A novelist, Charles Dickens’ works appeal to readers of all generations because he understood the psyche of the human race. He realised that we are people of extremes.
When things are bad, we often see them as worse than bad. Conversely, when things are good, we are inclined to see them as better than good.
During current times, people tend to focus on what can go wrong rather than see what can go right. The emotional pendulum swings from one end to another. Fear and greed drive us to extremes and blind us to the truth.
Yes, the sub-prime lending problems have caused a domino effect, putting the global economy into a spin. Singapore, including our property market, has not been spared.
On a brighter side, our economic fundamentals remain sound; the Economic Development Board has forecast a healthy pipeline of foreign direct investment.
We have one of the highest financial reserves per capita. If leveraged correctly, especially during downtimes when you can get more ‘‘bang for the buck,” this will help us leapfrog other nations when the market recovers.
When negative sentiments clash with sound fundamentals, they open a window for profits. In particular, property investments will become more attractive because it is a tangible instrument, proven to be a good hedge against inflation and providing one of the highest leveraged returns in the medium to long term.
Remember, everyone needs a roof over his or her head.
The HDB market is at a steady equilibrium and prices are still rising because of demand from upgraders, downgraders and buyers shifting their attention from the private residential market. The centrally-controlled supply will provide a positive support to the HDB market.
The private residential property market is facing the brunt of the economic crisis. While there seems to be an oversupply, research by Credit Suisse indicated that 57 per cent of the oversupply is in the high end of the property market.
When the market turns around (which will most likely happen when we least expect it), properties in the core central region will be the focus of attention again. Singapore, as a favoured business destination, is cheaper than Mumbai, Moscow, Tokyo or Hong Kong.
In the mass market, the current downturn, coupled with fear gripping many owners, has generated many opportunities for investment. Many properties are being sold at below current replacement cost.
The property market is not suffering from any structural problems that cannot be resolved. Major developers are in a better position to overcome current challenges and hold back the launching of new properties.
The support level will also be underpinned by the foreign talent we are attracting to live and work in Singapore. Demand will come from many sectors, including more than 12,000 families that sold their houses through en bloc sales in the past three years, global citizens, and families with children who are pursuing their education in Singapore.
All said, it is wrong to think that property investments march to the same tune up and down the property cycle. At any point in the cycle, there will always be good buys. Many such good buys are available at the height of the fear cycle - which possibly could be during this period of time.
There are sellers who are over-geared or have factored in the worst-case scenario and have decided to exit the market.
For sellers, there is no better time to upgrade or downgrade your property than now. Remember, when you sell low, you also buy low - or possibly lower.
Moreover, as the gap between prices of HDB flats and private residential properties is narrowing, it is a good time to move your family to a better home or location.
What’s more, you do not have to rush with any crowds, and can take your time to find the right home. You can also be assured of closer attention and better service too.
The key forces are converging into what I call a perfect day to invest in the market. In the near future, many people will look back and regret they did not take any action to profit from it.
Patrick Liew, chief executive officer of HSR Property Group.
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