Christmas rally?

Some said it is time to buy....some said long term down trend and short up trend.......some said correction is over don't miss this opportunity........Christmas rally..........Singapore property has already bottom.........

In general, markets came down between 16% to 44%.  Not surprising, mature markets came down lesser than the emerging market.  Difference on the down side in term of percent, happen not only today, ten, twenty years back was this way, 10 years from now will still the same.  http://achua138.blogspot.sg/2015/08/why-asia-market-tumbled.html

As I said - first time in history, bull charge for more than 5 years.  He was tired and the mama bear took the opportunity to pound on him.  Nevertheless, the bull still has the last breath and he will fight back.  And that was what we were seeing over the past few weeks.  How far can he goes? 

I mentioned that - with politician involvement, the market is not easy to foresee and predict.  Past one to two months, I saw lots of retail investors/traders chose to stay out.  We saw market went down and the up like coasters.  Experts said that it was because of the US, FED will not raise their interest rate in October, in Y2015.  Why?  Because of the poor monthly data numbers.....

Those were only an excuses and 骗人的借口.  The person who really moved the current going around were the fund, institution.......Lousy PMI numbers, lousy non-farm numbers........if someone is going to tell me those numbers are great as it means that interest rate is not going to raise.  You know what I am going to ask him/her?  Continue to have those poor numbers for 3 months, then you continue to tell me oh good........  Common sense tells us whether those lousy numbers are from the US, Europe, China.....or anywhere, what does that means?  Something wrong is with their economic, isn't it.  Then what the expert going to say next?  Oh another QE?  You will come to a day where people is going to be sick of that QE.

First time in history, country after country are printing money.  Interest rate close to zero.  The next crisis going to come, won't be that easy as what we think.  Now, those people who save their money inside the bank is stupid, right?  Why?  Because of depreciation, inflation........  Inflation really at 0.1%, 0% -0.1%.......you better know how this number was calculated.  Your daily expense, a plate of chicken or a can of baby milk powder, how much it cost in 5 to 10 years back compare to now?

Concern and worry about China economic growth.  That's only one part of the story.  As I said knowing and respect the big brother.  Janet Yellen knows the consequence of raising interest rate when everyone is printing money.  What she was doing was to buy time and doing something which called psychology approach.

Today market is mend for trade.  You will continue to see the coaster ride.  Whether the bull will bring us to another peak or papa bear will pound on him before he exited the peak, I know only one thing, the market is at current situation - refer to the chart.  The Y2007 scenario. 

As for Singapore property bottoming up, is time to buy?  Refer to my past posted - http://achua138.blogspot.sg/2015/08/singapore-property-market-really-bottom.html.  You are going to see housing rental, office rental, industry rental coming down, private property................http://achua138.blogspot.sg/2014/01/hdb-resales-price-falls-for-first-time.html.

Singapore property market really bottom up?

On 1-September 2013, I mentioned to watch out for the Singapore property market.  The price will come down.  Both on the resale and new private property.  On top of that the rental as well.  http://achua138.blogspot.sg/2013/09/property.html

We saw that in early 2014.  Till date, say the resale HDB flat, in general it has came down around 15% to 18%. 

Past three months, we saw lot of so called property experts came out to say that it is time to buy houses now as it has bottom up.  People spent money to attend seminar which conducted by those experts as to listen ad seek to their view.

I won't listen to all these so called experts.  As I understand who and where they came from.  My view on Singapore property market is in fact it has not even reach the bottom yet.  There are still rooms for the price to go down.  Why I said that?  Simple.  Interest rate has not gone up yet.  Global stock market has not really tumble. 

I saw developers eagerly lunching and trying to sell their unit.  Hong Kong property guru Li Ka-Shing was selling his property shares.  So what was the indicator?  Watch out not only on the Singapore property market but also Hong Kong, Beijing........

Beside resales now rental volume also started to drop

Overall HDB Cash-Over-Valuation (COV) dropped from $3,000 in January 2014 to zero in Feb 2014.  Twelve out of 26 HDB Towns saw zero or negative median COV.

Bukit Panjang, Punggol, Sembawang, Sengkang and Woodlands led the drop with negative overall median COVs recorded in Feb.  Bedok, Bukit Batok, Chao Chu Kang, Geylang, Jurong West, Tampines and Yishun recorded zero overall median COV.

Almost four in ten HDB deals closed below valuation.  According to transaction records from srx.com.sg agencies, 37.3% of HDB resale deals were closed below valuation in February. This represents a 7.9 percentage point increase from 29.4% of negative COVs in Jan.   Overall, HDB resale prices fell 1.8% in February.  HDB prices now are at the same levels as 20 months ago in Jun 2012.

According to flash estimates, 734 HDB flats were sold in February's resale market, a 20.0% month-on-month drop from Jan 2014's 918 units.  On a year-on-year basis, February's resale volume posted a smaller 6.3% drop from 783 flats sold over the same month of last year.

Rental volume dropped 13.7% y-o-y.  An estimated 1,118 HDB flats were rented in February 2014, 25.3% less than Jan's 1,496 rental transactions. On a year-on-year basis, February's rental volume posted a 11.9% drop from 1,296 flats leased over the same month of last year. 

HDB resales price falls for the first time in 8 years and private home price also fall in Q4

Yesterday, we saw this article “HDB resale prices fall for the first time in 8 years” and “Private home prices fall in Q4”.

 

Let me highlight some of the important data that were released.  HDB resale prices fell by 1.5% in the 4Q of last year.  For the whole of 2013, the resale price index registered a decline of 0.6%, the first time annual drop since 2005.  18,100 resale transactions last year, a 28% dip from 2012 and the lowest since 1997.  Luxury homes also shows signs of losing steam.  Data released by URA showed that private home prices fell by 0.9% from the previous quarter.  For more detail, you may refer to the website or yesterday newspaper.

 

Now, we started to see economists and analysts came out to say - watch out the property market……some analysts estimate there could be a fall by 5~10% for the private housing this year, HDB price could……….

 

Does this piece of news surprised me?  Those who follow my blog will know that in September I have already mentioned that the property price will come down.  http://achua138.blogspot.sg/2013/09/property.html  When everyone knows this piece of news, it is no longer a news.  As an investor, I don’t listen to others.  Whoever he is.  I do my own analysis.  I need to be on guard and act before others do so. 

 

Give you one example on what I mean on that.  Cash over valuation (COV) on the HDB housing. Two extreme examples, 4-room flat, Queenstown, in 4Q 2012 COV $65,900.  4Q2103 dropped to $37,900.  Non- mature estate Punggol, same 4 room unit 4Q2012 $45,000 and 4Q2013 dropped to $0.  These data I extracted out from yesterday article.  I mentioned that “some areas are selling with zero COV and some even to the extend of selling under valuation” in October.  http://achua138.blogspot.sg/2013/10/hdb-resales-price-drop-for-first-time.html

 

When I saw private developers eagerly lunching their unit with discount, gift…….respond by the developers on the new land bidding…….Singapore’s 3 main banks were been downgraded due to household debt …….government concerned about the continuous property price increase and started to implement cooling measured one after the other until they see result…... ……….I know the property peak is there.  Yes, I agree to some extend with some people saying that Singapore small island, no matter what the property price will go higher than what the price that they paid now.  When?  3 years later or 5 years later.  I will say before the crash or some people called it correction.  不要自我安慰。 If you can buy a unit whether is for investment or own stay with a 20~30% lower, why not, right?  Property prices are not thousand nor ten thousand dollars.  We are talking about few hundred thousand to millions.  20% is a lot.  

Game has begun.  HDB resale pricing is only the beginning.  Now we see private property housing got sucked in, so what next?  Industrial property, shop space prices………watch out on that.  As I said in my previous posted, investment products are inter-related with one and the others.  We see DOW dropped 500 points over the last 2 days.  Remember I said 小心， 小心再小心。 I will talk about equity market by end of January. 

HDB resales price drop for the first time over 4 years

Read this article:-
"According to HDB's results released today, the resale price index dropped 0.9%, the first time that the index declined since 1Q 2009 when deep recession hit. 

Transaction volume was also lower, falling 13% from the previous quarter to 4529 cases.  Comparatively, there were 6560 deals done in the 3Q of last year.  A dropped of one-third comparing YOY.

The overall median COV had dropped more than 45% to its current $17,000 in 3Q 2013 compared to $32,000 at the beginning of 2013. 

Economists and analysts claimed that the price trend is due to stricter controls on home loans.  Reduction of the mortgage servicing ration to 30% of borrower's gross monthly income.  Coupled with new BTO flats on offer.  HDB is on track to launch 25,000 new flats this year, with about 5,000 due to released next month.  PRs having to fulfil 3 years requirement before they can purchase a resale flat and so on."

Remember I talked about property on 1-September.  Think twice before you decide to purchase an unit.  This is just the beginning.  More will comes, in regardless HDB or private.  In fact some areas are selling with zero COV and some even to the extend of selling under valuation.   

My advise, think before you act.  As what I said in the 1-September posted, some people said the housing price in Singapore no matter what, 10 years, 20 years it will go up as Singapore has limited land space.  Make sense.  But, have they watch out and calculate the interest rate.  Have they forgotten what happened during the Asia crisis?   Am I hurry to get a house now?  If not, why rush?  Wait, and if I can buy an unit with 20% to 30% lower, why not?


 

Property

Government came out with numbers of cooling measure, one after the other.  Yet people are still thinking of buying property.  Whatever cooling measure government implemented, property prices still keep going up.  Investor gurus keep warning that the property price in Shanghai, Beijing, Singapore……are too high, but yet till today the price has not come down.  So these people do not want to miss the boat. 

Bank interest is so low that people think of ways to grow their money, to fight inflation/depreciation.  Property is one of the investment products that people are looking at.  Those people staying in HDB and can afford, they will purchase a condo, stay there and rent out their HDB unit.  Well, it makes sense.  Some, upgrade to condo.  But the question is here.  How much are you paying, in terms of the unit price and monthly installment? 

Last year, I saw one condo which is located in a non-mature estate with 99 years lease, calling for $2.2 ~ $2.5 million.  The area is about the size of a HDB 5-room unit.  To be frank, I won’t consider buying that, a 99 years lease with a price of $2.2 million.  Crazy.

A friend of mine bought a condo at a price of $1.2 million.  Few years later, he sold it at a price of $1.4 million.  Wow, a profit of 0.2 million, not bad right?  What do you think after deducting those bank interest rate, taxes……….how much profit has he made?

Since I started my blog mentioned about 3-rooms flat, I shall take that as an example.  Residential property has done up over the past 8 years.  Let’s rewind back what was the price of a 3-rooms unit before the crisis in 1997.  Average price for one 3-room unit reached a high of $265 thousands.  Then we saw the Asia crisis - stock came down, oil came down………and of course, property.  Y2003, 3-rooms flats dropped to an average low of $165 thousand.  A drop or some people called it as a correction of more than 30%.

Nowadays, bank interest is pretty low.  Some are paying their loan interest rate at 1.2%, 1.3%......Our general saving interest rate is at 0.05%  Do you think bank interest will stay at this low level for life?  Have we considered what will happen when the interest rate increases?  Some people said yes both Europe and the US are having problems but then look at the stock market like the DOW, S&P………..breaking record high and property prices keep going up, in regardless of what cooling measure the government implement. 

All this streams down to QE and low interest rate.  Past 2 years inflation was about 5%, bank saving interest, 0.05%, so people find places to park and grow their money.  QE1, QE 2 and now QE3.  Property was one of the areas that the money flowed to.  We are going to see the tapering soon.  When time comes by, we are going to see an increase of interest rate.  Some countries have started to increase their interest rate.  The recent one, Indonesia.  In Singapore, if you guys check around, some banks have increases their interest rate too.  They also came out with a few numbers of new products with a better interest rate return of around 1%.  You can see that everyone is preparing for that.  So, property buyers, have you all prepared for that?  Have you guys prepare when loan interest rate goes up to say 2.5%, how much more money you need top up on top of what you are paying right now.  Worst comes to worst, the property prices drop lets by say, 20% and bank ask you to offset the difference. 

Some people said that Singapore has limited land space, no matter what, the price will still go up and it will be higher than what they are purchasing right now.  Agreed but again, if I can buy it at a lower price like say 20% lower, why not?  Thirdly I ask myself how much more can the property price go and how much can the property price drop when crisis hit.  What is the ratio between the 2?  Then I look at the whole economic market.  The cycle of property, stock……….to conclude is it the right time to purchase now.   Why government keeps implementing cooling measure one after the other.  Think about it. 

Watch out when loan interest rate hit 3%.  And watch closely on some cities residential property movement like the Shanghai, Beijing, Hong Kong…….