In the near future, many people will look back and regret that they did not take any action to benefit from it
THE property market goes through a constant cycle; the prices go up, plunge a little and fall back into place. This cycle waits for no one and investors do not halt on property purchases despite the constant flux.
At any point in the economic and property cycles – whether in good times or bad – there will always be good buys. There will be people who capitalise on them to maximise their returns. In particular, during times of major changes and uncertainty, there are actually better opportunities for investment. There are also fewer people to compete with to capitalise on these property gems.
When times seem bad, people often perceive things to be worse than they really are. People tend to be overly focused on what can go wrong rather than on what can go right. Fear, like greed, can drive them to take extreme positions and blind them to reality.
At the higher levels of the fear cycle, there will be more gems surfacing in the property mine. Sellers who have taken a bearish view and are concerned about their financial exposure may decide to sell their properties for a good price.
The recent set of cooling measures is helping to produce such a conductive climate for investment. The doomsday prophets are out in force to strike further fear in the hearts of pessimistic sellers.
To put these measures in proper perspective, they are not designed to crash the market or devalue the assets of property owners. Bear in mind that if prices continue to increase unabated, they will lead to the formation of property bubbles – the bursting of which will have detrimental effects on the economy and society.
On the other hand, Singapore has one of the highest percentages of home ownership in the world, and if the prices stay flat or decrease for a protracted period of time, there will be a cascading effect at both macroeconomic and microeconomic levels. In the worst case scenario, should the property market slump, the authorities can withdraw some or all of the measures. There is a precedence of such a response in the past.
Fundamentally, the property market is well supported. To state the obvious, our land mass is limited and there are restrictions as to how much land we can reclaim from the sea. There is no major oversupply of properties unlike during the Asian crisis. In fact there are segments that are currently undersupplied and hence, the government is increasing sales of land, supply of HDB flats and executive condominiums, and throughput of build-to-order flats. The demand will generally be on the increase if we are to fulfil the planning parameter of increasing the population to 6.5 million. Although this is not a population target, there is a need to increase the number of people working in Singapore to help us sustain and improve the economic and societal engines.
As Singapore positions itself to be a global hub, we will be attracting more enterprises and talent to be rooted here. The financial standing of potential property owners should also improve with better economic development, educational system, and contributions from foreign talent.
On a macro level, the property market is also supported by positive economic growth, relatively low inflation and unemployment, and reasonable household affordability for property ownership. Major developers are generally in a better position to hold steady their selling prices or postpone the launch of their properties.
When negative sentiment clashes with sound fundamentals, it will give rise to opportunities for profit. Property investments will become more attractive because it is a tangible investment, proven to be a good hedge against inflation, and it provides one of the highest leveraged returns in the medium to long term.
Remember, everyone needs a roof over their head. It is a basic need compared to other instruments of investment.
For sellers, there is no better time to upgrade or downgrade your property than now. When you sell low, you can also buy low or possibly lower.
This is an opportune time to shop for good investments. You do not have to rush with the crowd and can take your time to find the right property that meets your requirements. You can be assured of closer attention and better service too.
Property investment is not just about market size but market share as well. It is not just about the market situation but also your ability to sieve out the property gems.
The key forces are converging into what I believe to be a perfect spring to invest in properties. In the near future, many people will look back and regret they did not take any action to benefit from it.
Founder and executive chairperson
HSR Property Group