I've repeatedly avoided buying Singapore property stocks, or indeed any Asian developer stocks because I'm convinced that most Asian cities are over supplied. Here are my reasons:
1. Unlike in the west, Asian properties did not face a steep fall in prices back in 2007-2012. This means Asian property prices continued to rise to new highs by 2014. All over Asia, price to income ratios are above 20x, with the exception of Bangkok ( which is grossly oversupplied anyway). Yields are at record low. In Most of Europe and US, price to income is between 3x to 15x. Australia' price to income ratio ranges between 5 (Darwin and Brisbane) to 10 (Sydney).
2. Interest rates are at record low all over the world, and mortgage as a percentage of income is at record high in Asia. Most Asian banks increased their appetite for mortgages post Global Financial Crisis. In the west, most banks curtailed lending and you cannot find mortgages even if you wanted. The two major exceptions in the west are the UK and Australia. Once interest rates rise, Asian cities will be hit hardest.
3. There are cranes everywhere in Asian cities. This means that supply is going to be massive in the next three years. Rents will fall and eventually those households who are over leveraged will fall. With the exception of London, Melbourne, Brisbane, you could not find a crane if you searched hard because many developers went bust after 2008.
Conclusion:
1. If you area patient and bargain hard, you'd probably be able to find decent off plan deals with developers. Between 2011-2013 off plan properties in Singapore used to be at a ridiculous premium of between 20-40% higher than resale properties. I never buy the B. S. that new properties cannot compare with old ones. You ALWAYS ALWAYS ALWAYS compare off plan vs resale because you will sell in the resale market!!!!
2. The off plan premium will drop to 0-20% in the next 3 yearsl you can even find some deals where off plan is at a discount to the resale just like I did in London back in 2011/12, when market was quieter.
3. Avoid buying off plan properties where your deposit goes direct to the developer. You will lose everything if there developer goes bust. Remember the Asian crisis. If there is no provision to out your money in a trust account or escrow, make sure you putas little money as possible and get as big a bank loan as possible. The bank will check thoroughly for you that the developer is progressing.
4. Avoid Asian property stocks for the next two years. Many Chinese developers will fall on hard times. Some will default. Singapore developers will not recover strongly between now and 2015.
5. You can pick some developer bonds for between 6-7% YTM which are safe. Be very selective and you will be rewarded. In an industry sell off, most developers' stocks will crumble, bonds will be downgraded. But not all developers are the same. Those that have little leverage, and have strong owners (e.g. Govt linked or wealthy families like Li Ka Shing) will survive. The bonds will be bargains. Avoid the stocks nevertheless because they will probably dilute stocks to raise funds.
Property Guru – 10 hours ago
1. Unlike in the west, Asian properties did not face a steep fall in prices back in 2007-2012. This means Asian property prices continued to rise to new highs by 2014. All over Asia, price to income ratios are above 20x, with the exception of Bangkok ( which is grossly oversupplied anyway). Yields are at record low. In Most of Europe and US, price to income is between 3x to 15x. Australia' price to income ratio ranges between 5 (Darwin and Brisbane) to 10 (Sydney).
2. Interest rates are at record low all over the world, and mortgage as a percentage of income is at record high in Asia. Most Asian banks increased their appetite for mortgages post Global Financial Crisis. In the west, most banks curtailed lending and you cannot find mortgages even if you wanted. The two major exceptions in the west are the UK and Australia. Once interest rates rise, Asian cities will be hit hardest.
3. There are cranes everywhere in Asian cities. This means that supply is going to be massive in the next three years. Rents will fall and eventually those households who are over leveraged will fall. With the exception of London, Melbourne, Brisbane, you could not find a crane if you searched hard because many developers went bust after 2008.
Conclusion:
1. If you area patient and bargain hard, you'd probably be able to find decent off plan deals with developers. Between 2011-2013 off plan properties in Singapore used to be at a ridiculous premium of between 20-40% higher than resale properties. I never buy the B. S. that new properties cannot compare with old ones. You ALWAYS ALWAYS ALWAYS compare off plan vs resale because you will sell in the resale market!!!!
2. The off plan premium will drop to 0-20% in the next 3 yearsl you can even find some deals where off plan is at a discount to the resale just like I did in London back in 2011/12, when market was quieter.
3. Avoid buying off plan properties where your deposit goes direct to the developer. You will lose everything if there developer goes bust. Remember the Asian crisis. If there is no provision to out your money in a trust account or escrow, make sure you putas little money as possible and get as big a bank loan as possible. The bank will check thoroughly for you that the developer is progressing.
4. Avoid Asian property stocks for the next two years. Many Chinese developers will fall on hard times. Some will default. Singapore developers will not recover strongly between now and 2015.
5. You can pick some developer bonds for between 6-7% YTM which are safe. Be very selective and you will be rewarded. In an industry sell off, most developers' stocks will crumble, bonds will be downgraded. But not all developers are the same. Those that have little leverage, and have strong owners (e.g. Govt linked or wealthy families like Li Ka Shing) will survive. The bonds will be bargains. Avoid the stocks nevertheless because they will probably dilute stocks to raise funds.
50 projects record poor sales
Property Guru – 10 hours ago
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