Ep #37: Finding Gems In The Property Market (Part II)


a lot of people say that you know Vina
you’re very pessimistic too pessimistic about the market I’m not being
pessimistic I’m just being pragmatic and realistic that’s why developers and
agents they don’t like me but do you know that every time when I’m optimistic
people also don’t like me I remember during the 2008 financial crisis I was
working as a department head in an IT MNC and that’s the time the company gave
us a quota to cut the headcount in our department so every department had quota
to cut the headcount so during a lunch with other department heads I was saying something like oh times are bad so maybe it’s
time to look at the property market again I remember they all looked at me as
if they just see ghosts and there’s complete silence and after lunch there’s one
department head talked to me in private and she said Vina I think you’re too stressed do
you need some professional help to talk to someone and that’s also the time during
the SARS period I was sharing a flat with two other flatmates in a private home next
to Tan Tock Seng Hospital so nobody dared to come and visit us so
the government advised everybody to stay at home after work but because of my
passion in properties I was being very itchy so that’s why I still continued to
have flat viewings ten to fifteen times per month in the SARS period and people found out about that they said hey Vina you don’t know how to write the word of death
in Chinese because you might contact SARS by going
everywhere but personally I feel that it’s very safe going for flat viewings during SARS because nine out of ten times I am the only one going
for flat viewing and the doors and windows are all open
it’s only me myself and the property agent so there’s enough air circulation
and fresh air it is much safer than the thousands of people who
flocked to the showflats that are not that ready to launch last year on the evening of
July the 5th after queueing for hours for the showflat to open for their turn
I’m sure that the person in front or behind you even though he’s sneezing or coughing or have TB you are still unwilling to give up your seat see and it’s much much
safer than the thousands of people who crowded at the preview or the launch
at these kind of new projects because the chance of contacting germs I mean
not finding gems contacting germs or being infected by viruses or bacteria
it’s much higher compared with the chance I get SARS when I go for flat viewing at that time
in 2003 human traffic is impressive but what about the sales
results it seems that the heavy traffic at the preview weekend with nine
thousand going to JadeScape but for the first weekend launch the people who
really give out the cheque are not that many so you only have like 3.3
percent of conversion rate from the preview traffic to the people actually
put down the cheque same happens for those with impressive traffic at the preview weekend Florence Residences Parc Komo Riviere One Pearl Bank Avenue South Residence same
thing thousands of people flocked over there
but what happened for the first weekend they only managed to sell dozens of
it or hundred to two hundred of it having a conversion rate of just 1.4 to 6.1 percent and that is even before the number of returned units it’s
because URA one day suddenly found out that every month with a lot of returned units so even though they say the first weekend they sold a lot of them but a lot of them are being returned then they realize that the options to purchase are
not being exercised but being reissued and reissued many times so what
happens there are a lot maybe there’re a lot of impulsive buyers who listen to agents
saying that they can sell their hdb and buy two private properties but suddenly
realize that after they go back to check the numbers they cannot afford it or
they cannot get approval by the bank for bad loans they have no choice but to return the units and forfeit their deposit so what happened to these projects with heavy traffic at launch what happen to them now this is a table to
show as of first of October how many units are sold and unsold look at JadeScape the first week launch happened more than a year ago after a year
how many more units sold 300 sold on the first weekend now after one year 468
that means 168 more units sold and you still have 61% of units unsold
the same for the other projects the percentage of units unsold
ranges from 61 percent to 90 percent so what’s the point of rushing there during
the first weekend launch because you never know what the developers will do
later on for the following year it may secretly or slowly give discounts to
the latecomers without you knowing because they have a five-year timeline
to sell everything they don’t have a choice so there is actually no reward
for early birds do you know that for one of the new launch projects recently they
said the first weekend launch they sold over 90 percent of the units but they made
the announcement on a Sunday afternoon around one o’clock I was surprised because how
can they accurately predict what will happen for the rest of the afternoon and
that evening how can they predict it at once how many units are sold for the whole
weekend on a Sunday at 1:00 p.m. so do they launch first or do they sell first
do they wait until a portion of the units are sold and they then announce the preview and launch so they launch then sell first or they sell then launch which
one comes first I’m really confused it’s just just like you went to attend a
wedding and you notice the bride is pregnant so you wonder you know is they
have the marriage decision first or they’re expecting a baby first so which
one come first so it will forever remain a mystery question what are the
similarities between going to the registry of marriage and going to the
sales gallery in a new launch project they both require you to sign on the
dotted line and after you sign you don’t realize that you are actually signing
away your power to get things under control in the ROM after you sign on the dotted line you lost your freedom to control your lifestyle your personal time your
diet everything in the sales gallery after you sign on the dotted line there
are a lot of things suddenly not under your control for example discounts
given by developers to new buyers property prices economic slowdown
interest rate hike cooling measures all these things in the past they are
irrelevant to you suddenly all come after you and bug you so what is the
lesson learned the lesson learned is when you go to the ROM or the sales gallery just
observe only observe only the people exchange their vows and sign and they give away the cheques don’t sign anything ok that’s the lesson learned this is the chart to show new projects launched versus the take up from first quarter of 2017 to second quarter of 2019 I have taken the data from the quarterly release from URA if you notice that this
red color line shows the number of new units of sold per quarter blue color line shows
the number of units launched if you notice that the cutoff time is
somewhere around second quarter of 2018 before that you always
have more units sold compared with units launched but what
happen now you have far more new units launched compared with the take up the
sale of new units and we have another 53,000 new units in the pipeline so it
is going to take us many years to absorb that in the market even if from tomorrow
onwards the government not selling any land and developers not launching any new projects
but for this year they are launching 50 to 60 new projects so we have a lot a lot
more waiting and queuing to be launched so be careful okay how to tell gems from junks is fire sale a gem in the market when you
see the words fire sale does that imply it’ is a gem when we say fire sale in
properties we are implying that it’s an urgent sale and the seller is
distressed and definitely they need to have cash and then they are going to
you a heavy discount but do you know there’s any seller in the
market who would prefer a slow sale no right everybody is fire sale
there’s no slow sale in the market if you look at those property advertisement
fire sale is probably the most misuse word in those advertisement everywhere is
fire sale see this one is 280k below purchase price excuse me I just want
to know how many thousands is it under the market value who cares how much the
owner bought before right so it’s 280k below purchase price has
nothing to do with the buyer it doesn’t matter to the buyer at all I just want to
know how much you’re going to slash your price for me the gems in the market are
the ones who are rare with quality properties for rare I mean good
location well maintained and good resident profile and they are so much
lower than the actual value the valuation you can find the last few
transactions in URA of similar projects or the same project and it’s
much lower than that and those gems because talking about gems gems need to be polished and then you’ll find it and they’ll become precious stones so it is
not noticeable it is not like being advertised everywhere and
everybody know about it they won’t be gems anymore because you need to do
something with it before it can shine for example you need to go and fix it you
want you need to go there and change the tenant profile and you need to go there
to change the usage of it so that you will be able to increase the value the germs are definitely not those after
the government announced there is a new infrastructure plan or something new to
be built for example new MRT lines for the downtown line remember it is announced in June 2005 and it doesn’t start construction until 2011 and completion need another few years to be done that means after the announcement you have a leadtime from announcement to construction and there’s another leadtime
from construction all the way to completion but due to unforeseen
circumstances you have some projects delayed or some projects that can’t even be
completed like for example the high speed rail and Singapore-JB RTS Link they can’t even decide when they’re going to go ahead with it for
the recent one announced in August the Greater Southern Waterfront construction won’t happen until five to ten years later and by the time is fully completed maybe some
time in 2040 2040 is 21 years from now how
many economic or property cycles would happen in 20 years’ time and how many
changes would happen in 20 years’ time in your stage of your personal life cycle
so there’s really no need to rush in during announcement you buy in the hype at that
time the developers are launching new projects you are paying a premium so
you are not finding gems or hidden gems so any future gems over there but
you are just benefiting whoever are launching at that time and you will suffer
the construction inconvenience later in years to come
until the day the project competed there’s going to be many years to come
and if the completion day is not under your control I think I have mentioned a few times in my blog how to tell real property
bargains from fake ones and I’m going to quote from my book No BS Guide To Property Investment how you can tell the differences I mentioned in one of the
blog posts in 2013 to avoid buying anything in Iskandar Malaysia
because we foresee what will be happened later I’m going to summarize this into
very easy 4 questions plus 2 numbers 4Q2N easier to remember the 4q is the first
question who are the other buyers to tell the difference between an investment
opportunity and a lousy one is you know you observe who are the ones signing up
are they experienced investors or are they laymen like you are they savvy
property investors or are they average joe in the market did you check with Property Soul whether she’s buying into that or not before you buy the next
question is can you trust the country their currency and the developer would they complete in time and deliver with quality projects or would
they finish halfway and run away the third question is why are the locals not buying if the property is so good why would they have the hassle to package it go
overseas and sell it to you why are the locals not snapping it up if it is so good
last question is next time when you want to sell it
do you notice there’s a secondary market because there are a lot of properties in
some countries are only selling to foreigners the locals won’t buy next time you want to sell it can you get out of it because I’m sure
that you won’t want to hold the property forever if you hold the
property forever and not able to sell whether the prices go up and down have nothing
to do with you because you can’t sell and you can’t get out of it the 2Ns
the two numbers first one is valuation is it above or below valuation very easy
to check just check the transaction for this market I recommend you to check at least last 15 years so that you notice that at the bad times
what’s the variation and then you will know whether the market is actually near
the boom near the peak or at the bottom the most important number over here is the
net ROI you can calculate the cash on cash return or the net return if
there’s no net return that means the revenue you get it from your rental
revenue and after deduct all the expenses the figure is negative what is the point
of buying into it you might as well spend it on your favorite overseas
vacation sports car or something nice reward yourself rather than suffering for the chance of losing money for buying a property because you lose money in properties it hurts your pride I have a few blog posts over
here that talk about property investment tricks and all the traps in this market
I’m going to summarize into two things do you know how to tell the differences
between bad property salesperson and good sales people best sales people will
push you to buy make money from you and run away good sales people will let
you see both sides of the coin the pros and the cons and then he will tell you
what you can or cannot buy in a market and they’ll leave the decision up to you
whether you want to buy or not how to tell differences between scammers
and savvy investors scammers will be satisfied if they get ignorant people
believe in their lies savvy investors are not satisfied with seeing the ignorant people believe in them they will only be satisfied if they find
people who are smarter than them or at least as smart as them to inspire them with new
ideas or the other way round to make them inspired with new ideas by
themselves okay let me summarize my presentation this afternoon finding gems in this property market I’m going to summarize with 3 Ls
first L is look look when nobody is looking it’s just like gold rush last time
if you go where everybody is trying to find the gold nuggets in the sand you’re
not going to find any why because all the gold nuggets would have been gone you should go to a place that nobody has been there before
and it’s not noticeable and you’ll be able to find your gold
the second advice is listen L listen to the right party the right party I
just mentioned it means the government it’s not listening to the media the developers the agents or the banks or the analysts listen to the government
and get the hint the last advice is for L is laze
around for the right time because to win in the property game the secret is to
be there at the right time and buy the right thing at the right price so that
summarize my presentation today and thank you very much

2 comments

  • Don't worry. We like you. People can't handle the truth.

  • Great insights! New to Property here. Do we nornally expect developers to lower the unit prices nearing the 4-5 year timeline? Since there are so many unsold units left.

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