$1 million 99 year leasehold 3 bedroom condo in suburbs – is the market crazy?
Flickr image "Apartments" by Matluckins
I stay in the western part of Singapore which is not the choicest location for residential properties in Singapore compared to the east and central. This morning, when I was flipping through the classifieds to get a sense of the market value of asking prices of my own residence in addition to other private apartments, I was shocked to see sellers asking for above $1 million Singapore Dollars for a three bed-room condo in Centris. Centris is a private condo that is built on top of Jurong Point.
While I admit the location is very attractive for yuppies and those who crave convenience of being next door to the MRT and amenities, the $1 m still shocked me because it is still in the suburbs.
If this is not a sign of a bubble, then there are either many rich Singaporeans who can afford the $1m price tag or there are many rich foreigners who can afford that type of property investments.
$1m – a psychological mark
It seems amazing that property prices can hit $1m for 99 leasehold 3 bedroom apartments. The Centro in Ang Mo Kio was also reported to be selling at $1,000+ per square feet. At this type of pricing, families buying to stay either have to be high income earners or super-rich or perhaps a combination of both.
Increasingly, recent trends show that the high rate of immigration is helping to drive demand from PRs and foreigners for HDB resale housing. How else can we explain HDB cash-over-valuation prices going up in a recession?
Fools rush in where angels fear to tread
Anecdotal evidence from my esteemed friend and ex-colleague who recently sold his investment property tell me that some buyers who could meet his asking price failed to obtain bank financing. So, it appears that some buyers are quite aggressive in rushing to buy even before they have obtained sufficient funding to do so.
Even his lawyer handling the conveyancing informed him that now is a time to sell but not to buy properties.
What does that mean for us who either intend to buy an investment property or a place to stay?
My own sense is that the economy will get a lot worse before it gets better as the much of the world’s GDP is propped up by stimulus spending by governments. Once that evaporates, economic slowdown for the next few years is inevitable. I remember going through the dot-com bust and even earlier during the Asian financial crisis in 1997/98.
I recall those days of hearing about people unemployed and tightening belts. It was those scary days that pushed me to consider paying off my housing loan while I was young and before hitting 40. Now we read articles in the main stream media even sharing how people in their 30s are hit by the economic recession.
Thus, the current market prices cannot be sustained because eventually the economy will run out of steam and some sectors would have to lay people off. Some expatriates in my neighbourhood are already going back to their home countries in Japan and UK and the asking rental in my neighbourhood is starting to soften.
I’ll keep looking around for suitable investment properties but I’m in no rush to buy. For those who are looking out for their own home, it’s tough but keep up your savings, continue to live within your means, to save and invest and scout for a suitable place. Pay what you think it’s comfortable giving yourself some buffer in case either one of the couple cannot work for whatever reason.
The property market cannot continue in its stratospheric climb when the economic fundamentals are not there to support.
Be well and prosper.
[...] If this is not a sign of a bubble, then there are either many rich Singaporeans who can afford the $1m price tag or there are many rich foreigners who can afford that type of property investments. Read more… [...]
The problem with property is that someone has always heard of someone else who got rich through it, and this fuels the frenzy and continues to make people speculate when they prices are bubbly. It’s really a classic case of “why is that idiot rich, and I am not??”.
Live within your means, be patient and contented and focus on relationships instead of possessions and money; and one will turn out happier and more satisfied with life.
Money is the root of all evil – if you let it control you.
Cheers,
Musicwhiz
Hi Musicwhiz
Classic signs of property asset bubble. Part of it is fueled by massive immigration propping by HDB resale but the other part is speculative frenzy.
I am closely watching interest rates as when it starts climbing north, it will squeeze weak holders of property for speculative purposes and if rentals cannot support, they will have to fire-sell.
Be well and prosper.
Panzer´s last blog ..Maybank iSavvy Savings Rate Declines for Balances Exceeding $50,000 (wef 28 Sep 2009)
Hi Panzer,
You’ve raised a good point on interest rates. I recall the Fed Reserve mentioning that they will not hesitate to raise rates aggressively should inflation rear its ugly head. They have a delicate balancing job to do and I don’t envy their jobs – it’s tough to know when to pull the plug on the stimulus.
Singaporeans may be caught off-guard by the interest rate hikes (just like they were caught off guard by the massive surge in the stock market in just 1 week in May 2009).
Cheers,
Musicwhiz
Kind of hoping interest rates goes up
Firstly, it’ll increase my MMF returns. Secondly, I can finally get a property at reasonable price!!
Hard to be a young singaporean these days…the odds are against you in making it easy in life. Okay, maybe it’s harder to be an older singaporean, haha
la papillion´s last blog ..Newbie mistake in dividends
Hi LP
I agree. I went through similar situation when house hunting around 1999-2000 period. The main thing is not to “panic” buy as a house for staying is a long term commitment.
Do your sums and include the margin of safety!
With 2 incomes, supporting a home is possible but the question is how much margin of safety do you want.
All the best and let’s see if interest rates go north!
Be well and prosper!
Panzer´s last blog ..Finatiq 1 Month Fixed Deposits
Yup. That price for a condo at Jurong Point is indeed quite crazy. Not too sure how they are going to sell it off in the future.
However, I must admit that there the Centris is indeed quite conveniently located. And if property is all about location, location, location, I think owners of the Centris should never have a problem selling their property. It is only at what price they can sell it off at.
financial freedom´s last blog ..Super Rich Lose US$300B
Everyone forgot 1998. Since HDB insist new HDB owners must hold on to their flats for at least 5yrs, people switched to condominium property speculation. If that’s the case,rules for housing loans must be re-looked because everyone assumes they can get a loan.
The subprime mortgage crisis did not affect purchasing power in populations with high savings. People in China are doing what we Singaporeans are doing now….rushing to buy properties, although the Chinese are buying into American property market too. I hope we don’t end up like Dubai.
Have you looked at The Sail, located at Raffles Place. Two room condo selling for more than $2mil. Location is very good but is it worth the money?
Forex Educator´s last blog ..Breakthrough Discovery In Forex Trading
Hi Dear All,
Yesterday a HDB apartment with an area about 170 something Sqm. at Bishan selling at S$900k. If this condo mentioned is around the same size but is a pte condo just next to MRT and Jurong Point, I believe there will be buyer at this point in time.
Hi Hendri
The market indicators point to a property bubble. Even developers themselves (The ones for “The Vision”) are saying that it is a bubble.
I think it is. Once interest rates rise significantly or when the economic recovery story tanks, the scenario can change very fast.
Be well and prosper.