Tuesday, September 10, 2013

Residential hit will worsen… Beware!

At the last Asian Titan Trends earlier this year at the Marina Bay Sands, I told all of you that the residential market looks toppish and you should not be betting in an asset class that the government is trying to manage increases in prices. Many of the participants were rather surprised that all they have to do is to limit the amount of financing to 50% financing. There were looks of disbelief and again skepticism. I shared with them that before the end of the year, such measures will become a reality. Well, the government have gone a step beyond that and some are counting 50% financing a privilege under the TDSR, those who believed and managed to off load are heaving a huge sigh of relief. The hardest hit is still the higher end of the market but should the international economy prove to weaken again, mass market homes will be the hardest hit.

Why? Many have bought horribly expensive homes at sub-urban areas. Developers have sold these homes at ever increasing prices. They have to as they paid the government ever increasing land prices in the government land sales program as many HDB upgraders fall over themselves. Guess what the party will have to end eventually. The government is removing demand for HDB by imposing curbs on foreign workers, thus rental yields will fall. Add the recent measure to prevent recent PRs from owning their flats, this is very effective to remove demand thus a double whammy. We have witnessed falling COVs and this is just the beginning. If not managed properly, the whole residential property situation can prove to be a bloodbath. I sincerely hope that the improving global economy will buffer the situation as an economic slowdown now will be an absolute party pooper.

I am writing this blog from an airplane after visiting our local operations and seeing quite a few sites there. I am now actively looking at regional opportunities and am frankly amazed by the many great sites available. We maintain a strict investment regime. We mainly invest for our own real estate requirements and do not speculate. Such investment discipline has served us well, as own use assets will enable us to ride out the cycles.

I am maintaining this blog on a casual basis thus the number of thoughts is limited but I will be more active if there are more people liking what I’m doing. So do like my blog and encourage me to share my thoughts please. Till the next blog, take care and God bless!

Your Friend
Andy Ong