My economic model for Singapore Property

[Porker]

You need accountant or not? Please look for peasant me ok?

 

ð

I need an acCUNTant you can or not?

[Jamesc]

Of course TS is correct.

 

It comes from a famous saying.

 

"Buy land, God stopped making it years ago."

 

[edwin15]

Sorry, you lost me... what initial assumption have i used that is not supportable by historical data or reasonable projection?

 

 

Aiyah bro,

 

Its this assumption that I object to using in the model. But not because its a bad assumption or because its wrong but mainly because this one assumption will drive the whole conclusion.

 

"

Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high.

"

My point is not whether property is a good or bad buy now. (This i do not know) but whether the model is a good and useful model. These are 2 different issues.

 

3 Things;

 

1) Logically you have to admit that the assumption above gets weaker the further out you project into the future.

 

2) Its a core assumption of your model.

 

3) Your model pertains to look at the very long term.

 

So in this sense, the model is poor as its core assumption gets weaker in the period that it aims to look at.

 

But let me be more constructive here and describe my way of looking at properties. (Feedback and suggestions welcome)

 

1) The most important overlying factor is the economics, demographics, and trends of the country I wish to buy property in;

 

2) Next comes looking at the individual sectors and their dynamics. Sectors that I will look at will be;

[edwin15]

The thread broke so let me continue here.

 

But let me be more constructive here and describe my way of looking at properties. (Feedback and suggestions welcome)

 

1) The most important overlying factor is the economics, demographics, and trends of the country I wish to buy property in;

 

2) Next comes looking at the individual sectors and their dynamics. Sectors that I will look at will be;

 

a) Residential

b) Industrial

c) Retail

d) Office

e) Logistics

f) Medical

 

Each of these sectors will have different characteristics and government regulations. Eg in Singapore, we have ABSD for residential properties and this year we had the ban on subletting HDB industrial properties which had great impact on the relevant sectors.

 

3) Finally, we look at the expression of the investment idea. This will be driven by liquidity, funding, and leverage concerns. Broadly, you can chose to;

 

i) Buy the actual development

ii) Buy into a reit

iii) Buy into a property developer

 

 

 

One thing is for sure, your Principal Gardens location is a decent one compared to many others which are priced similarly. So i personally also think that its ok. Not the best or greatest deal but decent lah.

 

 

However, most of us (if not all) in this forum have limited resources and entering (and exiting) the market at the right opportune can make a very significant difference. That i also believe, none of us here will be silly enough to dispute. 

 

___________________

 

 

Brother you have changed my opinion of you somewhat with these 2 comments. Want to praise you for them but can't bring myself to do so as yet. 

Brudder next time I do M&A and need a CEO to build up the business I look for you. You sound like an expert in building businesses lah

[edwin15]

PS: On a side note. Had too much wine last night. Massive hangover. Anyone know anything to take for that?

[Showster]

PS: On a side note. Had too much wine last night. Massive hangover. Anyone know anything to take for that?

Warm tea should help.

[Limwsv]

Aiyah bro,

 

Its this assumption that I object to using in the model. But not because its a bad assumption or because its wrong but mainly because this one assumption will drive the whole conclusion.

 

"

Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high.

"

My point is not whether property is a good or bad buy now. (This i do not know) but whether the model is a good and useful model. These are 2 different issues.

 

3 Things;

 

1) Logically you have to admit that the assumption above gets weaker the further out you project into the future.

 

2) Its a core assumption of your model.

 

3) Your model pertains to look at the very long term.

 

So in this sense, the model is poor as its core assumption gets weaker in the period that it aims to look at.

 

But let me be more constructive here and describe my way of looking at properties. (Feedback and suggestions welcome)

 

1) The most important overlying factor is the economics, demographics, and trends of the country I wish to buy property in;

 

2) Next comes looking at the individual sectors and their dynamics. Sectors that I will look at will be;

 

I C.  True, But if you look at the implications of that assumption not coming true, it would be very frightening to have ended up in that state.  No?

- blown up by terrorist nuclear devices

- invaded by foreign country

- drown under the waters by global climate changes

- broken/sunk by earthquakes/tsunamis

- killed off by nuclear plant disaster in neighbouring countries

- zombified by some virulent form of mutated diseases

- dismember by civil war

 

In any of these kinds of scenarios, there's no where, no assets that you can run to to protect from the impending doom.

 

Or have I totally misunderstood your point again?

[Limwsv]

The thread broke so let me continue here.

 

But let me be more constructive here and describe my way of looking at properties. (Feedback and suggestions welcome)

 

1) The most important overlying factor is the economics, demographics, and trends of the country I wish to buy property in;

 

2) Next comes looking at the individual sectors and their dynamics. Sectors that I will look at will be;

 

a) Residential

b) Industrial

c) Retail

d) Office

e) Logistics

f) Medical

 

Each of these sectors will have different characteristics and government regulations. Eg in Singapore, we have ABSD for residential properties and this year we had the ban on subletting HDB industrial properties which had great impact on the relevant sectors.

 

3) Finally, we look at the expression of the investment idea. This will be driven by liquidity, funding, and leverage concerns. Broadly, you can chose to;

 

i) Buy the actual development

ii) Buy into a reit

iii) Buy into a property developer

 

 

 

 

However, most of us (if not all) in this forum have limited resources and entering (and exiting) the market at the right opportune can make a very significant difference. That i also believe, none of us here will be silly enough to dispute. 

 

___________________

 

 

Brother you have changed my opinion of you somewhat with these 2 comments. Want to praise you for them but can't bring myself to do so as yet. 

 

 

I don't know how to run business and not looking for a job form you but can you tell me who the chio chick on your avatar is pls.

 

Pretty pls.     

And finally happy 2016 all here and hope everyone HUAT into the new year.

 

HUAT AH!!!!!!

 

  

 

I c.  that's a lot more systematic than me!

 

Probably because, retail, commercial, industry and agriculture properties have already been mentally eliminated from my option list.

Likewise REIT are out.   Shares in properties are treated under share asset class and manage differently.

[inlinesix]

Brudder next time I do M&A and need a CEO to build up the business I look for you. You sound like an expert in building businesses lah

[OmOm]

Properties in Singapore (long-term prospects):

 

The economic fundamentals of the country have to be further strengthened. The emphasis on innovation cannot let up - we have to produce our own Googles, Facebooks, and the like. For that to happen, there needs to be paradigm shifts in culture, mindsets and negative connotations regarding failure. Focus on real-world knowledge and ability, and not on academic grades. Stress on perseverance and competitiveness, and not on self-centred advancement.

 

Without the above, our best bet is demographic expansion (aka Ponzi demography) in which we leverage on our branding and international fame to keep bringing new imports (talent and otherwise) into the country who will contribute to the GDP and economic growth at the expense of stiff and considerably unhealthy competition for housing and infrastructure. 

 

The performance of the property market in Singapore since independence in 1965 has been stellar, to say the least. It has been riding on the back of strong fundamental growth pillars of the country (up to early 2000s) and a substantial increase in population size (to date). How much more growth in both these aspects are needed to propel the property market further?

 

A quick back-of-the-envelope calculation will show that our population size needs to go way beyond the current 5.4m into the early teens in order to sustain the same rate of property price-growth that we have seen the last five decades.

 

At the same time, if national income levels have not been growing at the same rate, then the outcome of further price increases will be an unstable and unsustainable property market inflated purely by influx of investment monies from outside Singapore, and not by genuine localised demand. And we know how that typically ends up.

 

Properties in Singapore (near-term and mid-term prospects):

 

There have been many analogies that have been made regarding the size and nature of our economy. The most visible metaphor has been that of a sampan (albeit one that is a supposedly improved version 2.0). The turbulent waves of the global financial waters easily unsettle the small vessel that we are, throwing us about in the chaos ensuing from international political and economic strife. 

 

It is quite apparent that the global economy is faltering. Trade has been dwindling at a precarious pace and we are beginning to see swift implosion of prominent funds vested in bonds (from junk to IG). Major indices have been struggling with (and a significant number already breaking below) key support levels and there does not seem a bottom in sight for commodities such as crude, iron ore and the like.

 

To top it off, the Fed has just hiked their benchmark interest rate in spite of global economic headwinds. 

 

O&G bonds will be the group to watch moving into the first quarter of 2016. The damage incurred in this category will set off a chain reaction of redemptions and defaults in other bond categories. In the event this blow-up cascades and develops further, a credit crisis could well come about. This shall further impede lending, trigger more unwinding and deleveraging, thereby resulting in increased refinancing failures and thereby worsening the debt situation.

 

It would be prudent to pay heed to the above developments and not throw caution to the wind where large purchases are concerned, especially if any form of debt/leverage is involved. 

 

 

This thread arises of a discussion initiate in the car/lifestyle section.  However, some very interesting points came up as to how Singapore properties should be considered.  The emphasis is deliberate as the model only works for Singapore.

 

There are a lot of property gurus here, so please ignore this un-sophisticated newbie who is just venturing into property and trying to justify his purchases.

 

Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high.

 

Let with with an analogy from Singapore/Malaya history; Rubber planting.

 

As all Singaporean students knows from their history books, rubber tree takes 5 - 7 years to mature.

 

So, any businessman intending to venture into this industry has to

1. Buy the land

2. Clear the land 

3. Plant the cuttings and continue to care for the younglings

 

These are the years where there are negative profits as the businessman has to continue to pour money into his investment with no guarantee on returns (storm blows down estate, commodity prices collapse, disease toll on trees, etc).

 

However, if the plantation make it through and extraction starts, profits will start to flow in and can continue to flow for another 25 years or more.  Also, the rubber estate itself also gain value as it could be sold to buyers with a risk premium for taking on the early year risk.

 

One thing that a number of people keep telling me is rental margins and so on... but they always left me scratching my head, the time horizon they use is very short.

 

Like rubber planting, buying property for me is for the long haul with time horizon of 30 - 40 years or more.  Analogous

1. Buy the property

2. Do interior finishing

3. Continue to care for the property

 

These are the years where profits may be negative (if you cannot find a tenant) as the investors has to pour money into the investment.  

 

However, once the mortgage is paid off, profits will start to flow in and continue to flow as long as you own that property.  That is not in addition to capital appreciation if you sell off the property.  

 

So, the total cost and total profit that can be taken from the property over a time horizon of 30 - 40 years is actually more important then short term rental margins gained while the mortgage is still in force.

 

Edited January 1, 2016 by OmOm

[Limwsv]

Properties in Singapore (long-term prospects):

 

The economic fundamentals of the country have to be further strengthened. The emphasis on innovation cannot let up - we have to produce our own Googles, Facebooks, and the like. For that to happen, there needs to be paradigm shifts in culture, mindsets and negative connotations regarding failure. Focus on real-world knowledge and ability, and not on academic grades. Stress on perseverance and competitiveness, and not on self-centred advancement.

 

Without the above, our best bet is demographic expansion (aka Ponzi demography) in which we leverage on our branding and international fame to keep bringing new imports (talent and otherwise) into the country who will contribute to the GDP and economic growth at the expense of stiff and considerably unhealthy competition for housing and infrastructure. 

 

The performance of the property market in Singapore since independence in 1965 has been stellar, to say the least. It has been riding on the back of strong fundamental growth pillars of the country (up to early 2000s) and a substantial increase in population size (to date). How much more growth in both these aspects are needed to propel the property market further?

 

A quick back-of-the-envelope calculation will show that our population size needs to go way beyond the current 5.4m into the early teens in order to sustain the same rate of property price-growth that we have seen the last five decades.

 

At the same time, if national income levels have not been growing at the same rate, then the outcome of further price increases will be an unstable and unsustainable property market inflated purely by influx of investment monies from outside Singapore, and not by genuine localised demand. And we know how that typically ends up.

 

Properties in Singapore (near-term and mid-term prospects):

 

There have been many analogies that have been made regarding the size and nature of our economy. The most visible metaphor has been that of a sampan (albeit one that is a supposedly improved version 2.0). The turbulent waves of the global financial waters easily unsettle the small vessel that we are, throwing us about in the chaos ensuing from international political and economic strife. 

 

It is quite apparent that the global economy is faltering. Trade has been dwindling at a precarious pace and we are beginning to see swift implosion of prominent funds vested in bonds (from junk to IG). Major indices have been struggling with (and a significant number already breaking below) key support levels and there does not seem a bottom in sight for commodities such as crude, iron ore and the like.

 

To top it off, the Fed has just hiked their benchmark interest rate in spite of global economic headwinds. 

 

O&G bonds will be the group to watch moving into the first quarter of 2016. The damage incurred in this category will set off a chain reaction of redemptions and defaults in other bond categories. In the event this blow-up cascades and develops further, a credit crisis could well come about. This shall further impede lending, trigger more unwinding and deleveraging, thereby resulting in increased refinancing failures and thereby worsening the debt situation.

 

It would be prudent to pay heed to the above developments and not throw caution to the wind where large purchases are concerned, especially if any form of debt/leverage is involved. 

 

Thanks for the analysis.  That's nice.

 

For me, I believe that we are at the tail end of the 60 year K wave,  We have seen economic recession across multiple countries across the globe for the past decade, and the start of commodity deflation.  We also know that despite the massive reserve stockpile by China, there are even a greater mass of debt and over-capacity hidden behind the firewall of China.

 

How that will play out will be interesting...  there are signs that China may use militarisms to divert attention outwards.  This accounts for the strength of the expansionist faction in China that's driving the recent conflicts in South China Sea.

 

This means that our economy may be hit from the eastward end but given our current geopolitical positioning, hopefully we will ride out that unscathe.  After all, war is good for business as long as you are not caught in it.

 

As to when the new K wave cycle will start, it's hard to predict, but my bets will be on biotechnology or low energy industry which has been incubating for the last 60 years.  As the major industrialised countries re-pivot their industry towards technologies that uses less energy, we will see efficiencies and therefore real economic gains accumulating.

 

It's with this background that I am basing my optimistic view of Singapore.  The quotation has always serve me well, "The night is the darkest just before dawn".  So, hang on there, Singapore may seems to be slowing and the problems may seems insurmountable, and the answers does not seems to be there.  

 

No one predicted back in the 60's/70's that semi-conductor industry and computing industry would have so much impact on the global economy, yet the world made it through those dark times of the 70s.

[OmOm]

The deflationary pressures of today are real and here to stay for a while. Besides commodities, we are seeing its impact on asset classes - properties, equities, precious stones and metals, and such. And it would appear to be getting worse. Just a few days ago, it was reported that Nov CPI has fallen for the 13th straight month since 2014. However, the more diplomatic term for this seems to be "negative inflation" rather than in-your-face "deflation". Debt-fueled growth over the last few years is now exacting its payback on the global economy. 

 

Much as mainstream media does not wish to play up the militarisation of the countries in the region, we cannot deny the fact that Japan has been striving for military "normalcy" backed by the US, China is building its second aircraft carrier, etc - the prelude to arms race per se.

 

From: http://www.straitstimes.com/asia/se-asia/us-admiral-warns-of-risk-of-arms-race-in-south-china-sea

 

All that will take subsequently is an unfortunate incident, either fortuitous or insidiously planned for, to be the last straw that breaks the camel's back, sparking military conflict from an already tense situation.

 

Past performance is not necessarily indicative of future results. Some will term this pessimism but others will consider it pragmatic to exercise more care and prudence in light of current macroeconomic and geo-political tension. The adage "be greedy when others are fearful" has its time and place, and, in my humble opinion, the current situation is not it.

 

Thanks for the analysis.  That's nice.

 

For me, I believe that we are at the tail end of the 60 year K wave,  We have seen economic recession across multiple countries across the globe for the past decade, and the start of commodity deflation.  We also know that despite the massive reserve stockpile by China, there are even a greater mass of debt and over-capacity hidden behind the firewall of China.

 

How that will play out will be interesting...  there are signs that China may use militarisms to divert attention outwards.  This accounts for the strength of the expansionist faction in China that's driving the recent conflicts in South China Sea.

 

This means that our economy may be hit from the eastward end but given our current geopolitical positioning, hopefully we will ride out that unscathe.  After all, war is good for business as long as you are not caught in it.

 

As to when the new K wave cycle will start, it's hard to predict, but my bets will be on biotechnology or low energy industry which has been incubating for the last 60 years.  As the major industrialised countries re-pivot their industry towards technologies that uses less energy, we will see efficiencies and therefore real economic gains accumulating.

 

It's with this background that I am basing my optimistic view of Singapore.  The quotation has always serve me well, "The night is the darkest just before dawn".  So, hang on there, Singapore may seems to be slowing and the problems may seems insurmountable, and the answers does not seems to be there.  

 

No one predicted back in the 60's/70's that semi-conductor industry and computing industry would have so much impact on the global economy, yet the world made it through those dark times of the 70s.

 

[Atonchia]

PS: On a side note. Had too much wine last night. Massive hangover. Anyone know anything to take for that?

Hangover headaches is because wine or alcohol is also diuretics like coffee, it caused you to loose water, blood vessels compensate the loss by dilating to allow more blood flow, thus more water.

 

Our brain contains lots of water, so when blood vessels expand to get more water, that when you feel the throbbing headaches. The pain is caused the pressure from dilated. vessels.

 

In short, rehydrate yourself

[Voodooman]

The quotation has always serve me well, "The night is the darkest just before dawn". So, hang on there, Singapore may seems to be slowing and the problems may seems insurmountable, and the answers does not seems to be there.

 

It is getting darker and darker at my dashboard but I hope you are right.

[Voodooman]

The thread broke so let me continue here.

But let me be more constructive here and describe my way of looking at properties. (Feedback and suggestions welcome)

1) The most important overlying factor is the economics, demographics, and trends of the country I wish to buy property in;

2) Next comes looking at the individual sectors and their dynamics. Sectors that I will look at will be;

a) Residential

b) Industrial

c) Retail

d) Office

e) Logistics

f) Medical

Each of these sectors will have different characteristics and government regulations. Eg in Singapore, we have ABSD for residential properties and this year we had the ban on subletting HDB industrial properties which had great impact on the relevant sectors.

3) Finally, we look at the expression of the investment idea. This will be driven by liquidity, funding, and leverage concerns. Broadly, you can chose to;

i) Buy the actual development

ii) Buy into a reit

iii) Buy into a property developer

 

 

But we won't even know who will be the governing party, much less the prime minister and minister of national development in 20 years time, how to analyse factors like "the economics, demographics, and trends of the country"?

 

But I have to agree with your line of thoughts and I opine that there is a more than 60% chance prices of SG properties will be higher in 2030 than what it is today. You have highlighted logical issues/data to delve into but sometimes too much analysis may not be good, just like during Lehman crisis, so many of my friends, especially those in the finance sector who knew too much, made so little money out of it while the non financial people managed to pick up some cheap stocks and properties.

 

Limwsv may just have the last laugh.

[Throttle2]

Enjoy your holidays too...

 

As for all this bubbling, it's sharing... I have 100% assurance in my decision with my purchase of the property. If you are following, all these came about because we are discussing lifestyles and cars. Enye always like to dig and dig and dig, so I oblige him.

He always dig me also, but i dont say anything.

I only dig him back and poke him on his miserable amount of cash / liquidity.

Its all good and fun.

 

In all honesty, i find the analysis of yours, edwin'sand seohster's very similar.

Maybe you guys around the same age and went through similar experiences and have similar family background.

 

One cannot be blamed for easily mistaking the three of you to be the same person albeit some slight difference in writing styles.

 

Muayhahahahah

Edited January 1, 2016 by Throttle2

[Porker]

One cannot be blamed for easily mistaking the three of you to be the same person albeit some slight difference in writing styles.

 

Muayhahahahah

 

I thought Edwin and Lim are the same person 

[Throttle2]

I thought Edwin and Lim are the same person

 

I still think they are, muayhahahahaha