What Lessons We Can Learn From The Last Property Peak?

Today, in 2023 – we are at a new property price peak.

The last property peak we were in was way back in 2013.

Source: Private Property Price Index – https://data.gov.sg/dataset/comparison-of-property-price-index

There is something I noticed about human behaviour when prices are rising.

They become very bullish.

They become very optimistic.

They start to believe that prices will continue to rise and rise.

I am starting to notice this behaviour everywhere.

From various property agents that I’ve met to property owners who are currently sitting on paper gains.

This behaviour has also started to “infect” buyers who are looking for a property to purchase.

The belief they have seem to be this:

You “confirm” make money even with “any” property in the market!

Usually when I see such behaviour becoming widespread, I become more cautious.

So I decided to sit down and do some research on what happened during the last property peak in 2013.

2013 Was The Last Private Property Price Peak

For this analysis, I am looking at what happened to buyers who entered in the last property peak in 2013.

I am going to analyze the results of buyers who bought:

• a resale property that was perceived to be “undervalued” and compare against
• a new launch that was happening nearby

Now, to make this comparison more interesting  – I am going to compare the results against the worst-performing new launches that I know of.

I am not going to compare against the best-performing new launches of 2013 because that would be too obvious.

But I am going to compare against the WORST new launches of 2013 that I am aware of.

WARNING: I am sharing with you data about some of the most unprofitable condo developments in Singapore. 

If you are feeling concerned your condo is in this list, please do not proceed.

Example #1: The Skywoods at Dairy Farm (New Launch) vs The Tree House (Resale)

Skywoods at Dairy Farm was launched in 2013 and completed in 2017.

For this development, the profitable transactions were not really very profitable.

So I made a comparison The Tree House which is a much more popular development.

The Tree House is located within the same area but it is slightly older – it was completed in 2014.

So when Skywoods was announced for sale in 2013-2014 period, the Tree House had just hit TOP.

If you notice the buyers who bought Skywoods in 2014 – they lost almost $8k in 2018 when they sold.

What a lousy experience right?

Everyone says that buying a new launch will make money. But this is not the case.

But when you compare with someone who bought a resale unit at Tree House in 2014 and sold in 2018 – they lost $120k.

You can see that a handful who bought resale unit in 2013 and sold in 2018-2019 – their losses were as high as $235K.

Which is more painful?

Losing $8K or losing $120K?

I think resale buyers came into the market feeling confident about their purchase at the last peak price of 2013-2014.

But unfortunately, they were not able to make any gains but incurred losses instead.

Here is another example.

Example #2: Rivertree Residences (New Launch) vs Seletar Springs (Resale)

These 2 condos are located at Sengkang area.

Rivertree Residences was a new launch development that was launched at a high of $11xxpsf.

A unit at Seletar Springs can be bought in the resale market for $800psf.

Some units can also be gotten for as low as $718psf too.

Can Seletar Spring be considered as the “undervalued” property when compared to Rivertree Residences?

Purchasing Seletar Spring at a lower PSF would be the better choice right?

But what was the end result of buying a resale unit at Seletar Springs instead of selecting a new launch back in 2014?

In 2019, 2020, 2021 – there were still Seletar Springs units selling at a loss.

Whereas for Rivertree Residences – there has been no unprofitable transactions till now.

Even for those who bought at the peak prices of 2014 at $11xx psf.

(Take note that for all these transactions – it is exclusive of tax and costs involved. These are purely buying and selling prices.)

Example #3: Alex Residences (New Launch) vs Ascentia Sky (Resale)

These 2 developments are closely located at Redhill MRT.

Ascentia Sky hit TOP in 2013 while Alex Residences was launched in 2014.

You can see that someone brought at unit at Ascentia Sky for $14xx psf in November 2013 and sold in 2021.

And they still lost $85K.

Nowadays, people say that bigger units will perform better than smaller units.

But this Ascentia Sky unit actually lost more money when compared to a 2-bedder unit at Alex Residences that was bought in Dec 2013 and sold in 2021 as well.

That Alex Residences unit that was bought and sold at around the same time of the Ascentia Sky $85K loss-making unit?

It only lost $3K.

$1891psf for Alex Residences and $1343psf for Ascentia Sky.

Both developments are just beside each other. Which one is really “undervalued”?

And yet Ascentia Sky lost more money.

Unbelievable right?

Example #4: Urban Vista (New Launch) vs Optima @ Tanah Merah (Resale)

Let’s look at the development with the most number of unprofitable transactions I ever seen for a new launch.

Urban Vista was completed in 2017.

Optima @ Tanah Merah was completed in 2012.

Personally, I don’t really like Urban Vista due to its poor layout.

I think it is one of the main reasons why it doesn’t really generate profitable transactions for its owners.

So by right, it should perform really poorly for a development that was considered a new launch next to Optima.

Let’s look at the performance between Urban Vista and Optima @ Tanah Merah.

For units bought in 2013 and sold in 2020 and 2021 – the Urban Vista owners made losses from $94k to $216k.

For units bought in 2013 and sold in 2020 and 2021 – the Optima owners made losses from $70k to $288K.

Both are not fantastic.

We might think Urban Vista has a lot more unprofitable transactions.

Which is correct. Urban Vista has more transaction volume.

But for Optima there was only 1 profitable transaction for owner who bought in 2013 and sold in 2023.

This means out of 4 units bought in 2013 for Optima (when it has hit TOP) and have sold their unit by now – 3 of them were unprofitable.

And not forgetting there were many more units bought in 2012 that lost money when sold in 2020 and 2021 too.

The losses can go up as high as $430k.

The Market Can Always Turn Against You

After the peak of 2013, you can see the property price index started to slide downwards.

What happened that caused this downward slide?

There were a few factors:

• An extreme form of cooling measure which was the introduction of TDSR in 2013
• Increased supply of new launches and properties in the pipeline

Here are some of the news headlines from that period:

Source: https://www.facebook.com/ChannelNewsAsia/photos/a.106297597933/10152737271432934/

https://www.todayonline.com/business/home-prices-hit-longest-losing-streak-1975

The reason I am pulling out all these headlines is because it has happened before.

I was in the market back then.

I’ve seen the struggles before to sell properties when there was very few takers.

Now, when we see the market continue to rise, we feel optimistic.

Sometimes even invincible.

That’s why I am reminding of the need to be cautious.

TDSR brought in significant impact to the property prices that it started a longest losing streak on record back in 2016.

However our memories are short.

We tend to forget the bad times too quickly.

And we have forgotten about the time when it was hard to find buyers for our property.

Conclusion

The resale developments I presented here are usually considered undervalued and in a good location.

When compared to a new launch nearby which was sold at a much higher price, the perception of the resale development is that it is “undervalued”.

You can see that even the worst new launches that I am aware of – they still performed better than the “undervalued” resale development located nearby.

This is something for you to consider to think about:

If you are a buyer who is planning to just go for an “undervalued” property – I urge you to be mindful and think about whether it will still be “undervalued” in the future.

There is a reason why some condo prices remain stagnant for long periods of time.

Your definition of “undervalued” might not be what you think it is.

If you are an owner who is now feeling good about your paper gains – I suggest that you secure those paper gains into actual gains – before the market turns against you.

And if you think your property is not performing – perhaps it is time to consider changing to a better-performing one?

Free up the funds from those underperforming properties and channel it to a better one.

Do it while sentiment is still positive and optimism is high.

As you have seen, cooling measures can come without warning and at midnight.

The market can turn against you.

This is the time to consider whether your success in your property gains was due to luck or skill.

If you have further questions on your own property choices for the future, let’s arrange a no-obligation discussion.

You can drop me a message via WhatsApp or the contact form.