Saturday, July 11, 2009

A visit to Vista Residences

I visited Vista Residences show flat today and was appalled by the prices of private property prices! A 1 bedroom 646 square feet unit costs $1370 PSF! After factoring all stamp duties, legal fees, it will cost almost $1400 PSF. Yet there are only three 1 bedroom units left and all 2 bedroom units are sold! The project is at least 80% sold at the 3rd week of launch!

Consider a district 12 property, selling at this kind of price and high take up rate, does it feels like a bubble brewing?

The Toa Payoh MRT station was not within sight and I have to walk at least 18 minutes to reach Toa Payoh central. This is a far cry from the 7 minute stated on papers. It is near PIE, which means the noise from expressway will probably accompany you everyday. Traffic was quite bad even during off peak hours, the lanes are narrow and I do feel some stress navigating the neighbourhood.

Of course it was the price that totally put me off! The stamp duties and legal fees are not even absorbed. The sales agent even has the cheek to ask me to pay a 5% booking fee within 15 minutes of viewing. He thought I was buying vegetables in the market.

I would have to pay 3% more if I opt for interest absorption and payment deferment.

Consider Vision Crest, a district 9 property near Plaza Singapura. It was initially launched at $1100 PSF in 2003 (recession) and peaked at $2500 PSF. It is currently selling about $1650 PSF, which has an average of $5.92 median rental (1Q09 data).

As I stated in my earlier posts, I am still looking for a $600 PSF freehold property near novena area, for investment purposes. The current prices will definitely be unsustainable as the recession’s impact has yet been unleashed.

I foresee some cheap lelong sale coming up in 2010 and 2011 when the backlog of properties are being cleared by developers and huge influx of projects TOP.

Hopefully by then I have enough cash and CPF to scoop up nicely TOP apartments and can see what I buy.

Buying over priced apartments based on photos, artist impressions, showrooms, floor plans, architectural models and imagination are still too sophisticated for me now.


musicwhiz said...

OK, so I am not the only one who feels that all this super hype for private properties is misplaced and harmful in the long-run !

Just one word for the current euphoria and sky-high prices - Ridiculous.


Alvan said...

i second that. is surreal, for those couples who r intending to buy a flat or property to settle down, this "bubble" is definitely confusing a whole lot of them (me included!). Any experts who wanna share their views why this phenomenon exists?

JW said...

I'm just rather confused...

If we can see that all these are hyped up prices, why are people still supporting these prices?

musicwhiz said...

Hi JW,

If I may, I think the reply will be similar to bubbles in the Stock Market. People know it's a bubble, but they always think they can "get out" in time. The party is raging and no one wants to miss it, but everyone eventually wakes up with a terrible hangover that may last for years !


Sgbluechip said...

Yes, I do see a strong herd mentality there. Interest rates are low, which means borrowing is cheap and return on deposits is low. Property seems to be best alternative investment for many cash rich investors.

If we were to analyse from the past, many investors strike pots of gold when they bought properties during recessions. Hence, assuming the property market is efficient, prices will rise to a "post recession" level as demand during recession translates to higher prices.

We know the market is never efficient, hence prices tend to over correct both ways. Currently, I see limited upside in the new launches but at least a 20% downside.

Let time tell.

Marvin said...

isn't the price of stock market and property linked?

maybe there's some euphoria from STI's 50% gain. I also bought quite a bit of shares at STI 1,500-1,600.

if you believe property market is going to crash, then maybe you should also sell your shares?

Sgbluechip said...

Marvin, the high end properties corrected about 30% from the peak. I do not view it as a crash. Similarly, I feel there is limited upside and at least a 20% downside at current property prices. Definitely, a property crash is an overstatement.

My shares portfolio is yielding a comfortable 5-6% per year, as I have picked up some REITs along the way this year. I will welcome a share market crash (again) for me to collect more bargains.

la papillion said...

Hi sbc,

Long time no see :)

I think pple jump into bubbles because they are afraid they will miss the upside. Imagine you're all flush with cash, ready to commit to your property. Any signs of a downside will be welcomed, but instead, you see property gng upwards and refuse to drop. Months and months of such news will cause everyone safe the well experienced to rush in.

If you're not desperate or greedy, it's hard to fall into this :) Don't they say the market is ruled by greed and fear? haha

Sgbluechip said...

Hi LP, well said!

Marvin said...

Hi Sgbluechip,

Don't wait too long for property prices to drop.

This is the time to buy "good units." If prices drop too low, sellers will hold rather than release the good units, at best you get 2nd rate units.

Things like facing, road noise, make a big difference in the expat rental market.

I've entered the property market in June (got to thank the stock market recovery since I started buying to average out when STI went below 2000 - you should have averaged out your portfolio at STI 1500) when the market was quite dead because a good unit came up (rented out to nice European family - rent paid directly by the MNC). Suddenly this month, lots more resale transactions and average price already up 5%.

If i just look at the psf$ i could have gotten a variety of cheaper units in the same development, but you have to know which ones can rent to say, a senior manager in an MNC.

On the other hand, if you want to rent out to say, entry level engineer from China, India, no problem, go for the cheaps $psf and charge lower rents.