Why is Crisis and Recession the BEST time to Invest in Singapore Property?
Published 20 March 2020
With the global pandemic Covid-19 coronavirus spreading like wild fire all across the globe and causing fear and economy damages in more than 100 countries, many experts believe that we are in an unprecedented global crisis.
Already, stock markets all over the world are crashing, wiping out trillions of dollars. And inevitably, recession will follow after this Covid-19 pandemic.
Back to home, property market in Singapore, how does the coronavirus affecting it?
Somewhat surprisingly, the Singapore property market are quite resilient, even in the midst of the virus crisis. For example, The M at Bugis sold more than 360 units on first day of launching, which is 70% of its total units, in Feb 2020, despite the concerns and fears of coronavirus.
And the reason why The M sold so well despite the virus crisis that we are in? By selling at “crisis pricing”!
According to calculation, the breakeven cost of The M is about S$2300 PSF, and yet the average selling price of The M is only S$2450, which represent only less than 10% of profit margin. In Singapore property market, most developers were making 25-35% of profit margin during the good times.
As a result of the “crisis pricing”, more than 360 savvy buyers took advantage of it, and stand to gain big in the future when crisis is over and property is completed.
Crisis Investing
This kind of crisis investing are not new and uncommon, as one of the greatest investors of all time, Warren Buffett, famously says :“Be Greedy when others are fearful, and fearful when others are greedy.”
Sounds logical right? Why is it so? And is it proven by facts and figures?
Below I will share with you the research we have done on Singapore property market which prove with facts and figures that this crisis investing works. But first, the logic.
It’s actually quite logical, during crisis time and recession market, when most buyers are not keen or unable to buy a property, developers have to sell at lower profit margin or “crisis pricing”, like The M did, in order to sell in this market.
Whereas during booming market, when lots of buyers flock to showflat, FOMO (Fear of Missing Out), packed the showflat and queuing for balloting for the units, as developer, of course they will sell at higher price and better profit margin. That’s why those buyers who bought their properties during booming market are not making much return or even lose money, as they have to pay higher price.
Below are the chart that show, property investors who invested in property during the previous crisis like SARS (2003-2004) and Global Financial Crisis (2008) made the most returns when the crisis and recession are over, simply because during that period they bought their property at “crisis pricing”.
Specifically, those who bought during SARS made an average of 115% of return by 2007, and those who bought during Global Financial Crisis made an average 88% by 2014, much more returns then property investors who bought during bullish real estate market.
Ok, let’s say you are convinced by now that it’s a good time to buy property now, during the crisis, but which property to buy? In the market right now (year 2020), there are 100+ projects in different locations in Singapore, and not all of them are good and at crisis pricing.
We have done our research and identified 3-5 excellent projects that are selling at very attractive pricing and with huge investment potential for capital appreciation, in locations like Central Business District, District 9 (Orchard/River Valley), and city fringe location.
Feel free to arrange a no-obligation discussion with us and we will share more with you.
Regards,
Jack Ooi
Professional Real Estate Consultant (Singapore)
Contact Us HERE
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