By Property Soul (guest contributor)

With the circuit breaker, I finally have the time to read Nassim Nicholas Taleb’s 2018 book Skin in the Game: Hidden Asymmetries in Daily Life.

What is skin in the game? It means standing behind what you say; having a stake in what you promote; and exposing yourself to the risk of what you advocate. If you are an organization, you are using the products or services you sell. If anything goes wrong, you must have a taste of your own medicine.

As Taleb said in the book, “someone with a high public presence who is controversial and takes risks for his opinion is less likely to be a bull***t vendor”.

This topic is sensitive but very relevant to ordinary buyers, clients, customers, or citizens like us. How many products or services we use that we know the companies are eating their own dog food? How often do we find a sales representative, middleman, or consultant whom we engage are completely neutral and transparent with us? How many governments in this world have the guts to own up to their mistakes, apologize sincerely and rectify for the sake of their countrymen?

Boris Johnson has his skin in the game

British Prime Minister Boris Johnson just has a perfect demonstration of skin in the game in his national policy to tackle Covid-19 in the UK. Although many questioned his decision to choose herd immunity over country lockdown to curb the spread of coronavirus, he insisted that it is wrong for a democratic country to deploy the police or military to forcefully impose lockdown.

“I can tell you I am shaking hands continuously,” Johnson told reporters in a clip. “I was at a hospital the other night where I think there were actually a few coronavirus patients and I shook hands with everybody.”

On March 19, he declared that the UK was absolutely confident to send coronavirus packing. The country could turn the tide of the outbreak in twelve weeks. Just four days later, when cases and mortality got out of control, Johnson was forced to tell the British that they would be locked down for three weeks. But the first week hadn’t passed before the prime minister himself was down with coronavirus. After ten days of showing symptoms, he was admitted to the hospital. On April 7, he ended up in the intensive care unit.

The British are asking themselves: If their country’s top official who leads the war against the pandemic is also inflected, how can they trust that he is capable of protecting his countrymen and keeping everyone safe?

Not everything that happens happens for a reason, but everything that survives survives for a reason.

– Nassim Nicholas Taleb, Skin in the Game

What most people fail to see is: Johnson is a man who stands by his words. He put his health at risk and his life at stake to demonstrate to the nation what herd immunity is. He is a living proof to show how to survive coronavirus with no lockdown. He has his skin in the game.

Don’t judge Johnson. As Taleb put it, “judging people by their beliefs Is not scientific. There is no such thing as the rationality of a belief, there is rationality of action”.

According to Taleb, beliefs are cheap talk. Courage or risk-taking is the highest virtue because courage is the only virtue we cannot fake. “Courage is when you sacrifice your own well-being for the sake of the survival of a layer higher than yours”. Same as entrepreneurs in start-ups, they are heroes of our society. They fail for the rest of us.

Now is the time to buy new projects?

The URA data show new private home sales fell 32 percent in March. This was even before the implementation of a circuit breaker on April 7 with compulsory closure of sales galleries. In SRX’s April non-landed private residential flash report, only 309 resale units changed hands in April. That is a whopping 62.2 percent year-on-year drop. According to CEA, we have 30,073 property agents in Singapore as of January 1, 2020. What are the rest of the agents surviving on?

A spokesperson from Orange Tee & Tie recently told the media that “once the situation stabilizes and safe distancing measures ease, new homes sales will likely pick up when show flats reopen and house viewings resume. The growing economic uncertainties around the world may also propel more investors to seek shelter for safe-haven assets here”. (The Straits Times, April 15, 2020)

Really? Do you think “new homes sales will likely pick up” after the government relaxes safe distancing measures? When they allowed the bakeries to sell cakes again today, I immediately rushed to buy some this morning. How many of us miss the sales galleries so much that we need to rush to visit the showflats when they reopen again? How many homebuyers or investors will commit to a new private property at this time?

Do you think investors will “seek shelter for safe-haven assets here”? We investors all know why we should flee for cash and gold as safe havens when the market goes south. Since when did buying uncompleted properties off the plan becomes “safe-haven”, especially with “growing economic uncertainties around the world” and before the onset of a potential full-blown global recession?

Will foreign investors seek shelter for their money and flock to Singapore to buy properties? Dream on. Even on normal days, the percentage of foreign buyers of Singapore’s private properties barely makes up 6 percent of the total private home buyers. And that humble percentage of foreign buyers does not even exclude non-residents who are considered “foreign buyers” after they have stayed here for long without getting their permanent residency.

And how could it be possible for foreigners to drop by Singapore to pick up a new private home? From January 31, all Chinese visitors and foreigners with a recent travel history to China have been banned from entering Singapore. From March 23, all short-term visitors from the rest of the world are not allowed to enter or transit through Singapore. How many foreign investors are keen to buy uncompleted projects here after visiting their virtual showflats online?

People whose survival depends on qualitative “job assessments” by someone of higher rank in an organization cannot be trusted for critical decisions.

– Nassim Nicholas Taleb, Skin in the Game

Just meet 5 criteria and you can buy right now

As a tight budget investor, I don’t want to be pessimistic. But I must be realistic. Taleb said “a foolish gambler is not committing an act of courage, especially if he is risking other people’s funds or has a family to feed”. I can’t have “selfish courage” that can risk my money and impact my family’s wealth.

When the government lifts the lockdown measures in phases, we are busy reopening our business or protecting our job and a monthly paycheck. If we still have the mood to look for a new home, we must be capable of fitting at least five criteria below:

1) We have to be 100 percent sure that our employment, business, and investment will not be affected by Covid-19. We have the financial means and holding power even if the worst is yet to come.

2) Even when prices are to drop further, be it 10, 20, or 50 percent in the coming months or years, we really don’t mind buying now at higher prices – at 10 to 50 percent above the future value.

3) We are fine buying under the current loan-to-value restrictions, pay 4 percent buyer stamp duty, 12 to 25 percent ABSD, and 4 to 12 percent seller stamp duty when selling within 4 years.

4) After our purchase, it matters nothing to us whether the government will relax any property cooling measure. We are fine if we don’t get to enjoy any property stimulus measures rolled out by the government when the time is ripe.

5) We don’t mind developers delaying construction and completion of new projects for six months or even longer. It doesn’t matter if there is no definite deadline to collect the key. We will still pay the downpayment now and progressive payments as scheduled.

Congratulations if you fit all of the criteria above. Unfortunately, I have to admit that I can’t meet even one of these requirements. I am just an ordinary homebuyer.

How to ensure developers and agents have skin in the game?

According to URA, as of 1st quarter 2020, there is a total supply of 48,868 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals. Among them, 29,149 units remained unsold.

Taleb asked a question in his book: Is it ethical to sell quantities to buyers without informing them that there are large quantities to be sold? Taleb said “an upright trader will not do that to other professional traders”. But it is “sort of permissible to do it to the anonymous market and the faceless non-traders”.

How much should a developer or property agent reveal to a homebuyer? Is it ethical to sell something to someone knowing the price will eventually drop? Why does the seller always get all the upside while the buyer forever gets the short end of the stick? Does Taleb’s saying “rip them off, don’t tick them off because every day a new customer is born” applicable to the new home sales market?

Because the person who gives advice, telling you that a certain action on your part is “good for you” while it is also good for him, while the harm to you doesn’t directly affect him.

– Nassim Nicholas Taleb, Skin in the Game

When China was under lockdown in the most critical stage to control coronavirus spread in the country, property sales plunged 40 percent. To save new project sales, China’s second-largest property developer Evergrande decided to adopt aggressive promotion. As a result, 99,000 units worth RMB102.7 billion (S$20.5 billion) were sold online just in February. Despite all sales offices being shut, sales surged 118 percent – even higher than a year ago when there was no coronavirus. Evergrande became the top market performer of the month. (Reuters, March 2, 2020)

I am sure all Singapore developers and property agencies are eager to know how. Let me summarize Evergrande’s successful strategies and possible rationale for everyone’s reference:

1) 25 percent discount for all properties until the end of the month

You are afraid that prices will fall after you bought? How deep can they drop? 10 percent? 20 percent? Fine. I am giving you 25 percent off straight away. A 25 percent buffer is fair enough, right? And I am offering it to you right now so you don’t have to wait for any price correction before you buy.

2) Deposit only RM2,000 and the unit is yours

You are taken aback by many who lose their jobs and have pay cuts? Cashflow is a problem for you? Fine. You have RMB2,000 (S$400) with you? Transfer it to our bank account now as the deposit to book a unit. You pay nothing until it is ready to collect the key.

3) Option to cancel with full refund

You don’t know what will happen next with so many market uncertainties? You may lose your job or your business may have to fold? Fine. If anything happens, you have the option to cancel the deal within 3 months. We will give you a full refund of your RMB2,000. No questions asked.

4) Buyers get all the upside

You don’t believe that we are willing to suffer a loss? The deal is too good to be true? Are we afraid of a large number of cancellations, refunds, and returned units? We are a big developer with a very healthy cash flow. With the profits we made over the years, we can surely survive the Covid-19 crisis. Country Garden may be the largest developer. But we are the top developer in terms of putting customers first. During these bad times, we dare to put our skin in the game.

If any developer in Singapore can match China Evergrande’s offer, I think we can seriously consider buying from their new launch project.

Yes. I said I am buying.

By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.

[Disclaimer: The main aim of is to provide good sources of information and opinion on the Singapore property market for our readers. These sources come from a broad mix of experts, who could be independent bloggers, analysts, and real estate professionals. We do not publish anything we feel is overly promotional or lacking substance, and do not get paid to post articles (any ads you may see will be clearly marked). That being said, you should be aware that every guest contributor has their biases, and so you are less likely to see an article from a property agent (for example) that will be negative on the market.]

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