The Multi-Million Dollar Mistake

By Mr. Propwise

Here’s the story of a property investor who missed a once-in-a-decade opportunity. The date is early March, 2009. Post the onslaught of the Global Financial Crisis property prices had corrected sharply and everywhere he looked there were bargains to be had. At many projects prices were down 30+% from the early 2008 highs.

To Buy or Not to Buy?

He found a large unit in a prime area with a desperate seller, asking for $1,600+ PSF, 15% below what he had paid for it. He had done his homework, liked the up-and-coming area, and thought the pricing was attractive, but was uncertain whether to pull the trigger.

Everyone he talked to, every newspaper or website he read, was still all doom and gloom. “Gurus” were talking constantly about how this next Great Depression would last for years, about the likelihood of a Double Dip in the face of any rally, about how the Singapore property market would bottom at the end of the year and that would be the best time to buy.

And so he hesitated and didn’t pull the trigger. By June 2009 the asking prices had risen by 20% to $2,000 PSF, and prices have now reached $3,000 PSF. That hesitation had cost him several million dollars.

The Thirst for Certainty

I get it. We want exact forecasts, to know exactly how much property prices will go up or down by and when.

And thus an entire industry of “gurus” have come forth to help quench this thirst for certainty, telling you confidently in the newspapers and TV news clips that property prices will rise by 5% over the next 12 months.

But if we get right down to it, the truth is that nobody (at least in the secular realm) can foresee the future with any certainty.

Putting your faith in these “guru” forecasts to time your property investments will almost guarantee that you’ll be following the crowd like a troop of lemmings right over the cliff.

The Smarter Approach to Timing

“It is better to be vaguely right than exactly wrong.” – Carveth Read

While we can’t forecast the market with any certainty, we can make use of continually occuring cycles to guide our investment timing the decisions.

Rather than focusing on trying to predict exactly how the future will turn out, it’s more important to figure out where we stand right now. What are the current conditions and DATA telling us about where we are in the property cycle?

Armed with this knowledge, we can then look at leading indicators such as interest rates, urban planning directives (e.g. Master Plan, zoning), government and population policies, upcoming supply, and stock market movements to corroborate this view.

In other words, while we can’t predict the exact timing and movement of the market, we can make use of our analysis of the current situation to guide our decisions as today’s events leads to tomorrow’s trends.

This is how the smart, sophisticated investors make their decisions.

The Genesis of Property Market Insights

In late 2010 I started Propwise.sg as I was sick of the misinformation out there in the market. There was no reliable, unbiased source of information on Singapore property that the regular person could turn to back then.

Many of the burning questions I’ve been getting from readers since then are about the timing of their property purchases. And while sophisticated investors might spend both the time and money to gather and analyze the data, or pay tens or hundreds of thousands of dollars to brokers and analysts to help them do it, the regular person had no such access to this information.

And thus Property Market Insights (PMI) was born. My goal was to give access to regular property buyers and investors access to this knowledge, at a tiny fraction of the cost it would take to pay for the data and support the small team needed to analyze and update the data.

I also spent close to a year to develop the Property Market Cycle Model, the centerpiece of PMI, that incorporates both the current property market data and also leading indicators to help investors know where we are in the cycle, and the best actions to take.

In the next part of this series, I will discuss how to get on the right side of the property cycle by being a contrarian investor. Till next time!

By Mr. Propwise, founder of top Singapore property blog Propwise.sg, a Chartered Financial Analyst and resident real estate analyst at PropertyMarketInsights.com, a site to help property owners and investors make profitable decisions in uncertain times. Click here to learn more

1 Reply to “The Multi-Million Dollar Mistake”

  1. Yes I completely agree that nobody knows for sure exactly where prices will be going. As long as we have done our relevant homework and worked out the worst scenarios that could happen, the next thing to do is to take action.

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