By Property Soul (guest contributor)

It is common for international property investors to compare how different property markets perform across the world and take their pick from the shortlisted countries. LaSalle Investment Management recently claimed that “Singapore’s property market may be closer to a bottom than Hong Kong”.

How true is that?

The peak and the pit

Prices of properties in Hong Kong have jumped by370 percent since their last bottom during the SARS period in 2003. The market didn’t show any sign of softening until September last year. Since then housing prices have fallen 13 percent.

On the other hand, home prices in Singapore have increased 92 percent since 2003 but have dropped 9 percent from their peak since September 2013.

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Here is a possible reason behind LaSalle’s statement: Since Hong Kong’s property prices have shot up much higher from their last bottom, there should be more room to adjust downwards.

The dangerous part of this conclusion is that we are comparing two countries with totally different fundamentals – the population, housing demand, government housing policy, and number of buyers and investors of the two places are completely different.

But the most dangerous part is the assumption that Singapore property prices are closer to the bottom because they have already fallen 9 percent from the last peak. What is 9 percent after a 92 percent surge?

Back in 2001, developers and investment companies kept telling the media that the property market was bottoming out. In reality, prices didn’t really pick up until five years later in 2006.

Pro-Hong Kong vs pro-Singapore property camps

SC Capital Partners told Bloomberg that “recent price declines make investing in Hong Kong property attractive”.

The Singapore real estate private equity firm expected the Singapore government to stay firm on its cooling measures until the end of next year. Compared with Singapore, homes, offices and hotels in Hong Kong offer more value after the recent drop in prices.

The truth is: SC Capital bought units at a Singapore condominium project in bulk just before the property curbs kicked in. It had to offload the 18 units to Blackstone Group LP in January 2015 and suffered a hefty loss of S$12 million. It is not surprising that the private equity firm won’t be touching Singapore property any time soon.

Meanwhile, Macau casino tycoon Stanley Ho’s Shun Tak Holdings has just set a new record of property sale in Singapore by paying $145 million (a big discount from the listing price of $160 to $170 million) or $2,145 per square foot for a bungalow at 9 Cuscaden Road. The 25,741 sq ft freehold land parcel is formerly owned by the descendants of philanthropist Tan Tock Seng. With the company’s track record in the hospitality industry, the land is believed to be used for hotel development.

My poison, your meat

The two cases are only one-off incidents that do not represent the market sentiment. However, recently there are Singapore high-end projects being marketed in Hong Kong. The selling point is that luxurious apartments in Singapore are now more affordable because of the government’s cooling measures. Likewise, foreign buyers are told that they can now own a piece of Hong Kong at deep discounts.

Do you know the story behind Overstock.com? Founder Patrick Byrne started the company based on the theory that ‘products that cannot sell in one country can be best sellers in another country’. Instead of letting retailers dump cancelled orders, leftover stock and surplus merchandise out the back door, he marketed the goods on the internet where there was a lot of demand for it. Overstock.com is now a $1.5 billion listed company.

A marketer’s job is to turn a disadvantage to an advantage: to turn hot potatoes into hot cakes. You find it excessive but I find it exotic. One man’s poison is another man’s meat.

What a smart sales tactic to shift the supply and demand equilibrium to the seller’s advantage!

Price drop signals opportunities to buy?

Analysts of the stock market often comment that when stock prices drop below a certain level, it signals a good opportunity to buy. But to look at it in another way, when prices drop below a certain level, it also signals an opportunity to short.

Look at Japan. After the burst of the asset price bubble, the Japanese lost decade that started in 1989 is still ongoing after more than 25 years. Companies marketing Japanese properties keep persuading buyers that it’s a good time to buy now.

With a declining population and a vacancy rate of 13 percent, are you ready to take the plunge?

Jim Rogers said “bottoms in the investment world don’t end with four-year lows. They end with 10- or 15-year lows”.

And I like this piece of wisdom from his decades of investment experience:

You do not buy unless it is cheap and unless you see positive change coming within the next 2 to 3 years.

What exactly is the positive change in Singapore and Hong Kong’s property market?

LaSalle Investment Management is currently overseeing over $58 billion in real estate funds. Whether it is a right bet that the Singapore property market has reached its bottom matters less to such a deep-pocketed fund. It can afford to take the risk.

But can a retail investor or a first-time buyer take the same risk?

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

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