While past performance is never a guarantee of future performance, there are many lessons we can learn from the past and some of these lessons are compelling reasons why you should consider buying property amid the current uncertainty. Take a look at these TOP REASONS why you should be buying:-
1. Inflation is here to stay
When oil futures prices tumbled below zero briefly and it was all over the news that oil giant Hin Leong was in a deep financial conundrum due to the unexpected collapse of oil prices, it raised much talk about the possibility of a deflation. Near-zero interest rates and even negative rates in some countries have helped to propagate those expectations further. The truth is, deflation is much more frightening than inflation, it is how wealth built over decades can be destroyed and not recover for a long time, if ever. This is evidenced by what had happened to Japan after the 1980s’ asset bubble. In early 1992, this price bubble burst and Japan’s economy stagnated for decades. This is not where any economy wants to be.
Fortunately, inflation is here to stay despite the near-zero interest rates, low oil prices and the collapse in consumer demand and industrial production around the world. Inflation is now being driven by the on-going trade war and the change in the way people live and interact socially. The trade war between US and China had already been driving some prices higher and are set to increase as many production facilities move away from China to neighbouring economies or even back home where cost of production is higher.
Recent spats over the alleged cover-up of the Covid-19 situation in China may lead to more upsets in global trade relations and threaten more protectionist measures which will only serve to increase the costs of goods and services globally. Safe distancing rules will affect everything from restaurants to air travel and retail, all areas will no longer be able to yield the same return on investment. Eating out, travelling and shopping will all become more expensive. Unfortunately, it is unlikely that incomes will be able to catch up in the same magnitude.
2. Costs of construction will rise
The inevitable spread of Covid-19 among the foreign workers’ dormitories in Singapore has highlighted the importance of social distancing as well as the downside of a heavy reliance on foreign labour particularly for the construction industry. As Singapore prepares to re-start its economy after the Circuit Breaker, Minister for National Development Lawrence Wong cautioned that higher costs for construction work must be expected on the back of more testing as well as the implementation of various measures to ensure the safety of all workers. Such measures are important to maintain the quality and safety of projects.
So going forward, the costs of procuring workers, rising transportation costs and as a result, the costs of building materials will inevitably result in higher costs of construction. Time being another important measure of cost. Being a long-term phenomenon, these costs will inevitably be passed on to the consumer, eventually. Thus, higher selling prices.
3. Developers offer discounts
With more new private homes coming onto the market the end of 2020, coupled with the uncertainty surrounding the timing of the global economic recovery, it is more than likely that the average buyer will prefer to stay on the sidelines until signs of a recovery in the economy and property prices are more certain. This makes it a buyer’s market and developers can be expected to offer further discounts off listed prices and other incentives to sweeten the deal.
At the time of writing, some developers are already introducing “star-buy” units are with new-launch prices and further incentives. So, instead of bidding for a unit not of your choice and paying top dollar, you have the luxury of selecting the unit of your choice, at your own timing and with attractive pricing.
4. Singapore property market will rebound
When the pandemic eventually passes and everyone has gotten used to the new normal, the pent-up demand from those who had postponed their purchase due to various reasons will cause a bit of a flurry in the market. This albeit short-term phenomenon plus the fact that Singapore is land scarce will serve to provide a good support to non-landed property prices.
Coupled with the recovery of consumer confidence on the back of an economic recovery, jobs will return, new jobs will be created and the this will support new household creation and new demand for accommodation.
Most importantly, Singapore’s stable political and regulatory environment will continue to be the highlight of the Singapore property market’s relative attractiveness within the region and even globally. The price adjustment mechanism put in place by the Singapore government since 2004 has been tried-and-tested and has prevented Singapore property prices from rising too excessively, benefiting both local and foreign buyers alike. The financial chaos resulting from the pandemic has only serve to highlight the role of property within any wealth portfolio.
5. Buy when everyone is fearful
As the saying, buy low sell high. Would you rather buy when everyone is rushing or when the showflat is empty? Price is what you pay. Value is what you get. As long as you can afford and doing your due diligence to manage your risk, there is never a good time to buy.
About the Author
Lisa Khoo CFA is a Chartered Financial Analyst with more than 20 years of experience in the financial markets. She worked as an economist and investment analyst at a major insurance company before moving on to manage Asia Pacific equities for both institutional and private clients. In her last appointment before retreating from corporate life, Lisa headed Product Sales at a global asset management firm, responsible for product and client analysis/reports and RFP generation, She is now an independent investment analyst and writer with special interest in economics, investments and lifestyle, She can be contacted at Linkedin.
BestBuyCondo.SG is a leading online editorial and property resource for home buyers and investors. We are committed to empower home buyers and property investors to find their value homes and investment properties by providing reliable, transparent information and independent review. Our articles do not receive any sponsorship.