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Down 40% since 2012 because of strict cooling measures beginning 2009?

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I have been to Singapore 8 times within this year. I have been to Sentosa a few times.  It’s always full of activities even if the sand feels a bit rough and it’s not the usual white sandy beaches you find in natural islands. These days, the property prices in Singapore, especially the luxury ones have fallen. I just read an article quoting Alan Cheong, a Singapore-based director at broker Savills Pls saying that prices in Sentosa island have fallen to the 2008 levels. 2008, if you remember was the year of mortgage crisis in USA and it affected many investors including Temasek of Singapore which lost billions in their investments overseas. If prices have fallen to 2008 levels, should it not start to rise again since this is likely the bottom?

Many have pointed at the Singapore government’s cooling measures as a key component for this. For example, the additional taxes for foreigners when they buy residential properties were raise to 15% and when this is included to the stamp duty rate of 3%, it meant that as soon as any foreigner buys, they ‘lost’ 18%. Selling within the first year incurs another 16 percent. Actually, is it due to just these measures? I think it is more than this. I think the main reason for this correction has to do much more with the actual pricing as well as the demand. When the prices went up way too much compared to the usual fundamentals, plus they were supported more by the foreign purchasers guess what happens when the tide turns? These foreigners can easily just sell and move elsewhere.

This can happen to many projects in Kuala Lumpur, Penang, Iskandar too. The only question is just time. Seriously, how many can continue to afford RM1 million condos or anything higher than RM1,000 psf? A view of KLCC and a small unit may mean RM1,600 psf. Prices for sea view luxury condos can hit RM1,200 – RM1,500 psf in Penang. Of course for Iskandar, it has started. 13.5% drop for 2014 compared to last year. Maybe because it is nearest to Sentosa, thus the sentiment is stronger. A friend just told me the other day about a potential RM700,000 property going to RM850,000 in 4 years. Total square feet of just 1,000. I told her I have no answer.  As the head of a family with a wife, a baby daughter and another new baby next April, I would not pay RM850,000 for a 1,000sf condo. No matter what the view may be. It’s just too small and I would rather buy slightly further away for a lower price and a bigger unit, plus a hill view or swimming pool view. Oh yeah, that’s why I did. Haha.

Remember, whatever the cooling measures may be, if sentiment remain to be bullish, cooling measures will only kick in after some time. This has happened. Thus, stay objective and think before you buy. Would you pay more in 4 years time? If you say Yes, then sure, please buy.

written on 7 Nov 2014

Next suggested article: ‘Severely unaffordable’, worst than Singapore, Japan and USA. US-based Demographia.

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