History always repeats itself, just remember this old adage.
In the 1990s, Singapore property market went through the same cycle as it is now. The market went frenzy as many plunged in blindly, speculating with their life savings. The property developers were capitalising on the greed of speculators and kept pushing the land prices up as to create the impression the prices would be on the upward trend for some time. Through this artificial price mechanism, they created the price were unlikely to drop.
These developers also benefitted from the land banks they have bought previously as the value has now appreciated. Even after the Government introduced a series of anti-speculation measures, it has insignificant impact on the property prices. Mortage interest rates are low, this allows more people to hold on to their investments.
Although the number of transactions went down, developers choose to absorb stamp duties, legal fees rather than revising the price of the property significantly downwards while continuing to put in ambitious bids for new plots of land. The developers hope by keeping the bid prices high, they can continue to prop up the prices of the property. Potential buyers might have the impression that prices were unlikely to fall. This strategy works very well for period while the game evolved into a cat and mouse game eventually. Each camp is just waiting for the other to cave in.
Does everything sounds familiar? The execution of the strategy of "besieging Wei" ( pushing the prices of new lands) to "save Zhao" (prevent downward correction of property prices) work to the advantage of developers. If you are a smart buyer, I'd suggest you run before it's too late. I really can't see how the young can afford the "affordable" housing in Singapore.
By : Jared Ng
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