How far can pigs fly?
On 17 October 2015, National Development Minister Lawrence Wong told the press that it is still not time yet to unwind the cooling measures. Price adjustments so far have been moderate compared to the increase in prices over the past few years.
Price corrections are moderate
So how "moderate" are price adjustments? Have price corrections been "meaningful" so far?
According to the Urban Redevelopment Authority (URA), the Property Price Index (PPI) for private residential properties have fallen almost eight percent from their peak of 154 (based on rebased PPI) in the third quarter of 2013 to 142.3 in Q3 this year.
However, based on the last bottom of 95.3 (based on rebased PPI) in Q2 2009, prices of private residential properties have jumped 62 percent. As of Q3 2015, prices are still 49 percent above the second quarter of 2009.
The conclusion is: price adjustments for the past two years are still "moderate" compared with the hike in property prices over the last few years.
Cooling measures are here to stay
There is a predictable request-response pattern here: A spokesperson from a stakeholder in the property industry comments that it's time the government relaxed property cooling measures before it's too late. This will be followed by a Minister's reply through the press that it is still early to consider removing any property buying restrictions.
The message from the government is very clear: The cooling measures are here to stay - not before or after the election; not when the economy slows down; not until prices have achieved a "meaningful correction".
When the wind changes direction
Yes, the worst has yet to come. The Total Debt Servicing Ratio (TDSR) framework and Additional Buyer's Stamp Duty (ABSD) are only the tip of the iceberg. The property industry is facing other challenges like a supply glut and soft rental market. It is also constantly under the threat of interest rate hikes and another economic crisis.
Buying properties is like sailing in the open waters. When the wind and waves are in your favour, it doesn't matter what you buy, everyone makes money. It is such a no-brainer that it is almost impossible to lose money when you buy a property and sell it when prices are on the way up.
The trend is your friend, until it stabs you in the back.
Once the wind changes direction, you try your best to stay afloat when in fact you can't even control where the waves will carry you to.
Fancy thinking that prices can only go higher and the market will never collapse. If the wind forever blows in the same direction, pigs can fly.
Alibaba's founder Jack Ma once said, "First of all, a pig can fly in the wind, but when that wind dies down it's the pig who's going to fall to his death. Because he's still a pig. What everyone has to think about is how to control the wind, how to grasp that wind and push yourself up. I think we shouldn't seek the next strong wind; we should make ourselves into people that can fly at even the slightest breeze, people who can soar."
Successful investors are measured in a bear market
Allow me to conclude by quoting my book No B.S. Guide to Property Investment:
John Templeton said, "The most successful investors are defined by their actions in a bear market, not a bull market." Likewise, the success of property investors is not measured by how well they do when times are good, but how they perform when times are bad.
It is only through years' of experience, the lessons of others, or the losses you made that one day you finally come to realise that buying a property doesn't necessarily guarantee a profit at the end; that buying a property and investing in a profitable one are two separate things; that speculators and professional investors are two different species.
If there is a probability formula of finding a good deal, it may come one-third from the buyer's insight, another one-third from the buyer's discipline (hard work, patience, persistence, etc.), and the last one-third depending on market conditions and opportunities.
And of course, buying the right property at the right time makes all the difference here.