Sunday 28 January 2024

Singapore Property Market Will Always Rise Fallacy And What Many Property Gurus Never Warn You.

It has been a very busy 2 weeks meeting up with clients and visiting project site. With age catching up on me, so does my energy level it seems and one gets tired very easily....haha. Today I am going to touch on the gravity defying crazy Singapore property market as I find it shocking that there are still many young couples rushing into the market and snapping up mass market condo Outside Core Region (“OCR”) for S$2Mil plus 3 bedder at 947sqft. Worst still, some are playing the buy 1 condo for (i) own stay and another 1 for (ii) investment game and heavily leveraged up. Do skip reading further if one is upset by this topic which is just me venting my personal thoughts.

1. Fallacy belief that in Singapore, prices of property will always shoot up and never drop due to “scarcity” of land.
Many people also believed that for Hong Kong with limited land space, its property price will keep going up. However, HK property price has already slumped to its lowest in 7 years with more than 20% decline since its peak of September 2021. Property market is cyclical in nature and all countries undergo boom and bust in terms of its economy-this is the natural rule of the universe. Nothing flourish perpetually- take a look at China which escaped the 2008 Global Financial Crisis relatively unscathed but currently facing a bear market for its 3rd year with rapidly worsening unemployment among its fresh university graduates.

Singapore property market has already been in a boom status for more than 14 years in particularly the recent run up in price created the impression that buying property is a sure way to generate lots of wealth in Singapore. Once the economy tanks and one gets retrenched or paycut, it can lead to the ultimate financial disaster of a life-time. 

2. Look at the Standard Terms and Conditions ("STC") of Borrowings instead of just the T&C inside the letter of offer from the banks for property financing.
Unless one is super rich, most middle-income folks are actually taking up banking bank loans of up to 75% of the property’s market value. For S$2Mil OCR private property, there are many folks taking up loans of S$1.5Mil which seems to be the current norm.

The interesting part here is that if the Singapore property market were to correct by 10% to 20% downwards in valuation, this will mean S$150K to S$300K diminution in property value. Theoretically speaking, this in itself will trigger the Security Margin breach clause and the bank can actually choose to request for immediate top up of the “deficit” or exercise its right to force sell one’s property at the worst possible market doldrum time. Many folks seemed to have missed this critical T&C which is stipulated in the "Standard Terms and Conditions Applicable to Banking Facilities" accompanying any letter of offer by the bankers.
Extract from DBS STC
So far, I have not seen any banks exercised this clause during crisis, but having it is like the Sword of Damocles hanging over one's head. Note that this is actually worse than buying stocks using margin financing as most folks are super over-leveraged when it comes to property which is perceived to be safer or carry the same risk as holding stocks but as you can see above, this is strictly just a fallacy- property purchase using 75% leverage is highly risky,  

Parting Thoughts
Housing to me is just for a roof over one's head. Buying into a property at the wrong time can lead to life-long financial ruin. Personally, I will diversify my investments into other asset classes rather than wholly going into holding on to multiple properties. Also not a fan of UK properties and those companies such as I Quadrant. For now, I hope that the musical chair continues and don't stop. Take care and good luck!

(P.S: Updated 29 Jan 2024- During the 1990s dark period of Asian Financial Crisis, apparently, Singapore banks did ask their client to top up cash or face foreclosure due to significant decline in property valuation- please see below comment for sharing by Bro Henry. I thought that this is a rather good reminder for folks to consider whether they have covered all areas in their own property financial purchase decision.) 


  1. Hi bro, how are you?
    Allow me to chip in. I was a property agent in the 90s. Had a lady who came to me asking for help. She bought a condo at $1M at.the peak. Then AFC striked thrn dot.con bubble burst. The valuation plunged and the highest offer she could get was $600K. The bank asked her to top up $200K in cash or run the risk of foreclosure. But she has no money to do so. She asked me to help her to sell it at $1M so that she could get out. No agent wanted to take it.
    I agree with the fallency you mentioned. I'm more worry about the baby boomes hitting 65YO and many would want to downgrade. For me, I don't even include my fully paid property in my networth. Sell already stay where? Lol. The day I cleared my loan, the weight on my shoulders dropped. Shiok

    1. Hi Bro Henry, I am good. Thanks for dropping by and sharing your interesting experiences during the Asian Financial Crisis ("AFC"). Trust all's well with you too.

      Wow, I did not know that the banks really did exercise the margin security clause breach and asked for top-up during that dark AFC period. S$200K top up request even in today's standard is a mammoth amount. I really wonder how a young couple can come up with that emergency amount if they have already took out everything they had to meet the 25% deposit for a new S$2Mil 3 bedder condo and if the market were to crash after that. I do have my own share of personal bad experience during the 2008 GFC where my property dropped in valuation of S$150K 3 months after the purchase. Luckily my banker did not ask for any top up then.

      Fully agree with your view that one should not include in one's live in property into one's net worth. Very well said..."sell already stay where"....whaha.

  2. Actually you have to factor in the policy changes made since the AFC. The TDSR & LTV limits are very prudent measures.
    You also have to consider that there has been many rounds of cooling measures to discourage property speculation. These acts as safe guards.

    But I agree with your notion. Property prices has jumped too high since covid. 30%? Its unavoidable that regression to mean will happen.

    Also, it boils down to volume. New higher prices everyday, but transaction volume has gone down.

    1. Hi Damn, good day to you. Yup, I hope for a smooth landing for our local property market instead of an external shock triggered deep recession throwing chaos and sudden plunge.