The speculators

Lately, I have found myself sucked into an old hobby: scanning property advertisements compulsively, circling those that sound promising and chasing down the leads.

I’m not a property speculator or investor. But I’ve been observing the property scene since the 1990s, and am always mildly infected when property fever hits town.

As an observer from the sidelines, I know the property speculators are back in action.

The action has also filtered down, from the top-end luxury condo market, to the mass market, and is now reaching the Housing Board resale market.

Over the past couple of weeks, I’ve rung up many agents about the units they have on offer. Three times last weekend, I rang to inquire about HDB units advertised, only to be told they were already snapped up the same day the ad appeared.

No wonder there’s a spring in the steps of nearly every property agent.

The mystery of property fever in Singapore has always been why a population with 90 per cent already owning a home, should be so obsessed with property.

There are many theories: that it’s an ‘Asian’ thing; it’s a ‘Chinese’ thing; it’s due to scarcity of land in Singapore.

My addition to these theories is that buying property is rather like gambling, another obsession with many Singaporeans.

You spot the right unit, you buy low, sell high - bingo, you make a big profit.

Many people who buy property never intend to live in it. Instead, they view property as a speculative instrument.

Who are these speculators? Here’s a completely unscientific snapshot, from stories of friends and friends of friends.

1. The speculator wannabe

This young executive joined others in the queue for a new development.

He couldn’t believe his luck when he got into the queue before units were sold out.

He maxxed out his credit cards to put down the option money for a condominium.

When the time came to put down the downpayment a few weeks later, he considered borrowing to pay up, but then got cold feet.

He lost several thousands in option money, but saved himself years of debt and worry.

2. Buy and hold

They spot properties with good value, make friends with the right agents and get invited to previews.

Their strategy is to buy and hold for a few years, for capital gains. Developments in districts 9, 10 and 11, and new hot spots like the financial district, are their choices.

3. The trader

A businessman bought into shophouses before they became hot properties and sold them for profit of a few million.

With a chronic shortage of office space in the Central Business District, savvy investors will be looking at how to maximise gains in that sector.

4. Consortium approach

They get together with a group of trusted friends to pool money and risks.

Property agents with the time and information to sniff out the best deals, may form their own consortiums with their friends.

Strategies may differ: from longer-term holds to shorter-term punts of a few properties a year.

They may buy iconic developments like Marina Bay Residences, banking on its rise in value in two years’ time when the integrated resorts open.

Another group may specialise in suburban 99-year-old condominiums, figuring there is still some upside in price in that segment.

5. Original is best

Some ’specuvestors’ look out for old landed homes in original condition which they can buy cheap.

Many buyers shun such properties as they don’t want to spend time and money renovating an old property. With a smaller potential market of buyers, the price of such properties is often lower than expected for a home in a particular location.

Smart agents tie up with architects, interior decorators and renovation contractors for good deals to rebuild homes. They buy an old place, refurbish it and sell it quickly for a profit.

In a rising market, they may hold the property and wait for prices to rise before letting it go.

A variation of this group are those who buy old condos they think have good potential for en bloc redevelopment.

6. The Johnny-come-lately

This group didn’t have the foresight to start hunting and accumulating assets last year, before the property boom really took off.

Better late than never, they reckon, and they want a piece of the property action before it’s too late. Their theory is that the market may be high now, but there’s still some upside potential in many areas.

The trick is to identify the ‘undervalued’ properties and make a bid for them, and then hope to sell them off a year or two later for a profit when the market climbs further.

The problem is that owners are fully aware of the bullish state of the market, and asking prices have accordingly soared. Many owners in fact are treating their properties like futures, asking prices they think the property can fetch a few months down the road, not today’s.

7. The armchair speculator

These are people like me, who follow the property market and spot trends they don’t act on.

Two years ago, I could have told anyone who asked that Newton/Novena was a good buy at about $800 psf. A year ago, I knew those old River Valley condos would rise in value. Alas, I never put my money where my hunches were.

Now? I think Bukit Timah is undervalued. Will I plonk down $1 million I don’t have on that bet?

It’s academic. Armchair speculators don’t actually like to risk their money on anything. They just like the satisfaction of saying: Mmm, I could have told you so.

Source: The Straits Times, 1 June 2007