As we cross the second half of 2022, our government has unveiled several new GLS sites, that will lead to the resurfacing of en bloc activities. That being said, how will the release of land sales and its correlation with developers and their land banks affect the future of property prices? In today’s episode of Nuggets On The Go Melvin Lim from PropertyLimBrothers will also share some interesting records of the trends of sellers and their properties over the years.
1 [Melvin Lim]
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– Okay, great.
2 [Melvin Lim]
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HAHAHAHAHAHAHA
3 [Melvin Lim]
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It happened once before with Faruuq
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after like 20 minutes.
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HAHAHAHAHAHAHA
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HAHAHAHAHAHAHA
7 [Melvin Lim]
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Okay, let’s continue.
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All right, welcome back to Nuggets On The Go.
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Today we’re going to talk about en bloc,
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as well as developers saying
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that prices will rise further in 2022, towards 2023.
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Let’s go.
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All right, so you have been seeing a lot
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of different kinds of news.
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Let me just flash some of the news
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that has been happening recently.
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So, you have a couple of GLSes that has been released
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by our government, seven new sites
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unveiled in the second half of this year,
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and later we’re going to chat more about that.
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Most importantly is that we want to look
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at all these en bloc news that have been happening.
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For example, you have Lakeside Apartments
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successfully being en bloc.
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Kensington Park, launching their en bloc.
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Thompson View up for collective sale.
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Golden Mile has been successfully sold.
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New launches doing very well,
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for Piccadilly, as well as LIV@MB.
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If you were to look at this news here,
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Jansen Mansions at Kovan, third attempt,
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Euro-Asia Apartments up for en bloc sale attempt as well.
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And of course on the ground, we’re seeing a lot
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of activities being picked up by projects attempting
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en bloc in the second half of this year.
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So looking back at this article,
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seven sites are being unveiled
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in the second half of the GLS program.
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Okay, so we have a combination of the confirmed list
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as well as the reserve list,
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but let’s have a look at the confirmed list.
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And what does this mean for everybody?
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So in the first place,
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why do our government want to announce
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new sites under the GLS scheme?
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This is a very clear indicator
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because our government, of course,
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they are very prudent, in terms of timing
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when should they release new land
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in order not to overflood the market with brand new supply,
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as well as to ensure that the market is not overheated
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because of a lot of pent-up demand.
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So our government’s job is to ensure
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that in terms of supply and demand,
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it’s very well balanced,
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so that we don’t overkill the market with too much supply.
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And we also don’t allow prices to run up too quickly
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because of a lack of supply.
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Controlling of government land sales is extremely important.
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This is one of the clear signals
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that developers’ land bank is drying up.
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And if you were to come back to this chart again
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that we have shown everybody.
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This is basically what is happening right now
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because developers are running out of land.
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Why they are running out of land, it’s
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because they will be handing over a lot
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of projects hitting TOP in the next two to three years.
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When projects are being handed over,
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they need to top up their land bank.
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If you’ve seen this chart that we’ve released before,
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these two years are the period that a lot
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of land banks are being depleted.
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2022 basically, I’m not sure whether
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if this is actually happening now,
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but on the ground, I think more or less,
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this is already happening.
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So, resale prices inch up,
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resale home sellers are asking for future prices.
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So if you’re hunting for properties
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via the property portals,
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you’ll see that a lot of the asking prices
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have already moved up.
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So when this happens, when you look at the particular project
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and you look at a transacted caveat prices,
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vis-à-vis what is the asking price on property portals.
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You’ll see that there’s like a huge gap happening.
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And this happens because existing home sellers
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will have this fear that they will have nothing to buy,
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or they are not sure what to buy,
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or because prices are all going up everywhere else,
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they also want to raise their current asking prices.
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And we are talking typically about a few types
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of very hot favourite properties.
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Namely 3-bedders, 4-bedders
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and namely a lot of these properties belong to
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the quantum play properties.
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Meaning, if you are talking about
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mass market in the OCR region,
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properties below $2 mil are extreme hot favourite.
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If you go to RCR properties
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in the range of $2.5 mil are hot favourites.
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If you go to CCR of course, properties in the range
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of $2 mil to $4 mil are moving very well as well.
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So when you come back to this chart,
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what might possibly happen is that by 2023,
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new launches will hit new benchmark PSF.
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Resale will continue to move again
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because resale will then act
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as an alternative option,
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compared to new launches, very high PSF level.
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A lot of buyers might then fall back on resale properties
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because of a lower quantum, because of a lower PSF.
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And in the year 2024, resale will then start
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to look very far apart from new launch PSF.
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Recently, in one of our seminars,
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we talk about this chart as well
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and I want to bring it to your attention.
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So this chart shows the movement and growth rate
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of brand new launches PSF, from 2019 to date,
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vis-à-vis resale growth rate from 2019 until Q2 of 2022.
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So in terms of the percentage growth,
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new launches have grown by 26%,
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resale has grown by 5%.
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And what does this mean
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is that if you look back in the year 2020,
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their difference apart is only about ~10%,
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but right now it’s close
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to about 21% growth rate difference.
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This might present an opportunity for resale to move up
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in order to reach back an equilibrium,
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in terms of their core differences, in terms of growth rate.
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Because what we can deduce from this graph is
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that new launch PSF might have grown too quickly
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over the past three years.
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And now it’s time for resale to catch up.
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Of course, you will then come back and look at
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articles like this because we also reviewied
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one of the latest news articles that popped up
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on some of the very popular mediums.
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Talking about a property market sentiment survey
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that was being done,
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and a lot of developers are forecasting
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that because of inflation of construction prices,
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manpower labour crunch, materials crunch,
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new launches PSF are going to be more
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and more expensive in the near future.
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Do we agree with that?
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And by the end of the article, we do agree with that as well
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because of the fact of a lot of inflation push factors,
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$PSF level of brand new launches will definitely
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see a new high, challenging a new benchmark.
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Our article actually states,
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when are all these going to end?
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Because with prices of resale moving up
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over the past two-and-a-half years,
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new launches also moved up
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over the past two-and-a-half years,
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landed properties also moved up, rental rates also moved up,
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and then before we can even take a breather,
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now en bloc season came back,
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even though interest rates are set to rise,
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but it seems like everything else is
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going to jack up once again.
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So let’s have a look at the current balance launches.
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Most of the launches have already reached its 70% clearance mark.
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And that will also mean
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that developers will be more confident not to lower prices.
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Developers will also be more confident
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to raise prices as well,
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because they’re already at the tail end
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with balance units on the table,
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there’s no need for them to sell the properties
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at a discount level.
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So in terms of the balanced new launches from 2020 and 2021,
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we’re not going to see a drop in pricing.
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In terms of the brand new ones
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that are going to come up at the second half
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of next year, we’re going to see a raise in benchmark prices.
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So I think all of us will need to brace ourselves
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and of course get used to the fact
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that everything is touching $2,000 PSF.
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But that will also mean that a disparity will start
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to occur among the resale market.
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Resale market right now, in our personal opinion,
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is one of the best times to go in.
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Because, if somebody would to still try to continue to time the market,
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existing resale sellers, once they have
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the motivation to move and they head out
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and see that new launches are already at $2,000 PSF
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and above, and all other resale properties,
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other resale sellers are also asking at future prices,
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they themselves will want to ask for future prices as well.
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So of course right now, if there’s a quantum play available
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for larger units, 3-, 4-bedders,
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then we’ll suggest that as far as you can,
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try not to time the market.
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Now let’s have a look at the performance
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if we were to track back further over the past seven years.
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So from 2015 until today, in the past seven years
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the average price growth rate of new launch
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private condominiums and apartments has been at 51%.
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And average price growth rate of resale properties
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over the past seven years is at 17%.
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So here, as we track back even further
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because the first graph that we’ve shown you just now,
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the one over here, it’s only a three years calculation.
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But if we were to stretch back to seven years,
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we can even see a faster growth rate
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in terms of new launch at 51%, vis-à-vis 17%.
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So these two years are pretty crucial for resale properties.
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It might be set to rise
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and if you’re hunting for resale,
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we think that you should go ahead
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and head in right now.
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So right now for the second part of this
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Nuggets On The Go, we want to talk about
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some of the interesting charts that we have charted
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over the past two weeks.
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The amount of BTO flats are reaching MOP
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over the next three years, is set to drop.
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The highest amount is actually 31,000, which is this year.
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And if you look at entirety of all the MOP properties,
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this is the exhaustive list.
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If you come back to 2023 and 2024, there’s going to be a dip
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in the amount of MOP flats that are available in the market.
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Actually, what does this mean
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for the private property market?
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So what does this chart tells us?
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Basically, this chart tells us
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how many BTO flats are going to reach MOP.
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Why do people always want to monitor these numbers
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year after year?
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It’s because MOP property owners have the highest amount
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of motivation to exit from their BTO flat
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that hit their five years mark. Because of the fact
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that most BTO flats will see a very healthy paper gain
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after staying there for five years.
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This will mean that these are also the families
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with the most locked-up profit sitting under
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their HDB properties, and they’re usually the group
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that has the capacity to upgrade to private properties.
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So, seeing a dip like this
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technically also doesn’t mean a lot of things,
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because not all owners that are living in BTO flats
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will want to sell their properties
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at the fifth years mark.
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Sometime s they sell it at its six years mark,
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seven year mark, eight, or even 10 to 15 years mark.
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And a lot of the owners that hit their MOP
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from 2015 until 2022, they are still staying
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in their BTO properties and there’s no data
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to track how many people actually exited
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from their BTO properties.
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But on the cumulative fashion, year-on-year,
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if there’s 10,000+, 20,000 or 30,000 families
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hitting their MOP status,
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this presents itself more kinetic energy
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because there are more people with paper gains
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that are still living in their MOP properties
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that might exit and sell,
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and move out to private properties in future.
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If you were to look at this,
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also a very interesting updated chart
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is that, as income levels move up
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on a combined income per family level,
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as it moves up to 10K,
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12K and 14K,
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these income category of families are moving away
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from their existing HDB properties.
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So meaning that the higher income that a family goes to,
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the more motivation that they have
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to sell off their HDB properties,
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to move up to private properties.
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And another very interesting chart that we’ve found out
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is that some of us might be worried that,
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“Hey, when interest rate rises,
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will a lot of people dump their properties?”
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Technically speaking, if we look at what is happening
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in the market right now,
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whether a family owns one or two properties,
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because of the fact that rental rates have increased
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over the past two years,
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even if they’re holding onto a second investment property
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they can easily rent it out.
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And the rental right now, some of them can even
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cover the money mortgage and money instalment.
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Another supporting data that
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there’s simply no reason for people to fire sale
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their existing property is that
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the average net cash, versus the debt per household,
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has increased over the past two years.
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So if you see, there was a sharp rise
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from 2017, 2018, until today.
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And the sharpest rise was from 2019 until 2020,
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from 123 index points, all the way to 173 index points.
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That means there was a rise in terms
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of net cash per household versus their debt level.
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This will mean that they have higher holding power
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of their existing property.
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And there’s no reason why existing families
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with properties have to sell their properties
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and fire sale them into the resale market.
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One more chart is that we also noticed
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that the mortgage data shows that more
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and more people are buying their properties for own stay.
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Now, the grey bar here,
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you see a drop in people buying properties for investment.
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The drop is very minute from 2019 to 2020
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with like a 2% drop and a 2% rise in the amount
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of people buying their property for own stay reasons.
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This actually shows that the more people buying properties
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for own stay reasons, the less motivation
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and the less occurrence that they have
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to dump their properties in the market,
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through a recession, or maybe through certain kind of event.
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Because of the fact that when you live in the property,
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maybe your kids are studying within
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1km or 2km,
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There’s no reason for you to fire sale your property.
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And most families in Singapore,
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they are dual income families.
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And thus, holding onto their first property,
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that is an owner-occupied property,
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has a lot of motivation for them to continue holding it.
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And there’s no reason why they need to
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sell off their properties cheap in the market,
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should there be a rise in interest rate.
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And further on, a lot of families that are buying properties
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or have bought properties for own stay reasons,
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have chosen to have fixed rates instead of floating rates.
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Because most of the time, families going for floating rates
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are usually people that got into new launches,
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and for new launches they only have
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floating rates to choose from.
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But people that are buying properties
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for resale reasons, or after their new launch hits
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their TOP date, they will usually convert
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to fixed rate packages to lock in the rates
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for the next two to three years.
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Jarring all these reasons together,
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coupled with the latest charts that we found,
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and coupled with the first part
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of this Nuggets On The Go that we share with you
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on en bloc coming back,
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as well as Government Land Sales,
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as well as developers expecting prices to raise further.
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We think that in summary if you look at
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the growth rate of resale
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versus new launches, firstly 2022 to 2023,
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hunt for resale aggressively,
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if you are already in market looking
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for resale property, if not, then of course you have to
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brace yourself for $2,000 PSF upwards
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for all new launches coming on stream
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for the next 6 to 12 months.
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All right, so we have come to the end
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of our Nuggets On The Go episode.
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Thank you for staying tuned with us and
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email [email protected] to get a copy of the
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10 charts mentioned in this episode.
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00:14:00,960 –> 00:14:03,000
We hope that this particular episode
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will add value to you.
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We’ll see you on the next one. In the meantime, take care.
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