TalkNoAction has a view on the condo rush phenomenon in Singapore, from Sammyboy's kopitiam:
Everytime the crowd appears in show rooms, it is precisely the wrong price and time to buy. Yet history repeats, every few years, the phenomena occurs. No doubt the latest condo rush, the herd of buyers are lambs to the slaughter. The slick marketing, the beautiful enticing ads, lures them in like suckers. In a few months time, the bubble bursts, the realisation will come slowly, and happiness will turn to regrets.....
If you think it is "good time" to buy thinking, the economy is bouyant... think again, CAREFULLY, do your sums:
1. You notice every property peak occurs when there are many condo launches. This is the time developers want make use of the "feel good" factor to clear stock before the economy slides again.
2. The financial erosion built into 99 year leases hasn't yet been appreciated. Why? Many of the 99 year leases started about 10 years ago, a minority were earlier (e.g. Mandarin Gardens), but those were pre-property price escalation period. If you look at they property bought in 1996 peak, we see a depreciation of 30-40% just on price. Not to mention the cut-throat amounts paid to banks as interest, opportunity costs(if you leave your money in CPF, over 8 years it would have gone up by 30+%). The lease as it get used up faces downward pressure every year. After 10 years, potential buyers would ask how much it is worth after 5 more years when it has only 85 years left. By the time you finish paying in 15-25 years time, the total you paid to would be 150%-180% of the property price because of bank interest. After 20 years, the lease only has 80 years left, how much do you think it will be worth?
3. Remember if you go bankrupt the bank can sieze your condo but not your flat. So think twice before committing.
4. Freehold properties don't suffer from the value erosion, but they are priced higher. For the same property, whether freehold or 99yrs, the rental is the same. By paying higher price, the yield would be lower for freehold, currently it is 2.5%. Not even enough to cover your interest payment. Between a freehold and 99 years choose a freehold. But remember it is a "better" investment BUT not a GOOD investment. HDB is best & buy to stay.
5. Some people are rushing because they think prices will be even higher a few months from now. In that case, the condo developers must be fools, to dump so many units now when they can hold for higher prices.
Every economic cycle, the silly-ness repeats, you think people will one day learn, but they almost never. The property trap is a poverty trap, one mis-step and you spend the next 15 years fixing it. Don't ever think it is ever safe just to do what others are doing it, or that the smiling property agents are selling you dream homes, or the banks that gives you that loan is helping you to secure a solid investment. Think and use your head. Don't be seduced by the beautiful colors of the show room flat, the nice marketing video and the soft gentle music they play. All this is to soothe your brain so you will buy something you don't need. Just like the show flat with the trick of mirrors and interior decor that you can ill afford, they are selling you an illusion not a dream home.