I have personally found the articles by the author insightful and straight to the point. The decision to pick up this book as a holiday read did not disappoint me and I would like to share some key messages in the book.
1. Ageing Population and the Housing Market
The book started off analysing the changing demographic of Singapore over the next 15 years. In particular, the ageing population and increasing death rate coupled with the inadequate replacement by new families will cause adjustments to the housing market. The segment of the market which will likely bear the brunt of the shift in demand will likely be HDB as the future demand for resale HDB flats will be increasingly insufficient to absorb the escalating resale supply caused by death of baby boomers. This is in a large part caused by children of the deceased not being able to inherit the HDB due to various restriction on public housing such as not allowing to hold 2 HDBs and also by the fact that home ownership in Singapore is already at 90% while 80% of Singapore households live in HDB flats. Hence, it is highly probable that children of baby boomer generation are already owners of HDB flats.
In short, assuming there is no major change in public housing policy, there is likely to be a net supply of HDB flats in Singapore over the next 15 years which will exert downward pricing pressure to HDB. The above will be more apparent if the HDB has no special attributes such as being an iconic project (e.g. Pinnacle at Duxton) or located within mature estate (typically within 3 MRT stops from town). From a housing policy perspective, I think the increasing commoditisation of public housing is a right step to ensure all Singaporeans have an opportunity to own a home.
2. From Scarcity Comes Bargaining Power
In Chapter 12, the author analyses the real estate market in 2016 whereby the overall residential index turned out surprisingly resilient, dropping 3% compared to their forecast of 8-10%. However, as the author dives deeper into the details, he actually noted a development of a two-tier market.
On one hand, there are HDB flats with special attributes as mentioned above, transacted at above $900,000 and projects which have gone quiet for more than a year starting to selling briskly when developers offered discounts and attractive payment schemes (e.g. deferred payment scheme at OUE Twin Peaks). On the other hand, according to research by The Edge Property, the proportion of unprofitable deals rose from 10% in 2015 to 17% in 2016 while resale value in less desirable location of Singapore (e.g. Choa Chu Kang, Jurong West, Punggol, Sengkang and Woodlands) all dropped significantly from 2012 as more families are able to sell their HDB after the 5-year Minimum Occupation Period (“MOP”).
In Mandarin, the term is called 物以稀为贵。The author further show a breakdown on new HDBs crossing five-year MOP and number of new additional ECs crossing five-year MOP from 2017 to 2021 which will be on a general upward trend. These properties are the result of the massive ramp-up in residential development post-Lehman (as mentioned by the author) and also in my view due to the government policy to increase the supply of public housing (both HDB and EC) following the “feedback” from the 2011 General Election.
To summarise, for buyers who buy their real estate with a view on investment should consider the near-term increase in supply in areas such as Punggol will result in elevated pricing pressure especially for HDB where more flats reach their MOP over the next 5 years. This will be good news for buyers of resale flats in the area while for existing owners could consider upgrading to a HDB in a mature estate or a EC/Condominium in a non-mature estate as the supply for these real estate class are relatively limited.
The books have other interesting titbits such as raising pertinent questions on a bullish report published by a leading global institution titled Property Prices Inflecting and On Track to Double by 2030, as well as the impact on disruptions on office and retail sectors.
The author’s ability to make reference to hard data in analysing the property market allow readers to stay grounded and clear on why they make the property investment decision amidst the recent exuberance in the real estate market. Personally, my biggest takeaway from this book has been highlighted in the 2 sections above and which will help me better able to distill the noises in the property market as well as focusing on potential investments in healthcare companies with good fundamentals as the demographics of Singapore shifts over the next 15 years. A good read and definitely worth your time and cents.