We would like to thank Mr John Lee for his detailed analysis of the “Future Uncertainties”, and of the impending hurricane, tsunami and assorted scarring of the world economy. Mr Lee paints a picture of a very gloomy outlook in the future, one dominated by a global recession which will affect all countries. Mr Lee is entitled to his strong beliefs about the pessimistic future, undoubtedly from his experiences in an investment company.
We find it strange, therefore, that a systematic search through various media sources including Asian Wall Street Journal, Financial Times, Business Times, New York Times, London Independent, plus 30 other news sources, in the past 6 months revealed only four articles that talked about a global recession (Straits Times 19 Aug 07, Australian Financial Review 4 Aug 07, Montreal Gazette 2 Apr 07 and New Straits Times 6 Mar 07). All 4 articles pointed out that a global recession is not forthcoming.
For example, just recently, Sunday Times reported that “experts polled by the Sunday Times do not believe the sub-prime crisis in the United States will lead to a global recession” (19 Aug 07). The Business Times (17 Aug 07) also argued that the domestic economic growth will not be dampened; it'll be driven by booming building and construction activities that are not going to halt. David Lum from Daiwa Institute of Research pointed out that the “building and construction driver is not going to slow down at all, and that driver is good for a few more years, not just this year”, contrary to Mr Lee’s forecast of a downturn in fairly soon.
Perhaps we should turn to another Lee for his views. Minister Mentor Lee, founding father of modern Singapore, over the weekend assured Singaporeans that the market nervousness will go away soon. He asserted that "whatever the troubles, they will go away in weeks, if not months. What we are absolutely sure of (about) East Asia is that it is set to grow. Nothing will change the long-term plans and growth of China and India, and the rest of Asia”. MM Lee also stated that Singapore’s future is secure, and that “economic growth is here to stay for the next 10, 15 years or more”.
Ultimately, whether you believe Mr Lee or MM Lee is up to your own beliefs about the future, your risk disposition and whether you simply need the cash now or not. If you take Mr Lee’s gloomy outlook, then by that logic, if the tsunami and hurricanes are at your doorstep, it would make sense to individually cash out your property investment now, as opposed to taking the riskier route of going for an en-bloc which can take anything from a year to two, without a guarantee of a sale until legal completion.
On the other hand, experts will tell you that in the face of volatile economies, the best thing to do, if you are not strapped for cash, is to wait and hold out. The land value of Botanic Gardens View will always appreciate in the short and long term future.
Furthermore, and importantly, if developers are becoming more cautious, then perhaps we may already be too late in maximising our land value. After all, the MD of Credo has reported that developers have “bought more than they ever intended” and will be slowing their purchases down (ChannelNewsAsia 18 Aug 07). Will we then expect to see the PSC lower the reserve price, to make it more ‘realistic’? Or to put this in another way, to ensure that the sale goes through, even though it may not be the true potential value of the land?
Whether you believe we’re too late or not, wouldn’t it be better to just wait and see what happens in this "increasingly unfavourable economic situation", rather than push for the sale and get a less than satisfactory sales proceed?
You can believe Mr Lee or MM Lee. But regardless of which side you take, common sense tells you that you are the owner of a unit in a land that will always be in demand, and that you can afford to be patient, rather than be persuaded by hurricanes, tsunamis and assorted disasters.
(For those owners who did not receive Mr Lee’s email, you can find it in the comments section.)
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6 comments:
Some of us received this email, which we are reproducing here, with various sensitive information removed.
Date: Fri, 17 Aug 2007
Subject: BGV Enbloc - Latest Status
From: John Lee
Dear Friends,
It is almost a fortnight since the Owners' Meeting of 5 Aug 2007. We have as of today just exceeded the 20%(or 30 units) who have signed the CSA. Tomorrow. Sat 18 Aug 07 from 1 to 2.30 pm will be another signing session at my office. We hope a lot more owners will come and sign the CSA tomorrow. Even if you are not ready to sign the CSA yet because you have some unanswered questions, do drop by the office and we will be present to answer some of the questions that you may have.
At the 5 August meeting, among other things, I spoke about the Future Uncertainties - the US Subprime (US$1 trillion problem), the Yen Carry Trade (US$4 trillion problem) and how this will seriously destabilize our world economy. We have witnessed right before our eyes for the past 2 weeks the unravelling of the US Subprime problems and the turmoil it had caused the international financial markets. The stock markets have been battered, the liquidity in the financial markets has vaporised and Central Banks in US, Europe and Japan have had to pump in Billions into their financial markets to preempt a meltdown in their credit market.
This is just the Subprime problem. The Yen carry trade is a more serious problem if it were to be blown up. If the Subprime is a hurricane, the Yen carry trade will be a tsunami. Quite fortuitously, our world financial system is matured and strong to weather the storm. Risks are evenly spread through the world system, and in this instance the Banks are not badly affected although some of them were culprits in packaging and selling their subprime CDOs to wealth managers around the world.
Still, this is a category 5 hurricane, and by the time it blows over in the next few weeks, it will leave a severe scar on the world economy. Almost surely, the US economy will go into negative growth, ie a recession, led by poor consumer sentiment and spending power. Almost surely, this will affect all countries(including China and Singapore) that export to the US. Recession in the US will be on the cards by Q3/Q4 2008 even if the Fed were to start cutting interest rate in September.
Inspite of all these problems,we can still be successful in our enbloc sale, but our window of opportunity is fast shrinking all the time. Singapore's economy will still be strong going into 2008, buoyed by the bullish construction sector. But going into 2009, the uncertainty in our export segment will be a cause of concern although the effervescent expectation of the completion of our 2 IR projects in 2010 will give us a sense of optimism. But once the IRs are completed, it could be an anti-climactic event.
The URA has reported that 42000 private residential properties will be built between 2007-2010. Out of these, 19500 units have been sold mainly on deferred payment scheme, i.e. purchaser pays only 10%-20% of the purchase price now and the balance upon completion of the properties. It remains to be seen how many of these purchasers will complete their purchases. The speculators will be badly burnt because of the weakened property market by the time their properties are completed.
We have read also about the MAS being concerned about the Singapore Banks making too much loans to the property sector. One newspaper reported that the property segment in banks' portfolio is at a record high of 47%. One can reasonably expect that banks will not have much more appetite for making loans to developers except to the best of their customers. If we are late going into the market, the developers may not have the credit lines available to aggressively bid for our property.
Finally, the Collective Sales Committee and CBRE have worked hard to optimize the value of our land. We have affirmed with the URA that our as built plot ratio is 1.8 and that we will be allowed to build up to that plot ratio instead of the 1.4 under the current master plan. The difference in the value of our land at our reserve price of $XXXX psf ppr is $XXXXXXXXX (at 1.8 plot ratio) and $XXXXXXXXX (at 1.4 plot ratio). We have enhanced the value of our land by $XXXXXXXXX.
However, if we are late in launching the enbloc sale and misses the market, then all these benefits will literally evaporate before our eyes. The URA has been very fair to us under the current set of rules, but this does not guarantee that the rules will not change in the future and our plot ratio will revert back to the 1.4 as shown in the current master plan.
Friends, the hope is always there that we will have 146 multi millionaires from Botanic Gardens View if our enbloc is successful. Let us not wait. Let us sign the CSA quickly and make this hope a reality. We do not have much time left because of the increasingly unfavourable economic situation. So please, come and sign the CSA tomorrow.
With best wishes,
John Lee
Using people's fear of the market crashing is just unethical and opportunistic. Keep your own beliefs about the future to yourself and don't try to scare people into signing.
Here's a prediction about the future - CBRE will increase the reserve price when they cannot achieve their 80% and the signature collection slowdown! They will say "price adjusted because market improved" when in fact they need the % to get the $ or they end up with a big fat 0! Wait and see!
by next year, almost $2billion funds fresh from the enblocs of farrer, leedon and grangeford, himiko etc will flood the equity + property + fund market.. plus together with the 2008 US elections and the 2008 bejing olympic games + the 2008 singapore first F1 night race, will push property market so high you wish you had a studio in the central region, nevermind the core central + sentosa..
If you have stocks in a volatile market, best thing to do is hold and see what happens when things stabilize. Same for our homes. Why sign when we don't know where the market will end up going?
Mine is just a simple argument: I want to continue living here!
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