When is the right time to buy?

Perhaps the most frequently asked questions prospective buyers would ask agents or those in the real estate industry are

"Is it a good time to buy currently?" or,

"Will the market go even lower?" or,

"Everyone is not buying now so why do you think I should buy?"

Seriously, this is the most classic example of a buyer who does not know the market. To quote someone by the name of Warren Buffet, "Be greedy when others are fearful and fearful when others are greedy". In short, be a contrarian. Do exactly the opposite of what the general herd is doing.

As a general rule of thumb, I shall use data that is available to everyone. Many sceptics have told me that only real estate or investment professionals can make better investment decisions because they are in the market and have "special" tools to help them analyse the situation. Basically everyone is born equal and has access to the same tools out there. The most basic and common tool to use would be transaction records. EVERYONE has access to www.ura.gov.sg. Click on "Private Residential Property Transactions with Caveats Lodged" and all the data you need is there.

Simple rule of demand and supply. When demand is high, supply will not be able to sustain the demand and thus prices would be pushed higher.

Example:
Let's analyse landed property transactions in District 19 ie. Serangoon (We do so because district 19 and 20 have the largest transaction volume and thus the data would have lesser bias as the sample size is bigger than other districts. Statistics students would understand this, if you don't, just remember more transactions means better estimate.)

In January 2009, there were 26 transactions in District 19
In February 2009, there were 19 transactions in District 19

VERSUS

In August 2009, there were 75 transactions in District 19
In September 2009, there were 66 transactions in District 19

In January and February units were dirt cheap compared to today which is only 8 months away. A single storey terrace of 2200 square feet of land would cost $900,000 then. Today owners are selling similar properties for $1.4-$1.5 million. Yet in the early part of this year the market was dead quiet. Real estate agents were considering leving the industry, banks were frantically searching for loans to disperse. Today buyers are seen queueing overnight at showrooms, bankers and conveyancing lawers are up to their neck in deals.

My response to all this...

If I told you that when the transaction volume tapers off to what it was in January of February this year would you heed the advice to dip your hand into the market? 19 people did exactly the opposite of what the buyers in August and September 09 did. They got their houses at a 20% discount.

When the Singapore stock market was at an index level of 1200 many thought that it would go below 1000 points. Those same people are the ones who are getting in at todays level of 2600 points.

When Citigroup was going for USD$1 volume was very thin. Today at USD$4 Citigroup is trading at 4-5 times that thin volume.

Trust me, when volume and prices are low, many will not buy. That's when you become a contrarian.

p.s. In October 2009, there were 20 transactions in District 19 (Recorded as of 6th November 2009)