A million dollar HDB flat. This is it people, the end is nigh. Those of you without flats, go buy a blanket; we’ll be sleeping in longkangs by Christmas. Seriously: The news reports have been filled with so much hot air, you could fly a Zeppelin if you chuck today’s papers under it. I’m not impressed by the media coverage, and I’m going to tell you something important: The only three things you need to know about that million dollar deal.
The Million Dollar Flat
An executive maisonette on Mei Ling Street (Queenstown) has sold for just over $1 million. That’s the highest price so far, beating the previous record of $900,000. The flat is a 1,614 sq. ft. unit (works out to around $620 per sq. ft.) and is just opposite the MRT station.
Both buyer and seller were Singaporean, much to the dismay of Stomp commenters (who’ve lost a perfect opportunity for an anti-foreigner rant). Reports on the sale have led to worries about rising resale flat prices.
Lesson 1: It Will Not Be the New Norm Any Time Soon
The people who paid $1 million for their flat are pure home buyers, in love with their flat. Their property agent specifically said it was “love at first sight” for them, and that they started on a high bid.
That isn’t the attitude of most Singaporeans. We don’t buy so high, because we want the value of our flat to rise far above its purchase price. We think of property as a cash cow, as a retirement plan, a hedge against inflation, etc. That’s the mentality that drives our housing market.
The buyers of this Queenstown aren’t on the same page. They’re not concerned whether their flat will be worth more than $1 million in a certain number of years (At least I hope not, because otherwise they have the financial acumen of a mushroom. But I’m sure they did their homework).
They simply liked the place and bought it, even if it meant a lack of profit. This sort of behaviour is not reflective of our housing market. Their purchase does not mean the average flat will cost $ 1 million any time soon. Inflation and overcrowding might take us there one day, but don’t hold your breath.
Incidentally, do you remember the Bishan Maisonette that sold for $900,000? The COV for that flat was $220,000, whereas the COV for this million dollar flat is just $195,000. This is not the most dramatic thing we’ve seen.
Lesson 2: Some Property “Analysts” Are Salesmen
Every time a flat sells for an abnormally high price, some property analysts will claim it reflects a new market norm.
Note that some of these interviewed analysts (no names here, Google their names from the paper) also sell property. They aren’t analysts as much as they are salesmen. And obviously, it’s in their interest to spin any existing news to encourage sales.
They’ll tell you million dollar flats will “soon” become typical. Interesting choice of word; I wonder what you’d do to your stock broker if he told you some stocks would be rising “Uhh…soon. No, I don’t even have tentative dates. That’s my detailed, expert analysis: Soon.”
“Soon” can mean next week, next year, or the next 10 years. It’s a weasel’s choice of word, and aimed at panicking the market. They want you to believe that you better buy now, or you’ll be priced out of the market.
Don’t fall for it.
Lesson 3: Our Media Often Inflates Property Stories
Yes, it’s interesting that someone paid more for their flat than Iran might for plutonium. But you can pretty much stop at that point, and realize the rest of the story is justification for a front page spread.
A high property price is interesting, but you know what makes it sensational? The fear that your flat will cost as much. The fingernail munching fright that your children will be sleeping on garbage bags. Now, that’s a story that’ll sell. So that’s the angle some news agencies will pick.
Don’t be panicked by this sort of fear-mongering. Your HDB flat is not going to cost a million dollars any time “soon”, and it’s not as if all flats are resale flats.
Speaking of media influence: Some property firms add fuel to the fire, aggressively marketing the myth of forever-rising prices. They publish books, launch websites, and conduct seminars, all of which are just veiled promotional efforts. When asked to comment on the news, some “analysts” interpret events in ways that pressure you to buy.
Be picky about the media you trust. Heed the ones that consult independent property investors, or real analysts (the people who sell nothing besides information).
So take a deep breath, and don’t get spooked by today’s news. If you want more commentaries and insights on property, follow us on Facebook; we do our best to keep it real. But if you’re still worried about property prices, you can check the current home loan rates on sites like MoneySmart.
What are your thoughts on the million dollar flat? Comment and let us know!
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