This EC TOPed During The Global Financial Crisis. Did The Buyers Lose Money?
May 7, 2020
Ever since the coronavirus was first discovered in late 2019, it has since went on to create a phenomenal impact on the world. It has affected the global economy in so many ways – travel, trade, brick and mortar businesses and has caused stock markets to plunge to record lows.
This is truly a black swan event – defined as an event that is extremely rare and has impact beyond normal expectations. While it may bring about adverse consequences, it also results in incredible opportunities for the discerning investor.
Amidst the flurry of efforts to contain the virus epidemic, one question that we have been asked, and a very important question nonetheless, is:
“What is the impact of covid on the property market?”
THE PREVIOUS BLACK SWAN
There are multiple perspectives on how long the covid impact will last, and depending on who you speak with, it could take anything from the next 6 months to 1 year before the economy could recover.
However, there are countries all over the world that have begun to reopen.
In China, the property market begun rising as early as March this year, barely a few months after the outbreak first occured.
We can’t predict the future, and we’re not going to offer any prediction at this point.
Instead of simply speculating, what we could choose to do is to look back at the earlier black swan event that most closely resembles (but not entirely similar) today’s state of affairs – the 2008 Global Financial Crisis.
AN EC THAT TOPed DURING THE GLOBAL FINANCIAL CRISIS
Since we are analysing Executive Condominiums, we’ve selected an ideal candidate for our topic on hand.
There was an EC which TOPed during the Global Financial Crisis.
(We’ll reveal the name of this EC in a bit.)
Without the benefit of hindsight, going by pure market sentiment, with markets crashing everywhere, buyers who bought in during the Financial Crisis should have lost money right?
How else could it have panned out?
With stock markets plunging, does anyone really expect the prices of this EC to pick up?
In the same way that the stability of current markets today are threatened by the impact of covid, buyers today are put off from making any kind of foray into the property market.
It is the exact same sentiment today as anyone would have had in 2008, gazing at the colossal fallout of markets everywhere.
“Markets are crashing. It’s not the right time to enter.”
What do you think? Should prices move up or down from 2008?
THE REVEAL: PRICES WENT UP.
From 2008, prices took a slight dip (with an outlier data point) but proceeded to grow from there.
Looking at the chart, if you were pondering about this question, there is no doubt about the answer – buyers DID NOT lose money.
Let’s be a bit more specific. Prices didn’t just grow from 2008 – it grew by at least 49% till a peak in end 2014.
PROFITABLE TRANSACTIONS (AND NOT SO PROFITABLE ONES!)
Here we want to share with you some actual price data.
The address of each unit has been masked for privacy, but you can see the transaction date and profit.
Buyers who bought in 2008 earned 6-figures in profit, from $100,000 to $300,000.
In fact, the highest profit was a staggering $556,640, from a buyer who bought in Feb 2006, an effect of the first mover advantage, something we’ll talk about in a different article.
Till date, there has been as many as 270 profitable transactions.
Does it mean no buyers lost money?
We want to provide you with as fair a dissection as we can, and show you the unprofitable transactions as well.
To show you only the profitable transactions would not be a fair discussion.
There were a total of 22 unprofitable transactions, just 8% of the 270 profitable transactions.
The amount of “loss” experienced by the buyers ranged from $34,000 to $138,000.
But here’s something to pay attention to.
ALL of the unprofitable transactions came after the Financial Crisis, and were purchased from 2013 to 2015.
Does it mean that it’s not a good idea to buy later into the lifespan of an EC? Well, not necessarily, but prices do tend to stagnant after a while.
(Contact us for more information on this)
THE BIGGER REVEAL – THIS EC IS LA CASA
This EC that we have been dissecting so far is La Casa.
La Casa TOPed in early 2008 and is located in Woodlands, a little bit of walking distance from Admiralty and Woodlands MRT Stations.
BUY DURING OR AFTER A CRISIS?
Looking at the price data of La Casa, it is clear that:
- Buyers who bought during the 2008 Financial Crisis earned money
- Buyers who bought after the 2008 Financial Crisis lost money
Is this result surprising to you? Why or why not?
If you were back in 2008 experiencing the Global Financial Crisis, would you have bought into the EC?
If you have been pondering about making an investment into property, speak with us. We can arrange for a personalised analysis specific to your needs and current property ownership.