Monday, January 31, 2011

To pay $1.2 million to stay in Sembawang?

On Sunday, I went to the show flat of Canberra Residences in Sembawang. As usual, two agents from ERA and CBRE were fighting to serve me. What has this world come to? Hasn't the property agents earned enough for the past two years? Is time really so bad that they must fight for their potential customer?

The scene above is not the point. The point is already stated in the title. How much do you think you are willing to pay to stay in an underdeveloped estate like Sembawang? The word underdeveloped is the word the agent used.

Here are the prices of a two bedroom, three bedroom and four bedroom units.
A two bedroom unit costs $730,000 to $760,000.
A three bedroom unit costs somewhere between $950,000 to $1 million.
A four bedroom unit costs about $1.4 million.

The agent claims that his company has analysts who did research and said that the units in Canberra Residences can reach $1000 per square feet in 5 years time. The current psf price is already close to $900. To me, Canberra Residences is overvalued by many, many times. So I asked the agent some questions an investor would ask. One of the questions I asked is, "In 1996, the property agents were saying the same thing. People lost their mind, grabbing any properties they get hold of. So what are their returns like?"

In 1996, properties everywhere were at record prices. After 14 years, that is 2010, their current price is still lower than the price they paid for then. the returns are actually negative. The current property market has reached the crazy 1996. I hope you readers can feel it too. I feel that this property market is worse than the stock market in 2008, just before the crash.

Back to the property in Sembawang area, have you checked the prices of neighboring properties like Seletaris (Freehold), Yishun Emerald and Yishun Sapphire (99 years)? You will be surprised that with the same amount of money, you can actually buy two properties in the same neighbourhood. By the way, Canberra Residences is a 99 year project.

So Canberra Residences will not be in my watch list unless the price has dropped to a more reasonable one. You may want to put it in your watch list or you may not want to. The choice is yours.

I will not know how will the prices of the properties go, but I do know that this project is definitely over valued. Look around for undervalued ones. Now do your homework and stop listening to the analysts/agents. Trust your own instinct.


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