THE REALITY OF PROPERTY CYCLE

ECCLESIASTES 1: 5 -7 :-

“The Sun Rises and the Sun Sets; And hastening to its place it rises there again. Blowing  toward the south, Then turning toward the north, The wind continues swirling along; and on its Circular  courses the wind returns. All the rivers flow into the sea, Yet the sea is not full. To the place where the rivers flow, There they flow again.”

By observation King Solomon points out 3 cyclical things in Nature.

No.1) DAY & NIGHT CYCLE

The Sun Rises and The Sun Sets. Every 24 hour period the earth rotate One Cycle on its own  axis.  12 hours day and 12 hours night. One cycle round the Sun takes 365 days – or 12 calendar months.

No.2) THE WIND CYCLE

Blowing toward the south, Then turning toward the north, The wind continues swirling along (The North-east monsoon blows from November to March. Fishermen from Kelantan, Trengganu & Pahang will not go out to the South China Sea due to its high waves and strong wind at this time of the year. Same for Desaru Beach, it is not safe to swim at this time.

No.3) THE WATER CYCLE

All the rivers flow  into the Sea. Evaporates into cloud, carry by wind back inland and fall as rain on hillslope. The cycle repeats for thousands of years.

Just as there are  CYCLES  In  NATURE, there are Also  CYCLES  in BUSINESS ACTIVITIES, CYCLES In  Share  Market  Rising & Falling & CYCLES IN PROPERTY  BOOM & PROPERTY BUST  PERIOD.

So As An Investor It is Very Crucial to UNDERSTAND  THE CYCLES OF EACH BUSINESS, EACH SECTOR, EACH STATE, EACH COUNTRY IN THE WORLD.

Since the earth’s surface is positioned unevenly at the north & south pole the weather at the 2 poles perform differently. While the 2 poles  experience the 4 seasons of spring, summer, autumn & winter, the lands near the equator only experience perpetual summer. Only 2 seasons – wet or dry.

For winter, businesses that sell winter clothes, coal or firewood,  mountain  resort that provide skiing come to life. You see business is seasonal –  good only in winter.

Nearer home we can think of the durian sellers (twice a year sales), the mooncake maker (business is good only during the mooncake festival). The cycle of demand Only Comes Back about the same time every year.

However, some businesses Never Comes Back. At the turn of the last century people were using horses and carriages. The industries that blindly expanded into the manufacture of horse shoes & horse whips will be in deep trouble.

With the advent of cars & motorbikes  demand for horse shoes & whips vaporized. Becareful not to invest in any Sunset industries.

There is also A Class of Non-Cyclical Businesses.  Food for example. And water utility companies. No matter how bad times are, we still need to drink, wash our clothes, wash our cars and take a bath.

SINGAPORE PROPERTY BOOM TIME 1993 – 1997

In 1993 people queue for days and nights at the launch of PARC OASIS  in Jurong, Singapore. The Property Craze  was on fire  and  those who queued earlier sold their queue numbers for a handsome profit of up to 30,000 Sing dollars.  Similarly there was a Property Boom in Johor.

At Bandar Sri Alam Apartments facing the OCKVILLE GOLF  Course was  advertised  in CENTERFOLD Singapore Newspapers. The Picturesque View of the wide expanse of rolling golf course from Amansari Condo was simply irresistible. Launches after launches were SOLD OUT. Developements sprout up everywhere in Johor.

JOHOR BUYING FRENZY TIME (1990 – 1997)

When PLAZA  BEST  WORLD  (A Johor Mall now called DANGA CITY MALL)  was launched in Singapore, a fine young gentleman took out his check book and put down a deposit for a RM1 Million shoplot.

While we looked at the ridiculously high prices and watched,  the same young man again whipped out his cheque book and bought another unit – another million ringgit purchase. The Property Bubble went on until the Asian Financial Crisis Struck in 1997 – 1998.

AUSTRALIAN PROPERTY BURST TIME (1995 – 1998)

Australia in 1997 was a totally different story. We visited Perth , Australia in 1997. What A Change!  From A Region of Hottest Property Craze To A Place Of Total Despair! A Real Eye Opener!   The Property  Bubble had burst here. At a Chinese run restaurant the boss told us that an australian was offered a very good price for his house. Instead of selling, he decided to pull it down and rebuilt into a 3 storey semi-d lowrise apartment – in total 6 units.

However,  before he could finish building  and put it on the market recession struck. The project was abandoned. Prices crashed so badly that the tourist guide told us he bought a 6,000 sg ft bungalow near Perth for A$120,000. A four room HDB flat then was going for S$300,000. Imagine, a 4 room HDB flat in Singapore was worth 2 Perth bungalows with S$60k to spare! Exchange rate in 1997 One Sing $ equal One Aussie $  (par value)

 

LIKE A BOLT OF LIGHTNING FROM THE SKY,  THE ASIAN FINANCIAL CRISIS STRUCK THAILAND, MALAYSIA, INDONESIA, KOREA & SINGAPORE.

On July 2, 1997   George Soros sold down the Thai Bath – Triggering a Sell Call on the Ringgit,  the Korean Won, the Indonesia Rupiah and in a Smaller measure the Singapore Dollar. I remember this day well, being my birthday and also exchange rate for ringgit to singapore dollar was suspended by the money changers. (I would like to relate this in another posting)

 

JOHOR PROPERTY LONG, LONG SLIDE DOWNTREND  –  TWELVE YEARS    (1997 End  –  2009)

Both Amansari Condo & Plaza Best World were failed projects. Plaza Best World went into Receivership. Sold and name changed to DANGA CITY MALL. When THE EXPOSITION HALL was built Business Greatly Improved. Anchor tenant is METROJAYA  – belonging  to the MUI GROUP.

AMANSARI CONDO was abandoned by the Bankrupt Developer. Incidentally, many were bought by Singaporeans. After a decade of neglect, thieves moved in to cart away whatever fittings for sale as scrap. It looked like a bombed out wreck in a war zone.

Every time I drove past Amansari Condo site, I accelerate faster to get away from it quickly lest I meet with any undesirable element, in this case robbers or lurking thieves.  For those unfortunate Singaporeans who bought here will swear that they will never, ever buy Johor properties again.

Some even abandoned  the idea of  setting their foot again in Johor.    Many years later many units bought at over RM200K were auctioned off  between RM30K – RM80K.  All bought by MAHABUILDERS through his hard working agent – Mr. C G LEE. For  those hardy owners that paid cash, Mahabuilders charged RM60K to refurbish the whole unit and help to  rent them out as serviced apartments or hotels.  AMANSARI CONDO has been transformed into  a Successful Business Hotel beside CHRISTINE GOLF in Sri Alam.

JOHOR  REAL ESTATE  BOOMED  IN 1990 – 1997 (7 YEARS UPTREND)

GONE BURST IN END 1997 TILL EARLY 2009 (12  YEARS  DOWNTREND)

BOOM   CYCLE   RETURNS  IN MARCH  2010  TO JUNE  2013  ( 3 YEARS 3  MONTHS ) IF PAST PERFORMANCE IS A GUIDE — THE BOOM SHOULD LAST FOR AT LEAST 4 MORE YEARS. BUT THE BOOM MIGHT EXCEED  4 MORE YEARS DUE TO THE ADDED   POSITIVE   FACTORS:-

1) THE ASCENSION OF ASCENDAS ( A  S’PORE  SME  SURVIVAL INITIATION)     It is A Do or Die Project for S’pore SMEs.  Will Explain in Another Posting.

2) PENGERANG OIL & GAS BOOM (tens of thousands of high paying jobs creating high demand for real estate. ( Coal, oil & Gas jobs  survived in  the 1929 – 1939 US Great Depression). Like water, electricity is a neccessity.

3) WITH THE STATES OF PENANG,  SELANGOR,  FEDERAL TERRITORIES  Fallen Under Opposition Rule, BARISAN NATIONAL will Continue to pour Money For Developement in Its Stronghold of Sabah, Sarawak & ISKANDAR.

4) THE ISKANDAR PROJECT was started in 2006 by PM Badawi,  continued by PM Najib (5 more Years:  2013 to 2018 of new mandate given).   With all the Inputs of Costs,  Painstaking Planning & Great Effort by the M’SIAN GOVT. to make ISKANDAR A WORLD CLASS METROPOLIS.

5) A NEW PARADIGM SHIFT BY S’PORE GOVT & CAPITAL LAND.

S’PORE GOVT  is Now Fully Involved In ISKANDAR through Its Many Financial Investments. The Success of ISKANDAR is definitely in S’PORE’s Favour. The Bible says, “Where your Treasure  Is, there YOUR HEART Follows.”

6) HIGH SPEED BULLET TRAIN FROM KL & MRT FROM WOODLAND TO JOHOR

The Enhancement Of Connectivity Will Shorten Travel Time To KL & S’PORE.  Also KUB/MASTEEL Are Given The GO-AHEAD To Build A Network Of Rail Lines In Iskandar. Precious Time Saved In Traveling Could Be Used For A Thousand Purposes. More time for shopping at JPO? More time for visiting LEGOLAND & HELLO KITTY THEME PARK? More time for family, business, leisure, shopping, sightseeing, etc. etc.