Sunday, April 18, 2004

Waiting for home prices to regain peaks 

In the mid-1990s, speculation in property was rampant in much of Asia, including Singapore. Many people still seem unable to forget the prices of that era.

The Sunday Times today had a feature on retirees downgrading to free up funds for retirement. What caught my eye was a statement by Mr Sazali Sarwan, associate director of Propnex, who apparently told the newspaper that "those who bought their homes when prices were at their peak in 1996 and will face a loss if they sell, shouldn't consider downgrading".

To me, since prices of homes are already down from their 1996 peaks, the loss has already been made. Holding on may not help. Like it or not, a paper loss is a loss.

Propnex may think that prices will recover their peak levels soon. I doubt it. Home-owners who hold on to such a hope may have to wait a very long time, suffering opportunity cost in the meantime.

And for retirees, time may not be on their side.


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