History going one full circle – Property crash of 1996

STI – PPI – HDB Chart

Fast forward 14 years later to the current state, the property news that are making to the papers now are generally the same as in the past though the property market now is not as hot as it was back then. Similarly, it is also seen that the government has introduced an increase in land sales to meet the demand and HDB will also be ramping up its flat supply. Measures to counter speculation have also been introduced though they are not as draconian as in the past. To me, it seem like history is going one full circle in a milder manner though. So the question is where will the market head to from now? That is something for you to think about.

This article serves as a reminder that property, like any asset class, follows a cycle as well. There is also an interesting chart linked in the article with a chart of the property price index from 1960 to 2010.

Also, a sober reminder -> 1 semi-D + 1 cluster house = 1 flat and $700k loss

DBS offers S$500m preference shares

The above headlines was used in Straits Times to report DBS’s preference share issue to retail investors. This is good news to retails investors who could not participate in the S$1.7 billion preference shares offered to institutional investors in Oct 2010. The dividend yield of 4.7% per annum for 10years is attractive and we can expect this offer to be oversubscribed.

However, I found the article alittle disturbing. It started the report with:

RETAIL investors looking for a product yielding far more than bank deposits have a new option to consider.

and they go on in the article comparing it to bonds and bank deposits:

The shares, which operate in a similar manner to bonds, pay an attractive dividend of 4.7 per cent a year for 10 years – well above the 0.125 per cent interest that a saver currently gets on a POSB savings account.

The discerning investor may find the article somewhat misleading. Preference shares are not bonds, and should not be compared to deposits because it is an investment.

You should consider the following risks before buying:

• The dividend yield is not guaranteed as it is conditional on the DBS making a level of profit sufficient to pay the dividend.
• The shares are non-cumulative, so dividend payouts that are missed will not be paid retrospectively when financial conditions improve.
• There is the possibility that investors receive less than the principle amount if the preference shares are sold on the open market. A possible scenario is when market interest rates rise significantly.

If you find this investment a good complement to your portfolio, after considering the risks, go get it. It is already open for sale from now till 12.00 noon on 18 November 2010 via DBS, UOB or OCBC ATMs. And like we said earlier, we can expect this offer to be oversubscribed.