When Flippers flop

Property sub sales; who wins and who loses
Business Times – 26 Aug 2008
Some bleed from sub-sales, but most come out ahead
Business Times – 19 Mar 2009

Some 'flippers' took big hit in sub-sale deals
Straits Times – 23 Sep 2009.

'the hefty losses some suffered earlier this year suggest they might be deserving of some sympathy.'
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Are they asking for any? I don't think so - it is in their nature to roll the dice and take the tumble if they have to. If a high roller were to lose $1 million dollars at the table, would we be tut-tutting and offering our condolences? What about the Blackjack player who bets on the next card being an Ace, or the poker player hoping for a Royal Flush but instead draws a 2? Anyone who buys a property on a wing and a prayer in the hope of making a killing before his bluff is called is suffering from a colossal failure of common sense - but half of mankind suffers from that particular insufficiency.
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Since it is their personal choice to enter the market without sufficient financial backing, flippers cannot (and do not) expect public sympathy. It is their money after all, their future, their livelihood they are putting on the line. Are they not just doing the capitalistic thing - buying low and selling high and shouldn't we be applauding their entrepreneurial spirit? The media does.
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Flippers, speculators of all kinds are all in the business of making money; they produce nothing and offer no service. They are the engines of giant ponzi schemes.

Property flippers usually justify their unearned profit in one of two ways. They can claim they were lucky in securing a property at developer's price or lower or they assert they are just plain smarter than other buyers in the market and saw unrecognised value in an older property that they subsequently sold for a higher sale price. The sneakier ones prey on ill-informed owners to sell their 'old, dilapidated, badly maintained' properties to them at an 'above market' price (yet well below the true value of the property if it were sold enbloc).

Flippers rarely do any improvement to the property to justify a higher selling price. They add no value. It's all about 'timing'. Flippers say that if someone is willing to pay the price then that is how much the property is worth. "The value of a property is what the the market is willing to pay" - a favourite mantra of property agents everywhere. But sales price and market value are not synonymous. When the Government puts up a land parcel for sale and attracts low bids, it does not sell to the lowest bidder if it is deemed to be below the true value. Property is not like a car and the price is not set through a COE bidding type process; no property goes for $1 if that were the only bid in an open tender..

But is that all? Does it stop there? What damage, other than to themselves, do they inflict on society as a whole? Since property flipping is epidemic in Singapore, shouldn't we be looking at it's negative consequences at a societal level more closely.
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Flippers skew the market by creating a false demand. Hoards of speculators queueing up before a property launch create the illusion that things are 'picking up'. Genuine buyers join the queue in fear of losing out - the power of kiasuism and herd mentality intertwining to make for a heady mixture indeed.

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Flippers are instrumental in price escalation. Markets impacted by flipping are not rational markets. Each flipped sale is an incorrect price signal which then permeates throughout he market and other buyers and sellers make inferences about what their properties are worth based on these flips, without truly realising (or maybe they just turn a blind eye) to that fact they are not true market sales. Flipped sales act like viruses that corrupt the whole market. Even the HDB market is affected as the subsidised rate of new flats is pegged to the market value of similar flats in the area. Ultimately, property flipping makes it harder for ordinary folk to buy a decent home.

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Flippers create havoc in quiet estates by relentlessly pushing for enbloc. This causes uncertainty, anxiety and confusion. They may join the management council and run the estate down.

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Flippers are happy to force others into selling in order to realise their gains. They act without conscience or moral responsibility as their ends always justify the means. I am not talking about Tampines Court here, but in the many other estates that I have watched and had information on.

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Flipper activity might even be outright fraud - as in the case recently whereby the property agent sold a property to his immediate boss who then put it on the market at a higher price the very next day. That case went to court, how many more passed unnoticed, beneath the radar? Fraud can be perpertated in a variety of ways and I suspect some flippers might even work in concert; buying and selling property to each other, securing higher and higher loans and pocketing the difference. It happened in the US, so why not here.

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Flipper activity will always reach a point where a market correction is inevitable it is after all, unsustainable. Flippers were one of the major causes of the sub-prime woes in the USA.

Like a ponzi scheme, if you get out early you are ok, and the last ones holding the bag are the ones who get burned. If that happens to be a flipper - well then, that's poetic justice.