Quote:
Originally Posted by Unregistered
You are so wrong. With Singapore population hitting 6.5 million soon, demand will shoot through the roof. Mr Khaw is not building fast enough to meet the expected demand.
These are my calculations:
Graduate couple, husband and wife each making 10k.
35% of combined salary = $7k for servicing mortgage.
At 1% interest and 30 years loan tenor, they can borrow more than $2 million for their house.
TWO MILLION DOLLARS!
So, property is still super affordable at current levels. Mah Bow Tan was right all along.
My prediction: property prices will double in no time.
The current stock market crash has no effect on Singapore property market. In fact, hot money from China, India and all the rich people around the world will flow here given our excellent AAA rating and US credit rating downgrade.
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Another joker who's long the property market...
You want stats ? I'll give you relevant fundamental stats.
Take price to income : historically, the average house price to income ratio in the US was 3:1. That's still the recommended ratio many financial planning textbooks recommend. The year before the aubprime crisis, the ratio hit 4:1, a clear indication that the housing market was overpriced. Sure enough the market collapsed like a house of cards soon after. Now look at Singapore, where a median priced house will cost you about $450k (4 rm resale in bukit batok ) and where median household salaries are about $60k ($5k per month). Thats a median ratio of 7.5x!
Take price to rental. Conventional wisdom says you should buy when price to rental ratio is 10x and sell when its 20x. I've done a bit of sampling - you can rent a $1.2 mn condo in the outskirts for $4k per month for a ratio of 25x, or a $450k
hdb flat for $1.5k for a ratio of 25x, or a $6m central landed for $8k for a ratio of over 60x. So you have a situation whereby even outskirts
hdb are failing the price to rental test and where central landed is failing by a very very wide margin.
Finally the mortgage to income test. To be prudent, you really should use 4% interest for 20 years. The 1% rate we have now is near the lowest rates we have ever seen and cannot be locked in for the term of your loan. Using your example, if the couple takes a $2mn loan, and rates normalized to 4% they'd be stuck with $10k payment per month or half their salary. Not sustainable and not at all wise. Plus u are taking a 30 year loan, means no savings for retirement.
So to recap, current prices is entirely liquidity driven and is not supportable by local salary levels. Every fundamental indicator tells you that the market is overpriced. History tells is that prices can deviate from fundamentals for a time (see dotcom crash where we had about 5yrs of deviation from fundamentals) but ultimately the gap will bridge. It's a matter of when.