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Old 28-10-2012, 10:23 PM
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You brought up good points but unable to see that those points exactly are the reasons why property prices will appreciate in the long run. Your price to income ratio approach is incorrect as that does not look at the ease of financing. Even though the price to income ratio today is higher at 4.2x compare to 2.6x in 1980, the fact that today's interest rates is so low compared to in the 1980's mean that with the low interest rates, the monthly mortgage payments constitute a smaller proportion to monthly income.

We all know that our population will continue to grow. I won't be surprised over the next 30 years, the population could grow to 10 million or more. Also there are new developments across the island that will be new engines of growth. When the marina bay project was developed, prices across the island went up. Now with new projects in Jurong lake, we can expect the same. So keep a look out for the surge in property prices in the Jurong area.

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Originally Posted by Unregistered View Post
That's true HDB has appreciated a lot since 1980s, but then again, its because of the below stimuli:-

1) Reasonable price to income ratio: In 1980s, HDB was about $80k, but starting salary of a fresh grad was about $1.3k. So that's about $2.6k assuming a graduate couple, or about $31k per annum. So, that's about a 2.6x price to income ratio ($80k divided by $30k), well within the recommended 3x. Today, the same ratio is about 4.2x ($300k divided by $72k, or a couple each earning $3k per month), which is about the level we saw in the US right before the subprime bubble burst.

2) Interest Rate: Back in the 1980s, we routinely saw interest rates close to, and sometimes above 10%. Today rates are sub 1%. Not much room to go down further.

3) Third world to first: Then, we were 3rd world, with 3rd world prices and plenty of room to grow. Today, we are first world, with one of the highest GDP per capita in the world.

4) Arbitrage: In 1980s, a person working in Australia earned 5 times the salary of a person in Singapore. Easy for people overseas to come here to buy properties. Today, Singaporeans in the same role earn more than Australians on a tax adjusted basis, and are happy (or rather, in most cases, have no choice but) to pour all the excess cash into property.

So, to be frank, which of the above stimuli do you still see ? Where do you see the driver for this big upside you are hoping for ?

If you bought in 2006, well, you are well on your way to achieving 3x, but if you just bought your property, good luck with that target.
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