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  #2411 (permalink)  
Old 26-05-2013, 03:12 PM
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Default ipdrhapsilk

Quote:
Originally Posted by Unregistered View Post
Your response an epic fail. Her post does not warrant any response. She already learning that high IQ and good academic results do not equate to knowledge and acumen in how the world works. If she still doesn't understand then she lacks one important ingredient - situation awareness.
if she already understands then why this statement from her "However, as mentioned, I find it hard to swallow that being smarter of the two, I am not within the same salary bracket. That is my MAIN gripe." ? To be honest, if she claims to be on the upper echelon of the society, I find it quite condescending to her husband and anyone who has weaker grades in college but manage to earn more than her.

By the way, this is a public forum and anyone is free to comment and response, including my posts.

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  #2412 (permalink)  
Old 26-05-2013, 07:57 PM
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Everything goes through boom and bust cycle including property market in Singapore. Nobody or government in the world can act independently defying this law of nature. Even the most powerful government of USA which has the unique position of issuing the world only reserve currency and thus has the priviledge to print as much money as they desire cannot stop bubbles from bursting. In fact, interfering with the way nature works by short-circuiting the natural boom and bust cycle has incur more damage than help.

Similarly, I don't think, the government of Singapore has the power to stop the boom and bust cycle of the local property market. It is also not right for the government to prop up the market just to make people happy for the illusionary high property price that they own because doing so will simply spell economic disaster. Asking the gov to do this is akin to asking the gov to bail out people for the bad investment that they have made and this simply lead to disaster.

Property market has been hot because of the historical low interest rate and it will not sustain beyond 2016. Coupled with the fact that economic growth is just at a paltry 1% and with no improving global economic condition in sight, it is very easy to see a rising unemployment and a rising interest condition within the next three years.

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  #2413 (permalink)  
Old 26-05-2013, 10:18 PM
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Everything goes through boom and bust cycle including property market in Singapore. Nobody or government in the world can act independently defying this law of nature. Even the most powerful government of USA which has the unique position of issuing the world only reserve currency and thus has the priviledge to print as much money as they desire cannot stop bubbles from bursting. In fact, interfering with the way nature works by short-circuiting the natural boom and bust cycle has incur more damage than help.

Similarly, I don't think, the government of Singapore has the power to stop the boom and bust cycle of the local property market. It is also not right for the government to prop up the market just to make people happy for the illusionary high property price that they own because doing so will simply spell economic disaster. Asking the gov to do this is akin to asking the gov to bail out people for the bad investment that they have made and this simply lead to disaster.

Property market has been hot because of the historical low interest rate and it will not sustain beyond 2016. Coupled with the fact that economic growth is just at a paltry 1% and with no improving global economic condition in sight, it is very easy to see a rising unemployment and a rising interest condition within the next three years.
I think you missed the point. People are aware economies and property prices are closely intertwined and that they go up and down in cycles. They are not saying they don't. What they are saying is that in Singapore, a tiny island, as long as there is a stable and good government, holding properties long term is a good bet. If you look at the historical property cycles you will observe that the new peaks are always higher than previous peaks.

There are many reasons for this:
1. Value of money shrinks by the day
2. People desire to own property (more than 1 if they can afford it)
3. Limited land
4. A source of income from rental
5. People now are generally richer, and not many avenues to park their extra cash
6. Before the CM, returns from properties were very good. Now one can still make money because it is the only investment where you can leverage.
7. Singapore is more stable and dynamic (sounds contradictory but that is what sets us apart) than other countries in the region
8. Low loan interest rate, but in the previous bull runs on property, the interest rates were quite high. So I will think the current low interest may not be the key driver.

I would say that yes, if the economy suddenly turns the corner, property prices would head south. But once there is a small of sign of recovery, the prices will race up again. So I am beefing up my war chest for this - by the way, that war chest is sitting there for awhile already and losing its value daily. :-(

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  #2414 (permalink)  
Old 26-05-2013, 10:44 PM
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Wiseman1 is on a distinguished road
Default

Quote:
Originally Posted by Unregistered View Post
I think you missed the point. People are aware economies and property prices are closely intertwined and that they go up and down in cycles. They are not saying they don't. What they are saying is that in Singapore, a tiny island, as long as there is a stable and good government, holding properties long term is a good bet. If you look at the historical property cycles you will observe that the new peaks are always higher than previous peaks.

There are many reasons for this:
1. Value of money shrinks by the day. This is correct at the moment, but that does not mean property would always be a better store of value
2. People desire to own property (more than 1 if they can afford it) This is a very strange behaviour especially in Sillypore, make sure you dont wear a big hat if your head is not so big, you cant eat off bricks and motars
3. Limited land. True, but dont count on the population to keep going up, the government cannot stomach the political costs, and people would leave if the overcrowding becomes unbearable
4. A source of income from rental. Dont count your chickens before they are hatched. I firmly believe the completion of the huge supply of new houses would drive the rental yield to a new low 3 years from now
5. People now are generally richer, and not many avenues to park their extra cash. Cash is still king, dont believe the favorite taglines from property agents that deposit interest rates are low and property investments are best bet against inflation. Is it not obvious they have vested interests?
6. Before the CM, returns from properties were very good. Now one can still make money because it is the only investment where you can leverage. just remember, dont wear a big hat is your head is not big, leverage is for people who dont actually need to borrow money to buy property in the first place
7. Singapore is more stable and dynamic (sounds contradictory but that is what sets us apart) than other countries in the region. Dont count on this, we are generally assessed as one entire Asean region
8. Low loan interest rate, but in the previous bull runs on property, the interest rates were quite high. So I will think the current low interest may not be the key driver. This is even more dangerous, people are blindly following the crowd to dump money into properties with no thought of consequences.

I would say that yes, if the economy suddenly turns the corner, property prices would head south. But once there is a small of sign of recovery, the prices will race up again. So I am beefing up my war chest for this - by the way, that war chest is sitting there for awhile already and losing its value daily. :-(
Let me be objective and bring some reality checks to your points. See above in red.


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  #2415 (permalink)  
Old 26-05-2013, 11:37 PM
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Default Fundamentals fundamentals fundamentals...

I am invested in Singapore property, and as much as the next person with vested interest, I would like property prices to continue going up.

But objectively, I'll have to side with Wiseman1, bitter as his message generally is for a property owner.

I read the below article sometime back, but thought one paragraph particularly relevant to the discussion at hand.

"To determine the affordability of a house, we need to look at price vs salary. From this measure, HDB prices have become a lot more expensive over the years. For instance, in 1986, the starting salary of a graduate was about $1,400 per month (approximately), and a 4-room HDB flat cost around $65,000, resulting in a price to monthly salary ratio of about 46 times. Today, the average starting salary of a graduate is about $3,000 (generous estimate), and a 4-room HDB flat costs anywhere from $240k to about $572k (for the Peak @ Toa Payoh). This translates to a ratio of between 80 times to 190 times. Hence, from an affordability perspective, HDB flats today are about 1.7 to 4.1 times more expensive than in 1986.."

Its talking about HDB prices, but I think the same analysis can be applied to private housing prices.

Clearly most fundamental ratios are pointing to an overpriced market, by most standards globally i.e. (1) Per the book, the Millionaire next door, the recommended mortgage quantum is not more than 2 times the annual household income; (2) most finance text books recommend housing price of not more than 3 times the annual household income etc.

I'll bet most people reading this site have bought a house considerably above the recommended thresholds ! I have checked with my bank, they can loan me up to 15x my annual pay for a mortgage loan ... so clearly the banks are not helping people make rational decisions !

So today's market is way out of whack by fundamental measures, and running solely based on technicals of excess global liquidity.

Personally I believe reversion to mean will gain traction at some point in time, hence am staying out of the SG market for the moment and looking primarily at Malaysian properties now (JB + KL) ... I think selectively there is still value there.

But where ever you are putting your money, good luck to all !

Cheers

Long-time PAP supporter disappointed with Mah
Posted by theonlinecitizen on April 25, 2011 42 Comments
25Share
D Lim

I refer to Mr Mah Bow Tan’s rebuttal to WP’s proposal on pegging HDB prices to median salaries.

Let me preface my comment by saying that I have been an ardent supporter of PAP policies over the years, and I think they have done an exceptional job. However, for this particular issue, it appears that WP’s position is more intellectually pure than the PAP’s.

Indeed, Mr Mah’s response appears to be missing the woods for the trees. At the end of the day, we need to go back to basics – to what the fundamental mission of HDB is, and it is to provide affordable housing for the masses.

To determine the affordability of a house, we need to look at price vs salary. From this measure, HDB prices have become a lot more expensive over the years. For instance, in 1986, the starting salary of a graduate was about $1,400 per month (approximately), and a 4-room HDB flat cost around $65,000, resulting in a price to monthly salary ratio of about 46 times. Today, the average starting salary of a graduate is about $3,000 (generous estimate), and a 4-room HDB flat costs anywhere from $240k to about $572k (for the Peak @ Toa Payoh). This translates to a ratio of between 80 times to 190 times. Hence, from an affordability perspective, HDB flats today are about 1.7 to 4.1 times more expensive than in 1986..

This has resulted in many people having to stretch out their mortgage payments to 30 years (even in one of the lowest interest rate environments in history) in order to keep mortgage payments at an affordable level. Prudent financial planning guidelines typically advise that if you have to stretch out mortgage payments to 30 years in order to afford the monthly payments, you are probably buying a house that you can ill-afford.

PAP’s primary argument is that the subsidy is in the discount to market pricing. Well, the problem with this is that market prices are not linked to salaries (as market prices are also heavily influenced by offshore liquidity and general investor sentiment). Over the last 10 years, we have all seen the market go astray, in various asset classes and in various geographies. Hence, without a fundamental link to salaries, it is difficult to ensure that HDB flats will remain affordable (in fact, given the above examples, it is arguable that they currently are).

In his rebuttal, Mr Mah’s principal point is that lowering the primary market prices would lower resale market prices. This response appears to be populist and scare-mongering in nature, and skirts around addressing the fundamental issue. Is it important that resale prices are maintained? As a flat owner, I would say ‘Yes’. However, is it more central to the mission of HDB than providing affordable housing to the masses? Well, clearly no.

Beside, the link between primary property prices and resale market prices is a tenuous one, at best. The resale market is driven by supply and demand. If HDB is able to flood the market with cheap flats, then yes, resale market prices will collapse. But as long as the demand tension dynamics remain unchanged, the resale market prices should still hold, regardless of where the primary market flats are priced.

Mr Mah’s other point regarding home buyers switching to new homes instead of resale flats is again, a peripheral point that can easily be addressed via policy levers (first time owner priority etc).

Finally, his point on this being an illegal raid on the reserves is irrelevant and unnecessarily confuses the issue. The government makes spending decisions every day on policies which are in line with its policy goals. If affordable housing is a policy goal, then such subsidy is a necessary means to achieve the
goal.

In summary, as a long-time PAP supporter, it is somewhat disappointing that Mr Mah has chosen to skirt the issue and serve up populist appeals with scare-mongering tactics, rather than to seriously address a serious issue for thinking voters.

Mah Bow Tan! This is what longtime PAP supporter said! PAP liao liao!
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  #2416 (permalink)  
Old 27-05-2013, 09:26 AM
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Zhang,

Many stupid analysts say HDB prices are high but you have to remember, this refers to HDB flats in mature estates such as Bishan, Toa Payoh, Queenstown, Bukit Merah. Also, these are resale flats. There are very cheap BTO HDB flats in Punggol, Sengkang selling at $200k plus only. For new graduates, they shouldn't be looking to buy those $1m HDB flats but focus on the $200k BTO. Those who buy the $1m HDB flats are usually upgraders. They sell their BTO after the MOP and make profits of $400k or more so when they buy their $1m HDB, they only loan about $400k after putting in down payment of $600k.

Those international analysts are not aware of our public housing scheme that enriches so many, such that they can afford million dollar HDBs and condos. The EC scheme has also enriched so many people as they can profit as much as $500k when they sell after MOP. So, ironically, the cheap BTO scheme is the one that created high demand for condos. The only way for this demand to slow down is to price BTO higher so that people cannot flip and make tons of $$$$ at the expense of our reserves.
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  #2417 (permalink)  
Old 27-05-2013, 12:53 PM
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"As long as we continue to grow and we have a good gov, the property price will continue to go up in the long run" - this itself is a big assumption. Already, we are facing a bottleneck in our economic growth. Not many thing we have has a international competitive edge. Wages has become too high by international standard and yet people lack entrepreneurer spirit and creativity. No society develop forever in a straight line upward including Singapore. you can see that our growth projection is already slowing down and a big problem of greying population is right in front of us.

As for property peak price is always higher than the last peak...how many years apart is that? You won't want to enter in a wrong price and wait 10-20 years in whatever investment you make. And for your info, many other things in the world has a peak price higher than the last peak too...like Dow Jones Industrial Index, Gold price, Silver price, in fact property price in many places (not just Singapore), chicken rice price, coffee price etc etc...
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  #2418 (permalink)  
Old 27-05-2013, 01:40 PM
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In the long run property prices will be higher than the last peak. This is inevitable as the value of our paper money depreciates over time. If you learn economics in school, you would understand that the paper money printing by central banks in many countries make the value of paper money go down. One dollar today is worth more than one dollar in the future.

So, with limited land and more paper money in the global system, not surprising why property prices will need to rise globally, not only in Singapore. In fact, Singapore property prices have been depressed from rising faster due to cooling measures. In the US, China, property prices have rebounded.

So, you should take economics lesson to understand how the world works and this makes you a better investor.


Quote:
Originally Posted by Unregistered View Post
"As long as we continue to grow and we have a good gov, the property price will continue to go up in the long run" - this itself is a big assumption. Already, we are facing a bottleneck in our economic growth. Not many thing we have has a international competitive edge. Wages has become too high by international standard and yet people lack entrepreneurer spirit and creativity. No society develop forever in a straight line upward including Singapore. you can see that our growth projection is already slowing down and a big problem of greying population is right in front of us.

As for property peak price is always higher than the last peak...how many years apart is that? You won't want to enter in a wrong price and wait 10-20 years in whatever investment you make. And for your info, many other things in the world has a peak price higher than the last peak too...like Dow Jones Industrial Index, Gold price, Silver price, in fact property price in many places (not just Singapore), chicken rice price, coffee price etc etc...
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  #2419 (permalink)  
Old 27-05-2013, 02:13 PM
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Quote:
Originally Posted by Unregistered View Post
In the long run property prices will be higher than the last peak. This is inevitable as the value of our paper money depreciates over time. If you learn economics in school, you would understand that the paper money printing by central banks in many countries make the value of paper money go down. One dollar today is worth more than one dollar in the future.

So, with limited land and more paper money in the global system, not surprising why property prices will need to rise globally, not only in Singapore. In fact, Singapore property prices have been depressed from rising faster due to cooling measures. In the US, China, property prices have rebounded.

So, you should take economics lesson to understand how the world works and this makes you a better investor.
I think you should take some proper economics instead.

Whether an asset class will rise in price depends very much on money flow cycle. To refute you, Japan's property price has been dropping for 10-20 years even though they have been doing QEs and interest rate at zero.

The huge QEs in US since 2008 has not cause the property price to rise in USA either. property price in Europe is crashing.

China has not been printing since 2012 and has in fact been reducing money. Just go and check the world central banks balance sheet and you will find that the money printed by USA has very much been offset by reduction in Europe and China.

So drawing a direct cause and effect relationship between money printing and property price is wrong. even if it is correct, it is a dangerous assumption to assume that central banks around the world can/will keep on printing and that the printing will not hit a wall.
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  #2420 (permalink)  
Old 27-05-2013, 02:30 PM
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All these views are but two sides to the same coin. I believe all have desire to grow our wealth, but differ in the approach.

Without a doubt there are many still on the sideline hoping, arguing for a correction. The million $ question is when is it going to happen? I belong to this group, anxiously waiting for some correction to deploy my war chest. Anxious because I cannot find any good investment to put the cash that would give me a decent return, while helplessly seeing that the property I aim for slipping away.... It was not too many years ago (4? maybe 5yrs?) that I could have bought a 3 rm HDB with my savings of $200K including some renovation, but I waited thinking a crash was imminent. I was aghast when I found out that the same flat was going for $350 to $400K! Now I asked myself will it ever go back to $200K, maybe not $200K but $250K? I feel that time is also not on my side. I dont know if I can wait for another cycle. I am already resigned to continue to stay with my parents.

The other group who have committed to properties believe that our government has stepped in to prevent a bubble from forming or if formed already from growing too big. Flippers / Speculators are removed from the system. They also believe rightly or wrongly that the government would not allow the prices to crash deeply. The government does have a lot of instruments at their disposal to soften any crash such as removing the CM and liberalise the CPF use to shore up the prices to reduce the pain.

At the end of the day, it is your money. You should not let anyone influence what you use it for. For me, I dont blame anyone for the missed chance of owning a place of my own.
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