On Margin Call for Property

Originally Posted by Unregistered

Talking about inflation, if you had put the money in the bank to earn interest, then your return in real terms will be negative. Hence HDB flats are still superior investments!

Which bank pays your 3% interest or more to help you beat inflation, other than the one below? You want to buy? 5.25% beats inflation and very credit worthy some more with minimum rating -A!

Pinnacle Notes Series 2
12 Oct 2006

Yield: 5.25% pa
Tenor: 5.5 yrs (maturing in 16 May 2012)
Credit linked basket: PRC, Korea, Msia, DBS, Bank of China, Korea Dev Bank and Malayan Banking.
Credit rating: Minimum -A.
Denomination: S$5000
Callable option: Yes

On the other hand, if you had bought the other Pinnacle ... the one @Duxton ... hehehe ...

c'mon. you are comparing a risk asset like real estate to a low risk asset like deposits?

might as well compare stocks to deposits - its an apples and oranges comparison, man.

Originally Posted by scholar

c'mon. you are comparing a risk asset like real estate to a low risk asset like deposits?

might as well compare stocks to deposits - its an apples and oranges comparison, man.

What's the point of comparing apples with apples, or oranges with oranges? You must compare lemons with oranges with apples with durians, then you will know which fruit is the best. Let's use the Pinnacle Notes' 5-year period from Nov 2006 to Nov 2011.

Investment 1 - Pinnacle Notes (loss 100%) investors lost court case in Singapore, now fighting in New York (lost money plus wasting time and legal fees and energy worth another 100%) total nominal lost is 200%. Benchmark against inflation of 3% p.a. or 16% for 5 years, investors of Pinnacle Notes suffer real term loss of 216%.

Investment 2 - Singapore stock index STI 5-year period from 13 Nov 2006 (STI 2813.18) to 11 Nov 2011 (STI 2790.74), nominal loss 0.80%. Real term loss after factoring inflation is 16.8%.

Investment 3 - Fixed Deposit (1% p.a.) or nominal gain of 5% over 5 years. Against inflation of 16%, real term loss of 11%.

Investment 4 - HDB Flat!!! Q4 2006 Index 103.6 to Q3 2011 Index 187.2 nominal gain 80.7% or real term gain of 64.7% after factoring inflation.

Conclusion, Pinnacle@Duxton is the best! Pinnacle Notes is the worst!

Originally Posted by Unregistered

What's the point of comparing apples with apples, or oranges with oranges? You must compare lemons with oranges with apples with durians, then you will know which fruit is the best. Let's use the Pinnacle Notes' 5-year period from Nov 2006 to Nov 2011.

Investment 1 - Pinnacle Notes (loss 100%) investors lost court case in Singapore, now fighting in New York (lost money plus wasting time and legal fees and energy worth another 100%) total nominal lost is 200%. Benchmark against inflation of 3% p.a. or 16% for 5 years, investors of Pinnacle Notes suffer real term loss of 216%.

Investment 2 - Singapore stock index STI 5-year period from 13 Nov 2006 (STI 2813.18) to 11 Nov 2011 (STI 2790.74), nominal loss 0.80%. Real term loss after factoring inflation is 16.8%.

Investment 3 - Fixed Deposit (1% p.a.) or nominal gain of 5% over 5 years. Against inflation of 16%, real term loss of 11%.

Investment 4 - HDB Flat!!! Q4 2006 Index 103.6 to Q3 2011 Index 187.2 nominal gain 80.7% or real term gain of 64.7% after factoring inflation.

Conclusion, Pinnacle@Duxton is the best! Pinnacle Notes is the worst!

haha ... I agree with your point above - hdb pinnacle is definitely better than pinnacle notes!

As you have very adequately proven above, real estate or specifically resale hdb can outperform other asset classes over a chosen period of time.

my point basically is that the decision to buy a hdb resale flat
(i) is not a sure thing regardless of timing as some have implied, as illustrated by my prior examples (buying a long dated high grade bond in the late 90s will give you c. 4% return annually), and
(ii) should still be a considered investment proposition, and the buyer should perform the necessary analysis and due diligence before entering into the decision, just as they do before they enter into any other investment decision, and
(iii) given that timing is critical, now is not an optimal time based on all the fundamental indicators i.e. why buy in 1996 when you have the option to buy in 2002?

I entirely agree that your 4 fruits approach above, if conducted prior to the investment decision, is the appropriate approach

Originally Posted by hedgie

(iii) given that timing is critical, now is not an optimal time based on all the fundamental indicators i.e. why buy in 1996 when you have the option to buy in 2002?

Fundamental analysis is more an art than a science and hindsight is always perfect. The fear that today could be a repeat of 1996 which saw a drop of 30% in 5 years will always be countered by the fear that today could be a repeat of 1990 (HDB resale price index rose from 33.6 in Q1 1990 to 136.3 in Q4 1996, that's 400%).

Will HDB resale price quadruple again in 5 years? If you had asked anyone in 1990, most would have said that you were crazy, what with Saddam wrecking havoc on world economy.

I will not rule out that applicants rushing to buy DBSS flats include young professionals whose full-time work involves some sort of fundamental analysis. Why are they so kan cheong?

Business Times November 12, 2011 - More than 40% of Belvia units sold in first phase

CEL Development CEO Chia Lee Meng said that the larger four- and five-room units on the higher floors were the best sellers.

Originally Posted by Unregistered

Fundamental analysis is more an art than a science and hindsight is always perfect. The fear that today could be a repeat of 1996 which saw a drop of 30% in 5 years will always be countered by the fear that today could be a repeat of 1990 (HDB resale price index rose from 33.6 in Q1 1990 to 136.3 in Q4 1996, that's 400%).

Will HDB resale price quadruple again in 5 years? If you had asked anyone in 1990, most would have said that you were crazy, what with Saddam wrecking havoc on world economy.

I will not rule out that applicants rushing to buy DBSS flats include young professionals whose full-time work involves some sort of fundamental analysis. Why are they so kan cheong?

Business Times November 12, 2011 - More than 40% of Belvia units sold in first phase

CEL Development CEO Chia Lee Meng said that the larger four- and five-room units on the higher floors were the best sellers.

i disagree.

fundamental analysis is based on income ratios - if people cannot afford to pay for a flat with their income, then flat prices are constrained. and as hedgie has said, the fundamental ratios are alot higher today than they were in the past. hence, as one of the earlier posters have mentioned, fundamental analysis is a probability play and the probability of a 1996 situation is much much higher than a 1990 situation.

Originally Posted by scholar

i disagree.

fundamental analysis is based on income ratios - if people cannot afford to pay for a flat with their income, then flat prices are constrained. and as hedgie has said, the fundamental ratios are alot higher today than they were in the past. hence, as one of the earlier posters have mentioned, fundamental analysis is a probability play and the probability of a 1996 situation is much much higher than a 1990 situation.

you are assuming income ratio is relevant. you are only partly correct.

it's now very apparent that singapore is moving toward a pro-business elites-only global city. income of citizens is now IRRELEVANT. as long as the rich can afford it, prices will continue to go up. citizens are irrelevant. if they can't pay, they can always move to johor.

[Wiseman1]

Most people here would try to defend current property price levels, since the majority would have sinked huge amounts of monies into bricks and motar......while this may allow you to sleep better at night but it would not change the reality.....there is only onw way for ridiculous priced houses to go - that is down

just read from the newspaper that property sales in China are slowing at a very fast pace these 2 weeks. Few hundred brokerages have dismissed few thousands workers.

The article even commented whether this would be the start of a snowball effect of property crash.

Well, I look at the number of highly paid people in this decade compared to 90s, where alot of people didn't earn $5000 as easily, I think more people are able to afford private property and support the unit.

I have been looking at the market since 2009 and thought the following month would be the crash and thought so again, again, again....But the crash never came. So many people have been talking about it, but that's only it.

Not cursing the market, but perhaps the crash is coming ... next year? If not, let's hope not, because I might be taking a property next year.

The market can stay irrational for longer you can stay rational.

Japan boomed for an irrationally crazy 10+ years before it crashed crazily for a couple of lost decades.

Originally Posted by Unregistered

you are assuming income ratio is relevant. you are only partly correct.

it's now very apparent that singapore is moving toward a pro-business elites-only global city. income of citizens is now IRRELEVANT. as long as the rich can afford it, prices will continue to go up. citizens are irrelevant. if they can't pay, they can always move to johor.

Yes that's right. Income ratio is just one of many factors that determine affordability. There are myriad other factors like the inheritance effect and the foreign transfer effect.

Singapore has reached its 46th year of independence. The first generation is passing on and the second generation is about to inherit substantial wealth.

Imagine for example a middle-aged technician called Li Ah Long's father suddenly leaves him a terrace house worth $2 million. Even though Li Ah Long is a technican earning only $30k per year and stays in an HDB 4-room flat, he is suddenly able to pay off his entire HDB loan with spare cash to buy a suburban condo for investment.

So he sells his inherited terrace house to an aesthetic doctor called Dr. Sally Lam who already owns 100 other properties. Dr. Sally Lam charges clients like the Prince of Arabia $20,000 for each pimple removed. As the Prince is an adolescent who keeps growing pimples non-stop, there is only one way for ridiculous priced houses to go - and that is up.