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Property Prices Have Crashed (see graph)

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  #41 (permalink)  
Old 06-08-2011, 11:34 PM
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Default Update property graph with stock market

Hi, I found your graph very useful. do you think you can update it with the current stock market too? Thanks

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  #42 (permalink)  
Old 11-08-2011, 08:31 AM
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MRT circle line just opened, greatly easing the capacity crunch. COE prices on record high, so there will be fewer cars. As for jobs, didn't the media just said a million jobs were created and all fresh grads got jobs that pay like 10k a month?

With higher income, happy people, and more good years, property prices have no where else to go but up up up!
I read this post with some amusement. It's hard to discern if the poster is deceptive because he is long property or just unbelievably naive.

By every objective measure (price to rental, price to salary, % of salary to mortgage etc), the Singapore property market is not just overpriced but way overpriced. Prices have shot up over 100% in 4 years, fueled by easy money (enbloc plus stock market), overseas liquidity, and low loan rates.

We are at a point where funding a property purchase by salary is not feasible if u use conservative Lian assumptions of 4% interest and 20 year loan period.

The smart money (property developers) know this and are trying to get rid of their inventory as fast as they possibly can, and are bidding very very very conservatively for new land plots. They are also slamming khaw boon wan every opportunity they get, cos they are very nervous indeed.

And bank analysts are coming out of the woodwork to say that 2012 and 2013 will be down years.

Prices have to come down. It's just a matter of when.

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  #43 (permalink)  
Old 11-08-2011, 05:50 PM
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I read this post with some amusement. It's hard to discern if the poster is deceptive because he is long property or just unbelievably naive.

By every objective measure (price to rental, price to salary, % of salary to mortgage etc), the Singapore property market is not just overpriced but way overpriced. Prices have shot up over 100% in 4 years, fueled by easy money (enbloc plus stock market), overseas liquidity, and low loan rates.

We are at a point where funding a property purchase by salary is not feasible if u use conservative Lian assumptions of 4% interest and 20 year loan period.

The smart money (property developers) know this and are trying to get rid of their inventory as fast as they possibly can, and are bidding very very very conservatively for new land plots. They are also slamming khaw boon wan every opportunity they get, cos they are very nervous indeed.

And bank analysts are coming out of the woodwork to say that 2012 and 2013 will be down years.

Prices have to come down. It's just a matter of when.
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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  #44 (permalink)  
Old 11-08-2011, 09:43 PM
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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.
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.
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  #45 (permalink)  
Old 11-08-2011, 10:49 PM
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Another joker

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.
Both of you are jokers!
The joker who said property prices can only go up and up is delusional. History has shown the cyclical nature of property prices. What goes up must come down and vice versa.
The sad joker who tried to sound intelligent by expounding a little bit of market jargon is obviously a non starter - it is safe, easy and terribly cliche to say "it is only a matter of when". When you wait long enough, even the dinosaurs become extinct, and they lived for many million years before that happened
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  #46 (permalink)  
Old 11-08-2011, 11:13 PM
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Both of you are jokers!
The joker who said property prices can only go up and up is delusional. History has shown the cyclical nature of property prices. What goes up must come down and vice versa.
The sad joker who tried to sound intelligent by expounding a little bit of market jargon is obviously a non starter - it is safe, easy and terribly cliche to say "it is only a matter of when". When you wait long enough, even the dinosaurs become extinct, and they lived for many million years before that happened
There is no value add in your comment at all. All you are saying is property markets go up and they go down, with no view either way. That adds nothing to the discussion.

All I'm saying is : look at the objective numbers. things are overpriced. At least I have a view and I back my view up with facts. that's how u make an informed decision.

Now the question is how you can profit from that view? Do you actively go out and short property counters like capitaland and cdl? Well no, cos history says that the market can stay irrational longer than you can stay solvent. So since timing of correction is unknown, you wait until the correction happens, then you go in and look to profit from the upswing.

So in other words, you need to have a view on both direction and timing before you are in a position to determine the optimal strategy.

The question then is - do YOU have a view or are u just a passive spectator?
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  #47 (permalink)  
Old 11-08-2011, 11:34 PM
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We are in the super cycle of real estate boom, because

1) US interest rates will stay low until 2013, and possibly longer. MAS monetary regime means that SGD interest rates will stay low too, and infact, today, the SOR is negative. In short, liquidity will stay abundant

2) Rental yields are still at least 3% at current level and above the funding cost (around 1%). It is one of very few property market in the world that has +ve carry

3) The supply is still relative small to the pent demand built up over the past 5 years. All Singaporeans who bought a HDB prior to 2007 property boom is now sitting on a very large equity on their home, easily 200-300k. They are sitting at the side to pound the market.

4) Singaporean couples who missed out the property boat for past 5 years due to lack of new flats are enormous. Around 20k of couples get married yearly and current BTO flats are building at the speed of 20k per year, so the backlog of flats still will remain until at least 2015.

5) Given current market turnmoil, even US may technically default, the europe PIGGS may soon facing fiscal trouble, the only AAA asset is SGD, and the best way to park the money for foreigner is Singapore property (no capital gain, total freedom of exiting the money, no restrictions)

6) In past 5 years, around 120k of PR are granted every year. Even the numbers are cut by half i.e. around 60k, around 20k of rentals/purchase still needed assuming 1unit:3occupants ratio
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  #48 (permalink)  
Old 11-08-2011, 11:46 PM
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Both of you are jokers!
The joker who said property prices can only go up and up is delusional. History has shown the cyclical nature of property prices. What goes up must come down and vice versa.
The sad joker who tried to sound intelligent by expounding a little bit of market jargon is obviously a non starter - it is safe, easy and terribly cliche to say "it is only a matter of when". When you wait long enough, even the dinosaurs become extinct, and they lived for many million years before that happened
So do you know when? At least he (not the delusional guy who thinks property prices only go one direction) pointed out some really good points to ponder about. What have you to share? With all the uncertainties, the experts have different views and only give possibilities. His post definitely sound more intelligent than what you have posted. And if your financial planning takes million of years to mature, in my opinion, you fail badly.
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  #49 (permalink)  
Old 12-08-2011, 03:23 PM
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We are in the super cycle of real estate boom, because

1) US interest rates will stay low until 2013, and possibly longer. MAS monetary regime means that SGD interest rates will stay low too, and infact, today, the SOR is negative. In short, liquidity will stay abundant

2) Rental yields are still at least 3% at current level and above the funding cost (around 1%). It is one of very few property market in the world that has +ve carry

3) The supply is still relative small to the pent demand built up over the past 5 years. All Singaporeans who bought a HDB prior to 2007 property boom is now sitting on a very large equity on their home, easily 200-300k. They are sitting at the side to pound the market.

4) Singaporean couples who missed out the property boat for past 5 years due to lack of new flats are enormous. Around 20k of couples get married yearly and current BTO flats are building at the speed of 20k per year, so the backlog of flats still will remain until at least 2015.

5) Given current market turnmoil, even US may technically default, the europe PIGGS may soon facing fiscal trouble, the only AAA asset is SGD, and the best way to park the money for foreigner is Singapore property (no capital gain, total freedom of exiting the money, no restrictions)

6) In past 5 years, around 120k of PR are granted every year. Even the numbers are cut by half i.e. around 60k, around 20k of rentals/purchase still needed assuming 1unit:3occupants ratio
I note your point on liquidity, and agree that the low interest rate environment is probably going to be around for a time.

However excess liquidity only serves to muddy the waters in the short and at best medium term. Sustainable prices still need to be tied into local salaries.

If you are relying on external investor liquidity to prop up prices, then history has shown us that such capital is too flighty ie if the Sgd is expected to weaken against their home currency, they may decide to sell; if their home stock market crashes, and they get a margin call, they may sell; if the positive carry of buying and renting out you mentioned above reverses (eg if interest rates increase and/or rental decrease), they may sell etc.

If you are looking to invest, you are looking at two things : potential for positive carry and capital appreciation. Tough to imagine much capital appreciation when prices are at all time highs, over 100% above 2007 levels, with 53k private and ec units coming on stream next three years (where average private sales per year is about 7k in a normal year), and where prices are already out of whack by all fundamental measures. Positive carry? Well, in all likelihood, we will see this disappear as interest rates go up in time, and rental rates come down as the 53k units come TOP.

Wha does the smart money think? Well CDL, the largest developer in Singapore, warned investors during their results announcement yesterday that they expect a slowdown in the residential market going toward due to global uncertainty and to measures by the government to moderate housing prices.

What about banks? Well, Citi has said that they expect a large correction in 2013 due to supply overhang. BOAML issued a report predicting 10% fall in prices in 2012 and 15% in 2013.
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  #50 (permalink)  
Old 12-08-2011, 05:39 PM
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I note your point on liquidity, and agree that the low interest rate environment is probably going to be around for a time.

However excess liquidity only serves to muddy the waters in the short and at best medium term. Sustainable prices still need to be tied into local salaries.

If you are relying on external investor liquidity to prop up prices, then history has shown us that such capital is too flighty ie if the Sgd is expected to weaken against their home currency, they may decide to sell; if their home stock market crashes, and they get a margin call, they may sell; if the positive carry of buying and renting out you mentioned above reverses (eg if interest rates increase and/or rental decrease), they may sell etc.

If you are looking to invest, you are looking at two things : potential for positive carry and capital appreciation. Tough to imagine much capital appreciation when prices are at all time highs, over 100% above 2007 levels, with 53k private and ec units coming on stream next three years (where average private sales per year is about 7k in a normal year), and where prices are already out of whack by all fundamental measures. Positive carry? Well, in all likelihood, we will see this disappear as interest rates go up in time, and rental rates come down as the 53k units come TOP.

Wha does the smart money think? Well CDL, the largest developer in Singapore, warned investors during their results announcement yesterday that they expect a slowdown in the residential market going toward due to global uncertainty and to measures by the government to moderate housing prices.

What about banks? Well, Citi has said that they expect a large correction in 2013 due to supply overhang. BOAML issued a report predicting 10% fall in prices in 2012 and 15% in 2013.
Crystal ball gazers are usually wrong. I would go contrarian against their views, just as I did against those run-of-the-mill stock analysts and benefited lots.

Long property!
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