IMF flags risk of significant decrease in real-estate prices

[princess_morbucks]

http://www.todayonline.com/business/imf-flags-risk-significant-decrease-real-estate-prices

One of the risks the local financial sector could face is a significant fall in real-estate prices, said the IMF in its report on Singapore.
In the assessment, it noted that property prices are already past the 2008 peak and suggested that a 55 per cent fall in prices over three years is a risk.

While local property experts agreed that a correction is on the cards, they said a fall of that magnitude is highly unlikely.

Century 21 Singapore Chief Executive Ku Swee Yong said if prices started to fall very quickly, the Government would step in. “If there were two consecutive quarters of a 5 per cent drop, immediately, the alarm bells would start to ring.”
He noted that the Government had introduced initiatives to stabilise the property market and, if prices start to spiral downwards, some of the cooling measures brought in to curb price increases could be relaxed.
“Realistically, the only way prices could fall so fast is if there’s a global catastrophe.”

In a recent report, Goldman Sachs Global Investment Research noted that a fall in prices is definitely coming, but not at the rate flagged by the IMF.
“We believe home prices are on the precipice of a 10 to 15 per cent correction over the next three years, with rising interest rates the tipping point.”

But Mr Colin Tan, Head of Research and Consultancy at Suntec Real Estate Consultants, said the IMF risk-assessment numbers cannot be totally written off. “Prices have doubled since 2007, but income has not. I think, based on that fundamental, property prices should be 40 to 50 per cent lower than what they are now.”

To lower the impact of any major property-price correction, the IMF made a few suggestions, including encouraging over-extended households to reduce their leverage.
In its response to the report, the MAS noted that some measures have already been implemented to encourage borrowers to exercise financial prudence.

[indomie]

Let's say it comes true that in 3 years price down by 50%. What kind of economy would it be for sg?. Interest rate would be 6-7%, unemployment would be at 10-12%, iskandar would be down by 80% (if not 99%).

[blackjack21trader]

Told u guys before. Property prices crash is not immediate one. It will crash slowly over a span of several years. Last time before this bull was like 10 years slowly slowly crashed.... that is enough to be like slowly boiling a frog la.

[blackjack21trader]

Many do not understand the property market. How come economy, stock markets and interest rates can affect the property market so drastically in the previous crashes.

It is because property is a LEVERAGED instrument. Let me give u an example.

Say the market equilibrium price is S$1million.
But a fool comes along and buy it at S$2million. Logically, the transaction should not close. However, with leverage, this fool can borrow from the bank the extra S$1million and complete the deal.

This leverage portion is what that worries me. And it varies directly in proportion to the rest of the other markets.

[blackjack21trader]

You want to know the true meaning of "LEVERAGE " ? I will enlighten you in my own language:

It means " NO MONEY CANNOT AFFORD BUT CAN BORROW FROM THE BANK TO BUY"

get it ?

[lionhill]

dropping 55% means being even cheaper than 2007.

IMP should sack such kind of experts.

[blackjack21trader]

because this Leverage or "NO MONEY CANNOT AFFORD BUT CAN BORROW TO BUY " portion should not be there in the market in the first place. It therefore works like the contra instrument in the stock market. It provides liquidity when times are good, but it will become a devil that soaked up the liquidity when times are bad.

[indomie]

dropping 55% means being even cheaper than 2007.

IMP should sack such kind of experts.
Maybe MR.B is working for IMF now

[princess_morbucks]

Don't think the prices will come down anytime soon.

QE is going to be continued, and likely SG will follow the low interest rate.
Since IMF said our financial sector is healthy, so with the continued low interest rate, our property market will continue to be healthy la.

[onglai]

risk nia la... take aeroplane oso got risk. drive car oso got risk...

basically = gong jiao wei...

[indomie]

because this Leverage or "NO MONEY CANNOT AFFORD BUT CAN BORROW TO BUY " portion should not be there in the market in the first place. It therefore works like the contra instrument in the stock market. It provides liquidity when times are good, but it will become a devil that soaked up the liquidity when times are bad.
So when crash happens... Can sg gov print more money like the FED to provide stimulus?

[GIG]

Don't think the prices will come down anytime soon.

QE is going to be continued, and likely SG will follow the low interest rate.
Since IMF said our financial sector is healthy, so with the continued low interest rate, our property market will continue to be healthy la.


Even in continuing low interest rate...if property prices do not come,
More cooling measures will be introduced.
What a forumer posted on another thread that historically prices are not related to interest rates is correct.
Sg Govt has all the power.

[mermaid]

So when crash happens... Can sg gov print more money like the FED to provide stimulus?

can, but it will only helps if they deposit the $ printed into every citizen's bank account. only thr tat we can help our govt to support their economy when it crashes :D

[PC08]

Don't think the prices will come down anytime soon.

QE is going to be continued, and likely SG will follow the low interest rate.
Since IMF said our financial sector is healthy, so with the continued low interest rate, our property market will continue to be healthy la.

The in-thing now is not predicting QE taper or QE to be continued. Those are old thoughts ... INCREASE RATE OF PRINT PLEASE!! STI looks weird without the euphoria wave. GO GO GO!!! :D

Euro Pacific Capital boss Peter Schiff is well known for his bold and often accurate predictions. Now he is saying that far from reducing QE money printing the new Fed chairman Janet Yellen will rev up the printing presses and that will boost gold prices ’straight up’.

Over the weekend, China’s inflation, industrial production and retail sales numbers for the month of October will be released. China’s much awaited Third Plenum meeting gets underway tomorrow where DB’s Jun Ma expects a wide ranging package of reforms will follow, in terms of industry deregulation, financial liberalisation, reforms to land titles, state-owned enterprises and social security. Our take on this is that there will be lots for the market to get excited about in the reforms but that it will not necessarily be easy to implement them successfully. Our GEM equity strategist JP Smith yesterday reiterated his bearish view on China and most of the EM complex. If he's correct Yellen and Draghi are going to have interesting 2014s with the provocative thought being that Yellen may actually have to increase QE.

Marc Faber: Basically, we will have next year a new FED Chairman, Janet Yellen. In order to gain some credibility, she may decide, as the FED Chairman, to implement a cosmetic tapering that would be, say, $10 billion a month or $20 billion a month. In general, the asset purchases by the FED will not be reduced, but actually increased.

[PC08]

Don't speculate too much.

Enjoy your time with your family and friends! What will come, will come. No point stressing over something you've no control over.

[princess_morbucks]

Even in continuing low interest rate...if property prices do not come,
More cooling measures will be introduced.
What a forumer posted on another thread that historically prices are not related to interest rates is correct.
Sg Govt has all the power.

Even if the government introduces more CM, the financially prudent ones will likely to be less affected.
As long as the interest rate remains low, the property market here will remain healthy.

[sgbuyer]

Even in continuing low interest rate...if property prices do not come,
More cooling measures will be introduced.
What a forumer posted on another thread that historically prices are not related to interest rates is correct.
Sg Govt has all the power.


Not true, they can only control either money printing or the exchange rate and not both.