View Full Version : Forbes : Singapore economy headed for Iceland style Meltdown
princess_morbucks
14-01-14, 09:33
http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown/
One thing other than the talk abt crash. the article never mention that face iceland crash was caused by the government and businessman taking huge risk and the citizen borrow to the hilt.
with all the cooling measures. as well as the LTV and TDSR limits would limit the exposure of the banks. Also the goverment have been prudent and thats why we need to have a strong reserver to back it.
on the surface the article try to draw parallel of iceland n Singapore but we are also not the same as iceland in many scenarios.
As long the policies continue to be prudent there if the slow down hits. there might be some defaults. but as long there is no run on the banks the general economy will remain intact.
propertyhans
14-01-14, 11:24
look at the contributor bio. At the same time, the author also predicts that there is a bubble in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more........like that everybody can also predict future. Another attention grabbing contributor.
look at the contributor bio. At the same time, the author also predicts that there is a bubble in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more........like that everybody can also predict future. Another attention grabbing contributor.
The contributor is a bear writer. Almost everything he writes is negative about the global market. Bears everywhere :hell-hath-no-fury:
bargain hunter
14-01-14, 12:08
he's bullish on Japanese stock market. today nikkei is currently losing almost 500 points, lost 3% following the dow. :cheers1:
The contributor is a bear writer. Almost everything he writes is negative about the global market. Bears everywhere :hell-hath-no-fury:
thomastansb
14-01-14, 12:10
The article only states private condominium of 1 to 1.2M. More than 80% of the people stay in HDB and most people bought at 100 to 300k. What a lousy article.
One thing other than the talk abt crash. the article never mention that face iceland crash was caused by the government and businessman taking huge risk and the citizen borrow to the hilt.
with all the cooling measures. as well as the LTV and TDSR limits would limit the exposure of the banks. Also the goverment have been prudent and thats why we need to have a strong reserver to back it.
on the surface the article try to draw parallel of iceland n Singapore but we are also not the same as iceland in many scenarios.
As long the policies continue to be prudent there if the slow down hits. there might be some defaults. but as long there is no run on the banks the general economy will remain intact.
There is not much original insight - what is presented is basically a meshup of previous articles from various sources. There are circumstances that put Singapore in a much stronger position that iceland e.g. fiscally sound, +ve current account, local banks are very well capitalized, highly liquid
Mr Tharman is keeping a close watch on Singapore banking and financial industry. We can ask our MPs to pose this question in parliament for an official answer
The article only states private condominium of 1 to 1.2M. More than 80% of the people stay in HDB and most people bought at 100 to 300k. What a lousy article.
Yeah like i say this is 1 bias and not well research articles. Also Iceland downfall was due to government overlevarging and the fall of lehmen and bear trigged a default.
Singapore on the other hand are very careful with its expenses. ensure a solid reserve as well as many levels of protection.
Oh.. who is it I keep hearing Some C guy keep wanting to "raid the reserve?"
look at the contributor bio. At the same time, the author also predicts that there is a bubble in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more........like that everybody can also predict future. Another attention grabbing contributor.
He can claim bragging rights if any one of these come true, and then put on his bio that he predicted this and that... so lame
The trend seems to be back to basic nowadays.. Govt seems to be trading excess growth for votes.
The trend seems to be back to basic nowadays.. Govt seems to be trading excess growth for votes.
well the people want slow down they get a slow down.
But actually it will be " This is not the SLOW DOWN I want!!" Correction. People want a no change in life style but without need to work so hard. Yet after all the labour crunch… many will realized they have to become the labour or pay more for the labour they so much looks down on and despise.
well maybe good to slow and crash. then many in this forum who missed the boat can board. but when the crunch time comes will see who is man enough to board.
Also without a crash people don't seem to think all we have could be transient. maybe after a crash people will appreciate and value what we have more.
Let's just hope that whatever the government have done will prevent a meltdown similar to what happen in Iceland. If that happen, it will affect everyone and not just those property owners. So seriously, let's hope that day will not come.
source: http://app.mof.gov.sg/reserves_sectionone.aspx
============================
Q5. Why does the Government not disclose the overall size of our reserves?
MAS and Temasek publish the size of the funds they manage. As of 31 March 2013, the Official Foreign Reserves managed by MAS was S$320 billion, and the size of Temasek’s portfolio was S$215 billion.
============================
so, i think dun need worry too much ah, ah gong has enuff moola for small / minor setback? :D
Does anyone know how deep is Temasek reserve. What are those small property players n developers to them? The key for govt now is to win votes.
http://m.sbr.com.sg/residential-property/news/property-investment-sales-predicted-drop-21-23b-year
Capital appreciation days may be over.
Let's just hope that whatever the government have done will prevent a meltdown similar to what happen in Iceland. If that happen, it will affect everyone and not just those property owners. So seriously, let's hope that day will not come.
the glaring flaw of the commentary is to analyze the two countries as isolated economies and consequent conditions/factors.
case in point, iceland itself is not connected extensively to the global economy, unlike Singapore. secondly, the characteristics of our economy and industries are not exactly similar - they export fish, we export semicon chips and petroleum products.
while the article is not hogwash, it definitely isn't as critical and insightful as some may think or claim. verdict: useful to know, but inconsequential
Worse than A Levels Econs standard. Cut and paste effort.
princess_morbucks
14-01-14, 22:12
http://www.channelnewsasia.com/news/business/s-pore-is-not-facing-a/954240.html?cid=FBSG
Channel NewsAsia @ChannelNewsAsia 7m
Responding to a Forbes article, Monetary Authority of #Singapore says Singapore is not facing a credit bubble http://cna.asia/1eGblgq
SINGAPORE: The Monetary Authority of Singapore (MAS) on Tuesday said Singapore is not facing a credit bubble that puts the country or its banking system at any risk of crisis.
This was in response to media queries after a Forbes article claimed that Singapore is facing a dangerous credit bubble, fuelled by ultra-low interest rates.
The article cited several risks including Singapore's ratio of household debt to GDP, rising property prices and potential crisis in the banking system should non-performing loans increase when interest rates start to normalise.
The lengthy article dated January 13 was titled "Why Singapore's Economy Is Heading For An Iceland-Style Meltdown." It was written by a contributor who claims to be an economic analyst.
The MAS emphasised that serious observers and investors are not in doubt about Singapore's financial health.
On the unusually low global interest rates, the MAS said it is clear that they have stimulated credit growth and an increase in property prices in recent years.
However, decisive steps have been taken to cool property demand and prevent excessive leverage.
The central bank also highlighted three facts which it said 'stand out clearly'.
First, the property market is now stabilising and new housing loans have also been declining.
Private home prices in Singapore rose by one per cent in 2013, with a 0.8 per cent decline in the fourth quarter. This is after a three per cent price increase in 2012 and annual increases averaging 12 per cent per year during 2010-2011.
The MAS added that new housing loans fell by 35 per cent on year in Q3 2013.
Second, household balance sheets are on the whole strong and property asset values are significantly higher than the debts incurred.
The MAS explained that "the average loan-to-value ratio of outstanding housing loans stands at a healthy 47 per cent as of Q3 2013, implying a large buffer in asset values”.
Lastly, the MAS said Singapore's financial system is robust.
It cited a recent assessment program by the International Monetary Fund that showed Singapore's financial system would remain sound even under severe stress scenarios which include a sharp increase in interest rates - together - with a steep decline in property prices.
The MAS said Singapore's banks are resilient, with strong financial and capital positions.
The MAS said Singapore's triple-A rating from all the major rating agencies is not an aberration and that it attests to the country's economic and financial strength, including its sizeable foreign reserves.
- CNA/fa
Mas come out this statement, make many bears angry:D
Mas come out this statement, make many bears angry:D
此地無銀三百兩...................
Tharman barred more people from joining the life debt slaves by introducing debt ratio, while those already carrying those burden continue to pay lor even with capital depreciation. If this don't give the desired results, expect more curbs on foreigner ownership lor (temporary bullshit) That's the game.
The fundamental difference between Singapore and Iceland is that Singapore is running a ship with budget surplus and Singapore is still country of saver rather than borrower and thats the reason why Singaporeans can still afford to buy property even with 40% down payment.
Also Singapore is a country that has got high number of expats and foreigners which will help support the pricing of property, unless we have reason to believe that suddenly Europe and USA will slash the income tax policy and economy will start to grow at high single digit.
Many analyst fail to understand that Singapore government doesnt run this country like their, PAP run this country like a company and thats the reason why Singapore can become Singapore today.
What surprise me is that the same analyst doesnt even mentioned HK in the same report.
After what Temasek did to Muddy Waters, I am sure many will be trying to proof that they are better.
Iceland’s jailed bankers ‘a model’ for dealing with ‘financial terrorists’
http://rt.com/op-edge/iceland-bank-sentence-model-246/
http://www.youtube.com/watch?v=5R7DczXyIcA
http://www.youtube.com/watch?v=YH0_JQW--gc
bargain hunter
15-01-14, 08:29
http://en.wikipedia.org/wiki/Jesse_Colombo
author is a 27 year old young boy.
and gahmen responded to him. :doh:
Just like musical chairs. Once music stop, the standing will take d burden.
propertyhans
15-01-14, 08:35
http://en.wikipedia.org/wiki/Jesse_Colombo
author is a 27 year old young boy.
and gahmen responded to him. :doh:
Sigh. The boy got what he wanted. Now more people will click and view his articles. And then he can demand higher fees for his anal.. analysis.
Mas come out this statement, make many bears angry:D
Yah lor...Iceland, Greece, Spain, Italy are so badly manage....
http://en.wikipedia.org/wiki/Jesse_Colombo
author is a 27 year old young boy.
and gahmen responded to him. :doh:
it is not the age of the author that mattered, but the platform from which the article was released. Forbes is has global repute and so there is a need to refute flawed analysis.
it is not the age of the author that mattered, but the platform from which the article was released. Forbes is has global repute and so there is a need to refute flawed analysis.
When people say US market is going to crash, does FED come out and say "Don't worry, we are ok?" If it is not true, you will not even be bother with it.
Just like if you are a slim guy and someone say you are super fat, as fat as a pig.. Will you talk back or just smile at the stupid comment?
When people say US market is going to crash, does FED come out and say "Don't worry, we are ok?" If it is not true, you will not even be bother with it.
Just like if you are a slim guy and someone say you are super fat, as fat as a pig.. Will you talk back or just smile at the stupid comment?
whether u are fat or slim, nobody give a hoot. but any article dat has the potential to shake confidence on our economy shd be refuted, coz its our rice bowl.
how to happen ... we are triple A status ...
When people say US market is going to crash, does FED come out and say "Don't worry, we are ok?" If it is not true, you will not even be bother with it.
Just like if you are a slim guy and someone say you are super fat, as fat as a pig.. Will you talk back or just smile at the stupid comment?
well, bro onglai has spoken my mind.
you must consider the potential consequences of the article. example if the article was published on the TRE platform, i doubt anyone in the financial world will take it seriously
however, the article came from Forbes so that makes it a big deal
MAS says no bubble
it seems like current pace is steady (stagnant) with slow growth
negative growth and major correction = bubble burst (which is not happening)
is it time to enter now? :beats-me-man:
2-3 years later ... price will skyrocket after taking a break :D
well, bro onglai has spoken my mind.
you must consider the potential consequences of the article. example if the article was published on the TRE platform, i doubt anyone in the financial world will take it seriously
however, the article came from Forbes so that makes it a big deal
True also... Forbes quite famous... How could they let this type of incorrect report to come out.. I feel MAS should sue them.
When people say US market is going to crash, does FED come out and say "Don't worry, we are ok?" If it is not true, you will not even be bother with it.
Just like if you are a slim guy and someone say you are super fat, as fat as a pig.. Will you talk back or just smile at the stupid comment?
I will be very concerned and check if the perpetrator eye sight got problem or not.
True also... Forbes quite famous... How could they let this type of incorrect report to come out.. I feel MAS should sue them.
eh, on what basis ah? you can't sue flawed analysis. or else, all economists and columnists will be too scared to work
proud owner
15-01-14, 15:13
how to happen ... we are triple A status ...
Germany used to have so many AAA rated banks ... now left how many ?
rymccondo77
15-01-14, 15:29
Just because it is Forbes, doesn't mean every article in the magazine is a good or accurate article.
Just because it is Forbes, doesn't mean every article in the magazine is a good or accurate article.
World is full of short sellers, currency manipulators, libor rate fixers. Conning each other for a buck is justified.
Just because it is Forbes, doesn't mean every article in the magazine is a good or accurate article.
i disagree with you. Precisely because Forbes is Forbes and for its hard-earned reputation, the organization should ensure whatever it publishes doesn't tarnish its brand
proud owner
15-01-14, 15:59
i disagree with you. Precisely because Forbes is Forbes and for its hard-earned reputation, the organization should ensure whatever it publishes doesn't tarnish its brand
do you mean to say that Forbes would have done its check on the validity of this article ?
do you mean to say that Forbes would have done its check on the validity of this article ?
the editor should have. well, the article isn't erroneous factually or slanderous. i find that the scope and breadth are too narrow and hence, the analysis is flawed
Germany used to have so many AAA rated banks ... now left how many ?
Depends on whether the rating is manipulated.
SG's reserve is real stuff.
proud owner
15-01-14, 16:33
Depends on whether the rating is manipulated.
SG's reserve is real stuff.
the usual S and P Moodys lor
if we want to trust these rating agencies ... then we should trust them all the way
why suspect that others getting AAA maybe manipulated ?
other will also think our AAA is manipulated right ?
rymccondo77
15-01-14, 16:35
i disagree with you. Precisely because Forbes is Forbes and for its hard-earned reputation, the organization should ensure whatever it publishes doesn't tarnish its brand
1) My point is that we shouldn't accept or believe everything that is written in a magazine (for example the analysis in this article is flawed), no matter how reputable the magazine / publication is.
And yes, agree that Forbes should ensure whatever it publishes doesn't tarnish its brand.
2) This just reminded me of Enron. Reputable business magazines (e.g. Fortune) had glowing articles about Enron's success but in the end it all turned out to be a big lie by Enron. In defense of the magazines / writers of the articles, they (and many others too) were deceived by the Enron senior management.
Wunderkind
15-01-14, 20:36
SINGAPORE: The Monetary Authority of Singapore (MAS) on Tuesday said Singapore is not facing a credit bubble that puts the country or its banking system at any risk of crisis.
This was in response to media queries after a Forbes article claimed that Singapore is facing a dangerous credit bubble, fuelled by ultra-low interest rates.
The article cited several risks including Singapore's ratio of household debt to GDP, rising property prices and potential crisis in the banking system should non-performing loans increase when interest rates start to normalise.
The lengthy article dated January 13 was titled "Why Singapore's Economy Is Heading For An Iceland-Style Meltdown." It was written by a contributor who claims to be an economic analyst.
The MAS emphasised that serious observers and investors are not in doubt about Singapore's financial health.
On the unusually low global interest rates, the MAS said it is clear that they have stimulated credit growth and an increase in property prices in recent years.
However, decisive steps have been taken to cool property demand and prevent excessive leverage.
The central bank also highlighted three facts which it said 'stand out clearly'.
First, the property market is now stabilising and new housing loans have also been declining.
Private home prices in Singapore rose by one per cent in 2013, with a 0.8 per cent decline in the fourth quarter. This is after a three per cent price increase in 2012 and annual increases averaging 12 per cent per year during 2010-2011.
The MAS added that new housing loans fell by 35 per cent on year in Q3 2013.
Second, household balance sheets are on the whole strong and property asset values are significantly higher than the debts incurred.
The MAS explained that "the average loan-to-value ratio of outstanding housing loans stands at a healthy 47 per cent as of Q3 2013, implying a large buffer in asset values”.
Lastly, the MAS said Singapore's financial system is robust.
It cited a recent assessment program by the International Monetary Fund that showed Singapore's financial system would remain sound even under severe stress scenarios which include a sharp increase in interest rates - together - with a steep decline in property prices.
The MAS said Singapore's banks are resilient, with strong financial and capital positions.
The MAS said Singapore's triple-A rating from all the major rating agencies is not an aberration and that it attests to the country's economic and financial strength, including its sizeable foreign reserves.
rymccondo77
16-01-14, 11:18
Think this article published in the The Independent is (much) better than the Forbes one:
http://theindependent.sg/academic-dismisses-forbes-commentary-but-says/
Almost everything mentioned in this article applies to USA!
Wow! why he is not telling us that USA is having the greatest bubble of all time?! Instead of "USA", he put "Singapore"! :doh:
If USA is not having a bubble means there is no bubble in Singapore loh, especially Singapore has budget surplus compared to USA huge budget deficit and Singapore has huge reserves per capita compared to USA govt owing many people huge debts per capita!
http://www.forbes.com/sites/jessecolombo/2014/01/13/why-singapores-economy-is-heading-for-an-iceland-style-meltdown/
Almost everything mentioned in this article applies to USA!
Wow! why he is not telling us that USA is having the greatest bubble of all time?! Instead of "USA", he put "Singapore"! :doh:
If USA is not having a bubble means there is no bubble in Singapore loh, especially Singapore has budget surplus compared to USA huge budget deficit and Singapore has huge reserves per capita compared to USA govt owing many people huge debts per capita!
hahaha.. How can you compare Singapore to US? Are u trying to insult US? We cannot compare ourselves to countries like US, China or even EU. As we are really different from them.. They are bigger and withstand bigger shock to their economy. We are small and need to be careful about what we do as once we fall, we have nothing to bring us back standing again. The world can do without SGD but cannot do with USD (At least at the moment)
But I feel the MAS have taken decisive step to ensure a bubble does not happen or at least will not burst and blow us all up.. I also believe that Singapore government have taken necessary step to ensure the healthy growth of the economy.
divert attention so dow can go to new high high ...
bargain hunter
16-01-14, 19:57
http://www.forbes.com/sites/jessecolombo/2014/01/16/its-not-a-bubble-until-its-officially-denied-singapore-edition/
game on, forbes guy rebutt the mas rebutt. :ashamed1:
I can also say that this guy cheated my money, and when he denied, viola! Now I can say that he didn't actually cheat my money until he officially denied! :doh:
http://www.forbes.com/sites/jessecolombo/2014/01/16/its-not-a-bubble-until-its-officially-denied-singapore-edition/
game on, forbes guy rebutt the mas rebutt. :ashamed1:
This is what I call professional. He rebutted every individual point that MAS mentioned with figure and past history. I hope MAS can come out with a more stronger rebut based on figure and history rather than just say "Serious Observer"..
And he have predict the 2008 crisis?
He predicted crisis every year right? A broken clock also right twice a day isn't it? :p
This is what I call professional. He rebutted every individual point that MAS mentioned with figure and past history. I hope MAS can come out with a more stronger rebut based on figure and history rather than just say "Serious Observer"..
And he have predict the 2008 crisis?
http://www.forbes.com/sites/jessecolombo/2014/01/16/its-not-a-bubble-until-its-officially-denied-singapore-edition/
game on, forbes guy rebutt the mas rebutt. :ashamed1:
Look at the comments at the bottom of the page really make me boil blood. :simmering:
Alot of people want to see the fall of Singapore. how stupid r the comments, singaporeans talking down Singapore??
Allthepies
16-01-14, 21:06
Look at the comments at the bottom of the page really make me boil blood. :simmering:
Alot of people want to see the fall of Singapore. how stupid r the comments, singaporeans talking down Singapore??
Yes it really makes my blood boil too... these are Singaporean traitors, they only know how to condemn Singapore.... :doh::doh::doh::doh:
proud owner
16-01-14, 21:12
Look at the comments at the bottom of the page really make me boil blood. :simmering:
Alot of people want to see the fall of Singapore. how stupid r the comments, singaporeans talking down Singapore??
I don't think that's what Bargain hunter meant
I don't think that's what Bargain hunter meant
Hi bro, i not talking about bargain hunter. I am talking about the link.
Bargain hunter is a respected forumer here. :)
Wunderkind
16-01-14, 22:03
I am sure the Forbes' report makes Singapore sit up and think hard whether we are heading into a credit bubble.
The government has anticipated the potential risks of a credit bubble quite some time ago due to the massive QE program in US that pushes interest rates to near zero level.They have ensured that our local banks are able to withstand the stress tests for credit default and implemented measures to curb excessive loan borrowings.
Although the Forbes report is not without its merit as a warning of a possible credit bubble to our Singapore government, we should not be overly alarmed. Our economy is resilient and our reserves are strong. We should be able to ride out the economic challenges like we have done in the last Asian financial crisis.
The way forward is for Singapore to plan for the worst and hope for the best which we have already done. Keep our economy going. Raise productivity. Ensure our reserves are preserved well. Stabilize the property and stock markets. Keep inflation in check. Let's not forget the hope for the best and get ready to sail farther when the US and world economies start to move ahead with growth.
Southbank 2 Bedroom for sale @ SGD 535,000.
I am sure the Forbes' report makes Singapore sit up and think hard whether we are heading into a credit bubble.
The government has anticipated the potential risks of a credit bubble quite some time ago due to the massive QE program in US that pushes interest rates to near zero level.They have ensured that our local banks are able to withstand the stress tests for credit default and implemented measures to curb excessive loan borrowings.
Although the Forbes report is not without its merit as a warning of a possible credit bubble to our Singapore government, we should not be overly alarmed. Our economy is resilient and our reserves are strong. We should be able to ride out the economic challenges like we have done in the last Asian financial crisis.
The way forward is for Singapore to plan for the worst and hope for the best which we have already done. Keep our economy going. Raise productivity. Ensure our reserves are preserved well. Stabilize the property and stock markets. Keep inflation in check. Let's not forget the hope for the best and get ready to sail farther when the US and world economies start to move ahead with growth.
we don't need this report to inform us that singapore's economy was and is at risk of overheating. the writing's on the wall
when my TEH-O-KOSONG-PENG costs $1.50 at an un-airconditioned hawker centre
when land auction and property prices keep skyrocketing the past few years
when we can't find any more decent sized apartments, for family living, below $1m
when we start seeing real old terrace houses going at no less than $2m, regardless of location
when we see low wage income earners suffer a real wage decline over the last decade, while the number of millionaires keep going upif that guy thinks Singapore is going to have a bad time, he failed to look just north of our borders where our neighbour is really suffering now.
does anybody know why singapore government raise the deposit guarantee during 2008-2009 ?
Look at the comments at the bottom of the page really make me boil blood. :simmering:
Alot of people want to see the fall of Singapore. how stupid r the comments, singaporeans talking down Singapore??
are you equating pap government with singapore?
talking down pap govt = talking down singapore?
Mr Ku Swee Yong, one of the most respected property guru, made the comments as follows. The household leverage is not as bad as thought.
"
Dear Jesse
A few of the sources that you have quoted on the points about mortgages and household debt were debunked in this 2-part article published in October in Singapore’s Business Times.
Singapore’s overall Loan-to-Value ratio for all residential properties stand at 20% (many homes simply do not have loans against them).
The article is titled “Where is the excessive borrowing?”
For your reference.
http://www.btinvest.com.sg/blogs/2013/10/17/where-is-the-excessive-borrowing-pt-1/
http://www.btinvest.com.sg/blogs/2013/10/21/where-is-the-excessive-borrowing-pt-2/
"
I don't understand what is loan-to-value? If we have a drop of property price? What will be the loan-to-value?
And what does he mean by it is misleading to use Household-debt to GDP ratio? What is the main cause of the 2007-2012 US and Euro Crisis? I cannot believe people can forget about it so fast? I hope the government will take more step to ensure that we will not meltdown like Iceland... But if the government take this matter lightly, I feel we may have a problem
that's why property price DIE DIE cannot drop
it's a value chain that 1-support-another
just take a quick look of the mass-market (exclude the low-end and high-end)
resale hdb remains $400k-$600k
EC remains $700k-$900K
PC remains $1M-$1.5M
I don't understand what is loan-to-value? If we have a drop of property price? What will be the loan-to-value?
And what does he mean by it is misleading to use Household-debt to GDP ratio? What is the main cause of the 2007-2012 US and Euro Crisis? I cannot believe people can forget about it so fast? I hope the government will take more step to ensure that we will not meltdown like Iceland... But if the government take this matter lightly, I feel we may have a problem
I don't understand what is loan-to-value? If we have a drop of property price? What will be the loan-to-value?
And what does he mean by it is misleading to use Household-debt to GDP ratio? What is the main cause of the 2007-2012 US and Euro Crisis? I cannot believe people can forget about it so fast? I hope the government will take more step to ensure that we will not meltdown like Iceland... But if the government take this matter lightly, I feel we may have a problem
Well people all want crash mah.. so why worry? Crash good lot the people get what they want.
BlackRock Sees Revival of Asian Institutions’ Property Appetite
By Bei Hu
January 16, 2014 10:25 PM EST
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Asian institutions’ appetite for regional real estate investments has returned as they hunt for yield for their growing assets amid low interest rates, according to BlackRock Inc. (BLK), the world’s largest asset manager.
These investors are expected to deploy more money and a bigger percentage of their property allocations to Asia, especially in commercial real estate, Joseph Pacini, Asia-Pacific head of BlackRock’s alternative investors strategy group, told reporters in Hong Kong yesterday. He cited recent discussions with clients he declined to name.
“What has been surprising is that Asian real estate has not been part of the equation for a number of years,” said Pacini, whose group oversees $119 billion of assets globally, including investments in property, hedge funds, infrastructure, private equity, commodities and currencies. “Now it’s popping back up again.”
The U.S. Federal Reserve has kept interest rates near zero since December 2008, trying to bolster growth after a global financial crisis triggered the longest recession since the 1930s. Low interest rates have driven institutions such as government funds and insurance companies to seek higher yields from alternative assets including properties and infrastructure.
The Fed said last month it would keep its benchmark rate near zero “well past the time” that the unemployment rate falls below 6.5 percent. European Central Bank President Mario Draghi said in July rates would stay low for an “extended period.”
‘Huge Stress’
“We’re living in a low interest-rate environment so there’s more of a need for yield today,” said Pacini. “You compound that in Asia with the fact that they have a lot of capital that they have to invest, that’s a huge stress.”
The renewed interest represents a departure from the last few years when Asian institutions were focused on a few cities in developed markets in North America and Europe, Pacini said. These markets will probably continue to account for the bulk of new real estate investments because of their size, he said.
Time Warner Inc. sold its headquarters space at Time Warner Center in New York City’s Columbus Circle for $1.3 billion to a group led by Related Cos., which also included the Abu Dhabi Investment Authority and Singapore’s sovereign wealth fund GIC Pte.
China Investment Corp., the nation’s sovereign wealth fund, is in talks to buy Chiswick Park, a west London office development whose tenants include PepsiCo Inc. and Walt Disney Co., from Blackstone Group LP, a person with knowledge of the matter said in November.
To contact the reporter on this story: Bei Hu in Hong Kong at
[email protected]
To contact the editor responsible for this story: Andreea Papuc at
[email protected]
Cheap cheap 2 Bedroom @ Southbank for SGD 535,000.
Cheap cheap 2 Bedroom @ Southbank for SGD 535,000.
You selling?:D
princess_morbucks
24-01-14, 09:46
http://www.businesstimes.com.sg/premium/editorial-opinion/opinion/why-singapore-not-iceland-20140124
ON Jan 13, independent economic analyst and "anti-bubble activist" Jesse Colombo posted a lengthy commentary on www.Forbes.com (http://www.Forbes.com) titled "Why Singapore's economy is heading for an Iceland-style meltdown". To date, this has garnered more than 770,000 page-views, including from Singapore-based investors.
Mr Colombo argues that ultra-low interest rates have fuelled a "dangerous credit bubble" in the housing sector, where "Singapore's ratio of household debt to gross domestic product recently hit approximately 75 per cent . . . up from 55 per cent in 2010 . . . household debt has risen by 41 per cent since 2010, while household income has increased by only 25 per cent and wages by a paltry 15 per cent". Because "Singaporeans are going into debt to invest in property or buy more expensive houses than they can afford . . . Singapore's property prices have approximately doubled since 2004, and are up by 60 per cent since 2009".
Risks arise because "70 per cent . . . of Singapore's mortgages have floating interest rates". Singapore's recent GDP growth, disproportionately driven by construction and financial services, is unsustainable and "Singapore's bubble will most likely pop when the bubbles in China and emerging markets pop and as global and local interest rates continue to rise".
MAS's response
The Monetary Authority of Singapore (MAS) responded with a statement that noted:
First, "decisive steps have been taken to cool property demand and prevent excessive leverage", and "the property market is now stabilising and new housing loans have also been declining" (falling by 35 per cent year-on-year in Q3 2013).
Second, "household balance sheets are on the whole strong and property asset values are significantly higher than the debts incurred", with an average housing loan-to-value ratio of "a healthy 47 per cent".
Third, a recent International Monetary Fund (IMF) assessment concluded that Singapore's financial system would remain sound even with a sharp increase in interest rates and steep decline in property prices.
What happened globally?
Mr Colombo's overall thesis of a massive emerging market asset bubble fuelled by the US Federal Reserve and China's monetary stimulus following the 2008 global financial crisis is not new or original.
Economists understand that in a world of free capital flows, low interest rates in one country cause capital to move to other countries with higher interest rates, "chasing higher returns". The capital influx pushes up the currency of the recipient country, and lowers its real (after inflation) interest rate (because of the increase in money supply). This can fuel a domestic asset bubble (high, rapidly rising asset prices) especially in smaller economies where the flood of money has "not many places to go" and often ends up in real estate.
This happened in emerging markets like Brazil, Turkey and India, as well as Indonesia, the Philippines and Thailand, and in developed economies like Canada, Australia and New Zealand, all of whose floating currencies predictably soared.
A stronger currency helps to mitigate the inflation problem by lowering the cost of imports, but it also attracts even more capital inflow seeking to benefit from currency appreciation even with low interest rates. This is the well-known "trilemma of international finance": a country cannot simultaneously have currency stability, capital mobility and monetary policy autonomy (independence in setting interest rates according to the condition of the domestic macro-economy).
What happened in Singapore?
In Singapore, MAS did the right thing in not raising interest rates (to cool off local inflation and deflate an incipient property bubble) because this would simply have attracted even more "hot money" inflows, further fuelling asset bubbles. It allowed the currency to rise, which helped to combat imported inflation, though this hurt export-oriented manufacturing and services like tourism and education.
But unlike emerging markets which limited capital inflows through (IMF-approved) taxes and other restrictions, Singapore could not do that as its very lifeblood is free capital flows, especially in and out of the financial services sector.
Instead, MAS has imposed domestic regulatory constraints such as loan restrictions on the banking, housing and automotive sectors. These are already having an impact, as seen in the Q3 2013 decline of car and private residential housing sales and prices, which should continue.
What happens now?
But the MAS measures' success also depends on what happens in source countries of the capital inflows. The Fed's 2013 announcement that it would soon begin "tapering" its bond-buying or quantitative easing (QE) programme led capital to flow out of emerging markets, causing currency depreciation and interest rate increases in India, Indonesia, Brazil, Australia and other countries. This is a good thing, as it helps to deflate bubbles. But asset deflation also slows down economies through a "negative wealth effect" - as people's assets decrease in value, they feel poorer (or become bankrupt), so spend less.
The Fed is likely to taper very slowly, especially with Janet Yellen at the helm, so Singapore has time to let its asset bubbles deflate gradually, rather than crash suddenly. Interest rates should rise slowly, and the currency will depreciate gradually as the USD strengthens.
Singapore's "managed float" currency system and huge foreign exchange reserves (which can be used to purchase SGD to prop it up if necessary) protect it here: the SGD is not likely to drop by 15-20 per cent versus the USD in 2-3 months like the freely-floating AUD has. Singapore's financial sector is also pretty sound, given high domestic savings and deposit rates and generally conservative banking practices.
How did Colombo get it wrong?
Mr Colombo is correct on the market mechanism that leads to credit bubbles, but lacks knowledge of Singapore's policy and institutional environment. His statement that Singapore has a "25.38 average house price-to-income ratio" probably results from dividing private housing price by average national income. But the private housing market involves only the top 15-20 per cent of income earners, while the majority 80-85 per cent of homeowners have access to much cheaper HDB housing (though this is still expensive by world standards as a multiple of average incomes).
The numbers Mr Colombo himself refers to suggest that the problem is nowhere as severe as he suggests: he says that "almost half" of banks' credit portfolios are in "property-related loans", with "residential mortgages accounting for nearly a third of their overall loan portfolios", and MAS estimates that around 10 per cent of borrowers "may have overextended themselves to buy property". So, 10 per cent of 30 per cent of banks' loan portfolios, or 3 per cent, are potentially at risk.
But not all of those "at risk" are going to default (especially if they are foreigners who bought the property with USD and can repay their loans with fewer USD as the SGD depreciates). MAS also has the means to contain the problem, including (if necessary) persuading banks to roll over loans, and providing partial bailouts of borrowers or lenders.
Singapore's government debt is also not the problem that Mr Colombo says it is, given the decades-long practice of running huge annual budget surpluses and accumulating massive reserves (both of which may be criticised for other reasons, but do provide large buffers against any sudden credit implosion or capital flight).
So there's nothing to worry about?
Not quite. MAS's "average" housing loan-to-value (LTV) ratio of 47 per cent ignores the distribution of LTV. It is likely (given the booming property market of recent years) that a significant minority of mortgage-holders could have much higher LTVs, balanced by those (particularly wealthier, older mortgage holders) whose LTV is very low. Household balance sheets are also relatively illiquid, with 60 per cent of net worth derived from real estate and 17 per cent locked up in the Central Provident Fund (CPF).
How vulnerable a minority of households is to default depends on the (unpredictable) speed and size of interest rate increase and property value decline, which in turn negatively impact banks' loan portfolios. As the US subprime mortgage crisis showed, even a small minority of non-performing loans may be sufficient to trigger a broader financial crisis. Added to this, Singapore's economy now depends more heavily on the financial sector, which itself is now more open than during the Asian financial crisis of 1997.
What about China's influence?
Mr Colombo mentions China's reining-in of its credit bubble as another major risk for Singapore. The Chinese government is certainly serious about this, raising interest rates, restricting credit and allowing the yuan (CNY) to strengthen. But this process will be gradual. The government has already "eased on tightening" when nervous about the political consequences, while local authorities, the shadow banking system and state-owned banks have been very creative in combating the credit crunch.
This may not bode well for China's efforts to quickly rebalance its economy, but it helps slow down the retreat of Chinese hot money flows, much of which is already outside China. China's economic slowdown will reduce Chinese tourism, including casino tourism, into Singapore, but this will be partially countered by the increased purchasing power of a stronger CNY and a weaker SGD. Of greater concern would be a "hard landing" in China adversely impacting our commodity-exporting neighbours, especially Indonesia.
What should be done in Singapore?
The Singapore authorities might emulate China's policies to achieve a "soft landing". Embracing a more neutral market-driven stance on the currency would discourage bubble-fuelling hot money inflows based on appreciation expectations even when interest rates are low. Announcing lower long-run GDP growth targets would "reset expectations" and discourage future speculative bubbles, as would reducing over-reliance (including by GLCs) on construction, real estate and leverage finance (property loans) for GDP growth.
Besides reducing risk and volatility of the economy as a whole, such moves would also contribute to Singapore's cost-competitiveness (by limiting asset and goods-and-services price inflation), housing affordability (including the aspirations of some citizens for private housing), and productivity goals (by diverting capital from rent-seeking to value-creating enterprises). If housing expenses claim a smaller share of the family budget, more could be spent on other goods and services, encouraging entrepreneurship and perhaps even that elusive second child.
The bottom line
Singapore's financial sector and economy are not at risk of an "Iceland- style meltdown", as Jesse Colombo claims. Still, the market mechanisms on which his analysis is based are standard features of global capital markets, and fragilities and excesses do exist in our financial system. Consumers and investors can keep our money and its purchasing power safe by understanding and acting on a few simple principles: low interest rates (and high and rising property prices) do not last forever; excessive leverage (indebtedness for speculative purposes), like gambling, puts one at risk of losing everything; the government cannot protect and rescue us from all our behavioural excesses (that is, market risks exist in Singapore investments just as they do in other places - to expect otherwise is to court "moral hazard"); and the most secure way to make more money is to increase productivity from which sustainable higher incomes and real wealth flow. As a mature, developed economy that is now one of the world's richest as well as most open, we can no longer rely on future rapid GDP growth for recovery from a potential financial crisis.
Linda Lim, a Singaporean economist, is professor of strategy at the Stephen M School of Business at the University of Michigan; and James Cheng, a Singaporean MBA graduate from the same university, served as lead portfolio manager/CEO of Morgan Stanley Investment Management Singapore from 2006-12 and as senior adviser to the firm in 2013
You selling?:D
If you can travel back in time, Jun 2006. Moral of the story is 85 Billion a month for 2013, 75 Billion a month for 2014.......
http://www.wholesaledirectmetals.com/index.php/gold-blog/594-the-fed-just-guaranteed-9-gas-and-3800-gold/?bid=PopularArticles
The Fed Just Guaranteed $9 Gas and $3800 Gold
http://www.youtube.com/watch?v=fhGkCrxz-Us
Comparing iceland with singapore? Cant compare. Our banks are very strong. Totally different market n geog areas. Although sg is dependent on world economy, it is closer to the emerging economies n china.
http://www.youtube.com/watch?v=0-9tUqeZCAI
What happen when the world print money and Singapore don't.
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