Who gets hurt in an economic downturn?

Dear condo singapore supporters,

With all this talk of recession and property price crashing, I think we have all failed to take into consideration the very basic question of who is the one who is most affected by an economic recession.

Here we are discussing about landed property and condo prices. However, if you actually go look at the job fairs, those that are fighting their fellow Singaporean for jobs are those who make up the bottom 50% of the population. They cannot even afford a 4 rm HDB flat let alone talk about upgrading.

Hence, is there really a strong case for private property prices to crash albeit drastically? How badly hit are those who belong to the top 20-30% or even 40% in Singapore?

How many property investors here use your credit card and only pay the minimum monthly installment?

My two cents worth is that the only group (in condo or landed) that will be hit in this recession are those who have overstretched themselves in the last upturn (i.e. those who bought into One Amber, Seafront@ Meyer, Sentosa Cove, reflections@keppel, marina bay residences, one shenton...etc) buying on DPS. But most of the other investors who are cash rich or make prudent investments, or are in stable jobs will be able to weather this recession just like any other.

So are we going to see 500psf D15, 600-700 psf D12, 800-1000 D9,10,11 and D3? i dun think so. Property prices might dip a little but not as drastically as imagined. Hence I would like to retract my earlier speculation that property market will go into a great downward spiral. For ppl like gfoo who have done their calculation and bought sail now, i tink its just as good an investment as i dun see the sail falling to 800 even 900 come end of 2009 or 2010.

i prefer to use PMEB as opposed to PMET (where B= Biz men and T=Technicians).

PMEBs is unlikely to approach CDC or similar kind of job fairs bcos the offerings are just not for them. Instead PMEBs will find jobs thru their own networks and friends.

Without doubt property prices will dip. i think this is a good time for those buying for own stay. For investors i think it less certain, bcos property as an asset class may not be attractive compared to other assets like stocks, commodities etc due to larger quantum required, especially if loans come into play. i m highly risk averse, feel dat in this time it is damn risky to invest thru borrowings...

my 2 cents :o

my 2 cents:

there are different levels in every economy, each with different spending/investment patterns and thus, different economic floors.

a well to do person will forgo his gallardo, and stay with his 635. an upper middle will not upgrade to a lexus, and stick to his camry. but they'll probably still be buying vuittons, on-sale-guccis, and eat at ding tai fung. this will be the same for property to an extent.

y are the suburbans like TQ, alexis, caspian doing quite well, even when the prices are high in historic terms? because you cannot forget the massive amount of liquidity sitting at the sidelines that were made from enblocs, overpriced hdb sales etc etc. and because such properties are the domain of the masses and heartlanders, there is little fluctuation.

the story is different for high-end properties, which were the domain of the speculators and fund houses. there is little trickle in the mass property segment - the rich and the funds cannot fathom staying or renting out such mass market stuff.

so back to my car analogy. a person in a certain strata cannot, and will not change his lifestyle drastically unless in dire circumstances. a GCB will not lelong to stay in a HDB. he might sell his GCB and downgrade to Ion Orchard to keep some cash handy. the hdb upgraders will exit while the going is good, and downgrade in terms of size in getting a condo, but maintain left-pocket-right-pocket. the upper middle class will see great value buys in the lower high-ends like the sail and balmoral. they probably have made good money in the previous years. property ownership is a singaporean penchant.

As long as there is no more funds or foreigners force selling their properties, prices will be stable. in the short term, i see mass market condos pricing up slightly, and high-ends pricing downwards slightly.

there will be a floor

but again, let me state that i have no doubt that prices will still correct down the road - it's the extent of which i am not sure. since i cannot predict the bottom, f@ck it.

all central banks are now inflating like crazy. MAS's 20k rule is another example. it is no longer deflation i fear, but inflation.

i will still be shorting the markets and putting my money in gold just in case

:)

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Originally Posted by august

i prefer to use PMEB as opposed to PMET (where B= Biz men and T=Technicians).

PMEBs is unlikely to approach CDC or similar kind of job fairs bcos the offerings are just not for them. Instead PMEBs will find jobs thru their own networks and friends.

Without doubt property prices will dip. i think this is a good time for those buying for own stay. For investors i think it less certain, bcos property as an asset class may not be attractive compared to other assets like stocks, commodities etc due to larger quantum required, especially if loans come into play. i m highly risk averse, feel dat in this time it is damn risky to invest thru borrowings...

my 2 cents :o

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an alternative view - this is the worst of times, the best of times.

In the US, the ones who borrowed beyond their means are getting their debt forgiven via taxpayer money. as long as enough people are in trouble with their mortgages, even in Singapore, measures for the civil good will be put in place.

chaos is the best and ONLY time the meek can become barons

Just to add, past downturns recovery mostly V-shaped ones. This time round it is likely to be U or L type.. means will drag out.


dun want to be baron lah, stay as peasant holding cash gd enough for me :o

My humble opinion:

The worse hit in this recession are the upper middle class. The upper middle class are those on the borderline between the upper and middle class, with net assets of about 10 to 50 millions.

These are the people very very very badly affected. They have no time to redempt their funds from the stock markets which crashed within a 3 months period. Now I estimate these people's net worth to be about 300K to 800K. Yes, those with a net worth of 50 million is about 800K worth now.

( All in US$ )

An example of how a fictitious upper middle class is hit:

Before crisis:
a) Value of home stayed in and other real assets: $2 million
b) Value of stocks and other financial apparatus: $10 million
c) Value of currency, commodities and cash: $800K
d) Estimated total income per month including bonus: $100K
e) Estimated expense per month: $20K

During early crisis, moving assets into other perceived safe havens to save net worth:
a) $1.5million
b) $3 million
c) $7 million
d) $50K
e) ($20K)

Further worsening of crisis, continue to switch assets around the different financial instruments and the value of most assets classes and safe havens decreasing:
a) $1million
b) $500k
c) $2 million
d) $50K
e) ($30K)

Current Balance Sheet:
a) $1 million
b) $10K
c) $500K
d) $50K
e) ($45K)

Worse case scenario:
a) $800K ( Locked and cannot sell )
b) $10K
c) $500K
d) $0
e) ( $30K) if continue current lifestyle

Ability to survive in a deep and prolonged recession : 6 months.



All in US$, Just My Make Believe Case

You sound like we are abt bottom up from our worse economic crisis. What u see now is just the starter , you still have your main course , dessert on your way.

Let talk abt this in coming Sep and see

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Originally Posted by Sean.G

Dear condo singapore supporters,

With all this talk of recession and property price crashing, I think we have all failed to take into consideration the very basic question of who is the one who is most affected by an economic recession.

Here we are discussing about landed property and condo prices. However, if you actually go look at the job fairs, those that are fighting their fellow Singaporean for jobs are those who make up the bottom 50% of the population. They cannot even afford a 4 rm HDB flat let alone talk about upgrading.

Hence, is there really a strong case for private property prices to crash albeit drastically? How badly hit are those who belong to the top 20-30% or even 40% in Singapore?

How many property investors here use your credit card and only pay the minimum monthly installment?

My two cents worth is that the only group (in condo or landed) that will be hit in this recession are those who have overstretched themselves in the last upturn (i.e. those who bought into One Amber, Seafront@ Meyer, Sentosa Cove, reflections@keppel, marina bay residences, one shenton...etc) buying on DPS. But most of the other investors who are cash rich or make prudent investments, or are in stable jobs will be able to weather this recession just like any other.

So are we going to see 500psf D15, 600-700 psf D12, 800-1000 D9,10,11 and D3? i dun think so. Property prices might dip a little but not as drastically as imagined. Hence I would like to retract my earlier speculation that property market will go into a great downward spiral. For ppl like gfoo who have done their calculation and bought sail now, i tink its just as good an investment as i dun see the sail falling to 800 even 900 come end of 2009 or 2010.

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Originally Posted by blackjack21trader

My humble opinion:

The worse hit in this recession are the upper middle class. The upper middle class are those on the borderline between the upper and middle class, with net assets of about 10 to 50 millions.

These are the people very very very badly affected. They have no time to redempt their funds from the stock markets which crashed within a 3 months period. Now I estimate these people's net worth to be about 300K to 800K. Yes, those with a net worth of 50 million is about 800K worth now.

( All in US$ )

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Am I missing something here?
Singapore upper middle income has assets USD 10-50millions & earn 100k a month? :scared-5:

No doubt property prices will tumble. But what type of property?

High end luxuary apts (D9, 10, 11, Marina) might have corrected down 20-30%, but still out of reach of middle class. So the floor might be reached already.

Mid-higher tier market (D12, D15) held mainly by local buyers and investors in the middle upper class. In economic recession, I believe they still have the power to hold on to their current properties (so long as they have not overstretched themselves). Hence prices might also fall but only slightly. So floor rate might be reached here already.

Mid end to mass market (D16, and popular estates like Simei, Tampines, Bishan, Tanjong pagar, Tiong bahru etc), prices defying this recession as many upgraders ae buying in.

So that's why I feel there are still alot of sideline liquidity as gfoo says. And that's why i feel the top 40% of Singaporeans might me hit, but its more of a case of " I have 2 mil, I lose 1 mil, still have one mil.

But the common man, the blue collar and technical worker, its more of "I have 2,000/mth, now I have lost that 2,000/mth and I have nothing" Hence i really feel that property prices have almost bottom out or at most drop abit more only. Cos the people that are in the condo market still have the means to survive.

Basically we also have to consider the value of money over time. In 1992, buying a corner terrace for 750K was a big deal. in 2002, 750K can only get you a mid end condo. Now 750K can buy what? HDB? Mass mkt condo but only 2 rm. So what I am trying to say is...i dun tink we can hope to buy a 3-4 rm condo for 750K even if this recession kills everyone.

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Originally Posted by PN

Am I missing something here?
Singapore upper middle income has assets USD 10-50millions & earn 100k a month? :scared-5:

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http://www.salary.sg/2007/watching-m.../#comment-2320

You can use the link for reference. Also, I would like to reiterate that my example is fictitious, just for example sake. There are also not many households that fall into this category. Finally, it only referred to those households that have heavily invested in equity. Not neccessarily apply to Singaporeans, JMHO.

As of today, still not too bad. The retrenchment nightmare has not really started in full force.

Things will be clearer when the retrenchment accelerates in the next few months. Whether you are white or blue collar you are not spared. Many companies are also freezing headcounts. This means that you lose you job & can't find an equivalent job or have to go for pay cut if you're still lucky to get a job.

Blue collar, no savings no job. Live in HDB may still can restructure loan with HDB. Daily expenses will be a big problem if can't find a job quickly.

Main pillar white collar live in HBD with some savings & no job. HDB may still help to restructure your loan. Savings will help temporally.

Dual income white collar in HDB/condo with some savings. One don't have job the other income can sustain until the other find a new job.

Main pillar white collar live in condo/landed with bank loan. If have some savings to last 1-2yrs to cover installment & daily expenses, still not so bad. If don't have much savings & cpf, prepare to face the bank knocking at your door.

Millionaires with lots of savings even if make some losses in stock, still ok to them. So long as he has not over-committed his investments. Otherwise, bank will be asking you over for a chit chat session.

I'm worried as well. That's why I say buying a property is not just about having money & mind, you really need GUTS to make such a big ticket purchase in this climate.

But doesn't mean that nobody should buy. There are still many who have done their homework and waited many years for this opportunity to come.
They will benefit from this crisis.

It's about risk taking. If you are prepared & have the resources to face the worst scenario, you're pretty much in control. This is calculated risk. But if you mis-calculated, you can be screwed as well.

For those who buy because others are also buying, good luck ......

Quote:

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Originally Posted by PN

Am I missing something here?
Singapore upper middle income has assets USD 10-50millions & earn 100k a month? :scared-5:

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exactly.. US50 mil is only a upper middle class ??? :doh:

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Originally Posted by blackjack21trader, 28 February 2009

http://www.salary.sg/2007/watching-m.../#comment-2320

You can use the link for reference. Also, I would like to reiterate that my example is fictitious, just for example sake. There are also not many households that fall into this category. Finally, it only referred to those households that have heavily invested in equity. Not neccessarily apply to Singaporeans, JMHO.

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These are 2007 figures. Any recent update?

the ones who gets hurt the most are those who OVER commit.

During normal/good times, paying $1000-$2000 cash for instalments is no big deal for most singaporeans(household). But when one gets retrench.....a $10 burger king happy meal is a big problem.

Wow BTOs loan servicing 4 years from now also need mid 1k - 2k

interesting that this thread started in early 09, when forumers are predicting a crash. Hope nobody acted on it.... would have lost money big time!:banghead:

same conversation is happening now.

What will happen in 2015, 3 years from now? Will we be having the same conversation?

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Originally Posted by House

the ones who gets hurt the most are those who OVER commit.

During normal/good times, paying $1000-$2000 cash for instalments is no big deal for most singaporeans(household). But when one gets retrench.....a $10 burger king happy meal is a big problem.

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BK got happy meal?