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Thread: Facing up to the impending property market correction

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    Default Facing up to the impending property market correction

    http://www.todayonline.com/singapore/facing-impending-property-market-correction

    Tighter industry regulations could prevent Singapore's property market from collapsing

    Owning a condominium — or, for the really ambitious, landed property — is many a Singaporean’s dream. But anything that is not an hour’s commute from the city centre can be eye-wateringly expensive and out of reach for most of my generation (those born in the 1980s).
    Our predicament is not unique: Many citizens of major Tier 1 cities around the world experience the same challenges, and too many of them have also given up any hope of ever owning a house.

    In cities like London, where the average flat is estimated to cost 7.9 times the average household income (according to Demographia), an entire generation of 20-somethings is growing up only to find that, even in their 30s, their savings are still not enough for a down-payment on their first home.
    The situation is even more acute in cities like Sydney (8.3 times) and Vancouver (9.5 times) where, like in London, Hong Kong and Singapore, home prices have been bid up by inflows of foreign capital from investors seeking to park their wealth away from the relatively less stable regimes from which it was derived (such as the Middle East, China and Indonesia).
    The result is almost always increasing discontent and disenfranchisement among the local population and, in particular, the emerging middle-class of young professionals. This is the group who have not had the time to accumulate any assets to benefit from rising asset prices, and yet must bear the costs associated with this form of inflation.
    In Singapore, the problem is exacerbated by the pressures that our imported workforce exert — competition in the labour market depresses wage growth, while that same competition for scarce resources contributes to overall inflation for consumer goods, services and, yes, housing (although according to figures announced yesterday, this seems to have ameliorated — foreign buying in the private housing market fell from 17 per cent in 2011 to 7 per cent in the third quarter this year).
    Overall, this leads us to the current situation, where real wage growth is outstripped by the pace of inflation, and thus, people find themselves in prolonged servitude to the owners of capital and other economic rentiers, widening the chasm between the haves and the have-nots.
    WHAT GOES UP ...
    The question that naturally comes to mind is one of sustainability. How long can an environment of such extreme disparity and disconnect last before capital flows reverse, and prices revert to reflect the fundamentals of domestic incomes and affordability?
    The answer, if London and Sydney are anything to go by, is “very long, indeed” — but my suspicion is that Singapore’s market for private residential property is more likely than not to go through a period of significant correction in the next 12 to 18 months, along with much of the emerging markets.
    Experts and industry leaders such as Robert Shiller (Nobel-winning economist) and Larry Fink (CEO of BlackRock, the world’s largest fund manager) have expressed concerns about the “bubble-like” state of current global financial markets — bonds, equities and real estate — propped up by the unprecedented monetary expansion of global liquidity by major central banks, particularly the United States Federal Reserve and the Bank of Japan. Both Professor Shiller and Mr Fink have called on the Fed to begin tapering quantitative easing to take some froth out of the markets. Indeed, indications are that this may come as early as the first quarter of next year, thanks to stronger-than-expected US recovery.
    While a tightening of monetary policy is overdue (and probably healthy) for the US economy, such action has dire implications for the emerging markets, including city states such as Singapore and Hong Kong, where asset bubbles have built up as an indirect consequence of exceptionally low US interest rates.
    The withdrawal symptoms associated with weaning any economy off cheap credit are severe; asset prices could plunge to reflect the reduced willingness/ability for creditors to extend loans and for debtors to service them, and unemployment would likely spike as companies cut costs to preserve their profitability.
    KICKING THE DEBT HABIT
    As is the case with quitting any addiction, the initial stages are the most painful but also the most crucial, and the global credit binge since the onset of the 2008 financial crisis has created a population of “credit junkies” on an unprecedented scale.
    In my opinion, the world needs another severe financial crisis, because we do not seem to have learnt a key lesson from the previous one — you do not solve a debt problem by creating even more debt.
    Unfortunately, as figures from a recent report by Dutch bank ING show, total debt (that is, all forms of debt across both private and public sectors) relative to GDP has increased since 2011, having initially fallen from 2009. I guess old habits just die hard.
    A handful of friends and family have accused me of being somewhat sadistic, wishing for a purgative recession of sorts. However, I would argue that our artificial sense of prosperity is due to central bank largesse, which masks the true cost of capital, distorts economic incentives and plays havoc with price signals generated by a market-based system.
    Given access to artificially cheap money, inefficiencies are tolerated for longer and funds are diverted to unproductive rent-seeking activities, resulting in an economy driven by outsized, fundamentally unprofitable “zombie companies” and dominated by banking and property barons.
    If recent data from the Urban Redevelopment Authority are anything to go by, recent measures (like the Additional Buyer’s Stamp Duty, Total Debt Servicing Ratio and others) to cool the housing market may be working: Home prices rose at the slowest pace in six quarters. But unfortunately, prices are still rising.
    It is my belief that, even if Singapore’s private property market does not undergo correction, as I expect it to, the Government should engineer one by continuing to tighten credit conditions and industry regulations. It is worth taking a little bit of pain now if it means preventing a far uglier property market collapse in the future and setting us on the path towards a more stable, sustainable economy over the longer term.

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    The above was written by :


    Charles Tan Meah Yang - a Singaporean investment analyst.

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    He wants to buy it cheap?

    No government will engineer a crash...... Soft-landing maybe but not crash or correction.

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    Quote Originally Posted by solsys View Post
    He wants to buy it cheap?

    No government will engineer a crash...... Soft-landing maybe but not crash or correction.

    Government will engineer a crash in soft landing mode.
    Government letting people to cash out in orderly way.
    If many people cash out at the same time, it will be a crash.

    "An aeroplane will still be descending down the ground in soft landing mode no matter high it is"

    Meaning...prices can go down a lot but it will still not be a crash.
    Last edited by GIG; 13-11-13 at 15:08.

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    Quote Originally Posted by princess_morbucks View Post
    The above was written by :


    Charles Tan Meah Yang - a Singaporean investment analyst.


    the trend has always been the same ...


    his parents or even grand parents' generation would have felt the same way...

    but they managed ... WHY ? HOW ?

    those days ... 3 to 6 kids share 1 room ...

    now each child has his own ...


    if he is willing to live the same way his parents and grandparents lived, he would find it still manageable ..

    of course there were other stuff that the older folks didn't have ...cell phone, annual holidays, iPad, etc etc ...

    is he willing to forego all the luxuries ?

    if he is ...EVERYTHING will become affordable and manageable

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    Quote Originally Posted by solsys View Post
    He wants to buy it cheap?

    No government will engineer a crash...... Soft-landing maybe but not crash or correction.

    Hard to say. 2016 election coming, LHL promised cheaper BTOs.

    There're still more people buying HDB (including children of private property owners) and living in HDB than there are private property owners.

    At this point, only speculators and recent property buyers are worried about a price collapse. This number is not large, maybe only 100,000 people out of 2 million+ voters.
    Last edited by sgbuyer; 13-11-13 at 18:34.
    狮子王 (formerly blackjack21trader): READ MY LIPS: NO MORE CRASH FOR 60 YEARS.

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    n cities like London, where the average flat is estimated to cost 7.9 times the average household income (according to Demographia), an entire generation of 20-somethings is growing up only to find that, even in their 30s, their savings are still not enough for a down-payment on their first home.
    The situation is even more acute in cities like Sydney (8.3 times) and Vancouver (9.5 times)

    Question they have HDB?

    My yearly income SGD 44,000. SGD 44,000*7.9 = SGD 347,600 can buy HDB lah.

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    http://m.todayonline.com//commentary...-you-singapore

    charles.t.yang

    Why I’m coming back to you, Singapore

    In Singapore, as in life, change is the only constant. I am reminded of this fact every time I come home for Chinese New Year, looking out at the CBD skyline as I travel over the Benjamin Sheares Bridge.

    More recently, however, it is our politics that have undergone a fair bit of change, and my worry is that the path we are heading down is an all-too-familiar one that democracies lean towards over time — but one that Singapore cannot afford to follow.

    The saying “you don’t know what you’ve got until it’s gone” is particularly poignant for me. My grandfather, who practically raised me, passed away just before Chinese New Year, and it evoked strong feelings of regret and guilt, for not having spent more time with him while he was alive.

    The event was particularly distressing because I was unable to attend his funeral, being stranded in the United Kingdom, waiting for my visa to be renewed — a process that was already four months in, and would have taken two months more, if not for the unfortunate circumstances which enabled me to expedite my application.

    I never appreciated the importance of an efficient public sector, until I actually found myself at the mercy of such inefficiency in a foreign land; such woefully long waiting times are unheard of in Singapore, and even if some might protest that standards are slipping across quasi-public services such as SingPost and SMRT, at least we appear to be addressing these issues, which is more than I can say for my temporary country of residence.

    MOVING THINGS FORWARD

    Undoubtedly, it will take time to implement improvements and, yes, the populace will suffer certain costs in the meantime as a result of these policy shortfalls. But hindsight is 20/20 and it is all too easy to criticise.

    I am not saying that we should “cut the Government some slack” —we have a right to expect more from those elected to public office, and as public servants they should not be beyond reproach when they let us down. However, the time for protest is done, and the time for constructive dialogue is now; the electorate and the elected alike need to engage to move things forward instead of allowing populist rhetoric to set us back.

    There are two points I would like to make: One, Singaporeans should stop making emotionally-charged, one-sided complaints if they are unwilling to offer pragmatic suggestions/solutions and defend them vigorously against scrutiny. And two, politicians need to avoid making unilateral decisions without due communication to the electorate; they too must be prepared to justify and defend their policies instead of waving off concerns.

    On the first point, an interesting anecdote of a conversation with a taxi driver comes to mind. The encik began his tirade with the usual lines about inflation, immigration and income disparity and concluded that the Government was conspiring to subject the masses to a vicious circle of debt and depressed wages.

    To be fair, I have yet to meet a taxi driver that did not harbour some misgivings about the “gahmen”, but what struck me was that I had heard all this just shortly before, from my friends, who shared his sentiment despite coming from what some might consider a different socio-economic strata.

    “Stay in the London, lah,” the cabby advised, espousing the virtues of Europe, to which I countered with points about high tax rates, crumbling infrastructure, rising unemployment and an unsustainable, widely-abused welfare system (to name a few).

    I prodded further, “so, what do you think the Government should do?”, hoping he would share some of his insights with me. The response, however, was classic. “We already pay the MPs so much money! Why should we also do their jobs for them?” — which I have come to understand is code for “I don’t know either, but I’m just unhappy with the status quo”.

    This attitude, in my opinion, is plain wrong. If we, the citizens, want to be treated like adults, we have to stop behaving like petulant children. One of the Government’s functions is to improve the lives of its people, and much like a visit to the doctor’s, feedback is a vital part of the process.

    A CLOSER LINE OF COMMUNICATION

    On the second point, I believe that politicians need to be more upfront and maintain a closer line of communication with the people.

    Gone are the days when the Government could claim intellectual and moral superiority as “philosopher kings”. An increasingly educated and politically aware population demands more say and respect than that.

    In this vein, I found reassuring Prime Minister Lee Hsien Loong’s acknowledgement of the changing political landscape, in an interview in The Washington Post last week. “It’s a different generation, a different society, and the politics will be different. We have to work in a more open way. We have to accept more of the untidiness and the to-ing and fro-ing, which is part of normal politics,” he said.

    A good analogy, perhaps, is that of one’s journey towards maturity. We all start out young and vulnerable, and in these formative years, benefit from a strong, if often controversial or unpopular, authority figure.

    But as time goes by, greater autonomy must be given, and the relationship shifts from one of pure instruction to mutual consultation. While I would not go so far as to let referendums dictate policy direction, the introduction of a regularly-scheduled, televised forum along the lines of BBC’s Question Time could be something to consider.

    Another issue to consider is that of social justice. It is imperative that we not continue pushing blindly for economic growth — as several leaders have acknowledged — but to consider how the distribution of that growth impacts the stability and, therefore, sustainability of our ecosystem.

    The Government has a duty to bridge the wealth divide by extending short-term transfers (such as taxes on the rich, subsidies for the poor) so as to preserve our long-term ideology, that of levelling the playing field for a truly meritocratic society.

    More fundamentally, the Government must demonstrate that they understand what their role entails — they are there to inspire, to lead and to empower, but ultimately, to serve.

    Small gestures to help make everyday life easier may seem pointless to the privileged, but can make a significant difference to middle- and low-income households: One idea (since taxis are expensive and cars now priced out of the reach of many) is to give all Singaporeans access to free public transport by giving them special, non-transferable EZ-Link cards.

    But we must never take what we have for granted.

    The never-ending torrent of news about economic despair and political turmoil across the world serves as a reminder of what an enviable position we occupy in the global context, and how fragile and fleeting success can be when met with complacency and a sense of entitlement.

    Ours is a position that has been achieved through the hard work and tireless struggle of those that came before us, and it is our shared responsibility to preserve and grow this brilliant legacy for our children to inherit.

    This is why, even as some around me contemplate emigration, perhaps facetiously, I am coming back to you, Singapore.

    Charles Tan Meah Yang is an Investment Analyst working in London and intends to return in the near future.

    This is the first of several personal essays exploring the evolving engagement between citizens and Government in the national conversation.
    Last edited by ecimbew; 13-11-13 at 19:25.
    Yee ha! Did I tickle your funny bone?


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    Hit the nail on the head.
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
    ― Martin Luther King, Jr.

    OUT WITH THE SHIT TRASH

    https://www.facebook.com/shutdowntrs

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    Quote Originally Posted by Arcachon View Post
    n cities like London, where the average flat is estimated to cost 7.9 times the average household income (according to Demographia), an entire generation of 20-somethings is growing up only to find that, even in their 30s, their savings are still not enough for a down-payment on their first home.
    The situation is even more acute in cities like Sydney (8.3 times) and Vancouver (9.5 times)

    Question they have HDB?

    My yearly income SGD 44,000. SGD 44,000*7.9 = SGD 347,600 can buy HDB lah.
    its says household income..... so if married add your working spouse? if not add your working parents if u r staying with them?

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