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Thread: Severe asset inflation a risk: Economist

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    Default Severe asset inflation a risk: Economist

    http://www.straitstimes.com/Money/St...ry_415594.html

    August 12, 2009 Wednesday

    Severe asset inflation a risk: Economist

    By Melissa Tan


    SINGAPORE risks 'severe asset inflation' during the economic recovery, a local economist has warned.

    But this danger can be averted if the Government acts now to control the prices of HDB flats, said Mr Paul Yip, Nanyang Technological University (NTU) associate professor of economics.

    Asset inflation - meaning a rise in price of assets such as stocks and property - is a possible consequence of the United States' current expansionary fiscal policy, Professor Yip said yesterday.

    He was speaking at an NTU symposium - on exchange rate systems and Asian macroeconomic policies - which brought together 11 macroeconomists from institutions such as Stanford University and Delhi School of Economics.

    'Many people say that the property market is rebounding, but I don't think so; we are still bottoming. Recovery will be slow ... and a few years later we might have severe asset inflation, much more than the rise today,' Prof Yip said.

    'So if you are a stock investor or property investor, it's very easy. Just hold your stock and shares for another three or five years - the price will climb to be much higher. But if you lose money, don't blame me,' he quipped.

    Prof Yip noted that the US government has lowered interest rates and expanded its money supply in a bid to avoid a repeat of the Great Depression.

    But post-recession, the government may fail to shrink the money base back to pre-downturn levels, he said. In that case, excess US dollars would flood the market.

    'For Singapore, there may be an inflow of money from the US, increasing the money base and therefore the money supply... When the recovery comes, there will be wage inflation and consumer price index inflation, and this will fuel asset inflation,' he told The Straits Times.

    'Rents will rise and then people will be able to charge even higher rents, causing a vicious circle,' Prof Yip said.

    'To curb asset inflation early, the Government can supply more HDB flats and prevent HDB prices from going up with private property prices - among other things. The price will become unaffordable because we have the wrong market structure; developers are trying to maximise profit by selling in batches and using price discrimination.'

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    instead of preventing the property bubble from growing..
    the article is helping to put more oil into the property market...

    So now everyone will be rushing to buy properties since professor say next 5 yrs properties will definitely rise in value.

    I will stay out of the property market and missed the bull run instead.
    Buffett says Be greedy when others are fearful.. and be fearful when others are greedy.

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    Quote Originally Posted by focus
    instead of preventing the property bubble from growing..
    the article is helping to put more oil into the property market...

    So now everyone will be rushing to buy properties since professor say next 5 yrs properties will definitely rise in value.

    I will stay out of the property market and missed the bull run instead.
    Buffett says Be greedy when others are fearful.. and be fearful when others are greedy.
    Not everyone buys bcos of greed. Some buy now exactly bcos they are fearful of not able to afford it years later. Ultimately, the BTO/DBSS schemes are favoring property inflation isn't it?

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    teddybear's Avatar
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    There seem to be serious shortage of supply of HDB flats (demand from new PRs and newly weds), which in turn fuel the upgrading of current HDB owners to private properties. This upgrading will not stop until HDB flats increase supply and prices drop. However, there is no way HDB flats prices going to drop when there is shortage of supply and even if to build now, it will take at least 2.5 years to allocate land, design, build & complete the flats and hence prices are expected to escalate for at least another 2.5 years even if they flood the supply NOW.

    Quote Originally Posted by jitkiat
    Not everyone buys bcos of greed. Some buy now exactly bcos they are fearful of not able to afford it years later. Ultimately, the BTO/DBSS schemes are favoring property inflation isn't it?

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    Quote Originally Posted by teddybear
    There seem to be serious shortage of supply of HDB flats (demand from new PRs and newly weds), which in turn fuel the upgrading of current HDB owners to private properties. This upgrading will not stop until HDB flats increase supply and prices drop. However, there is no way HDB flats prices going to drop when there is shortage of supply and even if to build now, it will take at least 2.5 years to allocate land, design, build & complete the flats and hence prices are expected to escalate for at least another 2.5 years even if they flood the supply NOW.
    Actually it is quite a balancing act that the government has to hold on to.
    Too many HDBs and ppl will complain too many.
    Too little HDBs and ppl will complain too little.

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    The tone of the above article is totally wrong.

    Either the reporter missed his point, or the economist was not clear in presenting his.

    Let me attempt to re-write it.

    Quote Originally Posted by mr funny
    Severe asset inflation a joy!: Economist


    SINGAPORE will enjoy 'severe asset inflation' during the economic recovery, a local economist has enthused.

    But this joy can be spoilt if the Government acts now to control the prices of HDB flats.

    Asset inflation - meaning a rise in price of assets such as stocks and property - is a possible consequence of the United States' current expansionary fiscal policy.

    'Many people say that the property market is rebounding, but you ain't seen nothing yet! We are still in the early days ... and a few years later we might have severe asset inflation, much more than the rise today,'

    'So if you are a stock investor or property investor, it's very easy. Just hold your stock and shares for another three or five years - the price will climb to be much higher. But if you lose money, don't blame me,' he quipped.
    The only word I do not need to correct is the word "quipped". I think that sets the correct tone for the whole article.

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    You will notice that he said that the bottom has not set in and will take a while before the rise.... property will correct first....

    After that.... property is within reach (since corrected... even fire sales - my views).

    Next...If there's too much US $ coming to Singapore....
    Then property prices will be inflated... it will take 3 to 5 years in his views.

    So if you do not have a case of too much US $ coming to Singapore... it will NOT be as stated. Read it well.

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    Quote Originally Posted by Condorich
    You will notice that he said that the bottom has not set in and will take a while before the rise.... property will correct first....

    After that.... property is within reach (since corrected... even fire sales - my views).

    Next...If there's too much US $ coming to Singapore....
    Then property prices will be inflated... it will take 3 to 5 years in his views.

    So if you do not have a case of too much US $ coming to Singapore... it will NOT be as stated. Read it well.
    Aiyah, we are still trying to guess the 'real' message of this article.
    I think it was meant to be ambiguous.
    So that they can say they are right when things happen or don't happen.

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    Correct....

    There are some assumptions made... it all depends and it can happen both ways. But it do give them impression that it is more likely to happen. Simply by virtue of inflation. No need to bother about it too much, it is only a hypothesis and not a fact.

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    Default scared stiff

    Scary artcle "severe asset inflation"

    But to be honest it is true. Int rates are so bloody low that it makes little sense not to buy assets now at the "
    bottom"

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    its the government intention to jerk up the HDB prices. all their policies support this.


    1) Restricting supply of HDB flats especially in the west.
    2) Using resale price to bench mark the price of new HDB. (affordability is no longer their concerns.)
    3) BTO/DBSS


    so they are unlikely to want to burst the bubble

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    so what the guy is saying is that property is a good hedge against monetary inflation in the next 5 years.

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    Quote Originally Posted by Regulators
    so what the guy is saying is that property is a good hedge against monetary inflation in the next 5 years.
    That is so obvious, you dont need a professor to tell u that right?

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    When Lehmen brother collapse, credit freezed and velocity of money almost come to a standstill. We are now seeing an improvement in the velocity of money as credit has been restored back into the system.

    However, many people have underestimate the consequences of the massive injection of funds by central banks. The combination of improving velocity of money, supply of money and low interest rate will lead to inflation worst than what we see in 2007.

    This is an opportune time for people to lock into an asset at a low price and enter a leverage position (borrowing) to hedge against inflation. But of course need to know when to get out before bubble burst.


    From Wikipedia, the free encyclopedia


    The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. Velocity associates the amount of economic activity associated with a given money supply. When the period is understood, the velocity may be present as a pure number; otherwise it should be given as a pure number over time. In the equation of exchange, velocity of money is one of the key variables determining inflation.

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    Seriously.. i dun get what he is trying to say

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    so now what, buy or don't buy?

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    [quote=Allthepies]so now what, buy or don't buy? [/quo
    te]

    BUY those undervalued older properties,not those new launch overpriced.

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    [quote=jwong71]
    Quote Originally Posted by Allthepies
    so now what, buy or don't buy? [/quo
    te]

    BUY those undervalued older properties,not those new launch overpriced.
    Do your homework. Some old properties still present good values. However, sellers expectation are increasing each day (as long as the market is stable/up and no major shocks). Buy within your means, even if there is a correction, you can still hold on to your assets and not force to liquidate it at a loss.

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    [quote=AAA]
    Quote Originally Posted by jwong71

    Do your homework. Some old properties still present good values. However, sellers expectation are increasing each day (as long as the market is stable/up and no major shocks). Buy within your means, even if there is a correction, you can still hold on to your assets and not force to liquidate it at a loss.
    Good advice.
    Resale properties asking price can exceed new launches. That's the problem today. However there seems to be a massive difference between asking/advertised price and what the URA caveats are showing. Has anyone experienced how owners will respond if you offer 20% or 30% lower than asking or closer to the caveats?

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    [quote=andy]
    Quote Originally Posted by AAA

    Good advice.
    Resale properties asking price can exceed new launches. That's the problem today. However there seems to be a massive difference between asking/advertised price and what the URA caveats are showing. Has anyone experienced how owners will respond if you offer 20% or 30% lower than asking or closer to the caveats?
    Back when sales was the bleakest and lower than 500 units a month, I tried offering 20% or 30% lower than asking. Agent was very kind to not make me feel like an idiot trying his luck, he reverted my offer to the buyer. Needless to say my offer failed miserabily.

    Tried again in April May 2009. This time offered close to caveat prices, again failed miserabily.

    Asking 20% or 30% lower is only a stretegy u can use in a falling property market. Even then, as my experience showed, u have to thank your lucky stars if the owner (a desperate seller) decides to sell to u.

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    [quote=andy]
    Quote Originally Posted by AAA

    Good advice.
    Resale properties asking price can exceed new launches. That's the problem today. However there seems to be a massive difference between asking/advertised price and what the URA caveats are showing. Has anyone experienced how owners will respond if you offer 20% or 30% lower than asking or closer to the caveats?
    Maybe u can try those desperate fire sales. Need not apply to those who got the holding power. Smtimes the owners see some opportunity in recession, just wan to free out their cash from their properties. Doesnt mean that they are desperate to sell.
    I had frzs trying to offer below bank valuation, when is had alrdy been 50k cheaper from transacted prices.
    They will chase the boat forever even if is CHeap or Expensive.

    Caveats- take some months to be updated of the latest uped prices.
    - depends the unit facing conditions. etc ...
    http://forums.condosingapore.com/showthread.php?t=6876
    As shown above caveats having the non-accurate transcated prices
    Last edited by jwong71; 13-08-09 at 18:28.

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    Just try... no harm trying... but as you are now in a chasing mode.... not easy to get any owner who would want to sell you below market rate.. Have to work harder and go through the classifieds and call the owner yourself. It's now a seller's market.

    Sometimes the offer never get past the agents... beware and be aware.

    If you can wait... wait till the tides are turned... to a falling market... or buyer's market. Otherwise... just watch from the sidelines. If your hands are itchy... don't blame anyone when you get burnt.

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    Quote Originally Posted by Condorich
    Just try... no harm trying... but as you are now in a chasing mode.... not easy to get any owner who would want to sell you below market rate.. Have to work harder and go through the classifieds and call the owner yourself. It's now a seller's market.

    Sometimes the offer never get past the agents... beware and be aware.

    If you can wait... wait till the tides are turned... to a falling market... or buyer's market. Otherwise... just watch from the sidelines. If your hands are itchy... don't blame anyone when you get burnt.
    It may surged up to 50% and corrected to a 10-20% low. So is overall of surged of 30%.. but if hoping for the correction,back to the bottom prices. It likely come or never come.
    Buy on guts and within budget

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    the offer dont pass the agents. haha

    [quote=andy]
    Quote Originally Posted by AAA

    Good advice.
    Resale properties asking price can exceed new launches. That's the problem today. However there seems to be a massive difference between asking/advertised price and what the URA caveats are showing. Has anyone experienced how owners will respond if you offer 20% or 30% lower than asking or closer to the caveats?

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    Quote Originally Posted by hans
    the offer dont pass the agents. haha
    You are right.

    There is no point in offering 20% to 30% below market price, because the agent will know that it is not a serious offer.

    At any point in time, there is a "market price". Whether the market shoots up 30% or crashes down 30%, there will be a "market price".

    A serious property buyer will offer around the market price.

    If the owner is really willing to accept 30% below market, the property agents themselves would grab the property, or they would arrange their friends to buy it, and it won't be your turn.

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    If a below market price property is available, they will probably try to buy it and quite likely to try to sell it to you at the Market Price. Flipping.

    So if you want to have good lobangs... be a agent, banker, auction buyer etc..

    Beware... agents may be liable and risk being sued by owners. There's a recent case on this in the courts and agents lost the case. Although this being the case.. it is going to be harder to prove in future.

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    Don't believe you can get 20% to 30% lower than asking. 10% lower may be in a falling market but not a rising market like now. Current transactions most likely will be at about asking price. I recently seen 2 units in an estate being sold lower than last transacted price and yet these units are on much higher floor and 1 unit is the best stack in the estate as compared to the transacted unit being on lower floor and poorer facing. People may just point to the transacted price and say that prices have dropped. If they know what is behind then they will know that these 2 units are private transactions owned by the same owner and not listed publicly for sale. There is no way anybody out there can buy at such price.

    [quote=JohnTan]
    Quote Originally Posted by andy

    Back when sales was the bleakest and lower than 500 units a month, I tried offering 20% or 30% lower than asking. Agent was very kind to not make me feel like an idiot trying his luck, he reverted my offer to the buyer. Needless to say my offer failed miserabily.

    Tried again in April May 2009. This time offered close to caveat prices, again failed miserabily.

    Asking 20% or 30% lower is only a stretegy u can use in a falling property market. Even then, as my experience showed, u have to thank your lucky stars if the owner (a desperate seller) decides to sell to u.

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    [quote=teddybear]Don't believe you can get 20% to 30% lower than asking. 10% lower may be in a falling market but not a rising market like now. Current transactions most likely will be at about asking price. I recently seen 2 units in an estate being sold lower than last transacted price and yet these units are on much higher floor and 1 unit is the best stack in the estate as compared to the transacted unit being on lower floor and poorer facing. People may just point to the transacted price and say that prices have dropped. If they know what is behind then they will know that these 2 units are private transactions owned by the same owner and not listed publicly for sale. There is no way anybody out there can buy at such price.

    Care to share which development has these kind of price manipulators?

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    Don't forget that some deals are not meant to be public and not offered to be public also. Father to son deal etc.

    Also note that there will be some deals which reflect inflated prices or deflated prices and is not the true transacted value. This practice would run foul of the law and it is for the law enforcers to proof their case. You do have such cases in the news from time to time.

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    Buy!

    Property is an excellent hedge against inflation!

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