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Thread: Averting property bubbles: lessons to heed

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    Default Averting property bubbles: lessons to heed

    http://www.businesstimes.com.sg/sub/...49272,00.html?

    Editorial

    Published September 8, 2009

    Averting property bubbles: lessons to heed


    WHILE it is appropriate for the government to continue monitoring the situation in the property market, the question is whether pre-emptive measures should be taken sooner rather than later to prevent a bubble from forming. It is instructive to consider the actions of the Reserve Bank of Australia (RBA), which has largely managed to keep the country out of a recession.

    Prior to the sub-prime crisis, central banks in several countries (notably the US and the UK) had helped to pump up property bubbles with low interest rates which were accompanied by easy mortgage terms. By contrast, the RBA resisted cutting rates and chose instead to talk down the property market. As far back as 2002, the RBA, feeling that property prices were escalating dangerously, decided to commission housing market reports to show that prices were unsustainable.

    Looking at affordability, bank lending standards and collating data on home loans as well as errant marketing ploys, the RBA went on the offensive with its then governor Ian Macfarlane saying: 'I'm using a certain amount of moral suasion to try and get . . . to investors, to make them sit back and think again.' Interestingly, his comment mirrors that of Singapore's National Development Minister Mah Bow Tan, who said last week that home buyers 'need to think carefully, think long term, think about the unexpected'.

    Mr Mah's comment, which buyers would do well to heed, came as he revealed that the government was likely to resume confirmed land sales through the Government Land Sales (GLS) programme, a strategy that can help keep property prices in check. However, there is little consensus on what is spurring property sales, which reached a record high of 2,767 new housing units in July. Stated reasons range from low interest rates and confidence in the economic recovery to speculation and panic buying, to the imminent completion of the integrated resorts (IRs) and a renewed influx of visitors and potential homebuyers.

    Whatever the reasons, prices have risen significantly, and across the board. A recent Citigroup report noted that, based on caveats lodged, luxury and the mid-segment home prices are now 15-30 per cent above the lows in the first quarter of 2009 while the mass market segment is some 10 per cent higher. However, the latest evidence suggests that buyer interest may be cooling off - although it is too soon to view this as a trend.

    The need for vigilance thus remains. Apart from hastening land sales, the government should stand ready to enact other measures, including reining in liberal housing loan practices.

    Historically, there has been a tendency to let free market forces run their course and for measures to be taken only when the home-buying reaches frenzied levels, as in 1996 and 2007. We are fortunately not at that point yet. But one of the lessons of the financial crisis of 2008/09 is that by the time a property market bubble is even identified, it's too late.

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    Quote Originally Posted by mr funny
    http://www.businesstimes.com.sg/sub/...49272,00.html?

    Editorial

    Published September 8, 2009

    Averting property bubbles: lessons to heed


    WHILE it is appropriate for the government to continue monitoring the situation in the property market, the question is whether pre-emptive measures should be taken sooner rather than later to prevent a bubble from forming. It is instructive to consider the actions of the Reserve Bank of Australia (RBA), which has largely managed to keep the country out of a recession.

    Prior to the sub-prime crisis, central banks in several countries (notably the US and the UK) had helped to pump up property bubbles with low interest rates which were accompanied by easy mortgage terms. By contrast, the RBA resisted cutting rates and chose instead to talk down the property market. As far back as 2002, the RBA, feeling that property prices were escalating dangerously, decided to commission housing market reports to show that prices were unsustainable.

    Looking at affordability, bank lending standards and collating data on home loans as well as errant marketing ploys, the RBA went on the offensive with its then governor Ian Macfarlane saying: 'I'm using a certain amount of moral suasion to try and get . . . to investors, to make them sit back and think again.' Interestingly, his comment mirrors that of Singapore's National Development Minister Mah Bow Tan, who said last week that home buyers 'need to think carefully, think long term, think about the unexpected'.

    Mr Mah's comment, which buyers would do well to heed, came as he revealed that the government was likely to resume confirmed land sales through the Government Land Sales (GLS) programme, a strategy that can help keep property prices in check. However, there is little consensus on what is spurring property sales, which reached a record high of 2,767 new housing units in July. Stated reasons range from low interest rates and confidence in the economic recovery to speculation and panic buying, to the imminent completion of the integrated resorts (IRs) and a renewed influx of visitors and potential homebuyers.

    Whatever the reasons, prices have risen significantly, and across the board. A recent Citigroup report noted that, based on caveats lodged, luxury and the mid-segment home prices are now 15-30 per cent above the lows in the first quarter of 2009 while the mass market segment is some 10 per cent higher. However, the latest evidence suggests that buyer interest may be cooling off - although it is too soon to view this as a trend.

    The need for vigilance thus remains. Apart from hastening land sales, the government should stand ready to enact other measures, including reining in liberal housing loan practices.

    Historically, there has been a tendency to let free market forces run their course and for measures to be taken only when the home-buying reaches frenzied levels, as in 1996 and 2007. We are fortunately not at that point yet. But one of the lessons of the financial crisis of 2008/09 is that by the time a property market bubble is even identified, it's too late.

    Mr MBT useless piece of shxx

    talk about monitoring market .. no speculations ..then 2 weeks later said something else ..

    then said to start releasing land ( indirect to ease market but really to make more money for his ministry) ..then slap himself and said HDB price will continue to go up


    what the hell is he talking ?

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    So is the report "Sales quieten down at Trevista, Trizon" considered "talking down"?

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    Quote Originally Posted by echotrain
    So is the report "Sales quieten down at Trevista, Trizon" considered "talking down"?
    Cos all the millionaire spend all their moneies in properties already, left with the poor now, can't afford.

    See any more hidden millionaire when the new projects launch later part of the month.

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    Quote Originally Posted by Honesty
    Cos all the millionaire spend all their moneies in properties already, left with the poor now, can't afford.

    See any more hidden millionaire when the new projects launch later part of the month.
    Later part of the month there will be many hidden millionaires coming out to buy properties, especially those with filial children sending them money over the past month.

    I predict on 18 Sept (农历七月三十) there will be a great rush.

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    To me, is talk cock one. 1. Seventh month sales has been traditionally slow. 2. Most of the better units are sold already. So how fast you want to sales to go? I mean left 20%, then there isn't much units left already so if first day 200 units, you expect today to sell 200 units also? Talk cock sing song report.

    Quote Originally Posted by echotrain
    So is the report "Sales quieten down at Trevista, Trizon" considered "talking down"?

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    UOL just placed a top bid of 495psf for Dakota Crescent !!! ha ha tok about cooling the market... no use one la, need concrete action rather then words =) but it may be too late already...

    i think the governemnt now realise that their "strategy" of restricting land supply and new HDB to only Punggol/Sengkang is causing this problem...

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    why are you all talking about actions actions ? Is there excessive speculation already ? I just read a JPM report, it says there was practically no "flipping" (50 out of 2712 subsales) in 2009 so far.

    what's wrong about pty market going up ? just like share market, it's going up too.

    please , just because 1 or 2 ridiculously priced projects coming from one well known unlisted developer who has a "reputation" of pricing above market, dun dismiss the whole market as already in bubble.

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    Default Sour grapes gripping...

    Aiyah...the nay sayers or people who keep complaining of rising market prices are propbably those who missed the boat and are letting off steam now. Talking up or talking down the markets, the cheese have already moved. Hemming and Hawing will do no one any good and will only seed frustration and more greed to come...so start sniffing for opportunities (or dangers) and scurrying to new cheese. Either we shift with the market/times or be sifted to sniff the exhaust.

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    Quote Originally Posted by greenhorn
    Aiyah...the nay sayers or people who keep complaining of rising market prices are propbably those who missed the boat and are letting off steam now. Talking up or talking down the markets, the cheese have already moved. Hemming and Hawing will do no one any good and will only seed frustration and more greed to come...so start sniffing for opportunities (or dangers) and scurrying to new cheese. Either we shift with the market/times or be sifted to sniff the exhaust.
    There may be 4 main categories of people in this forum:

    a) Those who are interested to buy but still watching or waiting
    b) Those who are selling
    c) Those who cannot buy
    d) Those who have bought

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    According to Mah, the govt policies is to ensure gradual appreciation of HDB property in line with economic growth as that is the only 1 asset that majority of Singaporean own. They will ensure affordability but not cheap. So far their policies are right, restrict the number of new build and channel new house owners and PRs into the resale market.

    As for pte properties, those who dabble in it do so at their own risk.

    Quote Originally Posted by Allthepies
    UOL just placed a top bid of 495psf for Dakota Crescent !!! ha ha tok about cooling the market... no use one la, need concrete action rather then words =) but it may be too late already...

    i think the governemnt now realise that their "strategy" of restricting land supply and new HDB to only Punggol/Sengkang is causing this problem...

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    Quote Originally Posted by durian
    According to Mah, the govt policies is to ensure gradual appreciation of HDB property in line with economic growth as that is the only 1 asset that majority of Singaporean own.
    provided the economy is really growing, our GDP is still in negative territory for this year

    Quote Originally Posted by durian
    They will ensure affordability but not cheap. So far their policies are right, restrict the number of new build and channel new house owners and PRs into the resale market.
    how is then the government going to ensure affordability for the masses when new HDB is priced to market (with a discount) and the HDB prices is rising and rising? (our median household income is only $5000+/mth)

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    I think the key here is that there ARE HBD flats available for many first time buyers. Many of these are also at reasonable prices. However, these more reasonable priced ones are frequently located rather far out from the city.

    It is just a matter of where you want to stay vs what you can afford.

    Perhaps people shouldn't complain about DBSS flats being too pricey (comparative to the 8000 income limit) and just settle for the more faraway flats which are more reasonably priced? Leave the DBSS flats for those with sufficient cash savings to buy.

    Just a thought. Don't bite off more than you can chew.

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    Quote Originally Posted by amk
    why are you all talking about actions actions ? Is there excessive speculation already ? I just read a JPM report, it says there was practically no "flipping" (50 out of 2712 subsales) in 2009 so far.

    what's wrong about pty market going up ? just like share market, it's going up too.

    please , just because 1 or 2 ridiculously priced projects coming from one well known unlisted developer who has a "reputation" of pricing above market, dun dismiss the whole market as already in bubble.


    no flipping ?

    or is it becos all speculators cant find buyers ? as buyers only want to buy from developers ?

    so far all buying new launches ..all want to be the first 'owner' direct from developers ..

    i believe there are many flippers ..trying to sell BUT becos all potential buyers only want to buy from developers .. and not subsale ..cos subsale may not get same valuation, subsale may not have same scheme as buying from developers


    think about it ...

    no flippers ? hahah JPM ?? maybe they should write about US properties .. and tell us more about the number of foreclosures in USA, in every state of the america ..

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    Out there, in ST Forum, CNA, in online petitions etc - there are thousands of posts on how HDB has become too expensive lah, the $8k cap is unfair lah, simi sandwiched class lah.

    The noise and sentiment wave is getting larger and larger. And 2010 is an election year. MBT will do something about this - i wonder what?

    If the raise the income ceiling to say 10k or 12k, then i suspect there will be a mad rush for everyone to buy flats, get grant, and take a hdb loan. The key beneficiary of the 8k cap spillovers - OCR mass market condos - might see a hit.

    If they put policies in place to deflate asset values, that's stupid. You sell high, you buy high. You buy low, you sell low. Everybody suffers in deflation, especially those who have bought since June. So much pain just to benefit a handful?

    I suspect in 2010, we'll see either a huge reset button being hit, or a huge accelerate button. Too much IR hype already, true or imagined.

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    Quote Originally Posted by gfoo
    I suspect in 2010, we'll see either a huge reset button being hit, or a huge accelerate button. Too much IR hype already, true or imagined.
    Eh gfoo shifu dun scare me leh...

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    Quote Originally Posted by gfoo
    If the raise the income ceiling to say 10k or 12k,
    I guess it will happen

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    Quote Originally Posted by gfoo
    If the raise the income ceiling to say 10k or 12k, then i suspect there will be a mad rush for everyone to buy flats, get grant, and take a hdb loan. The key beneficiary of the 8k cap spillovers - OCR mass market condos - might see a hit.
    Quote Originally Posted by Property_Owner
    I guess it will happen
    Definitely, it will only be a matter of time that the income ceiling is raised. However, I don't see why OCR mass market condos should "take a hit".

    If we look at the big picture, a household income of $8k per month defines the subsidy line in Singapore, so only people below this line are deserving of the government's sympathy in subsidising their public housing.

    If one day, this subsidy line increases to $10k, that would mean Singaporeans have all become richer. Correspondingly, all houses should cost more, both public and private housing.

    To visualise this, let's say one day (maybe many years from now), the HDB income ceiling has reached $80k per month (i.e. only households which earn less than $80k per month deserve sympathy from the government to subsidise the roofs over their heads), I would expect that when such a day arrives, a new subsidised HDB 4-room flat would cost around $3 million; an OCR mass market condo $8 mllion; and a bungalow $150 million.

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    This has truth.

    Also beware what u wish for. When the income ceiling is raised, more will be able to afford hdb flats and see the flat prices jumping again.

    Quote Originally Posted by jlrx
    Definitely, it will only be a matter of time that the income ceiling is raised. However, I don't see why OCR mass market condos should "take a hit".

    If we look at the big picture, a household income of $8k per month defines the subsidy line in Singapore, so only people below this line are deserving of the government's sympathy in subsidising their public housing.

    If one day, this subsidy line increases to $10k, that would mean Singaporeans have all become richer. Correspondingly, all houses should cost more, both public and private housing.

    To visualise this, let's say one day (maybe many years from now), the HDB income ceiling has reached $80k per month (i.e. only households which earn less than $80k per month deserve sympathy from the government to subsidise the roofs over their heads), I would expect that when such a day arrives, a new subsidised HDB 4-room flat would cost around $3 million; an OCR mass market condo $8 mllion; and a bungalow $150 million.

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    Quote Originally Posted by gfoo
    I suspect in 2010, we'll see either a huge reset button being hit, or a huge accelerate button. Too much IR hype already, true or imagined.
    i share the same feel too in 2010....but the 1H09 reset & accelerate buttons happened damn fast. Sporeans very efficient, must be the skills upgrading govt promoting.

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    some buyers hv to exercise common sense.....to price the market correctly

    e.g. as you move along from orchard towards newton, prices decreasing, same when you head further down newton towards novena.

    it is not the other way round - prices increases as you move from changi towards orchard.

    in any developed countries the above rule of thumb applies......

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    Quote Originally Posted by dmonddd
    some buyers hv to exercise common sense.....to price the market correctly

    e.g. as you move along from orchard towards newton, prices decreasing, same when you head further down newton towards novena.

    it is not the other way round - prices increases as you move from changi towards orchard.

    in any developed countries the above rule of thumb applies......

    " it is not the other way round - prices increases as you move from changi towards orchard." Uh????

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    Quote Originally Posted by echotrain
    This has truth.

    Also beware what u wish for. When the income ceiling is raised, more will be able to afford hdb flats and see the flat prices jumping again.
    so as i was saying it is actually a supply problem, it not about the income ceiling....., not enuff new HDB flat in better location, buy new condo, not enuff new condo, the developer can keep raising the price and the people will still have to bite ....

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    Quote Originally Posted by focus
    " it is not the other way round - prices increases as you move from changi towards orchard." Uh????
    dun u see some cases where prices are close to prices in projects within D9, 10 n 11.

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    Not always true lah, depending on the surroundings and environment. Geylang so close to City, but price so cheap. Further away from city eg Belestier prices higher than Geylang (always higher, regardless of when).

    Also, eg Newton Suites further from Orchard MRT than [email protected] but transact at higher prices. Rochelle and Amaryllis closer to Orchard MRT than Newton Suites, Viva (latter 2 closer to Novena) but transact at much lower prices.

    Quote Originally Posted by dmonddd
    some buyers hv to exercise common sense.....to price the market correctly

    e.g. as you move along from orchard towards newton, prices decreasing, same when you head further down newton towards novena.

    it is not the other way round - prices increases as you move from changi towards orchard.

    in any developed countries the above rule of thumb applies......

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    Quote Originally Posted by teddybear
    Not always true lah, depending on the surroundings and environment. Geylang so close to City, but price so cheap. Further away from city eg Belestier prices higher than Geylang (always higher, regardless of when).

    Also, eg Newton Suites further from Orchard MRT than [email protected] but transact at higher prices. Rochelle and Amaryllis closer to Orchard MRT than Newton Suites, Viva (latter 2 closer to Novena) but transact at much lower prices.

    that is another traits of sporeans.... anywhere they like ..it becomes the centre of their world ..prices should fall as you move further away from them ...

    so if he is a die hard novena fan... then novena will cost more and scotts rd will cost less ...

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    Quote Originally Posted by teddybear
    Not always true lah, depending on the surroundings and environment. Geylang so close to City, but price so cheap. Further away from city eg Belestier prices higher than Geylang (always higher, regardless of when).

    Also, eg Newton Suites further from Orchard MRT than [email protected] but transact at higher prices. Rochelle and Amaryllis closer to Orchard MRT than Newton Suites, Viva (latter 2 closer to Novena) but transact at much lower prices.
    The reason is both Rochelle and Amaryllis are 99 year properties .

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    Orchard Residences (above Ion) also 99 year properties, but still can transact at >$5000 psf, even higher than other nearby FH properties (e.g. Paterson Edge). What I am trying to point out is that both these condo estate being nearer to Newton MRT yet have to sell cheaper than those near Novena MRT means nearer to Newton MRT have no distinguishable added value.

    Quote Originally Posted by helenthean
    The reason is both Rochelle and Amaryllis are 99 year properties .

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    Quote Originally Posted by teddybear
    What I am trying to point out is that both these condo estate being nearer to Newton MRT yet have to sell cheaper than those near Novena MRT means nearer to Newton MRT have no distinguishable added value.
    Ha ha to me and maybe to many others, nearness to shopping malls/amenities is really a big plus point compared to nearness to an empty MRT station. Since Newton and Novena are just 1 stop away, Novena should sell higher =)

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    Quote Originally Posted by Allthepies
    Ha ha to me and maybe to many others, nearness to shopping malls/amenities is really a big plus point compared to nearness to an empty MRT station. Since Newton and Novena are just 1 stop away, Novena should sell higher =)
    Yes I agree.

    Novena MRT is so vibrant with all the shopping malls ... United Square with all the kiddie shops, Novena Square, Velocity, Goldhill ... many makan places and shops.

    Newton MRT is like a "ghost" MRT ... I think only during the Chinese 7th month it will be more busy than Novena MRT.

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