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7/21/2008

Housing glut

HDB must have sold the 10,000 units of unwanted flats by now. Today, despite some trying to talk up the private housing market, the numbers are telling, that many are unsold and the stock is growing. The developers must have built and continue to build on the premise of a 6.5 mil population. With this as a guiding principle, building another 50,000 units would not be a problem. But should there be a change of the master plan, many of these private units will be left high and dry. Then again, knowing that we don't meddle with market mechanism, we can still open the immigration door a little wider and the new arrivals will quickly snap up the excess in supply. Private developers are in such a privilege position and in land scarce Singapore, investing in properties is a sure win formula. This may be the reason why the 6.5 mil population target is unshakable. Too many stakes involved.

9 comments:

Anonymous said...

Property crash is unlike any other. Japan has been struggling for the past decade and a half after the property bust in the mid 80s. The US is in the process of following suit, depsite what they try to tell everyone. They will take a long while to come back because, unlike the tech bubble which only companies in that sector were involved, everyone is affected by property because almost everyone has one or paying for one.

Hmmm, 6.5 million population may make the property sector a sure win formula, but when one is stuck with a massive mortgage and jobs are scarce or suddenly lost when the US go into a recession, it may not turn out that way. The signs are beginning to show.

Left to be seen.

redbean said...

i share the same view. when the stakes get bigger and bigger, a collapse in property price in a recession can bankrupt many rich scions. family fortunes too can be wiped out when over geared.

now everyone is playing with millions of dollars as chicken feed. ya, when the income is not coming in, it will collapse like a house of cards.

Mockingbird said...

For people who can't afford a resale pigeon hole in a mature estate like Toa Payoh and Queenstown because prices are too high, they are eager to see the property bubble in Singapore burst. For them, they can only afford resale flats in these hot locations only if the bubble bursts. As long as the bubble doesn't burst, they have no chance of being able to afford a such a resale flat.

Mockingbird said...

i'm also waiting to see how families who bought overpriced flats, are going to cope with the monthly housing loan repayments once their income gets disrupted. They probably have to sell their expensive flat and downgrade to a much cheaper one.

redbean said...

is it a good thing to let propery prices escalate to such a level? good for those who have a lot of properties and speculating on them to get richer.

for those with only one, the young people buying their first flat, i don't think it is a good thing. too much money tied down to a single and only asset to many.

and if a crash comes in, many will be made bankrupt when the bank recalls the loan like the subprime crisis. or like we experienced in the late 1990s when many ended up with negative assets. even selling them were not enough to pay back the loan.

this is bad macro planning.

Anonymous said...

In a crash the banks will recall the loans, but if they resell the property at a loss, which is most likely in a property crash, they will still come after you for your pants.

Anonymous said...

A crash is a good time for younger people looking for a home. It makes little difference to those who have already paid for their home to live in. Those who speculate and drive up property prices would be taught a lesson. Let them loose their pants.

redbean said...

someone quoted the affordability index in uk to be around 3.5 to 6. this is derived from the property price divided by the annual household income. eg a $350k property versus a household income of $100k pa give 3.5.

3.5 yrs or 6 yrs annual income makes property ownership very affordable. we used to have such figures in the early 70s. a semi D costing $40k versus a household income of $24k. hey that is much lower than 3.5, lest than 2.

what is the number now? $700k versus $70k or $100k? this works out to be 10 to 7. as this number gets bigger, it means that the affordability of the owner is getting dicier. or the bubble gets bigger.

we are definitely worst off in this area. so when the same question is popped up the next time, are you better off today than yesterday, the answer is obvious. then there are other things, cars, education, food etc, how can we be better off?

oops, i mean those earning less than $5k a month. there are many living better than a swiss standard of living.

ok, the answer is that those who are still struggling, just too bad, losers.

redbean said...

let me clarify the numbers i posted on the affordibility index. to be fair we need to look at the price of say a 4 rm HDB flat. if this is kept at $150k ot $200k, a family income of $60k pa could reduce the indext to less than 3.

forget about the semi D dream. it will cost at least $1.5m.

lower the expectation to within your own means.