Gambling with your only asset
Gambling or trading with your home or gambling with your only asset or flat, private or HDB. Not many are house owners. Does this statement tickle anyone? Many of us just have a flat that we called home. This is all we got, the most expensive asset. Shall we be trading this every now and then? At the way we buy and sell our flats, and the way prices fluctuate up and down, we could be buying and selling the same flat over and over again. And if we are lucky, we may end up with some extra cash, or lose some in most cases as the transaction cost is not low. So, shall heartlanders be gambling with their only asset? Or is it a good idea for this asset to keep running up in value? Should be good isn't it, that a flat one bought 20 or 30 years ago is not worth 10 or 20 times its value. Time to cash out and downgrade, and make a tidy sum. The question is whether this process is worth it, downgrading for a little more pocket money. Often the downgrading is not meaningful as the price difference between a 5rm and 4rm or 4rm and 3rm is so small after subtracting transaction cost and the normal appreciation of the value of money invested. The small gain is an illusion. To be meaningful, the downgrade must be fierce, 5rm to 3rm or rental flat, or private to a smaller HDB flat. The other fallacy to this ever increasing price paradox is that property prices should go up in leaps and bounds over the years. Using the past statistics, a 5 rm flat that was priced at $27,500 in the early 70s is not priced at $500K, nearly 20 times in monetary gain. If this is to hold true into the future, a 4rm flat selling at $300k today must fetch $6m into 30 years time. How much will an average Singaporean's income be for him to be able to afford this palace in the sky? Would it be better if this only asset be allowed to appreciate in a slower pace over time without it becoming a betting instrument, swinging wildly, and owners sometimes happy, sometimes angry. For the young, always angry because it is like chasing a fleeting dream. Is it likely that our average young executive or a supervisor will be getting a monthly salary of $30k or $50k? Possible, and our currency will be no different from the infamous banana money. I think many countries are in such a state at the moment. We can be one too.