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12/29/2008

Time to cash out

HDB is building more 2 rm flats for the baby boomers who are hitting the 60s. Nice thought and nice planning. Since the late 60s till the 80s, HDB probably have built flats for a whole generation baby boomers and see them grow, settle down, raised families and now time to retire comfortably into their golden years. The baby boomers were the most successful generation of self starters, stepping out from a time when poverty was the norm. Many are living in bigger HDB flats and private properties. With children having their own families and leaving the roosts, some may want to cash out and live on the gains from their inflated assets. Typically they would have bought their HDB flats for between $20k to $40k and could now sell them for $400k or more. Neat profit. If a 2 rm flat costs $150k, there is still plenty of money to live by, provided they qualify for the purchase if they have not used up their two bites of the cherry. The good news is that there will be many of these bigger flats available for the young to pick up. The bad news is that these young couples did not have the same opportunities as the baby boomers, where the prices of flats were relatively low to their income. The cost of flats to the baby boomers was about 20 or 30 times their monthly salary, on one pay packet. A $400k flat today will be about 400 times that of a $4k monthly income or 200 times that of a $8k combined income. It looks like HDB lives on one cycle, taking care and planning for the baby boomers. The subsequent cycles or new generations will have to take care of themselves. Or maybe they are being taken care off by having better quality flats to suit their sophisticated lifestyles.

36 comments:

Anonymous said...

The costs of accomodation and escalated property prices are not unique to sg alone, it is a global phenomenon that is fueled by actual demand, cheap loans and speculations. Throughout all the biggy countries, china and india, the middle classes are swelling like never before in history.

If you size down the population of this country however and bar foreigners from the market, perhaps then the property prices may meet your expectations.

redbean said...

hi anonymous, have you heard of the phrase 'govt control'? almost everything in this island is controlled by the state. with HDB being the state builder for flats and town facilities like shops, hawker centre and markets, with JTC controlling commercial properties and rentals, who do you think set the prices?

the latest $180k increase in pinnacle duxton flats spoke for itself. it is not the cost of building but how much profit the govt wants, leading to higher cost of living.

all the control, monopolies, etc, is not for nothing.

Anonymous said...

With all due respects, you think the govt should underprice a prime location?

redbean said...

why do people elect a govt for?

maybe for sentimental reasons. we will see what the political parties will be telling the people come the next GE. my guess is that every political party, including the ruling party, will be telling the people what it will do for the people, free upgrading or things like that.

this issue will not be forgotten.

redbean said...

oh yes, the people deserve the govt they get. and if the people elect a govt that will make the most profit from them and accept it as a good and decent thing, then they should continue to elect the govt.

Anonymous said...

The govt controls the price of HDB flats is a myth you should consider adding to your list. The fact is no one is forcing the buyers to cough up an extra $180K. If no one buys them, can the govt still make the $180K? If you need to apportion blame, I say blame the idiots who are willing topay that sort of money for a box in the sky. But then who are we to chide them. It's their money, anyway.

redbean said...

we can look at the issue from different angle. a private developer will just keep raising his price as long as the buyer is willing to pay for it.

then there are different kinds of buyers. the speculators who will use the defer payment scheme or borrow money for the first payment and hope to sell it off for a profit as quickly as possible.

then there are the genuine buyers who have no cheaper choice and fearing that the constant pushing up of prices will be worst tomorrow. and some are in urgent need to buy one for some reasons.

then there is the govt. what is the role of the govt? should the govt just keep pushing prices as high as the people are willing to pay and laugh at the idiots who are willing to pay for it?

the thinking people don't need this kind of govt. your view that this is a fair thing for the govt to do may be acceptable to some people. but some will not agree with this view.

we will see how the next general election goes. there will be some for and some against and some neutral. it is a considered choice by all parties.

Anonymous said...

The hdb is not wrong to price Pinnacles to market. If you earnestly coveted the luxurious project, you should have positioned yourself in the cantonment area before the enbloc sales. No point crying over spilled milk.

redbean said...

it is not an issue of right or wrong. it is an issue of govt and govt's relationship with the people. i hope you are not the govt or i can assure you that you will lose a lot of vote for this kind of policy.

the principle of a govt by the people, of the people and for the people is still relevant and valid. a govt that distances itself from the people with unfriendly people's policy will have to pay the price for its decision, sooner or later.

redbean said...

maybe i should encourage the hdb and like minded people who think that this kind of policy is good for the people to continue with it.

then the hdb will be happy, and you too will be happy.

Anonymous said...

Go easy bruther beanie. Hdb cannot be faulted in this case. It is a perception problem that hdb main function is to provide low cost housing to needy families, thus its incidental involvement in a prime property project thru the SERS blows minds away and led to these grunts.

Clearly, Hdb should consider the belated step of liberalising existing public flats where prices have already exceeded the hudc's when they were first privatised, and concentrate solely on housing the needy. They should have done that at the time when they liberalised their mortgage scheme.

redbean said...

liberalising? hdb flats come with a lot of conditions. market pricing without market conditions fair? on second thought i think it is fair. somebody has to make the money.

Anonymous said...

By liberalising I mean that Hdb could privatise the public flats like they did the hudcs, and concentrate on its original purpose of providing public housing to the needy and low income group. By the time Pinnacle matures, the grunts and howls will increase when we may find ourselves with million dollars hdb properties on the market.

redbean said...

the original purpose of hdb was to provide public housing to the people, giving them a stake in the country. not necessarily for the needy.

today it is changing its mission, like govt hospitals, to make profits. this is a decision that the govt takes it on its own and the people will be the ultimate judge to approve or disapprove of it. it is not a right or wrong thing. the govt may think it is good for its own interpretation of events. the people can agree or disagree, can support the govt or withdraw their support.

the pinnacle flats can go to $1m, possible. this would mean that private flats that are presently sold at $600k to $800k will be worth $1.5m. now if the income of the people are to stay fairly the same, who would have the money to buy these flats? the oldies are downgrading and are also selling off their bigger flats.

and by then an ordinary hdb 4 rm flat would cost $750k. to afford it, a household income must be at least $10k pm.

that is the future we may be seeing.

redbean said...

oh, for those who already own a flat, very good. the flat will be worth that much more. now who is going to buy from them, or who can afford to buy from them?

this is any other pyramid scheme. you need to feed the base and make sure the base can support the heavier top. it will break down as a matter of time. unsustainable.

Anonymous said...

Wrong, people can very much afford to buy a $1m flat if theirs is worth $800K, this is how the property game is played since the beginning and that has been obvious in Beijing, Shanghai and Phnom Pehn when their property markets soared. The property game is not a zero sum game like you make it out to be, the losers are those who stay on the sidelines. Landbanks increased in value, property prices skyrocket, and it becomes more affordable for with each generation. Ask yourself how come there are so much more properties now compared to when prices were low decades back.

Anonymous said...

Redbean, I am really not sure if you are in touch with reality, $10,000 per month for a couple is no big deals these days. I know of young girls earning $10,000 in their twenties. That's why the mall managers are targeting these people, not your yew ja kway bruthers or those in the $1,000 to $2,000 brackets who have no idea what the other half are earning.

Anonymous said...

Bruther redbean, mind if i ask you a personal question since you seems to so personal abt the property prices; do you own a 3 or 4 room flat, or are you having difficulties coughing out the mortgage for your child/ren? Times are bad eh?

Anonymous said...

the original purpose of hdb was to provide public housing to the people, giving them a stake in the country. not necessarily for the needy.

In that case, what is your quarrel?

redbean said...

ya, i know of people earning $100k pm. according to our statistic, anyone earning $10k a month is in the top 10% of income earners. if there are so many young girls earning that kind of money, then they are all in the top 10%.

i belong to the generation that can think of downgrading but no need to. my children are comfortable enough on their own, all grads, spouses grads.

i am just earning for my pocket money. : )

redbean said...

oh, property prices always go up. what do you think cause the financial crisis today? where do you think are the prices heading in Japan, UK and Australia?

and if this crisis is not contained, you will see what you think will not happen next year.

Anonymous said...

Wah congrats on your happy family.

Not sure about the parameters used in your statistics or what figures were involved in the data collections, if it makes you feel better then the stats must have achieved its purpose. I used to earn multiple of that figures, and I was told by an official (?) that it is small cake today, so i am not sure what you meant by top 10%. Was that from the bottom up?

redbean said...

everything that is built on the principle of a pyramid scheme must break down. i have seen several cycles of boom and bust.

the american lesson does not come for nothing. and when it hits us, god help us. the american crisis is only making us helpless and trying to contain the damages. our reserves can be wiped out totally in just one major crisis.

don't stay in Alice in Wonderland for too long.

Anonymous said...

what, next year? we havent done with this yet. redbean you talked like our property market has crashed and there are dead bodies in the street. i hope we wont have to line up in the soup kitchens next year.

redbean said...

ya, the stats must have served its purposes. i nearly fell off from my chair when the stats put me in the top 10%.

the really big earners are in the 6 digits. and there are many of them which somehow were not in the official stats.

i sure want to meet a few of your ladies earning above $10k pm. like to tell me what are their profession other than a few top housing agents and life insurance agents?

Anonymous said...

The american crisis is a blessing in disguise for the asians to retake their long abandoned pole position without firing a single shot. you shud read sun zi's art of war to learn about crisis, dangers and opportunities.

Anonymous said...

well, for one they are not street walkers.

Anonymous said...

redbean you want to meet ladies, you go to a dating or escort agency.

redbean said...

you don't meet ladies in escort agencies. there you meet women in red : )

Anonymous said...

Nominal real estate agents already rake in over $10,000per month, thanks to the budgeoning property prices top agents dun struggle for that little anymore. Besides the oldest profession, it is not hard to guess the professions that pay comparative salaries. Banking, IT, Engineering and the RMs are in, you see the constant partying at SunTec? those are the cream de la cream, but to work in UBS, ML or the likes you must have a good education and network. It is easy to rake $10,000 pm if you are a pte banker. The IT systems analysts and managers do well too especially if they are in financial orgs. Those involved in regional MNCs, sales in particular you dun want to know their gross, it may spoil your dinner. These days, the civil service pays well too.. hmm. If you are bright, young and educated, enormous opportunity opens up to you. If you are over 40 you probably have to stay back in the office to play politics or be a good gossiper. If you are over 50 you may be thinking that the average workers earn like you did in your youth. With all the different stats, i dun blame you. If you dun know by now, there is a big gap between the ones smiling to the bank on payday and those who start to count the moment they enter a coffee shop. And i dun mean just calories.

Anonymous said...

Redbean was it you i just saw in the escort agency at Orchard Towers?

redbean said...

the american economy is in such a mess today not because they were sabotaged by external factors. they did themselves in, from the people in govt and those in position to make decisions. they were blinded to their own faults and kept on piling up the excesses and extravagance, all the time thinking that nothing would go wrong. and they kept paying themselves crazy. and the more they paid themselves, the more they believed in themselves.

compare to america, we are building a house of cards. and the people that can do us in are the highly paid decision and policy makers who are blinded to their own actions. it only needs a gust of wind and the house of cards will just collapse. the critics can only kpkb but can do nothing to harm the economy. it is the people within the establishment that will be the one who will do it.

yes, they are paid very well and believing, like the americans, that everything is well managed and will not go wrong.

redbean said...

let me share with you some of my recent experience. since the financial crisis till now, i have friends, multi millionaires, and more than a handful of them, now all declared bankrupt. it took just one crisis to wipe out their fortunes made over a life time.

for those who are still doing well, thank your good fortune. when a crisis comes, it is not how smart you are or how much you have.

redbean said...

you guys are right to say that the numbers today are numbing. you have people openly commenting what is $10m or $600k is peanuts. my best year is not even half of that peanut.

when times are good, making $20k or $30k pm is not a problem. the test comes when times are bad.

in this time, all investments are in the red. the more one invested, in stocks, in houses, in minibonds etc, the more one loses. the people who are safe from the crisis are those that keep their money in FDs or in the CPF. The latter is the safest for the next 50 years, if you ever see the money again.

December 30, 2008 8:17 AM
(amended latest to latter)

Sunny said...

I have read the exchange of information and opinion on this very interesting debate and I am also bemused with the way in which both parties felt so personally about this issue which almost lead to a heated argument at times.

redbean said...

hi sunny,

welcome to the blog. heated arguments can be healthy as long as it does not turn into personal attacks. bloggers must adapt and learn to accept that different people have different views and not everyone will agree with everyone.