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7/10/2009

The unsustainable ascent of property prices

Our property prices have skyrocketed over the years and the stratospheric prices of HongKong and Tokyo are within our reach. We will outshine them in a matter of time. Then why is it unsustainable when the prospect of prices going higher is so brilliant? Let me talk about the forces that will push the prices higher and higher. Our limited land is a fact that cannot be changed. Even with reclamation, we can just do that much more. The other reason is that with prices at such a high level, with many people ploughing their life savings into properties, many with high mortgages, allowing prices to fall is going to be catastrophic. So by hook or by crook, property prices must be maintained, if not higher, but not allowed to falter and slip. The solution is simple. Manage supply and demand. Supply is easy to contained. Don't build untill there is a demand. Don't sell land unless the price is high enough for a good return. The demand side, invite more rich foreigners to buy up our properties with attractive incentives, first world infrastructure, transparency, stability, and a value that can only go up. The rich foreigners can go for the high end. The not so rich can buy up HDB properties when they become citizens or PRs. As long as the demand for properties is there, have no fear that the prices will fall. But what about demand from the locals? There will be the upgraders who need a little more to move up. But will there be demand from the new entries, the new generation coming into the market? Can their income feed the high mortgages they will be paying, a stagnating income against an ever rising property market? The divide is going to widen. Many of the locals whose income is not going up will have to downgrade or go for smaller HDB flats. On the other end, the upper and high end market, demand will keep on soaring. And it is, or will be a good thing. They will help to prop up both the private and public housing markets. In the future, Singaporeans will have to beg the foreigners, and more foreigners, to come in to buy up their properties, to keep the property prices high. Without the foreigners and their cash, our property market will crash. Yes, the foreigners will be here to help the locals by buying up their properties so that they can downgrade and live on the profits. Hopefully the profits ill last their life time before they ran out. How many times can one downgrade? Without the foreigners, our high property price is unsustainable.

5 comments:

Wally Buffet said...

When this country vowed to bring our population up to 6.5 million, I already knew that I will be getting a windfall on my 3 room HDB. True enough, just the other day, some brain dead PRC offered my property agent 300K for a pigeon hole in the sky. What a nitwit! But as my motto is "Greed IS Good", I've asked the agent to go for 350K and I will throw in my energy saving though rickety fridge plus my 29 inch CRT TV which has served me well for 15 years. Folks, if you want to buy electrical products, go for "Sharp", they're the best. To spice up the deal, I'll even promise the dude a one way ticket back to Beijing where he came from! Hehe! I'm really having great fun with this 3 room flat which has been home to me for the past 30 years. Now by selling it, it will buy me 10 annuities of 30K each which will pay me a good tidy sum monthly for life!

Now, I am salivating on what I will buy for my 1 room rental flat. Any suggestions?

Anonymous said...

Hi Wally,

I also have my dreams. When my son gets his flat, maybe I will sell my flat and 'tong pang' for a while.

Is it a waiting period of 3 or 5 years to qualify for a rental flat after selling a 3 to 5 roomer? Not sure leh. Can advise or not?

'Sharp' did made good TVs that really lasted a long time, but I am not sure about them being the best now. In the past such products were all made in Japan.

I bought a 'Sharp' vacumm cleaner few years ago and it lasted just about more than a year, just after the expiry of the guarantee. The motor just gave up for no reason. The agent told me it will cost about the same as buying a new one, just to change the motor.

Lost Citizen

redbean said...

you are so lucky. let's hope they bring in more foreigners, then your 3 rm flat may fetch half a million.

Wally Buffet said...

Hi fellas. Just got up from my afternoon nap. I dreamt about my 3 room just now. Like Einstein, whose equation E=MC2 rocked the world, I dreamt about an equation too, like this:
FV=(CV/CP)xFP where FV is future value of flat. CV is current value of flat. CP is current population and FP is future population. To save you folks the trouble of taxing your brains too much, the theory is basically that if I can now get 300K with a population of 4.5 million, I can expect to get 400K if we achieved a population of 6.5 million. And if we press the govt. further to increase our population to 8 million, my 3 room HDB will be worth 533K! Wow! Now, I am changing my xenophobic stance against foreign talents.

Bring them on Baby! These FTs are a great property value inflator!

penn said...

Does that mean you can buy another flat from HDB @ 260K or do you think government should be building brand new flats and sell at 300K when foreigner are buying them @ your suggested price. This confirmed what i said it just mean our kids will have to pay alot more to buy in in time to come; that prices can only go higher.Is price fluctuation Government's doing or just free market biting in?