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9/12/2009

Property bubble to be raised in parliament

MPs are gearing up to raise questions on the buying frenzy for new properties and the escalating of property prices, both public and private. Would it be a concern all for nothing? Mah Bow Tan has said many times that HDB prices are affordable. So has HDB with their repeated explanations in the media, and today it came out with a detailed table to show how affordable the HDB flats are. The figures speak for themselves and why are people refusing to listen and accept the fact that HDB prices are affordable? A 3 rm flat at $150k only needs $460 pm to service. Very affordable for a household income of $2000. No need cash I think, just use the full CPF contribution. And a 5 rm flat at $330k needs only $1189 pm with a little cash after using all their CPF. The report did not say whether the repayment is 30 or 40 years. Anyway, very affordable, without much CPF left. While critics are embroiled in the issues of affordability and mark to market pricing, they tend to forget that maxing the used of CPF will mean compromising on the key role of CPF savings for retirement. No one is asking about the real cost of the flats and why pricing to extract the most from the buyers and eating up all their disposable income. This is public housing afterall and keeping the price low will allow the buyers to use their income in many other ways. The danger of a subprime crisis in our midst cannot be ruled out as the conditions are quite similar, low interest rate, liquidity, full employment, an economy that is still ticking. With such high leverage and big loans, a little flu in our economy will hit these high leverage buyers badly. When the price of a flat is dependent on mark to market pricing which is highly volatile and can go crazy, when a flat costing $150k can be sold for $300k or $500k, it can come tumbling down when the demand is not there. Would it not be better for a little intervention to moderate the craziness and not letting the bubble to expand to catastrophic proportion before bursting? Let the market forces or free market mechanism do its job? Where is the moral responsibility to be prudent and avoid plunging into a tragedy? Caveat emptor good enough?

7 comments:

Matilah_Singapura said...

The govt will intervene-- my prediction. But they will do piecemeal stuff -- stuff that "looks good". I don't think the govt should intervene but they should stop printing money and allowing credit to expand -- i.e. increasing the money supply of the SGD.

You can bet your genitals that many members in the house of infamy are profiteering from the property boom.

Anonymous said...

Why worry lah. With a 40 year loan, just work up to 85 years old lor.

And now with the discovery of the aging gene, perhaps they could even extend the human lifespan to 150 years, and you know, the prospects are limitless in terms of working life for the very, very old oldies.

Only problem is where to find work for them, or how to provide work for the younger ones waiting to replace them.

Good luck to those who want to live to a ripe old age.

Anonymous said...

Your govt says that property prices are affordable. Ofcourse they are. 99.9% of Singaporeans have a roof over their head. All are property owners. So what more do you want? Redbean, tell me honestly, how many properties do you yourself possess? Most Singaporeans I know own at least 2 properties, one to live in and one for rent. If the price of property is high it is because of the greed of most Singaporeans who buy properties for speculation or for rental. If you are greedy then expect demand to outstrip supply, a sure way for price increase.

redbean said...

i am an advocate of two parallel system running side by side, a public housing system and a private one. the public one is for those who need a place to stay. the private one for those who want to speculate, invest or play.

don't mix the two or lump them together.

Anonymous said...

Afforable mean you got spare cash to spend without to slave or paying for 25 to 30 years without suck dry your entire retirement saving. I hope our millionair minister know the meaning of afforable.

redbean said...

if my annual income can buy 4 or 5 hdb flats, how can they be not affordable?

Anonymous said...

Affordability interpretation-- using a major percentage of your income to service your housing loan and at the same time live to worry whether your job will be there forever and hoping you will not fall sick.