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2/24/2010

Is there a property bubble?

The commercial cum residential site at Choa Chu Kang and Woodlands junction fetched a cool $164m yesterday. Two years ago the bid was only $64m and not accepted. What does this tell? Cheap don't sell, no bubble? When is a bubble a bubble? As can be expected, there will be all kinds of definition of what and when a bubble is formed. For the moment, one can expect 90% of Singaporeans between 30 to 40 years and owning a property to be in debt of $200k to $1m. This is likely to be the bank borrowing to acquire their dream home, a roof over their heads. Presumably they are servicing their mortgages at 30% of their incomes. As long as the economy is running smoothly, no crisis or wars, they will have no problem paying their loans. When there is a crisis, two things could happen, one, losing their jobs, and two, property prices plunged. This double whammy will suddenly reveal that their properties are worth so much lesser in value, and they have no income to pay for their loans. Maybe then people will say, it was a bubble. At current prices, most properties are priced way too high and this will give them ample room to collapse when the time comes. The gap between the current price and the value it will settle is another measure of the balloon that has been built in. Inflated prices in good time and realistic prices when people will not dare to splurge. Do we have a bubble now? From $64m to $164m in two years! The developers will keep pushing the limits thinking that they can keep on charging more. And when in trouble, hoping that the govt will help them out so that they will not go bust. In the meantime who is going to help the people who need a roof over the head from having to pay a lifetime for it, at the prices the developers demand? Who is the profiteer or who is causing the price to shoot to the sky? Must be the developer lah.

15 comments:

Anonymous said...

I support your comments.Hope my children can react calmly when such situation arises ie no job and hugh loan to repay.

Wally Buffet said...

We are not alone facing this problem of a housing bubble. The Australians are feeling it too. Read HERE

Ironic isn't it that the Australian boom fueled by the Chinese may turn out to be the Australian Doom !

Chua Chin Leng aka redbean said...

I am very impressed by wage earners taking hundreds of thousand dollars of loans and depending on their salaries to repay over a 30 year period when all kinds of wrong can happen. And the monthly instalments can be several thousands. Very gutsy and confident.

This is actually the American way. Buy now pay later. It will ruin America and it can come any moment. The debt of America is too huge to settle. Small debt that can be easily service or repay is one thing. When the sum is too huge, pray that all things goes well. No room for mistake.

Anonymous said...

Saddling citizens with massive debts to service is the modern way of empires (US) and regimes (like PAP) to enslave their citizens.

Wally Buffet said...

Living on the never never...........

The Americans must be doing something right because being in hock for the rest of their lives is natural and part of their culture. Being debt free is not. Yet, they are the ones dictating the fortunes of stock markets round the world. Consume, consume don't worry about repayment because you don't know what the morrow brings. I'll rather they carry on the status quo because it builds bubbles across the world and that's good for stock prices. Trick is, you gotta get out, put your money under your pillow, before the roof caves in and all hell breaks loose!

Hehe.

Anonymous said...

People of the United States are consuming using other people's money. If other people wants to give them money to spend, what to do, it is their money.

How on earth is the US going to repay their debts when they cannot even cut back on their spending.

Obama can do it? Wait long long.

Anonymous said...

The SIN Government is creating such a great opportunity for its' citizens to make tons of money and be millionaires and billionaires elsewhere out of SIN.
And
yet I see the people make so much noise and refuse to see the kindness of their leaders.

Chua Chin Leng aka redbean said...

Singaporeans are either too stupid or too steep in righteousness and morality. So dunno how to make the money or refuse to indulge in it. Either way they will end up as losers.

soojenn said...

I am just waiting for the bubble.... when do you predict this will be.

Chua Chin Leng aka redbean said...

Ask Wally Muffet: )

chang said...

The properties are priced high and beyond the reach of a common man.It's all due to real estate flipping.

Chua Chin Leng aka redbean said...

Hi chang, welcome to the blog.

In paradise, there is no such thing as common man. There are only winners and losers. And the losers deserve to lose. Don't expect any help.

Paradise is a level playing field and everyone should take advantage of it to improve his lot. If he fails, it is his inability and nothing else.

Anonymous said...

Nice post, kind of drawn out though. Really good subject matter though.

Anonymous said...

Wow, that's crazy man. They should really try to do something to fix that.

Anonymous said...

Do you even speak English? Seriously, wall of text crits me for 99999k.