11/21/2010

Hongkong and China coming down hard on property speculation

Hongkong has announced more stringent measures to curb property speculations amid warnings by the IMF that the property bubble could burst. Sales of properties within 6 months of purchase will not have to pay 15% of stamp duty. Down payment for properties above S$2m has been raised from 40% to 50%. This irrational fear of property bubble is spreading from South Korea, China to Brazil. The control measures would mean that property prices in these countries will not go up anymore. Now that is bad. In Singapore, property prices can only go one way, up and up. And this is good. It must be. And we have no property bubble to fear. Our properties are all priced to be affordable. This is the ingenious trick that all the other countries failed to learn. The affordability formula is as stretchable as rubber. Even if our HDB 3 rm flats are priced at $1m each, they will still be affordable. From two income households servicing the mortgage for 30 years, this can be made even more attractive by having 4 incomes to pay for it. There is further flexibility to increase the repayment period from 30 years to 60 years too. If these countries would be humble enough to learn from us, they will not need to panic and impose all kinds of anti speculation measures. And they will be cheering everyday for property prices to go up, the higher the better.

6 comments:

Matilah_Singapura said...

Govt intervention leads to more govt intervention to fix the mess created by the preceding government intervention.

China has been inflating like a demon, and that inflation created more credit money ("fiduciary media") which naturally fuels stock and real estate booms.

People forget that China eased the banks lending ratio years ago and started the booms.

Thankfully, they've seen the light and mopped up the excess. However, "spent credit" is hard or impossible to mop up -- developers have already spent the money building, and they've also borrowed a shit-load.

If these, and other fuckers default, China's fragile, under-developed banking sector will be hit really badly.

So the govt has little choice if it wants to avert catastrophic market collapses and eventual bank failures -- better to hantam a few speculators now.

Personally, I think it is wishful thinking. China's markets are going to correct. You cannot beat (natural) economic law -- even if you are as big as China.

One thing China does have in its favour: lots of filthy, sexy, liquid CASH... which can be used to "de-leverage" thus making a bad crash, not so bad...but at a price (lose that cash)

Anonymous said...

Hopefully, China can really see the light, by not allowing themselves to be carried away by encouraging its people to accumulate debts to finance their spending habits.

Thus, it is a good sign that they are aware that rampant property speculation is not a good thing in the long term.

Matilah Singapura said...

Bernanke's QE2 might just be the trigger to cause China's speculative bubble to burst.

US has been nagging china to revalue the Yuan -- upwards i.e.make the currency appreciate.

The exchange rate is held fast by a peg -- to the USD.

QE2 is 600 billion. They are talking QE3 and QE4 already.

That peg ain't gonna hold. China might not have much choice but to inflate some more, just to keep it's currency "low" and therefore export-competitive.

If China inflates some more, those property (and perhaps stock) markets will melt down as borrowers default on their increasingly exorbitant loans, and interest rates skyrocket when the bond market gets "raided".

Cash rich Japan got walloped like that in the 1980's. Tokyo real estate prices went insane. The, a spectacular crash -- that was the '80's. The Japs still haven't recovered.

Anonymous said...

This time round the liquidity is going to drown everyone and everything all over the world. It is going to be like the great flood.

There will be a new beginning after the destruction.

Matilah_Singapura said...

anon 843

> There will be a new beginning after the destruction. <

Relax lah. almost every central bank in the world has taken Bernanke's lead: they are ready to inflate if (I mean "when") there's a crash.

So you might as well party. from here on out, you are no longer responsible because you don't control the money supply.

Anything goes. As for me: I'm going to make sure it goes my way.

Helicopter Ben -- bring it on dude!

Anonymous said...

Oh, don't worry folks. The crash will come. 'Helicopter Ben's' helicopter will come down in a fireball. It is just a question of time.