1/12/2011

I disagree with Temasek Review

I disagree with Temasek Review, or more specifically with an article titled, Buoyant property prices a sign of rising debt as opposed to rising wealth? by a Singaporean. This is what I disagree with and I quote the first paragraph, With property prices escalating into no man’s land, we see paper wealth rise with the proportion of debt. This is brought about by loose housing policies coupled with the loose granting of Permanent Residence to foreigners, this diabolic formula creates a surge in demand, and inflates prices way beyond their actual value and affordability. Ok, I disagree only with the last phrase which I have highlighted in bold. Who says our property prices are way beyond their actual value? Our property prices are exactly what they are, determined by the market of course. And no one can fight or manipulate the market. It is real market price. And secondly, who says they are beyond Singaporeans’ affordah..bility? I read everywhere in the media and in official speeches that Singapore property prices are affordable. And the govt is ensuring that they are affordable. So they must be affordable. Period. Ok, I must agree that high property prices mean high debt. High debt means high risk and can be turned into a nightmare for the debtors. I pray they don’t have to jump off their market value and affordah…ble properties when a crash comes along.

14 comments:

Matilah_Singapura said...

Sorry to tell you that you re bothe wrong ;-)

There is no such thing as "actual value". All value is subjective -- i.e. in the minds of the buyer/ seller/ wanter/ giver...i.e. the self-interested individual: who is pursuing goals (his "happiness") using limited means.

Prices form by the interaction of buyers unfulfilled "wants" with available (right here, right now -- not tomorrow or 30 years from now) supply.

This process works GREAT when the medium of exchange (money) has a stable purchasing power. However when the govt interferes by DEBASING THE CURRENCY -- i.e by inflating and allowing "credit money" (fiduciary media) to run amok, then you get distortions and dislocations in the capital structure -- usually represented as shortages or constantly quick upward increases in the price.

There is no solution to the escalating property prices in Singapore -- other than a "crash" or correction. If that happens, prices will fall as people "deleverage", but at 10 mil population target and a LIMITED, FIXED LAND SUPPLY, the long term trend is increase in prices (i.e. value).

Like I said before, if you don't own any property, you might want to think about the future.

Unless a natural disaster wipes out S'pore's population, you can more or less count on the 10 million "target". Yo0u may not like it, but unless you are god you won't be stopping it -- it's going to happen anyway.

Chua Chin Leng aka redbean said...

The magic formula for modern finance is print money, then can keep on increasing salary. Never mind about inflation. The poor buggers thinking that they are getting bigger and bigger salary are conned happily without knowing that the real value they are getting is getting lesser and lesser. They just feel good that the number is bigger.

The only people really benefitting from this game are those who could print their own money or write their pay checks. And you can be sure the pay rise they give to themselves will be many more times bigger than inflation.

The stupid masses are the real losers. A $500k 4rm flat and a $30k 4rm is still a 4 rm flat. A plate of chicken rice is still a plate of chicken rice.

Anonymous said...

Got to disagree with doomsayers here or anywhere else in Sin. I estimate no less than 50% will gain handsomely when they sell their properties now, with more to make if they sell further down the road.
When anything from 100Ks to 300Ks belong to you, this amount is going to take some years or decades for many nationalities in many other lands. And the best part, Singaporean hardly have to sweat for this profit.
For private properties, the profits could be larger or more lucrative.
Tell me when you sell your property and get more money than you paid for them, is that not profitable?

Matilah_Singapura said...

Lets say you sell up.

What then? Unless you own more than one property, or emigrate never to return -- what are you going to do? You still have to live somewhere, which means you have to pay high prices for the property you buy to live in.

From a financial accounting point of view, an "asset" is revenue generating. The house you stay in does not generate revenue, In fact, a mortgage is a liability.

Housing prices in S'pore will be "high" compared to other more land-abundant cuntries. However the RATE of price increase is related to demand -- usually steady reasonable increase in price over time, and "stabilizing" at some point.

When the prices shoot skyward at a tremendous rate, it is generally a sign of too much liquidity, which generally means the govt central bank is running a "loose" money policy.

2011 could be a "good" year for assets -- there is a lot of "new money" out there. Chances are you will see hight real estate prices, higher commodities and higher stock prices...until the bond raiders come to call...then it could all crash.

Anonymous said...

If foreigners came and are coming to cause realty in Sin to increase in value, Singareans could and maybe even wise to take the profits and go to foreigners' lands to buy cheap and bigger properties and enjoy cheaper everything such as car and chauffer, maid, gardener, beer, cigarette and meimeis etc.
My father told me he came to Singapore with few pairs of clothings and a few dollars in his pocket. He was poor but adventurous.
Singaporeans today are like caged birds, even when the cage is opened, they wont leave it for they do not know how to survive beyond the cage.

Anonymous said...

"2011 could be a "good" year for assets -- there is a lot of "new money" out there. Chances are you will see hight real estate prices, higher commodities and higher stock prices...until the bond raiders come to call...then it could all crash". Unquote.
A sentiment that is share by many intellectuals and professionals.
YET,
Singaporeans are looking at the danger in eyes without thinking of making plan to get away from the imminent ominous fate befalling Sin
BUT
making so much noise hoping to drive away the danger, like firing crackers to frighten away the spirit, will it work?

Matilah_Singapura said...

anon 133

> they wont leave it for they do not know how to survive beyond the cage. <

Unfortunately that is correct: for those who bought the "myths" that the PAP have been flogging for decades.

FORTUNATELY however, there are the more daring ones -- without them S'pore's engine of wealth-- the private sector -- will die. These folks are savvy, they can survive virtually ANYWHERE, which is why generally among the "quitters" (the overseas Singaporeans, the diaspora) they are generally very successful in their new adopted cuntries.

The PAP is just there to keep the peace -- like all politicians they work on people's sense of "hope" or "wishful thinking".

I think it is funny :-)

Matilah_Singapura said...

anon 139

> Singaporeans are looking at the danger in eyes without thinking <

Sure there are people always who look at the world through the lens of "danger" and "safety" -- it is the self-preservation mode in our consciousness working the way it should.

However there are those who don't look at the world as "good" or "bad" but in a way that they ask: "What are the opportunities, given the present situation? And how will the present situation evolve and how can I profit?"

Danger? Opportunity? Same thing lah!

Chua Chin Leng aka redbean said...

All the craps about property prices and market forces is about half truths.

The only people who benefitted from it are the sellers of properties and we all know who. and the next big bugger who is going to benefit from it is the tax man. The owner occupied HDB owners and pte property owners are smiling at the high prices but not getting anything out of it except to pay higher property taxes.


The half truth is that it is all plain speculation and the real losers are those who buy to have a roof over their heads. And yes, when the raiders said its time to haul in the nets and collect the profits, all the dominoes will fall.

This crazy craps about pushing property prices higher and higher, asset inflation, is a BIG LIE, A BIG TRAP.

Some already understood this. Buying an overpriced property is like carrying a big debt over one's back everywhere one goes.

If the prices have not been allowed to run to this level, Singaporeans will have lesser debt, some even debt free, and a lot of cash in their CPF.

Anonymous said...

What's the use of your cash in the CPF?
One of the biggest problem, bigger than the housing problem in fact, is CPF.
To take back your own hard-earned money, members are made to literally beg for it to be returned and yet as you know, your begging will yield nothing to your wish.
At least one is not forced(coerced) to buy property. But, not able to get flexibility in the use of your own money!
No wonder this shithole is called Sin.

Matilah_Singapura said...

More foreign buyers in Singapore, figures show

Makes sense: SGD appreciating, HK? China? India property markets cooling off, plus prices rising in Singapore, lot of new developments and future potential of growth from increased immigration (10 million target).

Redbean thinks it is all crap. I just think of "opportunity". Some one has to "clean up" the crap :-)

Chua Chin Leng aka redbean said...

A lot of opportunities for the cash rich locals and foreigners. But the highly priced assets would end up in the hands of not so rich Singaporeans who will be the last holder of the assets.

But one thing is true, no bluff you. Singapore property debt ratio is negligible. No need to pay cash one. Or maybe a few hundred bucks only. Same same as major surgery. Open heart surgery only cost eight bucks.

Where got bubble?

Matilah_Singapura said...

> A lot of opportunities for the cash rich locals and foreigners. <

Of course. That's the whole idea -- to be in a position to seize opportunities as they arise.

It's a choice, you know, not a matter of "fate" ;-)

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