8/28/2007
When the next economic crisis hit
Our cost of living is up. Inflation is up. Housing is up, rentals up, everything up. But all affordable. Salary up also. Where got problem?
An average Singaporean is strapped with all kinds of hire purchases and mortgage loans. Their lives depend on that monthly income. What happens if he loses his job? When the next economic crisis comes, cannot run, cannot hide. Singaporeans will face the same bad loan crisis in the US. People who lose their jobs will all become defaulters in a matter of months. And we will have our subprime loan, or triple AAA loan crisis.
Don't bet on it. With the high cost of living, no one can afford to lose his job and survive. Without that income, he will be debt ridden within months. Worst than the third world countries. They are poor but debt free, actually. They live within their means.
We are living beyond our means with everything under mortgage or HP or credit.
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Right now they are saying the mortgage crisis in America is under control. Is it? What the Fed had done was just lowering the discount rate, but the fundamental problem is still there - bad loans. It is akin to patching a leaking fishtank with scotch tape. Any moment it will still come apart.
Of course in Singapore with the economy sitting pretty and the Government spouting confidence everyday, no one worries about debts as long as they have a job. So most people are spending and living on money not yet earned. The old maxim of saving for a rainy day no longer holds water for younger people. They have to spend like no tommorrow, even borrowing to spend.
Well, they have to live with the consequences.
The mortgage crisis is the US is NOT under control. What people believe in what they see now is an ILLUSION.
It goes like this:
With low interest rates, people will spend more, borrow more and save less (low interest => disincentive to save). Businesses borrow more too, so do property developers.
But to BORROW more there must be MORE SAVINGS. But there isn't, because people are saving LESS.
It is a no-brainer to conclude that this situation is UNSUSTAINABLE, becuase to keep the interest rate LOW, the Fed must inflate the money supply: i.e. PRINT MONEY.
Therefore, it is plain to see that a crash is inevitable. Maybe they can deflate the bubble SLOWLY, but I seriously doubt it.
Add to the fact America is at war, and thus borrowing and inflating to pay for the conflict—which they believe they MUST WIN, so they'll just keep on spending.
Hang onto your cash or gold. A lot of cheap goodies will be coming online real soon!
I think we must give credit when it is due.
A short while ago property prices were shooting thru the roofs as developers, speculators and property agents were doing their part to fuel the run. The authorities responded with new DC charges, timely information on property transactions and trends, and providing new sites, buildings and HDB apartments to feed the market demands. Today, we read abt transparency measures to be introduced for collective sales.
Initially, some of us thought the govt shud just step on the brake and slap taxes, duties or surcharges to stem excessive speculations as in 1996, but in retrospect I think the authorities have done a marvellous job in tackling this situation in many creative ways, which averted a repeat of the 1996 property collapse. I am not sure if the same problems were to happen in another country, would it be tackled so efficiently and swiftly as our authorities have done.
You dun have room for mistakes when stakes are high. As in the present mortgage crisis in the States, people felt more comfortable with alan greenspan in charge than somebody else; similarly I would rather have our present chaps in charge than risks some unknowns making decisions during a property crisis or some high stakes situation.
i dun believe this is another exclusive anti government ranting site where conspiracy theorists and pessimists congregate and where decent people get flamed.
They never learn do they? This property agent boasting in the new paper abt how with only an o level she will be earning abt what mr pillay and other CEOs earn, $1.7 M by year end selling properties and she is just 38 years old.
I think it is unfair that property agents get 1% commission for doing something any ah soh can do.
The property agent said she worked very hard, for example fetching clients up and down the airport and buying bak chor mee. It is very TIRING.
You mean that kind of work is worth $1,700,000? The Bangladesh workers from my town councils would gladly do it for no more than $500.
I think it is time to adjust the commission rates for the property brokers; as with stockbrokering, the authorities shud cut it from 1% to 0.25% negotiable.
i cannot blame the developers and their gangs for drumming up the desires and demands for multi million dollar properties. this is a business.
the problem is that many are chasing a dream that is going to hang a stone around their neck. people must be advised to be thrifty. but then again, thrift is not what this country encouraged. we just want people to spend and spend. then end of the day, where is my retirement money?
we need some wise men to tell the people that it is good to dream but be realistic. a $500k home, a $1 mil home, a $10 mil home, is still a home. don't end up with a broken home or a home that will broken all your bones.
the govt has come in with some timely intervention. but not before the outcry. and if you read what was reported in the media, there were some who encouraged the euphoria and some were against it.
the wise men were in two opposing camps until someone slammed it down.
1% of $1 mil or $100 mil. actually the percentage game has become quite silly. everyone is using this percentage game to his advantage.
but when it is the other way round no problem. cut the percentage even if it kill the person's income with not regard to the risk involved in the biz.
what risk is there in a $10 mil property deal or $100 mil deal to the agent?
i don't know if the legal profession also charges their fee based on percentage of the lawsuit?
if only all the ceos can peg their salaries to the company's revenue like american's did. whew, 1% of microsoft or Boeing or citibank.
i love that too.
Two things have shifted. First starting income have grown. Second the income base have also grown.
Property costing 1 Million is now within reach of new income earners by way of leverage.
More of these people enters the prop mkt, pushing up prices further.
Even $1.5M will be affordable with coming shifts in income.
Leverage is the key, prices are inconsequential now. Who has more leverage wins.
Leverage goes up as income rises.
Those not in the game or late comers, would have neither leverage nor the equity to be in.
PMEBs and the highly mobile will be sole players from now on. If you dun have Old money, you are out. Prices will never be affordable.
that's true. leverage on old money or new money, whatever, is the answer.
never leverage on bank borrowing. know of a few guys that leverage on a few properties at one time. both went bust.
never leverage on bank borrowing. know of a few guys that leverage on a few properties at one time. both went bust.
sounds like sub prime borrowers
over leverage. they have a few millions but leverage many more times. that is how millionaires lose their money. they cannot use up all their money if they just spend and enjoy life.
greed has no bounds.
the govt are made up of intelligent people. not silly doggies. but they keep doggies for sure.
they listen and they will moderate their plans accordingly. there is an on line petition and i have signed it.
to be fair to matilah. he crossed the line and got walloped. he accepted it as a man and refrained from strong languages.
he has nothing to contribute? many of his posts are views collated from academics and serious thinkers.
the people, or more appropriately doggies, are those that are not contributing but just barking.
just ask yourself whether you are a doggie or a forumer who is contributing or sharing something worthy for others to read.
Redbean, your postings are becoming inspired, for once.
I fully agree with the 2 points you made above. 1 forummer is a loud talking intellectual several notches up there, whereas the other is an EMPTY vessel making the most noise without anything worthy to share.
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