Sunday, August 19, 2007

American Economists are a bunch of whiners!

After watching videos of tearful Americans getting foreclosed in YouTube, I was beginning fell sorry for those poor Americans. American economists are complaining about home prices being too high in USA during their speculative bubble in 2005 and Americans are too much in debt due to property. However, when I found out what the average home cost in USA, I think we can make a comparison:

1. At the height of the US housing bubble in 2005, an average American home cost S$375K (freehold, 3 bedrooms, 2350 sq feet)....vs S$410K for a 5-Rm HDB in Tampines on the resale market. Yes, private housing in USA is cheaper than public housing in Singapore....and cost less than half price per square feet.

2. At the worst point the average household debt of Americans is 100% of GDP vs 174% of GDP for Singaporean households.

3. The per capita GDP is US$44K for USA vs US$31K for S'pore.

Americans are soft people who can't even shoulder 60% of the debt burden of a Singaporean household. ...their economists like that bearded feller called Paul Krugman are a bunch of alarmists who go on TV to warn people about the impending doom and gloom because the US property bubble has burst. Oh come on, you call that a bubble?....That is one heck of a pathetic little bubble compared with the one we had in 1996 & 2007. They really have alot to learn from the PAP when it comes to asset enhancements.....don't their govt have a PR govt that ensure their media doesn't use the wrong alarmist terms like bubbles & crash?...replace it with wonderful words like asset enhancement when prices go up & increasing affordability when prices fall. In Singapore, go up good, go down also good. ...either directions the PAP has done a spendid job.

I think the solution for this subprime mess is the CPF! If the Americans are able to copy this wonderful system of ours in which retirement funds can be tapped for housing, their property prices will double in no time. ,


Anonymous said...

This is the part I like most:

"go up good, go down also good. ...either directions the PAP has done a spendid job"

Anonymous said...

With compulsory annunity kicks in, our lives gets better.

Welcome to City of Possibilities

young-pap said...

Dear Mr. Tan,
We at Young Pay-And-Pay are most impressed with your ardent support and twisted logic. Your ability is precisely what we lack right now. We are having writers' block! Any suggestion? :)

Anonymous said...

Compulsory squeeze-in-the-bus/trains..

Compulsory exit permit...

Compulsory NS...

Compulsory annunity...

Compulsory squeeze on the wallet every 5th year, up up away!

Poor thing. We deserve better.

Anonymous said...

Haha! Nice turnaround!

Hope you're financially ok.

The Bimbo said...

I agree. CPF. in fact many countries could benefit from having a system like that too.

No doubt it's not full proof but it's certainly served us well.

Anonymous said...

"3. The per capita GDP is US$44K for USA vs US$31K for S'pore."

In US, there is a higher income tax, therefore their take-home pay is lower. As a result, the mortgage loan might in fact form a larger part of their disposal income

Anonymous said...

Lucky, do a little more research. Your coverage of this topic is so superficial it is ridiculous. You can't compare singapore to the us on a country to country basis in regards to the property market. The sheer size of the country and extremely different local cities/economies have very different statistics.

If you want to say, compare LA, SF, or NYC to Singapore that would be a better start, even though they still aren't very similar. But if you were to look at average prices in say, SF or NYC I think you would find very different results. Much of the problem in the property markets is in fact in the areas that have had big price runups, so it is important to understand this.

Anonymous said...

"At the height of the US housing bubble in 2005, an average American home cost S$375K (freehold, 3 bedrooms, 2350 sq feet)...."

I do not know where you are getting this figure from, but it is ridiculous. At the height of the bubble in 2005, housing prices in top US cities like LA, SF, NYC, and Chicago were a minimum of US $600K, or S$900k...and that's for a condo, not even a house. Perhaps cheap housing costs in places like Idaho or North Dakota brought the average down, but seriously, where does a majority of the US population live? Add to this a high cost of living and bad mortgages issued by unscrupulous brokers, one finds that there is really more to the story. You might want to doublecheck the validity of your statistics before lambasting American economists.

Anonymous said...

A very simplistic mind coming to a simplistic conclusion obviously.
At the peak of the Housing bubble the housing prices in most areas of the US were inflated 300 to 400% over the earning capacity of the average US worker. But because of credit loans that allowed low initial repayments for a short term then at the prevailing rates thereafter, many speculated and jumped on the wagon and bought at prices that they could not otherwise afford.
There was a huge buying spree even as housing prices continued to escalate to the sky.Homes in hotly sought areas like California, Florida, New York, Massachussetts,Chicago were going at more than a million US dollars each and bought by peoples with incomes of US$40-60K/ year.Because of the sheer numbers of these people, about several millions, with the US pop at 300 million, the staggering impact is felt on the US economy and the world too.
Americans who bought houses within their means to stay in are not that impacted.

It was just a case of musical chairs as to who will be caught with the baby when the whole thing collapsed which was just the case.Buyers now have to pay higher mortgages for homes that have fallen drastically in value.
The fault lied with greedy and ignorant buyers , unscrupulous bankers and the Bush government who should have seen this coming.
Singapore went through the same housing doldrums from the late 90's and early 2000s.
Yes the CPF has allowed many to be able to speculate the property market but Singaporeans also had their tails burnt during the downturn when many suicides happened but never publicised.It is not the CPF that had saved the day for Singaporeans because many Singaporeans are asset rich but cash poor.Besides, many had tied up their retirement funds in bricks and mortars.It was the stringent lending policies in Singapore that had made the difference.
Besides, 85% of the people lived in HDB housing with all the attached restrictions and they are immunised from drastic price fluctuations and market forces.Unlike the US market which is all private. Also, the market players in Singapore are small in comparison.
What works for Peter does not necessarily work for Paul.
The US has its own retirement schemes which allow delayed taxation until time for withdrawal. These are put into private management funds or annuities.
Compulsory taxations are put into Social Security and Medicare for retirement.This allows a certain income adjusted for inflation for life with health care.No, these funds cannot be withdrawn for buying houses or for speculation.
So,is CPF better ? I don't know.The sum is finite while medical care and cost of living continues to escalate exponentially.Will need very prudent and frugal livng and don't fall sick in Singapore , perhaps?