Wednesday, December 08, 2010

Consequences of govt inaction in the housing market....

There are some lessons that should have been learnt from the 1996 property bubble and the link between the bubble and the effects Asian financial crisis that came shortly after that housing bubble.

Many Asian countries appeared to have learnt from that episode to keep bank lending in real-estate market low. If the lessons from 1996 have faded, there were reminders from the recent subprime crisis in the USA and what happened in Ireland.

Many Asian countries appeared to learnt the lessons well to contain the risks to financial system...but there are exceptions.
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Hot property prices here 'worrying' [Link]
05:55 AM Dec 08, 2010
SINGAPORE - The Asian Development Bank (ADB) said yesterday that Singapore's fast-rising home prices are "worrying", as real-estate lending accounts for more than half of total loans in the banking system.

According to the latest issue of the ADB's Asia Economic Monitor, the share of property-related loans in total loans is as low as 9 per cent in South Korea, 15 per cent or less in Indonesia and the Philippines, and below 20 per cent in Hong Kong, Thailand and China.

At 51 per cent of advances, Singapore's banking sector's exposure to property is the highest among the nine major economies of East Asia, followed by 42 per cent in Taiwan and 38 per cent in Malaysia, ADB data showed.

The ADB report comes less than two weeks after the Monetary Authority of Singapore said in its annual Financial Stability Review that household debt has been growing at a faster rate in recent quarters - driven largely by housing loans which account for the bulk of household borrowing.

The study pointed out that Singapore had already taken steps to cool the property market, in line with measures adopted by other economies in the region.

As a result, the increase in home prices had started slowing in the third quarter in eight out of the nine East Asian economies, with Thailand as the only exception.

The ADB also called for greater cooperation among East Asian authorities on exchange rates, so as to reduce the volatility of currency fluctuations within the region and benefit the production network that spans East Asia. For Asean nations and China, Japan and South Korea, cooperation on exchange rates could also help "manage surging capital inflows to the region and better rebalance the sources of growth", the study said.

A single currency is not on the menu because "the recent debt crisis in the euro zone shows that stronger institutions than previously thought are required for monetary unions to function properly", the ADB said. Nor does it recommend that regional countries peg their currencies to one another's or benchmark their exchange rates to the "Asian Monetary Unit", the artificial basket of regional currencies first mooted by Japanese scholars.

East Asian countries could instead pick a reference currency from outside the region - either the US dollar, or a combination of the dollar and the euro - and then seek to maintain stability of their home currency's exchange rate against the reference unit.

33 comments:

Anonymous said...

If u know PAP leaders,u would surely know the pride they take in higher,and more higher property prices in Singapore.

Not only that,they hv also imparted this so called HOLY knowkedge to their Communist brothers/sisters fr Communist China.

I just came back fr Shanghai where one boss told me how great his party was to being the property in Shanghai to US$2,000 per sq ft.whist admiting that his workers are earning US$150 per month.whist exclaiming excitedly that it is very easy to make money in capitalist world!WELL???

This is the disservice we Sinkies have done to our Chinese brothers and sisters fr Communist China by giying PAP too much power and let them sell themselves as Guro to all Chinese people.

Do we hv to pauy a price for this false prophecy,you decide!

Anonymous said...

Quote:
A single currency is not on the menu because "the recent debt crisis in the euro zone shows that stronger institutions than previously thought are required monetary unions to function properly", the ADB said

The above statement shows how stupid are the economists fr ADB who are living in ivory tower.

It is to the credit of MM LKY that he refused to be drawn into call for Asian currency union,years ago.

Not that he is that brillint in economy,but simply the so called ADB economists are pure stupid,w/o any sense of reality !

C H Yak said...

Read my blog posting after my recent retreat in China : "The Property Bubble & Investment Trap Part XII - Quick Sizing Up of Current Property Market"

Link : http://de-leviathan.blogspot.com/2010/12/property-bubble-investment-trap-part.html

Anonymous said...

Yes,thank u for yr blog,it is useful,pl promote it aggressively so that more rather not so clever sinkies can be educated.

Anonymous said...

Whatever the consequences, the difference may not be noticeable from day to day. Tomorrow will be just as normal and peaceful, like today or yesterday.

And this will be for a long, long time.

Nothing drastic will happen here, be it social, economic or political. If it does, maybe not in some our life time.

The only thing drastic, strong, etreme etc will be the comments in blogs and internet, but that's OK.

Anonymous said...

PAPies are not stupid. They *know* that S'pore property market is in the initial stages of bubble. But now they need to think about the GE --- they cannot impose too strong policies otherwise there will be knee-jerk reaction in the property market and will see sharp correction. Like that surely lose votes from majority of home "owners" whether lessee or true owner.

So PAPies impose some minor policies mainly for HDB, and talk cock sing song that they are so good at their jobs. But after GE then PAPies may impose stronger measures to cool property market.

I always believe the current (and the previous) batch of PAPies are usually behind the curve. The next set of anti-property policies may only be imposed in 2012, causing a relatively minor correction, but then will snowball and be exacerbated by the huge influx of overbuilt new condos and new HDB coming on stream starting from Q1 of 2013 onwards.

For next 2 years, property prices will be relatively stable, but not much capital gains, maybe another 10%-15% increase over 2 years, due to inflation, cheap money and pro-foreigner. Property market now is only for the rich, or for those with very stable jobs, or those expert property speculators who don't mind paying the higher stamp duties.

A word of consolation for those who think they've missed the boat: Grand riches (the type that can support your retirement) can often be made only when there is BIG financial disasters, BUT ONLY IF you can preserve your cash beforehand. E.g. I managed to grow my cash portfolio from $150K to over $450K from 2003 SARS to end-2007. After giving back some to the market, I realise a secular trend shift and exited the market. Then I managed to increase the $400K to now about $800K from early-2009 till today.

Anonymous said...

The blogger up there sure yak a lot and even giving prediction on when the bubble will bust before it booms again. Well, the game plan has changed.

Try not to think of the property market with an old mindset. SIN is well positioned to radicalize the property market.

We need not suffer the anxieties of property market especially in develop countries.

Anonymous said...

Yes,you can be said to be very far-fighted.

look at Monacco,a very small county with a population of about 30,000,but the richest in the world,not to mention the highest per capita GDP,but guess what is the average property price?

at least 10 times what we get in Orchard Road.

Sky is indeed the limit,if PM LHL would be kind enough to increase the no of gaming dens to 20?How about that?

Me,I am not clever,but a small brain to look and think!

PM LHL,pl do it!We would be rich!!!

Anonymous said...

The property bubble in Singapore will never burst. The sun has never, and will never set on Singapore.

We survived every single downturn and recession and pulled out stronger and stronger. Throughout every single recssion, the malls and food courts were packed. Orchard was just as crowded today as it was during all the recessions.

Singapore is special. We are much more resilient than any example you can think of. How can countries like Dubai, Ireland, Greece, Iceland ever compare with us?

Majullah Singapura! I am bullish on Singapore!!

Anonymous said...

The property price is destined to go from here to infinity. This is how the clever PAP does it.

Whenever property go down, import foreigners. If 5 million not enough we can have 50 million.

We can even take in all the 3rd world 4 billion of people.

Then, our GDP will rocket 8000 times. Lee Hsien Loong will be remembered as the most clever man in universe.

There is no bubble in Singapore. Our property price as dirt cheap like shit in toilet bowl. Hurry up, come on board and buy buy buy.

Anonymous said...

We have more people by percentage defaulting on their HDB payments than the US subprime crisis, yet HDB is still standing strong.

We had 3 recessions in 10 years, yet the MRT is packed daily each morning. None of our housing estates have become ghosts town. We also don't have scores of unfinished building projects. Look at Dubai and Ireland, where cosmopolitan places turn to ghost towns, and unfinished housing projects are scattered everywhere.

We went through 3 recessions, and never once did the government be forced to cut civil servant wages or default on salaries. Look at Greece and laugh at their incompetence.

We were under one-party rule for over 50 years, yet we are much more prosperous than other African dictatorships like Zimbabwe or North Korea.

Singapore will prosper. Property prices may dip, and we are so used to prosperity that we define dips in prices as property crashes. We will never have a real property crash like Dublin or US market. Never!

Anonymous said...

Dear Lucky,

Thank you for publicising this extremely important Eye-Opening report by a well-respected institution, ADB. Hope prospective buyers will plan carefully so that they do not become Asset Slaves.

Thank you once again and keep up your splendid blog.

Anonymous said...

Consequence of gvt inaction in the housing market has let to my HDB flat doubling in price over the past few years.

That's supposed to be bad?

Idiot at large said...

Again, another blogger, after reading reports from other sources, agrees to the view that the world, the economy, the people will come an end.

Not just a simple end mind you.
Lots of suffering ( no specifics)
Lots of pain ( no specifics again )
and that we must "do something" about it.

Gold prices are up
Oil prices are up
Property prices are up
Food prices are up

So?.. what about it?
Do you see less people at the town centres? Do you see less people at NTUC supermarkets?
Do you see less children at tuition centres?
Do you see less people queueing up at 4D/TOTO outlets?
Do hear taxi drivers complaining?
Are there less cars on the road?
Are there more people being killed along the north south highway?

Please. there is no doom.
The stock market has gone up
The economy is fine, it will slow but it will not collaspe!

You and I will still have sharks fin soup at wedding dinners

Stop this nonsense about how bad the 'situation' is.

Anonymous said...

"The property price is destined to go from here to infinity. This is how the clever PAP does it."

Dont be daft. We are a global player who know how to pace with leading markets. The PaPies know not to get ahead or try to outdo HK,London, shanghai etc in setting record prices in the general market.

In property,better not be the leader in setting record prices, especially in the general market, because, slow and steady will inspire confidence and long term players.

Jamesneo said...

idiot at large your words revealed your total ignorance. The reasons Singaporeans are still relatively "happily" is because the big crash has not occurred in Singapore yet. Americans never thought that more than 30% of their people will be on food stamps 10 years ago but look at them today.Arrogance at "uniqueness "of singapore is the very catalyst for our downfall.

Anonymous said...

The worst crisis ever to hit Singapore was WW2, and today, WW2 generates the greatest historical tourism money in Singapore. Look at most of our historical tours, and you will find that it is all about WW2. There is really nothing much before and after that.

Singapore is a miracle lah. We survived all the recessions without much trouble. Every single recession, rents only freeze. If they drop by 5%, it is a massive disaster for property market. If things are normal, rents rise by 20% at a go.

We had numerous recessions, but yet food courts are always packed. MRT is always crowded in the morning, not enough disgruntled voters to vote out PAP or to strike over wages and lost jobs. No pay cut for civil service. No ghost town. Nothing bad has happened to Singapore since the past 50 years.

Every single recession has been overhyped. Every single one of my peers survived all the bad times and did well. Many own their own homes today, have kids, and are happy to remain here.

Compare Singapore to any other city or country. See what happens when property market crash or when financial crisis hit. It is like getting whacked by a hurricane or being sent from first world back to third world.

Singapore is invincible.

Anonymous said...

Re Annon 9/12/10 00:20
///////
Singapore is invincible.
///////

Singapore is really a fairy tale miracle that everyone get rich in flipping property, and not working.

The earlier government send property to infinity by importing another billion of FT, the better for us.

Lee Hsien Loong has invented the property to prosperity economic system. The scumbag in sweden is really an idiot by not giving him Nobel Prize of Economics till date.

PAP has invented property as a form of pension, wealth creator... stupid other country dono y spend so much time on production.

Kudos to the PAP maggots. You are really the smartest ass on this planet and you make no mistake. PAP is really so good and so perfect that they are everything right.

Michael Flately said...

I have to admit that some of you had pointed out the obvious. Singapore is indeed invincible! i guess the answers lies in a simple proportion. 4m people on 640 sq km. how can we ever have decreasing property [rice and ghost town shopping mall when so much economic activity is concentrated on such a small piece of land.

It is true. simply by importing demand we can have growth. right now we are in a sweet spot. we can sustain the economy by simply satisfying demand on current population not to mention the transit and tourist. Our geographic position has ensure our invincibility. In singapore it is only a matter of how much profit, we are never down on our chips.

now all we need to do is to buy up other corporations for singapore and they will add to the coffers of singapore. the sing dollar is invincible as well. very soon we will join the swiss francs as the ultimate currency. i remember 40 years ago, 1 ringgit = 1sgd. now look at the tarazan and their kampung money...

i am so happy someone finally point to me the obvious. sounds utopia but it is true. i cant find any single fault with the invincibility arguement. there is no way singapore can be brought down. of course provided malaysia dont invade us.

Anonymous said...

I have to admit that Singapore is truly resilient. I moved into Punggol years ago when the economy is not doing well. And it kinda struck me that regardless of the economy, land development continues non-stop. Have any of you seen the scale of land development in Punggol? It has the makings of a new Jurong, and the potential new mall at Punggol might even be the next Jurong Point.

The stock market STI index was half of today's value a year ago. Yet, regardless the performance of the market, property prices have not dropped drastically. They may shoot up drastically, but they have never fallen to bargain levels like the stock market.

It's quite unlike the subprime crisis in America or the property bubble in Dubai, where people max their credit cards just before leaving the city in hordes.

I grew up in Singapore and lived through all its recession, and it struck me that the recession seems to be limited to mainly the performance of the stock market. The shopping centres are always packed, HDB is always clearing new land to build new flats, Orchard Road is as crowded as ever, rents are always high, the Causeway is always jammed in the morning.

Perhaps we should compare our government's incompetence to that of the Greek and Irish government, where naked dishonesty and total incompetence have seen them cooking government books or leading ot the government begging for bailouts.

So far, I don't know of any Irish or Greek politicians offering to resign or going to jail.

Singapore going the way of Ireland and Greece? It would be like saying RI has become a Band 9 neighbourhood school with NT and NA students.

I really disagree that countries like Ireland be compared to Singapore. The Celtic Tiger is a pussy cat compared to the Singapura Lion.

Anonymous said...

Haha, PAP apologists and internet brigade here in full force. Lucky's blog is easy meat for these guys, who dare not show up in other political forums.

Anonymous said...

I have yet to see anyone refue the PAP apologists argument on the 'invincibility' of Singapore through all the recessions. Even Lucky is smart enough to stay away.

Looks like the coming GE's result is likely to be certain. I bet PAP alreayd appointing their cabinet ministers-to-be, without even having to go to the polls.

Anonymous said...

I'm praying for big property crash to wipe out a lot of Sinkies. Need to watch the suicide rate. I got an insider in the Coroner's Court. He said suicides reached at least 10 a month due mainly to losing homes and not able to service mortgage, during 1998 AFC and 2003 SARS. He told me to buy first time in 1998, but I didn't believe him. He told me again to buy in 2003. This time I bought a relatively new condo in East Coast area for dirt cheap $450K. Now it's worth over 3X. So yeah, I'm hoping for more Sinkies to jump from their overpriced condos & HDB, or go jump MRT.

Larger than an Idiot said...

The 1998 Asian Financial Crisis
lasted less than 6 months

The SARS lasted than 1 year

The effects of the 1st Gulf War lasted less than 1 year

In each of these events, Singapore emerged unscathed.
yes, some people lost their jobs.
But where are the scars?
What battle damage that is visible?

Instead we have shiny new Intergrated Resorts
Changi Airport terminal 3
New shopping centres
More Cars
More people ( though imported )

and... ta.. daaa!.. highest GDP
numbers since Sir Stamford Raffles
and the highest in the world.

Ignorance you say?

perhaps.. but until I see the return of 3km long empty taxis at the airport, Tanjong Pagar terminal being dead and the ST index below 1500.. no foreign workers at the food courts
and all this happening at the same time.... only then I will kowtow to you.. if you are still here and not scootted off to other lands

Property prices will stay.. it may not move much higher, but it will hold. Even if LKY, LHL should suddenly drop dead.

The island's economic structure is not some whimsical creation. It was not based on hope.

Anonymous said...

For some reason (I suppose, personal ones), PAP supporters want to think that property prices will keep rising, even though they know it is economically unsustainable in the long run. I can understand why they need to believe in this "invincibility" myth. After all, if this house of cards starts crumbling, they would be in deep financial trouble. The rest of the saner people can just wait. After all, time and logic are on our side.

Anonymous said...

Singapore, as a whole, should not be sustainable in the first place. We import everything, and we are an export economy. Our domestic market is small.

Yet, here we are. We survived every single downturn and emerged unscathed. Never once, were we even closed to being threatned of going back to 3rd World standards. Our airport kept expanding, we keep clearning new land for HDB flats, we keep building new malls, and mind you, the new malls are packed without taking away much business from existing malls.

Singapore is going from strength to strength.

Anonymous said...

Wow looking at all the pandering from the PAP lackeys makes me wanna laugh. Thanks for the comedy guys.

Anonymous said...

There people waiting on the side lines to pounce and buy up stocks and properties.

Does that indicate more fools are actually waiting on the side?
If so, then only wise ones are TR,TOLC, this blog and etc...

Anonymous said...

I suspect the local bank/s knows if they goes belly up...and seeing how the US gov't "saved" wall street and "big" banks...

The thinking here is that the local PAP gov't will swing into "action" to save them...since quite a number of the Papies has real direct personal interests here within and without of the local banks...

The fact of the matter here is...eince main street in america is paying for the self created mistakes of wall street and big banks over there...the self serving imbeciles and idiots here knows in the end...the PAP gov't would again use "public" funds to save the "local" banks...putting the people of singapore into more debt or "creating" 'new' tax/money generating policies at the expense of the people of singapore yet again...

Pray tell why the idiots who created the mistakes are not paying directly for their self idiotic greed created mistakes...but "others" has to pay instead as well as always paying it forward for these idiots [never mind if they have degrees/doctorates or whatever BS certificates that proclaim they are "intelligent" but truthfully are not!].

This is really stupid as stupid does.

Viral plus said...

Debts brought upon by the banks will be paid by the people via the Government.

Its proven to be a champion scheme.
Citibank,JP Morgan all have recorded big profits and are paying huge bonuses to their management.

The US people have voted in a new party to run the country. Has anything changed?.. unemployment is still yet unresolved, mortages are still unpaid.

So, we vote in a new party to run our country. Yeah.. fantastic, we go out and celebrate... and when we wake up the next morning, the ERP will still be there, the high property prices will still be there
the foreigners will still flash their smelly arm pits in the overcrowded trains.

Then what do we do? call for another election? vote another party?.. please.

Look after yourself and learn to survive within the eco-system.. we need to behave like the SARs virus and continue to mutate.. when the host dies, we move on to the next.
only to lie dormant for the next decade.

Ghost said...

Strange at all the Anons defending the Singapore government here. Guys, there's no need for that. If you read the Asian Development Bank (ADB) report carefully, they are worrying about Singapore's banks, not the Singapore government.
The banks have 51% exposure to the market. You combine that with rising household debts, and it's no surprise the ADB are worried about the banks here.

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