Sunday, March 25, 2012

Global Economy, markets...and the truth about our low birth rates....

UPDATE 26 March 2012:  I went through the comments for this posting and a number of commenters are of the opinion that it is unfair to compare Singapore as a city with USA the country - Singapore should be compared with New York instead in terms of property prices and fertility rate. I think Singapore, as a nation, should be compared with USA as a nation rather than cities. Americans have the option of living in cheaper less crowded places and that helps to balance the overall social dynamics and fertility rate. Because Singaporeans do not have this flexibility, it is necessary for public housing to help create more stable families and averted the negative effects of profit driven private housing market. New York can afford to have a small and weak public housing programme but Singapore cannot . Only a good public housing programme can overcome stresses of city living from which Singaporeans cannot escape. When the PAP prioritized reserve building over the social goals of public housing, that is when our problems started...and it will end only when the HDB get its priorities right! 

My last 2 posting on the economy were in Dec 2011 during a time of much pessimism and fear [Eurozone Crisis :Stability or Spiral into chaos?][China's Economy : Many problems, many bullets....]. I tried to explain that there were a few silver linings in the European crisis and the "backdoor" easing by ECB head Draghi will buy a lot of time for European countries by kicking the can down the road and relieve the financial system of intense stress. The stock market has risen non-stop week after week since I posted those articles until last week when investors and speculators wonder again if the stock market has run too far up ahead of the economy and started taking some money off the table. The stock market is always falls ahead of potential problems and very often falls first on the hypothesis then falls further as more data to confirm the hypothesis - the stock market is as often right as it is wrong often when the hypothesis fall to pan out, it recovers. The main fears are again China and Europe - data shows both slowing faster than expected. Data from the US shows the opposite - growth is stronger than expected.

China has numerous problems that have been widely discussed. Other Asian economies have a few real structural problems - tight labour market, rising inflation and rising deficit especially in India. The star performer in the past 3 months is the US economy, the epi-center of the crisis in 2008. This is reflected in its stock market performance, US markets are near a 4 year high - but there is little speculative excess in the US market. Even star performer, Apple (AAPL) shares which briefly crossed the $600 is not particularly overvalued[There may still be bite in Apple -  The Business Times, Teh Hooi Ling] and  it will rise or fall based on its ability to grow its earnings, beat its competitors but you don't have to worry that you're buying into speculative excess. I wouldn't buy it although it may rise further because Apple is well analysed. While the stock is valuation is reasonable or slightly under valued, it is not compelling and the current product line faces competition from Samsung and Microsoft...but there are potentially still many secret projects leading to innovative products Steve Jobs left in Apple's pipeline and those can provide the upside for the stock.

The overall US economic outlook, I think is less uncertain that the bulls and bears on Wall Street make it out to be. With European crisis converted to a long term issue (less destabilising in nature) and assuming the Chinese can soft land their economy (haven't seen any evidence, contrary to this), the US economy has a lot of potential to "catch fire" and surprise on the upside. The reason is this:

The chart shows the Ceridian Index. It shows the real time economic activity measured by the transportation. There is a big gap which shows the potential and extra capacity in the US economy. The US economy is not yet firing on all cylinders - the main reason being the collapse of the housing market has led to slowdown of activity linked to housing and excess housing inventory that takes time to clear off. There is also a high level of unemployment (8.2%). As the employment situation improve and we has seen from data over the past few months[Link], and the housing market measured in term of home sales improve:

The volume of sales is picking out so are the prices. The improving employment situation and recovery of the US housing market can form a virtuous cycle to drive the US economy forward. The restructuring and reform in China  will soft land the Chinese economy keeping inflation at bay while the US pickup the slack. This gives also gives us some time to fix our own problems to get productivity up and lower our dependence on foreign labor.

Looking at the housing data, I can't help but side track a little. The average US single family home is US$230K and the (S$290K) average size of such a home is 2500 sq feet[Link] - a landed home of the same size in Singapore costs more than $2M and something half the size in the form of an apartment costs $800K-$1M. We are often told that our fertility rate is falling because we are a developed country so people especially women pursue qualification and careers rather than get married and have children. If this is true, why does USA which is also a developed country with higher unemployment rate of 8.2% having a birth rate almost double that of Singapore's?  It is not because we are asians that we have low birth rates, we used to have a birth rate of 6 as asians - so cultural difference is out. They now tell us that unless we have higher fertility, there is no choice but to import people.
"Partly, because it takes them longer to establish themselves (in a
...people are staying in school longer nowadays. In the past, after their O
-- Level and A -- Level, people start getting economically active, get a job,
start a family and buy a flat. (Now) it is taking longer for young people to get
to that stage because they feel they need better qualifications to get better
jobs.....Elsewhere it has been shown that the demand of the job has increased and
people need higher skills to enter the labour force and get a job before they
start a family." - Lee Kuan Yew [Link]

When a person starts a family, the one thing he needs is housing otherwise he has to squeeze his family into his parents' place and you don't expect him squeeze himself, his wife and children with his parents. The key to higher fertility is affordable housing and the size of housing. The PAP govt has wasted time and money on other incentives that have done nothing but failed - they claim they are trying very hard to bump up the fertility rate as it falls to the lowest in the world. HDB even said they build smaller flat these days because Singapore families are getting smaller[Link] - they are actually putting us in a vicious cycle. I think Singaporeans are really tired and fed up of the PAP creating the problems then blaming it on Singaporeans ...then waste time and money on schemes that will not work. The next time some one from the tries to explain our low fertility and talk about solutions ....remember unless they home prices are at truly affordable levels, it is yet another waste of time and our country is further endangered by importing more people which causes population density and housing prices to go up.

The root cause of our problem has been PAP policies - first the "Stop At 2" policy and housing policies. The PAP has been using revenues from our public housing programme to fill up govt coffers [HDB paying less for land is raid on reserves: Mah] from the CPF and savings of ordinary Singaporeans. No other govt does this with public housing - linking it to the market and creating reserves - the primary purpose is to provide cheap and achieve positive social outcomes. This is not what happened in Singapore and the PAP housing policy has led to whole array of problems e.g. inability to accumulate enough to retire, low fertility, indebtedness and social inequality. Now the problems have grown to endanger ordinary Singaporeans - we have stopped procreating, we are being replaced by foreigners and we do not have children to pass our values and culture to.  Time is running out for the PAP govt to fix this and from what we have seen from them - they are not serious about it and Singaporeans are running out of patience.


Anonymous said...

This is not what happened in Singapore and the PAP housing policy has led to whole array of problems e.g. inability to accumulate enough to retire, low fertility, indebtedness and social inequality.....Time is running out for the PAP govt to fix this and from what we have seen from them - they are not serious about it and Singaporeans are running out of patience."
Lucky Tan

Ya lah, things may not be good for ordinary Singaporeans.

But that's beside the point.

The point is whether despite these, the opposition can become strong enough to be the alternative to PAP. Or at least deny PAP its 2/3 majority in Parliament.

But at the way things are going since GE 2011, this is not optimistic at all for those who have hopes for opposition.

And being so, at least 60% majority voters will still consider PAP the best available to vote for. This is sensible because they are choosing the lesser of 2 evils.

And this most likely may last till 2016 or even beyond.

Anonymous said...

"Or at least deny PAP its 2/3 majority in Parliament."
Anon 25/3/12 09:50

Come on lah, if opposition can do so, they would have also won majority seats already.

Singapore elections is unique lah. Either a party win big or lose big. No such thing as in between or lose 2/3 majority one.

Why? because Singapore is small and everywhere voters profile is about the same one. You win in one, most likely you can win in all.

That's why opposition always lose one. Unless majority voters think they can be good enough to replace PAP as govt. If not, get lost and don't waste time.

Anonymous said...

Fixing our low birth rates.

First step is to fix PAP.

Anonymous said...

You know why PAP wants to take in so many foreigners and even take better care of them than Singaporeans?

Because by taking in foreigners, Singapore will be rich and also can survive. And this is what really matters. Of course some will become very rich and others poor. That's why income gap is wide and also a lot of other problems too.

But if PAP don't do so, Singapore will be poor and may not even survive. Everyone will also be poor. This is even worse, right?

So actually PAP is choosing between the lesser of 2 evils lah.

Just like majority Singapore voters are choosing between the lesser of 2 evils during elections.

It is a choice of what is best available, rather than what is good or best. This also applies to the type of foreigners we choose.

Anonymous said...

"It is a choice of what is best available, rather than what is good or best. This also applies to the type of foreigners we choose."
Anon 25/3/12 15:52

No wonder lah, some types of foreigners we get, I don't know what to say.

Anonymous said...

Pro Alien Party Says
Singaporeans are the problem.
Solution is to make Singaporeans cheaper, better, faster.

Opposition Party Says
The Pro Alien Party and their stupid policies is the problem.
Voting Opposition is the solution.

GE 2016. You decide.
Just don't spoil your vote.

Anonymous said...

I have enjoyed reading your commentaries since finding your blog during the last GE. The breadth of your knowledge and interest is indeed admirable. Our low TFR is certainly a concern, and as a father of three kids, I can tesify that raising them in Singapore is not easy.

Nevertheless, i dont think it is quite accurate to compare the TFR of Singapore, a city state of 700kmsq with the US, which is more more times larger than us in land size than population. If any comparison is to be made, we should compare with NYC, which has around the same land size as Singapore. It is the less urbanised parts of US whic enjoys high fertility.

As a generalisation, I think that many global cities around the world suffer from low TFR. (though they are often masked by country wide analysis). The prescription is not as straightforward as building larger homes. Even some states in India, an emerging reigional power, is registering less than replacement fertility, thanks to women empowerment and family education.

Anonymous said...

"As a generalisation, I think that many global cities around the world suffer from low TFR. (though they are often masked by country wide analysis)."
ANON: 25/3/12 19:25

So prove your statement with some research.

Anonymous said...

Actually for Singapore, low birth rate is not really an issue.

As long as PAP govt can attract many foreign talents to Singapore. Not an issue, right?

As long as PAP has 60% majority votes due mainly to opposition being worse than PAP. Not an issue also, right?

Anonymous said...

Mr Lucky

You still dun get it.
PAP is filled with highly intelligent people who thinks pretty much the same way. They truly believe they are correct and nothing will change their minds. Not even when shit hits the fan. Nothing u blog will change that. They do NOT see a problem.

Like PAP I just u won't get it either ...

Anonymous said...

I don't think housing (and affordability) is the sole reason for our low TFR. But housing is definitely a major contributing factor.

I believe there is no silver bullet in turning around the low TFR, But eliminating the housing factor one step in the right direction.

IMHO, the first thing we must do is to stop "assetising" public housing. HDB should just focus on providing affordable, good quality and spacious housing for Singaporeans. Give people a shelter where they can focus on building a home and a family. Not trying to maximise the asset value of these flats and turning a profit. Govt should stop calling upgrading as asset enhancing programmes.

When I say affordable, I don't mean the kind of benchmarks used by HDB. Saddling one with a 30 years debt in order to reduce mortgage payment to 24% of monthly income is not affordable by any measure.

It will be a difficult task as the govt past policies had "fried" housing prices to stratospheric levels. A way has to be found for a soft landing. But it has to be done for the long term interest of this country.

Lye Khuen Way said...

Lucky, do not be disheartened by the few who believe that your blog served no purpose.
I say that the PAP is now so shell-shocked that they just do not have a co-ordinated and well thought through response to all the bad outcomes of their money is everything strings of policies since 15 odd years or more ago.

Anonymous said...

The Proud Arrogant People are out of ideas.
Desperately clinging on to power in Singapore.
Too scared to emigrate to other countries and survive on their own merits.

Without the support of Singaporeans as cheap, compliant, trusting slave labour.
They are running scared.
Like a pampered family who is losing a long service maid.
No longer able to do things for themselves.

Only got money, but nothing else.
No skills.
No brains.
No vision.
No morals.
Only money.
Like a prostitute.

Anonymous said...

Lucky Tan said above, that.......remember unless they home prices are at truly affordable levels, it is yet another waste ....

Well, i think one should realise too that it is not just only home prices, it is also about the flat size. Sure, tomorrow they will make a mickey mouse flat truly *yes truly trully, affordable, (because it is so infinitesimal in area). But will birth rate go up? No.
It is very wrong for the govt URA or HDB to condone the construction of such small units and worst still straits times writers are all carry-balls journalists, churning out reports after reports of how great it is and nothing negative or sincere about people's perception.
A family nucleus require some decent space for proper living. Young couples need space to develop their families. To go into a small unit is to declare straight away that one does not want to have children. It is very bad psyche for the country.

Developers can easily built proper sized flats to create an environment for people to build families. But the developers are greedy they want to earn double if they build tiny flats because of more units sold.

Where is the regulator of housing or the policy makers? He doesnt care, he's got his own bungalow in Sentosa Cove and Upper bukit timah. "I donch know what to say".


Anonymous said...

Just before the election, they published are article showing a couple having a baby in their in laws place. Usual propaganda... While housing is not the sole factor, its a a critical factor.

High housing prices also wipe out the savings of young couples, which makes them think twice as they have to rebuilt their buffer before having a baby.

Anonymous said...

Guess what?
They don't care.
They don't have to care.
Your ramblings are to them what Derek Wee's life is to Wee Shu Min, or according to her father, "people cannot take the brutal truth"

2016 is still far away,
bear with it till that day,
then and only then,
can you have your say.

Amused said...

Singaporean couples know very well why they don't want to have children. It is in the statistics for all to see.

PAP refuses to recognize their child bearing/raising concerns. Instead it blames the people for not having children. Their solution is to import human resources. How 'brilliant'!

IMHO, SDP is the party that will do good to ordinary Singaporeans. From what I've read, their policies will definitely drive the fertility rate higher.

On your US economy analysis, I want to point out that a lot depends on unsustainable low interest rate. The interest rate has been creeping up and it will alter the outlook in months to come.

public liability insurance cost said...

I hope you have a nice day! Very good article, well written and very thought out. I am looking forward to reading more of your posts in the future.

Anonymous said...

I know people will call me dumb and stupid but Lucky give this a thought. I believe the day will come, perhaps after the death of LKY that the PAP runs out of the will to stay in power. As it is, it has problem attracting true talent who can solve the ever increasing social and economic problems. As pointed out by many this was mainly their own doing. We already have two who stepped down after being criticized and another four booted out by voters.
So do not be surprised that one day the PAP rather be the opposition for it's much easier to critical than to provide solution and be held responsible for all the blunders. We call know what an outstanding opposition the PAP makes. Just read the speeches by LKY and you will know that he was in fact critical of almost everything he has since implemented after coming to power.

Anonymous said...

" We all know what an outstanding opposition the PAP makes. Just read the speeches by LKY ...

PAP is not LKY and LKY is not PAP.

What is the PAP without LKY?
Who is the PAP without LKY?

Anonymous said...

"2016 is still far away,
bear with it till that day,
then and only then,
can you have your say."
ANON:25/3/12 23:08

Please don't be so passive and fatalistic. Don't wait till 2016 to take action.

Your solitary vote for the Opposition may not be enough.

If you want change, convince your family & friends to vote Opposition.

If you are really motivated, convince a PAP voter to vote Opposition.

Show up in GE 2016.
With a bloc of votes for the Opposition.
Put together by your love and patriotism for Singapore and Singaporeans.

Anonymous said...

Lessons to be learned with regards to high asset values and low TFR can be seen from Japan since the early 90s. However, our government got us deeper into a potentially bigger problem when they think that the shortfall can be made up by foreign immigration. If the economy tanks, the fallout from the high property value, coupled with the outflow of foreign mercenaries will be a disaster.

Anonymous said...

Given how screwed up PAP already is, there's no reason why opposition should finally be given the opportunity to form government and clear up the mess PAP has caused which will take many years to do so.

PAP is lead by people who are more concerned with their pay than people's welfare. Even if they got the brains- what's the use when their hearts aren't in the right place?

Anonymous said...

Yes, before the MIW step down or kicked out, the constitution will be amended to ensure they are protected. They do not want to end up like Suharto, Marcos or Arroyo. The past evils will be buried forever, never to be revealed.

Anonymous said...

A fair comparison of property prices will be with NY city rather than the whole of USA.
Therein lies the problem of living in a city state. No hinterland or rural areas for the citizens to fall back on. In America even some top executives travel hours everyday to work. So the solution for Singaporeans is to look around the region. Many have done so and more will follow. So long as u want to live in Singapore be prepared to pay even higher prices.

Anonymous said...

"A fair comparison of property prices will be with NY city rather than the whole of USA."

Are you now saying we should be comparing the prime minister's pay to the pay of the mayor of New York?

"So long as u want to live in Singapore be prepared to pay even higher prices."

Who says so?
This is just your opinion.
Not a scientific fact.
Prove it.

Ng Eng Hou said...

Not sure if everyone here notice, since Singapore enters into the post-industrialization stage and it is no longer the top favorite for MNCs to set up here, our country has always been struggling trying to find where are the new sources of growth. That period started from the late 1980s, just a short while after China reforms its economy to compete with the Asia 4 Little Dragons (Korea, Taiwan, HK, Singapore).

Since then, I get this impression that Singapore is more driven by bubbles - meaning inflating property prices to pump up the economy.If you realize, people got real crazy from properties starting at the 1990s and our HDB flat prices surged.

What I'm saying is our economy is more like a bubble economy, growing when property prices go up, cool down when property prices start cooling off. The biggest beneficiary from this kind of bubble is the government who is the biggest landowner. When property sector was in downturn after the 2003 SARS, it wagged up property prices using the 2IRs which it benefited a lot from selling at sky high prices to the casino operators. This also triggered the current property bubble which is in danger of bursting should interest rates go up to 3-4%.

I can only say house prices can only get expensive with the government being the biggest landowner, manipulating and inflating bubbles behind the scene. They're not going to care much whether the ordinary people can afford or not.

Asking the government to keep HDB flats real affordable, will be as good as asking the tiger to donate its skin! Dream On! Unless we kick them out!

Anonymous said...

Singapore's low fertility is mainly due to the low birth rates among the Chinese. The Malays and the Indians seem to be doing well on this front. Why does no one ever mention this? If life is so hard in Singapore, surely it should be affecting everyone. The Malays and Indians don't seem to be affected. Clearly it seems to a Chinese problem. So, the moot question is: why are the Chinese reluctant to have kids?

Anonymous said...

The Chinese (1.08) continued to have the lowest TFR, followed
by Indians (1.14) and Malays (1.82). The TFR for Malays showed the most significant decline over the past decade (Chart 13).

It's not only the Chinese who are not screwing enough. Because everyone is being screwed big time by the MIW

Anonymous said...

The low fertility rate among the Chinese may simply be due to the following reasons.

1. They do not want the burden of bringing up kids, even though they can financially well afford. Call it selfish, if you want.

2. If they want kids, they want their kids to be well provided, so the less kids, the better this can be done.

Maybe the other races do not viewed these as strongly as the Chinese. Why, I don't know.

So the reasons may be simple but why is it so may not be that simple.

Anonymous said...

I agree that housing is a great contributing factor.

I remembered when my parent applied for hdb in the eighties. The flats were already built. They only get to choose the flat after its built. A 4A flat (110 sq) in tampines costs about 64k. The time taken between application to getting the key its about 2 years.

In the nineties, the policy changed to balloting for BTO flats. My younger sis was lucky after 2 try, she gotten her 4A in tampines (102 sqm) in 1996 at 150k.

My brother balloted few times, the policy changed to 1st come 1st serve que system , he managed to get a 4A (94 sq m) in Sengkang for about 170k in 1998.

Look at how the prices has escalated while the floor area has been reduced each time.

Imagine, how as a young couple, you have been short change both in price and floor area. Now, the 4A floor area has reduced to about 80 sq m ?

The otherday , when i was eating my lunch at AMK coffee shop. Overheard an auntie said, how her son was lucky to tikam( ballot) and get a AMK 4 room flat at 380k. But the floor area is very small. Boh pian lah and so on...

See how affordable is our HDB ?

Some may say singaporeans are fixated or obsessed with getting their own house. But think again, with the ever overcrowding everywhere, one really need our own sanctuary/home to get away from all these madness !

Another factor is our ridiculous education system ! I have 2 kids and we sure know how its like !


Anonymous said...

"When the PAP prioritized reserve building over the social goals of public housing, that is when our problems started..."
Lucky Tan

Problems there will always be but as long as they are within manageable and tolerable limits, then it should be OK.

A 60% voter mandate for PAP is one important measure of the limits.

Another measure is the opposition remain weak, with no one party able to field candidates for all seats at elections.

Based on these 2 criteria, the current situation is well within manageable and tolerable limits for PAP.

Anonymous said...

//Problems there will always be but as long as they are within manageable and tolerable limits, then it should be OK.

A 60% voter mandate for PAP is one important measure of the limits.

Another measure is the opposition remain weak, with no one party able to field candidates for all seats at elections.

Based on these 2 criteria, the current situation is well within manageable and tolerable limits for PAP.
Anon. 26/3/12 15:38//

Any ruling party with absolute control of almost everything will have no problem to meet the 2 criteria.

Therefore,problems will always within manageable and tolerable limits as long as the ruling party has absolute control of almost everything.

Anonymous said...

"... as long as the ruling party has absolute control of almost everything."

Just remember.
Absolute control does not equal competence.

A village idiot wielding a gun may have absolute control over the use of the gun.
But that does not mean the village idiot has the correct moral values to guide him on when he should use the gun.
Nor does it guarantee us that the village idiot has sufficient intelligence in the safe operation of the gun.

Anonymous said...

Totally agreed blame the PAP for everything and not the foreigners. If possible kick the PAP out of office.

Anonymous said...

Housing is only one of the many factors which are depressing the fertility rate in Singapore. Generally it can be sumarised as the stress of living in Singapore. I can tell u that the young Singaporeans are stressed 10 times that of the Aussies. Australian housing affordability has decline sharply over the last 10 years and yet their incentive of $5,000 succeeded in raising the birth rate. Reason is simple. There are all sorts of measures to help the young (including unemployed) to start a family. I have seen many unemployed young family - usually single parent.

Anonymous said...

Funny sia. MOE quickly realized the folly of treating citizens and PRs equally, and rightfully gives SCs absolute priority over PRs.

when is Khaw gonna do the same? i'm sure he knows PRs gain huge when they buy HDB and rent it out like nobody's business. PRs can also own a HDB when they are back in India/China and milk the system. Is Khaw not going anything to rectify this because he is not native-born Singaporean, and prefers to have PRs plundering this country?

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