There are a lot of reasons that inflation in US is low.
shale boom to secure cheap energy for US.
recovery from housing bust to suppress property price.
weak demand from US/Europe to suppress price of product imported from emerging market.
Though agriculture commodity is rising compared to industrial commodity, US is an agriculture power house. so no effect on it at all.
so if US is not the safest major economy, no other country is.
There are many ways the property market can crash...
1) Weakening SGD causing Foreign money to flow out
2) Foreign workers leaving Singapore because there is better job opportunities back in their homeland (the recent strike could just be the tip of the iceberg)
3) Feds sudden change of policy to keep rates low
4) Some unforeseen event
All it takes is just one thing of the above to go wrong before the sh*t hits the fan...
But then again, I could be wrong. Like how I was wrong for the past two years.
More importantly, I think we should look for signs(data) to see if the property market is going to burst. Before the US housing market bubble burst, there was a growing number of people defaulting on their mortgage loans before it happened. US banks were also highly leveraged on mortgage backed securities before it happened.
In the SG context, I am not seeing this. Like what is shown in this thread's main story, the SG government is making sure that the US story does not repeats itself in SG.
However, IMO, I think one good indicator would be the FX rates and foreign money in SG. If the SGD starts to loose its strength, the incentive to invest in SG property/stocks will be lost, and the foreign money flow out of SG, causing property prices to drop.
Hi Natnavi,
Agreed, good points raised. I too do not see the possibility of a correction, or even the spectre of a price decrease in the near term. As I've said before in other threads, we should monitor unemployment and interest rates closely, for these will act as the catalysts for the downturn.
As for bank NPLs, I am not sure if there were a lot of these during 1997-1998 when many went into negative equity. Does anyone remember? With the Government propping up banks though, it may be that the people fail first (under-mortgages) while the banks are supported by the Government.
In my opinion, the only way for property prices to 'crash' is through unexpected black swan events.
The government controls booths the levers of supply (i.e. new builds) and demand (i.e. new foreigners) of real estate. With the knowledge of potential headwinds, regulation of lending and ownership policies, and a conservative forecast of economic growth, real estate prices are within their control.
Notwithstanding global conflicts and epidemics, growth in singapore should moderate (~2%) in the coming 2-3 years, and then resume stronger growth (~5%) as American, European, and Chinese economies improve. The next bubble is likely to be in Asia/China. And Singapore property will be hit pretty hard. But this is probably 6 years, or longer, away.
I wouldn't expect real estate to become cheaper anytime soon. But neither will I be buying one. If you're going for your first home, you probably shouldn't wait though. Likewise, coes are going to remain elevated for a long time now. This is the new normal.
There are, however, still good stocks to buy out there.
