(14-12-2012, 02:31 PM)Musicwhiz Wrote: [ -> ] (14-12-2012, 01:02 PM)corydorus Wrote: [ -> ]Well i do not want to bet on that. They can move their benchmark anytime as needed.
I remember years back 2% inflation is a concern by Fed.
That's true, but my point here is that since they can change their tune so suddenly, what makes everyone so sure that interest rates will be kept low until at least 2014-2015? 
No one knows for sure when the punch bowl will removed from the party. But when that happens, those of us who've been waiting for the moment will hopefully see our patience rewarded.
(15-12-2012, 02:22 AM)Muck Wrote: [ -> ] (14-12-2012, 02:31 PM)Musicwhiz Wrote: [ -> ] (14-12-2012, 01:02 PM)corydorus Wrote: [ -> ]Well i do not want to bet on that. They can move their benchmark anytime as needed.
I remember years back 2% inflation is a concern by Fed.
That's true, but my point here is that since they can change their tune so suddenly, what makes everyone so sure that interest rates will be kept low until at least 2014-2015?
No one knows for sure when the punch bowl will removed from the party. But when that happens, those of us who've been waiting for the moment will hopefully see our patience rewarded.
Say, if interest goes up to 3%, the price fall 10%, rental drop 5%, will it be attractive to buy properties for investment?
considering the percentage drop, have to get a good margin of safety also...
So ppls are even saying that even when the interest rates goes up, the price of the property goes up too!
That... i think is a bit stretched... but well... let's see what happens!
I feel it's rather hard to determine what would happen because it depends on a combination of factors, and also people's sentiment and personal circumstances at the time.
Add in one more variable - unemployment rate, and the equation becomes that much more complex!
I am combining the several possible factors people are expecting:
1. Interest rate to go up
2. Rental to go down (due to increase number of units)
3. (HOPE) Property prices to drop.
So this mean that even if the price drop, but the general economiy is not good for property investment, I should not just plunge in?
You can have a case where the price still goes up despite failling rental simply because there is still a high demand for property assets here. If one buyer is buying 5- 6 properties at one go, how is there supply to go around?
Current supply in the pipeline is unprecedented.
As of 3Q12, total completed units (including ECs) = 286.8k
Total units under construction = 64.5k or 22.5% of current supply!
This is not including another 30k units under planning...
Fed floods the market with liquidity, MND floods the market with properties and happily soaking up the liquidity.
Exposure of developers to a residential development can be as short as one year; whereas home buyers can be more than 25 years. It's like contra traders compared to long term investors in the stock market.
In my opion, there is just too much risks if buyers were to leverage / speculate with plans of using rental to pay for their mortgages.
(15-12-2012, 01:32 PM)bookworm Wrote: [ -> ]Current supply in the pipeline is unprecedented.
As of 3Q12, total completed units (including ECs) = 286.8k
Total units under construction = 64.5k or 22.5% of current supply!
This is not including another 30k units under planning...
Fed floods the market with liquidity, MND floods the market with properties and happily soaking up the liquidity.
Exposure of developers to a residential development can be as short as one year; whereas home buyers can be more than 25 years. It's like contra traders compared to long term investors in the stock market.
In my opion, there is just too much risks if buyers were to leverage / speculate with plans of using rental to pay for their mortgages.
If one wanted to participate in the property growth, but concern with the loan, taxes and risks of owning property/properties, the other alternative is to buy local strong listed developers' stock (global/regional players) with some margin of safety. The capital and dividend gains are tax free.
Cheers!
(14-12-2012, 02:31 PM)Musicwhiz Wrote: [ -> ] (14-12-2012, 01:02 PM)corydorus Wrote: [ -> ]Well i do not want to bet on that. They can move their benchmark anytime as needed.
I remember years back 2% inflation is a concern by Fed.
That's true, but my point here is that since they can change their tune so suddenly, what makes everyone so sure that interest rates will be kept low until at least 2014-2015?
The Fed has committed that it will keep interest rate low all the way up till 2014-15. The credibility of the Fed is crucial in anchoring inflation expectation, a key component of inflation. If it changes its monetary position frequently, it will not maintain credibility and general public will lose confidence, which could result in rising prices. Price stability is a mandate given to the Fed.
Unless there is a sharp decrease in unemployment rate, it is unlikely the Fed will change its monetary policy from expansionary to contractionary anytime before 2014/15.
(15-12-2012, 10:05 PM)csl123 Wrote: [ -> ] (14-12-2012, 02:31 PM)Musicwhiz Wrote: [ -> ] (14-12-2012, 01:02 PM)corydorus Wrote: [ -> ]Well i do not want to bet on that. They can move their benchmark anytime as needed.
I remember years back 2% inflation is a concern by Fed.
That's true, but my point here is that since they can change their tune so suddenly, what makes everyone so sure that interest rates will be kept low until at least 2014-2015?
The Fed has committed that it will keep interest rate low all the way up till 2014-15. The credibility of the Fed is crucial in anchoring inflation expectation, a key component of inflation. If it changes its monetary position frequently, it will not maintain credibility and general public will lose confidence, which could result in rising prices. Price stability is a mandate given to the Fed.
Unless there is a sharp decrease in unemployment rate, it is unlikely the Fed will change its monetary policy from expansionary to contractionary anytime before 2014/15.
Yes, 123 san,
Indeed your comment sound logical, I have the same view with you.
Other things I am not sure, but 1 thing am certain is that US and Euro will contd to print money there no other solution and of late Japan too join in the printing money club......frankly if during the sub-prime crisis in 2008 if they come out this printing money solution I think Lehman bro and the rest of the bank will not collapse.
Moving forward we are living in this monetary expansionary (QE infinity era) until 1 day whole world lost fate in their currency so how??? come out weapon lor, war!!! or default and reset to zero base again....situation like this who want to keep cash.
My take interest rate will contd to stay low, aro 1% plus and below 2% till 2015.
So how? will people park their money in hard asset like property and gold??? the ans is an obvious, "Yes"...next question why this ppty bubble never burst, becos govt constantly & regularly keep deflating the balloon, how to burst?