Buoyant property prices a sign of rising wealth

[Musicwhiz]

I spotted this letter in ST Forum today. Is this guy plain ignorant or does he truly believe that everyone has just grown 10x wealthier? It's amazing what media propaganda can do to people.....sorry but I don't believe a word of "rising wealth" because I don't feel much richer now as compared to 2007!

Dec 20, 2010
Buoyant property prices a sign of rising wealth

THOSE who complain about the spike in housing prices seem to have missed the point: We are in this situation precisely because the Government got us out of the recent financial crisis at such a quick pace with prudent policies.

Many Singaporeans' jobs, and thus their household incomes, were saved because of swift measures, particularly the Jobs Credit scheme which had a lasting and direct impact, allowing the vast majority to continue servicing their housing loans.

With a home ownership rate close to 90 per cent in Singapore, shouldn't Singaporeans in general be happy about rising property values? Since this Government was elected in 2006, property prices and the general wealth of Singaporeans have gone up greatly. Credit should be given where it is due.

Let us also not forget that property prices will continue to rise as long as buyers accept such prices. Even after the slew of measures and assurances from the Government, we see many snapping up shoebox units for hefty prices in outlying areas.

Benjamin Ching

[sgd]

I think cheap money more likely driving this crazy market than anything else. Cheap money is flowing in from elsewhere from US from europe from Hong kong china.

More QE will mean more cheap money but US$ lose more value - US treasuries will lose more shine. The US government lifeline is selling treasuries only. They even need to borrow to pay off earlier treasuries. If they can't borrow enough means interest rates will go up. It looks like a juggling act.

Once rates start hiking then lets see if the property market will still shine without the presence of cheap money.

[Musicwhiz]

Once rates start hiking then lets see if the property market will still shine without the presence of cheap money.

Haha yes, but interestingly I have started reading articles which say that rising interest rates may not be bad for property prices (can't remember where, sorry). So it seems analysts and journalists are trying to sing the "this time it's different" tune once again. Will they be right? I guess only time will tell.......

[Kalos_2]

My take on this - Buoyant property prices a sign of rising wealth is " Rising Wealth of Asians especially ". Some of these rich guys need to park some of their money in a "safe haven".
Singapore is such a "safe haven " , worst case , property will drop 50% - but they can be sure the properties will be theirs , well maintained and fetch fair values. And when market turn down , just need to sit tight and very likely market will turn again cos - we have very compentent people who are committed to see it thru and implement the right policies. So far , very good.

Well the retail market sees the Private Property trends and like all good market indices , at least must be correlated and move in tandem. So now , our shoebox homes are S$300K and more. Will this trend continue , I think yes , as long as the rich guys keep buying our properties.

There will be good times , there will be bad times , but overall , I think the market will be positive for the property market in the long term. I think the property market is all about timings. But , it is the wealth of the Asians that is driving the market.

[piggo]

With such high % of home ownership in singapore isn't it logical that most are actually getting 'richer' than before? Though its probably not in a very useful way with it being their primary residence :p even then its good to know that the house you worked so hard to buy isn't likely to depreciate in value...so no complaints there. The first step of always the hardest, think ppl should just focus on earning more and complain less.

Btw spotted this article today about general wage increment not matching inflation, but spending this month higher than last year's. People are sure feeling richer :p

[Musicwhiz]

Interestingly, today's MONEY section in ST also featured Goh Eng Yeow mentioning that people are spending more on property (thus driving prices higher) and also "splurging" more on cars (higher COEs); and the news also reports record turnouts at IT and travel fairs and record sales as well. So yes, it would appear that Singaporeans are spending more than ever, and that everyone is getting richer.

But is this really the case, or just the media distorting our perception of things through biased reporting?

1) Housing prices moving higher means you take a bigger loan, while being unable to sell as you are staying in your residence. This means using more of your CPF and more of your years o this Earth paying interest to either HDB or the banks. Even if investment property becomes more expensive, it means more people have to take bigger loans, thus increasing risks. If everyone tries to "flip" their property there will eventually come a day when the music stops.

2) Higher car purchase costs and running costs will put a dent to people's savings, and the current crop of high COEs are deterring mid-income families from buying cars, some of whom may find it essential as they have aged or disable parents/family members. Meanwhile, the rich continue to live it up and bid for ever higher COEs - so is this a sign that we are all getting richer?

3) Wages have yet to outpace inflation over the last 10 years, so how has economic progress and high GDP growth translated into a better standard of living for the common man on the street? In fact, his coffee and rice now cost more than before!

4) IT fairs and travel fairs being packed to the brim - are these people spending using cash or binging on credit? The statistics show that more and more youths and even families may be over-extending themselves, as rosy reports on the economy and of Singapore continue to spur spending. Is this necessary spending, or wanton spending?

Just some of my thoughts. It's a little like the Transformers theme song - there's more than meets the eye!

[kazukirai]

Interestingly, today's MONEY section in ST also featured Goh Eng Yeow mentioning that people are spending more on property (thus driving prices higher) and also "splurging" more on cars (higher COEs); and the news also reports record turnouts at IT and travel fairs and record sales as well. So yes, it would appear that Singaporeans are spending more than ever, and that everyone is getting richer.

Would like to see the Debt levels reported as well. Especially for the big ticket items like Car and Housing. Otherwise, it doesn't paint a very accurate picture of reality, only that of perception. But I guess the ST's reporting has been less than stellar no?

[piggo]

Haha think IT fairs will always paint a rosy picture of singapore...gadgets are like our opium.

Size of the housing loan especially for first timers can be moderated with buying in less cental areas, smaller sized accommodation etc etc...think expectations should be moderated according to the value you can get with what market would pay for your skills!

Cars are essentially optional with the variety of cabs. Don't really see how it can ever be a necessity here...

With no car and manageable housing, I'm sure people can indulge more on other stuff :p

[Pat Koh]

I know for a fact 2010 has been one of the best performing year for Singapore economy and next year though lower is still in the healthy positive range.
People around me are "feeling" richer for sure. More PR colleagues are buying condos and HDBs wherever possible, which for them is a safe heaven and a steal given the ultra low interest rate here. Most of them understand that it is better to "own" than to "rent" now as it makes more sense (with propoerty price expecting to trend upward).
As long as they are employed they can continue to service the house and see it as an asset with steady value.
Yes 1000psf for mass market condo is high but ... it may go higher

1. Housing price - almost everyone belives it will either hold stready or inch upward. Downside risk of 5-10% may happen but in the long run its a sure win. Interest rate while potentially may be creeping up in not too distance future but is still lower than PR's home base. Anyway transaction volume has decreased

2. Car is nice to have as a status symbol so it is secondary after housing. The price upward trend is logical given the shrinking quota, not wealth effect. Volume appears to be dropping with less people buying.

3. Wage - always not enough to keep up with housing and car but should be sufficient to support general family expenses. In Singapore its difficult to die of hunger but more visit to restaurant is always a plus.

My point - we are definitely "feeling" richer as our primary asset has appreciated in absolute term but in actual fact we are still very much the same than 10 years.
A million dollar today is worth than it is 10 years ago.

Just my humble view

[Musicwhiz]

I know for a fact 2010 has been one of the best performing year for Singapore economy and next year though lower is still in the healthy positive range.
People around me are "feeling" richer for sure. More PR colleagues are buying condos and HDBs wherever possible, which for them is a safe heaven and a steal given the ultra low interest rate here. Most of them understand that it is better to "own" than to "rent" now as it makes more sense (with propoerty price expecting to trend upward).
As long as they are employed they can continue to service the house and see it as an asset with steady value.
Yes 1000psf for mass market condo is high but ... it may go higher

I think what you described appears to summarize the problem pretty well - people generally "feel" richer even though in real terms, they may not be! It's due to the fact that ST and our media constantly report that GDP is growing, people are spending more, housing prices are higher etc. However, nominal salaries may be growing, but real salaries are actually decreasing.....

So this creates a very dangerous situation where people feel richer than they really are, and they commit to larger and larger purchases because of the psychological wealth effect; hence people may end up over-committing to houses, cars and gadgets (consumption items). The monthly installments and running costs can add up to quite bit!

As for property, I've said it many time before - the game of musical chairs carries on and on.....haha.