House Prices could drop by a Quarter?

[sgstrait]

http://www.businesstimes.com.sg/real-es ... xtor=CS1-3

A 25% drop in prices would signal a crash. A crash not to the bottom, but to reality.

The hot money from US, China, Indonesia, Malaysia etc that inflated real estate here is all drying up and being diverted to safe havens resulting in the balloon deflating.

Oh dear. But it had to happen.

[Strong Eagle]

I've already said that foreign speculation does nothing but drive up prices for the locals and make banks rich... and now the chickens come home to roost... when the money gets pulled back out a collapse occurs.

[BBCWatcher]

Real estate by definition serves local occupancy needs. One must be physically in Singapore, at least to some degree, to consume (occupy) real estate. So on a long-term (or even medium-term) basis real estate valuations must be supported by local income and wealth. Do Singapore's current commercial and residential real estate valuations reflect what residents (and, for commercial real estate, tourists) can and are willing to pay for from their incomes and stores of wealth? I'd also vote no, and there's a fair amount of data supporting our view. We shall see.

Central London is another place that certainly appears to have an overheated real estate market. I would not be a buyer there, but perhaps other people are braver than I am.

[PNGMK]

I tend to doubt it (at least WRT grey money).

[JR8]

Real estate by definition serves local occupancy needs. One must be physically in Singapore, at least to some degree, to consume (occupy) real estate. So on a long-term (or even medium-term) basis real estate valuations must be supported by local income and wealth. Do Singapore's current commercial and residential real estate valuations reflect what residents (and, for commercial real estate, tourists) can and are willing to pay for from their incomes and stores of wealth? I'd also vote no, and there's a fair amount of data supporting our view. We shall see.
Central London is another place that certainly appears to have an overheated real estate market. I would not be a buyer there, but perhaps other people are braver than I am.

I disagree. What Singapore, London and the place I currently live have in common is that it's home to a lot of safe-haven money. A lot of property is unoccupied for the majority of the year. I wonder how much of Battersea Power Station (London) that was marketed on the street in SG and elsewhere is occupied year around? The garden flat in the converted house where my home is (London) is owned by a Saudi; and she only spends the hottest 2 months of their summer there in London. Knightsbridge/South Ken have succumbed to the same phenomenon, they become 'mini-Arabia' during the summer. Most of such people are cash buyers, so don't fit inside the metric of local wages/affordability. Hence the large disparity between property prices, and the income of local people who work in London.

p.s. And no I wouldn't buy what is developed in London and pitched to the Asian market either.

[BBCWatcher]

What part of "One must be physically in Singapore, at least to some degree, to consume (occupy) real estate" do you disagree with?

[JR8]

Perhaps you should clarify what you mean by 'consume property' as I've never heard to term before, and it's not clear what it means.

[sundaymorningstaple]

The vast majority of higher end properties owned by Indonesians are not being consumed by the Indonesians at all and that's a huge number I daresay. The purchases are to just means of moving assets out of Indonesia.

[JR8]

So.... owning a flat but occupying it 1, 2, 3 months a year is not 'consuming it'? [squint] If right the definition would seem to be akin to 'properly' utilising it, perhaps preferably living in it as your full-time home.

Surely the government are well aware of the [these alleged] motives of Indonesian buyers, so one wonders why they do nothing about it. Especially if it leads to a domestically skewed market. Wouldn't slapping 10, 20, 30% additional SDLT on Indon buyers be justified (if this were the case)? So the next question might be why is that additional tax not enacted and levied?



[Sorry, got Judge Judy on, and feeling somewhat fired up ;;)]

[earthfriendly]

I understand in a free market economy, you can't just have a tyrant or autocrat try to manipulate and keep prices at an artificial level. If you have got the money, nobody should be telling you how to spend it. But there is something quite wrong when skyrocketing property value ends up pricing the locals out of a roof over their heads. Can't find the link but Singaporeans have one of the highest debt ratio in the world. And it is not for luxury items. Most of the debts are incurred for necessities like housing and food.

As an economy, the govt needs to encourage its citizens to create valuable industries. A solid education system that encourages entereprenearship and creativity. Loosening of censorship is a must. And not try to rely on the rich parking their funds there.

[JR8]

I understand in a free market economy, you can't just have a tyrant or autocrat try to manipulate and keep prices at an artificial level.

An overnight opinion/comment re: the stock/currency-markets:
-----
'China still has over $3 trillion in reserves, but it cannot continue burning them up at the rate of $100 billion a month or they will be gone in less than three years.
On August 11, 2015, China Joins Currency War With Surprise Devaluation, Biggest One-Day Move on Record.
That surprise devaluation was supposed to be a “one time” affair with the yuan subsequently stable. In August, following the devaluation, I received a reader question: Is China a currency manipulator?
Of course China is. So is the Fed, ECB, bank of Japan, and every other central bank.
China and the National Bank of Switzerland manipulate their currencies with pegs. The ECB, Fed, and Bank of Japan manipulate currency with interest rate interventions and QE. The Bank Japan also intervenes directly.'
http://mishtalk.com/2016/02/07/china-bl ... -pictures/
-----
And of course SG has a currency peg, which directs the country's interest rate policy. The majority of the population live in government provided housing, the value of which is 'manipulated' via control of new supply and measures such as additional SDLT etc.

If you have got the money, nobody should be telling you how to spend it. But there is something quite wrong when skyrocketing property value ends up pricing the locals out of a roof over their heads. Can't find the link but Singaporeans have one of the highest debt ratio in the world. And it is not for luxury items. Most of the debts are incurred for necessities like housing and food.

One notable local cultural aspect is about striving to own your home. Isn't it verging on taboo to be a SGn adult and rent your home? Strange that when you think about it. Stranger still when compared to stats from the UK where say 100 years ago only 10% [the very rich] owned their homes, and the rest rented. You see this shift in the UK where young people now seem to have this notion that they have a right to own their home; and many are very angry to find that they can't. Not only that, but the home must be in a nice, convenient and preferably fashionable area. Who sold them this lie?
Even today in Germany there is only a 43% owner-occupation rate, and Switzerland is lower still. That is curious given they're arguably the two richest countries in Europe. -> http://qz.com/167887/germany-has-one-of ... hip-rates/ How can such successful people be content to rent for life?
Mebbe indebted SGn citizens are controllable citizens, in hock (debt) to the government for their working lifetimes.

As an economy, the govt needs to encourage its citizens to create valuable industries. A solid education system that encourages entrepreneurship and creativity. Loosening of censorship is a must. And not try to rely on the rich parking their funds there.

Well, hehe, that requires a whole cultural shift that would encompass freedom of expression. A new paradigm. The metaphorical cheese appears to have moved - but where, does anyone know? Until they do they can't begin finding a path towards it.

[gunrock]

JR8, what' s wrong with aspiring to be a house owner instead of paying the mortgage on someone else's house for them? Why is it a lie? Are you suggesting that young people should just accept the fact that they can't achieve what the landlords who rent them their properties have achieved?

Totally with you on the location expectations thing, though. I hear young people in my office moan about not being able to find anywhere they can afford and they seem perturbed if you ask them why they are only looking in Zone 2 or 3 and not further out.

[JR8]

There is nothing wrong to aspiring to be a home-owner but many people appear to be enslaved by false expectations. For example as seen in the London market people starting out their working lives can have a sense of entitlement. They can believe that being graduates of any kind of degree (and 'who isn't a graduate in the UK these days') is an entitlement to live in a place of their choosing. If you point out that historically saving for one's first home has always been an epic struggle over years, requiring huge sacrifices (no holidays, no gadgets, no 'this seasons' fashions, no eating out, etc) they don't seem to accept that. If you point out that they can afford a place, just in 'Zone 4', they are prone to attack. They appear to have an outlook of 'I can have it all (with little or no sacrifice), now, live in an area of my choosing, and I'm entitled to it'. By no means all, but a sizeable segment of people starting out their careers appear to think this way.

I follow various web discussion boards, including one re: property markets, direction of prices, affordability etc., and have done so for around 15/+ years. The thinking I outline above is what I witness from perhaps 70% of posters on a daily basis, on that one forum, every day across those years. One of the 'logical extensions' voiced almost as frequently is that everyone that went before had it *easy*, and since the typical poster in question can't afford to buy what he wants and where he wants it, the market is 'clearly doomed and heading for a crash. I'm going to wait to buy and all you home-owners are going to get burned and I'll buy for 1/2 what you paid, you wait and see - hahaha!'. I've seen certain posters repeat that line (in an increasingly frenzied way) for even a decade, during which their refusal to compromise yesterday's expectations vs today's reality has meanwhile seen the market double.

That kind of thing

Why 'is it a lie'? There is no right to own your own home. Never mind located where you would wish, and of the size that you'd like. In say the London market look at how population has changed since 'those landlords (bought)'. Factor in the ripple-out of gentrification, how run down areas tend to improve over time and become desirable once again. There is no way in he11 one of the typical aspirant house-hunters (as above) would buy what was my first home as it was when I bought it. By way of illustration it had crack-ho's outside each night. Ditto drug-dealers; it was located about 500M north of what was known locally as 'The Front Line', rough territory, esp after dark. It was positively pretty dangerous at times back then. The flat had a toilet but no seat, a broken bath, and the kitchen was a sink hanging off the wall at 45 degrees. I don't recall there being any kitchen cabinets, cooker, fridge etc. In retrospect it's surprising I was advanced a mortgage on it as I doubt it was legally habitable until perhaps 6 months after moving in.

That property was located in what was then quite a highly undesirable location. Plenty of friends raised their eye-brows when I told them where it was located. But esp. in London this is how gentrification renews run-down neighbourhoods. That was on the fringe of Zone-2. What with population growth etc an equivalent today might be buying a 1-bed wreck at auction... don't know somewhere around Zone 4/5. Tell me, why wouldn't a person starting out these days entertain buying their first home in say Zone 4/5, or even [whisper it] outside of London?

p.s. 'The Front Line' was Westbourne Grove, 25 years ago. It wouldn't surprise me in the least if you think I am outright making that up! I can assure you I'm not though. Today some youngsters see that a generation before people of their current approx profile could buy there. Understandably they cannot conceive how the area has changed, nor the sacrifices those early movers made to buy there. I can understand it's hard to visualise and accept, but the reality of the situation won't change.

Yes, your anecdote from the office is the same as the kind of mind-set I describe above.

[Primrose Hill]

A lot of people in London, working in London earning decent sums of money, yes, graduates, earning circa GBP50k- 95k are unable to buy their own homes. Deposits are at a all time high, despite all the false advertising. So, flat sharing or renting on their own paying GBP2k for an average 2bed place in zone 2/3 is pretty much the norm these days.
It's tough out there. It isn't that easy, what you pay for rental if you live outside of the zone 3, you pay for in hours of your lives sacrifice to the mercy of Tfl or the trains.
Yes, there's plenty of flight money coming into London and in some instances SG as well. However, with the ever increasing taxes for non residents -BLT an additional 3% in stamp duty and in SG there's the ABSD or if you are a foreigner it is 15% SD, all these measures will have an impact on the average folks that merely want their cash to be safe somewhere. The ultra/uber rich are fine, what's another 3%? However, if you look at the stats, even in London purchases since Mr Osborne has re-lined the SD, all buys over GBP1m has plummeted substantially.

[JR8]

Nothing has changed... and this is how this discussion has been going around (as described) for the c25 years I've had an interest in the subject.