House Prices could drop by a Quarter?

[BBCWatcher]

Interestingly the Foreign Housing Exclusion, a provision in the U.S. tax code, only applies to rental housing. On occasion tax provisions can favor renting, and that's one such example. There's also the fact that rental rates and purchase prices can become detached -- as in central London right now -- so the smart move financially is to rent when that happens.

There are many very savvy and very wealthy corporations that rent office space and never buy it. Likewise, there really shouldn't be any bias one way or the other for individuals and families.

I would also point out that it's extremely easy to invest in real estate without buying a whole property. The financial markets offer REITs and even REIT index funds. You can buy $100, $1000, or $5000 of real estate that way.

[Primrose Hill]

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.

Maybe maybe not.
There are talks that the SG's govt cooling measures maybe loosen up.
And UK? Interesting times

[Barnsley]

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.

Maybe maybe not.
There are talks that the SG's govt cooling measures maybe loosen up.
And UK? Interesting times

The Singapore Govt will be under pressure to open up the gates again to let folk in to fill up the houses that everyone has bought and needs to rent out....

The only problem is that there needs to be jobs here for the folk to do, and whilst Singapore gets ever more expensive then the the mid to lower end jobs that powered the country will go elsewhere to places where the costs are nothing like what they are here.

[BBCWatcher]

UBS characterized Singapore's real estate market as "overvalued" in their 2015 report. The bank said that Singapore's home prices are vulnerable to "sharp corrections." Singapore has very high real estate valuations per price-to-income and price-to-rent ratios. UBS says that Singapore's house prices have "decoupled" from local incomes, leaving prices extremely vulnerable to swings in non-local foreign demand. According to UBS, Singapore's high price-to-rent ratios will fall if interest rates rise. That is, cheap financing is still contributing to something of a bubble.

UBS didn't think that Singapore had the world's most overvalued real estate market among the international cities they examined. London won their top spot in their "bubble index" followed by Hong Kong. In fact, UBS thinks that Singapore's real estate valuations have been trending toward more sustainable levels within the past couple years. (It's still an overvalued market, though.) The fact Hong Kong is so overvalued is another cause for concern since Singapore's and Hong Kong's real estate markets are somewhat correlated.

[JR8]

I recall the London property-bears having a field day when that report came out [sigh]. They took it as vindication that prices were set to crash.

I was curious how UBS correlate 'local incomes' vs globalised and 'safe-haven' locations. A material amount of London buying is by individuals with no disclosable UK income, so how does that come into the equation of 'affordability'? Same goes for SG and HK too, lot's of safe-haven money. Also the ramping up of UK stamp duty is going to reduce market liquidity. Why sell and realise your up-front entry costs if you don't have to? The irony is the UK-govt are trying to tame the market to assuage local voters, but reducing liquidity in the market invariably causes prices to accelerate north.

Example re UK: I'm looking towards the future of a typical pre-retirement down-shifting move out of the middle of London to a SE-UK shire city. To do so would realise the entry costs of originally buying my London home, added to which I'd incur a fresh batch. The latter would now include an estimated GBP40-50k in up-front cash for stamp duty. That's a lot of money 'for nothing'. That's a heck of a lot of money relative to the cash element that even mid-career people buying a home have to stump up, up front in cash. Supposedly reducing demand will tame prices, but it's going to kill supply as well.

So right now I'm thinking that it would be simply too dangerous to sell London and buy shire-city. The costs are huge, and what if this plan of mine didn't work out? Could we ever afford to change plans and move back to London? I doubt it, the SD would be more than a place out in the shires. So for now we do nothing, assume we'll return to London in due course and see how we feel... nothing gets sold, nothing gets bought, and there goes market liquidity.

[thismyvoice]

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.

Don't know about the Swiss, but the government in Germany actively regulate housing rent, imposing rental cap. As a result, housing price has not shot through the roof, unlike UK. This makes it more attractive to rent, does it not?

http://www.ft.com/cms/s/0/7e682660-1019 ... z40gsV7AJ3

[JR8]

Don't know about the Swiss, but the government in Germany actively regulate housing rent, imposing rental cap. As a result, housing price has not shot through the roof, unlike UK. This makes it more attractive to rent, does it not?
http://www.ft.com/cms/s/0/7e682660-1019 ... z40gsV7AJ3

The article is behind the FTs paywall so unfortunately I can't read it.

I forget how rent is determined in Germany; but I know we paid full market price there. There are a couple of things to consider though:
- They don't seem to moved beyond a culture of renting for life. Some of our neighbours had lived their entire lives in their current apartments. Our immediate neighbour was born in his and had lived out WW2 there as a child. It would be veeery unusual to meet someone in that position in the UK; I never have.
- Germany has a lot of unused habitable land. Esp post unification w/former East Germany. There's far less pressure on land hence property prices.
- Creating a system of artificially regulating rent lower has side effects. There is little or no incentive to create supply, or pay to maintain any supply. Apparently in Germany when you rent in the regulated/long-term market you're responsible for the supply and maintenance of all internal fixtures and fittings. Kitchen, bathroom/s, flooring etc - the lot.
- Rent control is a protection often introduced after very hard times. In the UK it would have likely come in after one of the wars. They only began to seriously deregulate the market in the 80s. That has markedly increased supply and the quality thereof. This is convenient for job mobility, both for people moving domestically, but also for people coming from abroad who wish to rent. It helps keep the economy dynamic and flexible.

Sure prices haven't 'shot through the roof' in Germany. Maybe for the same reason neither you nor I would buy investment property there? There is very limited free building land in the UK, it's a crowded island, a lot of people aspire to owning property there. Getting the permits to build is $$$ and even where possible they can take years to get.

[thismyvoice]

Don't know about the Swiss, but the government in Germany actively regulate housing rent, imposing rental cap. As a result, housing price has not shot through the roof, unlike UK. This makes it more attractive to rent, does it not?
http://www.ft.com/cms/s/0/7e682660-1019 ... z40gsV7AJ3

The article is behind the FTs paywall so unfortunately I can't read it.

I forget how rent is determined in Germany; but I know we paid full market price there. There are a couple of things to consider though:
- They don't seem to moved beyond a culture of renting for life. Some of our neighbours had lived their entire lives in their current apartments. Our immediate neighbour was born in his and had lived out WW2 there as a child. It would be veeery unusual to meet someone in that position in the UK; I never have.
- Germany has a lot of unused habitable land. Esp post unification w/former East Germany. There's far less pressure on land hence property prices.
- Creating a system of artificially regulating rent lower has side effects. There is little or no incentive to create supply, or pay to maintain any supply. Apparently in Germany when you rent in the regulated/long-term market you're responsible for the supply and maintenance of all internal fixtures and fittings. Kitchen, bathroom/s, flooring etc - the lot.
- Rent control is a protection often introduced after very hard times. In the UK it would have likely come in after one of the wars. They only began to seriously deregulate the market in the 80s. That has markedly increased supply and the quality thereof. This is convenient for job mobility, both for people moving domestically, but also for people coming from abroad who wish to rent. It helps keep the economy dynamic and flexible.

Sure prices haven't 'shot through the roof' in Germany. Maybe for the same reason neither you nor I would buy investment property there? There is very limited free building land in the UK, it's a crowded island, a lot of people aspire to owning property there. Getting the permits to build is $$$ and even where possible they can take years to get.

Don't get me wrong, I am not advocating rent control. I am just explaining why people prefer to rent in parts of Germany, where the government is actively managing rents.

[sgstrait]

I guess in places like Germany their GDP reflects real industry whereas in places like UK it reflects house price inflation ie hot air.

Sent from my bottom using High-Powered-Air[TRADE MARK SIGN]

[JR8]

I guess in places like Germany their GDP reflects real industry whereas in places like UK it reflects house price inflation ie hot air.
Sent from my bottom using High-Powered-Air[TRADE MARK SIGN]

Dow Jones Global 50 Index - 'The Dow Jones Global Titans 50 Index is a float-adjusted index of 50 of the largest (by market capitalization) and best known blue chip companies' [Wiki]

Looking at the 'scoreline' of the index by nationality what do we see:
UK 10 vs Germany 4
Which fully endorses the irony of your tagline.

In fact the UK has the 2nd highest number of constituents behind the US on 14. Not a bad showing for a small island.

[sgstrait]

Why is a Dow Jones index the be all and end all? If we are to pull up indices then what about this: http://www.weforum.org/agenda/2015/09/t ... in-europe/ clearly shows UK far lagging Germany and based on your reasoning that an index must be right, you are clearly wrong. Small Britannia, the sick man of Europe.

Sent from my bottom using High-Powered-Air[TRADE MARK SIGN]

[JR8]

I didn't suggest it was, did I? In fact it was simply the first global index that came up via Google.
And now you've moved from GDP to competitiveness as the benchmark to make your point, presumably conceding that your original point failed.
But then ranked 5th globally in GDP stakes your suggestion that that resulted from 'house price inflation' was fatally absurd https://en.wikipedia.org/wiki/List_of_c ... nominal%29

Not bad for 'Small Britannia, the sick man of Europe'

[PNGMK]

I was looking at some Singapore house/apt prices on the weekend - thinking about upgrading... decided that the market (at least asking price wise) has not corrected at all... on the other hand rents are dropping where I am living....

[Wd40]

I was looking at some Singapore house/apt prices on the weekend - thinking about upgrading... decided that the market (at least asking price wise) has not corrected at all... on the other hand rents are dropping where I am living....

People sell at a loss only when they are forced to. Currently buyers dont want to buy at the quoted prices and sellers dont want to sell at a loss. Its been like this from the last few years. It will be interesting to see who will bat first. Rents falling is a real danger sign for investors. At some point when rents are not high enough to cover installments, that will be a tipping point.

We just need the perfect storm of global recession to play out. SGD will sink like a stone and Singapore interest rates are inversely proportional to SGD exchange rate. Interest rates will soar through the roof. Then you will have a real correction. Not until then.

[PNGMK]

WD40 - I thinking back to the last crash I can remember - around 2004. Your right that rental returns were terrible. My neighbours have been dropping the asking rent on their unit for months with no takers - I currently estimate the asking rent is equal to their mortgage without taking costs (i.e. maintenance and sinking fund) into calculation. We're close. What I would say is that based on past experience when it drops, it drops hard. All rats of a sinking ship in this little red dot - that's partly because the market is so damn illiquid anyways - the market volumes are very low at the best of times; add in the Gahmen's various 'cooling'; aka tax grab measures and you have a recipe for disaster.