House Prices could drop by a Quarter?

[BBCWatcher]

The government has also been slowing the rate of immigration, and corporations are still squeezing down their housing budgets.

I didn't follow the interest rate logic upthread. How would that work?

[Wd40]

If you watch the relation between USD/SGD rate and SIBOR, you will note that when SGD weakens SIBOR rises and vice versa. Singapore monetary policy is based on exchange rate and it doesnt have a policy rate like the FED, BOE etc. Basically exchange is tweaked to control inflation and interest rates in the system.

This article explains it better

http://www.straitstimes.com/business/ec ... y-analysts

"But an MAS easing and a consequently softer Singapore dollar would squeeze local interest rates as investors demand higher yields as compensation for holding a weaker currency.
"
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[JR8]

I was squinting too, trying to figure out how the suggestion fitted together, since a weaker interest rate directly feeds into a weaker currency... From the article:
-----
'"Any easing [interest rates] will instil further depreciation [currency] expectation which leads to capital outflows and oblige the central bank to intervene. Both lift domestic interest rates," said Mr Ji, adding he expected the central bank to stay put in October.
"I don't think the MAS has the appetite to lift rates higher by either further easing or even suggesting it may ease. Managing exchange rate is about managing expectation of resultant capital flows."'
------

So, er, it seems they're going beyond simple cause and effect. Drop interest rates => weaken currency => $ leaves SG which gahmen don't want. So gahmen raise rates to protect the S$... ? No that makes no sense at all! Drop rates then as a result immediately have to raise them... maybe simply an example of SGn journalism at it's finest?

[Wd40]

The fundamental difference b/w Singapore and other countries is that Singapore doesn't have a policy rate. Like FED rate is what 0.35%.

So it's not Drop interest rate=>...

There is no interest rate to drop. There is only exchange rate to tweek.

So it is like this

Drop exchange rate => interest rate rises( which is SIBOR in this case) => ...



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[Strong Eagle]

The fundamental difference b/w Singapore and other countries is that Singapore doesn't have a policy rate. Like FED rate is what 0.35%.

So it's not Drop interest rate=>...

There is no interest rate to drop. There is only exchange rate to tweek.

So it is like this

Drop exchange rate => interest rate rises( which is SIBOR in this case) => ...



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All the more reason to pull out my CPF money... the USD/SGD exchange rate continues to worsen with no end in sight... and there is no end in sight for the pressures that are causing this devaluation.

[Wd40]

The fundamental difference b/w Singapore and other countries is that Singapore doesn't have a policy rate. Like FED rate is what 0.35%.

So it's not Drop interest rate=>...

There is no interest rate to drop. There is only exchange rate to tweek.

So it is like this

Drop exchange rate => interest rate rises( which is SIBOR in this case) => ...



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All the more reason to pull out my CPF money... the USD/SGD exchange rate continues to worsen with no end in sight... and there is no end in sight for the pressures that are causing this devaluation.

Well, I think the only reason to keep CPF is to keep your PR. There should be no other reason to give your money to a govt to manage.

So it really depends on how badly you want to keep your PR.



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[rajagainstthemachine]

You think its time to open some kind of account which can store money in usd instead of sgd? Do banks offer this? Any help on this would be great.

[Wd40]

Yes, you can open a dbs multicurrency account. You can keep your money in some 7 currencies.

But don't use DBS to do the currency conversion. Do it yourself at a money changer in Arcade.

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[Wd40]

There is another forum I follow in which doom sayers are having a field day, these days because of the way markets have tanked.

Their suggestion is to stay away from paper currencies and move completely to gold. Physical gold, not paper gold.

I was just thinking if you are anyways going to arcade to convert to USD, then why keep the money with DBS. Might as well keep it in your house.

Next level is why keep USD, might as well convert it to gold and keep it

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[BBCWatcher]

Wow, this is getting well off track. A few points:

1. If the price of apples or washing machines increases, is that when you decide to run to the supermarket to buy more apples or washing machines? Who thinks that way? So...why are U.S. dollars any different? Or real estate? (Hint: They aren't.) But if you want to buy high and sell low, nobody will stop you.

For the record, looking at the past 10 years the Singapore dollar is almost exactly at its midpoint value relative to the U.S. dollar. Over past 10 years it has been within the range of 1.2 to 1.6. It's now just below 1.4 -- right smack in the middle of that decade long range. U.S. dollars are neither particularly cheap nor particularly expensive by that reasonable measure.

2. Find me any other AAA rated government anywhere in the world paying over 4%, inflation adjusted, tax free plus some interesting domestic benefits on those funds. If you can find another AAA rated government paying a better yield, please let us all know! (Hint: There isn't any. However, there are ways to place money that pay a higher yield than zero to people selling investments or "investments." Funny how they don't like CPF, isn't it? I wonder if that's a coincidence. ) Which is not to say that you shouldn't save more than your and your employer's CPF contributions. You should if you can, and with some reasonable currency diversification.

3. Gold has been a terrible investment, and physical gold is extremely perilous and expensive to hold. With all due respect, this isn't India. If you want to put a couple gold coins in your sock drawer or a couple gold chains around your neck, or around your beloved's neck, fine, have fun. But as a way to save for retirement? Not a good idea. I agree with Warren Buffet.

[rajagainstthemachine]

@BBC - i'm just trying to understand what would be the best action to take..if i had say 150,000 SGD to put somewhere safe for the future ? that is considering a sliding SGD
I don't believe in physical gold either.. its a waste of time going up that road.

[BBCWatcher]

Here's my order of priority, assuming that you're saving for retirement (plus a few other implicit assumptions):

1. Adequately insure against at least the reasonable predictable catastrophes, such as disability or medical calamity (acute or long-term). I'm not totally thrilled with the insurance options in Singapore, but there are some options. (Owning a home or leasehold is a form of insurance, one could say. That's not a requirement, and I'm in agreement with this thread that real estate in Singapore is still overvalued.)

2. Accumulate an emergency reserve that's reasonably liquid if you don't have one. A fixed deposit or Singapore Government Savings Bond is a pretty good place for such reserve funds. Opinions vary, but being able to cope with 6 month spells of unemployment seems like a reasonable baseline.

3. Pay off high cost debt, such as credit card debt, if you have any. It's very hard to beat a ~20% guaranteed return on your money, and that's what you're doing by paying off typical credit card debt. Then don't repeat that mistake.

4. Pay off medium cost debt. Same idea. If you've got a ~10% loan, for example, that's a good return on investment, too.

5. Assuming your Singapore income tax rate is above zero (safe assumption I think), top up your Singapore tax-advantaged savings vehicles. There are two of them in Singapore: Central Provident Fund (CPF) and the Supplementary Retirement Scheme (SRS). If your salary is S$6000 or higher (as I recall), then you should be maxing out CPF already. But if not it's possible to top up CPF voluntarily, and that might be a very reasonable thing to do. SRS has some good tax advantages, although the investment choices aren't great. Even so, I think I'd take that deal and then pick something low cost (by Singapore standards anyway) to hold. Maybe the STI ETF or something like that.

6. Then you'd save beyond that. My favorite option unfortunately doesn't exist yet in Singapore (or at least doesn't make as much sense in Singapore): a low cost "target" index mutual fund or exchange-traded fund (ETF). I'll explain it anyway so you can get the basic idea then replicate aspects of it. Vanguard, BlackRock, and a couple others have these "target" funds. You pick a target year of retirement based on your age, then pick the closest matching fund. For example, if you're about 20 years away from retirement then Vanguard's Target 2035 Index Fund would be a good choice. And then you dollar cost average into the fund -- and do nothing. You don't even look at it. Dollar cost averaging from Singapore means, for example, if you're buying S$150,000 worth then every month for 12 months (for example) you buy S$12,500 worth of the fund. Dollar cost averaging means you automatically buy a bit more when the fund is lower priced and a bit less when it's higher priced. This assumes zero or insignificant fixed transaction costs with each purchase. Vanguard, BlackRock, or whoever else is running the fund automatically shifts away from riskier investments (such as stocks) toward safer investments (bonds) each year as you get closer to the target date. But it's an index fund, so it's passively managed, meaning they're low cost and, over time, beat the humans trying to manually trade stocks and bonds. "Target 2035" doesn't mean you withdraw everything in 2035. It means that's when you expect to start drawing down the fund, typically at a safe 4% per year (or thereabouts).

In Singapore we're not so fortunate to have those sort of low cost funds, so the best we can do is simulate them. Same basic idea, though: I'd be looking for a low cost mutual fund or index fund, at least low cost by Singapore standards. Some people get a bit "fancy" and buy Vanguard index ETFs that are traded on the London Stock Exchange and domiciled in Ireland (e.g. VWRL), but I'd say you have to be moderately savvy to know how to do that well, in a truly low(ish) cost fashion. But it can be done, and many people do it.

If you're a U.S. person then things change a bit.

[rajagainstthemachine]

ok let me clarify i'm on EP so some of the points may not hold for me.

1. i think have those from some savings back home.

2. thats the only thing i'm worried about At the moment.

3,4 i have 0 debt.

5 not PR therefore no CPF etc etc although i have 8 years worth of PF from my home country which i have to somehow recover and put it back into my bank account but i've been too lazy ( i think i need to work on that aspect)

6. i have to learn what this means.. i'm a total noob when it comes to money.

[Wd40]

Wow, this is getting well off track. A few points:

1. If the price of apples or washing machines increases, is that when you decide to run to the supermarket to buy more apples or washing machines? Who thinks that way? So...why are U.S. dollars any different? Or real estate? (Hint: They aren't.) But if you want to buy high and sell low, nobody will stop you.

For the record, looking at the past 10 years the Singapore dollar is almost exactly at its midpoint value relative to the U.S. dollar. Over past 10 years it has been within the range of 1.2 to 1.6. It's now just below 1.4 -- right smack in the middle of that decade long range. U.S. dollars are neither particularly cheap nor particularly expensive by that reasonable measure.

2. Find me any other AAA rated government anywhere in the world paying over 4%, inflation adjusted, tax free plus some interesting domestic benefits on those funds. If you can find another AAA rated government paying a better yield, please let us all know! (Hint: There isn't any. However, there are ways to place money that pay a higher yield than zero to people selling investments or "investments." Funny how they don't like CPF, isn't it? I wonder if that's a coincidence. ) Which is not to say that you shouldn't save more than your and your employer's CPF contributions. You should if you can, and with some reasonable currency diversification.

3. Gold has been a terrible investment, and physical gold is extremely perilous and expensive to hold. With all due respect, this isn't India. If you want to put a couple gold coins in your sock drawer or a couple gold chains around your neck, or around your beloved's neck, fine, have fun. But as a way to save for retirement? Not a good idea. I agree with Warren Buffet.

It's not about the returns. It's whether you trust govt/central banks/banks etc to return your money.

This is what happened with a bank in Austria.

http://www.capitalmind.in/2016/03/austr ... s-nothing/

We also know what happened with Cyprus and Greece. It may not happen with Singapore, but the point is why to risk it, keep your money with another country's govt when you are not even planning to stay there.

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[Wd40]

@BBC - i'm just trying to understand what would be the best action to take..if i had say 150,000 SGD to put somewhere safe for the future ? that is considering a sliding SGD
I don't believe in physical gold either.. its a waste of time going up that road.

Nobody can give you a perfect answer. You have to do your own research and find out all the products out there, the risks and then make your own decision.

From your statement, you are looking at capital protection more than appreciation. Capital protection in which currency? Are you are basing it against a home currency or USD? Why USD? USD can keep going up against all currencies, you dont have to worry as along as it is not your home currency. SGD may depreciate, but like BBCW said, from 1.4 USD it could go down to 1.6 USD. But do we know for sure it will go down to 1.6 USD, what if it appreciates to 1.2 USD. Anything is possible in the markets. So if you are looking for safety, I would suggest keep it in SGD itself. Look at SGD denominated safe bond funds. Upto 60K you can keep even in a bank account like OCBC 360 and get like 1.7% interest PA if it is your salary account and you make 3 bill payments a month.

http://www.ocbc.com/personal-banking/Ac ... 360account