Forbes article on singapore

[Beeroclock]

I learnt about a grossly inaccurate fact about govt debt claims he has made which hinges on gross debt not the net debt. So defeats his main points on SG govt completely. Though the consumer data is still interesting for someone new here

http://www.gov.sg/government/web/conten ... evelofdebt

gross vs net debt is a very basic level to mess up, it's like accounting 101. Anyone who describes them self as an "analyst and activist", you have to be wary of the quality and neutrality of their analysis

[ecureilx]

[quote="Beeroclock"]
It added: “Even excluding the value of property assets, cash and bank deposits owned by households exceed total household debt.”

[zzm9980]

but the Monetary AUTHORITY of Singapore, well I somehow doubt their points will be flimsy.

No, but they're hardly unbiased either. His whole article is critical of them and their policies, so I wouldn't expect them to agree with anything he says.

JR8, yes the government must keep the interest rate low to ensure votes. I'll readily defer to you know way more about this than I do. I'm a techie, you're a financial guy.

But tell me, I'm honestly curious so please follow along and humor me. My impression is locals (the Singaporeans) prosperity and wealth is predicated on their property investments.

1) The low interest rates has both A) allowed them to make these investments and B) fueled the growth in value of said properties.

2) Skyrocketing property values forces those who couldn't do 1a early enough to leverage themselves much farther in order to join this market or even purchase their own initial property.

3) Assuming MAS does nothing, US FED (or whoever) adjusts interest rates back up, SG rates track this, and suddenly mortgage payments skyrocket and property values drop. People are now paying more then their budget allows on properties worth 20% (or more, just a random reasonable sounding value) less than what they took out loans against.

The obvious problem is, what happens then?

The second less obvious or even less important problem the author pointed out is that this is just facilitating wealth transfer from younger working Singaporeans to a smaller number of older wealthier ones. That in itself may or may not be a problem depending on your POV.

Now for 3, assuming the government DOES intervene to keep rates low, then you still have property prices unsustainably climbing. That gives us cooling measures like we've seen. ABSD, more conservative mortgages, etc. Are those measures sustainable to keep interest rates low and affordable over the life of current loans? (20+ years?)

So what does the government do to keep property price growth reasonable so Singapore doesn't become an 'Elysium'*? I'm honestly curious. Seems to me their damned if they do, damned if they don't. I won't pretend to be an expert enough about finance to know if the authors other points are sound or not, but it all seems plausible to me and I haven't seen any strong solid reasons the above scenario won't be a big problem.



* - shitty new Sci-fi movie with Matt Damon about a ruined Earth with all of the rich living on a floating space station paradise, just go read the wiki synopsis

[Beeroclock]

but the Monetary AUTHORITY of Singapore, well I somehow doubt their points will be flimsy.

No, but they're hardly unbiased either. His whole article is critical of them and their policies, so I wouldn't expect them to agree with anything he says.

Yeah everyone's biased to some extent.... I was reacting to moksh's challenge as one of those poohpooh'ing Mr Colombo without even reading his lengthy article, and then moksh can't even be bothered to read MAS' response and wants others to inform if their points are solid or not. On face value, I will be inclined to assume MAS (as a regulated, Govt body) is credible and Mr Colombo (a random, self-proclaimed analyst/activist.... I still think these two are somehow mutually exclusive pursuits if you want to do either of them properly) is where to focus the due diligence. I'm just surprised Colombo didn't append a few more pages to detail the COE bubble, golf membership bubble, etc etc, perhaps that will be the next edition

[Beeroclock]

The second less obvious or even less important problem the author pointed out is that this is just facilitating wealth transfer from younger working Singaporeans to a smaller number of older wealthier ones. That in itself may or may not be a problem depending on your POV.

Actually I personally feel this is the most important point and the one warranting activism. It is an issue across the developed world (not just Singapore) where older baby boomer generations have benefitted tremendously by leveraging property investments, to the detriment of the next generations who find themselves priced out of the market. QE policies are only adding to the wealth transfer and kicking the can further down the road as even the US themselves admit. As much as the Fed says it's required for job creation, most of this money has flowed into equities, emerging markets and financial assets, that do not create jobs in US but just keep making rich people richer. There is growing income inequality and disenfranchisement of today's 15-30 year olds, most severely in those EU countries with record unemployment rates.

Of course if you take the view these are all bubbles about to pop then fine that might solve the problem, allow the younger folks an opportunity to step on the property ladder, and leave some older folks vulnerable in their retirement plans (but it serves them right anyway for hoarding all that property for all those years ?!?).

I don't expect the solution to come so easily. And we might see more serious social unrest in the years to come.

[Strong Eagle]

The second less obvious or even less important problem the author pointed out is that this is just facilitating wealth transfer from younger working Singaporeans to a smaller number of older wealthier ones. That in itself may or may not be a problem depending on your POV.

Actually I personally feel this is the most important point and the one warranting activism. It is an issue across the developed world (not just Singapore) where older baby boomer generations have benefitted tremendously by leveraging property investments, to the detriment of the next generations who find themselves priced out of the market. QE policies are only adding to the wealth transfer and kicking the can further down the road as even the US themselves admit. As much as the Fed says it's required for job creation, most of this money has flowed into equities, emerging markets and financial assets, that do not create jobs in US but just keep making rich people richer. There is growing income inequality and disenfranchisement of today's 15-30 year olds, most severely in those EU countries with record unemployment rates.

Of course if you take the view these are all bubbles about to pop then fine that might solve the problem, allow the younger folks an opportunity to step on the property ladder, and leave some older folks vulnerable in their retirement plans (but it serves them right anyway for hoarding all that property for all those years ?!?).

I don't expect the solution to come so easily. And we might see more serious social unrest in the years to come.

+1

Income and wealth inequality are going to be the unwinding of the USA.

[JR8]

Income and wealth inequality are going to be the unwinding of the USA.

Maybe the USA should stop the open-door policy for poor people?

Rich people don't tend to rock the boat too hard.

[JR8]

The author says that Singapore properties have the worst rental yields. This is bullshit. Singapore properties have the best rental yields in the world.
In Singapore, its opposite. Anyone who has $200K in the bank thinks its better to go into the downpayment of a condo.

As a landlord, in London you'd not look at anything yielding (gross) under 10 or 12%.

I don't know what yields are here, but I don't hear shrieks of agony from landlords. Nor do I see the OP quoting figures. What are the yields here, purported to be so bad?

[Arsenal_fan]

Remember reading some time ago that the proportion of domestic banks lending towards mortgages was quite high in singapore. Did some searching.

http://www.singstat.gov.sg/publications/publications_and_papers/reference/monthly_digest/mdsdec13.pdf

Page 68 for data on loans and advances of domestic banks. Loans towards housing is 30% of total lending as on nov 2013. if you add in the loans to the construction sector it goes up to 45%. It is almost around that number in 2011 too. The banks do seem to be lending a lot to one sector of the economy.

[scarbowl]

All of you who have pooh poohed him, I doubt if you managed to read till end. He has made it very clear he is not drawing an identical comparison between Iceland and Singapore. His points about 70% mortgages being floating are quite shocking for those who have seen the story playout in US in 2008. Would love to hear if anyone has a contrary opinion with solid facts behind it rather than just rejecting it as publicity stunt. I didn't see the MAS article, does it have solid points?

well if he didn't want to highlight the Iceland comparison perhaps he might've chosen a different title? Why don't you check today's press, but the Monetary AUTHORITY of Singapore, well I somehow doubt their points will be flimsy.

.

In most publications, and to the unending annoyance of writers, it is actually someone else's job to write the headlines. This is why the headline is sometimes contrary to the contents of the actual article.

[PrimroseHill]

Wow, JR8, you can actually annualise your rental yield between 10-12%? How? Teach me. The best in London is maybe 4-5% rental yield.
I read that article - made some good points. Here's my 2sens worth. I don't think that SG is in any other trouble that the rest of the world aren't facing -property bubbles, credit bubbles, low interest rates.
Look at the london property bubble. Financial crisis came, London prices remain stable, some selected areas went up. Greece, Spain problems- London property prices went up. Why? Flight money.
SG is in similar situation. It is due to the stability of this country/perceived stability, there will always be flight monies coming from China, Indonesia etc.
And these people will buy in prime areas, the Central Core Region, not the burbs. Not the HDB.
SG govt here will intervene too, to ensure that the property bubble is sustainable. Look at the recent measures, not just the cooling measures of ABSD but all the Total Debt rationing measures. It is also about location, supply and demand.

[PrimroseHill]

I have invested in a property here, private residence. It is SIBOR+ whatever the bank charges, so, it actually comes up to around 1%. What I am paying in mortgage is what my tenant is paying for a 2bed flat. So go figure.
US interest rate will rise in 2015? Maybe. Maybe not. Jury is still out. I have my doubts, simply because, if interest rates rises, US&UK at the moment are having unprecedented growth, what will happen to the DOW&FTSE? Those are having unprecedented growth as well.
OK, so US & UK interest rate rises, that means that USD & GBP will rise. Cost of manufacturing will rise. Cost of export will fall as it will be more expensive to buy from US & UK. Yes, cost of import will be lower.
What about the US &UK's collosual debt? How's that going to be repaid? So, FED & BOE are in a delicate position. Cheap money vs unpayable debt.

[Beeroclock]

Wow, JR8, you can actually annualise your rental yield between 10-12%? How? Teach me. The best in London is maybe 4-5% rental yield.

I was also surprised to hear that, my recollection of London was 3-5% rental yields and Australia is same....

[zzm9980]

The author says that Singapore properties have the worst rental yields. This is bullshit. Singapore properties have the best rental yields in the world.
In Singapore, its opposite. Anyone who has $200K in the bank thinks its better to go into the downpayment of a condo.

As a landlord, in London you'd not look at anything yielding (gross) under 10 or 12%.

I don't know what yields are here, but I don't hear shrieks of agony from landlords. Nor do I see the OP quoting figures. What are the yields here, purported to be so bad?

Article said under 4% i believe.

[PrimroseHill]

SG banks from my experience thus far are quite conservative and the mortgage products on offer aren't as mind boggling and complicated as UK or US. From my experience here, there's no buy-to-let, let-to-buy, equity release, sub-prime lending, self-certification mortgage, interest only, endowment mortgage, ISA mortgages etc etc.
Its a straightforward capital+interest mortgage, 20% deposit, XYZ times salary.