HDB resale index and bubble?

Hi,

Would you conclude that HDB flats are in a state of property bubble by looking at the HDB resale index?

http://www.hdb.gov.sg/fi10/fi10297p.nsf/...art1Q2011/$file/ResalePriceIndex1Q2011FlashEstimateChart.pdf


Appreciate your views.

(18-05-2011, 01:26 PM)flinger Wrote: Hi,

Would you conclude that HDB flats are in a state of property bubble by looking at the HDB resale index?

http://www.hdb.gov.sg/fi10/fi10297p.nsf/...art1Q2011/$file/ResalePriceIndex1Q2011FlashEstimateChart.pdf


Appreciate your views.

Hmmm, Flinger. Maybe it has to touch 200 before it can be labelled a bubble?

The index of 100 is taken at 4Q98 and is about 12 years ago.
Assuming 3% inflation per year, the index should be around 142.6.
Assuming 5% inflation per year, the index should be around 179.5.

Theoretically, if the salary grows at the same rate, I suppose it is fine.
But, our GDP growth is highly distorted by the increase in population.
The per capital income is also distorted by many rich people that are settling in Singapore.

So.. we come to a situation where the GDP is growing annually and the per capita income is also growing annually but some percentage of the native citizens are having stagnant income.

10 years ago, we do not need Workfare bonus but we need it now.
Strange.. isn't it?

(18-05-2011, 02:38 PM)yeokiwi Wrote: 10 years ago, we do not need Workfare bonus but we need it now.
Strange.. isn't it?

Ha! more strange if they dish out money following a rigid set of rules.
i.e. for those they missed,
1. the poor are not getting the money
2. the not-so-poor are getting the a mini-windfall
As with all system, there are "flaws".

(18-05-2011, 02:38 PM)yeokiwi Wrote: The index of 100 is taken at 4Q98 and is about 12 years ago.
Assuming 3% inflation per year, the index should be around 142.6.
Assuming 5% inflation per year, the index should be around 179.5.

If only I can use that for a reason for getting an increase in my pay. inflation increase by 3% so my pay should increase by xxxx.

(18-05-2011, 02:38 PM)yeokiwi Wrote: Theoretically, if the salary grows at the same rate, I suppose it is fine.
But, our GDP growth is highly distorted by the increase in population.
The per capital income is also distorted by many rich people that are settling in Singapore.

So.. we come to a situation where the GDP is growing annually and the per capita income is also growing annually but some percentage of the native citizens are having stagnant income.

10 years ago, we do not need Workfare bonus but we need it now.
Strange.. isn't it?

Is it strange really? or is it that the cost of living has gone up that there is a need for these top up's?

We need both parents working to survive in Singapore compared to previously, and kids are in daycare and maids looking after them, and for a lucky few grandparents looking after them.

Nowadays, its the rich who can afford to do this. What does this say?

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(18-05-2011, 02:54 PM)cif5000 Wrote: True Indeed. The question is , who does the flaws impact?

The rich, the middle class, the poor , the businessman, the companies, etc...etc...

and which system you choose to follow based on the impact.

(18-05-2011, 01:26 PM)flinger Wrote: Hi,

Would you conclude that HDB flats are in a state of property bubble by looking at the HDB resale index?

Personally, I track a Price-to-Wage ratio. The last high for this ratio was during the pre-Asian Financial Crisis era where it was about 1.4x wage before popping.

Now, it's about 0.93x. So I'd say that given history as a guide, we're not in bubble territory yet but certainly trending there is wages don't keep up.

The average from 1990 to date is 0.83x.

Notes:
- For price, I take a weighted average resale price measure (based on the floor area of 3,4,5 and Exec Rm flats) then convert it into a Per sq Mtr figure. (source here)

- For wage, I take the Average Nominal Monthly Earnings provided by MOM (here).

This doesn't separate the SG citizens from the PRs and etc so for those looking for that, I'm sorry to disappoint you. But I think it's more reflective of the market to include what everybody who is looking for a home on this island currently earns.

It never fails to amaze me, how you guys find data to research so much. Kudos to all the forummers here, for all your hard work! Much appreciated!

(18-05-2011, 04:16 PM)kazukirai Wrote: Personally, I track a Price-to-Wage ratio. The last high for this ratio was during the pre-Asian Financial Crisis era where it was about 1.4x wage before popping.

Now, it's about 0.93x. So I'd say that given history as a guide, we're not in bubble territory yet but certainly trending there is wages don't keep up.

The average from 1990 to date is 0.83x.

Notes:
- For price, I take a weighted average resale price measure (based on the floor area of 3,4,5 and Exec Rm flats) then convert it into a Per sq Mtr figure. (source here)

- For wage, I take the Average Nominal Monthly Earnings provided by MOM (here).

This doesn't separate the SG citizens from the PRs and etc so for those looking for that, I'm sorry to disappoint you. But I think it's more reflective of the market to include what everybody who is looking for a home on this island currently earns.

I was reviewing the details you provided and was wondering if it is correct to measure the mean wages against the median resale prices?

Should we be measuring the median wages with the median resale prices?

(18-05-2011, 06:30 PM)flinger Wrote: I was reviewing the details you provided and was wondering if it is correct to measure the mean wages against the median resale prices?

Should we be measuring the median wages with the median resale prices?

Given the increase in SG's Gini Coefficient, I suppose you're right to say that median wage will give a more accurate measure.

This was the best data I could find and with 20/20 hindsight on the HDB resale market, seems to give a relatively good indication of what an overextended property market, filtered down to the resale market, looks like.

I know the NUS real estate department has a property index out too instead of the HDB resale index mentioned here. That's probably a better indication of the overall property market for those interested.

I wonder if Koh-san can share any industry insider tips?

(18-05-2011, 07:46 PM)kazukirai Wrote: Given the increase in SG's Gini Coefficient, I suppose you're right to say that median wage will give a more accurate measure.

How about using statistics from department of statistics singapore?
http://www.singstat.gov.sg/pubn/papers/p...pp-s17.pdf