Singapore Homes Most Affordable as Rents Climb

[Humble]

I do not own any private property as of now.

Our property market is different from US. We have 20% down payment and banks here conduct vigourous check before loan being approved.

I hope Singapore will not experience similar predicaments in US and Southern Europe in future else a lot of people will be suffering besides falling property price.

[Musicwhiz]

Our property market is different from US. We have 20% down payment and banks here conduct vigourous check before loan being approved.

I hope Singapore will not experience similar predicaments in US and Southern Europe in future else a lot of people will be suffering besides falling property price.

I certainly hope it;s a case of "This Time It's Different". But history has shown time and again that it's not.

Looking at how leveraged some of the people mentioned in the article are, it's really scary to contemplate what would happen if interest rates rise rapidly and unemployment rate also rises.....

[Temperament]

Our property market is different from US. We have 20% down payment and banks here conduct vigourous check before loan being approved.

I hope Singapore will not experience similar predicaments in US and Southern Europe in future else a lot of people will be suffering besides falling property price.

I certainly hope it;s a case of "This Time It's Different". But history has shown time and again that it's not.

Looking at how leveraged some of the people mentioned in the article are, it's really scary to contemplate what would happen if interest rates rise rapidly and unemployment rate also rises.....

{I hope Singapore will not experience similar predicaments in US and Southern Europe in future else a lot of people will be suffering besides falling property price.}

Unquote
2008/2009 financial fiasco started by US because US GOV allowed "sub-prime lending by the banks and the banks re-packaged this sub-prime loans into MBSO financial products and sold it to the world. Don't know for how many years US did that before 2008/2009 fiasco happened (Bubble Bursted). So i always feel Americans are the "smartest" financial people in the world. Let us see what is next "financial product/products from the American that will trigger the next fiasco. Maybe this time from Europe? China maybe another 15 to 20 years time. China economy is still nowhere to USA or Europe.
If banks of Singapore are allowed to lend liberally without any down-payment or collateral, then it's time to convert your fiat money to stocks, gold, commodities or anything "solid"
Are we allow to take 100% loan from bank for buying a car? if so we have to be careful now. What's next item allow 100 % loan?

[Musicwhiz]

I just find it unnerving that mortgage loans take up such a large proportion of loans in our banking system. Plus our rates are one of the lowest in the region, mainly because we do not have an interest rate policy tweak in our Monetary Policy Setting.

This is making people leverage to the hilt. The guy mentioned in the article, a private banker, took out a 40-year $1m loan. Imagine paying a loan for 40 years - I think more than half of the repayment will be for interest alone, meaning he may have to repay >$1.5m after the 40 years. It's really hard to imagine, but perhaps I am just very debt-averse. These people are probably intending to make the spread and laugh their way to the bank by renting out at a 3% to 4% yield.

[Coattails]

My view - low rates give the illusion of affordability. The article mentions Singapore property has become the cheapest in 10 years due to low debt-servicing ratio, but to me it looks like a time bomb. Picture this - people are increasingly emboldened to take bigger and bigger mortgages because of low rates. When rates rise, it could substantially increase interest obligations. Would banks see more NPL then?

Firstly, I think we have our beloved ministers to thank for using "ability to pay monthly mortgage installment" as a gauge of affordability (I do apologize for politicizing this... but this is a fact)

Secondly, I read somewhere recently that Spain's banks had NPL of below 1% before the their country's property bubble burst in 2008. Right now, NPL for Spanish banks is about 8.6% (thereabouts). So your fear is really not unfounded.

[Temperament]

I just find it unnerving that mortgage loans take up such a large proportion of loans in our banking system. Plus our rates are one of the lowest in the region, mainly because we do not have an interest rate policy tweak in our Monetary Policy Setting.

This is making people leverage to the hilt. The guy mentioned in the article, a private banker, took out a 40-year $1m loan. Imagine paying a loan for 40 years - I think more than half of the repayment will be for interest alone, meaning he may have to repay >$1.5m after the 40 years. It's really hard to imagine, but perhaps I am just very debt-averse. These people are probably intending to make the spread and laugh their way to the bank by renting out at a 3% to 4% yield.

You are absolutely right in the business sense. If a bank willing to lend me a 100 year loan at a even more lower repayment rate it would even better. But the asset should be for business only and not for self consumption. The lower the rate of payment the better risk/reward for the person to next generation taking the loan. But is there such a loan from any bank? Perhaps if our concept of this 100 year loan for business investment is "sound", the bank may accept our proposition too. Perhaps it is just can happen in my imagination only. i am very debt-averse too.