The $1 Million HDB flat

[Musicwhiz]

On hindsight, investment in properties was the correct move over the past few years.

I don't fully agree with this statement. I think ultimately, one has to be comfortable with their own leverage level and Debt-servicing capability; and each individual should have their own comfortable level of cash buffer.

The rise in property prices was not, IMHO, due solely to low interest rates. I''ve attended seminars where speakers have mentioned that low unemployment rates, hot money flowing from the West to Asia, high levels of foreigners coming in and Singaporean's general propensity for property have been major factors in fuelling the property market.

[violinist]

Thought it's straight forward logic because we are a small red dot and they don't manufacture land anymore?

[arthur]

I fully agree with MW on the case that high property demand is based largely on low interest rate.
However my hypothesis cannot be proven until the time comes when the i/r rises.

We will just have to wait it out.

More 1 million HDBs to come, I believe.

I will love to see the ending of such a unlimited QEs by the Western world. Fortunes will favour those who are prepared and knowledgeable.
There is no free lunch in the world.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig von Mises

[Musicwhiz]

More 1 million HDBs to come, I believe.

I will love to see the ending of such a unlimited QEs by the Western world. Fortunes will favour those who are prepared and knowledgeable.

Hi Arthur,

I was just discussing this trend with a friend over lunch. We both agreed that housing prices are ""crazy" but there are still people who are willing to buy, and for investment as well as home-stay! TODAY surveyed a group of about 3,000 Singaporeans and about 2/3 of them said they will still buy property in the coming 12 months. How''s that for logic?

As for the $1 million HDB, it''s not so much the trauma of it hitting $1m, which I''d expected some time ago. It''s more of ""how high is the limit"" where people will scratch their heads and say ""this is purely insanity and it''s a ludicrous situation"". So far, no one''s saying that yet!

As for QE, it seems USA is intent on screwing the rest of the world. What they solve in their own country will cause problems for others, and asset bubbles may be building up even as we speak!

[Temperament]

It's not housing prices are crazy, or stock prices are crazy or gold prices are crazy.
It's people are crazy from time to time.
So how to remain calm and steady and not sucks into the madding crowd?
It's even better if you can be "Far from the madding crowd", said Thomas Hardy.
i think we are all in quite difficult times.
Now we are all "Internetted".
You can't hide in the countryside anymore.
Can you?

[arthur]

My personal opinion:

This is a liquidity driven rally, not a rally based on sound strong economic fundamentals. Thus, this rally has no legs and everytime the mkt starts to wobble, all western central bankers will chip in their (a) comments to make the mkt feel good, (b)Greece will not default, Europe will not collapse, America will continue to make hold its promise to pay its Yankee bonds debt & © pumping of money with alot of emphasis the excess liquidity shall not harm the economies.

The hot flow of money rushing to Singapore bcos we are the only 6 nations in the world with the coveted AAA ratings by 3 rating agencies as well as the low interest rate will provide alot of impetus of worldwide liquidity rushing here.
These only benefit selected group of people, the multiple properties owners, the property agents, the bankers, the financial advisers, the business owners and people who can and do make use of the low interest rate to leverage upon. Put it simply, only the rich and their respective service providers will get richer.

However all happy times must come to an end. And I can forsee the tremendous pressure MAS has to balance between the goal of not killing off the liquidity flowing here as well as preserving Singaporean sanity when the interest rate rises in the future.

Screw the western world with their high moral grounds when Asian financial crisis erupted in 97. They told us to bite the bullet and borrow from IMF. How many Asians suffered back then. Remember the Indonesian racial riots? Remember the tense times between Singapore and Indonesia back then? Remember how Mahatir actually go against IMF to apply currency control on Ringgit?

Now all they do is to PRINT unlimited amount of money.

I do not want my children to live in a world whereby the Yankee greeback is still the reserve currency. By having that status, they can screw us whenever they have a crisis of their own.

Food for thought ~

[Image: 320px-United_States_one_dollar_bill%2C_obverse.jpg]

Does anybody know how much this one American dollar bill is worth?
The actual answer is NOT one dollar.

The answer is it depends whether the American govt is able to pay you back a dollar in the first place.
This dollar bill is representative of the faith that the dollar owner has onto the government of being able to repay you back.

Think about it. How much faith one can has on a government that has embarked on a unlimited printing press policy?

[KopiKat]

These only benefit selected group of people, the multiple properties owners, the property agents, the bankers, the financial advisers, the business owners and people who can and do make use of the low interest rate to leverage upon. Put it simply, only the rich and their respective service providers will get richer.

Mostly agree with what you say except the above.
The stock market is also closely linked, so many of us here who invest in stocks would be an indirect beneficiary. With STI +16.02% so far this year, I have no complaints. Just have to make sure I run faster than Property Price increase and also be able to run fast enough if the dominoes start to fall....

[Temperament]

Yes agree. But does our current Capitalist System base on "Fiat Money System'' has an alternatives?
Anyway, when Britain & some Euro countries ruled the waves, what happened to East Asia (Especially China).
Now America is the Economic Power of the World and printing money is the way they try to "Rule the World".
And Euro is doing the same-Printing money.
It's like another form of colonization of weaker countries.
i think BRIC will protest very strongly in the future.
Or maybe they can play the game accordingly.

The question is will "Fiat Money System" collapse one day?
i think it will, if there is a major war between the Big Countries.

[arthur]

Mostly agree with what you say except the above.
The stock market is also closely linked, so many of us here who invest in stocks would be an indirect beneficiary. With STI +16.02% so far this year, I have no complaints. Just have to make sure I run faster than Property Price increase and also be able to run fast enough if the dominoes start to fall....

Hi Kopikat
The issue right now isn't about just individual benefits one can take from the QEs from either stock or property mkt.
The issue is the aftermath after the black swan hits.

Everybody wants to think that he or she will be able to escape in the nick of time. Truth to be told, nobody is certain he or she escape in time until hindsight.
What I rather have is a world economy that allows a slow reversal back to the norm than a highly leveraged banking system that still refuse to be corrected and politicans that are only keen to hold on to power.

I believe the ending would be far worse than 2008 GFC. But only time shall prove whether I am right or wrong.
And in that sense, the common people, not the ones in the HNW bracket, that will suffer the most. They are the ones that will be highly subjected to retrenchment, pay cuts, mortgage loans.
A common person trying to eke out a living using salary to pay for housing installment and renting out, hoping for rental income and capital appreciation. He is in far greater danger than a rich person who paid out in cash due to the fact he can be retrenched. Thus the saying the Rich get richer.

I cannot recall throughout history of any country that can print unlimited amount of money without any side effects, only either collapse or hyperinflation.
What would happen when the market participants literally dries out no matter what QE the American propose to dish out.

In the last few QEs, at least there were a fixed amount. Now that they have thrown the ultimate challenge of having limitless amount, tied to unemployment rates, I believe we are threading on unknown territory.
The only saving grace as I previously suggested was the reserve currency status.

But it will not hold out this status indefinitely. We are seeing the dusk of the American empire as this crisis unfolds.

The sunset of the empire would not be a 5 or even 10 years thing. Even the British Empire took two World Wars to bring about its sunset.

Yes agree. But does our current Capitalist System base on "Fiat Money System'' has an alternatives?
Anyway, when Britain & some Euro countries ruled the waves, what happened to East Asia (Especially China).
Now America is the Economic Power of the World and printing money is the way they try to "Rule the World".
And Euro is doing the same-Printing money.
It's like another form of colonization of weaker countries.
i think BRIC will protest very strongly in the future.
Or maybe they can play the game accordingly.

The question is will "Fiat Money System" collapse one day?
i think it will, if there is a major war between the Big Countries.

Hi Temperament

Honestly, I would rather a fiat monetary system than a system based on hard commodities such as a Gold std based.

The reasoning behind is I have read articles and research showing that a Gold standard based system actually cultivates Deflationary circumstances to occur during economic busts.
Deflation is definitely worse than inflation. (To all non-economic students, pls read up why). The only worse thing than this is hyperinflation, in my personal opinion.

A fiat monetary system, however allows central banks to print, therefore avoiding a deflationary scenario.
But the danger of hyperinflation is there, which is one of the thing I fear for unlimited QE.

Currently we are having a highly manipulative monetary system, a system that is geared only the bankers and the polticians. (Yeah, you might think I sound like one of those Occupy 99%..)

The fiat system inherently is ok or in fact, better than the Gold Std based system. But the world has abused and manipulated it to such an extent, its usefulness to me, is highly in doubt.

[yeokiwi]

But it will not hold out this status indefinitely. We are seeing the dusk of the American empire as this crisis unfolds.

US is still the only country that generates the most wanted intellectual properties for the world.
You want iphone X? -> US
You want space travel? -> US
you want driverless car? -> US
Best weapons? -> US

The rest of the world are mainly copycats.
All the technologies that enables you to write this article come largely from US.
Even Europe, which is in quite a bad shape now, is also a technology power house as a whole.

In asia, only Japan is outputing emerging technologies. South Korea, is still a copycat in general.
China? They are still far far away from the technology level of US and Europe.

Now, Apple Inc decides to use nano sim for its phones, so now the whole world must dump away the sim and microsim in exchange for the nano sim if they want iphone 5. And I will expect the rest of the HP manufacturers to follow.

US is having fiscal problems but in general, their economy is highly innovative and vibrant. Their ability to deliver new things that the world want will mean that US is simply indispensable.