Bloomberg: 'Ghost of 1994' looms over Asia

[finnfinn]

finnfinn

Surely Cityfarmer is entitled to his own opinion? As far as I can tell, Cityfarmer did not say anything like "because he disagrees with you, therefore you should not post." This is a marketplace of ideas, everybody is entitle to his own opinion. Let a thousand flowers bloom!!!

In any case, my (not so original) view is that ultra loose monetary policies of central banks created these financial crises. Dotcom bubble, housing bubble and debt bubble (the mother of all)?!

I am only 2 days old on this forum. My only intention to join is to share and learn from fellow contributors, nothing else.

I have given my perspective from the earlier posts in this thread and really, is just a simple feedback to ensure that fellow contributors' viewpoints are appreciated by everyone- whether we agree or not. This IMO is important to ensure that this site can encourage even more participation and remain successful.


I note that CityFarmer's point that he posted as a contributor, not moderator.
Surely CityFarmer can have his opinion and not disputing that. But if the so-call opinion makes the other contributor feel not/less appreciated whether authoritative or not, then is worth a second look..

Well, as I said, I am only 2 days old here. My only intention is to share and learn. Like fellow contributors, if I feel uncomfortable sharing and learning, I can always take my viewpoints elsewhere.

No further response from me on this.

Peace and have a good remaining weekend ahead.

[fat al]

Well, as I said, I am only 2 days old here. My only intention is to share and learn. Like fellow contributors, if I feel uncomfortable sharing and learning, I can always take my viewpoints elsewhere.

No further response from me on this.

Peace and have a good remaining weekend ahead.

Hey, take it easy. People who appreciated your comments may not be responding. This is good, else the forum will be flooded with repetitive agreements. Based on the statistics, most forum visitors are guests and not registered to comment anyway.

Also, those who tend to reply will be those who share a different view or perspective from you. To take it positively, such will be the most useful feedback. They can either allow you to learn something if they convince you or strengthen your original views if you do not buy theirs.

[hyom]

Singapore property market is far different from US. at least Singaporean can't just walk away from his/her property loan without declaring bankruptcy. It means, very unlikely, Singapore property market is going to have too high a default rate as long as banks don't foreclose the property and the owners continue to pay.

Keen observation. However, while Singaporeans cannot walk away from mortgage loan, foreigners can. We all know how high is the percentage of foreigners in Singapore population just by taking public transport and looking around your workplace. I do not know exactly how much of bank lending has been extended to these foreigners. But given the huge number of foreigners, they are a risk to our financial system if enough of them run away when debts go sour. The debt is not only limited to mortgages but credit card debt, car debt, student debt etc

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Leverage is the mother of all crisis

In one sentence, I think you have hit the nail on the head. The greatest bubbles that have caused the greatest damage upon bursting have at its roots a credit bubble. Many of them happened to be real estate because real estate is highly dependent on leverage. Perhaps this is why finnfinn called real estate the mother of all financial crisis but the grandmother of all bubbles ought to be a credit bubble. Cheap or lax credit provides the hot air to blow into all sorts of asset classes, the favorite one being real estate.

When the property bubble finally bursts in Singapore and Hong Kong, it is going to get very ugly. Because of the wide extent of leverage taken, bursting of property bubbles tend to pose higher systemic risk than stock bubbles.

[finnfinn]

Singapore property market is far different from US. at least Singaporean can't just walk away from his/her property loan without declaring bankruptcy. It means, very unlikely, Singapore property market is going to have too high a default rate as long as banks don't foreclose the property and the owners continue to pay.

Keen observation. However, while Singaporeans cannot walk away from mortgage loan, foreigners can. We all know how high is the percentage of foreigners in Singapore population just by taking public transport and looking around your workplace. I do not know exactly how much of bank lending has been extended to these foreigners. But given the huge number of foreigners, they are a risk to our financial system if enough of them run away when debts go sour. The debt is not only limited to mortgages but credit card debt, car debt, student debt etc

---

Leverage is the mother of all crisis

In one sentence, I think you have hit the nail on the head. The greatest bubbles that have caused the greatest damage upon bursting have at its roots a credit bubble. Many of them happened to be real estate because real estate is highly dependent on leverage. Perhaps this is why finnfinn called real estate the mother of all financial crisis but the grandmother of all bubbles ought to be a credit bubble. Cheap or lax credit provides the hot air to blow into all sorts of asset classes, the favorite one being real estate.

When the property bubble finally bursts in Singapore and Hong Kong, it is going to get very ugly. Because of the wide extent of leverage taken, bursting of property bubbles tend to pose higher systemic risk than stock bubbles.

I call it mother because 1. Households first to get hit.(household debt is 74 percent of Singapore GDP) 2. Major component of debt for household. 3. Prolong impact( just look at 2008). 4 highly leverage.

I did an interest rates scenario test on my mortgage loan when I bought my place. Incremental mortgage repayment increases significantly for every 1 percent increase of rates for a 25 years loan. Looking around me, my peers have larger debt and I cannot imagine how much they have to sacrifice on their usual consumption to allocate to the increase in mortgage repayments. Lower household consumption slows the economy, banks cut back in lending in anticipation of slowdown, corporate restructure can be expected and people lose jobs and cycle feeds itself. .

I hope I am too pessimistic but when I look at the willingness of people to pick up mortgage loan, I can't help but worry. .

[hyom]

I call it mother because 1. Households first to get hit.(household debt is 74 percent of Singapore GDP) 2. Major component of debt for household. 3. Prolong impact( just look at 2008). 4 highly leverage.

I did an interest rates scenario test on my mortgage loan when I bought my place. Incremental mortgage repayment increases significantly for every 1 percent increase of rates for a 25 years loan. Looking around me, my peers have larger debt and I cannot imagine how much they have to sacrifice on their usual consumption to allocate to the increase in mortgage repayments. Lower household consumption slows the economy, banks cut back in lending in anticipation of slowdown, corporate restructure can be expected and people lose jobs and cycle feeds itself. .

I hope I am too pessimistic but when I look at the willingness of people to pick up mortgage loan, I can't help but worry. .

Just curious. Are your peers who are taking on the mortgage loan buying an investment property or property to live in? If it is to live in, I think people should have factored in the possibility of paying down the loan fully when calculating their finances. If it is for investment purposes, they may have assumed that they could flip the property for a quick gain or that the rental income can cover the interest payments and forgotten to factor in the possibility of holding on to the property and paying down the loan. If enough Singaporeans chose the latter, all of us should worry.

[freedom]

I call it mother because 1. Households first to get hit.(household debt is 74 percent of Singapore GDP) 2. Major component of debt for household. 3. Prolong impact( just look at 2008). 4 highly leverage.

I did an interest rates scenario test on my mortgage loan when I bought my place. Incremental mortgage repayment increases significantly for every 1 percent increase of rates for a 25 years loan. Looking around me, my peers have larger debt and I cannot imagine how much they have to sacrifice on their usual consumption to allocate to the increase in mortgage repayments. Lower household consumption slows the economy, banks cut back in lending in anticipation of slowdown, corporate restructure can be expected and people lose jobs and cycle feeds itself. .

I hope I am too pessimistic but when I look at the willingness of people to pick up mortgage loan, I can't help but worry. .

The economy of Singapore is not exactly consumer-driven, unlike United States. So consumer hit would not be that great an impact to Singapore economy.

I agree that property price will drop one day or another. Not necessarily, all bubbles must burst eventually. We always can use time in exchange of magnitude, probably might result in something like in Japan(a long depression of property price). Fortunately, Singapore economy is much smaller and the government is more stable and competent than Japan(I hope). We might see a prolonged drop of property price instead of a sudden burst.

[camelking]

I call it mother because 1. Households first to get hit.(household debt is 74 percent of Singapore GDP) 2. Major component of debt for household. 3. Prolong impact( just look at 2008). 4 highly leverage.

I did an interest rates scenario test on my mortgage loan when I bought my place. Incremental mortgage repayment increases significantly for every 1 percent increase of rates for a 25 years loan. Looking around me, my peers have larger debt and I cannot imagine how much they have to sacrifice on their usual consumption to allocate to the increase in mortgage repayments. Lower household consumption slows the economy, banks cut back in lending in anticipation of slowdown, corporate restructure can be expected and people lose jobs and cycle feeds itself. .

I hope I am too pessimistic but when I look at the willingness of people to pick up mortgage loan, I can't help but worry. .

The economy of Singapore is not exactly consumer-driven, unlike United States. So consumer hit would not be that great an impact to Singapore economy.

I agree that property price will drop one day or another. Not necessarily, all bubbles must burst eventually. We always can use time in exchange of magnitude, probably might result in something like in Japan(a long depression of property price). Fortunately, Singapore economy is much smaller and the government is more stable and competent than Japan(I hope). We might see a prolonged drop of property price instead of a sudden burst.

The economy of singapore is definitely property driven...at least for last few years.
Last year, Singapore GDP was 1 to 2 % (can't remember, somebody please correct me if wrong, thank!) and we were and still are in a massive property boom/bubble (delete whichever word you prefer).
It would be interesting to see what the GDP would be like if we have a property crash/slow down.

[Temperament]

I call it mother because 1. Households first to get hit.(household debt is 74 percent of Singapore GDP) 2. Major component of debt for household. 3. Prolong impact( just look at 2008). 4 highly leverage.

I did an interest rates scenario test on my mortgage loan when I bought my place. Incremental mortgage repayment increases significantly for every 1 percent increase of rates for a 25 years loan. Looking around me, my peers have larger debt and I cannot imagine how much they have to sacrifice on their usual consumption to allocate to the increase in mortgage repayments. Lower household consumption slows the economy, banks cut back in lending in anticipation of slowdown, corporate restructure can be expected and people lose jobs and cycle feeds itself. .

I hope I am too pessimistic but when I look at the willingness of people to pick up mortgage loan, I can't help but worry. .

The economy of Singapore is not exactly consumer-driven, unlike United States. So consumer hit would not be that great an impact to Singapore economy.

I agree that property price will drop one day or another. Not necessarily, all bubbles must burst eventually. We always can use time in exchange of magnitude, probably might result in something like in Japan(a long depression of property price). Fortunately, Singapore economy is much smaller and the government is more stable and competent than Japan(I hope). We might see a prolonged drop of property price instead of a sudden burst.

The economy of Singapore is not exactly consumer-driven, unlike United States. So consumer hit would not be that great an impact to Singapore economy.

i think it's not true when come to cars. COEs are so high and yet people keep on buying. Housing too.
But this time if property bubble burst, i think many FTs /PRs are just too willing, waiting to buy. So maybe bubble will not burst after all.

[KopiKat]

The economy of singapore is definitely property driven...at least for last few years.
Last year, Singapore GDP was 1 to 2 % (can't remember, somebody please correct me if wrong, thank!) and we were and still are in a massive property boom/bubble (delete whichever word you prefer).
It would be interesting to see what the GDP would be like if we have a property crash/slow down.

For 2012, mainly driven by Construction. Perhaps partially related to Property but if I'm not wrong, the govt like to make use of Infrastructure projects to help stimulate growth in GDP when economy is facing slow down... Extracts fm MTI Press Release,

Overall Performance in 2012

For the whole of 2012, Singapore’s GDP growth slowed to 1.3 per cent, from 5.2 per cent in 2011, mainly due to weakness in the externally-oriented sectors. Weighed down by the contraction in the electronics cluster, manufacturing sector growth slowed sharply from 7.8 per cent in the previous year to 0.1 per cent. By contrast, the construction sector growth accelerated from 6.3 per cent to 8.2 per cent in 2012, due to the expansion in both public and private building activities.

The services producing industries grew by 1.2 per cent in 2012, anchored by a pick-up in growth in business services sector to 3.9 per cent, on the back of strong performance in the real estate segment. On the other hand, the wholesale & retail trade sector declined by 0.7 per cent, while growth in the finance & insurance sector and other services industries moderated to 0.5 per cent and 0.1 per cent respectively.

[camelking]

I see...

So, property drives the growth of both business services sector and contruction sector (partially) by 3.9% and 8.2% in 2012..
Still, the GDP grow by only 1.2%.....

Worrying trend indeed..