Tan Kin Lian's Blog: Property bubble?

Thursday, May 13, 2010

Property bubble?

Read this article.

My view.
All bubbles will burst one day. What goes up must come down. Any investment, including property, can go up to an unrealistic high price, but cannot stay there forever. It can only be sustained at a level that is affordable to the buyers, i.e. relative to the average national income.

Like Singapore, Dubai also had limited land. It created a property bubble that has now collapsed. Singapore will not be exempted.

There is one key difference in Singapore, and that is the role of the HDB and the CPF. The savings in the CPF had been used not only to service the mortgage payment but also to prop up the property market (by taking second priority to bank mortgage). HDB had been tolerant in allowing unemployed owners to delay payment of their mortgage installments.

In the case of Singapore, I expect that the property market will not collapse, but will remain dormant for many years. It will not show the kind of appreciation that had happened in the past. The return on property, as an investment, will be low.

Someone sent me this link:
http://www.coverville500.com/real-estates/the-next-dubai-real-estate-property-bubble-mike-maloney-of-gold-and-silver-inc

13 comments:

Anonymous said...: I share the same view that property prices in Singapore will not collapse.

In fact, there is one key factor that is pushing the property prices up i.e. the purchases from foreigners. Based on satistics, Chinese and Indians are buying local properties in big numbers. Their populations are huge. Hence, only a small percentage of their people buy Singapore properties, the effect will be very significant. Government, developers and owners of more than one properties are happy to see this happening. There is why Government is pushing out many sale sites and developers are bidding sites at sky-high prices. Party will go on until something very negative happens. But this will be external factors since our Goverment would not do something to stop the party as it is a big gainer of the situation.

CCL; May 13, 2010 10:22 AM
Anonymous said...: So in the near future all Singaporeans will be pushed to leave in HDB and rich foreigners will occupy the core regions.Cars on the road will only be driven by the rich. What are there to defend in times of troubles ?; May 13, 2010 11:04 AM
Anonymous said...: Ultra-low interest rates or free money is the sure trick for asset inflation. Easy monetary policy leads to food inflation until a point is reached when consumption is halted. No wonder I see heavy advertising on the juicy beef burger. Too bad; I am tempted but still cannot afford it.
Instead of raising interest rates for depositors and discounts on food prices, banks and supermarkets encourage their depositors/customers to try their luck with lucky draws. Why the authority did not step in? It is not morally right to do business in this manner, and they did not even need a gaming licence.; May 13, 2010 3:07 PM
C H Yak said...: I totally agree that the return from "investment" in properties (Both Private & HDB)will not show the kind of appreciation in the past.

It is no more an "investment" to me. If investment return is so low in a dormant market, it does not matter whether you hold it in the form of "properties" or "cash".; May 13, 2010 3:48 PM
Anonymous said...: It is no more an "investment" to me. If investment return is so low in a dormant market, it does not matter whether you hold it in the form of "properties" or "cash".

even apply for freehold landed properties, as singapore very limited land?; May 13, 2010 4:35 PM
Anonymous said...: Unfortunately we live in a country where profits to the government outweigh the welfare of its citizens.

Look at the Australian government. Their labour market is heavily protected, so that their own will not go hungry.

Foreigners are also not allowed to inflate the property market even though only 1% of the properties are owned by foreigners who don't reside in Australia. This is done so that their own will not become homeless.

What is the current government doing for its citizens?

Prostituting our land and handing our jobs to foreigners in the name of progress and productivity. What a sham!; May 13, 2010 6:33 PM
Anonymous said...: It is good property price will never collapse in Singapore. The main factor: HDB. Indirect government intervention. Mah has already reiterated that HDB will not be sold at cost. It can only go ahead. Haha, that why we are all buying property!

Mr. Tan, I beg to differ - the property investment yield will continue to increase, averaging 6% annually for rental and capital appreciate another 40%. You think property market now is high? Wait till the world economy fully recovers to pre-2007 period. Mind-blowing, Golden Age of Property (Prosperity) will come next!; May 13, 2010 8:11 PM
Anonymous said...: What is the current government doing for its citizens?

Prostituting our land and handing our jobs to foreigners in the name of progress and productivity. What a sham!

May 13, 2010 6:33 PM

You forgot to add selling away our power stations and national assets to foreigners.; May 13, 2010 8:27 PM
Anonymous said...: If property is a sure bet investment then my advise is that we should buy two properties at one go so that when the prc go up from $1000/sq ft to $2000sq ft we can sell one property and the other one become free. Yes, by then a new 4 room HDB flat will easily cost a 1/2 million or more. I feel so rich now ! What a golden age indeed.; May 13, 2010 8:55 PM
jamesneo said...: Only people that are naive will think that immigration and purchases from foreigners will always lead to an increased property price. A total collapse might not occur like the US but eventually correction will occur, it depends if it is a small 10-20% like in 199Os in singapore or a serious 30-40% or more.

The supposedly robust Canada property is starting to show freefall in their housing price and the common excuse people said there is: immigration and purchases from foreigners and the government will never let it fall etc.

Of course, the government can postpone the inevitable by injecting money into the property market or give huge grants like what Australia is doing but they are just postponing the problem. Once the Canada and Australia market show big corrections, then Singapore will be next in line.

Any property buyers should be prudent and follow Mr Tan's golden rule of 3-5 times your annual salary.; May 13, 2010 11:00 PM
Anonymous said...: Hi JamesNeo,

I fully agree with your comments, except for "small 10-20% like in 199Os in singapore".

The property correction in 1990s was NOT small, in fact it was more like collapse from 30%-50%.

If Singapore has another such "correction" in the next 2-3 years, many so-called rich owners will become superman and take off from the tops of their condos or HDB flats.; May 14, 2010 12:01 AM
flipper said...: Exactly!. postpone the crash.. thats what each and everyone here thinks..
.."it will not affect me "
let it be someone else holding the baby.

That is what all of us think. so as long as each of us play musical chairs and flip the units or shares, the one that will get burnt will be the last one to hold the baby!

This is the object of living.

this is where the defining line between the haves and have not occurrs.
can you get out before it happens?; May 14, 2010 2:12 PM
Anonymous said...: The biggest land lot has engineer higher land price. They always use different statistic to argue against it meets the standard rule of morgatage should not be 3 times your annual salary. Perhaps we should vote for every important issues like what they did in America; May 14, 2010 10:18 PM