Sharing of common sense and wisdom…


31st Jan 2012  Tue

By:  Property Ah Beng

IT’S MACRO ECONOMICS, STUPID!

My opinion of the Lion City property experts remains very low.

When the Lion City govt. introduced the additional stamp fees/charges for the property market cooling measure recently, it was the same group of property industry experts jumping high & low shouting that the property market might crash and prices might drop by 30%! These property “gurus” and developers started to blame the govt. for such extreme measure.

Now, with just one single quarter (Dec 2011) of stats, these experts started to change their tune, saying that oh, the property market might not be that bad… there’s still hope.

Read the following headline:

with 0.8% drop in sales prices, there's no more panic... against what initially commented

At least, here’s an example of there’s still sober people in this world looking at the Lion City property landscape.  Though the writer’s rationale may not be exactly correct at this juncture, but at least he has pointed out some obvious COMMON SENSE.  Read this forum:

This forum commentary makes some sense...

To fully understand the landscape of Lion City property market, one has to take in this statement: “It’s Macro Economics, Stupid!”

The City States’s property market and economy are no longer an exclusive corner of a garden.  Global economic environment continues to cast heavy influence on the City State’s overall economic performance.

To put things in perspective, here are the certainties Singapore property “players” must take note of,

–   Whether you like it or not, the US Federal Reserves (Central Bank) has announced to maintain low interest rates environment till the end of 2014. The aim is to boost corporate investment, employment and public consumption.

–  Whether the banks like it or not, Lion City’s interest rates will be “closely guided” by US Fed interest rates and will be in syn.  i.e. low interest rates prevail.

–  Whether the commoners like it or not, high inflation rates are here to stay, at least until 2014.  Gov.t won’t be confidence enough to raise interest rates to fight inflation amidst uncertain economic environment globally.

–  Whether or not the long-term US bond prices (with low yield) been jacked up by the Fed, more hot cash will continue to flow into Asia including Singapore. And watch out, QE3 is possible. The Lion City banks are full of cash! With uncertain economic and hence risky investment returns, banks have no choice but to lend out more cash as home mortgages, and less in business lending (with higher credit risk). So, home loans still cheap! New property launches continue to attract buyers, albeit the importance of locations.

–  Likewise, hedge funds are into Asian property markets as well. So there’s ample supply of funds/money to sustain property market. Developers are not ready to cut prices.  oh, forget about 30% cut in property prices, a wishful thinking.

–  To maintain economic growth, govts. all over the world will try to maintain healthy level of public investment to sustain GDP level and employment rates.  More land sales and hence property and public works constructions on-going this few years will help, for the Lion City. Asset prices must be defended “at all costs”… to prevent sudden dip in economy that can spin into uncontrollable depression and hence, cause total collapse of condifence that leads to exodus of funds (money). Therefore, property prices cannot dip beyond 15%… for that matter.

–  Anyway, just as the news forum mentioned, “healthy” demands for private homes are still there… so long as under low interest rates regime.

Just pray that there isn’t a global financial Tsunami… this few years.

 

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