Affordability?

[poi]

One reason why speculators do very well in the local market is because of the HDB. Private properties will always have a premium over HDB units. The govt. will never allowed HDB prices to collapse thus providing a floor price. A few years ago the govt. was holding more than 100,000 empty HDB units with no buyers and they dare not lower the selling price.   

[Chestertheinvestor]

PP. Very true. Private market will be hot in the coming months as 'the floor price' is on the up.

[Dr. Phil]

The poor rental yield in Singapore is a product of inflated property values and the higher prices Owners place on their property gives them poorer yields (on paper) and allows them to justify rent increases for which tenants have no answer.

Lets remain in the real world.
Rental yields are +5.25% if you use realistic valuations.

For those who bought when the market was high on an en bloc frenzy, you must reconcile yourselves to two decades of negative equity before you break even.

If you claim your house is your home that is good but nevertheless does not justify the extra 40% over a fair market price you have squandered and what that would have generated in wealth over the next two decades. Which ever way, you lose and this is the opportunity cost of the property bubble, which some agents and speculators will enjoy at your expense.

The excessive construction in Singapore will never be accommodated unless rental yields are close to zero or less and then only by high earners. If you cram IR workers 12 per condo, they will collapse.

Some posters have wisely suggested we look closer at the source of funds used to create such property bubbles. It is ironic that personal banking has become increasingly stringent with international oversight whilst telex transfers and similar transactions must now be routed through New York at the same time banks and other well-positioned rogues have increased their criminal activity; such heightened homeland and international security has not stopped the real money laundering has it?

At best, the massive construction in Singapore will be seen as a useful stimulus.

In UK the government's tax on banks has caused thieves to fall out and GBP is rediscovering gravity and a property correction is still overdue,although prices are falling at an increasing pace.

Personally I do see levels of frustration and distrust in in western banking and government institutions reaching the point of critical mass and we may well see our personal savings protected from investment bank gaming and banks will be forced to deal with negative equity to allow a downward correction in market prices which will allow young couples to afford a mortgage at affordable and realistic levels ie 3x their income.

The only exception is USA where property prices are unbelievably low and homes are spacious and "homely". Perhaps now the Japanese car industry has encountered so many problems with brakes and accelerators and now suspension and global warming has been debunked we can enjoy a resurgence of some new traditional US models? Lets hope Airbus takes note and allows pilots to override computers on their passenger planes.
Property in USA is the best value on this planet.
 

[Agent007]

USA. Oh yeah, sure. Bankrupt and soon to be 'owned' by China. You are a joker.

Singapore property is a much better investment.

Investors don't give a damn about rental rates. Which planet are you from?

Buy in the next two or three months to maximize gains.

[Kapitan Obvious]

Right on time!  Well done.

Spoken like someone who's never known any life other than a concrete dogbox on the 22nd floor.

If you had any idea what that S$1mill could buy in the US - the breeze, the peace and quiet, the sea air, the view and basically what real quality of life is...well you might just be the next Singaporean to jump out your HDB window.  So, please stay ignorant, for your own sake.

[Agent007]

U.S. no thanks.

Different people like different things.

I don't like loud fat women or people with guns!

I guess you do

[Dr. Phil]

Do you realise in some new housing developments in Florida, as an example, there are usd 750,000 homes reduced to usd 250,000 and this is a large home with swimming pool and movie theatre. This is far cheaper than an HDB and below the average UK home price.

This is value and because in USA the property prices are low (very low) the recovery will be all the more quicker and easier to achieve.
It just requires jobs, salaries.

Employment can not be denied by greedy MNCs forever after all the people dictate their own market or rather what overseas goods are allowed into their market and will eventually impose tariffs on those goods which during production, are not subject to Health & Safety, Quality Control, Environmental Protection and Anti-Pollution costs in order to create a level playing field.
Never mind FTAs 


   

[Nail on head]

Do you realise in some new housing developments in Florida, as an example, there are usd 750,000 homes reduced to usd 250,000 and this is a large home with swimming pool and movie theatre. This is far cheaper than an HDB and below the average UK home price.

This is value and because in USA the property prices are low (very low) the recovery will be all the more quicker and easier to achieve.
It just requires jobs, salaries.

Employment can not be denied by greedy MNCs forever after all the people dictate their own market or rather what overseas goods are allowed into their market and will eventually impose tariffs on those goods which during production, are not subject to Health & Safety, Quality Control, Environmental Protection and Anti-Pollution costs in order to create a level playing field.
Never mind FTAs 

Dr Phil, I agree with the 1st part of your assessment (US property is really cheap in some places) but wouldn't hold my hopes too high that jobs will come back to the West because of tariffs (too dangerous to spark an all out commercial war) or environmental / anti-pollution regulations (wishful thinking, as Copenhagen has just demnstrated).

But you might be vindicated anyhow in the long run: unless there is a massive technological break, commodities in general, and oil in particular, are going to become more and more expensive as the world slowly runs out it and emerging countries increase their consumption. Which will make most of the current supply chain circuits economically un-viable.

In short, it's likely that energy costs will make it too expensive to have products transformed / assembled in 2-3 Asian countries before being shipped to the West.

[Cruncher]

So, the assessment seems to be that this is an irrational market? Prices don't refect real affordability and are supported by a managed (hdb) market and foreign money parked here for safe-haven status without regard for yield? And they will simply rent out condos at the market rate, whatever that happens to be? So, these rich 'investors' who can afford to leave property empty if need be aren't affected by the decisions us mortals have to make (deposit, mortgage payments etc:)?  Translation for me: the rental market is likely to reflect real budgets (like mine) so I can probably expect my ability to rent to stay fairly stable (as foreigners arriving have salaries that are similar to mine), while the price of ownership of condos  is likely to be inflated and unattractive to  the mortals of this world.  Sound about right? So, I reckon in a few years there will be a lot of empty condos around (with 64k in supply pipeline) but it won't matter to the rich elite who bought them cos they don't need the income!

[Foreign$]

One other point to make, regardless of how 'managed' things are, property will always go in cycles, as every country knows. It reflects the changing circumstances of the economy and population. Singapore has been growing since 2005 after a period of weak property prices for years before. When property inflates to the point it is out of reach for most, is when the possibility of correction grows, given the 'right' circumstances. So, the two key questions: is property unaffordable for the majority now? (hard to tell) and, what would be the circumstances that cause a correction? (oversupply, backtracking and limiting foreign arrivals, inflation, anti-climax for IRs???). Next few years will be interesting!

[to cruncher]

So, the assessment seems to be that this is an irrational market? Prices don't refect real affordability and are supported by a managed (hdb) market and foreign money parked here for safe-haven status without regard for yield? And they will simply rent out condos at the market rate, whatever that happens to be? So, these rich 'investors' who can afford to leave property empty if need be aren't affected by the decisions us mortals have to make (deposit, mortgage payments etc:)?  Translation for me: the rental market is likely to reflect real budgets (like mine) so I can probably expect my ability to rent to stay fairly stable (as foreigners arriving have salaries that are similar to mine), while the price of ownership of condos  is likely to be inflated and unattractive to  the mortals of this world.  Sound about right? So, I reckon in a few years there will be a lot of empty condos around (with 64k in supply pipeline) but it won't matter to the rich elite who bought them cos they don't need the income!

It's all about low financing rates, of course owners wish rents were higher, but they are surviving for the moment due to low financing rates.  This is a classic credit bubble that can sustain itself for a long time before it corrects (if it corrects).

[Peasant]

One other point to make, regardless of how 'managed' things are, property will always go in cycles, as every country knows. It reflects the changing circumstances of the economy and population. Singapore has been growing since 2005 after a period of weak property prices for years before. When property inflates to the point it is out of reach for most, is when the possibility of correction grows, given the 'right' circumstances. So, the two key questions: is property unaffordable for the majority now? (hard to tell) and, what would be the circumstances that cause a correction? (oversupply, backtracking and limiting foreign arrivals, inflation, anti-climax for IRs???). Next few years will be interesting!

and PPP both return to the beginning an start again. This really isn't rocket science guys,

The average asking prices for condos is now about S$1 million and let us say average incomes over the majority of the population is about S$100k, that's a ratio of 10;1. Go figure.  

Obviously its not all dodgy Indo's stashing their cash ill-gotten from slashing and burning our nostrils each year all in the name of GW and bio-fueling the cars the majority do not drive. Its developers who have too much of our cash available from Funds who live for today. Deep pockets and no rosk. Just walk away if it goes wrong. Like it has.    

[poi]

Majority of the population do not stay in condos. They stay in HDBs. According to govt. figures they are still affordable as long as you buy direct from the govt.
Don't have to wait for a few years to see what happens. Just wait until after the elections.

[Even]

Well...... work out affordability if you like from the following excert of a CNA report this afternoon:





The average HDB household had an income of $4,238 in 2003.

The housing board said this figure climbed to $5,680 in 2008, reflecting the growing affluence of HDB households.

The survey also found that over 95 per cent of households were satisfied with their flats and neighbourhood.

About 80 per cent of homeowners indicated that they are proud of their flats.

About 85 per cent of homeowners felt that their flats were value for money.

[Kubes.SG]

Lets get it right.  It was reported last year that the SingStat bureau concluded the 2007 median household income in Singapore was $4,950, or just under $60k per year.

Using that figure, we see HDB flats priced at $500K, $600K even $700K  are so far past the internationally accepted affordability index limits that it clearly in speculative and bubble levels.

Just imagine the carnage when the interest rates start to risk.