Even MND Minister Khaw Boon Wan is worried Property Crash

[Dennis Ng]

In a blog post of MND on 9 Jun 2011, Minister Khaw shared his worries of a sudden turnaround in Property market amidst the expected over-supply in the next 3 years (something I have already warned months ago).

Cheers!

Dennis Ng

http://mndsingapore.wordpress.com/2011/ ... y-worries/

My Worries by Khaw Boon Wan

A sharply rising property market upsets and frightens many. Young people aspiring for the Singapore Dream get angry to see the dream seemingly slipping away. Their parents worry for them and get into panic.

We have to confront this issue head-on. Alas, policies often cannot deliver instant results. Still, we must do what we need to, as problems do not fade away by themselves.

However, even as we tackle the immediate problem, I must keep an eye on the medium term for possible pitfalls. Sharp property price increases cannot go on forever. Gravity cannot be wished away. We have always recognised that unsustainable, rapid price increase brings with it enormous risks and that got us to act earlier on. While sharp rises are painful, sharp declines are just as disastrous. Those who borrow to go into properties thinking that prices will continue to rise, will be thrown into financial hardship should prices drop and banks start calling. The world witnessed this barely 2 years ago when the US property market crashed and we all suffered from it.

I think it is my duty to sound an alert. A sort of a health hazard advisory, that things can go very wrong suddenly. Why is that so?

First, 35,000 private units (condos and landed properties) have already been sold, though still in construction, with payments in various stages of completion. But there are 45,000 units in the pipeline, waiting to be built and sold.

Second, to meet strong demand from developers and property buyers, URA has just announced its Government Land Sale Programme for the second half of this year. This will inject another 8,000 private residential units into the market. Together with committed investments, some 53,000 units will be looking for buyers over the next couple of years or so. That is not a trivial number.

Third, the external situation is not exactly bullish. Europe sovereign debt will take a long time to clear. The Middle East crisis can still go ugly. If that leads to a spike in oil prices and halts the fragile global economic recovery, the impact on Asia and Singapore will be direct and immediate. Moreover, foreign buyers of these properties have been strong. In the recent quarter, they made up 16% of all buyers of these private properties. Many Singaporeans also buy properties with the intention to rent them to foreigners coming here to live or work. In the event of any external shock, both foreign demand and rental demand can fall quite quickly. The impact can be serious if the drop in demand happens at a time when there is a substantial increase in supply. Further, low interest rates will not remain so forever. Cost of borrowing and repayment must go up and households must factor this in.

These are the worries in my mind. I am not alone. As one property analyst put it in his recent analysis, some property investors seem either “blissfully ignorant” of the massive supply that will hit the market from 2013, or under the belief that the impact would affect others and not themselves, just like “some reckless drivers who think that traffic accidents would only happen to other people and they are immune to any mishaps.”

A market correction or any crash is not a given. If all goes well, the economy will continue to grow and those who bought properties here will enjoy good returns when their units are completed in the next few years. But no one is immune to mishaps. With so much uncertainties, I must advise investors and upgraders to bear these considerations in mind when they go to show rooms and contemplate if they should sign up.

What seems rosy today may turn out to be thorny, if we are not careful.

[moneyisfreedom]

The solution is a simple one. Raise interest rates.

Instead, by releasing more land, oversupply is guaranteed. At the same time, we are forced to import workers (construction), leading to more crowded trains e.t.c. Focussing on these areas (constructing more and more units) is a waste of human and natural resources. We may also end up like China with many vacant homes that people cannot afford. When the crunch comes, there will be many asset rich but cash poor. Later on, when they find out that nobody wants to or can buy their units at breakeven prices, the panic will begin. Then foreclosures (like in the US) will really hurt the common man.

For the greater good, sacrifices are due now from developers and banks, before it is too late. After all, they have had a good few years.

In a blog post of MND on 9 Jun 2011, Minister Khaw shared his worries of a sudden turnaround in Property market amidst the expected over-supply in the next 3 years (something I have already warned months ago).

Cheers!

Dennis Ng

http://mndsingapore.wordpress.com/2011/ ... y-worries/

My Worries by Khaw Boon Wan

A sharply rising property market upsets and frightens many. Young people aspiring for the Singapore Dream get angry to see the dream seemingly slipping away. Their parents worry for them and get into panic.

We have to confront this issue head-on. Alas, policies often cannot deliver instant results. Still, we must do what we need to, as problems do not fade away by themselves.

However, even as we tackle the immediate problem, I must keep an eye on the medium term for possible pitfalls. Sharp property price increases cannot go on forever. Gravity cannot be wished away. We have always recognised that unsustainable, rapid price increase brings with it enormous risks and that got us to act earlier on. While sharp rises are painful, sharp declines are just as disastrous. Those who borrow to go into properties thinking that prices will continue to rise, will be thrown into financial hardship should prices drop and banks start calling. The world witnessed this barely 2 years ago when the US property market crashed and we all suffered from it.

I think it is my duty to sound an alert. A sort of a health hazard advisory, that things can go very wrong suddenly. Why is that so?

First, 35,000 private units (condos and landed properties) have already been sold, though still in construction, with payments in various stages of completion. But there are 45,000 units in the pipeline, waiting to be built and sold.

Second, to meet strong demand from developers and property buyers, URA has just announced its Government Land Sale Programme for the second half of this year. This will inject another 8,000 private residential units into the market. Together with committed investments, some 53,000 units will be looking for buyers over the next couple of years or so. That is not a trivial number.

Third, the external situation is not exactly bullish. Europe sovereign debt will take a long time to clear. The Middle East crisis can still go ugly. If that leads to a spike in oil prices and halts the fragile global economic recovery, the impact on Asia and Singapore will be direct and immediate. Moreover, foreign buyers of these properties have been strong. In the recent quarter, they made up 16% of all buyers of these private properties. Many Singaporeans also buy properties with the intention to rent them to foreigners coming here to live or work. In the event of any external shock, both foreign demand and rental demand can fall quite quickly. The impact can be serious if the drop in demand happens at a time when there is a substantial increase in supply. Further, low interest rates will not remain so forever. Cost of borrowing and repayment must go up and households must factor this in.

These are the worries in my mind. I am not alone. As one property analyst put it in his recent analysis, some property investors seem either “blissfully ignorant” of the massive supply that will hit the market from 2013, or under the belief that the impact would affect others and not themselves, just like “some reckless drivers who think that traffic accidents would only happen to other people and they are immune to any mishaps.”

A market correction or any crash is not a given. If all goes well, the economy will continue to grow and those who bought properties here will enjoy good returns when their units are completed in the next few years. But no one is immune to mishaps. With so much uncertainties, I must advise investors and upgraders to bear these considerations in mind when they go to show rooms and contemplate if they should sign up.

What seems rosy today may turn out to be thorny, if we are not careful.

[Dennis Ng]

The solution is a simple one. Raise interest rates.

Instead, by releasing more land, oversupply is guaranteed. At the same time, we are forced to import workers (construction), leading to more crowded trains e.t.c. Focussing on these areas (constructing more and more units) is a waste of human and natural resources. We may also end up like China with many vacant homes that people cannot afford. When the crunch comes, there will be many asset rich but cash poor. Later on, when they find out that nobody wants to or can buy their units at breakeven prices, the panic will begin. Then foreclosures (like in the US) will really hurt the common man.

For the greater good, sacrifices are due now from developers and banks, before it is too late. After all, they have had a good few years.

Hi moneyisfreedom,
Singapore does NOT control interest rates, interest rates are determined by the market, and one key factor affecting interest rates (SIBOR) is US Fed Interest rates.

No worries, I think next year, U.S. is likely to see higher inflation, and when people start to lose confidence in U.S. government bonds, the interest rates in U.S. would rise.

So be prepared for interest rates on Housing Loans in Singapore for a possible spike up in year 2012 to about 2% to 3% from the current 1.2%.

In my seminar, I always ask people to plan based on scenario of interest rate on Housing Loan at 4%.

Even if interest rates spike up to 4%, I'm well prepared and will NOT be much affected, I hope most people in Singapore are similarly prepared for such a possibility.

[jfoo2]

May I know what's the highest interest rate a housing loan has gone to? is 4% the all time peak previously?

[Dennis Ng]

May I know what's the highest interest rate a housing loan has gone to? is 4% the all time peak previously?

Hi jfoo2,
yes, in year 2007, that was about the peak.

In the 90s, it went up to as high as 6%...but unlikely to happen again, as Singapore's development was in different phase then. You would realise that developing countries typically have higher interest rates compared to developed countries.

[Dennis Ng]

Sure, go ahead to buy property. "Property prices can only go up one." This is what property agents said, please go listen to them.

Please ignore all the news about potential supply of Private Condos in next few years, "the supply should be fully absorbed by demand, there'll be NO Financial Crisis, Singapore economy only grow and grow and does NOT slow down one...go ahead to have such views and opinion, things will be ok one," said the Property agent.

"don't listen to this Dennis Ng, he's just a founder of HousingLoanSG.com, what does he know?"

Please bear in mind that everyone has an Opinion, but not everybody's opinion is worth listening or considering.

June 9, 2011, 4.11 pm (Singapore time)
Update: MND says more land supply to be released under 2H2011 GLS

By JASMINE NG

The Ministry of National Development (MND) announced on Thursday that it will inject 17 private residential sites, which can yield about 8,100 residential units, into the Confirmed List of the second half 2011 (2H2011) Government Land Sales (GLS) Programme.

The 17 Confirmed List sites comprise 16 residential sites (including 2 Executive Condominium (EC) sites) and 1 commercial and residential site.

In addition, the Reserve List in 2H2011 will have 13 sites which can yield about 6,100 residential units.

Both the 2H2011 Confirmed List and Reserve List supplies are comparable to the supply made available in the first half of the year.

The 2H2011 GLS Programme will therefore have a total of 30 sites for residential development, including 4 EC sites and 1 commercial & residential sites, which can generate about 14,200 private residential units.

The MND revealed that 34,270 private residential units out of 68,890 are unsold as at the first quarter of 2011.

This figure may rise to about 53,000 units if the potential supply from recently sold GLS sites and sites from the Confirmed List of the 2H2011 GLS Programme is considered. There is also an additional 4,220 EC units in the pipeline.

The Confirmed List will also see the inclusion of new commercial sites - Sims Avenue / Tanjong Katong Road and Sengkang West Avenue / Fernvale Road - for sale.

A 'white' site at Marina View, which gives developers more flexibility in development options, will be made available on the Reserve List.

'This will provide the opportunity for the market to initiate more office space, in particular prime office space in the CBD, for development, if needed,' MND said.

It added that more supply of commercial space can be expected from the development of six plots of land at Marina Bay and Ophir Road / Rochor Road.

These land parcels can potentially yield a combined GFA of about 500,000 sqm.

A new hotel site at Rangoon Road / Farrer Park Station Road and a 'white' site with hotel component at Thomson Road / Irrawaddy Road will be added to the Reserve List.

This brings the total number of Confirmed List and Reserve List sites to 19 and 24 under the programme respectively.

Apart from the GLS Programme, the government plans to initiate about 35,000 sqm GFA of commercial space outside the programme, which includes the leasing of vacant state properties for commercial uses and localised retail facilities at Sentosa, parks, MRT stations and community centres.

[Dennis Ng]

in my opinion, Singapore Property Market has already peaked or very near peak.

The higher it goes up, the harder it falls. (This is Law of Gravity).

In year 2012-13, China Shanghai and Beijing property prices might fall by 30% to 50%. Hong Kong and Singapore property prices, might fall by 10% to 30%.

I'm sure many people in China, Hong Kong and even Singapore, will disagree with me on this view. It's ok, I am just sharing my view, anyone can definitely hold a different view.

Of course over the long run, say10 years from now, prices would be higher than now. But learn from people who bought property at high prices and took many years (as long as 10 years) for the price to recover back to the price they bought)...they actually lost a lot of money since we did NOT even factor in other costs, such as Interest Costs and most importantly, Opportunity Cost.

While they took 10 years to go back to square one, in the last 10 years, I grew my wealth from S$200,000 to over S$2.5 million. (That's the Opportunity Cost of NOT learning how to invest, missing this 10 fold increase in your wealth, which could be yours if you know how to invest, just like me.

15 Jun 2011 - I wrote the following posting:

Hi all,
if one analyse with a Rational and Logical Mind:

1. Interest rates now at historical low, means it can only go up, not down. Interest rates on Home Loans can shoot up to 3% to 4% based on previous experience.

2. next 2 years, more than 30,000 condo units completed, with huge supply coming, guess Rental rates will go up or down?

3. If rental rates go down and interest rates go up, guess will this make Property Investment more attractive or less attractive? Rental yield now at current rental rates is 3% to 4%...so if rental rates drop, what would the revised rental yield be?

4. HDB built 8,000 units in year 2008. But for year 2011 and year 2012, going to build 26,000 units in each year, or 52,000 units in 2 years.

5. With Supply of both Condos and HDB flats expected to SURGE in next 2 years, if coupled with a slowdown in economy due to the next Global Financial Crisis, guess what will happen to Demand for properties?

6. Yesterday, on News Radio I shared that last month report show Job advertisements at Record High in 5 years, after reaching Mountain top, the way is Up or Down? Remember I share often in Seminars that Good News may be Bad News instead?

If one use a logical and rational mind to analyse ALL above factors I mentioned, will you think using Upside/Downside Analysis, which is More, Upside more or Downside more?

And what will be your Decision as to whether to invest into Condos now?

I seem to be able to see the future, not becos I know how to predict, but becos I train myself to use a Logical and Rational Mind to analyse information and draw my own conclusions.

I'm teaching all of you the Thinking Process I go through, this is Teaching. I think anyone who think through this proper Thinking Process will more or less come to the same conclusion, unless the person has a very Biased View on markets.

And if you think that instead of investing into Condos, then maybe you switch to invest into Commercial Properties (as some Trainers out there are now advocating), then you might be wrong again. I chatted with 2 multi-millionaires who specialise in investing into Commercial Properties and they shared with me their view is that now the Upside/Downside is NOT in investor's favour, and they themselves are NOT considering to buy more Commercial properties, but may sell if the price is Attractive enough for them.

[jfoo2]

I think it's a matter of time before property prices drop.

We are almost at very low unemployment rates (1.9%), very very low interest rate (<2%) but very very very high property prices ($800k for 5 room hdb flat!).

I just hope have enough capital when the prices becomes attractive again. So stock market must go up please!!

[Dennis Ng]

I think it's a matter of time before property prices drop.

We are almost at very low unemployment rates (1.9%), very very low interest rate (<2%) but very very very high property prices ($800k for 5 room hdb flat!).

I just hope have enough capital when the prices becomes attractive again. So stock market must go up please!!

Hi jfoo2,
yup, to use an analogy, once a climber reac Mountain Top, no matter how much you want to stay at the top of the mountain, it is just a matter of time, you have to come down the mountain... Observe Nature, they have Peaks and Valleys, similarly, Markets (NO matter what markets, be it stock markets, property market, gold market, silver markets etc, etc) also have Peaks and Valleys, Booms and Busts, Bull and Bear market.

So questions are, in the next 2 years :
1. Interest rates likely to go up or down?
2. Supply of property likely to go up or down?
3. With Supply going up, Rental rates likely to go up or down?
4. If Supply goes up, interest rate go up, while Rental rate go down, Property prices likely to go up or down?

Think logically, think rationally, and one is likely to arrive at a logical conclusion. This is the Secret to My "Predictive" Powers, how I managed to be right with my predictions possibly 7 out of 10 times...the good news is once I teach you my Thinking Process, more and more seminar graduates will also have such "Predictive Powers".