Will the property mkt crashed?

[Ongpeesai]

Property is not in good sign my veiw BY WARE

 

Know how to spell or not?

Boomz! Bigini la you!

[Picanto]

a perfect setup for the next crash... not sure who's the next victim after the financial sectors...it's going to be a bumpy ride from now on...

 

Did'nt we see the triggering factor for the last recession 12 months ago..? Once affordability is non-sustainable by peasants class like me... then it's a setup for the next disaster.

 

 

this is just like the lehman bros scenerio. buyers borrow a lot and banks happliy lend. once buyers cannot pay, banks are in trouble. of course, with MAS acting as a regulatory body, the diaster will not be as bad as in USA.

 

after the property crash, then COE is the next to crash perhaps.

[Marquee]

a typical analysis for the typcial ppl .....only if the world works this way.

 

Bear vs Bull. Such debate continues regardless timeline.

 

 

[Blueray]

Know how to spell or not?

Boomz! Bigini la you!

 

 

wonder how long before the Ah Seng in Subaru ads talks like that.

 

the last one was "shut up and sit down !" I think, very shortly after the aware saga.

 

btw, did not see anybody in rad bigini and gins along Orchard Road today, maybe today wearing laperd preens.

Edited September 13, 2009 by Blueray

[2bfree]

Wat goes up mus cme dwn......at least for a while & the whole process repeats. All this needs time to build up. Let others aka the rich investors contribute, step aside n unleash the bulls......let them run as fast & as hard as they can......slowly but definitely they will get tired......& the bears will shine their claws frm behind to butcher them.......& the hunt repeats itself.

[Ticklish8]

Hahahaha have been hearing about that prediction about market crash, property market crash, COE crash for some time now. So far nothing happen.

 

Yes I agree that stock market, property market move in cycle - to be exact 5-7 years. The truth is nobody can buy at the bottom... the reverse is of course painful.

 

 

 

 

a perfect setup for the next crash... not sure who's the next victim after the financial sectors...it's going to be a bumpy ride from now on...

 

Did'nt we see the triggering factor for the last recession 12 months ago..? Once affordability is non-sustainable by peasants class like me... then it's a setup for the next disaster.

 

[Ticklish8]

If you guys dont understand why Property, Share and Commodity is surging like crazy, read these. Quite interesting article.

 

 

A growing liquidity bubble that ignores structural facts is the basis for today's happy talk about a comeback for the global economy.

 

By Andy Xie, guest economist to Caijing and a board member of Rosetta Stone Advisors Ltd.

(Caijing Magazine) The United States is beginning to report data showing strong economic growth. Analysts are upgrading their outlooks for the U.S. economy, which is expected to grow at an annualized pace of 3 to 4 percent. And even before the U.S. revival emerged in the third quarter, China's data pointed toward a quick rebound in the second quarter.

Is the global economy staging a V-shaped bounce? The buoyant financial market had been expecting a rebound for months. Was the market right?

At the end of last year, I said I expected global stock markets to stage a big bounce in spring 2009, and the global economy to rebound in the second half. I also expected analysts to upgrade outlooks by this time. I warned that the economic pickup was due to inventory cycle and stimulus, and that the global economy would experience a second dip in 2010.

In a normal economic cycle, an inventory-led recovery would be followed by corporate capital expenditure, leading to employment expansion. Rising employment leads to consumption growth, which expands profitability and more capex. Why won't it work this time? The reason, as I have argued before, is that a big bubble distorted the global economic structure. Re-matching supply and demand will take a long time.

The process is called Schumpeterian creative destruction. Keynesian thinking ignores structural imbalance and focuses only on aggregate demand. In normal situations, Keynesian thinking is fine. However, when a recession is caused by the bursting of a big bubble, Keynesian thinking no longer works.

Many policymakers actually don't think along the line of Keynes versus Schumpeter. They think in terms of creating another bubble to fight the recessionary impact of a bubble burst. This type of thinking is especially popular in China and on Wall Street. Central banks around the world, although they haven't done so deliberately, have created another liquidity bubble. It manifested itself first in surging commodity prices, next in stock markets, and lately in some property markets. Will this strategy succeed? I don't think so.

The lifespan of a bubble depends on how it affects demand. The longest-lasting are property and technology bubbles. The multiplier effect of a property bubble is multifaceted, stimulating investment and consumption in the short term. The supply chain it impacts is very long. From commodity producers to real estate agents, it could stimulate more than one-fifth of an economy on the supply side. On the demand side, it stimulates credit growth and financial sector earnings, and often boosts consumption through the wealth effect. Because a property bubble is so powerful, the negative effects of a bursting are great. Excess supply created during a bubble's lifespan takes time to consume. And a bust destroys the credit system.

A technology bubble occurs when investors exaggerate a new technology's impact on corporate earnings. A breakthrough such as the Internet improves productivity enormously. However, consumers receive most of the benefits. Competition eventually shifts temporarily high corporate profitability toward lower consumer prices. Because the emergence of an important technology brings down consumer prices, central banks often release too much money, which flows into asset markets and creates bubbles. While an underlying technology leads to an economic boom, the bubble feels real. More capital pours into the technology. That leads to overcapacity and destruction of profitability. The bubble bursts when speculators finally realize that corporate earnings won't rise after all.

The cost of a technology bubble is essentially equal to the amount of over-investment involved. Because a technological breakthrough expands the economic pie, the costs of a technology bubble are easy to absorb. An economy can recover relatively quickly.

A pure bubble tied to excess liquidity that affects one or many financial assets cannot last long. Its multiplier effect on the broad economy is limited. It could have a limited impact on consumption due to the wealth effect. As it neither stimulates the supply side nor boosts productivity, whatever story it is based on will have holes that become apparent to speculators. It doesn't take long for them to flee. Furthermore, a pure liquidity bubble without support from productivity can easily lead to inflation, which causes tightening expectations that trigger a bubble's burst.

What we are seeing now in the global economy is a pure liquidity bubble. It's been manifested in several asset classes. The most prominent are commodities, stocks and government bonds. The story that supports this bubble is that fiscal stimulus would lead to quick economic recovery, and the output gap could keep inflation down. Hence, central banks can keep interest rates low for a couple more years. And following this story line, investors can look forward to strong corporate earnings and low interest rates at the same time, a sort of a goldilocks scenario for the stock market.

What occurred in China in the second quarter and started happening in the United States in the third quarter seems to lend support to this view. I think the market is being misled. The driving forces for the current bounce are inventory cycle and government stimulus. The follow-through from corporate capex and consumption are severely constrained by structural challenges. These challenges have origins in the bubble that led to a misallocation of resources. After the bubble burst, a mismatch of supply and demand limited the effectiveness of either stimulus or a bubble in creating demand.

The structural challenges arise from global imbalance and industries that over-expanded due to exaggerated demand supported in the past by cheap credit and high asset prices. At the global level, the imbalance is between deficit-bound Anglo-Saxon economies (Australia, Britain and the United States) and surplus emerging economies (mainly China and oil exporters). The imbalance was roughly equal to US$ 1 trillion, or 2 percent of global GDP. The imbalance was supported by: 1) the willingness of central banks in surplus, emerging economies to hold down exchange rates and recycle their surpluses into the deficit economies by buying government bonds; 2) the willingness of consumers in deficit countries to buy with borrowed money; and 3) Wall Street's ability to dress up high-risk consumer loans as low-risk derivative products. I am describing these factors to underscore that central banks are unlikely to bring back yesterday's equilibrium.

Recent data point to a sharp increase in the household savings rate in the United States. Over two years, it rose above 5 percent from minus 2 percent. The current level is still below the historical average 8 percent. If normalization remains on track, it should rise above 8 percent, and probably reach above 10 percent, to bring debt levels down to the historical average.

Some argue that, if low interest rates revive the property market, American households may be willing to borrow and spend again. This scenario is possible but not likely. The United States has not experienced serious property bubbles in the past because land is privately owned and plentiful. A supply overhang from one bubble takes a long time to digest. And American culture tends to swing to frugality after a bubble. One's outlook either for a normal recovery or a bubble-inspired boom depends on the outlook for the U.S. household savings rate. Unless the U.S. household sector is willing to borrow and spend again, emerging economies will not be able to revive the export-led growth model.

If one accepts that the U.S. household savings rate will continue to rise, emerging economies must decrease their savings rates, increase investment, or decrease production. The best choice is to decrease savings rates. But savings rates are hard to change. They depend mainly on demographics and wealth levels. The quickest possible way out would involve creating an asset bubble that inflates household wealth and decreases savings. Many advocates of inflated property and stock markets in China have this effect in mind. Japan's bubble after the Plaza Accord in 1985 had its origin in the same dilemma. This approach, if it works, has catastrophic long-term consequences. Japan remains mired in stagnation two decades after its bubble began to burst.

Some analysts are expecting China to repeat Japan's bubble experience, which occurred in the late 1980s. At that time, Japan's export-led growth model was stymied by a doubling of its currency value after the Plaza Accord. It tolerated a massive asset bubble to stimulate domestic demand and stabilize its economy. China's export-led model is facing a rising savings rate and declining U.S. demand for its exports. Asset inflation could be a way out in the short term.

China doesn't need to repeat Japan's experience. One reason is that the circumstances are not the same. First, Japan was a developed country when its bubble started getting out of control in 1985. It couldn't divert its vast savings into infrastructure investment. But today, China's national urbanization project still has up to 30 percentage points to go. If the right mechanism can be implemented, China could divert more savings into urbanization.

Second, China can decrease its savings rate substantially through structural reforms. Half of China's gross savings are in the public sector. The government and state-owned enterprises should decrease revenue-raising and increase borrowing to finance investments. For example, China's high property prices are based on the investment-fund revenue needs of local governments. If China's property prices were cut by one-third, the national savings rate could decrease by two to three percentage points.

Third, the Chinese government could give its shares in listed state-owned enterprises to the household sector. The subsequent increase in household wealth could lower the national savings rate by three to four percentage points.

China's exports are down by roughly one-fifth. It needs the national savings rate to fall by about six percentage points for the economy to function normally. Otherwise, the economy will experience either a recession or a bubble. And the purpose of a bubble, as mentioned, would be to temporarily decrease the savings rate.

This discussion may seem to digress from the analysis of sustainability in the current economic recovery. But it brings out two points: The old equilibrium cannot be restored, and many structural barriers stand in the way of a new equilibrium. The current recovery is based on a temporary and unstable equilibrium in which the United States slows the rise of its national savings rate by increasing the fiscal deficit, and China lowers its savings surplus by boosting government spending and inflating an assets bubble.

This temporary equilibrium depends on government action. It does not have a market foundation that would support sustained and rapid growth. Nevertheless, improving economic data will excite financial markets.

China's stock market is cooling because the Chinese government is jawboning it down, based on fears of a big bubble downside. And the economy is beginning to slow. Markets outside China will likely do well for the next two months; diverging trends reflect that China's market recovered four months before others, and adjusts before others as well.

Financial markets will turn down again when investors realize that the global economy will have a second dip in 2010, and that the U.S. Federal Reserve will raise interest rates soon. The turning point may well come sometime in the fourth quarter. By then, it would become apparent that China has slowed. U.S. unemployment will not have improved and, hence, its consumption will remain stagnant. And production data that's pushing expectations now will cool after the inventory cycle runs its course.

Most analysts would argue that central banks won't raise interest rates before the recovery is on solid ground. The problem, though, is that fiscal stimulus can't resolve structural problems blocking a sustained recovery. Liquidity is the wrong medicine for the global economy right now. Overusing it encourages its side effect -- inflation.

Conventional wisdom says inflation will not occur in a weak economy: The capacity utilization rate is low in a weak economy and, hence, businesses cannot raise prices. This one-dimensional thinking does not apply when there are structural imbalances. Bottlenecks could first appear in a few areas. Excess liquidity tends to flow toward shortages, and prices in those target areas could surge, raising inflation expectations and triggering general inflation. Another possibility is that expectations alone would be sufficient to bring about general inflation.

Oil is the most likely commodity to lead an inflationary trend. Its price has doubled from a March low, despite declining demand. The driving force behind higher oil prices is liquidity. Financial markets are so developed now that retail investors can respond to inflation fears by buying exchange traded funds individually or in baskets of commodities.

Oil is uniquely suited as an inflation hedging device. Its supply response is very low. More than 80 percent of global oil reserves are held by sovereign governments that don't respond to rising prices by producing more. Indeed, once their budgetary needs are met, high prices may decrease their desire to increase production. Neither does demand fall quickly against rising prices. Oil is essential for routine economic activities, and its reduced consumption has a large multiplier effect. As its price sensitivities are low on demand and supply sides, it is uniquely suited to absorb excess liquidity and reflect inflation expectations ahead of other commodities.

If central banks continue refusing to raise interest rates during these weak economic times, oil prices may double from their current levels. So I think central banks, especially the Fed, will begin raising interest rates early next year or even late this year. I don't think it would raise rates willingly but wants to cool inflation expectations by showing an interest in inflation. Hence, the Fed will raise interest rates slowly, deliberately behind the curve. As a consequence, inflation could rise faster than interest rates, which is what the indebted U.S. household sector needs.

This fool-the-market strategy may work temporarily. Its effectiveness must be reflected in oil prices; the Fed needs to target oil prices in its interest rate policy. If oil prices run from current levels, it means the market doesn't believe the Fed. That would force the Fed to raise interest rates quickly which, unfortunately, would trigger another deep recession.

Instead of a V-shaped recovery, we may instead get a W curve. A dip next year, although perhaps not statistically deep, could deliver a profound psychological shock. Financial markets are buoyant now because they believe in the government. The second dip would demonstrate the limits of government power. The second dip could send asset prices down -- and keep them down for a long time.

[Throttle2]

andy xie is quite a give-it-as -it-is economist.

 

I've always liked his reports.

 

but he's too straight so kena kicked out. hee hee

 

 

[Ticklish8]

Brilliant guy: he predicted correctly Shanghai bubble last year and early July/August. For the record Shanghai has lost more than 20 percent.

 

Formerly Morgan Stanley's chief economist in Asia but resign after his email which he characterized Singapore as an economic failure dependent on illicit money from Indonesia and China.

 

Xie, who worked at Morgan Stanley for nine years, sent the e-mail to his colleagues after attending the International Monetary Fund and World Bank annual meetings in Singapore.

 

"To sustain its economy, Singapore is building casinos to attract corruption money from China,'' said Xie, who ranked No. 2 among regional economists in a 2003 Asiamoney magazine survey.

 

 

andy xie is quite a give-it-as -it-is economist.

 

I've always liked his reports.

 

but he's too straight so kena kicked out. hee hee

 

[Wind30]

As long as HDB supply and prices hold steady (which is the gov direction as I far as I can see), the property market should not crash. Personally think the only risk is on Global recession which is well contained to date.

 

yup. I think that is the top factor in deciding singapore property prices. HDB resale price. How many HDB flats will be built and sold at what cost.

 

From the recent words of our Minister, he say HDB will go up 1-2% more..... and the government aim is to support the HDb prices at current levels as they are still "affordable"

 

It is very simple. If you can get 600k for you hdb flats, private property prices will NEVER EVER fall below 800k for a similar size apartment. Once the private prices reaches near the HDB prices, the hordes of HDB upgraders will push up the price. You can see it in the recent GLOBAL RECESSION. our private property prices did not dip much at all.

[Stary]

buyers are chasing up the prices of private properties. there is surely a peak to how high the prices can go. beyond a certain point, the bubble will reach its expansion limit and burst. then the property mkt will crash.

 

this is of course my own theory. any of you think such high property prices are sustainable in the long run?

 

 

Of course it will.

 

Back in March, I already said things will be going back up, from stocks to properties (search the forum under my nick). But it will only last till first or 2nd quarter of 2010 and then come back down.

 

The bottom will be around 2012.

 

Some of my high profile associates, are already selling their properties and plan to rent first till 2012

Edited September 13, 2009 by Starry

[Comnao]

report

 

although the small font read until

 

very very report

[Ticklish8]

Hahahah good stuff must share.

 

report

 

although the small font read until

 

very very report

 

[Ticklish8]

This is what SM Goh say recently, same prognosis

 

 

[Jadeband]

i read so many reports, hear so many guru's advise. And all gave differential view.

i know it will not happen but i still hope that property can drop to the '05 level.

 

[Fourth]

i read so many reports, hear so many guru's advise. And all gave differential view.

i know it will not happen but i still hope that property can drop to the '05 level.

 

I am very 05 property price level will never be seen again. You are talking abt Tanjung Rhu going below 600psf.

 

[Picanto]

i read so many reports, hear so many guru's advise. And all gave differential view.

i know it will not happen but i still hope that property can drop to the '05 level.

 

 

gurus are not gods. they will never know what the future holds.

[Blueray]

I think property prices will hold at current levels.