As the global economy creeps out of the financial meltdown which started in 2007 (Sub Prime), people will soon forget the painful lesson learnt. It will be a matter of 1-2 years that people will start spurging and go on years of spending without too much reflection of the painful recession.
This year, since second quarter (2009), as the recession dust starts to settle, the property bubble starts forming right till September. Property sales seems to have started slowing down in October and November. This can be a sign that the property market has overheated and is now cooling off.
This is time where the average buyers are looking at buying their first property.
Property purchase is usually the biggest ticket item in our life. As such, there are things that buyers need to take into consideration.
What is the best way for an individual to gauge if they can afford to buy a property?
It is important to do financial planning. The banks use a bench mark of 40% to 50% Debt Servicing Ratio (DSR). This means, there should not be more than 40% - 50% of the combined income, being commited to financial outlays.
For example, if the combined gross income is $5,000, the maximum financial commitment should not be more than $2,500 per month. Financial commitment includes home loan, car loan, credit card debt, etc.
Financial planning includes being conservative in the outlook. Would be property buyers should not take potential future income in their calculation as this will cause a large proble when income falls.
What are some important factors in securing a bank loan?
Largely, a lender are concern of the ability of a borrower to repay the loan. As such, good financial rating and being free from litigation helps ease banks concern.
Few common reasons why loan application are rejected, is usually due to bad credit history or outstanding litigation which could affect a person's financial standing. Other reasons could be due to inconsistency of income (frequent change of job).
What is the consideration on loan tenure?
Many people believes that they should pay off their loans within the shortest time. That is not totally wrong but not suitable for all senarios.
Shorter loan tenure means lesser interest paid. Loans repayment usually takes principle divided by duration. A simple calculation as follows (taking a small loan size for calculation).
- Loan Principle : $300,000
- Loan Tenure : 20 years
- Monthly principle repayment : $1,250/mth (being, $300k / 20yrs / 12mths)
- Monthly interest assuming at 2.5% : $625/mth (being, $300k x 2.5% /12mths)
- Total monthly repayment : $1,875/mth
- Principle / Interest Ratio : 66.67% / 33.33%
If the tenure is stretched to 30 years:
- Monthly principle repayment : $833.33 (being, $300k / 30yrs / 12mths)
- Monthly interest assuming at 2.5% : $625/mth
- Total monthly repayment : $1,458.33
- Principle / Interest ratio : 57.14% / 42.86%
It is not advisible to reduce the loan tenure for everyone. It is important to work back on to the DSR as well as, checking how much is available from CPF funds to be used towards repaying the monthly installment.
For those intending to reduce tenure using cash every month, there is a need to reconsider if these money can be put to better use, investment and getting better returns. A conservative investment can give a returns of 4-7%pa while home loan interest rates are currently hovering around 2-3%.
CPF Maximum Withdrawal Limit
This is another factor wew must pay close attention to. For those who bought their property on 1 Jan 2008 onwards, they are only able to use up to 120% Valuation Limit. This means, if the valuation is $500,000, the maximum withdrawal limit will be $600,000.
The maximum withdrawal limit includes, downpayment, legal and stamp fee, monthly installment (principle and interest), till it reaches 120%.
For a 30 years loan tenure, the borrower will reach the limit sometime on the 23 year. The remaining 7 odd years will involve full cash.
Take an average young couple for illustration. Assuming, the couple have their first child 2 years after marriage (and owning their property) and second child another 2 years later. If the maximum withdrawal limit is reached on the 23th year, the first child would be about 21 years old while second child is about 19 years old.
At 21 years old, the child may be receiving his/her tetiary education while the second child is reaching tetiary education soon. Cash would be very important then.
Types of Loan Package
Loan packages works around five main loan types as follows:
- Fixed Rate package
- Variable Rate package
- Combo package
- Current Link Account
- SIBOR Rate package
A mortgage bank officer or mortgage consultant will be able to advise further on that.
It is important to look at the economy direction, financial planning, property holding, etc, before deciding on what is a suitable package. The decision will eventually be for the borrower to make.
Other important information for borrowers
1. Mortgage Insurance and Fire Insurance
Mortgage insurance protects the co-borrower in the event one borrower is rendered invalid (death or permenant disability). The insurance will take care of the outstanding loan that they are insured for.
Fire insurance provided by the banks are insufficient. It convers mainly, structure and fittings, with minimal coverage. It is important to also take care of 3rd party liability, which an additional fire insurance can take care of. Such insurance policy cost as little as $150 per year.
2. Refinance
Refinancing upon the lapse of a Lock-in period helps keep the loan interest rate current. Refering back to the Principle/Interest calculation, a lower interest means more repayment towards Principle.
Lastly
It is important to seek the help of a Mortgage Consultant or Financial Planner to help you assess where you stand, how much loan you can secure, before proceeding on your purchase.
Saturday, November 21, 2009
Friday, October 2, 2009
Property Prices Rose by 15.9% in Q3 of 2009
The Urban Redevelopment Authority (URA)'s latest news release (1 Oct 09) doesn't surprise many, 3rd Quarter 2009 property prices gone up by about 15.9% from 2nd Quarter (decline 4.7% in 2nd Quarter).
The increase breakdown as follows:
- 16.2% Core Central Region
- 19.1% Rest of Central Region
- 15.4% Outside Central Region
Property prices have started to rise since May 2009 since the market hit a bull run. What is the supporting factor of the property price escalation? Apart from the stock market, the economy has not recovered as significantly and fundamental is not strong.
IMF may have released news saying global economy is expected to recover in year 2010 and have adjusted global growth forecast to 3.5% (China being 9% growth next year). The expected grow does not justify a 15.9% increase in local property prices, at least for now.
If surge is not supported, it is hanging in thin air. There is a danger of a property bubble that may just break without much warning. This happened in year 2008, but of course situation were different back then. Back in 2008, the global economy were ruin by the US Financial Crisis.
Where will the property market lead to in the coming one to two years?
The increase breakdown as follows:
- 16.2% Core Central Region
- 19.1% Rest of Central Region
- 15.4% Outside Central Region
Property prices have started to rise since May 2009 since the market hit a bull run. What is the supporting factor of the property price escalation? Apart from the stock market, the economy has not recovered as significantly and fundamental is not strong.
IMF may have released news saying global economy is expected to recover in year 2010 and have adjusted global growth forecast to 3.5% (China being 9% growth next year). The expected grow does not justify a 15.9% increase in local property prices, at least for now.
If surge is not supported, it is hanging in thin air. There is a danger of a property bubble that may just break without much warning. This happened in year 2008, but of course situation were different back then. Back in 2008, the global economy were ruin by the US Financial Crisis.
Where will the property market lead to in the coming one to two years?
Saturday, September 12, 2009
Further Financial Crisis 'Inevitable'
Former Federal Reserve chief Alan Greenspan said human nature made another global financial crisis inevitable.
"They (financial crises) are all different, but they have one fundamental source, that is, the unquenchable capability of human beings when confronted with long periods of prosperity to presume that it will continue."
The believe that markets would continue to rise led people to take speculative excesses with the consequences that have dotted history.
"No two crises have anything in common except human nature."
The current crisis was triggered by the trade in US sub-prime mortgages, any factor could have been the catalyst. If it were not the problem of these toxic debts caused by people's failure to repay the loans that were granted to homebuyers with bad credit histories, something sooner or later would have emerged.
It's human nature, unless somebody can find a way to change human nature, we will have more crises and none of them will look like this because no two crises have anything in common, except human nature.
To avoid a repeat of the situation, financiers and governments should look to clamp down on fraud and force banks to hold more capital to cushion themselves against financial shocks.
---
Humans are forgetful. When we go through a crisis, many people suffered and some will remind themselves not to make the same mistakes again. Others who have not suffered tremendiously, but just by the economy, would not realise the actual difficulties during the crisis.
When the crisis is over, economy will face boom and prosperity. People will start to forget what happened after a short while, and starts to spend and over-commit themselves. Before they realise it, the next crisis arrived sooner than thought, leaving these lot of people suffering.
In 2007 and early 2008, Asia was facing a boom. Many people were too ready, too soon, to change luxury items. Some luxury items cost an arm and a leg, but people forgotten the crisis S-E Asia underwent, namely Asian Financial Crisis (1998), 911 (2001) and SARS (2003). The economy stablized in 2004 and only starts showing promising signs of recovery in 2005.
As Singapore's economy crawls out of the 8 years on-and-off recession, people starts spending. US Sub-prime started showing it's fiery in August 2007 but many believes the storm won't reach our shores.
Now that the economy is showing signs of recovery, there will be some who will start spending.
Will people ever learn to take precaution? Unlikely! There will be the same patterns soon.
"They (financial crises) are all different, but they have one fundamental source, that is, the unquenchable capability of human beings when confronted with long periods of prosperity to presume that it will continue."
The believe that markets would continue to rise led people to take speculative excesses with the consequences that have dotted history.
"No two crises have anything in common except human nature."
The current crisis was triggered by the trade in US sub-prime mortgages, any factor could have been the catalyst. If it were not the problem of these toxic debts caused by people's failure to repay the loans that were granted to homebuyers with bad credit histories, something sooner or later would have emerged.
It's human nature, unless somebody can find a way to change human nature, we will have more crises and none of them will look like this because no two crises have anything in common, except human nature.
To avoid a repeat of the situation, financiers and governments should look to clamp down on fraud and force banks to hold more capital to cushion themselves against financial shocks.
---
Humans are forgetful. When we go through a crisis, many people suffered and some will remind themselves not to make the same mistakes again. Others who have not suffered tremendiously, but just by the economy, would not realise the actual difficulties during the crisis.
When the crisis is over, economy will face boom and prosperity. People will start to forget what happened after a short while, and starts to spend and over-commit themselves. Before they realise it, the next crisis arrived sooner than thought, leaving these lot of people suffering.
In 2007 and early 2008, Asia was facing a boom. Many people were too ready, too soon, to change luxury items. Some luxury items cost an arm and a leg, but people forgotten the crisis S-E Asia underwent, namely Asian Financial Crisis (1998), 911 (2001) and SARS (2003). The economy stablized in 2004 and only starts showing promising signs of recovery in 2005.
As Singapore's economy crawls out of the 8 years on-and-off recession, people starts spending. US Sub-prime started showing it's fiery in August 2007 but many believes the storm won't reach our shores.
Now that the economy is showing signs of recovery, there will be some who will start spending.
Will people ever learn to take precaution? Unlikely! There will be the same patterns soon.
Sunday, August 2, 2009
Developers Are Dumping
Refering to Saturday (1 Aug 09) newspaper (The Straits Times), there were many new property developments for sale (by developers). I could easily spot more 5 such advertisements, some taking more than one full page.
Over the couple of months, there were a lot of talks about properties being snapped up by buyers. Some new developments were even sold out in one day, some even sold out before the actual launch.
Buyers goes out viewing new developments with cheques in hand, more than ready to issue the 1% deposit. I even learned of a buyer who had to pay 5% deposit to developer.
Buy Low, Sell High!
This doesn't seems to apply now. Buyers are buying high, thinking property prices will not come down. This was the same mindset in the 1990s, that Singapore is land scarse and with huge population for this island country with only 687 square kilometers of land.
During the Asian Financial Crisis, 911 terrorist attack in 2001 and SARS in 2003, our economy almost collapse to its knees, and property prices dropped down to 60% value of their all time high. People have forgotten the lesson.
Developers knows the economy better than commoners do. Developers are in the business of making money. If they can sell their properties at a much higher price, why would they rush to dump their developments all at once?
When developers dump properties , it is time to be wary. When developers even demanded 5% deposit, the signs are even more worrying.
Is a property market correction on it's way?
Over the couple of months, there were a lot of talks about properties being snapped up by buyers. Some new developments were even sold out in one day, some even sold out before the actual launch.
Buyers goes out viewing new developments with cheques in hand, more than ready to issue the 1% deposit. I even learned of a buyer who had to pay 5% deposit to developer.
Buy Low, Sell High!
This doesn't seems to apply now. Buyers are buying high, thinking property prices will not come down. This was the same mindset in the 1990s, that Singapore is land scarse and with huge population for this island country with only 687 square kilometers of land.
During the Asian Financial Crisis, 911 terrorist attack in 2001 and SARS in 2003, our economy almost collapse to its knees, and property prices dropped down to 60% value of their all time high. People have forgotten the lesson.
Developers knows the economy better than commoners do. Developers are in the business of making money. If they can sell their properties at a much higher price, why would they rush to dump their developments all at once?
When developers dump properties , it is time to be wary. When developers even demanded 5% deposit, the signs are even more worrying.
Is a property market correction on it's way?
Monday, May 25, 2009
Obama And His Magic Wand
Since US President Barack Obama came into office in January 2009, he had extingished a lot of Bush fire that went out of control by his predecessor.
Credit reform had taken place. Cost cutting on military operations, strengthening of bilateral ties with many countries. Taking a strict rule on money handouts by government to rescue institutions in this Financial Crisis. Improving consumer confidence, etc.
The latest sweep came in the form of Credit Card Reform, aiming to shield consumers from predatory fees and shock rate hikes. Even though over protecting consumers can lead to another case of overspending, but a timely reform can help debtors handle their existing debts better.
The new bill includes:
- forbids rate increases on existing balances unless consumers are at least 60 days late paying their bill or the initial rate was a promotional rate that has expired,
- requires 45 days' notice to raise rates.
- bans fees for payment processing -- such as surcharges for paying by telephone
- imposes steep restrictions on issuing cards to people under 21 years of age
- requires that promotional interest rates on new cards stay valid for six months
When a person faces financial difficulties, they will start delaying repayment, default on payments, further extending their financial woes with credit card, etc, before they go bust.
At a time where economy is still not on a recovery route, such credit reforms are good to help debtors manage their existing debt, allowing them to start repaying. On the other hand, it will help those who are not in debt, to start spending with more confidence.
More financial reforms must be done in America, including housing loan reform as the current financial crsis originated from the Sub-Prime problem.
Let's hope the global economy will start seeing the storm clear up by year's end. Signs are already there, that depressing economies are starting to see smaller GDP decline.
Credit reform had taken place. Cost cutting on military operations, strengthening of bilateral ties with many countries. Taking a strict rule on money handouts by government to rescue institutions in this Financial Crisis. Improving consumer confidence, etc.
The latest sweep came in the form of Credit Card Reform, aiming to shield consumers from predatory fees and shock rate hikes. Even though over protecting consumers can lead to another case of overspending, but a timely reform can help debtors handle their existing debts better.
The new bill includes:
- forbids rate increases on existing balances unless consumers are at least 60 days late paying their bill or the initial rate was a promotional rate that has expired,
- requires 45 days' notice to raise rates.
- bans fees for payment processing -- such as surcharges for paying by telephone
- imposes steep restrictions on issuing cards to people under 21 years of age
- requires that promotional interest rates on new cards stay valid for six months
When a person faces financial difficulties, they will start delaying repayment, default on payments, further extending their financial woes with credit card, etc, before they go bust.
At a time where economy is still not on a recovery route, such credit reforms are good to help debtors manage their existing debt, allowing them to start repaying. On the other hand, it will help those who are not in debt, to start spending with more confidence.
More financial reforms must be done in America, including housing loan reform as the current financial crsis originated from the Sub-Prime problem.
Let's hope the global economy will start seeing the storm clear up by year's end. Signs are already there, that depressing economies are starting to see smaller GDP decline.
Wednesday, April 1, 2009
Global Recession Pushing Millions Into Poverty
The World Bank forecast record declines in 2009 global output and trade as the economic crisis bites, and warned a slowdown in the developing world is pushing millions into poverty.
The global economy is expected to shrink by 1.7 percent in 2009, "the first decline in world output since World War II,". The sharp contraction marks a dramatic 2.6 point downward revision from the 0.9 percent growth in 2009 forecast only last November.
The update "reflects the rapid deterioration in financial and economic conditions -- and the increasingly negative interaction between weakening economies and fragile financial systems -- that have come to the fore since late 2008 for virtually every country in the world," the 185-nation development lender said.
World Bank president Robert Zoellick said the recession was expected to trap 53 million more people in poverty this year, defined as subsistence living on less than 1.25 dollars a day.
"This comes after soaring food and fuel prices of recent years, which pushed 130 to 155 million people into extreme poverty, many of whom have still not recovered," Zoellick said in a speech in London.
Poor people in developing countries have little buffer to protect them against the effects of the crisis. "In London, Washington, and Paris people talk of bonuses or no bonuses. In parts of Africa, South Asia, and Latin America, the struggle is for food or no food," he said.
According to the latest GDP projections, high-income economies would shrink 2.9 percent this year, a notch more than the prior estimate of 2.8 percent.
The Washington-based bank projected trade volumes would drop a record 6.1 percent from 2008, led by a steep decline in manufactured goods trade.
A "modest" recovery in 2010 was possible but highly uncertain, the bank said."Continued banking problems or even new waves of tension in financial markets could lead to stagnation in global GDP or even to another year of decline in 2010."
-----
Reasons why most reports refers to this Global Crisis as being the worst since World War II, has much to do with, the last Great Depression started in 1929 and lasted into World War II. After WWII, economies went into a boom.
This global crisis may not develop into a Great Depression as communication and advance economical relationships of the world market have evolved in recent history, thus global efforts can help prevent the global economy from slipping into despair.
Monday, March 16, 2009
US Economy Recovery On The Way
US Federal Reserve Chairman Ben Bernanke predicted that America's worst recession in decades will likely end this year and recover would gather steam next year.
As Bernanke said the "green shoots" of economic revival were already evident. He further said that no more big banks will fail. The US banking system needs to be stabilised in order for an end of the recession, which he predict to be by end of this year while recovery should begain next year.
Tough regulatory reform is needed on the financial system and to avoid the risk of an institution becoming too big to fail. The banks now are being subjected to a "stress test" by Treasury Secretary Timothy Geithner and his team to ensure they have enough money put aside to ward off new crises, the Fed chairman noted.
The world's biggest economy may have cited they are out of the woods soon, but we have yet to hear much of the Worlds No 2 economy, Japan, and upcoming star, South Korea. We can only hope no bad news are dished out by both countries.
As Bernanke said the "green shoots" of economic revival were already evident. He further said that no more big banks will fail. The US banking system needs to be stabilised in order for an end of the recession, which he predict to be by end of this year while recovery should begain next year.
Tough regulatory reform is needed on the financial system and to avoid the risk of an institution becoming too big to fail. The banks now are being subjected to a "stress test" by Treasury Secretary Timothy Geithner and his team to ensure they have enough money put aside to ward off new crises, the Fed chairman noted.
The world's biggest economy may have cited they are out of the woods soon, but we have yet to hear much of the Worlds No 2 economy, Japan, and upcoming star, South Korea. We can only hope no bad news are dished out by both countries.
Monday, February 23, 2009
The US$787 Billion Stimulus Plan
The Stimulus Plan has been approved and US President Obama had signed the bill on 17 Feb 09.
How will the new stimulus bill of U$787 billion help turn the crisis around? By large, it is targeting to stimulate the economy by helping business restart their engines, banks to start lending, job creation and empower consumers with spending power.
A quick look at where the budget aims to help tackle the economical cancer tumor below.
1. Taxes
The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the ones they own more energy efficient.
By reducing taxes, people will have more disposable income, to slowly returning cashflow back to the economy.
2. Health insurance
Many workers who lose their health insurance when they lose their jobs will find it cheaper to keep that coverage while they look for work.
Such insurance are costly, often over $1,000 a month. The government will pick up 65% of the total cost of the premium for the first nine months.
3. Infrastructure
Highways repaved for the first time in decades. Century-old waterlines dug up and replaced with new pipes. Aging bridges, stressed under the weight of today's SUVs, reinforced with fresh steel and concrete.
These will help with job creation, which in turn stimulate the economy.
4. Energy
Homeowners looking to save energy, makers of solar panels and wind turbines and companies hoping to bring the electric grid into the computer age all stand to reap major benefits.
5. Schools
A main goal of education spending in the stimulus bill is to help keep teachers on the job.
6. National debt:
One thing about the president's $790 billion stimulus package is certain: It will jack up the federal debt. Whether or not it succeeds in producing jobs and taming the recession, tomorrow's taxpayers will end up footing the bill. The expected deficit will be $1.6 trillion (including $800 billion by the ex-president).
The US national debt — the sum of all annual budget deficits — stands at $10.7 trillion. Or about $36,000 for every man, woman and child in the U.S.
7. Environment
The package includes $9.2 billion for environmental projects at the Interior Department and the Environmental Protection Agency. The money would be used to shutter abandoned mines on public lands, to help local governments protect drinking water supplies, and to erect energy-efficient visitor centers at wildlife refuges and national parks.
The Interior Department estimates that its portion of the work would generate about 100,000 jobs over the next two years.
8. Police
The compromise bill doles out more than $3.7 billion for police programs, much of which is set aside for hiring new officers. There will also be budget to fund drug task forces, prisoner rehabilitation and after-school programs among others.
9. Higher Education
The maximum Pell Grant, which helps the lowest-income students attend college, would increase from $4,731 currently to $5,350 starting July 1 and $5,550 in 2010-2011. That would cover three-quarters of the average cost of a four-year college. An extra 800,000 students, or about 7 million, would now get Pell funding.
Other target areas in Education includes school building projects, tuition fees, computer expenses, research facilities, etc.
10. The Poor
More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package. Millions more could be kept from slipping into poverty by the economic lifeline.
Taken together, the various credits are expected to keep more than 2 million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.
(source : http://news.yahoo.com/s/ap/stimulus_stakes_who_gets_what)
A Good President Solves Problem. A Lousy President Creates Problems (goes to war and cause runaway inflation).
How will the new stimulus bill of U$787 billion help turn the crisis around? By large, it is targeting to stimulate the economy by helping business restart their engines, banks to start lending, job creation and empower consumers with spending power.
A quick look at where the budget aims to help tackle the economical cancer tumor below.
1. Taxes
The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the ones they own more energy efficient.
By reducing taxes, people will have more disposable income, to slowly returning cashflow back to the economy.
2. Health insurance
Many workers who lose their health insurance when they lose their jobs will find it cheaper to keep that coverage while they look for work.
Such insurance are costly, often over $1,000 a month. The government will pick up 65% of the total cost of the premium for the first nine months.
3. Infrastructure
Highways repaved for the first time in decades. Century-old waterlines dug up and replaced with new pipes. Aging bridges, stressed under the weight of today's SUVs, reinforced with fresh steel and concrete.
These will help with job creation, which in turn stimulate the economy.
4. Energy
Homeowners looking to save energy, makers of solar panels and wind turbines and companies hoping to bring the electric grid into the computer age all stand to reap major benefits.
5. Schools
A main goal of education spending in the stimulus bill is to help keep teachers on the job.
6. National debt:
One thing about the president's $790 billion stimulus package is certain: It will jack up the federal debt. Whether or not it succeeds in producing jobs and taming the recession, tomorrow's taxpayers will end up footing the bill. The expected deficit will be $1.6 trillion (including $800 billion by the ex-president).
The US national debt — the sum of all annual budget deficits — stands at $10.7 trillion. Or about $36,000 for every man, woman and child in the U.S.
7. Environment
The package includes $9.2 billion for environmental projects at the Interior Department and the Environmental Protection Agency. The money would be used to shutter abandoned mines on public lands, to help local governments protect drinking water supplies, and to erect energy-efficient visitor centers at wildlife refuges and national parks.
The Interior Department estimates that its portion of the work would generate about 100,000 jobs over the next two years.
8. Police
The compromise bill doles out more than $3.7 billion for police programs, much of which is set aside for hiring new officers. There will also be budget to fund drug task forces, prisoner rehabilitation and after-school programs among others.
9. Higher Education
The maximum Pell Grant, which helps the lowest-income students attend college, would increase from $4,731 currently to $5,350 starting July 1 and $5,550 in 2010-2011. That would cover three-quarters of the average cost of a four-year college. An extra 800,000 students, or about 7 million, would now get Pell funding.
Other target areas in Education includes school building projects, tuition fees, computer expenses, research facilities, etc.
10. The Poor
More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package. Millions more could be kept from slipping into poverty by the economic lifeline.
Taken together, the various credits are expected to keep more than 2 million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.
(source : http://news.yahoo.com/s/ap/stimulus_stakes_who_gets_what)
A Good President Solves Problem. A Lousy President Creates Problems (goes to war and cause runaway inflation).
Singapore Growth (GDP) Forecast
When the Ministry of Trade and Industry announced (on 21 Jan 09) the growth forecast for 2009 to be between -2% to -5%, I joked that "Wah, such a wide range of percentage, sure hit one. Anyone can also project that, it's idiot proof". With all those Elites working on their analysis, they come out with such vast ranging figures? It was indeed a big joke.
Now I'm wondering if I have to eat my words because the Prime Minister just dealt us with another knee jerking announcement.
"Our GDP growth is forecast to be between -2 and -5 percent. It could be worse if the global economy worsens, even lower than -5 percent is possible," Lee was quoted as saying at a government function on Sunday.
(source : http://sg.news.yahoo.com/rtrs/20090223/tap-singapore-economy-c3bb44c.html)
I also have a lot of doubts of the government's foresight these days. Where's the wisdom they used to brag? The economical problem the world is facing, was foreseeable. People were too complacent, too oblivious of the signs.
Now I'm wondering if I have to eat my words because the Prime Minister just dealt us with another knee jerking announcement.
"Our GDP growth is forecast to be between -2 and -5 percent. It could be worse if the global economy worsens, even lower than -5 percent is possible," Lee was quoted as saying at a government function on Sunday.
(source : http://sg.news.yahoo.com/rtrs/20090223/tap-singapore-economy-c3bb44c.html)
I also have a lot of doubts of the government's foresight these days. Where's the wisdom they used to brag? The economical problem the world is facing, was foreseeable. People were too complacent, too oblivious of the signs.
Sunday, February 15, 2009
World's Priciest Cities To Own A Home
It was reported recently, in Globalpropertyguide.com the top 10 cities to own a home. The report is based on apartments in the city-centre, with about 120sqm built-in area. This list was compute out of a total of 110 cities around the world.
Most Costly Cities
1. Monte Carlo, Monaco - average prices of $4,420 psf
2. Moscow, Russia - average prices of $1,937 psf (rental yield 4.61%)
3. London, UK - average prices of $1,928 psf (rental yield 4.12%)
4. Toyko, Japan - average prices of $1,672 psf (rental yield 4.86%)
5. Hong Kong - average prices of $1,498 psf (rental yield 3.73%)
6. New York, USA - average prices of $1,384 psf (rental yield 4.37%)
7. Paris, France - average prices of $1,126 psf (rental yield 4.26%)
8. Singapore - average prices of $901 psf (rental yield 3.97%)
9. Rome, Italy - average prices of $851 psf (rental yield 3.62%)
10. Mumbai, India - average prices of $851 psf (rental yield 4.21%)
High property price is usually associated to shortage of space.
On the opposite, the least expensive cities (it's so cheap I've to use 2 decimal points) based on the same property type above as follows:
Singapore is one the few countries in Asia with low rental yield. The list of top rental yields are (against property price/position) :
Before anyone jumps to conclusion that since rental yield is low for any selected country, it reflects that the property is over-valued and not worth buying, let is also look at mortgage rates.
How does Mortgage Interest Rate affect ROI? Interest is part of ownership cost. If interest rates are high, it will errode Rental Yield. Example
- Jarkata, Indonesia - Rental Yield 11.27%, Mortgage Interest Rate above 10% (heard up to 15%)
- Singapore - Rental Yield 3.97%, Mortgage Interest Rate 2.5% (SIBOR package)
Thus if the Mortgage Interest is higher than rental yield, there is barely any returns if we require loans to finance the property. All the rental yield will go towards interest payment.
The consolation is, with the recession, property price will continue to weaken. Property prices in Singapore has saw weakening since late 2008 and has continue erroding. At this rate, property price will soon be reasonably valued (not over-valued nor under-valued).
Note : All prices in US Dollars. PSF refers to Per Square Feet. SIBOR refers to Singapore Interbank Offered Rate (or Central Bank Rate).
Most Costly Cities
1. Monte Carlo, Monaco - average prices of $4,420 psf
2. Moscow, Russia - average prices of $1,937 psf (rental yield 4.61%)
3. London, UK - average prices of $1,928 psf (rental yield 4.12%)
4. Toyko, Japan - average prices of $1,672 psf (rental yield 4.86%)
5. Hong Kong - average prices of $1,498 psf (rental yield 3.73%)
6. New York, USA - average prices of $1,384 psf (rental yield 4.37%)
7. Paris, France - average prices of $1,126 psf (rental yield 4.26%)
8. Singapore - average prices of $901 psf (rental yield 3.97%)
9. Rome, Italy - average prices of $851 psf (rental yield 3.62%)
10. Mumbai, India - average prices of $851 psf (rental yield 4.21%)
High property price is usually associated to shortage of space.
On the opposite, the least expensive cities (it's so cheap I've to use 2 decimal points) based on the same property type above as follows:
Lease Costly Cities
1. Cairo, Egypt - average prices of $53.33 psf
2. Bangalore, India - average prices of $61.04 psf
3. Concepción, Chile - average prices of $62.15 psf
4. Quito, Ecuador - average prices of $76.18 psf
5. Chengdu, China - average prices of $92.81 psf
6. Managua, Nicaragua - average prices of $100.33 psf
7. Jakarta, Indonesia - average prices of $102.34 psf
8. Amman, Jordan - average prices of $106.84 psf
9. Lima, Peru - average prices of $107.21 psf
10. Santiago, Chile - average prices of $113.43 psf
However, high property price must be supported by high gross rental yields. Rental yield below 5% suggest that the property is overvalued. The historical average rental yield is between 5.5% to 8.0%.
Singapore is one the few countries in Asia with low rental yield. The list of top rental yields are (against property price/position) :
Highest Rental Yield
1. Chisinau, Moldova - 14.17% (100 placed, $122.26 psf)
2. Cairo, Egypt - 12.0% (112 placed, $53.33 psf)
3. Jakarta, Indonesia - 11.27% (106 placed, $102.34 psf)
4. Manila, Philippines - 10.99% (87 placed, $177.81 psf)
5. Skopje, Macedonia - 10.11% (101 placed, $121.05 psf)
6. Lima, Peru - 10.09% (104 placed, $107.21 psf)
7. Panama City, Panama - 9.98% (92 placed, $161.65 psf)
8. Amman, Jordan - 9.73% (105 placed, $106.84 psf)
9. Kuala Lumpur, Malaysia - 9.22% (99 placed, $125.14 psf)
10. Bogota, Colombia - 9.19% (98 placed, $130.25 psf)
Before anyone jumps to conclusion that since rental yield is low for any selected country, it reflects that the property is over-valued and not worth buying, let is also look at mortgage rates.
How does Mortgage Interest Rate affect ROI? Interest is part of ownership cost. If interest rates are high, it will errode Rental Yield. Example
- Jarkata, Indonesia - Rental Yield 11.27%, Mortgage Interest Rate above 10% (heard up to 15%)
- Singapore - Rental Yield 3.97%, Mortgage Interest Rate 2.5% (SIBOR package)
Thus if the Mortgage Interest is higher than rental yield, there is barely any returns if we require loans to finance the property. All the rental yield will go towards interest payment.
The consolation is, with the recession, property price will continue to weaken. Property prices in Singapore has saw weakening since late 2008 and has continue erroding. At this rate, property price will soon be reasonably valued (not over-valued nor under-valued).
Note : All prices in US Dollars. PSF refers to Per Square Feet. SIBOR refers to Singapore Interbank Offered Rate (or Central Bank Rate).
Friday, January 30, 2009
The Worst Is Yet To Be
Bad news after bad news and it appears, there are still skeletons in the closet. This week saw among the most bad news reported since the Sub-Prime and Financial Crisis started 1.5 years ago (just after mid 2007).
The International Monetary Fund (IMF) reported in its economic growth forecasts Wednesday, predicting the severe financial crisis would brake global growth to the slowest pace in six decades, and "World growth is projected to fall to 0.5 percent in 2009, its lowest rate since World War II".
It further reported, "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged" and that some light at the end of the suffering, saying said it saw a gradual recovery in the global economy in 2010 to growth of 3.0 percent, spurred by "continued efforts to ease credit strains as well as expansionary fiscal and monetary policies."
(source : http://sg.news.yahoo.com/afp/20090129/tts-imf-economy-growth-forecast-c1b2fc3.html)
The Singapore's Finance Minister said the Global economic crisis will take more than a year to unravel. Mr Tharman said "The foreign banks are still in the mode of contraction. I think every large global bank is still looking at building up its capital, much more than it’s looking at extending new loans. So we are still at that phase of the crisis where recapitalisation is still the priority and estimates of the extent of bad assets on their books are still on the upswing. So, we haven’t seen the worst yet."
He further add that is why it is a good move for governments in the West to help these banks recapitalise and incentivise lending.
(Source : http://sg.news.yahoo.com/cna/20090129/tap-698-global-economic-crisis-take-year-231650b.html)
While many countries' government struggled to contain the recessoin, there are disturbing news appearing. Large companies in the US that took government funding are happily pampering and rewarding themselves with more than a total of US$18 billion in bonus.
The top executives of the Wall Street financial companies that the US president targeted, includes shameless heads of such well-known manufacturing and technology giants as IBM, Motorola, Xerox and Corning are still paid handsomely.
Citigroup even planned to take delivery of a new corporate jet with billions of dollars of support from the government. That bank, Citigroup, just canceled the deal earlier this week. Big companies and their top Executives are totally irresponsible, insensitive and only cares for themselves and their lavish spending while the majority of people are suffering.
However, the Obama administration is considering an idea for the creation of a "bad bank" that could take over soured debt, like defaulting mortgages, that have corroded the balance sheets of banks and helped choke off lending. If this plan goes through, it will help ease up banks' bad mortgage and allow them to recapitalise, which in turn, helps them to start lending again in the foreseable future.
(Source : http://sg.news.yahoo.com/ap/20090130/twl-obama-bonuses-1be00ca.html)
The signs of global economic distress multiplied, with more companies worldwide cutting profits and jobs, and protesters swarming the streets of France in anger at the worsening crisis.
Economic fears gripping the middle classes amid waves of cut-backs and stagnant wages spilled over in France, while elsewhere the daily treadmill of layoff announcements and plunging profits rolled on.
(Source : http://sg.news.yahoo.com/afp/20090129/tts-finance-economy-world-c1b2fc3.html)
In the mean time, we can only hope the situation will start improving. So far President Obama appears much more capable than his predecessor, the warmonger Bush.
The International Monetary Fund (IMF) reported in its economic growth forecasts Wednesday, predicting the severe financial crisis would brake global growth to the slowest pace in six decades, and "World growth is projected to fall to 0.5 percent in 2009, its lowest rate since World War II".
It further reported, "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged" and that some light at the end of the suffering, saying said it saw a gradual recovery in the global economy in 2010 to growth of 3.0 percent, spurred by "continued efforts to ease credit strains as well as expansionary fiscal and monetary policies."
(source : http://sg.news.yahoo.com/afp/20090129/tts-imf-economy-growth-forecast-c1b2fc3.html)
The Singapore's Finance Minister said the Global economic crisis will take more than a year to unravel. Mr Tharman said "The foreign banks are still in the mode of contraction. I think every large global bank is still looking at building up its capital, much more than it’s looking at extending new loans. So we are still at that phase of the crisis where recapitalisation is still the priority and estimates of the extent of bad assets on their books are still on the upswing. So, we haven’t seen the worst yet."
He further add that is why it is a good move for governments in the West to help these banks recapitalise and incentivise lending.
(Source : http://sg.news.yahoo.com/cna/20090129/tap-698-global-economic-crisis-take-year-231650b.html)
While many countries' government struggled to contain the recessoin, there are disturbing news appearing. Large companies in the US that took government funding are happily pampering and rewarding themselves with more than a total of US$18 billion in bonus.
The top executives of the Wall Street financial companies that the US president targeted, includes shameless heads of such well-known manufacturing and technology giants as IBM, Motorola, Xerox and Corning are still paid handsomely.
Citigroup even planned to take delivery of a new corporate jet with billions of dollars of support from the government. That bank, Citigroup, just canceled the deal earlier this week. Big companies and their top Executives are totally irresponsible, insensitive and only cares for themselves and their lavish spending while the majority of people are suffering.
However, the Obama administration is considering an idea for the creation of a "bad bank" that could take over soured debt, like defaulting mortgages, that have corroded the balance sheets of banks and helped choke off lending. If this plan goes through, it will help ease up banks' bad mortgage and allow them to recapitalise, which in turn, helps them to start lending again in the foreseable future.
(Source : http://sg.news.yahoo.com/ap/20090130/twl-obama-bonuses-1be00ca.html)
The signs of global economic distress multiplied, with more companies worldwide cutting profits and jobs, and protesters swarming the streets of France in anger at the worsening crisis.
Economic fears gripping the middle classes amid waves of cut-backs and stagnant wages spilled over in France, while elsewhere the daily treadmill of layoff announcements and plunging profits rolled on.
(Source : http://sg.news.yahoo.com/afp/20090129/tts-finance-economy-world-c1b2fc3.html)
In the mean time, we can only hope the situation will start improving. So far President Obama appears much more capable than his predecessor, the warmonger Bush.
Thursday, January 8, 2009
Alternate Investment
Despite the bad news all over, I was in a brief conversation with a couple of friends and we discussed a few investment alternatives. I have not done my homework nor am I versed in these areas, but am just thinking out loud.
Forget about big ticket investments like properties or long term investments like land or Unit Trust and Funds. Look towards short term investments, that can even be prolonged or juggled with at our comfort and will.
These investments I like to think aloud, requires lower commitment, and has a short term exit when necessary. One could invest for a period as short as one month, or for years, with little restriction.
GOLD
As the greenback weaken from 2007 t0 2008, price of gold climbed. Gold is the closest alternative to currency thus during uncertain times, gold price tends to head north.
In recent times, as US dollar strengthen, gold price came down, to nearly US$800 per ounce (from above US$1,000 per ounce in 2008). In the second half of 2008, gold price dropped to just above US$700 per ounce before recovering. Recent Israel conflict (started about a week ago) has driven gold price up to nearly US$850 now.
(source : gold http://www.kitco.com/charts/popup/au1825nyb_.html )
Crude oil price hover around US$150 per barrel in June 2008 before heading south till it went below US$40 per barrel in December 2008. Crude oil price started climbing with the Israel conflict too.
(source : Crude Oil http://www.californiagasprices.com/crude_chart.aspx )
Would Gold be a good investment for the short to mid-term? It appears promising but risky. Some organisation/companies offers gold investment with a promised return of between 1.5% to 2% per month. This allows investors to invest in Gold for short terms, thus reducing risk.
Currency
Currency investment (forex) has always been around, be it good or bad times. In times when a country's currency is strengthening, it is worthy of investment. Apart from higher interest earned for Time Deposit with the banks, the appreciation of the currency gives more returns than what interest you could earn.
Before considering which currency to place your funds into, do your home work on what is the driving factor for the currency to appreciate or depreciate, before putting your money where your heart is.
Example. US Dollar was as low as about S$1.25 vs US$1.00 but had climbed in recent times. Australian dollar had plunge to A$0.944 against S$1 today.
Knowing the driving factor can help investor spot the upward or downward trend and avoid unforeseen losses.
Most work hard for their money. Why not make money work hard for you?
Forget about big ticket investments like properties or long term investments like land or Unit Trust and Funds. Look towards short term investments, that can even be prolonged or juggled with at our comfort and will.
These investments I like to think aloud, requires lower commitment, and has a short term exit when necessary. One could invest for a period as short as one month, or for years, with little restriction.
GOLD
As the greenback weaken from 2007 t0 2008, price of gold climbed. Gold is the closest alternative to currency thus during uncertain times, gold price tends to head north.
In recent times, as US dollar strengthen, gold price came down, to nearly US$800 per ounce (from above US$1,000 per ounce in 2008). In the second half of 2008, gold price dropped to just above US$700 per ounce before recovering. Recent Israel conflict (started about a week ago) has driven gold price up to nearly US$850 now.
(source : gold http://www.kitco.com/charts/popup/au1825nyb_.html )
Crude oil price hover around US$150 per barrel in June 2008 before heading south till it went below US$40 per barrel in December 2008. Crude oil price started climbing with the Israel conflict too.
(source : Crude Oil http://www.californiagasprices.com/crude_chart.aspx )
Would Gold be a good investment for the short to mid-term? It appears promising but risky. Some organisation/companies offers gold investment with a promised return of between 1.5% to 2% per month. This allows investors to invest in Gold for short terms, thus reducing risk.
Currency
Currency investment (forex) has always been around, be it good or bad times. In times when a country's currency is strengthening, it is worthy of investment. Apart from higher interest earned for Time Deposit with the banks, the appreciation of the currency gives more returns than what interest you could earn.
Before considering which currency to place your funds into, do your home work on what is the driving factor for the currency to appreciate or depreciate, before putting your money where your heart is.
Example. US Dollar was as low as about S$1.25 vs US$1.00 but had climbed in recent times. Australian dollar had plunge to A$0.944 against S$1 today.
Knowing the driving factor can help investor spot the upward or downward trend and avoid unforeseen losses.
Most work hard for their money. Why not make money work hard for you?
Are We Heading Towards A Great Depression?
US Sub-prime, Financial Meltdown, Global Financial Crisis, Recession, Retrenchment, Huge MNC Collapse, Bailouts, Trade Deficit, what not?
Those are familar words in the last few months, all thanks to inefficient governance of the US Giant. No point talking about blame, we all know it by now.
President Elect Obama's first challenge should have to do with an budget deficit of $1.2 trillion for fiscal year 2009, just as he steps into office. He have to thank the years of poor administration. How he can reduce the deficit and create job, create consumer confidence, etc, to recover the World's No 1 economy remains a challenge.
(source : http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B53217752%2D6CF9%2D4AEB%2D89D5%2D99EA412DA5FF%7D )
More and more large MNCs are coming out to admit the skeleton in the closet. I believe we have not seen all yet, suspecting there will be more decomposing corpse to be exposed in the coming few months.
Retrenchments have increased. London's Marks & Spenser, China's Lenovo, Japan's TDK, etc, have all announced retrenchment news. With more jobless, spending power will decline even further, thus resulting in more hits on retails, food & beverage industry, tourism, etc. This will result in even more joblessness in the coming months.
Even the porno industry is asking for US$5 billion bailout, claiming people are too depressed with the financial situation that they lost interest in sex. So what is the big deal and why does the government even want to rescue an industry where these people are paid to have wild sex? Afterall, when the economy is so uncertain for an uncertain extended period as well, who has the money to have childrens? This joke came as an awakening that some organisation are making use of the situation to rob the people.
(source : http://news.aol.com/political-machine/2009/01/07/porn-industry-to-request-bailout/ )
Stock market had taken a huge beating in the last half a year. Most indexes have plunge to all time low, crude oil were largely inflated and had plunged. Crude oil peaked at above $150 per barrel, while Gold peaked at above US$1,000 per ounce, before falling deeply. Oil and Gold price climbed recently due to the Israel's conflict with Hamas (Gaza) and new attack by Hezbollah militants (Lebanon) today.
With so much bad news, would it mean, we are heading towards the Great Depression, or is it going to be unavoidable? Too much coincidence. The last Great Depression was in 1929, and lasted for about 10 years.
During the Great Depression (btw, that Depression also originated from the United States), stock market crashed globally, joblessness was at all time high, etc. The last Depression reached its end when the World War II started in 1938.
With so much coincidence, we better be wary.
Those are familar words in the last few months, all thanks to inefficient governance of the US Giant. No point talking about blame, we all know it by now.
President Elect Obama's first challenge should have to do with an budget deficit of $1.2 trillion for fiscal year 2009, just as he steps into office. He have to thank the years of poor administration. How he can reduce the deficit and create job, create consumer confidence, etc, to recover the World's No 1 economy remains a challenge.
(source : http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B53217752%2D6CF9%2D4AEB%2D89D5%2D99EA412DA5FF%7D )
More and more large MNCs are coming out to admit the skeleton in the closet. I believe we have not seen all yet, suspecting there will be more decomposing corpse to be exposed in the coming few months.
Retrenchments have increased. London's Marks & Spenser, China's Lenovo, Japan's TDK, etc, have all announced retrenchment news. With more jobless, spending power will decline even further, thus resulting in more hits on retails, food & beverage industry, tourism, etc. This will result in even more joblessness in the coming months.
Even the porno industry is asking for US$5 billion bailout, claiming people are too depressed with the financial situation that they lost interest in sex. So what is the big deal and why does the government even want to rescue an industry where these people are paid to have wild sex? Afterall, when the economy is so uncertain for an uncertain extended period as well, who has the money to have childrens? This joke came as an awakening that some organisation are making use of the situation to rob the people.
(source : http://news.aol.com/political-machine/2009/01/07/porn-industry-to-request-bailout/ )
Stock market had taken a huge beating in the last half a year. Most indexes have plunge to all time low, crude oil were largely inflated and had plunged. Crude oil peaked at above $150 per barrel, while Gold peaked at above US$1,000 per ounce, before falling deeply. Oil and Gold price climbed recently due to the Israel's conflict with Hamas (Gaza) and new attack by Hezbollah militants (Lebanon) today.
With so much bad news, would it mean, we are heading towards the Great Depression, or is it going to be unavoidable? Too much coincidence. The last Great Depression was in 1929, and lasted for about 10 years.
During the Great Depression (btw, that Depression also originated from the United States), stock market crashed globally, joblessness was at all time high, etc. The last Depression reached its end when the World War II started in 1938.
With so much coincidence, we better be wary.
Friday, January 2, 2009
Singapore sees biggest-ever quarterly GDP fall: govt
Year 2009 didn't start off well and not expected to produce much positive news from the economy.
It was reported by AFP today, that Singapore's economy could contract by as much as 2% this year (based on deepening recession).
Real gross domestic product (GDP) fell by 12.5% in the 4th Quarter 2008. The 4th quarter figures are advance estimates based largely on October and November figures. Global economy crisis worsened since November 2008 with sharp decline in global demand, trade and investment.
2009 growth forecast, which now ranges between a contraction of 2.0 percent and expansion of 1.0 percent.
Singapore's economy rely on the movement of goods and services in the region, thus weaker global demand has affected Singapore's electronics and precision engineering industries, pulling the entire manufacturing sector down by an estimated 9.0 percent in the fourth quarter compared to the same time last year, the trade ministry said.
With such bad news, those who had been prudent in 2007 and early 2008, could benefit from their savings than those who had spludge excessively during boom times. For those looking at investing would be able to get good bargains in the near future. Be prudent, be cautious, and do sufficient homework.
It was reported by AFP today, that Singapore's economy could contract by as much as 2% this year (based on deepening recession).
Real gross domestic product (GDP) fell by 12.5% in the 4th Quarter 2008. The 4th quarter figures are advance estimates based largely on October and November figures. Global economy crisis worsened since November 2008 with sharp decline in global demand, trade and investment.
2009 growth forecast, which now ranges between a contraction of 2.0 percent and expansion of 1.0 percent.
Singapore's economy rely on the movement of goods and services in the region, thus weaker global demand has affected Singapore's electronics and precision engineering industries, pulling the entire manufacturing sector down by an estimated 9.0 percent in the fourth quarter compared to the same time last year, the trade ministry said.
With such bad news, those who had been prudent in 2007 and early 2008, could benefit from their savings than those who had spludge excessively during boom times. For those looking at investing would be able to get good bargains in the near future. Be prudent, be cautious, and do sufficient homework.
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