Tuesday, October 2, 2012

Property: A developing problem for tomorrow

I completely agree with this post in response to End of Valuation + COV formula in the Forum pages. Niall Ferguson in his "The Ascent of Money" dedicated a chapter on the dangers of mixing up property as an asset with housing in "safe as property", i.e., not as safe as you think.

On hindsight it showed the government child like belief in economic theory. There is nothing wrong with those theories provided you are very familiar with the circumstances which they apply. Also please use your common sense first then the theories can be a good servant.

Now we are stuck. No government has the courage to unwind this. One day the problem would become a really hot potato. It will not be pretty and definitely there will be painful consequences.

I can't speak for the broader society, but the smart investor must cash out early. Property prices have plenty of flexibility in a global city situated in a large country. Remember we are just a tiny city state.

I hate the politics of fear and hostage. It never ends well.

  • Christine Sng Mechtler Suresh, while it is true that "market forces determine property prices in Singapore", Lim Kim San never let that stop him from "under-pricing" HDB flats when he embarked on the HDB's mission. Otherwise, you think he could have housed the peasant population in those early years? It was Goh Chok Tong who first enunciated the philosophy of private sector economics in pricing public services - not only housing but also healthcare. That was when HDB started pegging prices of their flats to "market forces" in the form of land sale prices, hence, private property market. He gained acceptance for this upward spiral by selling Singaporeans the notion of "asset enhancement". But every investor knows that a home is a home and not an "investment vehicle". We should be buying cheap homes-to save rent and to have the security of a roof for our dependants-but saving our hard-earned money for real investments such as a second (investment) property or other investments. How can a home be used as an investment vehicle when the only way to realise the gains are to become homeless, or return the investment gains to HDB or another developer (since you need to buy a new home)?? When do you see real money from selling your "investment", that you can put to other uses-which is the real purpose of investment? In Europe and the US, outside of the major cities, such craziness does not exist. A home can cost £/$/€ 80,000 for decades because people don't use it to speculate for capital gains. And that should be the way HDB should be. Which is also why DBSS and private developers have NO role in public housing-it should not be a market segment for profit-seeking developers. And all who feel public housing is too basic and not good enough for them should look to private housing-ECs, massionettes, and all fancy developments should not be the purview of public housing. And all interested in "investing" in the property market should do so in the private housing, commercial & industrial property space.
    4 hours ago via mobile · Unlike · 4

  • Christine Sng Mechtler And pricing of any public good or service is a matter of political philosophy, more than anything else. Why was it okay for Lim Kim San to price HDB flats at cost+ but nowadays we are told we are "robbing the reserves" if we don't pay market rates? Is anyone accusing Lim Kim San of robbing the reserves?
    3 hours ago via mobile · Like

1 comment:

  1. Right on Christine.

    I should add tho that I believe in ECs. The best thing this govt has ever given me access to is my HUDC flat. If is is en-bloced I will certainly not be able to get anything of similar standard or quality or size or location with the money I'm paid for it.