Chua Mui Hoong: rising resale flat prices reflect genuine pent-up demand spurred by high levels of immigration
February 11th, 2010 | 
Author: Written by Our Correspondent
After pussy-footing for the last few months and finding scapegoats to deflect blame from HDB, finally one person from the establishment dares to step forward and say the truth about the real reason behind the sky-rocketing HDB flat prices – former ISD officer and now Senior Writer of the Straits Times Chua Mui Hoong.
In an editorial published in the Straits Times today, Ms Chua wrote:
“The way I see it, rising resale flat prices reflect genuine pent-up demand spurred by high levels of immigration. They do not seem to be driven by speculative frenzy. Those priced out of the market may find it emotionally satisfying to finger PRs or speculators as scapegoats than to acknowledge that the market is moving faster than one’s income and savings can keep up with.”
She cannot be more right: though PRs are partly responsible for the spike in prices, they should not bear blame because they need a roofs over their heads as well.
The blame should like entirely on the government for allowing too many foreigners into Singapore within too short a period of time without building adequate number of new flats to house them thereby leading to the situation we are in today.
Young Singaporean couples are being priced out of the HDB market and either have to rent their own places or stay with their parents for the time-being, hardly ideal conditions for them to start a family of their own.
Common sense tells us that an increased population will definitely increase the demand of housing and prices will only go up if the demand is not met.
Since the new flats need a few years to construct, the onus is on HDB to plan way ahead and build adequate number of flats to meet future needs and not to be “caught offguard” by building more flats only now which does not relieve the shortage in the housing market at all.
According to figures from the Ministry of Home Affairs, there are nearly 100,000 immigrants including both new citizens and PRs in the year 2008 alone, but only 3,183 new flats were built in 2008:
[Source: HDB Financial Report 2008/2009]
It doesn’t take a statistician to come to the conclusion that the number of flats built were grossly inadequate to meet the demand of a rapidly increasing population.
The decrease in the number of new flats built by HDB coincides with the sky-rocketing prices of resale flats as Singaporeans needing a roof over their heads are forced to purchase a more expensive flat in the resale market thereby contributing to the overall price inflation:
Though HDB is now “ramping up the supply of new flats”, it is too late to meet present demand and Singaporeans will have to pay a hefty price for its lack of foresight in building more flats earlier to cater to the needs of a growing population.
The ruling party has been finding all kinds of excuses to cover their most glaring mistake from pinning the blame to fussy Singapore buyers, speculative frenzy and some people are buying HDB flats for rental income which all do not explain the astronomical prices:
1. If Singaporeans and PRs are indeed “flip-flopping” HDB flats for profits, why is HDB not taking any measures now to prevent the situation from spiralling out of control?
2. Unlike private properties, there are strict rules governing renting HDB flats with a minimum occupancy period of 5 years for new flats and 1 year for resale flats. It doesn’t make sense for an investor to fork out so much cash to buy a resale flat for rental purposes due to the time lag when he can well invest in private properties with higher rental yield.
The prices of HDB flats have doubled in the last five years or so: this is not “asset appreciation”, but a property bubble – the HDB flats are valued much more than they are actually worth because of a gross lack of supply in a market monopolized by one single provider.
The laws of economics dictate that the prices will not go up indefinitely, they will have to come down at one point or another because it is impossible for wages to catch up with it and when it comes crashing down, Singaporeans who have paid ridiculously high prices for the flats now will be plunged into financial distress as banks come calling in for them to top up their mortgage loans.
Singaporeans should start demanding answers from HDB: give us the exact breakdown costs of each unit of HDB and explain why so few flats were built when the population has been expected to grow in the next few years.
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wow.. this chua mui hong didn’t defend the their policies! can i speculate that this “reporter” feels affected by the policy too?
Pre-election tactic to sweeten the ground for better result in the coming GE?
WP should send its “suicide team” again to AMK GRC. It’s time to have a report card on LHL performance since last GE 2006. It’ll be interesting to see if he can get more or less than 66% in the coming GE.
she dares to write? or she’s instructed to write?
if you’re the boss, would u want to say:
“all our statements to date have been wrong. i was wrong. you guys were right a year ago.”
or would you prefer:
“ok, you write a bit to say maybe we were wrong. and you, you write to say, ok, maybe we were wrong about that too. and after a while i’ll come out and say, i guess we all got fooled. not just me, but you too, and you, and you, since you all also didn’t see it coming.”
wat? on Thu, 11th Feb 2010 12:48 pm
You have to consider that she has 2 policies in which she has to defend. Foreigner policy and HDB policy. She simply chose one over the other. i.e she is still doing ‘defensive’ work.
It needs 2 to tango – the blame should be on HDB and some Singaporeans. Simply put, HDB for “controlling” the rules, numbers and prices of flats. Some Singaporeans for their kiasu attitudes – buying and selling at gullible prices. Let us keep the blame out from a few PRs and focus the blame on the two main culprits, for now. What say you?
Is Mah BT the scapegoat? Is he going to take the blame for everything HDB?
If he cannot smoke screen everybody with his highfalutin excuses, he probably got to start packing.
Why not, Mah belongs to the Goh era, it will be time to give his fabulous salary to someone else not so blurry. When opposition go to Tampines in the next election, their plan to go after a minister will probably fall through, Mah is not going to be there anymore. Maybe I am just speculating but what do you think the chances will be?
It is no surprise that this mouthpiece and a Janus-faced sychophant writes such an article. She lacks gumption and moreover when it is Shitty Times it is a certainty that reports of these sort are bound to be twisted in the favour of the PAP.
When the head is dysfuntional can the body be otherwise.
Mr Mah Bow Tan ought to resign and end this blame game and be more honest cos it is Singaporeans life at stake.
It is not an error but a political game that is being played out. The elections are coming and the PAP voter base is eroding fast. Quick fix lar – get foreigners in anyway, anyhow and give them PR/citizenship and need one go on to analyze and wonder why HDB units are so expensive.
Singaporeans have been used and now the game-plan is to use foreigners to gain votes. Singaporeans never came first – it was a lie and we bought into that lie. We are merely pawns in the game of politics and power. What has made it worse is the fact that it is a one-party govt and a dictatorship. Singapreans must never forget this lar – it was our grandfathers, fathers and so on … that put them there. Today, one can change it and IT OUGHT TO BE CHANGED.
PS: As for the likes of this reporter, there are too many in our local media (MSM) and one can only take it a face value.
When HDB said: “Last year, almost 50 percent of first-time applicants in BTO launches did not select a flat upon invitation. So it is not true that there is inadequate supply of new flats,” added Ms. Wan.
the real interpretation is: “50 percent of first-timers don’t want to choose those flats at THESE prices”
if you price them different will the number be 50% rejection? or would it be more like 30%?
and would this be a real phenomenon of a free market? Where if you get only 50% take-up at this price, reflecting a disagreement in the market between buy and seller, it might be time to change the prices?
but of course, you say “we have to peg it to this price based on our formula”
RIGHT. you HAVE to follow your blinking formula.
ST better be honest or face decline. Same goes for the other state media.
TR – I was suprised your were right about the issue of hdb prices going up as a result of high demand and the sudden increase of the FT population. I guessed if once a while your luck is with you and by pure chance you are right this once.
It has to be pure luck – you are not amongst the elite scholars nor the million-dollar salaried ministers. So don’t be so smuck OK? this one time you are right.
The Art of War : Know thyself, know thy enemy.
This is simply getting to know thy enemy strategy. So be careful.
She is definitely not affected by the policy guys.
HDB should also convene a study on the likely events that will unfold after all the BTOs are bulit and the owners satisfied the minimum occupation period. HDB need to pre-empt the events and come up with a feasible solution.
1. Some of the owners will want to sell their flats in the resale market, resulting in oversupply but low demand due to the controlled inflow of foreigners. Will the resale flat’s price collapse as a result?
2. With respect to 1., does this mean that ramping up the supply of new flats too fast now is not a good thing? What about the long term implications?
3. Shouldn’t the subsidy or grant be pegged also to the resale price index as a fairer way to disburse the grant?
even if i ask my 5 years old nephew gather some of his kiddo frens to contest in AMK GRC..also gurantee can take back the deposit..
Property prices in Singapore rocketing up in the midst of the world’s worst and most toxic recession. And it is still going up but stock markets globally and in Singapore heading down since beginning of this year.
The economics NOT only don’t add up BUT MOVE IN PERVERSE DIABOLICAL CONTRADICTION of rubbish political rhetorics that rising property prices is wealth creation rather than wealth and welfare DEMOLITION.
This is the ultimate sin of politics driving economics to its graveyard.
Is this country NOT SUFFICIENTLY INCOMPETENTLY BUT AUTOCRATICALLY MISMANAGED of its economy and society?
Or have I and Singaporeans blind and/or stopped thinking???
To: Dane on Thu, 11th Feb 2010 2:57 pm
1) > Will the resale flat’s price collapse as a result?
By this you mean will the prices drop? Based on the discussions in this forum as well as other forums, I think people by now realise that if the prices drop, it is generally good for them. So if what you say happens, I suppose people will celebrate.
2) > 2. With respect to 1., does this mean that ramping up the supply of new flats too fast now is not a good thing? What about the long term implications?
a) Based on (1), people celebrate, so I suppose they think it is a good thing.
b) is it really “too fast”? or on the contrary, is it “too slow”? will other more immediate methods such as “Revising the formula of pricing newly-built flats, which is currently based on a certain peg to prevailing market rates” have a faster effect?
c) long term, if people celebrate too much, they get stomach cramps from too much laughter.
As long as the PAP are in power, the HDB prices of new and resale flats are not going down but skywards, PAP are masters of “magic”!
To Ms/Mrs. Chua Mui Hoong,
Perhaps the below may help -
http://www.quotationspage.com/subjects/truth/
Sad.
Would not be surprised if PAP decides to postpone the GE beyond early 2012 dateline as even die hard PAP supporters like Chua Mui Hoong above feels the need to speak up about the misguided PAP policies.
Let us see whether GE will be postponed beyond 2012 as PAP can always use special excuses to their whim & fancy.
This mui hoong obviously instructed to write in this manner. Elections coming, must soothe the sheep a little bit. Wait for 22 Feb when pink panther will announce extra $300 hoonkie money for all citizens, and promise more Spurs for those still unemployed.
Ah Mui basic pay at least $8K per month, and probably stays in near city central condo, either Novena or Bt Timah.
The STUPID gahmen are delaying the GE because they are trying to nationalized as much FTrash & PRubbish into citizenship to gain more votes as they know the locals are against them.
The PM have to hold the GE latest by year 2011 that is within his 5 years term, from inside source.
Please do not be deceived by PAP’s wayang shows. They are merely playing good cop-bad cop.
The only way to wake them up is for us to wake up ourselves and vote in 40% of opposition MPs into parliament to ensure the spurs are permanently stuck in the hides of PAP MPs when it comes to the welfare of Singaporeans.
In my opinion new citizens less than 5 years should not be allowed to vote.
A young male who reads TR frequently and like so many other sgeans, he wishes for change. He wants PAP out.
But this young man is starting a family next year. Getting married. He needs a flat for his upcoming family.
He bought a flat this year. At 500k. He will fork out about 2k every month for the next 30 years to pay for this 99 years lease.
But this man no longer reads TR. He no longer wishes for change. He do not want the PAP out for fear of his flat losing value once the opposition takes over with new policies introduced.
He is in conflict and agony. But such is the truth in life.
He is not a saint. He needs to think of his family. He has to be selfish…
What was Miss Chua doing before being a jounalist ? Has she ever work in the ISD or some intelligence department ?
Psi on Thu, 11th Feb 2010 8:35 pm
Does it matter if his flat reach one million or drop to one hundred thousand? He will still need a flat to live. In fact if drop to one hundred thousand it will be better for him to upgrade to bigger and better flat.
Base on the analysis the ft policy should be tie in with housing policy. The number of ft allow to come should be tie to the number of completed flats.
To Psi,
I can empathise with the young man’s predicament. There are many out there who are also in the same shoes. What is the best solution that will benefit all, not just those who have not started work and has no liability, but also including the young man and all those like him? If things are only thought from only one point of view but not thoroughly from all possible perspectives, it is too self-serving.
Voting pap out is a possible way but think of the repercussions of doing so. What will happen to the young man and others like him or worse? Too radical a change is never good, as exemplified by the rise of HDB resale flats due to a sudden influx of PRs into the market. Change needs to be gradual. Voting in a bit more opposition with integrity into the government is a step in the right direction.
sigh..
Folks, let’s stand united as one people, irregardless of race ,religion, we must vote PAPPIES out in the coming election1!!
This is our final last chance! Do not be deceived by their wolves in sheep’s skin, they cannot be trusted!!! every word that comes out from their mouth, even a word of apology is also dirty. Even their tears is also considered as crocodile tears… Do not believe in them anymore!
Let’s use our votes. It is the people’s united together that will bring great force and strength to push the darkness out of the corner..
People is the strength! People is the force!! Vote for CHANGE!!!!
To: Spurs In My Ass on Thu, 11th Feb 2010 7:32 pm
> This mui hoong obviously instructed to write in this manner.
Sometimes you wonder which part is wayang and which part is not.
Assume it wasn’t a wayang. Assume she is not that smart. So she taps on her keyboard and writes a “brilliant” article about A Commodity (property). And when you write about Commodities and Markets, you talk about the Commodity, the Demand, but she forgot to talk about the Supply. Maybe she doesn’t understand that she forgot to mention Supply. Maybe it was dinner time and she was hurrying to finish off the article. So she was hungry, not stupid.
Then let’s assuming she is indeed wayanging as an obedient sister of Miss ex-ISD. She writes the above-mentioned lopsided article, which as some of you astutely point out, falls into the usual good-cop-bad-cop piece. Now why did she pretend Supply doesn’t exist as an issue?
In mentioning about Supply, you invariably bring up the controller of this Supply, which is the famous Mr Mah, who has the unprecedented honour of bring the candidate most likely to lose his seat even before the Election has been announced. And that defeats the purpose of her headline – which is NOT to make him a scapegoat. Because if you do that, you’re the bad guy. You made him a scapegoat.
Or did you? Or did he make the mistake himself, without your help? And now has the help of everyone friendly with his establishment, to not talk about Supply much?
A year ago, the establishment denied there was a problem with Supply. They also denied there was a problem with Demand. But you can only fool so many people so much of the time. When it comes to the crunch, you have to yield, and they admitted there was a Demand problem. They even manage to get MM Lee to acknowledge that Houston had a problem.
You do not concede everything if you can. So you try not to delve on the topic of Supply. An occasional mention is fine, but don’t run it every day in the newspapers, unlike TR, which is running it in every property piece it has. Hope the people forget. Distract with other juicy news. Place a good-cop-bad-cop piece as a “ok, peace, we acknowledge, you won (half) the battle, now go focus on something else like pesters”.
Not everybody bit on the cherry, Ms Chua.
She can say whatever she like, i WILL DEFINITELY vote for the Opposition Party.
to psi,
your flat will lose value if bought at too high a price whether PAP is voted out or not. PAP is no God,they can’t prop up HDB market forever, reality will sink in one day.
anyway,so long you are able to afford your mortage payment,you need not worry abt the hdb value as you can’t sell it w/o living in it for 5 years.
so,go ahead and vote for change. you need not be a saint to vote for change. just put your fear aside.
Has our higly talented and million dollars minister get the picture right now???
PM Lee is the main culprit for causing the housing problem through his liberal immigration policy. So voting him out is the solution ….
PAP has screwed up in so many of their policies and execution of the policies. Housing, Education, Population control – the stop at 2 and the current FTs/PRs overflows, etc to name a few.
If I were to grade each and every minister and the prime minister for their annual appraisal, based on a scale of 1 to 5 (1: bad performance, dismissal after a series of warning and time given for improvement, 2: below average, need retraining or dismissal when there is a retrenchment, 3: average, 4: above average, contributes , 5: outstanding and excel in his area), the following would be their scores and comments.
national development 1, mah bt, fact is he did very badly
Education 3, system is flawed, too long to elaborate
home affars 2, wong ks, dpm, lost and found, still cannot claim
environment & water resources 1, mr rats, diarrhoea & 1 in 50
finance, tharman 2, FT can do this job, just raise GST
MCYS 2, vivian, mr perennial-wherethefarkarewee-look
MFA ?, georgeyeo, to be graded pending outcome of hit&run case
defence 3, teo cheehean,dpm, “GENERAL” manager
health 2, khaw boon wan, Mr goJBwhenSickorOLDnowCPFalsocanuse
mica 2, lui tuck ew, maybe the minister with no world cup
law 2, shanmugam, doing Mah’s work with disastrous results
manpower 2, gan kim yong, no jobs for locals hurray!
trade & industry 2, lim hng kiang, bad hairdo for himself too!
transport, raymondlim, who is this guy? no see since last election
PMO 1, leeHL, the 3 lims plus Gck,lky n jayakumar.
disclaimer: the grading for PMO is not entirely based solely on the PM’s work alone. please note that this department is overstaffed and in many ways, functioning like an infantry section with 7 commanders, one of which is a trained anti communist commando sharpshooter, one hokkien ah beng rifleman, one guniang, one encik.
please note that the section commander actually reports to the sharpshooter.
” But this man no longer reads TR. He no longer wishes for change. He do not want the PAP out for fear of his flat losing value once the opposition takes over with new policies introduced. ”
what does it mean by “losing value”? how will it affect this young man?
If i had a chance to Vote i will vote for the Opposition Party for sure
Case 1:
Say you take a loan to buy a flat at 400k.
It drops in value to 200k.
You want to upgrade to a bigger flat which cost 300k.
you sell your old flat at 200k, but because you take a loan of 400k, you need to pay 200k cash upfront to settle the loan.
After coughing up the extra 200k to pay off the entire loan, you happily take another 300k loan to get the bigger flat.
Total damage: 500k
Case 2:
Say you take a loan to buy a flat at 400k.
It increases in value to 600k.
You want to upgrade to a bigger flat which cost 700k.
you sell your old flat at 600k, but because you take a loan of 400k, you get a profit of 200k.
You then take a loan of 700k to get the bigger flat.
Total damage: 500k
Case 3:
Say you take a loan to buy a flat at 400k.
It drops in value to 200k.
You want to downgrade to a smaller flat which cost 150k.
you sell your old flat at 200k, but because you take a loan of 400k, you need to pay 200k cash upfront to settle the loan.
After coughing up the extra 200k to pay off the entire loan, you happily take another 150k loan to get the smaller flat.
Total damage: 350k
Case 4:
Say you take a loan to buy a flat at 400k.
It increases in value to 600k.
You want to downgrade to a smaller flat which cost 400k.
you sell your old flat at 600k, but because you take a loan of 400k, you get a profit of 200k.
You then take a loan of 400k to get the bigger flat.
Total damage: 200k
Case 5.1:
Say you take a loan to buy a flat at 400k.
It increases in value to 600k.
You continue to stay in your house.
Total damage: 0k
Total gain:0k
Case 5.2:
Say you take a loan to buy a flat at 400k.
It decreases in value to 200k.
You continue to stay in your house.
Total damage: 0k
Total gain:0k
Case 6:
Say you don’t have a house, you want to buy a house.
The house price 3 years ago is 200k.
You wait and save money, and think it would drop in price.
Now, the price is 400k.
New buyers don’t want to wait and fork out the money to buy.
But once you buy, you go back to case 1, case 2, case 3, case 4 or case 5.
Case 7:
Say you don’t have a house, you want to buy a house.
The house price 3 years ago is 200k.
You wait and save money, and think it would drop in price.
Now, the price is 100k.
New buyers don’t want to wait and fork out the money to buy.
But once you buy, you go back to case 1, case 2, case 3, case 4 or case 5.
The people in Case 7 has the greatest benefit.
People in case 1,2,3,4,5,6 for 70%-80% of the population.
The conclusion is that there is no conclusion.
Downgrading at a period of property price rise seems slightly better than downgrading at a period of property price depreciation.
The issue is thus not whether price rise or not, but the rate of change. If the property does not appreciate too much or too fast too suddenly, there would be so much less problem.
And the amount of subsidy also need to be increased accordingly according to resale market condition to help people in case 6.
Then, there would not be so much discontent on the ground, Thats what i think.
Mr Dane:
Case 1:
Say you take a loan to buy a flat at 400k.
It drops in value to 200k.
You want to upgrade to a bigger flat which cost 300k.
you sell your old flat at 200k, but because you take a loan of 400k, you need to pay 200k cash upfront to settle the loan.
After coughing up the extra 200k to pay off the entire loan, you happily take another 300k loan to get the bigger flat.
Total damage: 500k
============
model answer:
Total kenna damage = $500k
of which, $300k is in a flat, which is goddam bigger. $200k is in the “loss from selling first tiny flat”
if this price drop did not happen, this will be the result:
Say you take a loan to buy a flat at 400k.
It increases in value to 450k (let’s not be greedy yet).
You want to upgrade to a bigger flat which cost 300k if the price of the old flat dropped to 200k (this flat is 50% bigger). but since this old flat is now $450k, this new flat 50% bigger is now $675k.
you sell your old flat at 450k, but because you take a loan of 400k, you need to pay 400k cash upfront to settle the loan.
After coughing up the extra 400k to pay off the entire loan, you happily take another 675k loan to get the bigger flat.
Total damage: 1,075k
Mr Dane, this is lesson number 1. Challenge my figures. I am the HDB Calculator.
Mr Dane:
Case 1:
Say you take a loan to buy a flat at 400k.
It drops in value to 200k.
You want to upgrade to a bigger flat which cost 300k.
(this bigger flat is 50% larger and therefore costs 50% more.)
you sell your old flat at 200k, but because you take a loan of 400k, you need to pay 200k cash upfront to settle the loan.
After coughing up the extra 200k to pay off the entire loan, you happily take another 300k loan to get the bigger flat.
Total damage: 500k
=== this $500k involves the $200k loss from the tiny flat, plus the $300k for the big flat. and now you have a big flat.
Case 2:
Say you take a loan to buy a flat at 400k.
It increases in value to 600k.
You want to upgrade to a bigger flat which cost 900k
(that’s where you made a mistake. this is the same bigger flat
that is 50% larger and costs 50% more)
you sell your old flat at 600k, but because you take a loan of 400k, you get a profit of 200k.
You then take a loan of 900k to get the bigger flat.
Total damage: 700k
=== this $700k involves the $200k profit from the small flat, and the $900k forked out for the same 50% bigger flat
do you see the difference now?
Case number 3 & 4 – nobody is arguing with you that downgraders benefit from inflation in asset prices. Downgraders form a small fraction of the population. Most people are stayers or upgraders or new applicants.
Case 5.1:
Say you take a loan to buy a flat at 400k.
It increases in value to 600k.
You continue to stay in your house.
Total damage: 0k
(not true. damage = paying interest on a 400k loan)
Total gain:0k
Case 5.2:
Say you take a loan to buy a flat at 400k.
It decreases in value to 200k.
You continue to stay in your house.
Total damage: 0k
(not true. damage = paying interest on a 400k loan)
Total gain:0k
now what is interesting is this:
Case 5.THREE:
Say Mah Boh Tan didn’t make that mistake and the flat is still 300k (3 years ago only)
Say you take a loan to buy a flat at 300k.
It decreases in value to 200k, or it stays put, doesn’t matter.
You continue to stay in your house.
Total damage: 0k
(not true. damage = paying interest on a 300k loan)
Total gain:0k
Your interest cost has lessened. That’s because your loan BURDEN has lessened. this is a sunk cost, you are sleeping in your flat, you are sleeping on your pile of money. the bank is collecting interest.
Mr Dane:
Case 6:
Say you don’t have a house, you want to buy a house.
The house price 3 years ago is 200k.
You wait and save money, and think it would drop in price.
Now, the price is 400k.
New buyers don’t want to wait and fork out the money to buy.
But once you buy, this is your error in interpretation:
You are stuck with a $400k loan due to price inflation, and as already pointed out, you are paying off interest (or opportunity cost) on your $400k loan.
Case 7:
Say you don’t have a house, you want to buy a house.
The house price 3 years ago is 200k.
You wait and save money, and think it would drop in price.
Mah Bow Tan corrected his mistake.
Now, the price is 100k.
New buyers don’t want to wait and fork out the money to buy.
But once you buy, as above:
You are now only stuck with a $100k loan due to price deflation, and as already pointed out, you are paying off interest (or opportunity cost) on your $100k loan.
People, 80% of the population if you will, fall into the class of stayers or upgraders and a minority are downgraders.
If the asset price did not inflate IN THE FIRST PLACE, the extra cash was not tied down IN THE FIRST PLACE. and that is their retirement fund.
But in this case, the asset prices inflated. Cash is tied down. The only way to unlock it so that you GET BACK what was originally your retirement fund, is to downgrade. Staying put or upgrading will not get you back what was originally your retirement fund.
The conclusion is not difficult to understand.
Dear TR, please delete my post on
hdb loan calculator on Sat, 13th Feb 2010 9:29 am
because i did not take into account the profit made by selling flat at higher price. the error has been corrected in the next post.
” Change needs to be gradual. Voting in a bit more opposition with integrity into the government is a step in the right direction.”
Did anyone tell Old Fart and his gambling family that gambling chips need to start small first and gradual ? How in the hell did we lost hundreds of billions in one short ? Still need to be gradual ? How much more gradual before we went bust and we pay for this old farter’s shit ?
If you want changes to be gradual, old fart and his farting family need to be gradual, but when these highfalutin clowns start to lose money so rapidly like no man business then changes to boot out the PAP must be accelerated. Didn’t we know that PAP = LCY the old fart ?
Why do you think the property price increase so rapidly other than to pay off the debt of gambling loss and to increase gambling chips for old fart and his incompetent family and party ?
sorry there’s an error in the first post at 9.29 a.m. and admin hasn’t managed to remove it yet. the 9.43 a.m. post takes into account the $200k profit made on the small flat.
looks like my subsequent posts were deleted by accident. shan’t retype everything but i’ll summarise here based on Mr Dane’s comment:
Case 3 & 4 – downgraders. Nobody disputes downgraders benefit from inflation. However, not many understand these points:
===Case 3 & 4 – downgraders. Nobody disputes downgraders benefit from inflation. However, not many understand these points:
a) in the days before price inflation, these potential downgraders would have bought a cheaper flat, and set aside some money for retirement. they didn’t have to downgrade since they have retirement funds. they did not have to pay interest on the larger loan quantum for the flat.
b) in these days, people pay interest on the larger loan quantum and/or lose opportunity cost from this sum. part of their retirement fund has to now be channeled into this loan. they have to consider downgrading (moving out etc) if they want to release this sum. this interest lost / opportunity cost lost / having to downgrade would not exist if the price did not get inflated in the first place.
Case 4:
===downgraders benefit from inflation of price, that’s undisputed.
Case 5.1:
Say you take a loan to buy a flat at 400k.
It increases in value to 600k.
You continue to stay in your house.
Total damage: 0k
=== this is wrong because you are paying interest on the large loan quantum of $400k. if there was no inflation, your interest / opportunity cost would have been like on a loan of $300k.
Total gain:0k
Case 5.2:
Say you take a loan to buy a flat at 400k.
It decreases in value to 200k.
You continue to stay in your house.
Total damage: 0k
=== same thing. you’re paying interest on a large loan quantum which you didn’t have to if HDB didn’t make such a mistake.
Total gain:0k
Case 6:
===yes, new buyers pay more in an inflated environment, and pay more in interest / opportunity cost as well.
Case 7:
Say you don’t have a house, you want to buy a house.
The house price 3 years ago is 200k.
You wait and save money, and think it would drop in price.
Now, the price is 100k.
New buyers don’t want to wait and fork out the money to buy.
But once you buy, you go back to case 1, case 2, case 3, case 4 or case 5.
The people in Case 7 has the greatest benefit.
=== yes, in a deflationary environment, new buyers, as well as upgraders benefit, and these form a bigger population than downgraders.
The conclusion is that there is no conclusion.
=== please review my points and see if you really conclude there is no conclusion.
a) downgraders benefit in this inflated environment, but they did not need to downgrade in the first place if prices didn’t inflate. they would just have a home fund to pay for their home, and a retirement fund.
b) stayers suffer from paying interest on larger loan quantum.
c) upgraders suffer from paying inflated prices to upgrade.
d) new buyers suffer from paying inflated prices AND large interest due to large loan quantum.
so we ask again: whoever invented the urban myth of “high home prices is good” ?
simple illustration on retirement fund and downgrading.
this has not been well dealt with by media as well as TR:
a) u plan to have $100k in your home. and $100k in retirement fund. when it is time to retire, your home might have inflated to $150k, but you continue to live in it. Your retirement fund might have increased from investments or even just plain old CPF SRS interest rates. if you don’t want to take any chances, these CPF / government bond stuff investments give you the best guarantee of capital-preservation. still more kiasu? put it under your bed in cash or gold. in even more desperate times, you downgrade from $150k home to something even smaller.
b) in an inflated housing environment, all $200k is in the home. there is no room left for $100k retirement fund. home prices continue to inflate. hopefully when you retire, it has inflated such that you can downgrade, otherwise you still have no retirement fund:
1) you sell your home, downgrade, free up the money for retirement. you have to “move house”, that’s no fun. you have to pay housing agents – and we all know how much work they do. you have to pay lawyers and someone to stamp your fees. transaction cost of a buy-sell in property is about 3-4% for one round trip.
2) when you retire, if prices did not inflate further, this is what happens. Your $200k house is still $200k. you have lost on interest paying your larger loan or lost on the opportunity cost of having a $100k retirement fund originally. you now need retirement money – you downgrade, “move house” pay agents pay lawyers etc.
3) if prices deflate, you’re in trouble. please wikipedia japan / tokyo / asset / bubble / lost / decade for more damning information.
your retirement fund which is locked up in a non-guaranteed asset, drops in value. poof. no amount of kaopeh will get you anywhere.
Ah Mui’s basic pay? Try doubling that and add a little more…
Used to work in another media establishment…another former ISD officer was stationed there as an assistant editor – she was paid S$16k
How did we know? She went to photostat her payslip but forgot to take back the original :p