Politics versus Economics

Recently developers have been sounding out to the government that the recent cooling measures are going to hurt an already frail economy and could spark a downward spiral for property prices. There has also been speculation that the government would remove these measures if property prices were to correct too much or if the economy were to contract drastically. To me, I feel that these measures should and would stay.

This is not about economics anymore. From day one, property prices were determined by political factors more than economic ones. Then minister for national development, Mah Bow Tan, embarked on his "asset appreciation" policy and wanted public housing to be seen as an asset which would appreciate over time. It did not matter that prices escalated out of control and beyond the reach of people. If economics played a part, the cooling measures should have been implemented from the onset of the bubble in 2009. Nothing was done and minister Mah allowed property prices to appreciate in a dramatic fashion after the financial crisis in 2008.

Next up was the use of social media. Politics in social media was liberalised. Singaporeans could discuss about politics and political groups could use sites such as Facebook and Twitter to spread their propaganda. Out came the opposition and they highlighted the problem of housing to all Singaporeans, young and old. It caused a great awakening and people realised that this spike in prices could not go on forever. Housing was one of the core topics in the general election of 2010.

Finally, the last straw to the PAP was the loss of a great comrade Mr George Yeo. Not only was he an able foreign minister, he was, to me, a possible candidate to take over as Prime Minister when Mr Lee Hsien Loong were to step down. This shocked the PAP and they had to do something. They realised that the past years were filled with mistakes in policies and that the unhappiness on the ground was spreading. Old guards like Lee Kuan Yew, Goh Chok Tong, Wong Kan Seng and Mah Bow Tan stepped down from the cabinet and finally our PM Lee Hsien Loong could assemble a cabinet which he could truly call his own. The PAP is now more consultative than authoritative.

Thus I would politely remind an association like REDAS that property prices have their ups and downs. Just because the government is trying to cool it down does not mean that you can throw economic rationale to the measures implemented. If REDAS truly cared about economics, why didn't developers feel that something was weird with our property market when they were making obscene amounts of money the past few years?

Typical upper elite class behavior. Only make noise when things don't go their way. They seem to forget that they had it very good for the last few years.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

What drives the market?

The latest set of cooling measures seem to be rather harsh but personally I feel it's the right step to take to make Singapore a home for Singaporeans.

The past few days I have been bombarded by my clients as to where the market would be heading. There are a thousand and one reasons as to whether the market will go up or down. However I think all reasons boil down to one main reason.

SENTIMENT

Not too long ago, majority of analysts, developers, home buyers and owners, real estate agents all thought that Singapore market was going to become more and more expensive. We live in a land scarce country and thus prices must increase. Thus buying a property is a sure bet to securing a healthy profit a couple of years later.

What a difference a few months make. Today analysts are singing to the tune that market is going to correct. One analyst from Standard Chartered even forecasted a 30% drop in home prices in the next few years.

Let's then look at what happened. In mid 2010, analysts predicted that markets had already peaked and will rise slowly in 2011. The market did not peak in 2010 and instead peaked in mid 2011 at a level 16% higher than the last property peak in 2007. We underestimated the magnitude of the property boom. This time round analysts are generally betting on a 10-15% correction. I believe that we will again underestimate the market.

Sentiment drives the market. Regulations set by the government help fuel the sentiment, be it positive or negative. The last minister in charge of national development set out policies which caused the shortage in supply and thus it fueled the euphoric sentiment that came along with a recovering economy and record low borrowing rates. Thus the ridiculous spike in real estate prices. This new minister is more people-centric and listens to public feedback about Singaporeans wanting to own affordable properties. Sentiment was that market had peaked and will come down in the near future due to the global market turmoil. His policies, which will serve Singaporeans well in the long run, will fuel the negative sentiment, causing prices to correct deeper than what we expect.

Oh well, prices are too expensive in the first place. A correction will be good and healthy and will NOT destabilize the economy. Property prices are not going to halve. This is just a wake up call for everyone not to over commit themselves. In the long run, lower prices will mean more affordable housing for the people in Singapore.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

The erosion of our social core

A client of mine recently could not complete the purchase of her new flat because she did not have sufficient funds in cash to fork out for the cash over valuation and down payment. Usually these monies are to be handed to the solicitor acting for the purchaser so that the solicitor can make the payment to the sellers. It was of no fault of mine that she did not have the money. She required about $10,000 worth of cash to complete the sale of her property. A few weeks ago she had collected a hefty cheque of more than $60,000 as profits from the sale of her flat. I told her to keep the monies and remember to set aside sufficient monies for the completion of the flat she purchased. She agreed to do so as well.

How then did this amount disappear in a matter of two weeks? Very simple, she had squandered it on the casino. She knew she needed this money and yet she was tempted to place all of it at the gambling tables of our very own casinos.

When the government built these "integrated resorts" they promised us that there was going to be barriers for Singaporeans to enter their premises. A few years on, the "integrated resorts" are experiencing extraordinary profits. The foreigners which we were supposed to attract are coming in but then who are the ones actually playing at the tables? Singaporeans. Let's all wake up to the fact that these are casinos and stop trying to dress them up merely by renaming them "integrated resorts". Other than the $100 levy, the government has not tried anything significant to educate Singaporeans about the ills of gambling. Buses were allowed to pick Singaporeans from heartland malls and were only halted after a public outcry. I also wonder how many Singaporeans are aware that we have a National Council on Problem Gambling (NCPG)? If our casinos are truly designed for foreigners then why is it that there are more entry points for Singaporeans and Permanent Residences than for foreigners? Why not have an opt in option rather than an opt out option? What we should have is that every Singaporean and Permanent Resident should be excluded by default from entering the casinos. If anyone wants to play, he has to apply and obtain a permit. This hassle will deter a quite substantial group of people and it will also sound alarm bells to the families of people who have a gambling addiction. The reason why the government opted for the current system? Profits.


I have a friend who has lost his whole hairdressing business due to the massive debts that he chalked up at the tables of the casinos. Let's face it. $100 is not a significant amount. I have clients who have had to sell multiple properties just to fund their gambling addiction.

It is a multi billion dollar industry. However, to me, the economic benefits that come along with it do not outweigh the social ills that is affecting our nation.

I'm very sorry but the government has taken the very very low road this time round.

Singapore is a land where there are no shortcuts. Everyone works hard for a living. The casinos are eroding the very social core of our society.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Facing up to reality

Every dog has it's day and certainly the Singapore property market has had it's days for the last three years. The market has gotten a great rally and prices are way ahead of the last peak in 2007. However, with the Europe debt crisis and the slowdown of the Chinese economy, Singapore seems to be affected as well. The property market is taking a hit and volumes have come down. As a real estate salesperson, I have felt the slowdown in terms of the number of appointments I have. However, buyers in the market are generally sincere and there are still sellers who are willing to let go at reasonable prices and thus deals can still be concluded. To be frank, the last two to three months have been my best months in terms of sales figures for the whole of 2011.

However, what will happen when almost all those who need a house have made a purchase? What happens if prices take a dip and sellers decide it is not worth their while to try to get a good price for their properties? What if sales volumes drop drastically? This time round, there probably will not be a quick rebound off recessionary lows. The main drivers of global economy, the US, Europe and China are facing problems of their own. Whatever is said, Singapore is definitely NOT immune to a global slowdown. The mere fact that the government is warning of a possible slowdown would mean that they have already seen some figures before we have and it does not look too rosy.

Just recently, my CEO spoke to me about maintaining one's bottom line. ie. keeping costs low. I realise that this is a very important concept lost by many out there. When times are good, some may spend lavishly on their lifestyle. They splurge on cars, branded goods and holidays. To them, summer is 24 hours a day, 7 days a week, 52 weeks a year and will never go away. Prudence is a concept lost by salespeople. I fear for those who have over-committed. Instead of upgrading our debt during the booming years, we should be downgrading our commitments.

Only time will tell who can stand the test of time. Times will be leaner but then for those who are willing to persevere and work hard, they can tide through the winter that is the upcoming economic downturn.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Is the market slowing down FINALLY?

http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_734143.html

Really interesting to note that new private home sales are down 15% for the month of October. As a real estate salesperson, I do feel that the sentiment of buyers in general are one of "wait and see". No one knows what is going to happen to the global economy. Europe may or may not implode, China may have a hard landing and the US recovery story may not be as buoyant as earlier anticipated. If new private home sales are down 15%, I would encourage home seekers to take a closer look at the URA website to get a feel of the resale home market. Volumes have been diminishing since the first half of this year.

I personally feel that prices have run ahead of fundamentals. This then comes to my point. Paying in excess of $900 per square foot for a 99-year leasehold property in Punggol may not make much sense. Reason being that a 3 bedroom apartment with an average size of about 1000 square feet may translate to a price of a million Singapore Dollars. Which then brings me back to the point of "how many people can afford a property higher than today's prices?" My fellow graduates are not making tons of money. Most of them are earning salaries of about $4,000 to $5,000 a month at the age of about thirty. A loan of $800,000 would set them back about $3,000 a month thereabout depending on the interest rate. How much more can prices increase such that they can sell it for a profit in future? $1,500 per square foot for a unit in Punggol? With about 80 plus years left on the lease? What will the typical buyer say about the purchase he made today?


"For own stay. So high or low it does not matter to me".

My response, "I bought my car for own use. I am glad I bought it when it was 50% the price of a similar model today."

No one can guarantee that the house they buy today will be last house they will ever live in. Buying for own stay is the worst excuse for the financial suicide that buyers are getting themselves into these days. 

This is a property boom of epic proportion. Prices have skyrocketed since the lows in January 2009. A mere two and a half year time frame has brought us to the dizzy heights of today. For those who jumped in without much thought, I pray that this boom is not a bubble in disguise.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

The gap between the "haves" and the "have nots"

It's been a long while since I've blogged. I have been travelling a fair bit. Visited Thailand and parts of China. I must say that it is good to be back home in Singapore.

Anyway, I have a few burning matters which I must blog about! First and foremost would be Mr Khaw's speech in parliament. Since I am a real estate practitioner, I must first take interest in his speech.


1) Getting a home for the first time home buyer.

This is very important! The first time home buyer makes a large chunk of the people in the market looking for homes. Be it resale or build-to-order. Do not think that the first time home buyer does not have cash on hand. I have many first time home buyers who can turn to their parents for a helping hand to fork out that $50K-$100K cash over valuation for a resale HDB flat. Most parents want their children to live near them. This may take some heat off the resale market. For the next year, cash over valuations should come down, there will be fewer scenarios whereby viewings will be packed with 5-10 groups of buyers vying for the same flat and eventually prices should ease a little. Reason why prices won't crash? These build to order flats are usually in far flung areas like Punggol or Jurong West. Places whereby the estate is less mature. The mature estates like Ang Mo Kio, Bedok and Clementi are the places where the parents of these first timers live. If the parents and children want to stay near each other, they will still have to go and dip their hands in the resale market to buy flats in these mature estates. Moreover, there are some first time home buyers who may want a home with close proximity to central areas and since they are well paid working executives, they will not mind forking out more for a resale flat.

My solution: The minister spoke about building the Bidadari estate. I would advise him to do so as soon as possible. Also, to cater for more BTO projects in highly matured estates. I am sure that there can be sites to be found in these mature estates. Then, if land is limited, build higher HDBs to really maximise the land use. I am sure I can find land available in places like Ang Mo Kio for HDB redevelopment. Why does Far East have to build Centro Residences to be the marquee of Ang Mo Kio? Ang Mo Kio is a predominantly HDB estate. Why not build a Pinnacle like structure in Ang Mo Kio? 60 storeys is just nice. The parent living in the block nearby can easily spot his or her child's home. Talk about family bonding. Think about it Minister Khaw. Create a HDB icon for a town to be proud about on-route to solving our housing shortage problems.


2) Catering for the needy. Those who fall between the cracks.

I feel that more can be done. It is not Singaporeans making noise for the fun of it when we mock about throwing money to the Youth Olympics or when we go big on Formula 1 but yet we should give more back to those in need. I believe the special housing grant does help but then by how much? The maximum the special housing grant can go is $20,000 and that is for households earning less than $1,500 a month. Moreover, this is for those who would like a 2-room flat.

Average Monthly Household Income*	SHG	Flat Types Eligible For With SHG
Not more than $1,500	$20,000	2-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats
$1,501 to $1,750	$15,000	2-room or 3-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats
$1,751 - $2,000	$10,000
$2,001 - $2,250	$5,000	3-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats

* Based on average of 12 months

I would think that the majority of applicant should fall under the SHGs of $5,000 or $10,000. This may sound like the government is giving a generous handout but there are a few problems. Why only in non-mature estates? Also, the grant is too little to make a significant impact in their monthly installment. A $10,000 grant broken down in a 30 year loan based on HDB's concessionary rate is about $40.03 per month. Basically the grant serves to lower the monthly installment of the applicant by $40.03. This is almost the conservancy rate for a 3 room flat. I would think that more can be done. If the SHG is insufficient, we must think of more constructive ways to help the needy.

My solution: I believe that since we are talking about increasing the rental flats, could we instead build such flats with the option of the occupant purchasing the flat after a certain period of time? The occupant can have the option of renting the flat from the government first. Perhaps at a nominal rate of about a hundred dollars. However, he is not allowed to make major changes to the structure of the flat since on paper he is the tenant. He is also not allowed to apply for a car park lot as on paper, he has a low income and thus should not have a private vehicle. If he wanted to own the property, make changes to it or have a car lot, he must buy it from HDB at a certain price. The good thing about this system is that we identify the problem, help those who need a place by renting one to them and then hopefully when some start buying over their flat, it will spur others to follow suit.


3) Other groups will be tackled by 4 years.

This is a really dangerous statement. By other groups I would say that Minister Khaw meant the second timers and the HDB upgraders and people aspiring to own private property. Basically I would deem him telling the middle and upper middle class to "hold on" while he settles the first timers and the needy. I really took PM Lee's parliament speech well. He mentioned that we should all have a stake in the country. I would think that he meant that if we all have something to work for, we would be purposeful citizens of Singapore. Basically the gap between the haves and the have nots is getting wider. It is dangerous to have a segregated middle class. A middle class who is well off to live comfortably but have little means to move up the social ladder. The middle class who is stuck in his HDB even though he dreams of owning a condominium or landed property one day. The middle class who has seen his 5 room flat price spike from $400,000 to $600,000 only to find that his dream condominium has risen from $800,000 to $1.6 million in that same period of time. This middle class is well educated, many working professionals with household incomes of about $10,000. The social immobility is startling. I can forsee that the gap between the middle and upper class will only get wider. As an inclusive society, we have to solve this problem together with the two previously mentioned. The middle class is educated, well connected to mass media, affluent enough to enjoy some form of luxury like a personal vehicle. Moreover, with our country's good education system, this group of people is growing. I have friends who seem to resign themselves to never owning a private property or are purchasing private properties overseas. Why then are we letting this educated and affluent group of people place stake holds in other countries when we can let them do so in our own country? Is the current level of private property prices affordable?

Let us take a look at an analogy. A loan of about $650,000 for 25 years at 3% interest would cost about $3,000 a month in installment. This breaks down to $100 a day! I recently went to Bangkok and stayed in a 5 star hotel (which incidentally is larger than a shoebox apartment in Singapore) and I paid $100 a night! Basically if private property prices continue to rise beyond fundamentals, and I believe they are beyond affordability in some categories, then why not just live in a hotel with room service, no hassle of paying electrical and water bills? Imagine a 3 bedroom 99-year leasehold property in Kovan is costing about $1.4 million. The monthly installment for such a suburban property is going to be about $5,000 a month once interest rates start rising!

My solution: The property cooling measures should stay for a long time to come. (sorry developers and REDAS) We need them to stablise prices. To further moderate this overheated property market, much more land should be released. The introduction of a property gains tax should be done. Singaporeans taxed a certain rate, permanent residents and foreigners a higher rate. This tax should be implemented on PRs investing in HDB properties as well. PRs should also not be allowed to rent out their HDB flats.


Hopefully my message gets across to the minister somehow.

To quote Maslow's hierarchy of needs...

Based on this pyramid, the Ministry of National Development is the most important ministry there is for Singaporeans.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Market turmoil

I have a great solution for the current market turmoil. Please stop all the intervening in the market. The problem with the west is that the future of the political party making the policies are dependent on the economic furtunes of the country. I'm sorry but they are making policies not for the good of the people of their country but for their own benefit.

Market is really weak. Be it in stocks or property.

The solution to the current financial crisis? The market is smart enough to make a solid rebound once we hit the bottom. Thanks to the western countries, it's going to take some time.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Singapore Condominium Market

Perhaps condominium owners should be a little fearful. There are many projects obtaining their TOP soon. The condominiums that I have on hand have really slow take up rate and yet owners in suburban leasehold properties are asking for in excess of $1200 per square foot.

To quote a seller of a 99-year leasehold condominium in Kovan who called me, "Property how to fall? The government bringing in a lot of China people! In one to two years time, Kovan condominiums will be worth more than $2,000 per square foot! I ask $1,500 per square foot only!"

Yeah right... Good luck to him. Based on my records, I believe he has been trying to achieve this price since the start of 2011.

When markets are moving up, us real estate practitioners will feel it. The converse is true as well. If I tell you the market is quiet, I believe I can feel it better than he can since I'm in it on a daily basis.

It's like me advising Sebastian Vettel as to how to pilot this...

The AWESOME RB7 car!!!

Anyway, there will only be ONE champion in 2011...

I'm eagerly awaiting the Singapore Grand Prix...

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

An European who knows common sense

http://www.channelnewsasia.com/stories/afp_world_business/view/1153203/1/.html

The world is topsy turvy.

In Singapore, our inflation is at an all time high. Yet our interest rates are at an all time low. This encourages more borrowing and investment. Thus pushing UP or maintaining inflation.

Thanks to the US and Europe for flushing the world with money. There is nothing we can do. In Singapore the rich will probably get richer and the poor will probably stay where they are. If you are asset rich your assets will most probably have appreciated by a huge margin.

Please everyone... no more economic policies for the insane.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

"Kancheong" Buyers

Recently I had a buyer ask me when property prices will fall off their recent highs. I replied, "When people like you are less 'kancheong'"

For those who do not understand, I am telling the buyer to calm down. Not to panic. The market will correct but as to when it will correct? It depends on buyers. If buyers still rush into the market, the market will inevitably rise. Why then am I so sure that the market will correct? Just to name a few reasons...

1) Prices do not reflect fundamentals. Singapore is moving towards a technical recession. is. two consecutive quarters of smaller growth as compared to the previous quarter. Though it can be argued that this is because of the extremely stellar growth figures posted in the first quarter of 2011 and the next few quarters cannot keep up with such figures, we still must realise what a technical recession will have on overall general sentiment.

2) Interest rates have only one direction to move and that is up! Currently we are at historical all time lows. Banks are flushed with cash and need to lend at rates close to nothing to get rid of excess cash. Perhaps the Singapore economy was more resilient than what we expected it to be. Resilient package did a little too much. Inflation is really high currently, financing is cheap, the economy has overheated due to too much governmental intervention.




3) Singapore should be moderating the rate we import foreigners. Despite whatever is said about the benefits of foreign talent, I still support a "Singaporean first" policy. If PM Lee is true to his word, and I believe he will be so, then the influx will moderate, demand for housing will fall, rental rates will ease thus lowering rental yields. Prices of property should come down. Anyway there are too many Singaporeans holding more than one property.

4) The most telling reason there will be a slowdown is because of the circus that is happening in Europe. You may have heard of a German television show mocking Singaporeans for drinking reused water (NEWater) and taking temperatures before we enter a building (SARS period). Well perhaps they are a larger joke. The Eurozone is not going to hold. Greece will most probably default and there is little Germany can do to prevent it. The Eurozone was doomed to fail from day one. How can a country forsake it's economic sovereignty when it is an independent state. Imagine Singapore, Indonesia and Malaysia merging to form one currency. The beauty of capitalism is that everyone in the system must be responsible for his own economic decisions. I'm sorry but the Euro is an extremely flawed system and the Europeans must learn to pay for things through savings rather than borrowing. 

Hopefully I am right. We have had a great run up in property prices. There should be a period of consolidation.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Downturn: What it means

Interestingly, this article was extracted from The New Paper. In my opinion, a tabloid magazine disguised as a newspaper for daily circulation. 

http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story20110909-298691.html

I find it weird that I have friends thinking of getting into the current market for speculative reasons. It is wiser not to play with fire. Didn't we graduate from the same place? Patience may save you quite a handsome sum of money.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

The rich need help?

Developers have had a good run. Many of them have increased their wealth many fold. Now that market seems to be slowing...

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1152072/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Inflation is still a problem

Singapore's CPI is up 5.4% on year!

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1148618/1/.html

Yet at this point in time our exports are weakening due to strong Singapore Dollar. I have mentioned it before, we need a change from our exchange rate policy. Basically we do not interfere with interest rates. We combat inflation by strengthening our Singapore Dollar. Yet interest rates are at an all time low! Finance Minister are you listening? Of course not, I'm a nobody to him. Perhaps I should go to my elected president to air my views?

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Luxury home prices in S'pore down 1.7% in Q2

Interesting report...

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1148502/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Singapore is NOT immune to a global crisis

I've had really stubborn people saying that Singapore is immune to any external shocks especially with regards to any impending financial crisis. Me being a real estate practitioner, I get this comment often from sellers of properties who ask for ridiculous prices for their properties. They often have the notion that Singapore is a land scarce city state with fundamentals so sound that even a slight correction in property prices is unthinkable. Instead, they see the pace in the increase of prices moderating. ie. prices will still rise in the short, medium and long term but at a slower rate.

Then comes a reality check.

Singapore is the fifteenth largest trading partner of the United States.

Source:
http://en.wikipedia.org/wiki/Economy_of_Singapore

What this means is that even though we think that the rise of China and India can shield us from any slowdown from the United States, it is important to note the vast size of the US consumerist economy.

The US makes up 28.90% of the world's consumer market

Source:
http://www.rediff.com/business/slide-show/slide-show-1-worlds-25-largest-consumer-markets/20110729.htm

In contrast, China makes up 5.29% and India makes up 2.12%. What this means is that the US is almost 4 times as large a consumer than both China and India combined!

Will there be a scenario whereby the United States and Europe go into a recession and Singapore continues to boom? I do not think so.

Then why the huge rise in asset prices the last three to four years? My answer would focus on three main reasons.

1) The extremely low interest rates made it very attractive for home buyers as most buyers calculate "monthly payments" rather than use a "what if interest rates were much higher" analysis before committing to a propety.

2) Excess foreigners due to lax government policy

3) (HIGHLY OVERLOOKED) Window dressing of the economy before a very important general election for Singapore in May 2011. Usually in the year or two before a general election, especially when the ruling party requires to garner support, money will be pumped into the economy so that everyone is doing well and the feel good factor will contribute to populist support for the government. I believe that if this was not done, we may have had an even bleaker election result for the ruling People's Action Party.

Recession soon? Possibly. Correction in asset prices in Singapore soon? Most probably.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

London Riots

Recently there has been absolute anarchy in England. Riots everywhere. Good thing Singapore is not such a country whereby hooligans ply the streets. Whatever the reason, it is plain stupid to use violence to solve matters. Japan was devastated by an earthquake, England is being devastated by it's own people. 


Click on link to view scenes of the violence...

http://www.cnbc.com/id/44059635?slide=1


It is fortunate to be living in Singapore...

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Proud to be Singaporean...

Weird... Watching the national day parade actually makes me feel really proud to be Singaporean. I have always reiterated the point to my fellow Singaporeans that this is home. I could not picture myself living anywhere else.

Majulah Singapura!!!

Anyway, I found a really cute kid reciting the Singapore pledge in Mandarin... Future member of parliament?

Oh yes, and for the benefit of those who need to know the English version.

Just some comic relief to take the heat of an ever falling stock market.Happy Birthday Singapore! Let's move forward together!

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Crazy buyers

I am really shocked at how Singaporeans spend their money. It is not just the everyday items like buying clothes or spending on posh restaurants. It is the fact that many Singaporeans are paying ridiculous amounts of money for big ticket items like cars and property. A brand new 1.8 litre Honda costs about $130,000 today when I paid $70,000 for the same car 4 years ago. Public housing or HDB flats are going for insane cash over valuations (COV). Sellers are commanding COV premiums and yet buyers are forking out what the sellers are asking. It is now rather normal to have a Sengkang flat commanding in excess of $60,000 COV and yet there will be takers for the flat.

This then brings me to think carefully. Are Singaporeans that rich? Are businesses doing that well that everyone's pay has gone up by such a large amount to be able to afford such prices? I look around and then I just don't get it. Everyone seems to be making about the same amount of money 3-4 years ago. Businesses are doing better than in 2008 but are perhaps at pre-recession levels. Why then the abnormal level of optimism? Why is everyone so sure that incomes will remain at this level? That property prices will only continue to increase. Cars can only get more expensive. I am not trying to be a wet blanket but I do not believe that this boom can continue forever.

So where did this huge wave of money come from? To understand what is happening in the world, I would suggest reading and watching this article and video from CNBC.  

http://www.cnbc.com/id/43268061

It is about "quantitative easing" in the US. This basically translates to flooding the economy with money to try to jump start a dead economy. Basically it applies to the US because their economy is in a very bad shape right now but then it should have no business with places like Singapore when we are seeing our economy skyrocket and everything is getting more expensive. However, because our economies are interlinked, money that is being pumped into the US economy is inadvertently being pumped into ours. What can we do? Nothing much. Is there a problem with this? I believe so. Because of the large amounts of money sloshing about in our economy, banks are lending at insanely low rates. At times with interest rates of as low as 0.2% per annum!

What I am trying to tell everyone is that the boom may be induced by the west. Their economies are doing poorly and money is being pumped into the system. It is merely flowing over to us. Is the stock market overpriced? Most probably so. Companies are doing well because money is coming in for investments. Everywhere you turn there are construction cranes, road works, cabling, upgrading and development of buildings. Why should companies not turn a huge profit? Is the Singapore property market overheated? Most probably so. There are Singaporeans committing to properties as though it is a sure way of making money. Quite a good number hold more than one property. The common excuse? "For investment". Like any investment, there are risks involved. Property investments are risky if you buy in at a historical high and that is where we are currently.

Recently the stock market has not been too kind. Stocks have been falling. I have a few remisier friends who still believe that the market can be played. My advice to the rest is that if you do not know what is going on, best thing to do is to shut yourself out from the stock market. The stock brokers will not want to hear this. They are like doctors prescribing you medicine wanting you to feel better but not curing you forever. They want you to visit the market often as they make money from activity.

There is still money to be made but I do not know when and where is the peak. Truth be told, I think we are in the midst of a bubble. I just do not know when it will pop.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

A survey on real estate sentiment

S'pore property prices may continue climbing: survey

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1144363/1/.html

Interesting how such a trivial survey can make the news. Well, we live in a media saturated society. I believe market will be flat with a very small upside to prices. I too agree that the economic downturn later in 2011 will not materialize. Just a guess.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Where has all the money gone to?

The rich poor divide is getting wider...

Now where did all that money go to?

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TAAA DAAA!!!!!!!!!!!!


I used to hold Las Vegas Sands shares. It is traded on the US stock exchange under the symbol LVS. I bought it at about USD$9 and sold it off for USD$42. It netted me a very handsome profit. Why did the stock run up so significantly? Basically Las Vegas Sands runs a couple of casinos, namely one in Las Vegas itself, Macau and most prominently, Singapore.

The gaming market is huge in Asia. LVS eanrs about 95% of it's income from the Asian market and Singapore is poised to profit from this, apparently...

http://www.reuters.com/article/2011/07/27/sands-earns-idUSL3E7IQ50L20110727


Or will we actually...

If setting up a casino was as simple as we made it out to be. Personally I do not think we were and we currently are still not ready for two casinos. The social problems will far outweigh the economic benefits that come attached to setting up the two integrated resorts. Now what actually happened?

1) The building of the casinos actually caused an unreal spike in building activity. This caused a spike in construction costs across the board. Manpower was being directed to the building of not one but two very major integrated resorts. Let us be clear on this. This was something Singapore had never embarked on before. I do not think many Singaporeans understand the magnitude of what happened.

2) The building of the casinos caused an acute shortage of raw materials such as steel and sand. Thus pushing up prices of such raw materials. Since building residential properties also required similar raw materials, this escalated the costs of developing buildings and what developers did was to pass on the costs to the end buyers since they could command prices in a country whereby there was an acute housing shortage due to the lenient immigration policy.

3) The building of the casinos caused a huge wave of extreme optimism in the region. Singapore was seen as the darling of Asia. Not just South-East Asia but the whole of Asia. It was the "in" place to be. Property prices were expected to escalate after the completion of the casinos and thus sellers demanded more, developers increased their prices, buyers rushed in. Just to jump on the bandwagon before prices escalated even further.

The news read that Singapore achieved record economic growth. The reality is that the negative aspects of the two casinos will not be fully felt by our community till a much later date. We are already suffering from the highly inflated economy and historically high property prices. I would like to reiterate what Senior Minister of State (Information, Communications and the Arts and Environment and Water Resources) Grace Fu had commented.

Grace Fu voices concern over effects of casinos

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1143734/1/.html

I have a couple of people whom I know who have a gambling problem. Increasing the entry fee will not be much of a deterrence to them. The $100 will only stop those who are interested to go in and take a look "for fun".

Mercenary as it may seem, we cannot do much to right the wrongs of such a drastic policy to welcome two casinos into our country. Money was made from the casinos. The gambling addicts got poorer, the poor are still poor, the middle income people are not any richer in terms of real income.

Only the super rich have made significant increases in their wealth.

Oh and did I leave someone out?

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1103967/1/.html

Sorry PM Lee, I support you wholeheartedly but I just do not agree with going the low road of setting up two casinos in our beloved Singapore.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Foresight vs Shortsight

Resale flat prices are alarmingly high. They are at an all time high in fact. Recently I brokered an executive maisonette flat in Bishan for $90,000 above valuation. The valuation was priced at $690,000 and thus the flat was transacted at $780,000. The offer came in during the very first viewing. This actually made me wonder, are flats really that short in supply? Do we really have that serious a supply and demand imbalance? The answer to these questions is an astounding YES!

I had 23 groups of buyers and buyers who were represented by their agents we came to the property. The house was not done up and extensive renovation was required. However, it was one of two executive maisonette flats on sale in Bishan and thus it was rather rare.

As the option was being filled in, I pondered as to what the buyers would have to go through. A 25 year loan for $552,000 (80% of valuation) at 3 % interest would mean a monthly installment of $2,617.61! This would have to run on for the next 25 years. For public housing, I find it ridiculous. Moreover, the buyer has to for out $90,000 cash over valuation, $34,500 in cash down payment and $103,500 in CPF down payment. On top of that the buyers will need an extensive renovation on the property and estimated that it would cost them about $80,000 to do up the place to their liking. Throw in another $10,000 for furnishing and the total cash that the buyer would have to spend on this property is a whopping $214,500!!!

I find having to spend $214,500 worth of cash on public housing is ridiculous...

Let's all please remember, when you buy a HDB, you are owning the lease on the property. When you buy a private property, be it landed or condominium or apartment, you are owning the title of the land either as land itself or in strata title. This is a very big difference and this discussion will be left to a later post.

Now then, our current Minister for National Development has come out to say this....

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1142742/1/.html

and I quote

"National Development Minister Khaw Boon Wan said it will take 3 to 5 years to "substantively resolve" the problem of high resale flat prices and for prices to stabilise."

Why then was this problem not singled out by the previous cabinet? It was already glaring. The asset appreciation policy was never an actual plan. It was conceived as a cover up for a flawed policy. One of lax immigration and poor housing supply planning. The two created a very good mix for escalating flat prices.

I am sorry but I believe that our ministers are and were paid a handsome sum of money to conceive policies that would benefit Singaporeans. Therefore we must have ministers with FORESIGHT, not SHORTSIGHT. I am a flat owner and I would like to say that I do not care if the value of my flat goes up or goes down. This is because I cannot monetise it.

Let's just say that I believe it is mainly this flawed policy that made our Prime Minister Lee Hsien Loong give an apology during the last election. 



Let me first state that I believe that PM Lee is perhaps the right person to lead Singapore forward. However, the same cannot be said for some of the policy makers who came up with weird policies in the last 5 years.

All I have to say to the policy makers who made our PM give this apology, shame on you! What have you done?




That was about 2 years ago. Today, flat prices are still higher than ever, suburban condominiums are commanding in excess of $1,000 per square foot for leasehold developments. Banks are offering easy financing with interest rates close to zero, people are spending huge portions of their salaries financing their houses with the belief that Singapore can remain prosperous forever and they can keep their jobs always.

Dearest Minister Khaw, please be someone with foresight. We do not need to see the problem before reacting. We can take evasive measures before it becomes too late. (a HDB flat valued at SGD$1 million soon?)

Do not be a doctor who prescribes medicine for a patient when he is sick. Instead give the patient an inoculation to prevent him from getting the flu in the first place.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Singapore's June inflation up 5.2% on-year

Proves my point entirely.

Buy a saving plan from an insurer and receive about 3% returns on your money. Inflation is 5.2%. The value of your dollar is still falling.

Buy term and invest in properties and stocks when market cools down.

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1142873/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Super low interest rates!

I was recently working on a new project launch by Far East Organisation (FEO) in Pasir Ris. It was a mass market leasehold condominium priced at about SGD$850 per square foot on the average. Sales were brisk due to the fact that the price was rather attractive and also, FEO staff are really good sales people!

Anyway I was shocked when I heard of the financing package that the local banks were giving my client. They were offering 0% + the 3 month inter bank offer rate (which at that time was 0.2%). This rate would stay till the project was completed, which in my estimation would be another 3-4 years. Although this super low interest rate assisted me in closing my clients, I really am failing to see how the government is encouraging financial prudence and yet allowing the banks to entice clients with such low rates. Banks themselves are taking on too much risk with such a move. All this for the sake of maintaining loan volume.

Why the reason for such low interest rates?

Our Monetary Association of Singapore  (MAS) uses our Singapore Exchange rate to regulate inflation. What it means is that if things get too expensive, they will raise the value of the Singapore Dollar to make our imports cheaper and our exports more expensive.

What is the problem then?

I thought about it for a while and then I realised something. The US is now embarking on an exact opposite path as Singapore. They are flooding the market with US dollars and thus the US dollar is dropping in value. If I were a developer I would not want to develop anything in the US. If I built anything, the value of my property will drop in value. If I spent USD$10 million to build a building, I am not sure the value of my building will hold. What if the US government wants to drop the value of the US dollar by another 10-20%? This would mean that my building would be worth much less over time. On the other hand, the Singapore dollar seems to always be going UP. As a developer or investor, I would want to build something in Singapore. In future when the Singapore dollar appreciates, it will add onto the profits that I will already be earning.

I build with cheaper raw materials and sell high because I sell in Singapore dollar and Singapore dollar goes up.

versus

I build with expensive raw materials and sell low because I sell in US dollar and US dollar goes down.

Thus the government is trying to lower inflation but in actual fact it is encouraging more people to demand for Singapore denominated assets because the value of the Singapore dollar is always going up.

How to solve the problem?

MAS has to understand that it cannot only use the exchange rate to fight inflation. It has to regulate the interest rates between banks. Perhaps a change in policy please. Finance minister are you listening?

Some videos to explain a little about what is happening in the US and between banks.

http://video.cnbc.com/gallery/?video=3000026496

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Scarce land in Singapore

I do a fair bit of landed property sales and I always get sellers telling me that landed prices will always hold because land is scarce in Singapore. Moreover, I get people who are living in places like Serangoon Gardens telling me that the estate is full of eateries and amenities and thus should command a very high price. I thought about this "landed property is the most valuable form of residential real estate in Singapore" idea for a good few months. I was thinking whether this was true or not. I was driving around Orchard Road a couple of days ago and it finally struck me what sort of property I should aim for when (and not if) prices fall during the next property correction.

The most valuable land is the land in the central region of Singapore! ie. properties in and around Orchard Road.

Let me explain why it is much better to go for a condominium in Orchard Road rather than a landed property in a suburban area.

1) Location is always the key. There will always be a demand for properties in and around the heart of Singapore. Be it the central business district (CBD) or our nation's prime shopping belt. Compare this to a landed property in the far outskirts of Singapore like Loyang, Sembawang , Woodlands or Jurong. There are landed properties in these areas calling for prices of more than SGD$1,000 per square foot for land. This to me does not make any sense. Add up all the land in such areas and compare that to the very scarce amount of land in and around Orchard area. You will realise that properties in and around the heart of Singapore are much more valuable than perhaps a landed property in Loyang.

2) To the people living in places like Serangoon Gardens. Such an environment can be replicated. The shops, the eateries, the banks, the cafes, all these were planted in the estate. The intrinsic value of the property is still not about location. Getting to the CBD is still a chore thanks to the constant jam on the CTE expressway. Basically the environment is man made. I would say that the establishment of Orchard Road and Raffles Place is more organic. Where else to place the headquarters of banks, companies, our best eateries, top hotels, flagship stores but in the heart of our nation?

My point is that places like Orchard Road are valuable because they are in the heart of a bustling Singapore. The fastest growing economy in Asia. (Though this may change after the last round of economic data just released). Few in Singapore will find getting to a place like Orchard Road as inconvenient but the people staying in Jurong may find getting to places like Hougang rather out of the way and vice versa.

While this happens in "ulu" places like Loyang

http://singaporeseen.stomp.com.sg/stomp/3552/4124/199852

Let us answer the question of where is the most valuable property in Singapore. (Notice I did not mention the type of property.)

It is right at the heart of Singapore!

I would much rather own a 2-3 bedroom apartment in District 9 than to fork out in excess of SGD$2 million for a landed property in the outskirts of Singapore! (Note: You can find a 2-3 bedroom apartment for about the same price as a landed property in the suburban area of Singapore)

Now why then are people paying about $1,000 per square foot for leasehold properties in places like Hougang?

Weird...

If they are willing to buy as these prices, as a real estate agent, my clients are willing to sell...

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

S’pore property crash: When and how serious?

Interesting article on Yahoo

http://sg.news.yahoo.com/blogs/singaporescene/pore-property-crash-serious-095330844.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

This policy makes a whole load of sense...

"Khaw elaborates on BTO exercise"

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1141421/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Life insurance as a form of savings?

Well... the answer to this would be NOT to buy a policy to have forced savings. I studied the investment rate of returns of most life plans and found out that they give you a rate of about 3% per annum. Inflation tends to be higher than the rate of return given by the insurance companies. In fact, you are WORSE OFF by forcing yourself to contribute to a policy. Your money is getting weaker everyday.

Solution: Buy a term policy. It is cheap, does the job of covering you in the event of unfortunate circumstances.

So why do insurance agents push life policies? Simple: It pays the highest commission. In some instances about half of the premium paid actually goes into the agent's pocket. (If you pay $200 worth of premiums a month, some companies pay up as high as $100 to the agent! This is before his bonus and incentives.) Moreover, companies need to earn their fair share as well. Where do you think they get the money to place huge bus adverts which go around Singapore everyday?

What to do with the extra money? Buy a property if you can! Property prices track inflation closely. Rentals are even bench marked closer to the economy and inflation. If you have sufficient cash on hand, you can pay off the property and live on the rental. In time the property should appreciate as well. I don't think you can pay off your life policy and then your policy value will keep on growing. If I am 30 years old I cannot tell my insurance company that I want to pay future premiums till the day I die.

I completed my Certified Financial Planner (CFP) course in 2010 and I know what I am talking about. Sorry to all insurance agents out there. Real estate is a much safer bet.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

HDB launches 7 BTO projects offering 3,600 new flats

This is a good move by Mr Khaw. Often every BTO is oversubscribed. This is usually because the launches are small and the demand is high. Small launches cause the large amount of buyers to have to "fight" over the small number of flats available. By combining the launches, they are trying to match the demand with an equal supply.

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1140817/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

The best place to buy property

Recently someone posted the question of where is a good place (globally) to purchase property. Immediately, I answered, "Singapore. Definitely!" He felt shocked that even after all the criticisms I have for the Singapore property market I will still hold Singapore in such high regard.

1) Singapore is really safe!
This is perhaps the most important quality about buying a property in Singapore. Singapore has very low crime rate and yet has one of the lowest policeman to population ratio in the world. This is due to our very strict laws. Where else can you go out in the middle of the night and not think about getting robbed all the time. Where else can you actually flaunt your wealth openly without constantly worrying about getting into trouble. Whether for investment or for own stay, buying a property in a safe and lawful country is important. It is much easier to rent out and when you do you will fetch a good rent.

2) Singapore is really exciting!
Not too long ago we could say that Singapore was nothing exciting. Not much night life, not many things to see, not  many things to do. Currently there are many nightspots available. With the opening of the integrated resorts there are casinos and even a Universal Theme park right in the heart of Singapore. The best thing for a racing fan like myself is the annual Singapore Formula 1 GP. To me it is the best race on the Formula 1 race calender and places like Monaco and Abu Dhabi have to fight it out to take second spot. Last but not least. Food is really everywhere. Please remember, all this is packed in our very tiny island. You do not have to travel long distances to get from one destination to the next.

3) Singapore welcomes everyone!
To me this is not good news for the locals but it it very good for the foreigners and permanent residents. Singapore does not restrict the purchasing of private properties, with the exception of landed properties, for foreigners. For any foreigner wanting to invest in Singapore, you and I get just about the same terms. Only thing is that you cannot buy public housing or own land in Singapore. When foreigners sell and make a profit, they are free to take the money back home. There is no property gains tax at the moment though there is a seller's stamp duty which was recently introduced.

4) Singapore has a stable and non-corrupt government!
Political turmoil is really unsettling for a country and Singapore is perhaps the most stable place politically in the region. The PAP government has ruled the country very much since Singapore obtained independence and recently has turned to a slightly more accommodating stance towards it's citizens. Our prime minister is capable and well liked (in the recent general election his ward garnered a higher percentage of votes than the last election. Almost all PAP wards fared worse than the previous elections) and the country takes corruption rather seriously.

5) Singapore is beautiful!
The quality of housing is impeccable. Finishing in even mid-end condominiums rival high end projects in places like Bangkok, Malaysia. We have come to a point whereby condominiums are selling a lifestyle, marble flooring is something expected of in a new development, condominium facilities are comprehensive. Pollution is low compared to almost every major city in Asia. Thus the air is fresh, the views are spectacular. There is no place that is this clean and this well maintained.

Seriously there's no other place i will want to live in. There is serious chatter on the ground that in time to come Singaporeans will have to consider living in neighbouring places like Johor Bahru as it will be too expensive to afford a place in Singapore. Something like how people in Hong Kong buy apartments in neighbouring Shenzhen as it is much cheaper. I do not buy into that idea. I believe that there is a prevailing property bubble thanks to the US government flooding the market with easy money and low interest rates. Singapore is an awesome place to buy a property. Just not at today's ridiculous prices.

A spot of patriotism before I end this post!

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Singapore's growth slows down

To me this is good for our country. Let's not overheat...

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1140801/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

The property market in China is booming?

What happens when you mix a nation which has endured decades of socialist policies with the desire to maintain economic growth?

China has been running up great growth figures. It is considered an economic powerhouse and is slated to take over from the United States of America as the world's largest economy in a couple of decades. However, things do not always seem as rosy as they seem. Growth is measured in the form of gross domestic product of GDP. Loosely explained, GDP refers to the market value of all final goods and services produced within a country in a given period. It is often considered an indicator of a country's standard of living.

Well what is the problem then? Let's take a company like Apple then. I am sure many people have heard of Apple products like the iPhone, iPad, iPod and their Mac computer systems. What companies like Apple are doing is producing innovative products that people around the globe want to buy and use. Often there are massive shortages. In Singapore, there was a period of time whereby people had to queue in the mornings just to get hold of an iPhone at the telecos' outlets. Apple products are always in demand and goods are always being shipped to end users. Apple produces about USD$25 billion of revenue a quarter. This goes into the calculation for the GDP of the United States of America. This is what I call quality GDP.

What is China doing? They are essentially a socialist economy. They measure success by the number of cities that are built. Not by the number of properties which are consumed. Since building is also an economic activity, they attribute the millions of empty apartments built as FINAL GOODS and thus calculate the market value of these goods into the calculation of their GDP. This is what I call rubbish GDP.

 Perhaps this very informative video by NBC: Dateline can illustrate my point.

It makes my point as to why a free market economy like Singapore works. Demand and supply fundamentals are always important. Socialism does not work.

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Financial literacy needed

It may shock many to know that there are rates as low as 0.2% per annum being offered at certain project showrooms. Many do not realise that rates cannot stay so low forever.

Example:

A $1,000,000 loan for a period of 30 years at 0.2% interest rate will mean a monthly installment of $2,862.38

However,

A $1,000,000 loan for a period of 30 years at 3% interest rate will mean a monthly installment of $4,215.98

Not to say that everyone buying properties in Singapore is reckless. Just saying that there are a few that do not think about what may come when interest rates start rising. Also, they expect the rental market to go strong always.

0.2% interest rate a little too amazing? It's happening in Singapore!

http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_689737.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Singapore is getting richer = Singaporeans getting richer?

The news reports state that Singapore is going through unprecedented growth. The economy is booming, people are getting richer. Yet as a property agent I get to meet some sellers who need to sell their houses to clear their debts. This scenario is getting alarmingly common. I was curious as to how the impact of the casinos would impact our society and thus I did a casual search and I found this article on CNBC.

http://www.cnbc.com/id/43628943?slide=10

It lists the "World's Biggest Gambling Nations" and behold!

[extracted from www.cnbc.com]

2. Singapore

Gaming Losses Per Adult: $1,174

Singapore opened its first casino a little over a year ago but it’s already the world’s third largest-gaming center after Macau and Las Vegas and it’s set to overtake Vegas this year.

The decision to allow casinos to be built in the city-state has created plenty of worries that Singaporeans may end up getting hooked to gambling. The government has tried to discourage local gamblers by imposing an entry fee of S$100 ($80.50) for citizens who want to enter a casino.

Authorities have also implemented a "Family Exclusion Order," that allows a family to ban relatives from visiting casinos.

But the measures have done little to dampen enthusiasm for gambling. Frank Fahrenkopf, president of the American Gaming Association, has forecast that Singapore's gaming revenue could hit $6.4 billion in 2011, outpacing Las Vegas, which earned $5.8 billion in 2010.

Gaming losses per adult was a whopping $1,174!!! This is calculated in US dollars I presume. Assuming that about a quarter of the people in Singapore is not adults, That would still mean that there were approximately 3.8 million adults each losing UDS$1,174 per annum to the casinos in Singapore.

We "donate" USD$4,461,200,000 to the casinos every year!!!

I personally do not feel richer. Wealth is perceived. Inflation is eroding away our money.

Hmmm... now where has my $2 chicken rice gone to?

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

A good report on the property outlook in Singapore

Thanks to my very good friend "codename: ET" for this awesome article. You really are someone I respect and I am waiting for you to come on board full time to the real estate industry.

Please click on the images to view them in their original (and larger) size.

 

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com

Let's play fair - Centrale 8 ain't that fantastic after all

Interesting to be back blogging. Just a simple and useful tool to keep in touch with friends, family and clients.

The recent displeasure with the prices of the DBSS (Design, Build and Sell Scheme) project in Tampines by Sim Lian Group, Centrale 8, has caused our recently appointed Minister for National Development Khaw Boon Wan to state that DBSS flats are not HDB flats.

http://www.temasekreview.com/2011/06/19/khaw-boon-wan-dbss-is-not-hdb/

Let me then make it clear as to why I disagree with this notion.

The DBSS scheme was designed by his predecessor, Mah Bow Tan, to boost building activity during the perceived housing and construction slump in and around 2006. The pilot DBSS project was The Premiere in Tampines. It was awarded, ironically, to Sim Lian in January 2006. This was at a time when our housing prices were still affordable and we have yet to open the floodgates to the mass of foreigners that would flood our beloved Singapore for the next few years.

Let's get this straight, DBSS is still a HDB flat. We buy it under HDB schemes, we cannot rent it out immediately and have to fulfill our minimum occupation period (MOP) and we cannot resell it to foreigners. When the MOP is up and the owners can sell the flat, there isn't a classified section that states "DBSS Flats For Sale - Tampines". Where do we advertise it in? We market it as a HDB. To me, it is way more a HDB than it is not. So I would politely remind Mr Khaw to kindly weigh the facts before making such a statement.

Why then do Singaporeans still go for DBSS projects?

Simple, DBSS flats come with furnishings. The whole flat is done up. The flooring is laid, cabinets are built, the finishing is classy. All this is included in the price. Since there is no cash over value (COV) for such flats and there is no cash to be spent on renovation, Singaporeans find it a great deal to buy a DBSS as they can literally include the renovation cost into their loan quantum. For couples with little or no cash, but with little financial sense, this is a great thing for them! If they buy a flat in the open market, they will have to pay a hefty sum for the COV and then fork up $40,000-$50,000 for renovation. With a DBSS flat, they can include such costs into the repayments! Little do they know that they are just kicking the problem down the road.

Should there be a correction in the property market? Is there a property bubble? To me, yes there definitely is one. Let's please realise that many Singaporeans do not benefit from Mr Mah's asset enhancement scheme. So what if our houses increase in value? We cannot monetise it! The only people who can are the PRs who bought at a low, sold at a high (at times to Singaporeans), and then return to their country with the profit. Asset enhancement scheme is a failure. We should then realise that if we cool prices, ie. depreciate prices, it will also not have an effect to the majority of Singaporeans who did not do anything during the recent property boom of the last few years. For example, in 2005, a family stays in a 3 room flat in Ang Mo Kio which is valued at $160,000. Today in 2011 they can sell the flat for about $320,000. However, they do not sell the flat. If 3 years down the road the price falls back to $160,000, it would not affect them at all. This is because they never did anything to the property which they needed to consume and thus could not monetise it. Do we really want a property market whereby public housing will cost more than a million Singapore dollars? Yet the government embarks on this policy of asset appreciation and then asks the young Singaporeans why they do not want to start a family.

Simple answer: MONEY NO ENOUGH.

You spend a huge chunk of your money paying for your public housing, where are the young couples to find the money to start a family? Incomes do not rise as fast as housing prices my dear government.

You have got to read Colin Tan's take on this DBSS fiasco

http://www.todayonline.com/Business/Property/EDC110708-0000112/Its-all-about-the-where

Last but not least, let's make sure the last DBSS does not go out with a bang. This will let the government and developers know that us Singaporeans are not fools. To those who have gone for Centrale 8, good luck to you financially in the long run. You will have to work your life away to pay for your flats. When the ceilings start spalding, the tiles lose their shine and your cabinets start to fall apart, you will realise that what you have bought is EXACTLY a HDB.

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1140077/1/.html

Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com