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
