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
