The Monetary Authority of Singapore issued an all points warning, "The current low global interest rate environment will not continue indefinitely." Some economists are also sharing the sentiment that the ultra-low borrowing rates in Singapore could soon start rising. The common message preached seems to be that house buyers should not over extend themselves, and fall over each other to sign up for the 30-year loan buffet spread that Mah Bow Tan structured to make HDB flats "affordable".
The three-month Singapore dollar Swap Offer Rate (SOR) is hovering at 0.2 percent, the benchmark for bank loans. MAS warns that at the ultra-low SOR, a 35-year, $1 million loan at 1 percent interest rate in the first year may mean "just" an installment of $2,823. But every 1 percent point increase will set you back by $500. If rates rose back to 2006 levels of 4 percent, that monthly installment could easily balloon to $4,300 monthly. The scariest part of the message is the $1 million example. Is this what they are planning to price HDB flats at? Is this going to be worse than the 6 million population target that caused so much misery?
People with money in the bank will see this as a glass half full (hurray, no more pathetic rates for their fixed deposits), rather than half empty. People who have more than the minimum sum of $131,000 in their CPF account, which was raised from the previous mandated $123,000. CPF Board said the new MS will apply to members who turn 55 from 1 July 2011 to 30 June 2012. According to the Future on Retirement Survey done by HSBC bank, most Singaporeans will have less than that minimum amount in total savings. Based on the HSBC survey, the average Singaporean has only $120,000 for retirement, and this sum includes non-CPF savings and investments.
So who are the people who made a buzz line for the over priced Centrale 8 DBSS flats, leading it to be over subscribed two times? Stock brokers will tell you these guys who drank the Kool-Aid must be the same lot who subscribes to the greater fool theory. Never mind the unearthly unjustified price tag, another fool around the corner will always be willing to pay more. Khaw Boon Wan has done his part by foretelling in his blog of the housing apocalypse to come. But, having cried wolf once too often, nobody knows what to say anymore.