Wednesday, January 15, 2014

The Towering Inferno

Jesse Colombo, self-styled anti-economic bubble activist, made his charge quite clear in the Forbes article, "Why Singapore's Economy Is Heading For An Iceland-Style Meltdown." He says Singapore is currently inflating "one of the most egregious examples of post-2009 bubbles", and predicts the boom will end in similar (but necessarily identical) manner.

The Monetary Authority of Singapore (MAS) is not about to take that lying down, and be accused of sleeping at the wheel. To deflect the sting of the tight slap, MAS insists that the Government and MAS have taken decisive steps to cool property demand and prevent excessive leverage. It cited Three Facts: 1) new housing loans declining, 2) household balance sheets are strong, 3) property asset values are higher than debts incurred. The latter is that one card which will bring the whole house tumbling down - when asset values fall, you can forget about household balance sheets and loan servicing. As in the debacle of the Marina Coastal Expressway opening, the traffic advisories are issued after the event.

It took a fire on the 65th floor of the posh Marina Bay Suites to confirm the worst of Colombo's fears. We now know more than 90 percent of the Marina Bay Suites are unoccupied. Only 20 of the 221 units at the 66-storey tower have physical residents, the rest of the 203 sold have phantom owners waiting to "flip" their investment, and cash in the chips as they would at the shared namesake casino. The Indonesian owner of one 53rd floor unit may not wait that long, "I bought an apartment in Singapore because it is very safe and clean here. But now I want to sell."

Thanks to the country's bubbles, wrote Colombo, the ranks of Singapore's wealthy is helping to fuel a luxury consumption boom in everything from high-end apartments to exotic cars. Just like in Iceland before the fall. There may be more Marina Bay Suites with similar occupancy rates, and no tears will be shed when the speculators get burned. Unfortunately the madness spreads to the heartlands, where first time owner occupiers end up indentured to a 30 year mortgage for a public housing unit.
Alarming map of 17 countries with potential housing bubbles


49 comments:

  1. 30 year mortgage - 99 year lease. Sweet.

    ReplyDelete
    Replies
    1. 10% occupancy rate - sweeter.

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    2. Not surprise the occupiers are not owner, could be tenant only. The situation will worst than imagined.

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  2. The empty apartment syndrome may have spread to HDB. At my block, my floor has 4 units (corner flats), 2 of which are not occupied. 1 is empty for more than a year, the other for more than 6 months. So it is 50% unoccupied flats at my floor

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    Replies
    1. sad thing is, it is unoccupied not because nobody needs flats but because they can't afford it

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    2. My immediate next HDB unit has remained vacant for more than 2 years. The last time I heard from the tenants was that the unit was rented from JTC.

      The next question is WTF was JTC doing to hold it empty for so many years?

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    3. Govt have the data, when will they be open abt it?

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  3. Indentured as in indentured coolies in by-gone rubber estates and railway yards? Apparently, Colombo is not alone to predict disaster. JJ Zhang, in Marketwatch said much the same thing. Those who rate this little red dot highly also rated the banks that failed highly. It is not an answer to the question if there is a bubbly waiting to burst.

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  4. I wager my HDB & CPF that nothing will happen... even after 2016.

    ReplyDelete
    Replies
    1. Being a captive audience, do you have a choice.

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    2. haha, are u sure its "my" CPF, it belongs to tumashit! And yr hdb won't be worth much by then. Why not post a photo of yr Chinese mistress, your ex-MP Palmer might be interested to "wager" with you :)

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    3. you are that arsenal fan who lost his house in wager to man u fan ?

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    4. When you play against the only 'dealer' in town, the 'dealer' always win.

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    5. most are 'wagered' like it or not. I'm sure our CPF's gone.

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  5. It is quite true. Many of the newly built condominiums and boutique apartments around my housing estate are empty. Every time I passed by, only a handful of the lights are on at night. The rest are deserted.

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  6. I am sure they will soon take issue with Mr Colombo's assertion too. Same logic that there is no evidence rioters are angry other than drunken rivalry that got carried away.

    Denial is the mother of PAP's invention.

    http://sg.news.yahoo.com/singapore-takes-issue-with-nyt-editorial-on--singapore-s-angry-migrant-foreign-workers---144711273.html

    ReplyDelete
    Replies
    1. yes MAS already posted an official statement
      http://www.channelnewsasia.com/news/business/s-pore-is-not-facing-a/954240.html

      Delete
  7. The recorded penthouse unit went for S$19.3m. If buyers have the money to hold while leaving them empty, why should it bother anyone?

    Th HK consortium must have forgotten to have their feng-shui activated properly. And if fire is on 65th floor wouldn't security protocols tell you not to take the lift, or at least take it to 64th floor and take the stairs up? Did they burn or did they die of inhalation, inside or outside of the elevator?

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    Replies
    1. The thing is there is no escape staircase for the security guards. The lift is the only way for them to access the lobby. I wonder how did they manage to get TOP and CSC from BCA when there is such a major fire safety blunder in the design of the building. No doubt the occupants have their cat ladder from within their apartments, but no so lucky for the security guards as their lives are not important to those at BCA.

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    2. //An SCDF spokesman said the fire, which was confined to the service lift lobby area, involved renovation materials such as paint.//

      Can the press be any more vague?

      According to report, all the lifts are sent to the ground floor in the event of fire. So how did the 2 guards ended up charred and dead in the lift?

      If the firemen were able to use the firemen's lift, why didn't it occur to the guards to do the same, instead of using the service lift where the fire is "confined to the service lift lobby"?

      Every floor has 4 units, and each has its own pte lift. So which service lift did the guards use exactly? Is it the same one as the firemens lift?

      What a messy reporting.

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    3. Maybe the fire then wasn't that big to trigger the homing device of the service lift

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    4. "The recorded penthouse unit went for S$19.3m. If buyers have the money to hold while leaving them empty, why should it bother anyone?"

      because over-consumption should be a crime. if your neighbours are starving, and you have more than enough food and hoard them, what would their reaction be?

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  8. Two security guards died in the lift due to the fire, and who dare to take the lift now ? Will it be haunted ? How is it that the lift can automatically stop working properly once there is a fire ? If it has worked properly, the security guards would not be trapped. What if there is people still trap inside the lift ? What kind of stupid design is that ? There is no camera in the lift ? It look like the building is only safe when nothing happens, and it not so safe when shit happens, just like PAP.

    ReplyDelete
    Replies
    1. Try not to use the service lift, unless you are cargo...

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    2. So why do cinemas treat its patrons like cargo going through back alleys, staircases and service lifts after movies are over?

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    3. Very good point!!

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  9. "2) household balance sheets are strong,
    3) property asset values are higher than debts incurred."
    MAS' points (2) and (3) is a circular argument.

    Household balance sheets are strong precisely because property asset values are higher than debts incurred.
    Conversely, when property asset values fall, household balance sheets will be weak.

    Throw in unemployment which then results in an inability to service the housing loan.

    Also, the collateral for your housing loan is the property itself.
    When property values fall, the value of your collateral also falls.
    So what are you going to do when the bank asks you to top up the value of your collateral due to falling property prices?

    ReplyDelete
    Replies
    1. Point 1 was pure lie: "First, the property market is now stabilising and new housing loans have also been declining."

      Housing and bridging loans by domestic banks have increased consistently by about $1b per month for the last 12 months, up to the latest data available in MAS's own website. Here is the link...

      https://secure.mas.gov.sg/msb-xml/Report.aspx?tableSetID=I&tableID=I.5A

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    2. dot gov dot sg - say no more.

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  10. Actually the most insightful chart in Colomo's write-up is Fig 1 from Nomura on the growth of bank loans versus nominal GDP growth.

    We can see clearly that since 1976, there were only 3 short periods when loan growth greatly exceeded GDP growth. First 1981 to 1984, then 1994 to 1997, and 2010 to 2013.

    Each of the first 2 periods of credit surge and high GDP growth were followed by deep recessions. The first leading to the major economic restructuring, of which LHL and the good professor were involved. The report can be read in the URL below, but I extract 2 para on the construction and property sectors for the young and old but optimistic speculators as well as the old and forgetful "analysts" cheerleaders of the MSM here:

    "Construction Slump
    13 Even while the construction boom lasted, we should have been alarmed that a third of our economic growth each year was derived from construction, as this trend obviously could not be sustained. Now that the boom is over, the construction slump has brought us even more severe problems. It is not just a matter of supply of properties exceeding demand. More significant is the contraction of aggregate domestic demand, resulting from the lower tempo of construction activities. This alone has contributed 2% points to the drop in GDP in 1985, and is likely to contribute a further drop in 1986.

    14 Also property loans by banks, and loans secured using property as collateral, are at risk if property prices collapse. Banks will tend to cut back credit lines as the value of the collateral drops, squeezing otherwise viable companies. Worse, banks with large property exposures may find themselves with a portfolio of non-performing loans. A collapse of the property market could affect the integrity of the banking system. Further, the drop in investments in construction leads to an imbalance between our high national savings rate and lower domestic investment rates, with multiplier contractionary effects on the GDP"

    Extracted from MTI report: http://www.mti.gov.sg/ResearchRoom/Documents/app.mti.gov.sg/data/pages/885/doc/econ.pdf

    The second period of credit binge was of course from 1994 to 1997, and even the young speculators will not forget the run up to the Asian financial crisis (if not, go watch Ilo Ilo on its social impact).
    of course the AFC gave us Mr Liew the chance to head CapitalLand, formed from the ashes of Pidemco and DBS Land, we also remember how POSB was lost to bail out some reckless mortgages of another bank, how OUB and Keppel all had to be "merged". Incidentally, all the 3 local banks are topping the charts in Colomo's article on exposure to property loans, one in particular charging head-and-toes on into HK and China, both with property mega bubbles.. have fun boys.. I got a feeling we will need the good professor again for another committee, but hopefully not the other chap.

    ReplyDelete
  11. When computer trading was introduced, remisiers lose much income.
    When properties slump, property agents will join the remisiers.
    And when the banks are affected by bad loans, bank staff will join them.
    Hey, when workers incomes fall or they are lay-off, they may default on their housing loans and lose their homes and properties. Will they contribute to the housing/property bubble?

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  12. Everybody should go read the Tomato Bubble.
    Keep reading it until you get it.

    http://www.tomatobubble.com/id39.html

    Highlights:

    As the new "prosperity" makes its way through the town, the prices of goods and services also begin to rise - exactly like the size of the bets in the poker game had risen, and exactly for the same reason! Everyone thinks they are getting "richer", but their new wealth is artificial and temporary.

    ---

    To feed the insatiable debt monster, and to maintain confidence in his notes, Mortimer must have a perpetually growing GDP (more tomatoes). If not, runaway debt and inflation will cause the economy to implode sooner, rather than later. GDP growth is fueled by "consumer spending"(consumption) and the constant borrowing which enables it. This is why economists, politicians, and other assorted lunatics are so obsessed with constant GDP growth.

    ---

    The "business cycle" is very simple. When the rate of growth in money supply (debt supply) exceeds the rate of growth in the general economy (GDP), the excess "money" has to go somewhere. It creates an illusion of prosperity. Artificial bubbles will form either in housing, stocks, currency, etc. Eventually the market always corrects for these phony excesses and the bubbles burst. (just like the poker game.)

    ReplyDelete
    Replies
    1. "eventually".. yes, eventually we die and the earth will collapse. The market here is not a "free" market.
      Land sales are controlled by the biggest landlord.
      Developers are also in cahoots.. they have already stopped blowing the air into the bubble.

      Everything here is managed.. except ponding & riots

      Delete
    2. ....and you helped them!

      I didn't, never voted for them!

      Delete
  13. Sinkies, you die your business. Good luck!

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    Replies
    1. Tax and death - no one gets an exemption. Only the delusional think they can get away with it.

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    2. Not true!

      They pay less taxes and live longer.

      Am I wrong? The old man still living in luxury and Run Run Shaw passed away 106 or 109?

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    3. !00 or 200 the grim reaper will eventually cometh. NO EXEMPTION FOR ANYONE,

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  14. Ever wonder how much a pigeon hole in the sky or a terraced house in Serangoon Garden cost in the 70's?

    Answer: Peanuts... less than S10K $10K and $50K respectively.

    Sinkies are really dumb!

    ReplyDelete
    Replies
    1. Ah...the seventies, free love, flower power, platform shoes and glitters. Love it.

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  15. Let me add a bit more salts in the 70's....

    A cleaner makes less than $60month
    A skilled Mechanic $250 or more
    An engineer around $1,200month

    Everyone loves the regime and up to and above 80% continuously voted for them.. then the promised of "Swiss standard of living!” You got it! Learn to live with it and stop bitching!

    Sinkies, it’s not will the bubble bust, but when! “You ain’t seen it yet!”

    You can take my words for it... the regime will call for GE, before and not after the bubble bust!

    ReplyDelete
  16. The reason only 20 units are occupied could be due to the fact that Marina Bay Suites only got its TOP recently. It could well be that many units are being in the process of being furnished before being rented out.

    We should always get the facts behind the facts before jumping to conclusions.

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    Replies
    1. The only confirmed fact is : "only 20 units are occupied".

      Why this is so?
      Nobody knows unless we can go interview all the missing owners.

      But if you are a Millionaire Minister, you will know the reason even before the Committee of Inquiry is convened.
      And persons-of-interest are deported even before they can testify in front of the Committee of Inquiry.

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    2. Yes, two three years later, they will still be in the process of furnishing.

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    3. It is true, TOP was just given 2 months ago. Management has been slow to get occupiers - could be the since price is high. 4bd flat goes for $13k/ month. But now with the fire, will be difficult to get renters to live there, at any cost unless. big security changes are made, then hire PR firm to advertise big changes.

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  17. A statistic which is very hard to come by is the foriegn and PR ownership statistics for provate home sector

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  18. My condolences to the 2 security guards did their duty and paid with their lives...and their loved ones also has to pay on and on...

    And those who created this to happen, indirectly/directly cause these deaths and supposely responsible are "allow to get away" easily is it?

    Sad.

    ReplyDelete
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    ReplyDelete
  20. Hello Everybody,
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