Singapore Mortgage: High Pay attracts the BEST bankers or the greediest?

Will high pay attract the best or the greediest bankers?


Article contributed by: http://www.PropertyBuyer.com.sg

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Throughout the world, bankers are paid huge salaries. No doubt the

organisations are huge, therefore in order to manage organisations of such

enormous size, you will need someone of enormous talent.

For such enormous talent, you will then have to pay millions, even hundreds

of millions. This is true even for national banks or quasi-national banks.




Does this Logic hold water?


We think that the relationship between bigger organisations and pay is not

linear. Managing a 1 man company requires not so much skills as opposed

to managing a team of 300 people. But between managing 300 people and

3000 people, there is yet again a skill pre-requisite.

However from managing a team of 3,000 people to 30,000 the incremental

skills required for that may be marginal. As a result the salaries increase for

that types of roles should also consequently be marginally higher, not that

much more.




Why the logic doesn't hold water, If you extend this logic more, then the US

president which presides over a USD$ 14 Trillion economy and 300 million

inhabitants should perhaps demand US$ 500 billion in annual salary.


Even using Singapore's Char Kway Teow analogy, where it is claimed that

it's only $2 a person a year for good leadership (Just the cost of Char Kwya

Teow), that means that we should pay the US president $600 million or (0.6

billion dollars).


Greed takes Over


When some companies are obviously better off being split into smaller and

nimbler companies when they grow too big. Instead the management

insisted that they are better off being the big organisations that they are.

However way they structured it or argued, the logic is tenuous.

Because the organisation is so big, this necessarily entails a very HIGH pay

for the top few layers of management. The argument is often that these are

talented people and they manage such a big team.


In fact the executive's time is same as everyone else, just 24 hours a day.

No matter how capable he or she is, he/she doesn't do the actual work. He/she has

someone reporting to him/her to carry out the work, while he/she sets the direction. Because the business is so big and

contains some many business units and divisions whose head of Business Units are already setting the strategy and directions,

so we don't see why there should be someone sitting yet on top.


BANKS and their SHARE OPTIONS

We cannot really blame the bankers, the system encourages greed. With

employee share option schemes, it encourages executives to BOOST

earnings.

The boosting of earnings can come in many ways.

1) Real earnings through best practices and ethic businesses practices.

2) Real earnings through taking excessive risks on behalf of the banks. (If

the risk pays off, the bankers get a big PAY cheque)

3) Create accounting profits, that are nonetheless legal, but will need to be

write down or accounted for in later periods.

4) Create outright fraud.


Now, because the regulatory oversight has failed in the USA, banks have

largely become "Bankrupt" and that has deprived many home owners and

businesses from credit (i.e. funds and borrowings).


We strongly condemn such activities, but these are systematic failures in the

systems. Checks and balances has also failed in the US with the republican

lobbying for more tax-cuts on behalf of big and profitable businesses and a

FREE Market knows best logic. That has obviously not worked.


We are hopeful that President's Obama stimulus package will clean up this

mess. But we are not happy that the package was watered down by

including tax-cuts in the package as a result of concessions to the

Republicans, that means that actual package is smaller than it is actually

stated. Tax cuts does not immediately create employment and the logic of a

trickle down economy has been given 8 years of trial and failed.


What does this do for Singapore Mortgages?

Singapore banks have also started to invest for higher returns and some of

them got caught out by Lehman brothers and others. Most of Singapore's

properties are backed by CPF and are by and large more resilient to

sub-prime mortgages. But Singapore's banks are not immune to global trade

and credit tightness. Singapore has a high number of expatriate workforce

and is highly dependent on external trade, And as a result, credit has also

dried up. Many Singapore home loans and home owners are faced with

banks becoming more and more stringent in lending out money.


If you have a home loan in Singapore and are considering to REFINANCE

or are thinking of getting one, we are a research focused mortgage advisory,

our service is free to you because the bank pays us separately.

AMAZON Property and Finance Books

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PM Lee's Call to Foreign Banks to take long term view

The Expatriate population wild card - Could cause your property prices to swing wildly.

Don't believe in Good Debt Bad Debt as 100% gospel

Learn how your Property can have Perpetual Option value

HDB Mortgage: HDB Refinance

SHOULD I REFINANCE MY HDB HOME LOAN TO PRIVATE BANK?

Article contributed by http://www.PropertyBUYER.com.sg

It has come to our attention that many people have been influenced by cheap rates that

some people emphasize. We feel we have to explain the RISKS here.


1) All commercial banks require CPF to relinquish first charge when you

switch your loan over to them.



WHAT IS FIRST CHARGE? (or FIRST RANKING)?


Let's say you have been hit hard in life and have fallen. For example you

owe some banks $200,000 and have sold everything and yet you cannot

repay this debt. Under certain circumstances if the Bank have first charge,

upon selling your HDB flat, the bank will take whatever money and interests

owing to them. The remainder will be put back into your CPF. If there is any

cash left over, it will be given back to you.


For example the HDB flat is sold for $300,000 and you CPF (used and with

accrued interests) is $250,000. Upon any sale, this money automatically

goes to your CPF ordinary account first. Nobody can touch this money. Even

if you own the bank $200,000, the bank can only take $50,000 ($300,000 -

CPF $250,000). There is no way the bank can force you to pay back that

money. That money is safely kept by CPF in your ordinary account for you to

be used at your old age.


If the bank has first charge, the bank will first take the $200,000, and the

remainder proceeds of $100,000 goes back into your CPF ordinary account.

Your retirement fund is DECIMATED!!!


Please note, you cannot choose CPF loans after you refinance out to a

commercial bank.

Please See
http://www.hdb.gov.sg/fi10/fi10207p.nsf/WPDis/Servicing%20Your%20Mortgage%20LoanPolicies?OpenDocument)

Quote (HDB)
"Refinancing Existing HDB mortgagors can choose to transfer their remaining mortgages to the banks if they wish to refinance their loans with the banks.

Mortgagors who refinanced their existing HDB loan with the bank will not be allowed to refinance that loan with HDB subsequently. "

So think twice, once you are out, you're out!!!

QUOTE (HDB)
"SPR flat owners who have refinanced their HDB loan with the bank (as well as those SPR flat owners who had taken bank loans upfront for the purchase of their flat) also cannot refinance that bank loan with HDB after they have obtained Singapore Citizenship even if they are eligible for an HDB concessionary loan. Instead, they can enjoy the HDB concessionary loan when they next purchase an HDB flat, subject to their loan eligibility at the point of application."

Singapore PR flat owners, also take note.

QUOTE (HDB)
"Re-mortgage of HDB Flats

HDB flats can only be mortgaged to banks or financial institutions to finance the purchase. HDB owners are not allowed to use their HDB flat, which has been fully paid for, as collateral to raise credit facilities."

HDB flats have no equity and cannot act as collateral to raise money. The only way to

raise money from a HDB flat is to sell and buy back another unit.


HDB RATES (CPF) ARE NO GOOD AT 2.6%


On an apple to apple comparison, no commercial banks can give you a fixed

rate for 5 years or 10 years or 15 years fixed rates at 2.6%. Long fixed rates

are not common and they are expensive. The cheapest 10 year fixed

rate packages are at least 5 to 6% in interest rate. We feel that HDB concessionary

rates at 2.6% is extremely good!


Of course home owners can speculate that Sibor will stay low for the next 5

to 10 years and take the risk. But considering that the lowest 10year SIBOR

rate is about 0.57%, with banks lapping on a lending margin of at least 0.8 to

1.1%. The effective rate (illustrative) for SIBOR + 1% = 1.57%

Interest rates cannot go negative, therefore the lowest theoretical rate is 1%

and Sibor does fluctuate. As recent as 2007, Sibor was at around 4%.

So you tell us, and you decide if you still want to proceed.


SO WHEN SHOULD I CONSIDER SWITCHING OUT OF HDB

LOAN?

The only reason is if you are eyeing a private property already. Because

HDB home owners who buy a private property will need to refinance their

HDB to a commercial bank.


HDB note: (see http://www.hdb.gov.sg/fi10/fi10207p.nsf/WPDis/Servicing%20Your%20Mortgage%20LoanPolicies?OpenDocument)

Quote (HDB)
"Refinancing
Existing HDB mortgagors can choose to transfer their remaining mortgages to the banks if they wish to refinance their loans with the banks.
Mortgagors who refinanced their existing HDB loan with the bank will not be allowed to refinance that loan with HDB subsequently. "

You cannot refinance your HDB back to HDB subsequently. BEWARE!!!

Home owners may tactically decide to act first and lock in favourable rates in

anticipation of buying a Private property. That is fine.

HDB TRACK RECORD

HDB has a better track record of being more benevolent than commercial

banks in cases of repayment defaults. If you default on your HDB loan with a

commercial bank, you would almost certainly be evicted and your HDB flat

will be put onto the market for sale.

We urge all HDB home owners not to fall prey to Cheap loans. Such loans

and refinancing offers irresponsibly put home owners at risk of not only

future possible higher rates, but also put them at risk of losing their homes in

the case of a default of repayment to the commercial bank.

LINK

How should I Refinance Generally? Refinancing or not, you should always start with YOU as the focal point. There is a DIY guide here. CLICK HERE

Singapore Refinance: Commentaries on PM Lee's call to Foreign bank to take long term view

SINGAPORE REFINANCE: PM Called on Foreign banks to take a long-term view

This week, reported in the straits times on the 20th Feb 2009 and Channel

News Asia, Prime Ministers Lee Hsien Loong spoke at a dinner held by

Standard Chartered. PM Lee called on foreign banks to take a long term

view and to consider the merits of borrowers who need financing to do

business, and continue to nurture clients.


We view this as a pre-emptive notice or plea to banks to stand behind

borrowers in times of hardship.

Just a few weeks ago, DBS chairman, Mr. Koh Boon Hwee re-iterated that

DBS will "stand behind it's loyal customers."


These are confidence boosting measures which we hope carry some weight

as Home Owners whose property's valuation has fallen a lot are in real

danger of the bank asking them for topping up CASH.


As we discussed in our previous article, where we highlighted the risks of banks

turning on your backs during tough times. One of the ways they can do that is not to

lend you money. Another even more drastic measure is to ask you to top up your equity

in your home loan in cases where your Property value has fallen.


An example of how a bank ask you for money when you need it most.

For example (The figures are just illustrative), your Home loan was $800,000

and your property value was $1,000,000. Banks usually have a provision

that states that they may require equity top up if valuation falls below

$900,000. If the bank valued your property and the valuers come up with a

value of $800,000, the bank, in order to maintain a Loan to Valuation Ratio

of 80%, that means the bank can only lend you $640,000.


The Bank asks you to TOP UP CASH of $800,000 - $640,000 = $160,000!!!

If valuations of properties could fall so quickly, it signifies severe distress and

many people are out of cash.

If you do not have the cash, you can refinance your loan with another bank

(which most likely will reject your application) or you can SELL you house at

a FIRE-SALE price to pay back the loan.

You very likely will lose Hundreds of thousands of dollars and perhaps go

bankrupt.


What we think

PM Lee's call to Foreign bank is an open call for them to NOT to do anything

so drastic and add to the market woes.

We hope the "Call to take a long term view" is also followed up with some

Carrot and Stick to greater effect. The fact is, borrowing money, despite your

credit rating has become very hard. This is making the already bad

economic situation even worse.


In fact, the banks in Singapore should have not lent too freely during the

economic boom times which created this problem in the first place, this also

applies to banks in Singapore.


They were lending money to the tune of 90%, creating an asset price

bubble.


Banks Make the BOOM and BUST even worse

So in order words, banks made the BOOM and BUST cycle worse! It may be

time to have a back to basics bank. And a bank that is an "efficient

thermostat", to turn on the heat when it's cold and turn on the Cool air when

it's hot. Not the other way round, giving you ice when you are freezing and

pouring hot water on you when you are already scalded.

Economics Basic

Read More articles

Singapore Economy: What we want for Budget 2009

WATCH VIDEO ON SUPPLY AND DEMAND (VERY EASY TO UNDERSTAND)
http://www.propertybuyer.com.sg/viewnews.php?article=74

WHAT WE WANT FOR BUDGET 2009


LOOSEN CREDIT ON LENDING FOR SME and FOR PROPERTIES, ETC.

We have an opinion, CREDIT if already existed in the past, should not be

taken away at a time when people most need it. The government needs to

step in to legislate that banks must lend as per normal. (They can tighten

in the next boom cycle to rectify the problems)

DON'T REDUCE CORPORATE TAX

Only companies that make money pay tax. Don't reduce tax indiscriminately

as it reduces the government's total revenues. Companies in need of help

are not making money, so reducing tax is giving away money

indiscriminately.


RICH PEOPLE DON'T SPEND

It's okay to reduce the top bracket of Income tax, but give that as a tax

rebate on consumption. I.e. if they buy something. The rich do not need the

money as much as others. If you just cut their income taxes, they may not

spend more.


JOB CREDITS BOOST MORALE

Schemes such as Job credits though gives a boost to morale, it is not

money well spent. There could be some net good coming out of such "Job

Credits" Scheme, but it is NOT targeted and very expensive. For example,

the jobs credit scheme gives credit to companies that keeps their employees

for 3 months to lower their costs. But it is demand that has fallen through the

floor, between keeping an employee where there is NO demand and jobs

credit, most companies will choose to FIRE the employee. The savings is

obvious. In other words, it benefits those industries that are already

profitable and does not much to keeping employee's employability where

demand has fallen off.


GIVE DIRECT AID - LOAN

People that have fallen on hard times need a hand. Government should

structure something to give aid to these people so that they live in a dignified

way. This however should NOT be FREE money and a plan must be

made on how such people can pay it back or pay back in-kind.


CO-OPT Industries in Long term investments

Many downturns are cyclical. During a recession, things are much cheaper.

Many industries are faced with a crunch of credit. This is probably the best

time to consider and use money to co-opt or co-invest with the industry

in infrastructure investments or other long-term projects. This will keep our

core skills intact and people employed at a time when companies are starve

of cash. This is what will make the country strong, not indiscriminate tax

cuts.

CREATE A FUND TO SUPPORT THE SHARE MARKET

Just like Hong Kong did in the 1997 financial crisis, it put it's funds behind

Hong Kong's share market and stopped the fall. People needing money are

unwinding from the market. If the government further dithers, the market will

further gets decimated and more jobs may be lost. This is by no means

FREE-MONEY, markets do recover and when they do, the government

stands to make huge profits when the market recovers. These profits can

then go back into the coffers.


MORATORIUM ON BANK SEIZURE OF PROPERTIES

Create an emergency Law to stop the banks from foreclosing on properties.

This stops fire-sale from happening in an extremely soft market condition. As

the transaction volumes are very little, distressed assets cause the market to

panic further depressing prices of assets and putting more banks under the

danger of bankruptcy.

US Mortgage rates at 50 years Low

THE US MORTGAGE RATES ARE AT A 50 YEAR LOW.

The reports have highlighted that many people in the US are refinancing their

home loans at an unprecedented level. They can typically safe a few hundred

dollars off their monthly installments. These days, a few hundred dollars

extra in a household is useful.


IS REFINANCING COMMON?

Refinancing is very common in the USA and Australia and many western

countries with a highly developed Property and mortgage market. It is still

not main-stream in Singapore as awareness is still not that high for

Refinancing.


IS REFINANCING DIFFICULT?

Refinancing is not that simple, neither is it that difficult. Anyone who can set

aside 5 to 10 working days reading, talking to bankers, corresponding,

sending documentation, etc., can do it. It is tedious, that is part of the reason

why people do not always do it.


WHAT ARE THE THINGS TO LOOK OUT FOR IF I DO IT MYSELF?

Here are the things we feel you should look at.

First, be honest with yourself and get a financial bearing of you and
family. Assess whether the current bank loan protects you

adequately in terms of loan repayment serviceability. Then you

can branch out to things that affects Loan repayment

serviceability. I.e. What if I change employment and I receive less

pay in the new job, can I still pay the mortgage? What if my child

goes to college and need funds, will it affect my ability to service

the loan? Be as exhaustive as possible with the scenarios. After

this exercise, you will get a pretty clear picture of what affects

your ability to service your loan.


2nd thing, never assume anything. If today you have a 20 years tenure
Some people will think, it's okay, I can always go to the bank to

extend my loan tenure if I need an easier repayment schedule.

That is not always the case.


Work out the possible cost savings.
Understand the minor differences in the clauses, legal clawbacks,
Repayment penalty, pre-payment penalty, legal subsidy, fire and

insurance subsidy, mortgage insurance, Repayment penalty

subsidy. Loan benefits and risks. Features Benefits and risks.

Some of the possible features are (non exhaustive list): -

Overdraft, Term Loans (Cash out), Construction loans,

Renovation loans, Interest offset savings account, combination

packages, Interest only loans, Variable Sibor Pegged rates with

fixed repayment, fixed rate loans for 1 year, 2 years, 3 years,

even 10 years...

Read more

READ MORE

Singapore Economy: Video on Analyst Updates for February 2009

SOME BANKS ARE TOO LARGE TO FAIL

But they are not immuned to nationalization. According to Philips securities,

once nationalized, common equity holders (i.e. Shareholders share price or

equity will be decimated). For those who consider buying bank shares, in

anticipation of a turn-around, they generally will be rewarded when the

market turns around. But provided that the banks are not nationalized.

Because when a bank is nationalized, it is usually at a bad state.


Example (Hypothetical): -

If a bank is currently worth $1,000 and there is 1 shareholder owning 1000

shares at $1 each.

And assume that Share price = Equity

Therefore Asset = Equity + Debt

If it has assets of $20,000 And debts or $19,000 --> Equity = $1,000.

Since the bank suddenly discovered that part of their $20,000 assets which

they thought was assets is GONE. Assume that $950 of that $20,000 is

deemed assets that is not recoverable and lost fo good.


That means that the bank's equity is now (Asset - Debt) = $19,050 - $19,000

= $50 dollars.


That means instead of a $1 stock price, the equilibrium price of the bank

stock should be only $0.05 (or 5 cents).


Consider that at this scenario, the bank is in a desparate position and goes

to the government to ask for a bail-out. The government values the bank at

$0.05 per share. Since the bank has 1000 shares outstanding, that values

the bank at $50 dollars.

Say the government then invest $950 into the bank, by issuing more shares

at $0.05 per share. That is a whopping 47,500 shares.

So instead of being a 100% ownership at 1,000 shares, the enlarged

number of shares is 48,500 shares. The common equity shareholders will

suddenly only hold 2.07% of the bank, effectively relinquishing control to the

government.


But let's say for instance, some of these asset prices such as properties, we

know that the prices won't be forever depressed. In other words, due to the

nature of the BAIL-OUT, even if in the future the $950 of losses gets

"write-back" into the books as assets or booked at Profit of $950 2 years

down the road.


The common share holder, holding only 2.06% of the bank, gets back only

$950 x 2.06% = $19.57, having already lost $950. The net loss is still a

whopping $930.43.


So even if the banks shares are CHEAP, the common equity shareholder

and/or Potential investors must BET that the bank will NOT be nationalized.

Because doing so will usually entail the government injecting capital while

valuing the bank at dirt cheap prices, effectively taking control of the banks.


Subsequent upside is mainly for the government and common share holder

will lose most of their investment.


So how to look out for which bank share to invest?

We think that investors should always look for bank shares that have little

risks of further losses and is in no danger of bankruptcy and/or being

handed a "bail-out" by the government.


Because a bail-out typically saves bank jobs, but not the share holders.


All banks are somewhat affected

As a result, many banks are in "risk aversion" mode and concentrating on

raising lending margin and only focusing on customers passing the most

stringent credit tests.

If you are in a current bank loan and your rates are rather high, call us

to evaluate Refinancing. If your house valuation is high and your debt is low,

you may want to consider refinancing plus get "CASH OUT" a term loan.

This gives you the added ammunition and ready cash to pounce on any

potential opportunities that come by given the fairly attractive stock-market

valuations now.

http://www.propertybuyer.com.sg/viewnews.php?article=72

Feng Shui: Master Lynn Yap's Ox year Forecast is out

http://www.propertybuyer.com.sg/viewnews.php?article=62

Click the link to download the powerpoint slides.

Singapore Budget Announcement

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Some Property Books - Specifically for Singapore
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Reverse Mortage in Singapore?

CLICK HERE FOR FULL TEXT

Global Economy: When US consumers Spend Less, Singapore is in Trouble

The Source: http://www.creditwritedowns.com/2009/02/us-consumer-spending-down-1-in-december.html

U.S. consumer spending contracted more than anticipated in December 2008, declining by 1.0%. However, this number is a look into the past and does little to help predict how spending will trend going forward.

My read on future trends has much to do with trend consumption patterns an debt. On Friday, I reported that GDP showed a sharp deterioration in durable goods spending. In that post, I mentioned that the unsustainable increase in consumption as a percentage of GDP is moving back toward trend. Moreover, this consumption has been partly debt-fuelled; Debt to GDP levels have also increased markedly over the past decades to unsustainable levels. Now, that we are in a sharp downturn where credit is restricted, this pattern cannot continue.

Therefore, I see this report, in conjunction with these other data points as confirming the trend toward increased savings, increased debt reduction and lower spending in the U.S. going forward. Given the level of job losses is still increasing, we should expect consumption to decrease even more going forward.

See the Bloomberg video below for another take on the numbers and their implication for the broader economy by Carl Weinberg of High Frequency Economics. You should note he has some scary words on Japan and their predicament but more upbeat words on China.


http://www.PropertyBUYER.com.sg

Comments: -


The US Economy is worth some 14 Trillion USD and represents at least

17% of the world's GDP according to CIA Factbook. (https://www.cia.gov

/library/publications/the-world-factbook/geos/xx.html).

US Citizens consumption contributes about 70% to the US GDP, or roughly

12% of the world's GDP.

When the USA sneezes, the world catches a cold.

The latest published data shows that disposable income decreased by 0.2%,

while consumption has fallen by 1%. This means that consumer confidence

has fallen. Consumers are now much more worried about the future

economic outlook of the country.

And consumers are cutting back on discretionary spending. They are either

borrowing less or saving more.


What is the relevance?

When US consumers cut back on discretionary spending, we really do not

know which area they will cut back on, but it is safe to assume that many

sectors and industries will be affected, especially big ticket items such as

Cars, houses, etc. And demands on imports is likely to fall. That means

Countries that export to the USA will likely take some heat from reduction in

demand from the USA.


Is Singapore Affected?

Yes, Singapore is a very open economy and depends a lot on trade and

exports to the USA. Reduction in US consumption will hit our manufacturing

sector hard. Singapore along with many Asian countries will need to rely on

their country's fiscal, Exchange rate, interest rate, Credit and tax policies to

pull them out of the woods, including stimulating domestic demand. Many

countries such as Singapore who has a reserve buffer are now using that to

create a soft landing.


Confidence

The key to sustaining the economy will still be confidence. People need to

feel confident of their jobs, their lives and so on, before they are to start

consuming again. If Confidence is gone and not propped up, the economies

will spiral downwards in a vicious circle.


Superfluous Demand

The global economy has developed into so many facets. Many of the jobs or

products of services were unheard even some years back. Services that are

not critical to a person's core needs will likely be hurt in such a slow down.


Likely outcome

There will be some form of "return to basics" in the economy with core

needs taking on a bigger importance relatively speaking. Therefore some

industries such as primary food production is likely to be cushioned from the

economic fall-out. The malfunctioning of the financial markets will lead to

some well deserved industries and small businesses being choked off from

well needed liquidity. If such businesses are forced to close, the impact

could be very serious. But we are hopeful that governments throughout the

world are already acting on this threat of a financial meltdown by doing all

they can to save the global economy. We are hopeful that 1 to 2 quarters

after the stimulus packages are implemented, we should see the bottom of

the economy.


My dear readers, fret not. Recession comes and goes, in a few years we will

have completely forgotten about this recession. So cheer up and go spend

some money and pamper yourself.

WATCH VIDEO

Population Swings and Your Property Prices in Singapore

Success is a thought process



TOTAL POPULATION

Singapore Citizens + PR + Expats (employment passes) + Working Permit

holders.

SINGAPORE RESIDENTS

Singapore Citizens + PR


SYPNOSIS

As you can see, there are only about 3.2m Singaporeans and the annual

growth rate last year was 1%. Most of this 1% growth, I would attribute it to

new births, with maybe a 20% of this 1%, or 0.2% coming from PR

converting to become Singapore Citizens.


The growth rate of Singapore citizens have been fairly stable at a low rate of

1%.


Last year, there were 4.8m of total population, a 5.5% growth rate over the

previous year.




By looking at the chart, you will see that years 1987 and 2003, total

population growth (In BLUE) was negative.




IN 1987 - PROPERTY PRICE CRASH?

In 1987, the total population drop reflects the exodus of working permit

holders and Expats on employment passes. Singaporeans and PR growth

slowed, but still in the positive ~1.5% range.


IN 2003 - PROPERTY PRICE CRASH?

In 2003, the total population drops, coupled with a drop of Singaporeans and

PR. Most Citizens usually stay put in Singapore. In 2003, it is suspected that

even PRs are leaving Singapore in droves coupled with Expats and working

permit holders leaving.


WHY IS THIS STATISTIC EVEN IMPORTANT?

I think it is important because from a historical standpoint, Foreigners who

come to our shores to work do not have strong emotional attachments to this

land. Many come for work or follow their spouses here. In the scenario of

reduction in jobs, many expats will be the 1st to leave the country. If they

leave, it represents an immediate vacation of the properties they used to

occupy.


From the data, it shows that PR while more likely to stay in Singapore are

not immune to leaving when push comes to shove.


MAGNITUDE

1.2m of the population are foreign, that means 1 in 4 person on the street is

foreign.

From a Property Demand stand-point, this is significant because we are

talking about a Foreign population of 1.2m people of which an estimated

400,000 are expats, some 800,000 are workers or various types.


For expats, if we assume 2 person per household, we are talking about

200,000 units in housing demand.

For the rest 800,000, an estimated 400,000 are domestic helpers (who

stayed with their employers), while the rest are lower educated workers

working factories, service outlets, etc.


These 400,000, assuming 3 person per household, will take up 133,333

units of housing, or in the form of room rentals (1 per room), HDB rentals,

lower end condominiums shared amongst several person.


Our Private property housing has been built with a view to catering to foreign

demand. The growth in Supply of housing has exceeded the 1.5% growth

rate of Singapore citizens and Singapore PRs in the past few years.


Therefore this makes the entire property market more volatile and

susceptible to price movements with the IN and OUT flow of foreign

population in Singapore.


MOST SINGAPOREANS OWN (Mortgage) their homes

Most Singaporeans own their homes. So the rental market is largely catered

to migrant and expat population. Sudden IN flows of foreign population

forces the Rental rates to go UP and an exodus leads to rental rates to go

DOWN.


Rental has a BIG and very direct correlation to the property prices, therefore

POPULATION SWINGS in the forms of Expats COMING and LEAVING the

country will subject first our rental prices to swing, followed closely by

property prices.


IN 2009???

In 2009, the total population has run up a lot while Singapore Citizens and

PRs have only grown at 1+%. Given that the foreign population in Singapore

now numbers 1.2 million, any exodus will immediately impact the rental

market as it is assumed that very few expats own the properties which they

stayed in and the rental market will impact the property prices.



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