Many people think that the Government will be able to control the property market to keep it from a collapse. I have seen the property market burst a few times - so I shall share with you what is a possible scenario, and why the Government will not be able to stop a collapse.
Suppose there is panic with the Euro or the US dollar, due to the economic crisis in Europe or America. We have read about the big and unsustainable deficits and the printing of money to support the economy. Many analysts are predicting various types of possible dire consequences.
You may say - well, that is Europe and America. It should not affect the Singapore property market. In 1998, during the Asian Financial crisis, interest rate shot up to 20 percent in Singapore. People, who borrowed money from the banks were suddenly asked to pay back the loans. They have to sell their properties at distressed prices.
If there is a financial crisis in 2012, which is possible, the people who have to dump their properties at distressed prices could be the foreigners and local speculators who were over-stretched and had bought expensive properties at astronomical prices. When they dump their properties at distressed prices, can the rest of the property market hold up?
During the 2004 crisis, the Singapore property market was saved by a smart move by the Government to allow borrowers to re-pledged their properties to the banks at higher priority over the CPF savings. This allows the bank to report the mortgages as safe, so there was no need for the properties to be foreclosed.
The next crisis could be different, as the properties prices are much higher now, and many borrowers could be foreigners or local speculators who do not have this CPF cushion. This is just a random thought - and I might be wrong!
Suppose there is panic with the Euro or the US dollar, due to the economic crisis in Europe or America. We have read about the big and unsustainable deficits and the printing of money to support the economy. Many analysts are predicting various types of possible dire consequences.
You may say - well, that is Europe and America. It should not affect the Singapore property market. In 1998, during the Asian Financial crisis, interest rate shot up to 20 percent in Singapore. People, who borrowed money from the banks were suddenly asked to pay back the loans. They have to sell their properties at distressed prices.
If there is a financial crisis in 2012, which is possible, the people who have to dump their properties at distressed prices could be the foreigners and local speculators who were over-stretched and had bought expensive properties at astronomical prices. When they dump their properties at distressed prices, can the rest of the property market hold up?
During the 2004 crisis, the Singapore property market was saved by a smart move by the Government to allow borrowers to re-pledged their properties to the banks at higher priority over the CPF savings. This allows the bank to report the mortgages as safe, so there was no need for the properties to be foreclosed.
The next crisis could be different, as the properties prices are much higher now, and many borrowers could be foreigners or local speculators who do not have this CPF cushion. This is just a random thought - and I might be wrong!
:.
0 comments:
Post a Comment