Martin Lee @ Sg
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The Inside Story of America’s Economic Crisis

CNBC has done up a very nice website showing in chronological order the story behind America’s economic collapse, highlighting key players and events.

Bloom, Bust and Blame – The Inside Story of America’s Economic Crisis

It explains clearly in layman’s language the circumstances leading to the subprime crisis, including videos of some breaking news and interviews that occurred.

There’s even a documentary produced called “House of Cards” that gives you different views of the event from the perspectives of house owners, lenders, bankers and government officials. I have embedded the documentary below.

As I re-read the story, I can’t help but wonder whether the recent exuberance in our property market will mirror some of the events in the US later on.

Low interests rate have made property suddenly appear to be more affordable, but as most of the housing loans nowadays are tied to SIBOR, property owners might be in for a shock when SIBOR starts to go up.

Rising property prices ultimately has to be supported by a rising level of income. It cannot go up indefinitely if income is stagnant or even decreasing. There is a limit to the amount of external demand.

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11 comments
Survey on Financial Literacy Skills says 10 years ago

[…] You can refer to this other post I made which a link to a well organised summary and documentary of the crisis done by CNBC. […]

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Caveat Emptor says 10 years ago

Alice, some auction are by invitations and some can be attended by public. Just goggle “property auctions in singapore”, or some key words, you will find a list of property consultants, like DTZ, CB, etc, etc, having auctions, dates and venue or even photos of the properties.

We should know that complaints are useless. Land cost is more or less determine by gahment and it’s a big part of the price of a property. Selling more land will not solve the problem immediately, and the key question is what is the minimum bid?

What one needs to do is protect yourself, by spending within one’s means. Don’t be greedy or believe things that too good to be true. This is what my family practices. Although we could have afforded a landed property if we want to, we chose not to. We enjoy being debt-free, live in a HDB and owns a car, and a family with no financial worries. I have seen too much of those kind of distress in 1997 and this is a reminder to myself. My inclination when buying property is to take at most 50% loan, preferably back by some liquid equities, bonds, or savings, etc. I’m a bit ks? No, just want to be sure.

Good luck.

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Caveat Emptor says 10 years ago

Agreed with VSL, it’s unsustainable. When i was an agent, i have friends coming to me to ask me help sell their hse because they went into negative mortgage and cannot afford the top up. Prices had drop so much, the hse just simply cannot be sold at their asking price. Those who lost their jobs are in danger of facing foreclosure. Just attend the monthly auctions to see how people got into trouble with greed and fear. I’m staying at the sideline to watch what happen down the road.

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    alice says 10 years ago

    Caveat Emptor,

    how can we (public) attend the monthly auction?

    it make no sense that hdb price rising in the current market condition – people lost job, pay cut and etc.

    quote below was from a recent news article, don’t think MBT or government going to do anything to cool down the market. Not forgetting who are the one who do valuation for hdb

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      alice says 10 years ago

      the missing quote:
      Mah also claimed that the government is subsidizing the cost of the HDB flats and have increased the value of flats already bought by Singaporeans.
      “We subsidised you when you buy and we increased the value of your flat when you live in it and… facilitate you to monetise it when you grow old. This is the best form of investment and welfare for the people”, he added.

      Reply
      lioninvestor says 10 years ago

      If you noticed the number of letters appearing in the ST’s forum on this topic recently, the rise in HDB prices has obviously been picked up by the media.

      The number of new HDB flats been built has dropped significantly in recent years. This has created an unhealthy situation of excess demand for resale apartments.

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VSL says 10 years ago

LI,

The 1.5 hr CNBC documentary was beautiful. Tks for putting it up.

One thing I learnt from that video was comparing rate of house price increase vs rate of income increase. The former is bigger than the latter. This phenomenon is not sustainable in the long term. Something has to give way. And I don’t think that salaries are going to increase rapidly. So, that leaves prices of houses to ……….

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Caveat Emptor says 10 years ago

Yup, you hit the key point, “provided prices are not too high”. The recent AMK Centro condo is going at $1200 psf. Even some property agents also told me they scratched their heads to try to understand this because at that price you can buy Admore in Orchard Road just a few months ago.
From yesterday’s paper, it doesn’t look like the government will act, so caveat emptor. Right now interest rate is at all time low, bankers also think that it will not be for long.

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    lioninvestor says 10 years ago

    Based on what I read from yesterday’s feature, I think it is an attempt to cool down the market by highlighting some of the pitfalls.

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noname says 10 years ago

I’m not sure whether such reasoning has any basis. I may be wrong as this seems a bit far stretched.

Sg gov policies in favoring foreign talents/workers, but caused much unhappiness among citizens.

Decreased in fixed deposits interest rate, lower than inflation, caused people to seek avenues to grow their wealth, like recent stock market rally.

Recent changes to cpf, annuity no longer guarantees amount paid in future, people are afraid, better to use it to invest in something, cpf can be used to buy houses, and real estate is a good hedge against inflation but provided the price is not too high.

Wtih GLCs/TLCs owning stakes in the three main local banks should have the means to increase/decrease SIBOR. You may wonder why SIBOR is low now.

Given that Singapore citizens stood at 3 million with birth rate at 1.29 and decreasing, without favorable foreign talents/workers policies, the three main factors – jobs, incomes and population that determine whether real estate will worth more than now 10 years or more later, will be undesirable for those owning rental properties.

At the end of the day, even though there are many reasons to dislike current gov, some people may have no choice but to vote them in due to investments in properties at too high a price and need the tenants from “grow GDP at all costs.”

Other opposition parties and Singaporeans in general know that certain foreign talents/workers policies are detrimental to their futures and jobs but once again like the estate upgrading, smart for one but dumb for all.

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Caveat Emptor says 10 years ago

I fully agree with you on our current property market situation. Sadly, people just never learn from mistakes, and history will keep repeating itself. I was a property agent some years back and understand the “tricks” that developer use to stir demand. It stirs both the greed and fear element of human nature.

The only difference today is speculation is heavy in the mass markety properties. Jurong, Chua Choa Kang, Upper Changi, all these so called “ulu” areas are the targets now because the prices are still affordable even when income drop. From the advertisements and calling agents, one can traced that some people buy 3 to 5 units in each development. One third to half of it are not genuine demand. Property consultants will deny when interviewed because their job and bonus depends on continouus prosperity of the market, just like stock brokers. And they know what they say will be reported in the press. Agents will intimdate potentail buyers that you better buy now, prices going up soon. Developers push back launches and wait for buyers to come in, then they hike the price. If demand remain low, the push back will continue. With few or no launches, this create an impression that supply is running out, to stir fear.

Put it this way, S’pore is a small country, but our government is an expert in urban planning, we will never run out of housing at least for the next 50 years. Our mnister had over the years repeatedly assured S’porean about this, but sadly i think many are deaf or just plain KS. The high housing prices today are because of not just the speculators but also KS S’porean. You are also correct to say that one fine day, many buyers will wake up and realized that their installment has shot up when interest rate move upward. Speculators just don’t care, they are looking to buy and sell within a few months. You created this yourself, so don’t blame others when you get into trouble.

Personally i think the government will act in a few months’ time. Mr Mah had already cautioned us twice but the speculation continues, some property stocks continue to run up.

Good luck, hopefully, it does not transform to fear…and hardship one day. Live within your means, you will be safe and worry free.

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