Singapore Property and The Poor Millionaire Syndrome

The World

We have, in other words, never been as wealthy as a human race as we are now. Yet governments the world over are pleading poverty and imposing austerity on their people. No mystery in that paradox. Just beaucoup heaps of inequality.


Brazil has been adding 19 ‘millionaires’ per day since 2007 — and that statistic will likely be repeated over the next three years as Latin America’s economic super-power continues to deliver stellar GDP growth and consumption rates, according to bankers.


Singapore seems modest by some measures: Median income among working households was only about S$5,700 (about US$4,500) in 2010, according to the Singapore Department of Statistics. Yet in this small island nation of only 5 million, known for extravagant shopping, high-end restaurants, and draconian chewing-gum laws, nearly one in every six households has more than $1 million in assets, making it the densest population of wealthy households in the world, according to a new report by Boston Consulting Group.

With this wealthy population comes a relatively high cost of living. In a 2010 cost-of-living survey of 214 cities by consulting firm Mercer, Singapore is the 11th most expensive city in the world for expatriates, on a par with Oslo and more expensive than New York City. 

Conclusion : If you are not a millionaire, better not live here. And no wonder, 5 out of 6 people I talk to, complain incessantly about being poor.

Back to Singapore

Singapore has a household debt to GDP ratio of 71% in 2007

Then it fell dramatically to 45.7% in 2009

Please not that 71% was a figure sourced from Bank Negara while the 45.7% was a ADB study number.

The household debt-to-assets ratio remains relatively low, with household debt about 15 per cent of household assets – below its long-term average of about 18 per cent in 2010.

To refute The Business Times article by Teh Hooi Ling about “Strong Balance Sheets For Singaporean Households” published 6 Mar 2012. Please read the story carefully for all its claims in a feel-good article in a non election year that makes us feel slightly all the more foolish after reading her claims.

Claim 1

Net wealth grew from $560 billion in 2000 to $1.09 trillion in 2009.

Population grew from 3.2 million in 2000 to 5.07 million in 2011. Answered.

Claim 2

From Chart 5, you can see that as at end last year, the total amount of cash is more than 210 per cent that of Singapore’s 2011 GDP!

She used the chart of deposits of Non Bank Customers to illustrate that Singaporeans have a lot of cash in their accounts. That is ASSUMING THAT NON BANK CUSTOMERS = SINGAPOREAN CITIZENS ?

Duuuuuh ! What about all the offshore private bank clients and the corporates who have raised a lot of money in bond markets ?

Claim 3

From Chart 6, you can see that as the stock-market prices climbed between 2002 and 2007, cash relative to market cap gradually fell. That reversed sharply in 2008, due primarily to the fact that total market cap on SGX plunged from $797.8 billion in 2007 to just $393 billion by end-2008.

Yes. Because companies used the cash too ? Stock buy backs ? How can we use a simple cash relative to market cap ratio when its only the market cap that is changing ? Maybe cash does not change, only market cap does ?

Claim 4

Of the mortgage loans, the financing of private properties by financial institutions registered the fastest expansion. It rose by 9.1 per cent a year, from $43 billion to $94 billion. Loans provided by HDB actually fell – from $59 billion to $46 billion.

How can mortgage loans grow and net wealth increase ? Because of wealth effect ? But how can property fall as a percentage of total wealth ? Means we are paying in cash ? Has wages really gone up that much ? Or is it from other gains besides wage income ? En blocs ?

Article then suggests that Singaporeans should buy more stocks as part of their portfolio.

Enough of reading propaganda.

I came across something more statistically substantiated.

61% of Singapore household assets is in the pension fund as of 2005. YES ! Finally.

Then the moment of truth.

Property made up about 50.2 per cent of the household assets, while cash, Central Provident Fund balances, stocks and shares, as well as insurance, formed the other half of households’ assets. Straits Trimes Nov 2011

Dear Friends, Remember that CPF IS PROPERTY TOO !! Because most of CPF savings are ploughed back into property. That is why no one is buying a lot of stocks and shares ! Its because they have no cash to.

“Property Prices At Turning Point” Feb 2012

This is an honest to goodness piece. Property prices are almost 100% higher since the trough in 2004. Just roughly total up the chart bars.

There is no panic yet, barring an unforeseen crisis. Incomes and wealth have not grown as much as the BT article would like us to believe.

Paper gains ? Yes. Heaps for those who had bought anytime before the Q3 2009 spike.

Affordability Issues

Earned income has risen from 5-6k in 2000 to about 8-9k per month in 2011 approx. 55% or 5% p.a. (; GDP has risen from $165bio to $299bio, approx. 81%; meanwhile, housing prices are rising more than 5% p.a.*. This makes affordability for new home buyers decrease because when you leverage 70%, you borrow 7 dollars for every 3 you have.

*Prices rose 38% in Q2 2010 off, the trough in 2009 and another 10% in Q2 2011 ! Apparently foreign buyers accounted for 25% of transactions in 2010 so DON’T WORRY IF SINGAPOREANS CAN’T AFFORD IT !!!

If the charts are going to tell us anything, price growth is slowing. The USD/SGD hit its historic low last year at 1.19 which means the foreign buyers Are Rich, if they do not live here !

Should we expect a correction ? Something must be done to address the soaring costs of living and ill affordability of housing. Leave it to the markets and not the government.

Markets will protest when there is enough critical mass.

To Buy Stocks Instead ?

2010 Straits Times SINGAPORE – The Asian Development Bank (ADB) said yesterday that Singapore’s fast-rising home prices are “worrying”, as real-estate lending accounts for more than half of total loans in the banking system. ……….

At 51 per cent of advances, Singapore’s banking sector’s exposure to property is the highest among the nine major economies of East Asia, followed by 42 per cent in Taiwan and 38 per cent in Malaysia, ADB data showed.

The Straits Times Index of 30 companies has 10 banks and property companies in total. This does not include the cross exposures of the rest in property.

Best Solution to Realise Your Wealth ?

Sell Up and Migrate !

I received a “fire sale” notice from an agent a couple of weeks ago. 4.5 million for a house down the road which should technically read as, 15 grand a month in mortgage for the next 30 years ? after paying 30% downpayment and qualifying for a 3.2 million loan (assuming wages of 30k a month) ? What a harsh life.

I am one of the lucky ones. Have the house, have the car, have some money. It is time to get a cheaper life for my hard work, or rather, luck. Because hard work will not get the kids as much these days.

Fortunately, I have never felt special about it, given one out of every 6 families I see on the street is someone like me too.