Ad Hoc Commentary – Singapore still fighting the last war
In America, they are still fighting the Great Depression, thus the bias to stimulate. In Germany, they are still fighting hyperinflation, thus austerity.
In Singapore, they are still fighting the Asian Financial Crisis of the 1990s. That is, hot foreign capital flows. We remember the inflows into Asia and the subsequent outflow to the formation of European Union in the 1990s.
Merkelections on Sep 22, 2013 will likely switch off the lights on the European Union economic growth prospects for the coming years. When that happens, capital that left Asia for Europe will return.
Bad memories on the destruction of wealth as capital fled in the late 1990s will keep Asia vigilant against such foreign capital inflows.
Well-known for being pragmatic and forward looking, the elites in Singapore had already put up barriers of entry in the local housing market. They likely fear locals overextended in local property markets. If 1996 repeats, these policies will save the people.
However, in all likelihood, it isn’t your grandfather’s market anymore. The villain this time might very well be locals overextended in foreign property markets. In cross-border investments, location, location, location is secondary.
The golden rule of cross-border property investments is:
1. the rule of law, and
2. stable tax regimes.
Without the rule of law, property investments degenerate into worthless pieces of paper. Without stable taxes, property becomes a conduit for foreign nations to consume the wealth of nations through property taxes. However, that brings us to the very difficult question on how to regulate cross-border flows? Moral-suasion anyone?
Good luck in the markets.
Related Articles :
Singapore Real Estate Menopause : (tradehaven.me)
Are you referring to Iskandar region? I understand that there are more than 100 projects going on now, each with 500+++ units. That means more than 50,000 apartments getting completed in the next 2-3 years. Who is going to occupy them? Singaporeans?
Iskandar is but one example. This just arrived in my inbox from the cfa singapore secretariat. The pertinent question is if the target audience understand cross border risks. The rest of this comment is a cut and paste from he email and is not a solicitation from yours truly:
1) Networking Talk – Investing In International Real Estate
Date: Thursday, 25 July 2013
Time: 6.30pm onwards
Venue: The Penny Black, 26/27 Boat Quay, Singapore 049817
Presenters: Ms Doris Tan and Mr David Neubronner from Jones Lang LaSalle
Synopsis:
The stability of the Singapore Dollar against a backdrop of global economic problems presents a rare opportunity for investors to add international real estate to their portfolios. Specifically, is London, Japan or Iskandar property a good investment?
One of the many contributing factors to a capital growth of 8.6 percent per annum is the increased appetite of Asian investors for London residential properties. This sector has outperformed commercial real estate and equities, which grew 4.2 and 7 percent respectively last year. The prolonged shortage of supply in Central London and transportation upgrades such as the Crossrail have continued to support the hypothesis of increasing capital growth.
With the promise by Prime Minister Shinzo Abe issuing an all-out assault on chronic deflation and anaemic growth, Japanese properties are becoming more interesting. Affordable properties and a strong and sustainable rental market provide upside potential for the investment. The weak yen, no restrictions on foreign ownership and stimulus by the new government are other reasons why investing in Japanese properties could well be very rewarding.
Another region that has caught the attention of investors is Iskandar Malaysia, an economic development zone in the south of Johor. It contains five development zones and it is expected to have about 3 million people living in that area by 2025. Singapore has a vested interest in the development and the high speed rail link between Kuala Lumpur and Singapore provides a great potential for intra-regional trade and development in Southeast Asia.
Be it London, Japan or Iskandar, it seems that now is the time to diversify into the international real estate markets.
Question : Will the new laws on mortgage servicing ratios affect such purchases ? Or does it only make sense for institutions engaged in the business because they are not subject to the new MAS regulations ?
Look at Oxley Holdings ! They are borrowing 9 times their mkt cap or more (did not include the new bonds).
I just saw a report that Iskander would be the next Shenzhen. Seriously??? Ask your friends or relatives in JB, who are buying Iskander houses? Only Malaysians and Sinagporeans who has no intention of staying there but hoped that the property will gain in value over the next few years.