Sunday, June 12, 2011


Is a new term i heard when it surfaced during the great recession(subprime bubble). Stay at home country for vacation in order to save $$. The US subprime crisis might be over but the overleveraging still lingers on. Many people are heavily in debt. This is essentially a credit fueled economic growth. More & more debts to drive growth.

Question is how much growth is there further down the road when there's so much debt already? Even more debts & interest payments? A period of deleveraging is needed. With staycation becoming more & more common it is a sign many people are stretched to their financial limits. Notice the staycation promotion ad appear around the area where luggages are sold. Ironic.

Someone who wrote to the State Times has mentioned valid points which i have bolded:
Jun 9, 2011
Tackle excessive speculation

IT IS heartening to learn of the plans to build more flats in mature estates ('New HDB flats likely in Kallang/Whampoa, Tampines... but not in 'built-up' Tanjong Pagar'; last Thursday). But this additional supply may not necessarily make housing more affordable if policies are not put in place to deal with excessive property speculation.

With the high liquidity in the financial markets, Singapore's 'open door' policies, and low-interest environment, it is inevitable that many would be tempted to borrow & leverage to invest in property. With the current pricing policies, newly built flats may still not be affordable to younger start-up families & the average working-class family.

The notion that flats are affordable simply because the buyers can afford to pay the mortgage using just Central Provident Fund (CPF) money is a myth. The CPF was originally meant as savings for retirement funding. Now, if the CPF savings are used towards paying off heavy mortgages, where then is the money needed for survival during retirement?

Despite that, many home buyers nowadays are stretching mortgage repayments over 30 years or more.

The Government ought to look at home affordability at greater depth. How has income grown over the past decades vis-a-vis property prices?

High property prices drive up rents, which in turn drive up business costs, which in turn cause price increases that are passed on to consumers - inevitably increasing the cost of living.

Gradual asset appreciation in line with income growth & overall standard of living is fine. But asset inflation causing runaway price increases, coupled with excessive borrowings to finance speculation, would be dangerous.

Kang Sing Fong

Selling of overpriced property by govt has essentially transferred people's retirement savings into govt's hands. Modern form of slavery. Exorbitant form of indirect tax too.

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