Thursday, December 8, 2011

Housing price correction: Banksters take the $, the people pay the price

Bloomberg reported. China’s home prices fell in 33 of 70 cities monitored by the government in October, the worst performance since it expanded property curbs and scrapped the reporting of national average housing data this year.

On the backdrop of property cooling in the region, finally PAP take some real action
AsiaOne reported. THE Government announced new measures yesterday to cool the housing market.

Foreigners who buy private homes will have to pay an additional stamp duty equal to 10 per cent of the property value.

Who benefit and who lost in this game
The biggest winner are banks. Rising and falling property do not impact their revenue stream. On the basis of fractional reserve banking, they may earn more than 30% of interest on your loan. ( However they are good at giving an illusion of charging 5% interest).

Landlord and property developer make some loses, nevertheless, they have already been making scandalous profit during the boom years. They will still be unbelievably rich, despite the cooling, unless they have foolishly overleverage themselves.

The biggest loser
The people of Singapore are the mother of all suckers. Those who buy at the peak, may see their networth go negative. These people will need to service the banks for their whole life, leaving nothing for themselves unless property price recover.

Best way to deleverage property is not to cool property price, but to raise workers' salary
Cooling the property hurts the people. The best solution out of this mess is to stabilize the property price, meanwhile gradually raising the workers's wages. At the same time, SGD must be allowed to depreciate in relation to rising workers' salary. This will ensure competitiveness and also the depreciation must be calibrated that the purchasing power our workers' remain unchanged on real-terms. Besides, CPF interest rate must be raise as well to preserve our savings.

This solution has its problem -- it hit elite hard (a difficult topic that I am not able to explain in few words on why this affects the elites). The pain of deleveraging property price will then be transfered to the elites rather than on Singaporeans.

Right now, Singaporeans are paying 100% on the stupid mistakes and crimes of our elites.  


TokyoSingaporean said...

I agree with you Veritas. I'd like to hear your thoughts on the impact of your assertions on the elites in specific terms in your next post.


Cool pax... said...

Regardless of who made more money.

The train cannot be stopped. If it does, all carriages behind will slam into each other and disaster strikes.

But that means the train will have to move faster and faster, so that we all enjoy the wind in our face, and the landscape whizzes by.. details cannot be seen.

At some point further down the tracks, when the speed exceeds the capability of the tracks, the train will jump off the rails and disaster strikes.

The trick here is to enjoy the breeze as long as possible, enjoy the dinner and drop dead before either of the 2 events.

We cannot get off the train
No helicopter will lift us off

Slow down the train?
Maybe.. but there are other trains behind us travelling at even higher speeds... and they will slam into us.

Build a different track?
No way.. we do not have a complete team to do that yet.. and we will need another driver who is not insane.

Enjoy the wind in your face...whistle and smile.