alexlee;410143 Kenneth said:
Is the Sub-Prime Crisis in US going to affect IPs in Australia ?
- Thread starter xQuIz8
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1. Based on Singapore's own housing experience, the average median unit price for 110m2 condo unit today, is reportedly about 23 times the average annual wage per person.... which is still below the 25 times in 2000 and more than 33 times before the 1996 housing market bust.
2. Thus, comparatively speaking, the claim made by Economist Magazine that "Australia has the most over-valued residential property in the world" is both inaccurate and untrue to a certain extent.
Cheers,
Kenneth KOH
Hmmmm....
I just love these historical comparisons to average earnings, which fail to mention there are now "usually" two average income earners per house hold compared to the historically "usual" single income earner.
IMHO I fail to see interest rates skyrocketing in Oz much further because of all the uncertainty internationally, the already mentioned evidence that things are slowing nicely already and the fact that we are all so much more leveraged now the RBA doesn't have to go as high as before to achieve the same effect. To the extent that oil prices for example are going to spoil the inflation party in the face of slowing domestic demand, the RBA seem to be giving enough hints that they are pragmatists about their 3% upper band inflation limit while not actually letting up on the jawboning about upside IR risks.
With the assumption of no skyrocketing interest rates, I also can't see how yields on resi property will go much above 6% in quality locations, as people will make the switch to buying instead, especially since renting off us landlords is such a bugger!
If you take the Anchorage example Kenneth (or insert similar estate elsewhere), with a nice beach in close proximity and excellent transport links to Perth, that really means to me there isn't much downside risk from here - especially if you can pick up a "below market" deal at the moment... as has been noted elsewhere you can't build them for what they are selling at now! And no I don't (yet!) have property there!
And in the more "blue chip" areas on much lower yields, I see plenty of people around on obscene incomes who are actually able to afford these places and don't have anything better to spend their money on - particularly those who are "up-trading" anyway and can't think of anything better to do with their money than upgrade the PPOR. So to cut a long story short (too late?), I reckon if you have the protection of either a decent yield or if your market is rich people anyway, then it's a good time to buy coz there's not much competition around right now and that's a good thing for me. This is not advice by the way so assume it all comes with a watertight disclaimer - just another point of view.
I just love these historical comparisons to average earnings, which fail to mention there are now "usually" two average income earners per house hold compared to the historically "usual" single income earner.
IMHO I fail to see interest rates skyrocketing in Oz much further because of all the uncertainty internationally, the already mentioned evidence that things are slowing nicely already and the fact that we are all so much more leveraged now the RBA doesn't have to go as high as before to achieve the same effect. To the extent that oil prices for example are going to spoil the inflation party in the face of slowing domestic demand, the RBA seem to be giving enough hints that they are pragmatists about their 3% upper band inflation limit while not actually letting up on the jawboning about upside IR risks.
With the assumption of no skyrocketing interest rates, I also can't see how yields on resi property will go much above 6% in quality locations, as people will make the switch to buying instead, especially since renting off us landlords is such a bugger!
If you take the Anchorage example Kenneth (or insert similar estate elsewhere), with a nice beach in close proximity and excellent transport links to Perth, that really means to me there isn't much downside risk from here - especially if you can pick up a "below market" deal at the moment... as has been noted elsewhere you can't build them for what they are selling at now! And no I don't (yet!) have property there!And in the more "blue chip" areas on much lower yields, I see plenty of people around on obscene incomes who are actually able to afford these places and don't have anything better to spend their money on - particularly those who are "up-trading" anyway and can't think of anything better to do with their money than upgrade the PPOR. So to cut a long story short (too late?), I reckon if you have the protection of either a decent yield or if your market is rich people anyway, then it's a good time to buy coz there's not much competition around right now and that's a good thing for me. This is not advice by the way so assume it all comes with a watertight disclaimer - just another point of view.
i don't see how "historically" applies to "current" singapore prices, as recent as 1996 and 2000.
Fair enough - looking back at my post I could have been much clearer - I meant that comparing current Aus prices vs earnings to historical averages is problematic when the income earning potential of households has changed by much more than that in Aus - I wasn't referring specifically to the Singapore situation although I realise I did quote it - my apologies...
I agree with Kenneth anyway that these numbers can go much higher anyway - an example would be a cultural change where people save more as a result of difficult economic conditions and can therefore afford more expensive houses as those conditions turn around. The counterpoint to that argument is that cultural change could also mean that home ownership is no longer seen as so desirable in Aus due to the financial obligations involved although IMO that seems more unlikely to happen...
Interesting data about the price/wage ratio in Singapore which was not used to discuss the situation in Australia with RE. In fact, Australia is still compared to UK and US, but precious little with Asian countries where I gathered most migrants in recent years come from even if some have to come in through the back door from NZ. Australia is undergoing Asianisation (pointedly KR's recent proposal of a Pacific economic region) while economic comparisons are still with traditional allies when there are developed countries in the Asian region. I wonder and hope it is not a sign of residual arrogance.
nah you're good - just thought i would put that point out there for anyone else who may have read deeper into it.
i'm sure 99% of people understood what you were saying, hence why i didn't elaborate any further.
i'm sure 99% of people understood what you were saying, hence why i didn't elaborate any further.
I know a lot less about Singapore than Kenneth but I can still confidently say this statistic is incorrect. Assume somebody has a working life of 45 years (20 to 65). Then at 25 times the average wage they would spend more than half of their working life paying off a house even if it was INTEREST FREE. If you add in interest you are consuming even more of their working life. The remaining cash (if there is any) is required to eat, feed the kids, pay school fees, buy appliances etc. It is simply not possible for the average person to pay this much for a house.
Now you could argue that they don't pay this much - they rent. Then the question I have is what sort of nutcase is the landlord to finance such an expensive asset at such a ridiculously low yield? They aren't a charity case for their tennants. As I always say - somebody, somewhere has to pay for the house.
two links for you.
1) http://en.wikipedia.org/wiki/Demographics_of_Singapore#Household_income
2) http://www.singaporeexpats.com/housing-in-singapore/search/singapore-apartment-sale.htm
What do they suggest?
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I can tell you the average income person won't be buying the apartments on that singaporeexpats link. Need to apply some common sense here - it is IMPOSSIBLE to actually pay for something like that in 1 lifetime on those wages. I'm sure Kenneth can tell us - where does the average worker live? Government flats I expect which are partly financed by their own super.
Now THAT is interesting.
So YM, given that property is massively over-valued in SG, and the majority of people live in public housing .. do you not see that as a possible "destination" in Australia's future?
Thats in direct contradiction to the wikipedia entry where it says the "purchase" and they are "affordable for the masses". You might want to update the wikipedia entry.
On the other hand I believe all of Canberra is on a 99 year lease so maybe it is one and the same thing.
I don't know how you came to that conclusion from my post.
It's 99 year leasehold if they "buy" new from the government, less than that if they "buy" from the resale (2nd hand) market. They are just buying the rights to lease it for 99 years. Last I heard they were quite strict on new purchases too, the citizens had to be at least certain age or be married to be eligible for certain sized flats.
Singapore is not a good comparison to Australia though given the lack of land and the lack of alternative there (ie people here can move interstate if one state is overpriced or move to rural areas).
Which conclusion?
That property is "over valued"? You said yourself the average Singaporean is not able to buy the property I linked to.
That most Singaporeans live in public housing? It says so in the article you linked to.
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Dear YM,
1. Please come over and live in Singapore for a while and experience its true reality for yourself. Perhaps, you will better appreciate what many families are presently having in Australia, at this point in time, after visiting Singapore for yourself.
2. As you will probably read/know, except for its human capital, Singapore has no natural resources to rely itself upon for its own survival.
3. So who do you think that actually pay for its HDB public housing flats in Singapore?...Its Singaporean Citizens and Permanent Residents who are eligible to buy such public housing flats, in particular those have bought and are still "owning" these flats today and who are still servicing their housing loans and paying the interest payments today as they are still required to live in them as their principal place of residence, with their own families.
Cheers,
Kenneth KOH
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Dear YM,
1. However, does it then surprise you that the average Executive HDB Public Housing Flats in the Queenstown area in Singapore, are presently selling as high a price as between S$700,000-S$890,000 price level, at this point in time?
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Resale Transactions
15 Jun 2008 1:54 am
Search Results
Flat Type : Executive
HDB Town : Queenstown
Resale Approval Date : Mar 2008 to May 2008
Block Street Name Storey Approx Lease Resale Price Approval
Number Area(m2) Commencement Date
148 Mei Ling St 16 to 20 149.00 1995 $832,000.00 May 2008
148 Mei Ling St 21 to 25 149.00 1995 $808,000.00 Apr 2008
149 Mei Ling St 06 to 10 146.00 1995 $750,000.00 Apr 2008
149 Mei Ling St 01 to 05 142.00 1995 $818,000.00 Apr 2008
149 Mei Ling St 16 to 20 142.00 1995 $785,000.00 Mar 2008
150 Mei Ling St 01 to 05 148.00 1995 $700,000.00 Mar 2008
150 Mei Ling St 11 to 15 150.00 1995 $810,000.00 Mar 2008
150 Mei Ling St 01 to 05 147.00 1995 $770,000.00 Mar 2008
150 Mei Ling St 21 to 25 150.00 1995 $890,000.00 Mar 2008
Total number of records found = 9
http://www.hdb.gov.sg/bb33/ispm051p.nsf/Search?OpenForm&Seq=1
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2. This is despite these public housing executive flats sold, are actually not part of the 99-leasehold private condo units referred to, under the SingaporeExpat Link.
3. The average worker in Singapore normally lives in the HDB public housing flats.
Cheers,
Kenneth KOH
It is no doubt that RE in Singapore is massively expensive. My relative has a bungalow in a suburb bordered by highways a few blocks away with land area about 600 sq m, no views, double storey more than 20 y.o., no garage, 6 bedroom. Worth about Singapore $7m, some surrounding houses worth as much as $13m. No views, just a bit of privacy in suburbia.
That's about $6m Aussie dollar. For $1.2m you can get a top grade property in the best suburb of Canberra. With the rest you can start to live of annuities and never having to work at another's beck and call. On the other hand if you want to buy the best property in Canberra, it is still possible for about $4.5m in Red Hill. Yes the landed property owner from Singapore can just uproot and buy the best property in Canberra and live of annuities with the remaining cash. From their point of view, Aussie RE is cheap. Not surprising that I heard people from HK buying waterfront property in Sydney nearly on the spot when they saw the views and the price it is asking for. Anyway, I hope this is not sprucing up, just my view about the Asian masses out there with money and what they think about Aussie RE.
That's about $6m Aussie dollar. For $1.2m you can get a top grade property in the best suburb of Canberra. With the rest you can start to live of annuities and never having to work at another's beck and call. On the other hand if you want to buy the best property in Canberra, it is still possible for about $4.5m in Red Hill. Yes the landed property owner from Singapore can just uproot and buy the best property in Canberra and live of annuities with the remaining cash. From their point of view, Aussie RE is cheap. Not surprising that I heard people from HK buying waterfront property in Sydney nearly on the spot when they saw the views and the price it is asking for. Anyway, I hope this is not sprucing up, just my view about the Asian masses out there with money and what they think about Aussie RE.
