Singapore Tightens Monetary Policy

• Singapore Q3 GDP -19.8% vs +27.3% in Q2
• Singapore tightens monetary policy; widens undisclosed exchange rate band

For the full detailed report, click this link:
http://www.singstat.gov.sg/news/news/advgdp3q2010.pdf

People have sent mails to me about the possible ramifications of Singapore’s move on tightening monetary policy. Personally, I was hoping for this and yet not wanting it to happened this soon. You see, while all the financially powerful nations around us like China and Australia have tightened, Singapore has lagged. We end up paying more for stuff because the value of our currency remains constant. Even Malaysia is doing something to improve their currency value while Indonesia’s Rupiah has stayed up against our dollar. This does not bode well for me as a businessman. So naturally, I would cheer a move to improve our currency value.

But this move also prompts the banks to start raising their rates. As it stands, I think its downright ridiculous that we’re getting less than pittance on our savings and fix deposits while getting charged prime interest rates on our loans that are more than double (and in most cases, more than triple) the pittance. Personally, the loan rates don’t bother me because I pay cash anyway. (Since the banks didn’t want my business then, I don’t need theirs now.) But it will be nice to get a raise on my savings rate and FixD rate.

More significantly, Prime rates will drive up and this is going to drive the property market bananas! Expect a surge in buying as real buyers rush in to lock in the current low rates before the banks start hiking. This should send property prices up in a flurry. And as quickly as it starts, the buying will end. I am waiting for that to happen. When it does, prices will come down as the Bid/Ask spread inevitably changes direction. With so many properties in speculative Sellers’ hands, the onus will once again swing into the real Buyers’ hands … and there will only be a few of them (like me) left to snap up the many choice units still left on a down-trending chart of housing prices. The higher prime rate will not bother me since I am dealing in cash. Seller’s in need of cash to bank-roll their next invest (which they will buy/have bought at a higher price) will be desperate to sell. The fact is that most Singaporeans and PRs eligible to buy homes are over-extended on credit (most of them 100 to 200 times over-leveraged) and will need to consolidate the assets within this opportunistic window. The current measures have limited their ability to weigh in on more credit and they will be forced to liquidate if they wish to continue their property binge or settle their debts – the banks will come calling for the next (huge) payment phase as many property projects come to fruition next year.

Its going to be a Lelong Pasar Malam when these many projects TOP in 2011 and 2012. I expect to see quite a few defaults by then … did I tell you I love auctions?

If you are a Seller, I don’t envy you. Timing is of the essence –

I love being a Buyer! My only nemesis is having to wait. But that is the good part – I am in no hurry because I am not selling my Lucky 3-roomer.

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Comments

I wish I can own a property or two so that I can enjoy some good passive income

Thanks for good stuff

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