Minister for National Development Khaw BW has been ignoring citizens' cry that our home prices are getting pricier and pricier, burdening young couples and families. But he appears aloof to citizens' woes.
The resale HDB market and the private property market are interlinked. Anyone who says that they are mutually exclusive is probably living in Mars. Ever since the ordinary account portion of the CPF has been allowed to be used for private home property around the late 1980s, the resale of the HDB market has been climbing and climbing in tandem with the private property market. Simple economics will tell you that the CPF OA opened the floodgates with loads of money for the purchase of property, property and more property.
The property market hit the peak around mid 1990s before the SE Asian financial crisis kicked in. Many property owners including bona fide HDB dwellers who have upgraded were saddled with mortgage loans they couldn't service.
Today in the year 2013, is this uptrend of property prices going to repeat? We don't know. But Moody has certainly pinned the rising property prices as one of its reason for downgrading Singapore's banking sector from "stable to negative".
Of course the PAPpy gang as always don't take criticism kindly. So they object. The lesson learned here is that the PAP can ignore citizens' cries, but they cannot ignore the words of international bodies.
Khaw Boon Wan and the PAPpy gang now know that what Moody and other international bodies say is also beyond their control. Tsk tsk.
Moody's moody statement about Singapore -
Moody's Statement on Singapore
Our outlook for the Singapore banking system is negative. The outlook expresses our expectation of how bank creditworthiness will evolve in this system over the next 12-18 months.
We have revised our outlook on Singapore’s banking system to negative from stable. The two main drivers underpinning our opinion are the recent period of rapid loan growth and rising real estate prices in Singapore and in regional markets where Singapore banks are active. These have increased the probability of deterioration in the banks’ credit profiles under potential adverse conditions in the future.
Singapore’s banking system has been operating in a favorable operating environment for an extended period, with low interest rates and strong economic growth domestically and in the surrounding region. This environment has given rise to strong credit growth and asset inflation in both the real estate and financial markets. Domestically, household debt increased to 77.2% of GDP as of March 2013 from 64.4% at end-2007. For the same time period, prices for private property grew 1.2 times andprices for Housing Development Board (HDB) real estate 1.7 times.
High leverage and high growth in property prices. Just like in the 1990s. Are we heading there again?
PAPpy's typical self-denial reply -
In response, here is PAPpy Lackey puppet MAS's reply - Singapore banks are strong, not at risk, says MAS
The three local banks have the highest average credit ratings in the world and are not at risk, the Monetary Authority of Singapore (MAS) said yesterday, a day after rating agency Moody’s Investors Service cut its outlook on the Republic’s banking sector to negative from stable.
Stooperd reply from MAS. Moody's statement is about only 24 hours old. It is based on very recent judgement. It is very current. MAS quotes a rating that was based on what was known then. Putting it simply, MAS is trying to rebut Moody's current statement with an about to be outdated data.
That's the typical PAPpy mindset. Just because a piece of data suits them once, they will hang onto to it for as long as they can. Small wonder Khaw cawed like a proud crow about Singapore's growth when citizens cried out about the exponential growth in price for housing.
In its report, Moody’s said these factors have increased the probability of deterioration in credit quality under potentially adverse conditions for the banks in the future, such as an increase in interest rates.
If that happened, borrowers’ ability to pay outstanding obligations could be undermined, it noted.
In response, the MAS said that while it had been concerned that some borrowers could become overstretched, “the local banks are not at risk”.
Yo ho ho. But the borrowers, who are mainly part of household debt, make up 77.2% of GDP. That's not risky? Of course not all borrowers will be in difficulty. But you don't need all to be in difficulty to have a problem, do you? In the 1997 SE Asian financial crisis, not all were affected too. But it did have an impact on the ability to repay mortgage and that further dragged our finance sector down.
One final note -
A final note that I would like to highlight is the typical PAPpy approach to praise and criticism. They always bathe in the glory of praise, yet will try to deflect the negative ones and blame others or factors as something that is "beyond their control".
The report ends its statement with the following...
The MAS also pointed out yesterday that Moody’s had been revising downwards its ratings outlook over the past two years for a number of well-rated banking systems.
“This is understandable, in light of the impact that low global interest rates have had on credit growth and asset prices and the potential risks when interest rates rise. The local banks are not immune to such concerns,” the central bank said.
Again, note the self-denial tone. MAS is trying to say that the latest downgrade is just part of Moody's exercise to downgrade about everyone globally.
That's right. When we get rated highly, the PAPpies will crow and boast. When the rating puts us in negative light, deny, deny, deny. Small wonder every cry our citizens make, they just care not.
In conclusion, we can say that citizens have long been telling the PAP that household prices have shot through the roof. Now it takes Moody to give the PAP what a moody gloomy picture we would face if that obscene household price is not kept in check.
==========
Update -
A point to note - HDB loans versus bank financing
More than 83 per cent of residents in Singapore live in a Housing Board flat. Last year, more than 59,000 residents became proud owners of new and resale HDB flats.
Two-thirds of these home buyers also took a direct loan from HDB at the concessionary rate of 2.6 per cent.
The remaining one-third HDB home buyers take bank loans which means they will be affected if the interest rates rise, as per Moody statement. And that has happened already - Some banks in Singapore raise interest rates for home loans.
Barrie
*The author blogs at www.wherebearsroamfree.blogspot.com