US Mortgage rates creeping up, S'pore to follow soon ....

[Spiky]

Singapore mortgage rates are highly correlated to U.S.'s and mortgage rates in U.S. are creeping upwards.

Singapore's property market seems to be in a frenzy at the moment. So many people snapping up condos and landed property at sky-high prices.

So affordable ? or are buyers leveraged to the hilt ?

When mortgage rates chiong upwards, what happens then ?

Is the local property mkt propped up so that 'insiders' can unload on the naive and bluff-fXXks ?

Given the fiscal problems in Europe and U.S., can demand for China exports be sustained ?

Is China's economy so solid that it can self-sustained without these demands for its goods ?

Isn't the China economy right now running on it's property boom ? Sustainable or running on fumes ?

Interesting to see how things will unfold in the coming year.

Happy New Year !

 

[bart12]

A market crash in 2011 will be better for the global economy in the long run.

 

[besotted]

PRC buyers will support Singapore market

They don't need loans, they pay in cash.

According to DTZ, they form 20% of all buyers here in Q3

 

[AhSo1]

Singapore mortgage rates are highly correlated to U.S.'s and mortgage rates in U.S. are creeping upwards.

Singapore's property market seems to be in a frenzy at the moment. So many people snapping up condos and landed property at sky-high prices.

So affordable ? or are buyers leveraged to the hilt ?

When mortgage rates chiong upwards, what happens then ?

Is the local property mkt propped up so that 'insiders' can unload on the naive and bluff-fXXks ?

Given the fiscal problems in Europe and U.S., can demand for China exports be sustained ?

Is China's economy so solid that it can self-sustained without these demands for its goods ?

Isn't the China economy right now running on it's property boom ? Sustainable or running on fumes ?

Interesting to see how things will unfold in the coming year.

Happy New Year !

Raising interest rates is but one tool to contain inflation. MAS prefers to use other means of tightening such as allowing the S$ to appreciate. Singapore tried to intervene earlier this year to weaken the S$ to no avail hence the switch to contain inflation via currency appreciation following China's lead. Singapore's exports are being hurt at present @ 1.28 to the US$

US mortgage rates are tied to treasuries, particularly the 10 year bond. The 10 year yielded 2.4% prior to QE2 but currently yields 3.4%, hence the increase in US mortgage rates. This situation can reverse dramatically if the Euro debt crisis spreads as investors seek the safety of US debt, causing US mortgage rates to fall drastically.

The increase in mortgage rates usually is considered a good sign growth has returned to the US Economy as investors become less risk adverse, however critics of QE2 have noticed the Feds asset purchases are not treasuries linked to mortgage bonds, hence the rise in rates. Analysts expect the 10 year yield to top 4% in 2011 which would equate to a 5.5% from its current 4.8% 30 year mortgage in the US, which is still historically low. The Fed might expand asset purchases to bring down the 10 year yield should it impede growth in the US or external factors such as China's slowdown or geopolitical issues force a flight to safety.

China's economy is expected to grow less than 10% in 2011 as tightening continues. China is engineering a slowdown to its overheating economy. China is in fact in big trouble with 12% inflation in 2010 and further inflation worries in 2011. China's property bubble might burst in 2011 or 2012 which will have dire consequences for Asia but now the consensus is the landing will be softer rather than hard. The China property bubble will however burst at some point which will affect Singapore.

 

[captainxerox]

no lah. fed rates didn't go up right? so local mortgage takers still on high here as local bank rates won't go up yet.

 

[longbow]

Ahsol1 - very good analysis.

Agree about issues with inflation in China but many analysts forget that Beijing has a lot more control on economy than say the US. They also have the $ to mitigate. However, going forward, gyrations in EU and QE2 in US is making the landing tricky. I think they can engineer a soft landing but much depends on externals like EU.

As for property bubble in China - if they can stablise prices and factor in 8% economic growth, 3 years would wipe off 24% of the bubble/loans

Raising interest rates is but one tool to contain inflation. MAS prefers to use other means of tightening such as allowing the S$ to appreciate. Singapore tried to intervene earlier this year to weaken the S$ to no avail hence the switch to contain inflation via currency appreciation following China's lead. Singapore's exports are being hurt at present @ 1.28 to the US$

US mortgage rates are tied to treasuries, particularly the 10 year bond. The 10 year yielded 2.4% prior to QE2 but currently yields 3.4%, hence the increase in US mortgage rates. This situation can reverse dramatically if the Euro debt crisis spreads as investors seek the safety of US debt, causing US mortgage rates to fall drastically.

The increase in mortgage rates usually is considered a good sign growth has returned to the US Economy as investors become less risk adverse, however critics of QE2 have noticed the Feds asset purchases are not treasuries linked to mortgage bonds, hence the rise in rates. Analysts expect the 10 year yield to top 4% in 2011 which would equate to a 5.5% from its current 4.8% 30 year mortgage in the US, which is still historically low. The Fed might expand asset purchases to bring down the 10 year yield should it impede growth in the US or external factors such as China's slowdown or geopolitical issues force a flight to safety.

China's economy is expected to grow less than 10% in 2011 as tightening continues. China is engineering a slowdown to its overheating economy. China is in fact in big trouble with 12% inflation in 2010 and further inflation worries in 2011. China's property bubble might burst in 2011 or 2012 which will have dire consequences for Asia but now the consensus is the landing will be softer rather than hard. The China property bubble will however burst at some point which will affect Singapore.

 

[LonewolfAlfa]

here we go again... i hope this time all u so called property experts without any property are right and the market does indeed crash... district 10 here i come!

 

[AhSo1]

Ahsol1 - very good analysis.

Agree about issues with inflation in China but many analysts forget that Beijing has a lot more control on economy than say the US. They also have the $ to mitigate. However, going forward, gyrations in EU and QE2 in US is making the landing tricky. I think they can engineer a soft landing but much depends on externals like EU.

As for property bubble in China - if they can stablise prices and factor in 8% economic growth, 3 years would wipe off 24% of the bubble/loans

Methinks the landing will be soft, but in China this means a growth rate at 8-9%. Anything less than 7% the Chinese Govt will be afraid of social unrest like Tianamen 1989, but China has 2.7 Trillion at its disposal. China has many years of strong economic growth ahead, but it has encountered serious headwinds, and double digit growth is not sustainable forever.

There simply is too much money chasing too little resources in the world.

Herein lies the ultimate problem, inflation. Price controls have never been historically effective. QE2 is purposefully inflating commodities priced in the reserve currency to "stoke" +1% inflation in the US to speed the economy up, but of course many know its also supposed to target China as well.

I am very skeptical at China's ability to control inflation for the very reason that created it in the first place, the massive record breaking 55% of M2 Stimulus the govt injected. Yes the Chinese escaped the worst of the GFC but now they must deal with out of control inflation, an oversight on their part. The Chinese can take steps now to contain the worst of it, but it is a serious problem regardless.

As for the property bubble we have seen some shocking reports. There are whole cities lying empty that have been overbuilt. Companies that manufacture have been given massive loans from Chinese state banks to build. And when the companies have not been able to repay the loans, more loans are made just to pay the original loan's interest payments. The problem is we dont know how bad these loans are because they are off the balance sheet.

As bubbles go, sooner or later they will pop, when the cheap money stops flowing there will be an "adjustment". They have choices 1) accept inflation and keep the bubble going, like in Australia or they can make the hard decisions are tighten to control inflation.

Inflation is the biggest threat to China and to Asia right now.