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The idea that banks are willing to lend their credit facilities more freely, it would be wise to examine the terms and conditions of the credit facility you are planning to take as property market comes in phases. (Source: wikipedia, 2009)

Europe

Europe’s practice of collective austerity may affect the world economy. Europe can no longer spend more than they earn. This could have an impact on the world economy. The balance and tightening of an individual’s budget may sound noble but it is not the way to go about housing and other investments. Spending cuts may add to the creation of jobs. For example, if the countries UK and Germany cut public spending that the private sector relies, this may hurt the private enterprise sector and could lead to job loses or retrenchments. This could also lead to diminishing trade with the rest of the world. The self-imposed austerity drive might do more harm to the economy than improve the situation of the people. Hopefully, the wealthy people might have more liquidity that would be enough to create more investments and jobs. Austerity is remarkable but capitalization through credit is the only way to move forward.

USA

The economy of the US seems to approach stability now after a trillion dollar efforts to recover. This situation sends good news and kind of stabilizing signal to the rest of the world. During the economic recession in US, many countries were also affected. However, the world is now reaching the tail end of the problem. The strategy of President Obama launched on Dec 2008 was quite effective. Economic recovery has been remarkably doing great. Many states depended to issuing municipal bonds to fund their deficits and balance their budget. (Source:tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol=USD)

The US was able to maintain the Federal Reserve interest rate at 0.25% level for over a year now. Most homeowners had equally benefited from the low interest rates and cheap credit loans. Businesses also benefited from the cheap borrowing rate offered by the banks. For sure, a bit part of it will certainly flow overseas as a Carry Trade activity where borrowers borrow at cheap rates and convert it to a higher yielding investment in another country. The fast flow of international borrowings makes it difficult to track and know the amount of funds operating overseas. International borrowings could move certain dollars out of the country fast and move back certain dollars into the country as fast as it goes out.

The high-end properties as well as the mid to high-end properties risks largely depends on the demonstrated price volatility during market swings. The mass market condominiums are presently facing the challenge of a market affordability risks. With the present elevated market price levels, a new benchmark for prices could be formed provided the employment figures remain stable. The new prices could hold up for awhile depending on the employment factors. The HDB supports the condition of the mass market condominium. The HDB is the basis for mass market condominium pricing. The HDB is currently experiencing shortage of supply.

Availability of housing loan services

The only limitation that an individual may face is the availability of housing loan services that ignores cash down payment or owner’s cash equity part. Normally, housing loans require owner’s cash equity. The owner’s cash equity will serve as the down payment for the purchase of the property. The fact that the savings and cash holdings are not homogeneous across all income groups of the country, it would be impractical and misleading to use the national savings as a guide. To simplify the analysis, the cash down payment funding portion is ignored in the following computation.

Sample computation using condominiums such as Shenton Way

* 76 Shenton – between $1,900 – $2,400 psf.

* The Sail @ Marina Bay – between $2,000 – $3,300 psf

* International Plaza – $1,100 range

* Icon – $1,600 – $1,700 psf

* Some parts of China town, Tiong bahru, etc….

* Leonie Hill, Leonie Studio – $1,500 to $1,900

* Grange residences – $2,500 to $2,800 psf

* Ardmore park – $3,000 – $3,600 psf

* Balmoral – $1,500 – $1, 800 psf

* Cyan Bukit timah (New development) – $1,800 – $2,400 psf

* Aspen heights – $1,400 – $1,600 psf

* Rivergate – $1,600 to $1,900 psf

* 5th Avenue Condominium – $1,200 to $1,400 psf

Singapore BANKS CREDIT stance

Banks have generally been more careful in managing their loan portfolios, investments, and loan or credit facility offers. Banks such as Citibank that were greatly affected during the worldwide recession or sub-prime crisis are aggressively introducing the credit facility package Sibor with trend showing about + 0.5% ascending to 0.9% in June 2010. HSBC responded with the competition and started to campaign aggressively for their credit facilities. The Bank of East Asia eventually entered offering consumers the residential housing loan packages. This time, the banks learn to lend more freely and aggressively to regular households.

Couples with household income of $8,000 are not eligible for HDB subsidized property prices. Assuming that couples belonging to the average household income computed at $8,000 would like to buy a condominium property. They need to have a Cash-over-valuation amount to help them pay the down payment. This is true only if this group of people already have an HDB. However, if these people were buying for the first time, they would be able to afford only properties with market values ranging from $1.08m to $1.35m at the maximum.

A household comprise of two persons could comfortably stay in a condominium that has an area of about 800 to 1,100 square feet. The conservative estimate of maximum affordable property level of $1m to $1.1m could present a $909 psf to $1,375 psf household affordability level largely depending on the size of the unit purchased.

The possible effects for this situation are:

* A drop of the HDB supply would lead to a corresponding expected HDB price increase.

* The increase of HDB price leads to some extent an upgrading or increase of the mass market condominium market prices (normally funded by HDB sales profits)

* The affordability level of the household can support property prices ranging from $909 psf to $1,375 psf, which is about 800 sq feet to 1,100 sq feet. This holds true if they are made on direct purchase skipping HDB and that the household total average income level is about $8,000.

* Unfortunately, this constitute as one of the good reasons for the Singapore government to raise real estate property prices because everyone could very well afford it. They will then pass the cost to the property developers, which will then pass on to you as a matter of chain reaction. The private properties in Singapore mass market may even possibly reach to the level of $1,200 psf because of the simple understanding that it is affordable. This condition may prevail considering that the employment is stable and that the GDP is also growing.

HDB prices could vary because of the lack of balance between supply and demand. The Singapore government hasn’t responded to the under supply of HDB, which resulted to massive increase of prices. The timing for the increase of the prices relates to the fact that the prices were already affordable to the common household. This boosts the ability of the Singapore government to benefit from more land sales. However, the context of releasing more private lands to build condominiums by the Singapore government, would possibly create an oversupply in the private residential market sector.