GCB

Just read the latest issue of The Edge.

Can't help but wonder what it's like to be as rich as Stephen Riady or Harry Chua. To be able to shell out millions upon millions to own so much land in Singapore, tear down the old and build something new. That's trully fulfilling their dreams and visions. Something that money definitely can buy. I wish I were that rich too.

If I wanted to buy a bungalow now, I think I'll need at least $3 million. Even to start off with the cheapest landed property (a terrace) in an accessible district I'd need at least $1.5 million.

Wonder when I can save up all that money.

Speaking of which, I think the current low interest rate environment is a HUGE money trap to alot of young Singaporeans buying property. They borrow at the maximum they can afford thinking that these low rates will stay, thereby stretching themselves on as much monthly payments they can afford, to buy the most expensive HDB/condo they think is within their means.

C'mon, the SIBOR has been hovering around 0.5-0.7% for the last year, and the average for the last 20 years has been around 3%. What are the odds that the rates will stay so low for much longer?

And when these rates start moving up, the banks will obviously revise their rates (the best fixed rate you can get is locked for 3 years max), meaning an increase in instalments. And we're talking about a very substantial increase. By then people will have problems trying to meet these payments.

So if they can't meet the payments regularly, they are forced to sell their property and downsize. When so many sellers start coming out into the market, the mass-market and affluent property sector will crash.

And because valuations drop so much, the value of people's homes drop BELOW their loan amounts. Banks have to recall their loans and request payment from clients to top up their property payments to meet Loan-to-Valuation ratios. Property prices will crash further.

Which is why it's actually a good thing to stick to HDB interest rates of 2.6% even though that may sound high. Because don't forget, your CPF is paying you 2.5% of your balance.

So keep your eyes peeled for any movement in the SIBOR!

By then, hopefully I will be ready to step into the property market :)