We are all watching with bated breath at our neighbours' recent elections. At the time of writing, neither of the main opposition parties, PH or PN have enough seats to form a simple majority, let alone a 2/3rd majority in Parliament (for laws to be passed convincingly), so it is highly likely that a coalition of parties will be formed to make the next Government, with the smaller parties forming the opposition.
The whole situation from our immediate neighbour is of concern for us here in Singapore. We can actually see the drama of meetings between rival factions playing out from our handphones and while the dust will take some time to settle, I think the reality of a Parliament which is too finely balanced will be felt by all in Malaysia.
Every new move now on, will be populist in nature and in the overall scheme of things, a backward move for our neighbour. This is my opinion.
In Singapore, while the ruling PAP has 90% of the seats, we can observe second hand how having a weak Government will or will not benefit the ordinary lives of the people.
While inflation is now rearing its ugly head, Singaporeans of all walks of life will feel its bitter bite only in 2023. There is also the new 8% (from 7%) Goods and Services Tax which will come into play. The asset class such as landed property as well as condominiums in the central districts will be harder and harder to reach with each passing decade, I fear. This is only my opinion and not one which a straw poll of say 10000 citizens were taken and their views recorded.
In the early 90s based on a median combined salary of 2 professionals (S$8,000),if 30% or $2400 per month was set aside to pay the mortgage, at 4%, a 1000 ft2 condominium of $600,000 in District 10 would take approximately 18 - 20 years of working to be fully paid IF the 30% downpayment or $180,000 is paid up in CPF and cash. That, and the fact that if one of them is retrenched, they better have savings to pay the ongoing mortgage. I know these numbers well, as I was part of that couple in the preceding paragraph.
Now, in the early 2020s, this same Condominium of size 1000 ft2 will cost $2.5 Million or 4 times that in the early 90s. Given that the mortgage rates are now 4%, and the new median salary of 2 working professionals is now say $ 12,000 (or only 1.5 times that of the early 90s). Given that 30% is approximately $4,000 per month.
If the 20% downpayment (now with parents' help) of $500,000 is magically coughed out ($200,000 to 300,000 is more realistic). Then for a $2,000,000 loan....
It is likely that this young aspiring couple would have to work... 40 years just to pay off the principal and interest - the loan may balloon to $3,600,000 (simple interest 4% over say 20 years) and maybe, one day they can own the condominium. This is based on the assumption that the next 40 years we do not see another (or 3 or more) major worldwide recession. The impact will be jobs losses, people will be forced to downsize , resize or worse.
It may reach a stage, if the economy stalls for a number of years, then we have stagflation.
It all makes for a depressing outlook.
Of course, this is all conjecture on my part. But so called economists have been calling out a Great Recession for over 2 years now.
In summary, asset prices have jumped 4 to 5 times, while true earning capacity has at best doubled in the short span of 30 years. In addition, food, transport and energy prices all have risen.
Of course, it would be still OK, if the economy was chugging fine and salaries are going up, property prices are still climbing.
What if, it all goes SOUTH for 2 years ???
Well the property prices will be falling, but can people sell them off faster than they can sell them ? It depends.
A loan of 2 Million will still be $2 million regardless if you sold your $2 Million house for $1.6 million or $2.5 million. The debt must be repaid.
I shudder to think of the scenarios for those who are over leveraged with million dollar loans on their declining assets.
Our elections are slated only in 2025, but n theory they can be called as early as mid 2024.
When a country has a Government which has very little or no power, it is not a good development.
Many things can and will go SOUTH with just one election outcome.
Just look at our neighbour up north....
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