Updated: Sep 6, 2020
A simple illustration of how I see Singapore’s real estate market is really like.
The tight-rope walker is akin to our government; specifically the Ministry of National Development & Monetary Authority of Singapore, who watches for all financial stability issues surrounding our little red dot and beyond.
While it is necessary for inflation to take place, and asset prices to grow, the rate of growth (Gradient of the tightrope) must be gradual and in pace with the rest of economic & income growth & wealth distribution among the masses.
Why is inflation necessary you may ask?
1. An increase in wages (Income inflation) increases consumption and spins the wheels of an economy, attracting foreign investments and maintaining a healthy psyche within the population. 2. Goods & services inflation (We rely mainly on imports) with income stagnation means a declining quality of life which is unacceptable for any country.
3. A steady growth in prices means a steady growth in the economy & a healthy national psyche.
Among many other reasons, these are 3 fundamental tenets why most developed nations around the world work towards that magic 2% annual inflation rate for their economies.
Now, as Singapore is a small country, we are heavily influenced by global events like grass in the wind.
What can cause the tightrope walker to tip off balance and fall are the ever-looming winds of global uncertainties and black swan events like the Global Financial Crisis, Trade war threats and presently, the corona virus.
Such winds can carry with it sentiments of doom and gloom when people lose their jobs, the economy slows down and negativity magnify causing a loss of hope and confidence.
At the other end of the balancing bar are the winds of increasing fund flows searching for a safe haven; of which Singapore, with her strict rule of law, attractiveness as a home and investment and overall economic strengths, have grown into an asset class akin to gold.
We have witnessed such a the wave of liquidity seeking to overwhelm our shores since 2009 that Additional Buyer Stamp Duties have to be increased several folds over the last decade; without which severe asset bubbles would have toppled the tightrope walker.
Where are we, the average homeowner and investor, in the illustration?
Well, we are actually sitting on the shoulders of the tightrope walker as “he“ navigates the world with his higher level information & insights.
The ability to connect the dots and synthesize overwhelming data points collected in real-time from the various ministries and intelligence units.
“He“ would know when exactly to release the brakes and to floor the accelerator, as time and again, through his demonstrated ability to act rationally and timely in rescuing Singaporeans' jobs, small medium enterprises and to resuscitate the confidence and sentiments of our nation.
Taking a step back to see clearly
Fear is emotional, irrational and our natural inclination to magnify it in our minds stem back to the times of our ancestors.
To survive, we always had to heighten our awareness of risks. Can this plant be eaten? Is a sabre-tooth lurking just behind the bushes?
While times have changed much since then, our natural tendencies to play it safe, magnify fear in our minds and favour inaction as a decision can be the very reason we miss out on opportunities and rewards too.