Thursday, October 08, 2009

Where is the money?

The world's real-estate and stock markets are bullish, which leads many economists and politicians to announce economic recovery is on track!!

But is it really so? Take Singapore as example, even though the government housings are controlled by regulations (for example, only married couples are eligible to purchase, and each household is only entitled to one unit, etc), the price is shooting up. These housings are commonly called HDB flats, where Housing Development Board is the body that governs the sales and constructions of them.

Nowadays, for a modest unit of 4-room flat, with built-up area of around 1000 sq. ft. buyers will have to dole out S$20k to S$50k of cash (this is called Cash over Valuation, CoV) to the seller, on top of the valuation which will be around S$450K. So the 20% down-payment, CoV and renovation costs will easy add up to S$100K, and we are not yet including the S$300K loan that will burden the poor couple for the next 20-30 years. I just wonder when do people in Singapore are so rich to the extent they can snap up flats just like it is free? Or there are some unseen hands interfere with the market? No one knows.

The next thing that intrigues me is the bullish sentiment in the stock markets. Take US stock market for example, with unemployment rate of close to 10%, what are the fundamentals that can support the rising prices? Where are all the money come from? There must exist some sources and I can only think of four: entities (business or people) in US, entities outside of US, non-US government(s), and US government.

Think about it. :)

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