Tuesday, August 7, 2012

A Good Warning

Strangely, I have found myself to be in a position of defending and praising a Minister once again. I recently praised Khaw Boon Wan for taking firm quick action over the tender of NParks’s purchase of their bicycles. Now I have to praise him again for his statement of caution on the newly launched 50-year property loan.

Now, I know of some home buyers who like the idea of a 50-year loan. To some home buyers, they will almost always take the maximum loan tenure available as this enable them to stretch their purchasing capacity. Mr. Khaw's statement saying that the 50-year loan is a gimmick is right on the money as there is almost no way anyone can pay a 50-year loan in its entirety.

Even if someone take the loan when they are 20 years old, by the time the loan is finished, he will be 70! That's past the current retirement age! The 50-year loan is just a gimmick by property agents and developers to entice home buyers to folk out cash they do not have to buy a house beyond their means. In fact, you can argue that this 50-year loan idea is to encourage property speculation as the only way it will work is if the home buyer flip the property in a few years time after purchase.

So I fully appreciated this warning by Mr. Khaw. I agree that the government can't ban banks from offering the loan but this official warning should be more than enough for home buyers. If home buyers ignore this warning, then they only have themselves to blame. The government, and Mr. Khaw, has done all they can.

12 comments:

Anonymous said...

@"The government, and Mr. Khaw, has done all they can."

Yah... a borrower is not likely to out-live a 50-year tenure, but 30-year just in time - can pay up in full without too much future retirement expense to worry about. Just nice.

But to play safe, maybe the govt can make it illegal to offer such a loan.

Just like it's illegal to offer loans above a specified rate of interest, even if the borrower is willing to pay.

Although of course, no-one can really save a person from him- or herself.

But sometimes still can try a bit harder lah.

Anonymous said...

The 50-year loan is just a gimmick by property agents and developers to entice home buyers to folk out cash they do not have to buy a house beyond their means.

- please get your facts right, the 50 year loan is NOT created by the property agents and developers. please bark at the right tree.

- tackle the problem not the symptom like you treat fever with medication and not ice alone to cool the temperature. If the aim of HDB is to provide an affordable housing for citizen, then keep it affordable. Stop all the renting-out, subletting and HDB as investment non-sense.

Anonymous said...

"The government, and Mr. Khaw, has done all they can."
A definite no. The government could return to cost plus pricing, then no need for 30 or even 20 year loan, let alone 50 year loan.

The said...

I beg to differ. KBW does not deserve your praise.

What is the real problem? Housing that is becoming more and more unaffordable.

And who caused this problem?

UOB is only offering a solution. Not suitable for everyone for sure - but a solution for those who are not too highly geared. And there is of course the usual caveat emptor.

So, is the 30-year loan also a gimmick? With many PMETs losing their jobs in their 40s, should we also ban the 30-year loan?

KBW should focus his energy on solving the housing problem instead of throwing brickbats at those who have to come and clean up the mess he and his predecessors created.

Anonymous said...

To explain the overcrowing on our trains and strains on our other infrastructures, one of our Ministers said that during the last Global Financial Crisis (GFC), when there were opportunity for Singapore to grab them, we should as this opportunity may not be there in the future. We can then deal with expanding/improving our infrastructure later.

If our Minister have such skewd thinking, the same justification applys to someone who want a 50 year loan. With prices of properties running away, the more expensive the property now, the more you can sell it for in the future. So say, if I can afford to pay $3,000 each month, it makes the most sense to take a 50 year loan rather than a shorter loan. After all, my wages will rise in the future and I can pay down my loan. What a good idea to make more money.

So if KBW is preaches prudence, the other Minister preaches risk taking. Both are equally right and wrong. The only difference is that in the first instance, Singaporeans takes the risk and not the Minister himself personally. If the rash action of the Minister turns out to be wrong, everyone of us is affected. In the second case, it is a personal decision and risk management by an individual and if thing turn out wrong, no one else suffers but him.

So, MR KBW, if you want to be a kaypoh, it is better you go tell your collegue to be more prudent and not take so much risk rather than trying to be smart to tick our only Bank run by Singaporean how to do their business.

Ghost said...

Wait...are you guys actually supporting the 50 years loan? Sure sound that way when you guys are running down the minister that's actually speaking out against the 50 year loan gimmick.

The said...

Ghost - let's look at what gimmick means:

/// gim·mick (gmk)
n.
1.
a. A device employed to cheat, deceive, or trick, especially a mechanism for the secret and dishonest control of gambling apparatus.
b. An innovative or unusual mechanical contrivance; a gadget.
2.
a. An innovative stratagem or scheme employed especially to promote a project: an advertising gimmick.
b. A significant feature that is obscured, misrepresented, or not readily evident; a catch. ///

Most of the definitions suggest some sort of dishonesty. For a minister to accuse the private sector of cheating - that's a bit rich.

Let me tell you what is a gimmick:

a) A heart operation that costs $8 only.

b) Someone earning $1000 can afford to buy a flat (okay - if you can survive on love and fresh air).

c) Affordable medical and old age treatment - sent them to JB (or some might say Batam).

d) Introducing GST is to help the poor.

e) Foldable bicycles are for productivity improvement. Now that the bicycles have been suspended from use, what happens to productivity? Why only NP staff needs foldable bicycles to lug the bikes across overhead pedestrian bridges when thousands of bikers can do so with ordinary bikes?

f) Upturn the downturn - now this is a real gimmick.

50-year loan is a choice. You don't have to take it. Ditto for 40-year and 30-year loan. Should we disallow it?

High rise buildings facilities many suicides and maids falling to their death - should we also ban them?

Is promising upgrading and giving out cash "growth dividends" not a gimmick? Or, I correct myself - worse than gimmick. Pork barrel politics.

Those you live in glass houses should close their curtains before making love.

The said...

Ghost - let's look at what gimmick means:

/// gim·mick (gmk)
n.
1.
a. A device employed to cheat, deceive, or trick, especially a mechanism for the secret and dishonest control of gambling apparatus.
b. An innovative or unusual mechanical contrivance; a gadget.
2.
a. An innovative stratagem or scheme employed especially to promote a project: an advertising gimmick.
b. A significant feature that is obscured, misrepresented, or not readily evident; a catch. ///

Most of the definitions suggest some sort of dishonesty. For a minister to accuse the private sector of cheating - that's a bit rich.

Let me tell you what is a gimmick:

a) A heart operation that costs $8 only.

b) Someone earning $1000 can afford to buy a flat (okay - if you can survive on love and fresh air).

c) Affordable medical and old age treatment - sent them to JB (or some might say Batam).

d) Introducing GST is to help the poor.

e) Foldable bicycles are for productivity improvement. Now that the bicycles have been suspended from use, what happens to productivity? Why only NP staff needs foldable bicycles to lug the bikes across overhead pedestrian bridges when thousands of bikers can do so with ordinary bikes?

f) Upturn the downturn - now this is a real gimmick.

50-year loan is a choice. You don't have to take it. Ditto for 40-year and 30-year loan. Should we disallow it?

High rise buildings facilities many suicides and maids falling to their death - should we also ban them?

Is promising upgrading and giving out cash "growth dividends" not a gimmick? Or, I correct myself - worse than gimmick. Pork barrel politics.

Those you live in glass houses should close their curtains before making love.

Ghost said...

Did you actually read my post before commenting? Cause I have no idea what you are talking about.
How is this warning by Mr. Khaw "pork barrel politics"? How is this warning, which is a good warning, some sort of dishonesty? Does this warning help him in anyway shape or form? Mr. Khaw can keep his mouth shut on the matter (you know, like everyone else) and who can say anything?
Mr. Khaw actually put himself out there by warning against this 50 year loan and he is getting pilloried for it? What sense does that make?

The said...

Because as Minister of National Development, he is responsible for affordable housing. Having screwed up the housing supply with prices shooting upwards, the private sector had to come in with such "gimmick" so that some may be able to buy houses.

Ghost - imagine you screwed up big time. Somebody comes in and help you clean up your shit. And instead of thanking him, you said he is indulging in gimmick.

Why don't you real the whole thread instead?

And who is the one who comes up with real gimmicks?

Ghost said...

If Mr. Khaw screwed up the housing prices and the private sector are now coming in to "help him clean up his shit" as you implied, why is he going against the 50-year loan program? If the private sector is "helping" him, Mr. Khaw would be promoting the loan, not going against it.

Anonymous said...

I'm the poster of the first comment and I'd like to follow-up in light of the responses, by the author of this blog, which I find interesting.

Compare the Minister's advice with a warning against smoking cigars because cigars cost more - cigarettes are cheaper and therefore a better bargain.

This warning fails to point out that an obviously better choice would be to smoke less, or even quit smoking altogether.

So while some correct advice is probably better than none, it is incomplete, and inadequate.

The Minister remarks that our public housing is priced to be paid off fully after working a lifetime.

But I feel that a system that counts on on an owner depleting a working lifetime of earned income to ensure a roof over his head is not a good plan.

It leaves little funds left, in old age, for healthcare in old age, for a reasonable standard of day-to-day living, amongst other things, like maybe an occasional small treat in the twilight years.

In addition, like means testing in public healthcare, one can be deemed "not poor enough" to stay in cheaper hospital wards or cheaper public housing, based on income ceiling criteria.

Thus I feel that the majority of Singaporeans, who live in public housing, will worry about their old age.

Or at least have to enact a financial life-plan that cannot tolerate big upsets like job-loss, prolonged ill-health, death of a spouse, or even an unexpected pregnancy.

The Minister warns against a 50-year loan, and gives the impression that the current repayment tenures of 20- to 30-year are better choices, for the same loan amounts.

They are better choices, but I think that they are still not prudent options, even if the only ones available.

Better, and workable options are needed.

Thus I feel that the advice given is incomplete and inadequate.

In addition, I feel that his depiction of the 50-year loan a gimmick may convey the impression that the lender is not making the offer in good faith, and that the borrower should be wary of hidden trickery or fraud.

This is an impression that one should be careful to suggest only with substantiation and explanation (none of which was reported in the news article).

This I think should be especially so, given he is speaking in his capacity as the relevant Minister.

Some of us do take ministerial comments seriously.

Therefore, it is in the contexts above that I cannot agree that the Minister did a good job when commenting about this new loan package on offer.

We need a better response. And the Minister, and his team, can deliver.

Because we need them to.

Because the Singapore life should not be about slogging a lifetime for a "home", essentially a 99-year housing lease that cannot be bequeathed to one's descendants after one's passing.

And that done in misery, in excessive uncertainty.

We need to ask more from ourselves.

Failing which we should hope to settle our debts before the inevitable.

A scenario of course less likely with a 50-year tenure.

Leading to more paperwork for the liquidation process, something everyone is anxious to avoid.