Property: Americans and S’poreans alike

In Economy, Property on 23/02/2018 at 4:56 am

In SIBOR up 25%, but property mkt is hot?, I pointed at riasing interest rates do not deter S’poreans from being bullish about property.

Seems the same is true in the US too. And maybe S’porean buyers are thinking like the American buyers.

Mickey Levy of Berenberg, who also offers this detail from the Michigan [Consumer Confidence] survey, widely followed by economists etc. More than half of Americans feel that their own household is better off than it was a year ago – the first time that has been true in too long:t appears that many people are taking rising interest rates as a reason to go out and buy a house now, before rates go up further. Mickey’s conclusion:

In the last year, we have emphasized that when confidence measures are among the highest of all of their historic readings—both on the consumer and business surveys—we find that they are reliable predictors of future consumer spending and business investment.  Accordingly, we take note of this strong University of Michigan Consumer Sentiment Index that was conducted during the abrupt stock market sell off.  If other surveys that mirror confidence also hold up, that would confirm our expectations that the economy is continuing to build momentum.


Emphasis mine.

  1. maybe the reason is share prices are high, so people can sell shares to buy property, and do not need to worry about loans as much

    interest rate’s main influence in house prices is actually indirect – if your monthly repayment is limited to a percentage of ur salary, then higher interest rate -> higher monthly repayment -> lower loan amount u can afford; but if u feel current house prices have already bottomed and waiting would only mean higher loans and increase in ur monthly repayment, u might feel it is better to fork out now than later

  2. how people decide house prices have bottomed is a mystery; somewhere about end of 2016, people started nibbling; why? I dont think anyone can explain; somehow around that time the conventional wisdom became “it wont get any cheaper, since I need a house, why dont I buy now”; once it starts, it fulfils itself; 2017 saw only a modest price rise, but a sudden spurt in enbloc sales; why? u tell me

  3. As I mentioned previously in your SIBOR up 25%, it’s all about jobs:

    “As long as unemployment is low & salary increments are higher than mortgage rate increases, property prices will continue to trend up.”

    Consumer confidence is a coincident indicator with low unemployment rate & tight labour market.

    FYI US housing prices have been on boom times since 2015. FT’s quote a bit late.

    The time to buy US properties, as I mentioned in 2012/2013, was back in 2010/2011 when you could pay 20 or 30 cents on the dollar for foreclosed properties on the steps of city halls across the country, just becoz the ex-owners couldn’t pay their property taxes.

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