My thoughts on Steel and HDB

Recently, I wrote an article about steel market to my colleagues. The article has nothing to do with HDB flats, but could it happen to HDB flats?

First, my thoughts on steel market:

A very interesting article and if you got time, it definitely worth the time to read.
http://www.economist.com/node/16432870?story_id=16432870

The article talks about what drive the commodity price to "absurd levels". Most of us feel that speculator like the futures trader are the blame of this, but the article points out that maybe speculator should not get the blame. Although the article did not direct the blame to commodity consumer, but did suggest they are in a bidding war that drives the price up.

Let's apply this to our beloved steel.

In the boom year in 2007, steel price rise to an outrageous level. We must ask ourselves, what drive the price up? Real demand or speculation? The article said "Similarly, in boom conditions commodity consumers will be so desperate to get their hands on raw materials that they will drive prices up to absurd levels, at least for a short time." This is so true. During that time, everybody are in fear of not getting steel that they just buy whatever is out there, but was the demand that great? Yes, the demand was there, but was never great as later we found out that consumers were able to stop all purchasing instantly. Steel price took a deep dive and we were amazed and baffled. The last sentence of the article said it so well, "When demand falters, or new supply shows up, the price bubble can evaporate as quickly as it arose, without a speculator in sight."

I think I'll stop here. Although, it’s nothing sensitive, but I still felt that the later parts are not suitable to publish in public. Anyway, just read the article by the Economist. It's very insightful.

Second, my thoughts on high HDB price:

Can a nation that creates 2 casinos continue to sustain its incredible economic growth? Do they want to cool off or continue its growth? If continues to grow, would the HDB price continues to rise? If HDB price continue to rise, can the people afford it?

Are these important questions to answer? Well, to me it’s very important. Most of us live in HDB and any effects on HDB will dramatically change our lives!

10 years ago, a 3 room flat at Holland V. cost about 150K, but now cost about 380K and still going up for a flat that is almost 40 years old. That’s a 150% jump! Don’t I wish my salary jump like that?

Should the government cool off HDB resale market? If needs to cool off, how to cool off? What measure should it take? Would cool off measures on HDB resale market affect Singapore’s economic growth? Current economic growth feeds current population. Any cool off measures will affect current growth which might create an outflow of foreign national who works here. How would this effect the rental of HDB? If you read the article I asked you to read in my previous thoughts, it might create a storm in HDB rental and would this lead to a ripple effect on HDB re-sales.

Most people use bank loans for HDB due to low interest rate and what if HDB price drops? In private property, if the value of property drops, banks may ask the mortgager to top up cash to fulfill the difference. I don't know about HDB situation, if banks do ask for top ups, does the mortgager has the money? Or banks can not ask for top ups for HDB flats?

Maybe PAP government can stabilize HDB resale price which is at all time high without hurting the economic growth. Singapore’s economy is in good position but the world is in a fragile state. Here is a good interactive graph of world debt.
http://www.economist.com/blogs/buttonwood/2010/06/indebtedness_after_financial_crisis
Also a special report on world debt which I did not read.
http://www.economist.com/node/16397110?story_id=16397110

If you ask me, we are approaching a cliff and should be cautious. Does PAP see it as I do? Who knows? Maybe I am being pessimistic. Maybe I am way, way wrong since I am no accountant, no banker, no financial planner, and know nothing. Future eventually will play it out. For now, I am thinking about how to accumulate cash before it’s too late.