Monday, July 09, 2018

The Art of the Good Life #30 : The Opinion Volcano

As a financial blogger, I have to admit that I cannot follow the advice of this chapter because my blog is the vehicle where I share my opinions with everyone no matter how ridiculous they may be. In a strange way, I get rewarded by my readers. In fact, my last post had an image of a bull having sexual congress with a bear, and it logged me 1000+ views within 48 hours.

Let's do something different for this chapter. The author says that most of the time, we do not need to share an opinion. In fact, having no opinion is an intellectual strength.

Let's illustrate this with an example of a piece of news that everyone seems to be very passionate about - The latest property cooling measures enacted by the government.

a) Opinions from people with no interest in the area are not worth much

Property cooling measures affect some people but not others. They definitely affect folks who want to buy property such as young people who can't really afford to spend the rest of their lives paying for an expensive home when all they have access to is the gig economy. They will benefit from the cooling measures. On the other hand, folk who want to sell the property are negatively affected by the change because a large part of their Singaporean Dream involves escalating real estate prices and retiring comfortably in Perth.

What the measures do not impact are folks who already have one property and intend to stay in it for quite a while longer. It is this group whose opinion may not matter so much as their exposure to property developers should be small.

b) Some opinions are for questions which simply may not be answerable so should be discounted completely !

Some questions regarding the cooling measures simply cannot be answered. Such questions like when will the changes be reversed ? Or whether ABSD will be increased by a further 5% if property prices go up further ? Other includes whether today's rebound is a significant reversal or a dead cat bounce. In this aspect, many financial gurus are more omniscient than God.

c) Some opinions are for questions that are simply too complicated and should be discounted as such. Alternatively, more opinions from a diverse crowd should be sought. 

One such question is why were the cooling measures enacted when the property market recovery has barely started and a big oversupply is just around the corner.

I struggled with this question over the weekend and it does seem very illogical for the government to enact this cooling measure so suddenly. I can understand the ABSD for second home buyers, but the reduction in LTV for first time buyers baffle me because I thought the government just wants the property market to favour young buyers over older sellers ( Who's hearts are actually in Perth ).

As my own answer failed to satisfy me, I starting thinking about whether elections are coming and whether the government does not want to be penalised at the ballot box from Millenial voters.

The closest answer which satisfied me is that we're shifting to a Smart Nation economy and expect younger Singaporeans to take on bigger business and career risks. This means not saddling them with larger mortgage payments. No sane young professional will service a mortgage and throw his life behind a startup. The highly leveraged folks prefer MNCs and public sector jobs and we won't such jobs for much longer.

It is this national obsession with home ownership that's kept us risk-averse all these years. You already have a mortgage to pay, how to start a business and generate jobs for other people ?

If the objective is to keep a lid on home prices to encourage risk-taking and entrepreneurship then expect the government to limit the rise in home prices for a very long time to come because a mind-set change takes a generation to occur.

But this answer is also not satisfying because the best move in such a case is to shift to a rental economy.

Either way, HODLing property counters and residential property may be a fool's errand if this is long term objective of our 4G leadership.


  1. Hi Chris,

    Rental economy is the way to go based on my perspective. Tbh,I doubt most folks will not be inclined to opt for such route given the way how their mindsets are heading to. I guess that more of them are likely to take more mortgages. This is evident in the circumstance in which most folks queue overnight to avoid ABSD.


  2. I don’t really like a rental economy even though dividends can pay rent in perpetuity. A rental economy introduces negative externalities because folks will only look after their homes only if it belonged to them. Our neighbourhoods will become much worse off for it.

    1. To each of our own. Personally, I prefer rental over ownership. I maintain the minimal lifestyle and keep minimum items. If the landlord decides to terminate the lease, I am fine with it and can vacate the premise within a day. There is no worry of the faulty stuff in the premise. All I need to do, is to contact the landlord and he will settle all the rest.

      Once again, to each of our own.