Singaporeans Buying Properties Overseas

Last evening, I overheard a report on the 6:30 pm Chinese news programme on Channel 8 that more Singaporeans were looking to buy properties overseas. This was also reported by Channel NewsAsia here.

What caught my attention was the following statement made by one of the developers:

"Still, buying properties in Spain now is about 50 percent cheaper than several years ago as property prices there have reached rock bottom, said property developers."

While it is true that real estate prices in Spain has declined by 50%, whether or not it has reached rock bottom remains to be seen. As the old trader's adage goes, 'cheap can get cheaper'.

The premise of the aforementioned statement by the developer appears to be that the worst of the financial crisis is over, and that we are slowly climbing back to economic growth. This is something which I disagree with.

A quick scan at the EU landscape shows increasing levels of social unrest as people express their unhappiness about the forthcoming fiscal austerity programmes imposed by their governments. Europeans accustomed to generous welfare benefits have so far been unwilling to accept the reality that high standards of living require the exertion of more than minimum efforts. This does not look to me to be a sound basis for an economic recovery.

Furthermore, despite the fact that European banks in general are more poorly capitalised than US ones, none have been closed down so far compared to hundreds in the US. Something is wrong with this picture, isn't it? Short of the ECB doing more 'quantitative easing', bank failures will hit the EU next year.

For Spain itself, more bad news as FT reports that municipal debt default has started with the town of Villajoyosa. Again, it does not look like recovery is on its way.

I don't know about you, but I never trust property developers when it comes to macroeconomic analysis.