Newsletter

 (A) MACRO FACTORS - HOW TO AVOID ANOTHER EURO ZONE PROBLEM AND WHAT DID HISTORY TEACH US.

 In Mid-April 2010, the Straits Times Index (S.T.I) briefly hit over 3000 points and then the Dow Jones Index went below 10,000 points on May 5th, triggered by unfolding problems in the European Union or Euro Zone (consisting of 27 countries) and the slow recovery in the U.S. This debt burden started with Greece and has since uncovered a pattern spreading to Portugal, Ireland and Spain. ( These countries have now the dubious honour to earn the acronym of ' PIGS '! - Portugal, Ireland, Greece and Spain). 
Market sentiment has been greatly affected as most bad debts will be infesting the European Union with the Domino effect. With the weak recovery in American and Japan, and Europe not buying, some are predicting another round of financial crisis, now played out from Europe, will creep into the Asian's stock and property market. 

All these end-result and consequential pains have its source on the human fundamental misbehaviours of wanton waste, bad work ethics, overspending and indulgence, uncompetitiveness, undeserved welfarism, draconian affirmative policy and protectionism.  

As an individual, we need to study hard, upgrade skills, innovate, postpone immediate gratification, save for a rainy day for emergency and invest for the future. 

As a nation, the people and the government should be competitive, open and transparent, they should cut down on waste and red-tape, reward risk-taking, practice meritocracy and set aside foreign reserves for saving/ defence / calamity. 

It seems like a deja vu drama played out first in the 1997 Asian Financial Flu, the 2008 U.S. Sub-prime crisis and now the Euro Zone. The people of the affected European countries will queue up to experience deflation, collapse of real estate prices, negative equity, wage and job loss, foreclosure, business and bank failures. 

Perhaps, everyone should be taught of the 'Basic Finance Lesson 101' on the Finanacial Ratios: 

1. Basic Liquidity Ratio : 6 to 8 months of Emergency Saving.

2. Saving Ratio : At least 10%.

3. Debt to Asset Ratio : 50% or less.

4. Debt Service Ratio : 35% or less.  

It is an irony that in the 16th to 19th century, the European countries similar with the 'PIGS' after the Renaissance, went for economic exploration to colonize the New World and control and explolt the people and government, created slave trading, sold opium to the weak Manchu Qing's China and subjugated other less developed regions.  

Yet, despite their advanced knowledge of weapon technology and business management of creating credits and debt financing, they have turned soft and decadent, succumbing to the basic human weakness of splurging on unearned future money through credit cards ( 'a western disease' together with the small pox and chicken pox ) and descended into The Dark Age of bubonic plague which killed one third (1/3) of Europe's population before the Crusade. 

Now bring forward to 2010. The Euro currency was valued at S$2.20 in November 2009 to 1 Euro but now it is at S$1.70. Some experts are even predicting that it will match S$1.40 to 1 Euro as the European Union countries fall like dominoes and eventually break up!

Even with the summer heat now on in Europe, Asian tourists, many from China, are queuing up outside the branded goods stores like Louis Vuitton, Prada, Hermes, Cartiers and Bvlgari to snatch up all varieties of branded products which are 40% cheaper now, ( Euro currency is now 30% cheaper and 10% for 'Value Added Tax', VAT, foreign tourists tax refund ). 

Yes, tourists in Europe's shops are crying out: cheap! cheap! cheap! . 

(B) WHY SMART SELLERS MAY CONSIDER SELLING NOW. 

Since January 2010, when retail trade volume has started to slow down owing to the new supply of shopping malls space, and now in July 2010, we have many more clear signals that the rent for tenancy renewal is coming down. Some are for 5% while others are as much as 30%. With consistent market feedback, we would definitely conclude that the rent will be dropping throughout this year. 

There are more incidents of tenants defaulting in terms of late or non payment or pleading for lower rent discount. We are handling more cases of rental cheques being bounced and the assignment of tenancy whereby the existing tenants want to stop retail operation and need to find a replacement through us. 

Ironically, many bank valuations have remained generously high and therefore buyers can still take high loan amounts based on the bank's panel of valuers.  

Singapore's property bubble may be forming as the rental income and yield cannot match the asking or sale price. Sellers have often quoted how much the bank has valued their properties and can give high amount of loan but the property's existing or prospective yield would not be able to give a decent rental return. 

Thus, while the going is still good, some smart sellers may consider to reap the capital gain by 'eating up the cherries' or roasted duck drumsticks (2 drumsticks are equal to 30% of the whole duck's price ) and pass the buck to some contrarian and adventureous buyers. When by then if most people think that the market is bad, both price and demand will suffer. 

To know how much your property is worth for sale or rent, please call us at HP 96736477 for a confidential discussion. 

(C) HOW CAN LANDLORDS AND OWNERS TAP OUR EXPERTISE IN MARKETING? 

1. Call us to find out how much your shop is worth for rent and sale. 

2. Sms your handphone number and email address. We provide a monthly report on the state of the market condition. 

3. Provide a Tenancy Renewal Package with various option services including negotiation with existing tenant, finding new tenant, collection of rent and after-sale caretaker supervision. 

4. Tenant's Default Re-Engineering - solve, eliminate, redress and maintenance of good tenant practice.  

5. Forward Sale Re-Packaging - to present the best property image and profile so as to seek the highest potential sale price in a future date.

   Charles Yue (Charlie) H/p: 9673 6477   Fax: 67325132
 www.fareast-plaza.com    Email:enquiry@fareast-plaza.com
14 Scotts Road #05-134 (B) Far East Plaza Singapore 228213