A friend of mine recently upgraded from his public housing flat to a new condo in the heart of town. Public housing may conjure images of living on the dole but it's actually very common over here. In fact, 80% of the population lives in public housing here. Here are some housing projects:
You can see more here
My friend isn't poor by any means. Both his wife and himself work as mid-level managers in a foreign bank and i guess they felt it was time their lifestyle 'matched their income'. We used to have this thing call the 5Cs over here which were basically symbols to show off your status. The term kind of lost its lustre with the Asian Financial Crisis in 1997, but for anyone wanting to chase them, they are: Cash, Condominium, Country Club, Car, Credit Card.
My friend's place cost him close to $3 million. It's roughly 6 times their combined annual income so they're not overstretched by any means. That said, he's been a lot moodier since the purchase. He's always worried about losing his job and if either one of them were to lose theirs, it would be a struggle to maintain their standard of living. No wonder he's moody.
It has been more than twenty years since the AFC but i remember how devastating it was, even though Singapore wasn't as badly affected like some of our neighbouring countries. Many people lost their jobs and weren't able to meet their mortgage payments. Their homes were repossessed very quickly by the banks, with no mercy shown at all. There were also quite a few suicide cases because buying stocks on contra was really big back then and all of a sudden they were ruined in a day. Leverage kills and the more leveraged you are, just a small adverse move can wipe you out.
Eventually thing stabilized and home prices picked up and exceeded what they were before the crash. That's scant consolation for anyone whose home was repossessed though. It's also why the rich get richer. Unless they're fully invested, they have a large buffer to weather the storm and pick up bargains when ordinary folks are forced to sell. You repeat this for a few cycles and that wealth gap becomes magnified.
Moral of the story: Make sure you're never put in a situation where you're forced to sell or have your assets repossessed.
Image credit: Straits Times
