Home loans -- it's the banks that laugh all the way to the bank

At last, someone is saying it: the real gremlin to beware of in the current private property boom are the low interest rates that banks dish out.

Property consultant Colin Tan, writing in TODAY's Property 2011 supplement (8 July, page 10), says in his commentary:

"... what drives our market today is not simply demand and supply but interest rates -- or the cost of money -- as well. Increasingly, the market may continue to rise or correct just on interest rates alone -- neither supply, nor demand.

"But you may ask: what is the big deal about interest rates?"

Here's his Cassandra-like warning:

"In property-obsessed Singapore, many buyers take a short-sighted view: Future problems are tomorrow's problems. Let us focus on today; who know what will happen tomorrow? Prices may shoot up and I can just re-sell my property for a tidy profit."

He goes on to say that interest rates can, and will, rise -- even sharply -- citing recent historical evidence. That's when servicing the loans can become a nightmare, such as happened in end-2007/start of 2008.

"Many multiple-property investors and speculators then were having sleepless nights. For those living at the edge or those highly geared, one by one, the properties went until they were left with just the roof over their heads.

"Out went the luxuries, the fancy cars, the club memberships and so on. The super rich or those with lots of cash reserves were not affected as the spike did not last too long but it was a painful lesson for those whom I can only describe as people who are not there yet, but who aspire to be among the ranks of the rich. It is this group that I am most worried about."

[Note: I was unable to insert the link to the article here. Each time I tried, my laptop hanged. The article by Colin Tan, "Will history repeat itself?" can be Googled.]