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Money matters: Another look at property?
Will rising rates bring correction or collapse?
Graham Macdonald
MBMG International Ltd.
UK house prices have been rising at rates of 20 per
cent or more a year. Across the western world, homeowners and estate
agents are bracing themselves for more central bank intervention as the
global interest rate cycle turns, partly in a bid to cool overheated
housing markets and excessive borrowing. But in all countries, pockets of
blistering hot-house prices sit alongside cooler spots. That complicates
the task of central bankers trying to engineer a correction without
causing a collapse.
In Australia, two interest rate rises in quick
succession last year appear to have cooled house price inflation, causing
major price falls in Sydney and Melbourne, its two biggest cities. In the
UK, the first quarter of the year saw feverish price rises, especially in
the less affluent north of England. But after a rise of 100 basis points
in interest rates since November, and especially following Mr. King’s
warnings, many estate agents report slackening home sales and falling
asking prices.
Mortgage lenders have also seen signs of a slowdown in
June. The evidence in Britain to say this is the long-awaited correction,
however, is still inconclusive - indicators of activity have fluctuated
wildly for several years and there have been several false peaks. Most
recently, the US’s quarter-point rate rise last week to 1.25 per cent
was the first in four years. But the expectation of higher rates had led
to a flurry of home buying in the first half of the year to catch the best
mortgage deals before borrowing costs rose. In New York, one of the
hottest markets, the average price of a Manhattan apartment touched almost
$1m this spring.
Given the pace of global house price growth recently,
few would dispute that properties in many countries are to some extent
overvalued. In a recent research paper, Goldman Sachs, the investment
bank, warned that the US, UK and Australian housing markets were
overvalued by 10, 15 and 29 per cent respectively, after prices had risen
by 37, 96 and 82 per cent in real terms since the mid-1990s. It said all
three markets were at risk from higher rates. We believe that those
average numbers could be masking far more dramatic falls in what have been
the hottest spots.
The European Central Bank has not yet raised interest
rates in the euro zone, but there too, house prices have rocketed in many
countries. Cheap credit has underpinned housing booms in Spain and
Ireland, partly because mortgage rates are flexible, and even lacklustre
economies such as those of France and Italy saw house price rises above 5
per cent - well in excess of economic growth, although far less of a
concern than in Spain and Ireland, although the low bases from which
Spanish and Irish prices have climbed must be taken into account.
Globally, the ratios of house price to income are at
their highest levels since the previous housing market boom turned to bust
in the late 1980s. For central bankers, the problem is not just which
index to look at. There are so many parts of the housing market, from
expensive dwellings to dilapidated terraces and tenements, that it is hard
to make policy for everyone. Nor are interest rates the smoothest of brake
pedals. The sensitivity of housing markets to tighter borrowing conditions
depends on the amounts of fixed-rate or floating-rate mortgages, the
number of cash buyers, and the preponderance of investors as opposed to
owner-occupiers. However, there are common elements. Goldman Sachs points
to the recent experience of Australia as a lesson for other markets. “If
you want to see what can cause a housing market to turn, we think the best
view in the next 12 months will be over Sydney Harbour,” it says in its
recent report.
Australian Property Monitors, a private sector group,
paints a gloomy picture, finding that prices in Sydney and Melbourne fell
7.5 per cent and 12.9 per cent respectively in March, with sales activity:
agents and buyers having slackened sharply. In particular, there are far
fewer buy-to-let investors, especially in New South Wales, the most
populous state, which has introduced a 2.25 per cent vendor tax on
investment properties. During last year’s peak, agents say buyers or
sellers of investment properties accounted for 40-45 per cent of market
turnover. In Britain 7 per cent of new mortgages went to buy-to-let
investors.
Looking ahead, the question is whether the Australian
market has slowed enough to dissuade the central bank from raising rates
again. Economists have been surprised at the continuing strength of
housing credit, which rose 20.3 per cent in the year to May, close to a
15-year high. The Reserve Bank of Australia, the central bank, suggested
it might act again after the upcoming federal election, expected between
August and October. Ian Macfarlane, the RBA governor, last month said that
while it was encouraging that loan approvals were down on last year’s
peak of A$15bn a month, they were still “far too high” at A$12bn a
month. We think that this fails to take into account the number of loan
completions that had been in the pipeline for quite some time because of
the preponderance of buying new property ‘from the plans’ in the main
Australian markets.
According to Mike Buchanan, economist at Goldman Sachs
and author of the recent global housing report, housing markets can be
divided into those that are “interest-sensitive” and those that are
“income-sensitive”. In the US, where most mortgages are at long-term
fixed rates, sensitivity to fluctuating borrowing costs is less pronounced
than in the UK and Australia.
Nevertheless the strength of activity this year has
surprised many. Deanna Kory, an agent with New York’s Corcoran Group,
says the buying binge that began last autumn was unlike any period she
could recall in 19 years. “It was a crazy frenzy, with 20 bids on the
table for each property,” she says. A New Yorker who waited until spring
of this year to buy that “average” Manhattan apartment would have paid
28 per cent more than a year earlier. Mortgage brokers and agents say the
New York market remains hot, but there is angst about whether the property
boom will have a happy ending, both for New York and the country as a
whole. The National Association of Realtors expects US home sales to reach
6.17m this year, a record for the second consecutive year. Average prices
for existing, rather than new -build, homes in the US rose 10.3 per cent
in May to $183,600, the group says - well above historical annual
appreciation rates of 4-5 per cent.
Edward Leamer, an economics professor and director of
the University of California’s Anderson Forecast, says he is concerned
that US home prices have reached unsustainable levels. He says economic
recoveries usually lead consumers to make purchases deferred during leaner
times. Yet US consumers, lured by inexpensive financing, bought
automobiles and homes during the recent downturn. “There will be
inevitable weakness in cars and homes in the years ahead,” he says.
The ripple effect on consumer confidence of collapsing housing markets
from America to Australia would take a heavy toll on the global economy.
The above data and research was compiled from sources believed to be
reliable. However, neither MBMG International Ltd nor its officers can
accept any liability for any errors or omissions in the above article nor
bear any responsibility for any losses achieved as a result of any actions
taken or not taken as a consequence of reading the above article. For more
information please contact Graham Macdonald on [email protected]
Snap Shots: Three legs
are better than two
by Harry Flashman
One of the hallmarks of a serious photographer is a
good sturdy tripod. This three legged device will open up completely new
avenues in photography and let you produce new and different images that
are otherwise way beyond your reach.
 You
need a tripod for night shots.
Having said all that, one of the hallmarks of the rankest
amateur photographer can also be a tripod. One of those light flimsy devices
that are designed to fall over with the first mild breeze. I am all for
tripods, but get a decent one.
So what can you do with a tripod that you can’t do
without? The first and most obvious is time exposure shots. The whole secret of
time exposure is to keep the camera still, and you won’t do that by holding
your breath, leaning against a tree and gripping the camera tightly, let me
assure you.
Twilight photography and night photography opens up a whole
new range of pictures and effects. Just the simple expedient of being able to
keep the camera steady while you shoot 30 second or longer exposures will
result in some great photographs. Try taking a shot just after sunset, for
example. Set the camera on f11 and give it 30 seconds. You will be very pleased
with the results.
Did you know that the very best landscapes during daylight
hours are also best taken on a tripod? To get the huge range of depth of field
necessary for these shots, you will end up with slow shutter speeds. The tripod
ensures there’s no blurring. Those flowing milky, misty waterfalls are also
best taken with a tripod, as again a slow shutter speed is required to capture
that effect.
Even nature shots are done best with this piece of
equipment. You can set up the camera and then leave it, so that the birds etc
can get used to its presence, and then with a cable or remote shutter release
you can get the nature photos of a lifetime.
Another type of shot that needs a tripod is the panorama. A
compilation of images which when placed together form a wide angle view of any
scene. This can only be done with the use of a tripod.
Even when shooting still life images, the use of a tripod
makes these shots a breeze. You can set up the shot and then make minute
adjustments while looking through the viewfinder. Again you can use a slow
shutter speed to be able to use very small apertures (around f22) to get the
very fine detail into the shot.
So what should you look for and what should you spend? There
are several items in the specifications that you should ensure is on any tripod
you buy. The first is that it is heavy with strong legs when extended fully.
The “locks” on the legs must also be secure. Another item is that the
actual swivel head incorporates a spirit level, so that you can ensure the top
swivels in a true horizontal arc. The tripod head should also have
calibrations, so you can swing it a definite number of degrees. A removable
“shoe” is also a good item, as you can then position the camera on the
tripod, but also remove the camera to take other shots but then replace it in
exactly the same position. The legs should be able to be spread out widely so
that you can get the camera very close to the ground, and finally if you can
get one, see if the tripod shaft can be removed and turned upside down, as this
can get your camera completely at ground level and immediately above an object
placed on the ground.
How much will this cost? Expect to spend a minimum of 6000 baht. My own
Manfrotto cost a lot more than that, let me assure you, but with now almost 20
years of faithful service, it has been a bargain!
Modern Medicine: Feet, ankles and RSI
by Dr. Iain Corness, Consultant
One of the readers wrote in with the
following heart-rending plea, “Could you write an article about ‘feet
and ankles’? My lovely Thai wife has asked me many times to squat down on
my feet and ankles. She has attempted to show me how easy it is to do. She
slowly descends and gracefully squats on her feet and ankles and it looks so
easy. She tries to get me to do it and when I try to explain to her that my
ankles are not like her ankles, she refuses to accept it. She insists that I
try to squat. So, I have tried to squat. I fall on my butt and roll around
on the ground, which she loves because she laughs and laughs. Maybe, I
should have surgery?”
Well, first off surgery does not fix this problem. If it
is a consolation, you have lots of friends. Caucasians cannot do this. I
also find that when I attend the local Wat with my Thai wife, I cannot
happily sit with my legs tucked under me, feet respectfully facing away with
palms together in front of me. The best I can do is to half kneel while
leaning against a wall. Even then it is agony after 30 seconds!
I first came across the essential musculo-skeletal
differences between the Asians and the Caucasians almost 30 years ago.
Australia was in the grip of an ‘epidemic’ of Repetition Strain Injury,
known as RSI. Repetitive movements of the hand particularly, would result in
inflammation of the tendons which would swell so much the afflicted person
could no longer work.
On one visit to Thailand, the Occupational Health Unit at
Chulalongkorn University made it possible for me to go round a fish canning
factory in Bangkok to look for evidence of RSI here. I noted that the female
workers were doing repetitive work involving the hand and wrist, but none of
them were getting RSI. This either meant that Australia was in the grip of
mass hysteria (which it wasn’t), or that the Asian tendons were more
pliable, or supple, than those from the west.
Further private nocturnal studies in the chrome pole
palaces showed that the Thai female was indeed much more agile than her
western counterpart. Just look at a Thai dancer’s ability to hyper-extend
the fingers while the thumb and index finger are touching each other. You
can’t do that and neither can I. But I will wager our wives can!
There are other essential differences between the two
races. The distribution of blood groups is quite different and even the
cross-section of the hairs on our heads are different, with the Asians
having a circular cross-section, whilst the westerners is oval.
Asian people have other metabolic differences. Westerners
have enzymes to deal with alcohol, which Asians lack. This is why many Asian
people go bright red if they drink wine. The Asian response to many
medications is also different as far as absorption and response is
concerned.
Now this is for those who have trouble learning Asian
languages. Magnetic Resonance Imaging (MRI) studies have shown differences
in the brain structures between those who can speak tonal languages (such as
Thai) and native English speakers. So it is not laziness on my part (or
yours). Our brains are different!
But getting back to the feet and ankles, there are also
ethnic differences here, and that’s why westerners have tall sit-up
toilets and Asians can use ‘squat’ toilets! But as the French say,
“Vive la difference!”
Learn to Live to Learn:A note of thanks
by George Benedikt
 Thank you to all those readers who have
written in with comments, observations and suggestions. It’s nice to know
you’re appreciated! There have been some interesting and illuminating emails,
to which I will continue to refer in this column. I’m trying to get around to
all the schools in the region and interview key figures so if you have any
particular suggestions in this regard, please let me know. In fact, invite me
over! (And thanks to those who have already done so!)
I’m extremely keen to meet owners, boards, directors,
teachers, parents and students and cross examine them on issues in education
raised in this column. As I wrote in my first column, “Learn to Live to
Learn” will look at different issues in local education and examine them
critically, compassionately and sometimes provocatively. I write as a consumer,
as a parent, as an educationalist and as someone who has enjoyed fortunate
access to the machinery of international education.
Although I have spent a considerable amount of my working
life in universities, I have been able to observe the operation of
international education at close hand for over twenty years as a result of the
combination of my fortuitous liaison with my partner of the same period, who
has been a leader in the field, and my experience in and of international
school governance, which goes back almost as far.
We have lived and worked in the United States and Germany
and we now spend half the year in Thailand and half in Europe, although we
prefer to call Germany our home.
I was particularly drawn to the subject of international
education in Thailand simply due to its apparent ubiquity and secondly as a
result of an extraordinary range of anecdotal evidence which has reached me
from a variety of sources and which I felt warranted exploration. As a
consumer, I have seen enough to know that it’s better to know sooner rather
than later! Of course, you might very well want to disagree.
Pre-University
Programmes
The hidden battle in high schools and sixth forms for
pre-eminence in pre-university programmes is on, at local, regional and global
level. For international schools, the choice depends on their orientation,
their persuasion and the cost.
There are more similarities than you might expect between
the most popular ‘international’ programmes on offer, yet there remain
significant differences. In our region and across the world, three programmes
in particular are fighting it out – although some would claim (with some
justification) that they are not in competition.
For American schools and students heading towards American
universities, the ‘Advanced Placement Programme’ (AP) offers high level
education and boasts that it can ‘change your life’.
The British based ‘A’ level system, unfairly maligned in
some quarters as antique but nonetheless typically slow to adapt, is touted as
‘proof of academic ability’.
Then there is the International Baccalaureate (IB) diploma,
which comes with a full package of authorisation process, training and modern,
illuminated, educational thinking.
I will leave discussion of the IGCSE for another time,
whilst recognizing its importance in Thailand in particular, where students can
obtain access to university with five passes at A-C.
Over the next few weeks I will focus on the ‘A’ levels,
‘AP’ programme and the IB diploma and describe some of their advantages and
disadvantages, their similarities and their differences and the associated
potential potholes faced by schools, which sometimes seem so very keen to
wander headlong into them. I’ll begin next week with the Mazerati of courses,
the IB diploma.
 Heart to Heart with Hillary
Dear Hillary,
Just the other week you were saying that this guy was stupid because he
loaned some money to one of the bar girls and you even said he should think
of it as a donation because he’ll never get the money back. How can you be
so sure? There must be plenty of cases where the girl pays everything back.
Have you got any figures to back up your claims, Hillary?
Tom
Dear Doubting Tom,
Have you any claims to back up your figures, Petal? Hillary has had hundreds
of letters on this subject over the years, and sure, sometimes the guy does
get his money back. I can distinctly remember the one letter to that effect,
which I received in October 1999. Does that give you an idea of the ratio,
Doubting Thomas? The reason they need the cash loans is because they
haven’t got any money, despite wild claims about their earnings. That’s
the same reason why they can’t pay the loan back either. That is why banks
(since 1997) want some sort of collateral or surety. And the ladies in
question haven’t got any of that either. All they do have is quick wits
and guys in bars who drink too much. You get what you pay for, Petal, and in
the bar scene it is very much a case of putting the money in the slot
machine and waiting to see if you win a prize. You won’t!
Dear Hillary,
I like going round the local markets and am fascinated by
some of the native carvings and jewelry you can pick up so cheaply. The
stall holders all tell me that most of it comes from hill tribe people, but
some of my friends say that much comes from Burma and China and even
Malaysia. Are they right about this?
Bette the Bargain hunter
Dear Bargain Bette,
I’m afraid your friends are right, Bette, much of the
goods available in fairs and markets come from the poorer countries, where
they are produced very cheaply. The traders make their money by buying at
the lowest cost and selling to the highest bidder. In this case it is you.
However, look at it this way - you’ve saved the hassle of having to go to
these other countries - and the air fares! And while thinking about where
the goods came from - don’t lend money to bar girls.
Dear Hillary,
Can you help me with the “song taew” situation? I
think that the number of them on the road is wonderful. You never have to
wait more than thirty seconds before one comes along, so much better than
the one hour wait between busses in suburban England. I know I am a
foreigner here, but does the bus cooperative know why it is so difficult for
us “farangs” to use their bus system? I don’t have this problem with
public transport in the Philippines or Hong Kong, as the drivers can speak
English, or can understand enough of it to get by. I have noticed that you
are always telling us ‘foreign devils’ to learn Thai as we live in
Thailand, but when the city is trying to attract tourists from the West,
surely they want the tourists to get around and see something of the place?
You can’t expect tourists to learn Thai on the plane coming over, can you?
Surely, if this city wants to be thought of as a tourist destination, then
some training for the drivers in basic English would have to improve the
situation. The busses should have the route or destination written in
English, just as they do in other countries (even the Jeepneys in Manila
have destination signs). Or am I expecting too much?
Bus Traveler
Dear Bus Traveler,
I do feel for you, I really do. You are not the first to
complain about the (non-existent) public transportation system in our city.
And I agree that we cannot expect tourists to be able to speak Thai (though
I am sure I didn’t call you ‘foreign devils’, did I?). A destination
sign in English is certainly a step in the right direction in making the
song taews more ‘user friendly’ for the tourists, and I will bring this
to the attention of the mayor. As far as getting the drivers to become
fluent in English, that is another story altogether. With the low wages they
get, they certainly would not be able to pay for lessons. Would city hall
provide some lessons? Perhaps, but will the drivers be prepared for the
down-time? The problem goes much further than the public busses, me Petal,
but is a mirror of the poor command of English in the Thai nation as a
whole. When our young students leave school with a reasonable standard of
English, then we will have new young workers in all levels of employment who
will have enough English to be able to converse with tourists.
As far as your problem is concerned, keep up the Thai
lessons, and ask your teacher to teach you song taew specific phrases, and
don’t lend money to bar girls!
PC Blues - News and Views:
Google IPO final
So, it’s all over. After several potentially serious problems,
Google went public.
You will remember they were going to price their shares via a
Dutch Auction. At the last minute, they got cold feet, and settled on a price of
85 USD; at the same time they cut the number of shares on offer to 75%. Before
this, they had been touting a target range of 109-115 USD. Lo, and behold - when
trading started, the share price rose to 109 USD. So they weren’t far wrong.
One problem they had was Playboy. There was an interview with
the founders in the issue of Playboy which came out at the same time as the
public offer. This contravened the stock exchange regulations about public
statements by the owners/officers of the company at such times. Oh dear!
Another problem was a rather large number of shares not
accounted for. The company offered to buy these back, but below the issue price
- the owners of the shares not surprisingly failing to cooperate. Google may yet
be fined for this.
Overall, however, the exercise went smoothly and quietly.
Google now has a lot of spare cash. We hear rumours of what it will do with it.
Google already provides an email service, Gmail. It is now looking into Instant
Messaging. If it goes ahead with an Instant Message service, it will be big
enough to challenge the main player here, AOL.
The idea behind Instant Messaging is to have a small, simple,
window on the desktop, where you can chat with your friends - those who are
online. Under AOL, this window has become crowded with adverts and
time-consuming ticker tapes, and the basic service is still primitive (text
only). The field is fertile for voice, images, and anything else you can think
of.
Google now has the cash to make a major improvement to its
range of services, by providing a most attractive alternative to the
brand-leader.
Good news and
Bad news - part 2
Micro$oft will licence ‘Sender IDs’
I reported recently that Micro$oft was supporting SenderIds,
the method for checking the origin of an email, and thus blocking the movement
of spam.
Regretfully, I have to announce that they are insisting on a
rather unsatisfactory licensing agreement to anyone who wants to use their
software for this. They are not charging for this licence, not at the moment...
We had hopes of a general improvement in the spam situation,
but this will probably now fail. Few people will wish to develop software
solutions based on Micro$oft and their licence, while the rest of the world will
not want to develop alternatives until they see how Micro$oft is getting along.
Psychological Perspectives: A bad idea continues to look good
by Michael Catalanello,
Ph.D.
Appearing before the United Nations last
week, President Bush defended his decision to launch an invasion of Iraq.
In his remarks, Bush described Iraq as a country on the move toward
democracy, freedom, and stability.
For reporters and commentators watching the events on
the ground in Iraq, however, Bush’s assessment may have seemed strangely
out of touch with reality. Based upon recent events, as well as comments of
many experts, the prospect of Iraq being transformed into a shining model
of democracy for the Middle East, as President Bush imagines, appears
increasingly remote.
If there ever was a time when the American led invasion
of Iraq could be viewed favorably, that time is clearly past. Originally,
the Bush Administration insisted that Iraq was producing and concealing
weapons of mass destruction, and that there were dangerous links between
Saddam’s regime and the terrorist network, Al Qaida which justified
military action.
The American people, traumatized and passionately united
by the events of 9-11 seemed willing to give their President the benefit of
the doubt, in return for an increased feeling of security. Consequently,
Bush led America into war. But when the invasion forces arrived, they, like
the weapons inspectors before them, found no WMDs. Furthermore, no credible
evidence of a link between Saddam and Al Qaida has ever been produced.
Nevertheless, Bush and officials in his administration
continued to defend the decision to go to war. Deprived of the WMDs issue,
a new rationale for invasion began to evolve. Accordingly, Iraq and the
world were represented as “better off” without Saddam in power. This
is, of course, a highly subjective judgment, unlikely shared by many, least
of all those who have experienced the ravages of this war firsthand, the
Iraqi people.
Undeniably, “War is hell”. From the first bomb to
land on Iraq, the U.S. led invasion has been ugly, bloody and tragic, with
thousands of civilians, men, women and children being killed and wounded.
The past seventeen months have seen a rising insurgency that has become
increasingly violent and ruthless. An angry backlash against the American
occupation is growing, and undermining U.S. aspirations to exert its
influence in the region. The interim government is widely viewed as
illegitimate, an appendage of the Bush administration. Credible elections
in January seem increasingly unlikely in the current climate of violence
and instability.
Kidnapped foreigners are held, then murdered with
growing frequency, the grisly acts often videotaped and posted on the
internet. The presence of American troops, rather than being a stabilizing
influence, is now viewed as provocative. As a military solution seems less
and less likely, signs point in the direction of further deterioration.
Bush would now like to hand off military duties against the insurgency to
an Iraqi army, or to multinational forces. So far, he has no takers.
According to Middle East analyst Fawaz Gerges, the
insurgency has recently become stronger, more sophisticated, and more
widespread throughout the country. A U.S. intelligence report received by
the White House in July predicted the best case for Iraq was “tenuous
stability” and the worst case was civil war. This pessimistic report,
likewise, has failed to sway the Bush team from their favorable
expectations.
How is it that the Bush administration can cling to the
hope of something good coming from the current military strategy? Why does
Bush continue to hang tough, despite the persuasive signs that the current
course is doomed to failure? Obviously Bush’s political fortunes may be
tied to a continued adherence to his policy, but is that the only
explanation we can suggest?
A similar phenomenon can be observed in the behavior of
investors who, upon losing money on a failed investment often persist,
sinking deeper and deeper into the hole. Another parallel is the case of a
manager who recommends that a worker be hired for the job. That manager’s
subsequent evaluations of the employee who is performing poorly,
predictably show a favorable bias, as compared to that of others who were
not involved in the hiring process.
Social psychologists have proposed the “escalation
effect” to explain this demonstrated tendency for people to remain
committed to a losing course of action. According to this notion, a
decision maker is generally likely to display a bias in favor of increasing
commitment to his decision, in spite of mounting negative consequences.
Research suggests that this bias is greatest when the consequences are
least consistent with the decision maker’s expectations.
Dr. Catalanello is licensed as a psychologist in his
home State of Louisiana, USA and a member of the Liberal Arts Faculty at
Asian University in Jomtien. Address questions or comments to: [email protected]
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