Sunday 19 January 2014

Is Singapore The Next Iceland?

A debate is raging between the US business magazine "Forbes" and the Singapore Monetary Authorities over a claim in the former that easy money policies in Singapore have blown up a huge property and asset price bubble that threatens to collapse in similar manner to the collapse of Iceland's banks - as CNBC Report.

Its important for a number of reasons.  Firstly, if Singapore were to suffer such a meltdown it would be more significant than with Iceland, because of the size of the Singaporean economy and its widespread, deep links to financial capital across the globe.  Secondly, and as a reflection of the above, one of the reasons for the massive property bubble in London and other metropolitan centres is the fact that in the face of attempts to cool massively overheated property markets in places like Hong Kong and Singapore, large amounts of hot money have been accumulated in funds in Asia to be used for speculation in the London property market.  Most of the buyers of this property, who may be individuals or consortia, do not even see the property they are buying, and the properties are frequently never even occupied or rented out.  They are simply a huge gamble, a massively extended version of buying off plan.

If the Singaporean banks do go belly up, and maybe even if they don't, but speculators in these economies begin to take fright, that could have a very big, very rapid effect on all of that frothy property in London.  Its very unlikely that if, or more likely when that happens, European, and particularly UK banks will escape unscathed.

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