1. Management in the Built Environment Lesson 8 – Issue of current interest rate, inflation and unemployment
When these 3 elements are placed side-by-side, WHAT are you actually looking for ?

2. I Want…… but can I actually afford ….. ?

3. Aim of this lecture
Understand the relationship between interest rate, inflation and unemployment
How the elements translates into affordability
Wrap and link up the 8 lessons learned

4. MORTGAGE Rules
JOB/INCOME
HOUSE PRICES
AFFORDABILITY

5. INCREASE DECREASE MORTAGE Borrow less Borrow more UNEMPLOYMENT
Basic necessity in question
Focus on short-term investment
Reduce risk – rent instead of buy
Sufficient to service the installment
Able to consider long-term investment
Property ownership
PRICES
Decrease in demand
Holding power of individual
Prices tend to reduce
Rental might increase
Increase in demand
Buying Property might increase

6. DEFINTION OF HOUSING AFFORDABLE INDEX
A housing affordability index is an index that rates housing affordability
It measures median household income relative to the income needed to purchase a median-priced house. The other real estate affordability index
Housing choice is a response to an extremely complex set of economic, social, and psychological impulses.
The price to income ratio is the basic affordability measure for housing in a given area. It is generally the ratio of median house prices to median familial disposable incomes, expressed as a percentage or as years of income

7. This chart from DBS Equity Research (Dec 2017) shows Singapore’s price-to-income ratio has remained fairly consistent over the past few years at a range of x.
According to JLL, Singapore’s housing affordability has improved from 7.3x in 2010 to 4.8x in This means in 2016, it takes 4.8 or five years to afford the average price of a home

8. IN Reality :
Average price of an HDB flat is still under three times the median household income.
Homes in Singapore were rated as seriously unaffordable, according to Demographia International in its14th Annual Demographia International Housing Affordability Survey.
Singapore got a median multiple of 4.8 in 2017, indicating a seriously unaffordable rating.
The median multiple is a measurement of housing affordability by linking median house prices to median household incomes.
According to Demographia, this is an improvement from Singapore's rating in 2013 which recorded a  median multiple of 5.1, indicative of a severely unaffordable housing market. 
Meanwhile, the US got a 3.8 rating as having the most affordable homes, followed by Japan with 4.2, and Canada with 4.3.

9. There are 26 severely affordable major housing markets in 2017 with Hong Kong ranking as the least affordable with a rating of 19.4 up from 18.1 last year, followed by Sydney with 12.9, and Vancouver with 12.6.
Singapore government's strategies in curbing the housing market price increase is to add "across the board" subsidies for all new houses. This has effectively pushed prices down to levels well below those of existing houses
Its publicly sponsored housing construction program resulted in a "vibrant competitive" housing market with about 82% of residents live in HDB housing. Further, Singapore has an overall 88% rate of home ownership, the highest of any country in the survey. 

11. Linking up Lessons in the Module : Construction and Property EconomicsVS
Unlimited Wants
Limited Resources
MARCO
MICRO
SCARCITY
RATIONAL CHOICE
RISK
COST
BENEFIT
OPPORTUNITY COST

12. IMPORTANCE OF ECONOMICS to
DECISION MAKING
Economics
Make Decisions
Minimize Risks
Maximize Returns

13. UNDERSTANDING ECONOMICS
is NOT ENOUGH

14. As time is of the essence, understanding the property market cycle would have the maximum possible opportunity to maximum return and minimize risk

15. IMPORTANCE of UNDERSTANDING REAL ESTATE CYCLE
Cycles with reference to the housing market
Increased knowledge about cycles to assist to avoid housing stress
By investigating levels of housing affordability and understand how the property cycles works, can assist to manage housing affordability in different property sector, and eventually avoid/minimise the impact of a downturn.
Some areas or countries may be affected to varying degrees by property cycles and levels of housing affordability
Property cycles to be used to avoid housing stress in the residential market. Traditionally cycle research is used to increase returns and avoid downturns in the residential /office and/or business sectors

16. Rule No 1: Most things will prove to be cyclical
The stock market is the story of cycles and of the human behavior that is responsible for overreaction in both directions
- Seth Klarman
Seth Andrew Klarman (born May 21, 1957)[2][3] is an American billionaire investor and hedge fund manager. He is known as a value investor, and is the chief executive and portfolio manager of the Baupost Group, a Boston-based private investment partnership he founded in 1982.
Rule No 1: Most things will prove to be cyclical
Rule No 2 : Some of the greatest opportunities for gain and loss comes when other people forget Rule No. 1
- Howard Marks
Howard Stanley Marks (born April 23, 1946) is an American investor and writer. After working in senior positions at Citibank early in his career, Marks joined TCW in 1985 and created and led the High Yield, Convertible Securities and Distressed Debt groups.[2] In 1995, he left TCW and co-founded Oaktree Capital Management. In the 2017 Forbes rankings of the wealthiest Americans, Marks was ranked the #374 richest person in the United States, with a net worth of $1.91 billion

17. Key takeaways in Lesson 8
What are the keys words that you have learnt in this lesson
What do you understanding about affordability
Calculate yourself, how long would you need to payoff the property if you invest in a property today