Finance and the Spanish Property Market

We hear it every day about how property prices have dived and how repossessions are at their highest for years as the so called credit crunch continues to bite us all. But when you look at other countries throughout Europe you see a picture that may be much worse that the UK.

Take Spain for instance that in recent years has relied on foreign investment in second homes from Northern European countries and has seen a high increase in property prices, with the huge demand to have a second home in the sun. The result has seen developments all over Spain which maybe on hindsight has been a bit too optimistic, to go on at a continued rate.

To give and idea of the size of challenge with Spanish property here are some statistics:

Last Year 40% of all real estate agents closed
Property prices are expected to drop by 20% by 2009. (Many believe they already have)
Inflation is now running at 5.1%, compared with the UK at 3.8%
Spanish house sales dropped by over 34% this summer compared to last summer
New mortgages fell by 40%, compared to last year.

It is harder to determine house prices in Spain that other countries due to the process where the true value of a home is not declared at purchase to avoid paying tax on the purchase. Although a legal process it is very common, to the point that most solicitors offer this process.

It is not hard to understand that as many people are finding it harder to afford their first home, and so buying that second home is no longer an option. Even those who would have stretched their budgets, safe in the knowledge that the increase in the property price would be worth the risk, are now more humble about and return from an investment in Spain.

The Finance Minister for Spain has now admitted that they are facing their worse economic crisis ever with the property collapse, many others wonder how Spain ever thought the bubble would continue for ever and questioning why no contingency plan was put in place, or that a reduction in new properties was not planned earlier, at least giving a good chance of ready built homes maintaining their prices.

It is predicted that this current credit crunch will affect Spanish home prices until at least 2010, so new ideas are being considered to try and kick start the mortgage market again, although at this time nothing has been announced.

Although many can see the benefit to kick starting the mortgage industry and there are genuine potential borrowers who want to buy a family home rather than a second one, there are some who would question buying any property where there is no forecast of that homes value increasing, with even the possibility of negative equity.

So it is possible that the absence of mortgage may be protecting some people from buying a property that will just decrease in value, adding more pressure to an already difficult situation.
Of course the bolt on financial organizations are also feeling the squeeze. As homes remain unsold, so do the potential second home insurance policies that would normally be bought to project the investment. The credit card purchase for furniture and other essentials will also remain in the wallet and not deliver interest for banks and organizations.

Property like oil affects our spending habits, so until some confidence is regained, expect money pinching few years.

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Canadian’s Personal Finances Fiscal Cliff: Are We There Yet?

Today we hear much talk about the USA’s economy approaching the so-called “fiscal cliff.” What about your personal financial affairs? Are you at the fiscal cliff as we inch toward 2013? Canadians are swamped in debt. Monthly, we read about the rising debt-to-disposable income ratio that stands now at around the precarious 164% level.

Although the world and many at home commend our government for its brilliant fiscal management, few warn about the unsustainable personal debt levels. Indeed, our central bank chief, Mark Carney, accepted an appointment to a similar role at the prestigious Bank of England. Will his legacy here be that of hero or villain? Will history show that he held interest rates low for too long, encouraging many folks to take on debt they cannot afford?

To his credit, he, our finance minister, and prime minister have been warning Canadians about these dangerously high personal debt levels. However, Carney could curtail the rise by raising interest rates. Sure, higher rates will dampen current slow economic growth. Even so, I think short-term pain is better than the likely personal finances’ crash that might happen if debt remains at present levels, or grows.

What can Canadians do to avoid their fiscal cliff? Let us examine three vital steps.

Accept you are dangerously leveraged.
Set a mechanism in place to live with declining debt
Develop a new vocabulary to guide your behavior

Accept You Are Dangerously Leveraged

You can’t solve a problem unless you recognize it. Do you think you are carrying too much debt? Your banker might tell you no; however, you alone can answer this. Take a helicopter view. What are you and your family’s emotional responses to your debt? Are you worried? Can’t sleep? If yes, you have too much debt. Certainly, look at ratios, but this is the key barometer.

The emotional cost of debt is the first and the most significant cost. If debt is 10% of income, and is causing problems for you or at least one in your family, it is too much. Still, you must accept reality and decide to live with it, take on no more, and start a debt free lifestyle.

If you are a Christian, give this emotional stress to Jesus (Matthew 11:28).

Set A Mechanism In Place To Live With Declining Debt

People are impatient. We live in a now society. Sadly, probably you got into debt over a long period, and it is likely you will get out over an extended time. Accept this fact and learn to live with it.

Develop a strategy to live in your debt. Look at how you got there; draft principles to prevent a recurrence; and then write a financial plan – alone or with help. The plan should show concisely how, by following your principles, you might be debt free in a specific time.

If you got into debt by impulsive spending, you might develop a principle never to buy without a list and a budget. As well, when you feel you need to spend, you might want to wait 24-48 hours during which time you would talk with your spouse or accountability partner.

You will have to find what might work for you, decide if you need help, and try to get it.

Prepare a debt-meter and place on your fridge. Monthly, as you repay debt, adjust the debt-meter.

Develop a new vocabulary to guide your behavior

This sounds easy, is simple, and when you get it, will be your most effective debt control “tool.” What you believe will decide how you behave. If you believe emergencies happen and cause you to spend erratically, you won’t change your behavior. However, if you believe that apart from the timing, most “budget emergencies” can be planned and should be planned by setting aside funds regularly to meet them, you will plan accordingly.

Your car will need repairs. It will need new tires. Your furnace will go, and so on. The issue here is timing. You don’t know when these potential budget busters will happen. Even so, you know they will occur, so create a capital fund, a rainy-day fund, emergency fund, or some other means to save for these predictable events. If you accept this fact about emergencies, and understand that to get there you must sacrifice today’s consumption, this is the start of your major victory over debt.

Another key vocabulary change is to accept that you can’t mange money, you can manage only your behavior – change from money management to lifestyle management.


As we enter 2013, look at your finances. You will know if you are at the fiscal cliff. Rest assured, you do not need more money to get you through, first, you need to accept where you are. Next, set a mechanism to live where you are as you work off your debt. Then examine your vocabulary, your beliefs, and adjust them to reality.

I pray you will turn away from easy seductive credit and start moving away from debt.

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Who Will Be The Next Prime Minister Of Singapore?

The reality is that we have little to no idea who will be the next prime minister of Singapore.

During the 2016 national day rally, PM Lee put across to Singaporeans that by the next election, he would be passing the baton to his successor.

The problem here is that there is no clear front-runner as to who would be the next PM.

Before PM Lee became PM in 2004, he was DPM for 14 long years. Meaning he had a very long “warm up” period before he took the hot seat.

In 1988, way before Goh Chok Tong became prime minister in 1991, he was already in charge of the day-to-day operations of the government.

Today, in 2016, there is no clear front runner to the PM hot seat.

Initially, with his heavy responsibilities in government, Heng Swee Keat seemed to be the most likely candidate. But when he was struck with stroke early this year, it seemed that his chances diminished drastically.

Which brings us to Chan Chun Sing, who this author thinks will most likely become PM. One reasoning is that he often represents the government on televised forums for events like the National Day Rally, a task normally left for senior members of the cabinet. This year, Chan also delivered the chinese version of the PM’s National Day Message, instead of the usual Lim Swee Say.

Also, Chan is often referred to as “Minister in the Prime Minister’s Office,” much more than NTUC secretary-general, which is his full time day job. This author believes that the reason why he is often referred to in this manner is to get the electorate accustomed to hearing Chan Chun Sing and “Prime Minister’s Office” in the same sentence.

One more key element of one being PM also is a strong experience with the defence portfolio. Chan previously served the majority of his career as a professional soldier and ended his stint as Chief of Army, and prior to NTUC served also as second minister of defence. (Both PM Lee and ESM Goh also had much experience with the defence portfolio, with PM Lee also an ex-career soldier and ESM Goh an ex-minister of defence.)

In addition, in PM Lee’s recent major overseas trips (like to China or USA), Chan Chun Sing is an unmissable part of the PM’s ministerial entourage. Perhaps the government is subtly using these overseas trips as a means to introduce to the world our next leader.

Chan is no slouch at elections either, with his Tanjong Pagar GRC team taking the baton from Mr Lee Kuan Yew and winning with a resounding 77.71% during the 2015 elections, higher than the national average of 69.9%.

As Heng Swee Keat took ill early this year, Chan also took over the co-chairmanship of the Committee on the Future Economy – Singapore, a task only for the brightest in government.

It seems like the government has very high hopes for Chan.

Some commentators have observed that when Chan was posted at the NTUC, it was seen as a sign that the government had little faith in him. This author disagrees with this sentiment. Rather than seen as a step down to Chan, this author believes that the government slotted Chan in the challenging role of NTUC Sec-Gen to test his political mettle and give him a more rounded and elaborate CV. With his helming of the NTUC, Chan is now a man who has Chief Of Army, Labour Chief, Minister MSF, Future Economy Committee Co-Chair, and PAP HQ Exco Chairman on his CV.

Does this sound like a résumé of a potential Prime Minister? This author believes so.

Although he does not have a luxury of a long “runway” to power like PM Lee or ESM Goh, Chan does have the privilege of a very well-rounded and successful career, which puts him in good slate to take over as PM during the next election.

On the contrary, Heng, who was education minister and currently finance minister and has much lesser experience with the defence portfolio, seems more slated to become a DPM. (Think Teo Chee Hean and Tharman’s ex-portfolios).

Ministers Lawrence Wong, Vivian Balakrishnan, and Tan Chuan Jin would not be discussed in this article.

The author of this article is not affiliated with the PAP and all published opinions are his own. He hopes no one from the establishment will shoot him an arrow if this is reproduced elsewhere.

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