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Thursday, November 7, 2013

Sentosa Cove: Good time to buy now?

Demand for luxury homes in Sentosa Cove may be softening but it is not losing its shine just yet.

Property experts said prices in Sentosa Cove are set to make a rebound, even hitting previous highs seen in 2008 before the global financial crisis.

The upbeat sentiment came following a report by Colliers International on Tuesday which said Sentosa Cove properties are now cheaper than mass market condominiums.

The sun, the sea, and the serenity are among the factors that lure home buyers to snap up properties in Sentosa Cove.

For some, Sentosa Cove also offers a perfect lifestyle and their purchases are not just for investment.

Sentosa Cove is also the only place where foreigners can own landed property without any restrictions in Singapore.

Samuel Eyo, director at Savills Singapore, said: “It is for different kind of people who want to live in Sentosa Cove, and for foreigners who love to stay in Singapore but don't want to stay too much in concrete areas like Orchard Road. For those who work from home like hedge fund managers, they would love to stay there because of the proximity to town and yet, they can enjoy the sea breeze and sun where you can't enjoy on Orchard Road.”

Property prices and rental yields for Sentosa Cove properties have been on the decline.
The latest report by Colliers said the difference in prices between condominium units there and those located in the mainland's Outside Central Region (OCR) is now at a historically low level.

The median price of condominium units in Sentosa Cove in the third quarter this year being just 26% higher than the $1,311 psf median price of 99-year leasehold mass-market condominiums located in the suburbs.

Analysts said the dip in rental yields for Sentosa Cove properties have also prompted investors to shun high-end waterfront marina residential properties.

Public transport on the mainland is more accessible than on Sentosa, making private transport vital for residents in Sentosa Cove to get around.

But getting a car just to get around would be a substantial cost in addition to the stamp duties imposed to cool the property market.

Analysts do not see loan curbs as a hindrance because buyers of Sentosa Cove are typically cash-rich.

Still, some analysts said Sentosa Cove properties should offer high net worth individuals better capital appreciation potential compared to similar developments in other cosmopolitan cities.

But for property prices to recover, various cooling measures, especially the additional buyers' stamp duty (ABSD) must be removed.

Colin Tan, CEO at Vestor Realty, said: “Our high end residential homes are artificially deflated. If you are looking at $1,646 per sq ft in Sentosa, that is ridiculously low in my opinion. In Hong Kong, Kowloon West, properties there in the high end area has already reached HK$40,000 psf - that is about four times more than in Singapore.”

Expected to be fully developed by 2014, Sentosa Cove will house over 2,100 homes comprising condominiums, terrace houses and bungalows.

All homes on the island are sold with a 99-year or 103-year leasehold tenure.

Market experts said such limited supply of homes on Sentosa Cove will help support prices. 

Source: Channel News Asia

Tuesday, November 5, 2013

And the YTD 2013 top foreign buyers are...


Mainland Chinese investors topped the list of foreign buyers of private property in Singapore from January to October.

They view Singapore as a favourable property investment destination despite the latest rounds of property cooling measures like the raising of the Additional Buyers' Stamp Duty (ABSD).

According to numbers compiled by OrangeTee Research, 34% of foreign property-buyers (excluding permanent residents) in Singapore this year were from China.

Indonesians formed the second largest group of foreign condo-buyers with 32% while Malaysians took the third place with 13%.

The US came in fourth with seven per cent and India ranked fifth with two per cent.

US buyers do not have to pay the 15% ABSD imposed on foreigners buying private property. This is because of clauses in the free trade deal that the country has with Singapore.

In December 2011, foreign buyers (excluding PRs) must pay 10% ABSD. In January 2013, this was raised to 15%.

While cooling measures have slowed transaction activity, the proportion of foreign property buyers has crept up.

In the first nine months of this year, foreigners (excluding PRs) make up nine per cent of all condo buyers, compared to about eight per cent in 2012.

But some foreign buyers, including those from China, have turned their attention to other property segments.

OrangeTee’s research head, Christine Li, said: “Over the last one year or so, I think because of the high ABSD levied on the residential property market, we did see some China buyers shifting their attention to industrial as well as commercial properties in Singapore.

“Going forward we expect this trend to continue because 15% ABSD is quite hefty on high-end homes.”

Analysts say the strength of the Chinese yuan relative to regional currencies could mean mainland Chinese investors will continue to make up the bulk of foreign property buyers in Singapore.

Source: Channel News Asia 

Wednesday, October 16, 2013

September private home sales up 65% on-month!


Developers sold 65% more new private homes in September compared to August, according to data from the Urban Redevelopment Authority (URA).

Excluding executive condominiums, 1,246 units of new private homes were sold in September, up from 756 in August as developers returned to the market with new launches after the Hungry Ghost Festival.

There was a sharp increase in transactions in the city fringes with 815 units sold.

Demand fell in the city, nearly half compared to August, with just 49 transactions.

While the number of new condo units sold in the suburbs was a third less than in August at 382 units, analysts noted the better figures were due mainly to two property launches in the city fringes.

And developers building smaller units have helped achieve higher prices on a per square foot (psf) basis.

Ku Swee Yong, Century's chief executive officer, said: "We expected the numbers to do well because of two well received launches - Thomson Three and Sky Vue in Bishan.
"In fact, Sky Vue in Bishan has also probably set a new record price for the Bishan area, and that is at above $2,000psf."

Source: Channel News Asia

Friday, October 4, 2013

Thomson View en bloc: Double trouble?


Our de facto business paper has reported that the legal costs and disbursements incurred by the Thomson View Condominium homeowners who had consented to a proposed $590 million en bloc sale is in the six-figure range.

These costs, from the onset of applications to the Strata Titles Board and to the courts, increased considerably because of new issues that arose when the secret incentive payments made by HSR International Realtors to four owners became public midway through the legal action.

Since the order for the collective sale was refused because the High Court found these offers by HSR amounted to bad faith, the next issue is whether the Thomson View Sale Committee (CSC) will take action against the real estate agency and the four owners, and whether it can recover damages.

Lawyers said the owners of the 215 units had agreed to the en bloc sale. Under the collective sale agreement, the consenting owners are liable to contribute towards legal costs. At this stage, the owners have been asked by the CSC to make payments to account for costs and disbursements. And those who refuse to pay costs may be exposed to a claim by the CSC for such contributions.

Looks like the Thomson view en bloc saga is far from over...



Tuesday, October 1, 2013

Private home resale up 0.1% in August


Prices of private resale homes rose just 0.1% in August from July -- this is according to the latest Singapore Residential Price Index (SRPI), which tracks prices of completed private apartments and condominiums.

The SRPI data is published by the Institute of Real Estate Studies at National University of Singapore (NUS).

Resale prices of private homes in the central area saw the biggest decline, down 1.1% last month.

However, prices of units in the non-central region went up by 1.0%. The index covering small units of 506sqft and below also increased 1.0%.

Source: Channel News Asia

Monday, September 30, 2013

Sky Vue: Over 80% of released units sold on first day of launch!


The wife and I understand that Sky Vue, the latest residential offering in Bishan Central by CapitaLand and Mitsubishi Estate Asia had received overwhelming response from buyers on its first day of launch today.

As at 7:00pm on September 28, 410 of the 505 units released for sale have been sold, with one- and two-bedroom units being the most popular among buyers.

The average price achieved for all the units sold is $1,500psf. The average price of a one-bedroom unit is $750,000 while that of a two-bedroom unit is $933,000. The average price of a two-bedroom suite is $1.15 million and the average price of a three-bedroom unit is $1.58 million.

Located in Bishan Street 15, the 99-year leasehold development has a total of 694 units.


Tuesday, September 24, 2013

New projects in Bishan/Thomson still hot despite cooling measures?


New property launches in choice locations such as Bishan and Thomson have been attracting interest from home buyers, despite recent curbs on housing loans.

Some analysts said this is because property prices have since softened and are now more competitive.
Potential home buyers have been checking out CapitaLand's latest project in Bishan - Sky Vue - since its showflat was open for previews last week.

The 694-unit project, which is slated for its official launch on September 28, is located next to CapitaLand's other new development, Sky Habitat.

More than a third of units at Sky Habitat have been sold since its launch in the first quarter of last year.

Although prices will be unveiled later this week, the average selling price of Sky Vue should range from $1,380 to $1,550psf.

This is lower than Sky Habitat's price range of $1,600 to $1,650psf.

CapitaLand said Sky Vue is targeted towards younger families, while Sky Habitat is for buyers who want the spaciousness of a landed property without the hassle of higher maintenance.

CapitaLand bagged both sites through the Government Land Sales (GLS) Programme.
Its bid for the Sky Habitat site was at $869.36 per square foot per plot ratio (psf ppr) in February 2011.

As for the next-door plot for Sky Vue, CapitaLand won the tender with a slightly lower bid of $852.94psf ppr in November last year.

CapitaLand said it is more than just price considerations when bidding for land.

Wong Heang Fine, CEO (Residential) at CapitaLand Singapore, said: “One cannot generalise unfortunately. The Singapore market has matured significantly over the last few years.

"There have been some launches that have great response, there are some launches that do not attract a lot of attention as well. The right product in the right location... is what the market is looking for.”

At a nearby project along Upper Thomson Road, Thomson Three's developers - UOL Group and Singapore Land – have said that more than 80% of its 200 units in Phase One have been sold.


Alan Cheong, research head at Savills Singapore, said: “We may see more competition on the supply side. One would try to achieve a sales rate that would suck up most of whatever they have launched upfront.

"Then they would think what they want to do next. This kind of competition would be healthy to investors in the long run.”

The average selling price of Thomson Three's units is around $1,350psf.

This is lower than what developers UOL and SingLand had earlier planned for before the Total Debt Servicing Ratio (TDSR) scheme was introduced in June.
Source: Channel News Asia

Coincidentally, the SON and I passed by the sales gallery of Sky Vue last Sunday and it looked packed with viewers. However, there seemed to be more agents than viewers at Thomson Three's sales gallery located at Venus Drive (i.e. the road leading to SICC Thomson clubhouse) whenever we drove past during the past 2 weeks...


Thursday, September 19, 2013

New project Info: Sky Vue


Thanks to Cheryl of PR Communications Pte Ltd, enclosed are the media release and fact sheet for Sky Vue - the latest development by CapitaLand located in Bishan.

Initially called Bishan II (working name), Sky Vue is located next-door to CapitaLand's other upcoming project - Sky Habitat.

The wife and I understand that the show units and sales gallery are ready and official launch of Sky Vue is expected within the next 2 to 3 weeks.
 
 
Please click on the links below to read the media report and fact sheet for Sky Vue:
http://www.scribd.com/doc/169273935/Sky-Vue-Media-Release#fullscreen
http://www.scribd.com/doc/169273943/Sky-Vue-Fact-Sheet#fullscreen

Monday, September 16, 2013

August private home demand up 54%!


Demand for new private homes in Singapore surged nearly 54% on-month in August, after the sharp decline seen in July.
According to latest figures from the Urban Redevelopment Authority (URA), 742 new private homes were sold last month, compared to the 482 units transacted in July.
The best-selling project in August was The Tembusu at Tampines Road with 218 units sold.
Including executive condominiums (EC), a total of 1,468 new homes were sold in August, with ECs accounting for nearly half of August's sales.
The most popular EC projects were Ecopolitan at Punggol with 335 units sold and Lush Acres at Sengkang, selling 311 units.

Source: Channel News Asia

Monday, September 9, 2013

August private homes resale prices hit record high!

Resale prices of private homes have surged to record highs in August.

This is despite a slew of property cooling measures introduced by the government, including recent curbs on housing loans.

Still, analysts are mixed on their outlook on where private property prices are heading.

Prices of private non-landed residential resale units climbed 1.5% last month, according to data compiled by the Singapore Real Estate Exchange (SRX).

This follows a 0.5% decline in the previous month.

Yet, the number of homes changing hands last month dipped marginally.

540 private homes were sold in the resale market in August, slightly lower than 573 units transacted in July.

Recent loan curbs were cited for slowing down the market.

Jeffrey Hong, CEO of GPS Alliance, said: “I think the resale property prices in the next 1-2 months will basically be very stagnant. Buyers are waiting along the sidelines to watch for any good buy or prices dropping further... I think towards the end of the year, I would see some price corrections but not by a lot. I think it's about 3-5%.

Introduced in June, the total debt servicing ratio (TDSR) framework limits how much property buyers can borrow to buy homes. Banks now have to check if a borrower's total repayments of car, student or mortgage loans do not exceed 60% of their gross income.

Other market watchers said the TDSR has also pushed buyers to look for smaller units - those costing between $800,000 and $1 million in August. The upper range is expected to increase to $1.2 million.

However, this means units sold would record higher prices on a per square foot basis.

The resale market saw price increases across all locations.

Private home prices in the city fringe led the market with a 2.4% gain.

This is followed by resale prices of homes in the city - at a 1.8% increase.

Mass market resale home prices inched up 0.2% last month.

Going forward, analysts expect prices of suburban homes to remain stable at current levels.

Lim Yong Hock, key executive officer at PropNex, said: “I think the developers and home buyers are now very cautious, especially now with the latest news of the recent announcement of TDSR. First of all, the developers know it's for the mass markets, so the price cannot be too high. I don't think the price will go down with the fact that land bid prices are still remaining strong and developers are still confident in the future.”

On Thursday, a land tender for a mixed use site in Yishun beat market expectations with a top bid of $1.43 billion - 43% higher than the second highest bid.

Source: Channel News Asia

Speaking of TDSR, the wife and I have experienced first hand how stringent the restriction can be. With only a small car loan and a remaining mortgage of about 30% of the current valuation of our property, the maximum refinancing that we can obtain from our bank is another 20% of our current valuation! However, TDSR does not apply for overseas property purchase so it is no wonder that more and more local buyers are looking outwards.



Thursday, August 15, 2013

It's official: July new home sales down 73%


Sales of new private homes in Singapore plunged in July.

Figures from the Urban Redevelopment Authority show that just 481 units of new homes were sold last month, down 73% from June. 1,806 units were sold in June.

Market watchers had anticipated the sharp drop in sales transactions on the back of new loan curbs introduced on 29 June and the lack of new major project launches in July.

The top-selling project during the month was Vue 8 Residence in Pasir Ris, which moved 63 units, followed by Bartley Ridge at Mount Vernon Road with 25 units sold.

Including executive condominiums (ECs), 593 new homes were sold in July, down from 2,119 units transacted in the previous month.

The best-selling EC project was Forestville at Woodlands, which sold 78 new units.
Developers launched a total of 557 new units last month, compared to 2,421 units placed for sale in June.

Source: Channel News Asia

Tuesday, August 13, 2013

July new home sales down 63%..?!


Property analysts expect new private home sales in Singapore to likely plunge by some 63% in July.

And they say the sharp drop in sales volume is partly due to new property loan restrictions implemented on June 29.

Two projects - J-Gateway and Jewel@Buangkok - accounted for more than half of the 1,806 new homes sold in June.

But sales in July are expected to weaken considerably.

Based on preliminary figures from URA and SRX, property agency PropNex says just 664 units of new private homes, excluding Executive Condominiums, were sold last month.

PropNex adds that take-up rate was down across all segments - including homes in the city, city fringe and suburban areas.

And the reasons for the sharp drop are - a lack of major new launches and the Total Debt Servicing Ratio Framework (TDSR) introduced at end-June.

Industry players say previously a home buyer could walk into a showflat, get an in-principle approval for a housing loan and book a unit all in a day. But now, it could take 10 days or more to close a deal as a result of the lengthier loan application process.

Under the new rules, a loan applicant will have to provide details of all his or her debt obligations, including property and non-property loans to the bank.

With that in mind, some property agents say developers are changing the way they market their projects.

Mr Mohd Ismail, CEO of PropNex, said: "Prior to TDSR, the preview will be over the weekend or on a Friday, and then Saturday, Sunday the booking starts. Today, the norm is most developers open up their showflats for a preview, 10 to 14 days and during the preview most of the buyers walk in and select a unit with an expression of interest, and then get the bank to give an in-principle approval.
And only after 10 to 14 days, the booking starts."

Analysts say the slower loan approval process has unwittingly become a cooling period, and some buyers have backed out on getting a unit during that time.

Meanwhile, property agency OrangeTee says it's seen a 20% drop in resale transactions for private homes in July.

Ms Christine Li, Head of Research and Consultancy at OrangeTee, said: "Usually agents took about four to six weeks to close deals, but because of TDSR, they are taking a bit longer, about eight weeks on average. This is partly because some of the buyers they are reassessing their affordability. Due to TDSR, they are not sure whether they still can get the loan quantum they previously wanted."

Analysts say property sales in August could remain slow as it coincides with the Hungry Ghost Festival.

But demand could pick up in September as developers launch more projects.

The URA is expected to announce the new private home sales figures for July on August 15.

Source: Channel News Asia

Wednesday, July 31, 2013

DBS Interest Guard: Want to know more?


The good folks at DBS have sent us details of their latest "Interest Guard" product. They have also thrown in details of their "Hybrid" mortgage products for good measure 

So for those seeking peace of mind on their mortgage interest rates...


DBS LAUNCHES INTEREST GUARD TO HELP
HOMEOWNERS MANAGE RISING INTEREST RATES
 
***

DBS Bank today introduced a first-of-its kind mortgage offering to protect homeowners against rising interest rates. DBS Interest Guard is an add-on to existing mortgages and caps the 3-month Singapore Interbank Offered Rate (SIBOR) at 1% for the next three years.
           
             With this offering, homeowners can enjoy peace of mind, knowing that they are protected against sudden increases in interest rates. DBS Interest Guard will benefit homeowners who may be committed to an existing mortgage programme and those for whom refinancing may not be feasible given recent regulation changes.

Lui Su Kian, Managing Director and Head of Deposits and Secured Lending at DBS Bank, said, “The best time to lock into a set of good rates is during a low interest environment, especially for longer term loans such as mortgages. We recognise that many homeowners may find it challenging to do so due to a variety of reasons, hence the DBS Interest Guard is designed to add a layer of protection against rising interest rates. With the majority of our customers purchasing homes to live in instead of as investment, this offering addresses their need for security in a fluctuating interest rate environment.”

In Singapore, property remains a key asset for many residents and represents one of the longest term financial commitments for a household. The uncertainty in the macro environment since 2008 has not stopped the growth of the property market. Instead, the low interest rate has fuelled interest in the market and contributed to the rise in property prices.

While the government and banks have taken steps to ensure that homebuyers are spending within their means, housing loans in Singapore have grown at a much faster pace than earnings. Over the last five years, the median gross monthly income for full time employed residents grew at an average of 4%. In contrast, housing and bridging loans have doubled over the last five years to SGD 152 billion at the end of 2012, or an increase of 16% year-on-year on average.

Over the last three months, the take up for DBS’ fixed rate programmes has increased by more 65% as homebuyers in Singapore sought to take advantage of the low interest rate environment.

Presently, over 70% of the bank’s customers purchase their homes for owner occupation purposes. With the average loan tenure spanning 20 years, it is prudent for homebuyers to consider their repayment ability at different life stages. For instance, a young couple’s financial commitments would be significantly different when they have children. Assuming the couple is paying 1.5% interest per annum on their $500,000 mortgage, a single percentage point increase in SIBOR could mean a $237 increase in their monthly repayments. If the couple had subscribed to DBS Interest Guard, the increase on their monthly repayments would only be $147, allowing them to set aside more money for other financial goals such as their child’s education or retirement.

While rates are not expected to increase dramatically overnight, historical data has shown that it is not inconceivable for SIBOR to increase by a few percentage points in a matter of months. At the beginning of the global financial crisis, on 26 September 2008, SIBOR increased by 0.47% in a single day. Over the last five years, SIBOR has risen as high as 3.56% in July 2006 and reached a record low of 0.34% in September 2011.

With DBS Interest Guard, homeowners can better protect themselves against rising rates for a nominal increase in their monthly repayments. There is no commitment period required for the DBS Interest Guard and homebuyers can opt to have interest rate caps of either  1% or 1.5% for the 3-month SIBOR over a protection period of two to three years. The monthly cost for adding on the protection starts as low as $5 per month for every $100,000 loan outstanding.
 

Protection period
2 Years
3 Years

Protection level for 3 month SIBOR of 1% (per $100,000 loan outstanding)
$10/month
$23/month

Protection level for 3 month SIBOR of 1.5% (per $100,000 loan outstanding)
$5/month
$18/month

 

 

 

 

 

 

             The DBS Interest Guard is also available for new DBS mortgage customers. Customers can contact the bank directly at +65 6333 0033 to determine if the DBS Interest Guard is suitable for them. For more information on DBS’ suite of flexible mortgage programmes, please see Appendix A.


Appendix A: DBS’ suite of flexible mortgage programmes

Today, besides fixed and floating rates programmes, DBS carries a variety of hybrid offerings that combine both fixed and floating rates. These are designed to cater to customers who seek both flexibility and security in knowing that their interest rate is capped:

·         POSB HDB Loan is the first floating rate programme in Singapore to provide HDB homebuyers with the security of having interest capped below HDB concessionary rates for 10 years while benefiting from the current low interest rates.

Pegged to the 3-month SIBOR, the Mortgage Rate Protector allows customers to benefit from the current low interest while remaining protected by a cap on the interest rate, in the event that interest rates go up.

·         DBS 2+2, the first-of-its-kind in Singapore, is a fixed rate programme suitable for customers who prefer more stability in their repayments. DBS 2+2 allows customer to move on to floating rates after two years if interest rates go down or exercise the option to enjoy the same fixed rates for another two years.
 

Package with MyProtector Mortgage
Year 1
Year 2
Year 3
Year 4
Year 5 onwards

POSB HDB Loan

3M SIBOR + 1.38% capped at the CPF Ordinary Account rate for the first 10 years

3M SIBOR + 1.38% capped at the CPF Ordinary Account rate for the first 10 years

3M SIBOR + 1.38% capped at the CPF Ordinary Account rate for the first 10 years

3M SIBOR + 1.38% capped at the CPF Ordinary Account rate for the first 10 years

3M SIBOR + 1.38% capped at the CPF Ordinary Account rate for the first 10 years

Mortgage Rate Protector

3M SIBOR + 1.15% capped at 1.88% for the first 3 years

3M SIBOR + 1.15% capped at 1.88% for the first 3 years

3M SIBOR + 1.15% capped at 1.88% for the first 3 years

3M SIBOR + 1.25%

3M SIBOR + 1.25%

DBS 2+2

1.78% FIXED

1.78% FIXED

1.78% FIXED or 3M SIBOR + 1.25%

1.78% FIXED or 3M SIBOR + 1.25% (if taken up in Year 3)

3M SIBOR + 1.25%

 
 
 

Interest rate hike: First the warnings, now comes the insurance...



Our de facto English newspaper has reported today that DBS has introduced a product offering to help protect home owners in case their mortgage instalments start increasing.

The DBS Interest Guard acts like an insurance policy for new and existing mortgages that are pegged to the interbank rate, which will increase if global rates rise.

The product means a borrower can cap his interest rate for a set period no matter what happens to rates in the open market.

It will cost from $5 to $23 a month for every $100,000 of the loan, depending on the form of protection.

Protection can be bought for only two or three years. After that the borrower will have to pay instalments at the new interest rate.

Customers can choose when their protection kicks in.

One option starts when the local interbank rate hits 1.5%. The more expensive option is triggered when the interbank rate hits 1%, providing a lower interest rate cap for the borrower.

So is this a case of DBS being the opportunist or as per what the Chinese says: 无风不起浪 (translated as: There’s no waves without wind)? Some of us will recognize the English equivalent as 

 



Update:

And in a separate report by our de facto Business newspaper today, the take-up rate for DBS’s fixed rate packages has increased by more than 65% as a result of home buyers’ fear of interest rate hikes.

While rates are not expected to increase dramatically overnight, historical data has shown that it is not inconceivable for Sibor to increase by a few percentage points in a matter of months.
 
At the beginning of the global financial crisis, on Sep 26, 2008, Sibor rose by 0.47% in a single day. Over the last five years, Sibor has risen as high as 3.56% in July 2006 and reached a record low of 0.34% in September 2011.

 

Friday, July 26, 2013

Mortgage serviceability: Reality versus Fantasy...

The following article contributed by Mr. Kuo How Nam appeared in the Forum page of our de facto English newspaper today.

Borrowers need reality check

THE key element determining a person's ability to pay his mortgage is income, whether it is from employment or from rent ("One in 10 borrowers overstretched, warns MAS"; Wednesday).

Rising interest rates can be managed if there is sufficient income, and if it grows in tandem with the rate increases.

Trouble begins if this does not happen. All it takes is for one spouse to be retrenched, or go through a period of unemployment, to spark a financial crisis in the household.

The same happens if properties are unoccupied or if rents do not cover mortgage payments.

There has not been much discussion on expected rental trends. This is an important element in determining debt-paying ability, as many people have bought additional properties on the assumption that the promised rental yields are better than the returns from alternative investments.

In many cases, they will be totally reliant on rental income for mortgage payments.

But we know that there is a huge supply of completed units coming on-stream in the next couple of years. Many are in the outlying areas, and several are shoebox units or tiny apartments.

These new locations and designs are, so far, untested in the rental market. There is the real possibility, particularly with slower growth in the labour force, that these new units will go unoccupied when they are completed.

Owners will be hard-pressed to meet their payments if this happens.

Property owners need to do a reality check and evaluate their vulnerabilities in the face of such uncertainties. They need to assess their employment and job security.

Nothing is worse than being unemployed and having outstanding mortgage loans.

They need to think of alternative scenarios, such as whether they can rent out their properties, the expected interest rate increases and how these will affect their cash flow.

Lastly, they must look at what cash reserves and resources they have available to ride out a rough patch that can last several years.

If necessary, they should lighten their debts, perhaps even taking a manageable loss now as a preventive step.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

There has been increasing sound bites recently from both government and financial institutions about rising interest rates and how this may affect homeowners with huge mortgages. This raises concerns that the low borrowing rate environment that we have grown so accustomed to for so long may be under threat.

The property buying euphoria has grown from strength to strength over the past 5 or so years, despite seven rounds of cooling measures. However, the latest (8th) sets of cooling measures may have bruised (the wife and I wouldn't exactly say "broken"...yet) the camel's back finally.

While it is natural for people to want to "get in" on a bull market, many have either failed or refused to acknowledge the fact that the property market actually go in cycles and those who are over-committed or highly-leveraged will be in trouble once the market starts to turn. One does not even have to be retrenched to spike a financial crisis at home - a combination of falling prices/rental returns and interest rate spike is sufficient to cause many sleepless nights (trust us, we have been on that road before). This is made worse if you have more than 1 mortgage to service.

Many will pour scorn on our cautionary tale even as recent as last quarter of this year, but the scenario doesn't seem as far-fetched today, given the double-whammy of a huge influx of new "for investment" apartments that are steadily coming on-stream and a much poorer rental climate.

There is this other thing that the wife and I cannot quite comprehend: whenever we spoke with people who need to "downgrade" from their current apartment due to financial constraints, the common notion is that they will be selling at a "loss" if the price they fetch is less than the price that they have bought the property for, say, 5 years ago. Few (actually NOBODY, that we have dealt with on the subject so far) will take into consideration the opportunity cost of occupancy - everyone expects to stay in their apartment "rent-free" and then made a killing off it when they want to sell. The usual "justification" is that if they cannot sell the apartment for higher than what they bought it for, they will be out of pocket and that makes any replacement purchase an even bigger challenge. We reckon this is the main reason for the big price gap seen buyers and sellers, especially during a bull market. But if the market is indeed turning, maybe sensibility will finally prevail and such disparity should become smaller? The wife and I certainly hope so.....









Monday, June 17, 2013

New private homes sales up 5.4% in May!


Sales of new private homes, excluding executive condominiums, climbed 5.4% to 1,455 units in May.

This is compared to 1,380 new homes sold in April 2013, according to figures released by the Urban Redevelopment Authority (URA).

The number of new private homes sold in the city fringes jumped by about 27% from 473 units in April to 602 units in May.

This was mostly due to new project launches in the area.

However, sales of new private homes in the city area dropped to 125 units in May, compared to 178 units in the previous month.

Meanwhile, new private home sales in the suburbs contributed to slightly under half of the sales volume in May.

The take-up rate for new homes remained stable at 728 units in May compared to April's 729 units.

Source: Channel News Asia

Friday, June 7, 2013

Private resale dips in May!


Prices of resale private homes softened in May as the government's cooling measures continued to dampen the market.

Non-landed private residential units showed an overall price drop of 0.5% in May compared to April, according to data from major property agencies compiled by the Singapore Real Estate Exchange (SRX).

Prices of resale non-landed private homes in the city area dropped 0.5% over the previous month while those in the city fringes declined 0.4%.

However, prices of resale suburban private homes remained resilient, reporting a 0.3% increase.

The SRX projected the final volume figure in May to be around 750 units, which would exceed the 671 units sold in April. This would still represent a 40% drop from the same period last year. There were 1,292 non-landed resale cases in May 2012.

Orange Tee's Head of Research & Consultancy Christine Li said the stand-off in the resale market could be due to the mismatch in expectations between buyers and sellers, who are still reluctant to reduce asking prices amid record property prices.

As a result, buyers prefer to buy directly from developers who are offering discounts and incentives.

Meanwhile, overall rental prices for non-landed private residential in May slipped 0.6% from April, marking a fourth consecutive monthly drop in overall rents.

Ms Li expects rentals to slide further in the upcoming months, given the strong pipeline of new private homes slated for completion this year.
Source: Channel News Asia

First it was sub-sale, now both resale and rental continue to soften. Are we finally heading down the "cannot sell cannot rent" road..?


Thursday, June 6, 2013

End of the road for "Specuvestors"..?


The level of speculative activities in the private residential market in Singapore has dropped substantially in the past few years.

Sub-sales of private residential properties hit a six-year low of 4.5% in the first quarter of 2013, according to data from the Urban Redevelopment Authority.

Analysts said sub-sales - which refer to the resale of uncompleted units - should continue to trend down in the next year.

In the past, some investors have been able to make a quick buck by flipping private residential properties.

But it has been a lot less profitable to do so after the government introduced the Seller's Stamp Duty in 2010.

It later increased the sales tax and holding period for properties in 2011.

The moves have helped bring down sub-sales, an indicator of speculative activity, over the last three years.

Nicholas Mak, executive director of SLP International Property Consultants, said: "The number of speculative sales as a percentage of total number of sales has dropped to about the same level as 2006.

"We are seeing one of the lowest levels, you can almost say that speculation has gone to such a low level it is no longer a problem."

From 14 January 2011, buyers who sold properties within four years of their acquisition will have to pay a tiered sales tax, with a hefty 16% levy imposed on those sold in the first year and 12% in the second year.

Units re-sold in the third and fourth year will have a Seller's Stamp Duty of 8% and 4% respectively.

Alan Cheong, research head at Savills Singapore, said: "People are not going to pay 16%; even if you make 20%, they are not going to say I am content with a 4% gain, and lose 16% in terms of a Seller's Stamp Duty. That will be a big turnoff for people thinking of sub-selling."

Mr Cheong said the sub-sales segment is also losing steam because many home hunters prefer buying new units from developers at project launches.

With these measures, analysts said the average holding period of private homes has increased from six years to 10 years in the last few years.

Ku Swee Yong, CEO of International Property Advisor, said: "Speculative activities are still around, but they are outside of the residential segment now. So (this is) good news for the residential segment; it means that we can expect more price stability and less speculative activity that might bring risk to the rest of the market.

"Less speculative activity means that there are fewer investors who are stretching themselves."

Going forward, analysts believe the sub-sales number should remain fairly low, unless there is a severe economic downturn forcing owners to sell, or if home prices run up substantially and home owners could still make a decent profit after accounting for the Seller's Stamp Duty.

Source: Channel News Asia