Overdue mortgage payments on the rise!

A report in the ST said that more private home owners are not making their mortgage payments on times. This is according to figures from the Credit Bureau of Singapore. 

·         The number of borrowers with delinquent mortgages hit 4,186 in May, up 20% from the 3,340 a year earlier.

·         Delinquent borrowers comprised 0.82% of private home loans in May, up from 0.7% in the same month last year.

·         Banks wrote off six mortgages in the first five months of the year, a touch up from the five bad loans in the same period last year. 

Banks typically consider accounts with payments that have been overdue for 90 days or more as a defaulted loan.

 

Although the percentage rise in the number of delinquent accounts was more than the increase in total private home loans, experts note that the figures are not yet alarming.

 

The increase on the number of  overdue payments may be due to highly leveraged individuals who took out large loans before the TDSR was introduced. Another possible reason could be the slight rise in the overall jobless rate, which increased from 1.8% in December last year to 2% in March.

 

Mr Song Seng Wun, regional economist at CIMB, pointed out that it could be a reflection of the correction in the property market.

 

The number of private condominium homes completing this year is expected to hit 17,000, up from 13,150 last year.

 

As tenants have more options amid a softening market, owners who bought units expecting to finance them with rental income could find themselves burdened instead, Mr Song said.

 

Moreover, mortgages are almost fully drawn down upon the completion of a new property, bumping up the monthly payments, he noted.

 

This underlines the increasing number of properties that were put up for auction by banks.

 

Earlier reports showed that 42 mortgagee sale properties went to auction in the second quarter, the highest since the third quarter of 2009, when 63 homes were up for a fire sale.
 

On a related note, the wife and I have noticed that the interest rate have been creeping up over the past 9 months. We have a mortgage that is currently pegged to the 3-month SIBOR. It was at 1.1513% in December last year, then went up to 1.1520% in March 2014 and the last revision in June 2014 saw the rate inched up further to 1.1537%. It will be interesting to see what the September rate is gonna be.

We also realised that the bank notification for interest rate revisions these days only provide you with the new rate. So unless you bother to keep track, you may only realised it when your mortgage repayment starts showing significant increase.

Maybe our local banks can start issuing advice that says "Your interest rate will change from  xxxx to yyyy from ..." for better transparency and clearer information?

And finally, we are keeping our fingers crossed that this post will not get spammed by all them "loan companies" promising to give out all kind of loans at 3% interest rate (no mention of whether it's per year or month) without stress and can supposedly dispense the loan to you within 2 days!

 

 

Condo in Vancouver, perhaps?

A condominium being developed in Vancouver is being launched in Singapore today.

The 57-storey Vancouver House will be the third tallest building in the city when it is completed in 2018, said its Canadian developer Westbank.

The top 10 storeys of 55 units are categorised as "estate floors" while the remaining 333 homes are part of the "architect series".

Units range from studios of 431sqft to four-bedders of 3,928sqft.

Prices start from about C$300,000 (S$347,000) to C$6 million, translating to an average price of C$800 to C$2,000psf.

Westbank marketing director Michael Btaun said that 40% of the project has been reserved for foreign buyers while 30 units have been set aside for the Singapore market.

"The nice thing about the Canadian market is that it doesn't have large swings like those in Hong Kong or the United States.

"There is more demand than supply in the market, and it appreciates year after year," added Mr Braun.

Rental yields are expected to fall between 5 and 6%, he noted.

The tower, distinct for its twisting silhouette, was designed by Danish architect Bjarke Ingels, who was also behind the West 57th Street development in New York.

The freehold property is being marketed by Christie's Singapore, a unit of local firm SQFT Group, which specialises in marketing overseas properties.

Info source: ST

 

The wife and I wonder if the market poly of setting aside only 30 of the 155 units reserved for foreign buyers will generate the necessary hype for this project. And typical for developments being marketed out to Asian countries with primarily Chinese buyers, i.e. Singapore and more importantly Hong Kong, which is a primary market for new developments in Vancouver and Toronto, you may already have noticed that the total number of units in Vancouver House is 388!

The indicative prices for this project is rather steep, probably because of the targeted buyers (Singaporeans, Hong Kongers and especially mainland Chinese are rich mah!). But buyers can supposedly borrow up to 65% to finance their purchases. 

The half page advert in ST today said that the mixed-waterfront project (retail, office, restaurants and residential) is located in Vancouver's downtown CBD. It is a 6-minute walk to Yaletown-Roundhouse station and a 2 minutes train ride to city centre. Amenities include concierge service, wellness centre and heated rooftop swimming pool. There is also a fleet of BMW vehicles available for residents' use.

The Singapore road-show this weekend is supposedly a review ahead of the official launch in Vancouver on 20 September 2014. Developer is offering 2 years of free rental management (leasing and management fees absorbed).

So for those who are interested and have some free time this weekend, the road-show is being held at Four Seasons Hotel (Temasek Room @Level 3). The wife and I have never ventured into Canada (yet) and this project looks rather interesting. So who knows, you might just see us at the exhibition!

Click on link below to go to the marketing website of Vancouver House:

http://vancouverhouse.ca/

 

ABSD: Give Singaporeans a break, says Wing Tai boss

Wing Tai chairman Cheng Wai Keung has urged the government to keep the additional buyers' stamp duty (ABSD) for foreign buyers but fine-tune it for Singaporeans who wish to buy more than one property.

 

While many players lament a drying up of foreign buying - especially in the high-end residential sector due to the punitive ABSD rate, and hope that the authorities would reduce the rate, if not do away with the charge altogether - Mr Cheng shared a different perspective.

 

 

ABSD should be retained for foreigners as the danger posed by foreign hot money still lurks. But the total debt servicing ratio (TDSR) framework is already in place for Singaporeans to limit their debt exposure.

 

The original intent of the ABSD is to deal with excessive liquidity flooding in from developed countries' monetary policies. And the conditions that necessitated the introduction of the ABSD by MAS have not abated. Notwithstanding QE (quantitative easing) tapering moves in the US, interest rates are still expected to stay low, and countries like Japan and Europe are still expanding their liquidity policy. Hence it is prudent for government not to remove the ABSD on foreign buyers for now.

 

However, Singaporeans who wish to purchase additional residential properties for investment should be given relief from the ABSD, Mr Cheng said. "Why should they be dealing with three policies - SSD, ABSD and TDSR? Especially with the TDSR in place to limit debt exposure and SSD to prevent short-term trading. I believe that it is redundant to continue imposing ABSD on Singaporeans who have the financial ability and wish to invest locally in real estate."

 

Given that the market has already responded to the cooling measures - demand has shrunk and prices have softened - it is timely for the government to consider opening up options for Singaporean investors so that they may invest their excess funds in the local property market, which provides greater protection for buyers and is considered relatively less risky than foreign property markets.

 

"This can be a win-win situation for both the industry and the domestic investor market," Mr Cheng said.

Info source: BT

The call that Mr Cheng made to get reprieve from ABSD for Singaporeans is actually quite shrewd on at least two counts:    
 

1. It subscribes to the "Singaporeans first" call that many locals have been clamouring the government about. By suggesting that ABSD should be eased for Singaporeans but maintained for foreigners, Mr Cheng will probably garner quite a bit of support from his fellow countrymen. 

2. It reaffirmed to some extent the notion that the "meat" when comes to property purchases in Singapore still resides with the locals. Foreign buyers, which no doubt have been increasing in numbers over recent years, may not necessarily be as "evil" in terms of inflating property prices as many of us made them out to be... at least not across all sectors of the private residential market anyway. This is because the bulk of the demand (70%) still comes from Singaporeans - foreign institutional and individual buyers currently constitutes only about 11% of total purchases. As long as Singaporeans are given a freer hand to participate in the market and willing to pay the prices that developers set , chances are that they are really the ones that are chasing up prices. Granted that the continual imposition of ABSD on foreign purchases will continue to dampen demand from foreign buyers, but the effects will primarily be felt on the upmarket/luxury sectors. And between cutting off a limb or removing the heart, the decision is quite straightforward really.

 

 

UK buy-to-let investors warned of mayhem (Part 2)

The BOE's new home-loan restrictions follow rules introduced in April after the Financial Conduct Authority's Mortgage Market Review. The rules, which don't apply to buy-to-let mortgages, require borrowers to prove they can afford to make payments even if interest rates rise.

One in three of the 50 economists surveyed by Bloomberg predict an increase this year from the record-low 0.5% benchmark rate the BOE has maintained since March 2009. Aldermore Bank plc, which provided Mr Kordestani with his last mortgage, offers a two-year fixed rate buy-to-let loan of 4.08% for 70% of a home's value, according to the lender's website.

The Financial Conduct Authority said it will consider buy-to-let when it reviews the impact of its latest rule changes. The BOE, in its first set of stress tests, will assess the country's eight biggest lenders on how they would cope if interest rates rose to 4% and house prices dropped by 35%.

"That is an approach across the housing market, which will allow us to test buy-to-let lending as well as the owner-occupier market," Andrew Bailey, BOE deputy governor for prudential regulation, said at a June 26 press conference. "It's not that we're going to ignore the buy-to-let market in terms of the supervisory oversight and observation."

Mr Carney told lawmakers on Parliament's Treasury Committee in London on Tuesday that the central bank is closely watching the buy-to-let market. "Current underwriting standards are in line with historical patterns and didn't warrant a response at this stage."

In London, buy-to-let investors took out more than GBP750 million of mortgages during the first quarter, which had more than 10 times the impact on prices compared with the government's Help-to-Buy lending assistance program, according to a May report by Morgan Stanley analysts including Huw Van Steenis.

Almost half of the new homes bought in the city last year were buy-to-let, according to asset manager London Central Portfolio Ltd.

Home values are rising faster than rents, That pushed down yields, which is rental income as a proportion of the purchase price, to 6.3% in the second quarter from 6.4% in the previous three months, Mortgages for Business said in July.

The small-landlord market could climb further from April 2015 when changes to government policy will give pensioners control over how they spend their retirement savings. Currently they must invest in an annuity - an annual income from a life insurer.

That's "freed up potentially a large flow of additional funds to go into the housing market", some of which may go to buy-to-let, said Wood at Berenberg Bank.  - Bloomberg 

Info source: BT

 

The higher property prices/ lower rental yields due to the increasing number of "buy-to-let" in the UK is of concern not only to local landlords but even more so for overseas investors, which typically buy for rental purposes. Although the "rent rather than buy" culture has traditionally been strong amongst UK home-dwellers, the deluge of new homes that are being put onto the market will continue to put a damper on rental prospects and yields.

 

This is something that potential investors into UK properties should take into consideration of.

 

 

 



UK buy-to-let investors warned of mayhem (Part 1)

This article from Bloomberg was published in today's copy of BT. Because of the length of the article, we will split it into two parts for easier reading.

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

Shahram Kordestani, who owns seven UK rental homes, has advice for investors eager to join the swelling ranks of landlords: Do so at your peril.

 

Mr Kordestani, who has been renting homes in London and south-east England for about 12 years, said when interest rates rise, the jump in mortgage payments will hammer buy-to-let investors who have helped push up property values. "There is going to be mayhem," said Mr Kordestani. "Whoever pays those prices is going to suffer."

 

The loan-to-income cap that Bank of England (BOE) governor Mark Carney introduced last month to cool Britain's housing market does not apply to buy-to-let  - the fastest-growing type of mortgage by value.

 

Economists say a hike in the central bank's benchmark interest rate or falling prices could result in a repeat of the past, when repossessions of private-landlord homes hit a record high after the 2008 financial crisis.

 

"It was a mistake not to include buy-to-let investment," said Rob Wood, a former central bank official who is now an economist at Berenberg Bank in London. "It's one way in which households can speculate on house prices rising and that is exactly the sort of dangerous debt built-up that Mark Carney was trying to avoid."

 

Buy-to-let lending is climbing as Britons rent properties for longer periods. The proportion of amateur landlords - those who supplement their salaries with rental income - reached a record 72% of the buy-to-let industry in the first quarter after rising by 10 percentage points in the two years through March, according to the National Landlords Association. There are 1.7 million residential landlords in the UK, the group said.

 

 

Lenders provided GBP2.2 billion (S$4.68 million) of private-landlord mortgages in April, a 57% increase from a year earlier, according to the Council for Mortgage Lenders (CML). Almost half of that by volume was refinancing.

 

Gross mortgage lending increased 36% to GBP16.6 billion and loans to first-time buyers gained 47% to GBP3.5 billion in the same period.

 

Homes bought as rentals made up 14% of new mortgages during the second quarter, according to the CML. Lenders offer a record 637 buy-to-let mortgage products, a 37% rise from a year earlier, according to broker Mortgages for Business Ltd.

 

Lenders "who aren't into it want to go into it; those that are there want to expand", Richard Sexton, a director at property appraiser e.surv, said. "It's a different pool to fish in."

 

Financing for residential rentals became easier to obtain starting in the 1990s, when the government allowed more companies to provide mortgages. That fuelled a 19-fold increase in buy-to-let lending in the decade through the end of 2007, during which UK home values tripled.

 

The market collapsed as the credit crisis spurred a 15% drop in UK property prices in the 18 months through March 2009. New lending to rental property investors rose by 40% in 2011, outpacing new residential lending.

 

Mr Carney last month introduced limits on mortgages worth more than 4.5 times the borrower's annual income and mandated an affordability test in an attempt to slow runaway prices in London.

Values in the capital climbed 26% in the three months to June from the year earlier, the biggest annual increase since 1987, according to Nationwide Building Society. UK prices climbed 8.8% during the period, according to Halifax.

Mr Kordestani planned to add a seventh property this year in Kingston-upon-Thames, south-west London, only to find that values for properties such as the two-bedroom Victorian cottage he sought had jumped by more than GBP50,000 in six months. Instead, he bought a home in Woking, 25km from Kingston.

{ to be continued }

Info source: BT