Tag Archives: Property cooling measures

Beware the Waiting Game: Some Points to Ponder While You Wait

Market naysayers claim that cheap financing has resulted in hot money, which has in turn created an unsustainable property bubble. While I constantly remind young, first-time home buyers not to overstretch their budgets by projecting affordability on the basis on today’s abnormally low interest rates, the continued upward march of property prices here was certainly not due to low interest rates alone. In any case, with the various phases of loan-to-value and loan tenure restrictions introduced since February 2010, the capacity for interest rates to create heat in the property investment market has been brought down to a minimum. (After the latest cooling measures in January 2013, the maximum loan-to-value in certain situations is a mere 20%.)

And so, when a property agent friend recently asked me for my opinion on whether she should advise her home-buyer client to “wait for property prices to drop”, I responded with a question in kind, “how long can she wait?” If you ask me for my honest opinion, today’s market is indeed a challenging one for buyers seeking an investment unit in the residential sector, and it takes a sharp eye to spot a gem worth surmounting the ABSD payable (there ARE such gems out there, I can personally vouch for that!). However, for those without a home to their names hoping to eventually get out of the rental cycle, I silently worry when they confide that they are waiting for prices to drop. (I stay silent in such cases, as my policy is never to give unsolicited advice, the opinions shared on this blog are for you to consider only if you choose to.)


Besides the fact that they are betting the roof over their heads on an event of uncertain magnitude and indefinite time line, very often the turning-point they have in mind may in fact work to their disadvantage if and when it actually occurs. Let me just run through the two situations commonly cited by those hoping to pick up homes during a property crash:-

Interest Rates Rising:

Some home seekers are waiting for rising interest rates to spark a housing market crash. While I certainly agree that interest rates will eventually rise, let’s not forget the reason for them being so low in the first place. The Feds have committed to keeping interest rates low until the US unemployment rates dip to at least 6.0-6.5%, in a bid to boost their flailing economy. What does this mean? That when they do decide to jack up rates, it will be because their economy is back on track and market sentiment has improved. Would an improved global market outlook help with bringing home prices in Singapore down? I doubt it.

Next let’s consider how the recent increase in local mortgage rates affects the housing resale market. The interest rate payable by a home owner here is based on a moving rate (SIBOR is the most commonly used one at present) plus a fixed margin (determined at the onset of taking up the loan). So a home buyer may, for example, take up a loan that charges him a margin of 0.75% per annum above SIBOR for the first 3 years, and 1.25% per annum above SIBOR in each subsequent year. In a bid to improve profitability, several banks have in recent months moved to increase the fixed margin they charge new mortgagors over and above SIBOR. So while we managed to secure a SIBOR + 0.7% loan package in mid-2012, we would probably be offered a package of around SIBOR + 1.15% if we sought to refinance the loan today. While the hike in rates does little to dampen first-time buyers’ demand, it could actually cause existing home owners to reconsider their upgrading plans, since their subsequent replacement home would likely attract mortgage rates at least 25 to 35 basis points higher than what they pay on older loan packages pegged to lower fixed margins. This in turn reduces the stock of resale units available to home seekers – not the best environment for home shopping.

Huge housing supplies scheduled for completion:

Firstly, the pipeline of private housing projects due over the next 4 years is competing with record numbers of public housing and infrastructure projects for both building materials and a tight foreign worker market, housing prices would tend to move in tandem with escalating construction and manpower costs.

Secondly, as I’ve highlighted before, developer companies aim to achieve profitable returns for shareholders. If there are serious signs that home prices must drop, they must and will source for other ways to reduce costs. There’s a reason why projects completed during times of economic crisis tend to have less impressive finishings than those completed during times of strong growth. There’s a wide spectrum of grades for marble floor tiles and wood parquet, a China-made glass window pane may look identical to an Australia-imported, shatter-resistant pane yet cost just a quarter of the price. Do you really want to be buying a new home when developers are at the point of slashing prices?

And finally, thanks to the 7 rounds of extensive cooling measures, there is a huge arsenal of tools available to the Government in the event that the market were to start showing signs of collapse: reduce ABSD, completely scrap ABSD, reduce/remove restrictions placed on loan-to-value and loan tenure. It doesn’t take much imagination to think, if this is how our property market performs under such draconian restrictions, what would happen if such restrictions were to be completely removed.

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Posted by on April 9, 2013 in General, Investment Tips


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Home sales jump 43% in January despite cooling measures


THE latest round of property cooling measures in January has apparently failed to deter home buyers, who were out in force last month.

They picked up 2,013 new private homes from developers in the first month of 2013, a 43 per cent jump over December’s number and the highest level of new home sales in four months, according to figures released today by the Urban Redevelopment Authority (URA).

January’s sales also exceeded the 1,799 homes launched by developers during the month, the URA said. Both sales and launch figures exclude executive condominiums.

Including executive condominiums, which are a public-private hybrid housing type, developers sold 2,269 homes last month.

A URA spokesperson said about 60 per cent of the 2,013 units were sold before January 12 – before the latest cooling measures took effect.

The remaining 40 per cent of the units were transacted from January 12 onwards.

The data released by URA on Friday showed that 350 units of new private homes located in the core central region were sold in January.

Meanwhile, developers moved 376 new units in the city fringe and 1,287 units in the suburban areas.

(Source: Channel Newsasia)

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Posted by on February 15, 2013 in Residential


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New Cooling Measure for Singapore Properties

New property cooling measures

New property cooling measures

Singapore has introduced new property cooling measures which are set to take effect tomorrow. The government’s aim is to control on-going speculation in the property market.

This is the seventh and most extensive round of tightening measures and include higher buyer stamp duty, rules on permanent residents (PRs) buying their first home and size restrictions on executive condominium (EC) units. Most notably, curbs will also be introduced into the industrial sector.

National Development Minister Khaw Boon Wan said: “A large supply of public and private housing – up to 200,000 units in total – will be completed in the coming years. Coupled with the new measures, we will be better placed to ensure that housing remains affordable to Singaporeans.”

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam added: “The reality we face is that interest rates are extraordinarily low, globally and in Singapore, and continue to add fuel to our property market. We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices further down the road.”

Below is the full list of measures released in a joint statement by the government:

Measures Applicable to all Residential Property

The following new property cooling measures will take effect on 12 January 2013:

a) Additional Buyer’s Stamp Duty (ABSD) rates will be:

i) Raised between five and seven percentage points across the board.
ii) Imposed on Permanent Residents (PRs) purchasing their first residential property and on Singaporeans purchasing their second residential property.

b) Loan-to-Value limits on housing loans granted by financial institutions will be tightened for individuals who already have at least one outstanding loan, as well as to non-individuals such as companies.

c) Besides tighter Loan-to-Value limits, the minimum cash down payment for individuals applying for a second or subsequent housing loan will also be raised from 10% to 25%.

The new property cooling measures listed above will not impact most Singaporeans buying their first home. Some concessions will also be extended to selected groups of buyers, such as married couples with at least one Singaporean spouse who are purchasing their second property and will sell their first residential property.

These new ABSDs and loan rules are significant, but they are temporary. They are being imposed to cool the market now, and will be reviewed in future depending on market conditions.

New Property Cooling Measures Specific to Public Housing

The Government is also introducing new property cooling measures to further moderate the demand for HDB flats, instil greater financial prudence among buyers, and require owner occupation by PR buyers. The following latest cooling measures will take effect on 12 January 2013:

a) Tighter eligibility for loans to buy HDB flats:

i) MAS will cap the Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions at 30% of a borrower’s gross monthly income.

ii) For loans granted by HDB, the cap on the MSR will be lowered from 40% to 35%.

b) PRs who own a HDB flat will be disallowed from subletting their whole flat.

c) PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

An additional new property cooling measure will take effect on 1 July 2013 to tighten the terms for granting HDB loans and the use of CPF funds for the purchase of HDB flats with remaining leases of less than 60 years.

New Property Cooling Measures for Executive Condominium Developments

The Government will introduce new cooling measures specific to new EC developments to ensure that ECs continue to serve as an affordable housing option for middle-income Singaporean families.

The following new property cooling measures will take effect on 12 January 2013:

a) The maximum strata floor area of new EC units will be capped at 160 square metres.

b) Sales of new dual-key EC units will be restricted to multi-generational families only.

c) Developers of future EC sale sites from the Government Land Sales programme will only be allowed to launch units for sale 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.

d) Private enclosed spaces and private roof terraces will be treated as gross floor area (GFA). The GFA of such spaces in non-landed residential developments, including ECs, will be counted as part of the ‘bonus’ GFA of a residential development and subject to payment of charges. This is in line with the treatment of balconies under URA’s current guidelines.

New Cooling Measure for the Industrial Property Market: Seller’s Stamp Duty

Prices of industrial properties have doubled over the last three years, outpacing the increase in rentals. In addition, there has been increasing speculation in industrial properties: in 2011 and the first eleven months of 2012, about 15% and 18% respectively of all transactions of multiple-user factory space were resale transactions carried out within three years of purchase. This is significantly higher than the average of about 10% from 2006 to 2010.

The Government is introducing Seller’s Stamp Duty (SSD) on industrial property to discourage short-term speculative activity which could distort the underlying prices of industrial properties and raise costs for businesses.

The following SSD rates will be imposed on industrial properties and land bought and sold within three years of the date of purchase:

a) SSD at 15% if the property is sold in the first year of purchase, i.e. the property is held for one year or less from the date of purchase.

b) SSD at 10% if the property is sold in the second year of purchase, i.e. the property is held for more than one year and up to two years from the date of purchase.

c) SSD at 5% if the property is sold in the third year of purchase, i.e. the property is held for more than two years and up to three years from the date of purchase.

These SSDs will apply for industrial properties and land bought on or after 12 January 2013.

(Source: The Straits Times)

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Posted by on January 12, 2013 in General


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Home buyers borrowing less with tougher rules

Home buyers are borrowing less as tougher lending guidelines contained in property cooling measures start to bite.
Mortgages with a loan-to-value (LTV) ratio of more than 80 per cent comprised 4.7 per cent of all  in the third quarter, down from 4.9 per cent in the same period last year.
This is the lowest since 2004 and is a sharp drop from the peak of 17 per cent in the third quarter of 2009, said the Monetary Authority of Singapore yesterday.
An LTV ratio of 80 means the buyer has borrowed 80 per cent of the home’s sale price.
The MAS’ Financial Stability Review noted yesterday that housing loan quality remains robust with the proportion of mortgages with negative equity – where the loan exceeds the property’s value – remaining negligible.
More than 70 per cent of mortgages are for owner-occupied homes, which tend to have a lower risk profile while non-performing loan (NPL) ratios for property-related lending have stayed low.
However, these trends warrant close monitoring as NPLs are a key indicator of economic conditions and how borrowers are handling their repayment obligations, the MAS noted.
“Banks should be mindful… if the economic outlook worsens, especially if interest rates were to rise,” it said, warning that the sector “could face a pronounced increase in NPL ratios”.
But it is evident that the cooling measures have dampened the market with growth in property-related loans slowing.
Associate Professor Sing Tien Foo of the National University of Singapore’s department of real estate noted that home prices would have to plunge by more than 55 per cent for loans to get into negative equity.
“The slight increase, however, could be due to the high volume of new loans taken in the past year which tend to have higher LTV ratios,” he added.
“This could be due to the run up in prices which require buyers to take larger loans and the fact that interest rates remain low.”
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Posted by on November 30, 2012 in General


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Private home sales predicted to drop in 2013?

Image The number of private home sales in Singapore could drop by more than 20 percent in 2013 after “spectacular” increases this year.

David Neubronner, Head of Residential Project Sales for Jones Lang LaSalle (JLL), issued the warning this week, suggesting that the number of sales this year, which is expected to reach 22,000 units, will correct to “more healthy levels of about 16,000 units” in a worst-case scenario.

In an exclusive interview with The PropertyGuru, he said: “Put in perspective the jump this year, from 15,800 in 2011 to probably 22,000 by the end 2012, has been spectacular. We believe this is not sustainable moving forward and should correct next year.”

“In the worst scenario, we estimate the market to correct to the healthy levels of about 16,000 units which were achieved in 2010 and 2011. This is taking into account the anticipated economic slowdown in 2013, clampdown on residency and employment of foreigners.”

Neubronner is also not ruling out a further wave of government cooling measures. He said: “The possibility is always there as long as the buying continues. Based on the recent robust sales volumes and concerns of market foaming, there is always the possibility of another round of measures to take the steam out of the market.”

Neubronner predicts that landed property sales will remain resilient given the limited supply and perennial demand, along with the general aspiration of Singaporeans to upgrade to a landed property. The luxury segment has seen sales volume and values declining over the past year and, according to Neubronner, should bottom out any time soon.

“We anticipate a recovery next year given the values and opportunity on offer,” he added.

The mass and middle market segments are expected to see most of the correcting in 2013, he said, adding that these sectors have been running up rapidly over the past year.

Neubronner also expects the proportion of foreign buyers, which now stands at roughly 20 percent, to stabilise. He said: “Singapore will continue to attract foreign buying interest for a million reasons and we believe the series of measures introduced over the past years will more likely subdue the Singaporeans appetite than the foreigners.”

Neubronner concluded by saying: “Although sales volume will decline, we expect prices to stabilise next year. The fundamentals, like a stable economy with high employment, low interest rates, a robust leasing market in the suburban areas and the overall bullish sentiments, are still strong and we do not see these changing in 2013.”

(Source: Andrew Batt, International Group Editor of PropertyGuru)

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Posted by on November 26, 2012 in General


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HDB Resale Market Stabilising

SINGAPORE: The HDB resale market is showing signs of stabilising, said National Development Minister Khaw Boon Wan.

Speaking in Parliament on Wednesday, Mr Khaw said the yearly Resale Price Index (RPI) growth has gone down from 14.1 per cent in 2010 to 10.7 per cent last year.

And in the first nine months of this year, the figure stood at 3.9 per cent.

However, Mr Khaw said an uptick in quarterly RPI growth to two per cent in the third quarter of this year showed that while things are improving, there is still some way to go.

He said a number of property cooling measures that had been implemented will take some time to work through the market. These include the “huge supply” of new housing units which will only be available over the next two to three years.

As for public rental blocks, the Ethnic Integration Policy (EIP) is also under review to better reflect Singapore’s demographic changes.

Mr Khaw said: “Currently, about 60 per cent of HDB’s public rental blocks have reached the EIP block limit of 25 per cent for Malay households. We are in the midst of reviewing the EIP limits for rental flats to take into account the demand from the various ethnic groups.”

MP for Aljunied GRC, Pritam Singh, had also asked if HDB would consider allocating rental flats on a strict needs basis only. This is to avoid rejection or delay as a result of the applicant’s preference of a rental zone.

In his reply, Mr Khaw said: “Applications for a rental flat are assessed and approved on a strict needs basis. As for allocation, rental applicants may prefer certain locations, which are nearer their workplace or their children’s school.

“We allow them the flexibility to choose the location zone, so that we are better able to meet their needs. HDB will advise them on the estimated waiting time for their preferred zone, as well as the zone with the shortest waiting time, so that they can make an informed decision.”

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Posted by on November 21, 2012 in General, Residential


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