Friday, 5 July 2013

Further steps to cool Singapore property market

Singapore Home Prices Climb to Record as Loan Curbs Imposed

Singapore Home Prices Climb to Record as Government Curbs Loans

Singapore home prices climbed to a record in the second quarter as gains in suburban housing values accelerated, leading to new government measures on property loans at the end of last week.

The island state’s private residential property price index rose 0.8 percent to 214.9 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter, according to preliminary estimates released by the Urban Redevelopment Authority today. The pace of gain in suburban home prices more than doubled from the previous three months.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a four-year campaign in January to curb speculation prices in Asia’s second-most expensive housing market. Singapore on June 28 unveiled new rules governing how financial institutions grant property loans to individuals, extending efforts to curb excessive price increases.

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HDB flat in Bishan sold for record $1.05m

HDB executive maisonette in Bishan Street 13 was sold for a record S$1.05 million in December with cash-over-valuation of S$250,000, according to market data.

Located on the 20th floor of Block 190, the 150 sq m (approx. 1,615 sq ft) flat was listed on real estate portalPropertyGuru for about one month and attracted keen interest from three other buyers willing to pay over S$1.05 million, said DWG agent Thomas Hee who closed the deal.

But in the end it was sold to a young couple very familiar with the market.

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Khaw urges calm after S$1m flat price

Singaporeans should not be upset over reports that a resale flat was sold for S$1 million, said National Development Minister Khaw Boon Wan during a recent dialogue session with grassroots leaders in Sembawang, reported The Straits Times.

Mr Khaw explained that there will always be premium units offering fantastic views that will command very high prices, just like the case of the executive maisonette in Queenstown.

The sale of that unit is still on-going and is expected to hit S$1 million, with a cash-over-valuation (COV) of S$195,000.

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Singapore home prices up again, suburbs seen most vulnerable to correction

A general view of private condominiums at Tanjong Rhu in Singapore in this March 15, 2013 file photo.ed investors who might be caught out by an expected rise in interest rates over the coming months. REUTERS/Edgar Su/Files

Singapore home prices rose for a fifth straight quarter in the three months to June, and analysts said owners and developers of private apartments in the outer suburbs appear most at risk should the property market correct.

Singapore's central bank on Friday introduced rules to cap a property buyer's monthly payments at 60 percent of income in a bid to stabilize the housing market and to ensure those buying homes would not be caught out by a rise in interest rates.

Based on flash estimates released by the Urban Redevelopment Authority (URA) on Monday, prices of apartments in Singapore's core central region, which includes the posh Orchard Road district popular with foreign investors, have risen by 49 percent since the end of the global financial crisis in 2009.

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Singapore Tightens Home-Loan Rules Amid Record Property Prices

Singapore unveiled new rules governing how financial institutions grant property loans to individuals, extending efforts to curb speculation as prices in Asia’s second-most expensive housing market continue to rise.

Starting today, a new framework requires that lenders take a borrower’s debt into consideration when granting property loans, the Monetary Authority of Singapore said in a statement yesterday. Home loans should not exceed a total debt servicing ratio of 60 percent and those that do will be considered “imprudent,” it said.

In January, the government unveiled a seventh round of measures in about four years that included an increase in stamp duties for home buyers by 5 percentage points to 7 percentage points. While private residential property prices rose to a record in the three months through March, the gain was the slowest in three quarters after the government’s January curbs

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Property craze propels S'pore debt level

As a result of Singapore's love affair with property, debt levels have soared to 75 percent of its GDP from just 38 percent in 2000. This level is high compared to other countries in the region, according to a Standard Chartered report.

The study which covered 12 Asian countries revealed that only Korea, Malaysia and Australia have higher debt levels than Singapore.

The surge in household debt is attributed to high property prices as housing loans account for 74 percent of all consumers loans. In fact, mortgage growth in Singapore increased at a double-digit pace since 2000 and this has shot up further in the last six years

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Singapore property shares fall after cooling measures

Shares of Singapore's blue-chip property firms fell as much as 2.3 percent on Monday as investors reacted to new measures aimed at cooling the city-state's housing market.

Shares in Southeast Asia's biggest real estate company Capitaland Ltd fell 2.3 percent while City Developments Ltd dropped 1.2 percent, figuring among the biggest losers in the market in early trade. The benchmark index market was down 0.2 percent.

Singapore on Friday introduced rules to ensure that a property buyer's monthly payments do not exceed 60 percent of his income, reining in highly leveraged investors who might be caught out by an expected rise in interest rates over the coming months.

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New Shadow Cooling Measures from MAS – the Leverage Killer?

It’s been less than six months since the Seventh Round of Property Cooling Measures and around four months since the hike in high-end property tax rates in Budget 2013, but the property market has not cooled. Developer sales, in particular, are still going strong while the resale market has been steadily recovering since March based on transaction volumes. Prices also stubbornly refuse to come down – the just-released URA flash 2nd Quarter 2013 quarter-on-quarter increase of 0.8% is an acceleration of 0.6% compared to the previous quarter.

So while it’s not officially a cooling measure, the introduction by the Monetary Authority of Singapore (MAS) of the Total Debt Servicing Ratio (TSDR) framework signals the Government’s continual concern about the exuberant state of the property market and its incremental (though so far mostly unsuccessful) efforts to cool it down.

Effective 29 June 2013, the TSDR covers all property loans granted by financial institutions (FIs) to individuals (including sole proprietorships) and will require FIs to take into account all of the borrowers’ other loans when granting property loans. The TSDR will comprehensively cover all types of property loans, including those used to purchase property, those secured by property, and the re-financing of these loans (with some exceptions).

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Will new measures on property loan cool the property market?

Over the weekend, the government rolled out new measures to curb excessive borrowings by property investors. The new ruling requires lenders to take into consideration of the debtor's other existing loans when granting property loans. The aim is to strengthen credit practices by financial institutes and encourage financial prudence among borrowers. The central bank will also refine rules related to the application of the existing Loan-to-Value (LTV) limits on housing loans. These refinements seek to ensure the effectiveness of the LTV limits that were put in place to cool investment demand in the housing market. In particular, they aim to prevent circumvention of the tighter LTV limits on second and subsequent housing loans.

The question at the back of investors' mind will be whether the new measure will be the ultimate needle to burst the housing bubble. My take is that this new measure will not have any significant effect on the housing market. To put things into perspective, the current housing situation is not truly due to demand and supply dynamics. The private home market has witnessed huge gains in prices in recent years because of the hot money flowing from foreign countries such as United States and China as a result of loose monetary expansion.

Cash rich investors poured in funds to pump up prices of local private homes. Therefore no matter what policies that are going to be or have been implemented by government, they will have limited effectiveness to cool the market because the rich will not be hurted. Only the middle-income buyers will be curbed by the slew of measures

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Who the New Total Debt Servicing Ratio Will Kill

The Monetary Authority of Singapore (MAS) introduced the Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions (FIs), with effect from 29 June 2013

Computations of the TDSR affects properties that are residential or non-residential, owned individuals or companies, new applications or re-financed loans, and in or outside Singapore. Declaration and calculation of incomes and loans are also now very detailed.

TDSR may be a new term, with explanations in the FAQs of the TDSR unnecessarily long and difficult to read, but they are only additional sub-clauses to address the loopholes of the Loan-to-Value (LTV) limits announced in the previous property cooling measures.

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MAS Has Another Go at Property Cooling Measures

Monetary Authority of Singapore (MAS)

The latest financial measure to hit the Singapore property market comes from Monetary Authority of Singapore (MAS), the same body that targeted car loans just a few months ago. This time, they are targeting housing loans with a range of refinements and definitions to level the playing field for both banks and buyers.

The refinements to the application of LTV limits will prevent people from using family members to make property purchases and to apply for loans on their behalf, as pointed out by several other news sources. This loophole allowed individuals to effectively have two housing loans, or more, without incurring Additional Buyers Stamp Duty.

But something else in that announcement caught our eye as well, within latest slew of measures described as a “TDSR framework”. It seeks to better outline the requirements and methods to compute and evaluate TDSR for property loans, and in doing so introduces a new 3.5% interest rate provision. We believe this number could drastically affect the house-buying plans of many. But first, some background on TDSR.

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Singapore takes further steps to cool property market

Singapore's central bank on Friday introduced rules to ensure that a property buyer's monthly payments do not exceed 60 percent of his income, a move aimed at cooling the housing market and ensuring investors are not caught out by a rise in interest rates.

"The TDSR (total debt servicing ratio) will apply to loans for the purchase of all types of property, loans secured on property, and the re-financing of all such loans," the Monetary Authority of Singapore (MAS) said in a statement.

The new requirement, which takes effect on Saturday, will also help strengthen credit underwriting practices by banks and encourage financial prudence among borrowers, MAS added

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Punggol EC oversubscribed 1.2 times

The newly-launched Ecopolitan executive condominium (EC) in Punggol has been 1.2 times oversubscribed, with 650 e-applications received since Friday, 5 June.

Developed by Qingjian Realty (South Pacific) Group, the project comprises 512 units spread across eight blocks. Units range from three- to five-bedroom configurations.

Ecopolitan also features a “CoSpace” concept which offers the flexibility to combine both utility and study rooms into a wider, more useful space that can be used for various purposes

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Discounted penthouses for sale in Singapore

Amid another round of cooling measures, Singaporean developers are luring buyers with discounts on their completed penthouse units. Savills Singapore reported that City Developments Limited has offered five percent discount on some of its completed penthouses including units at Shelford Suites, a 77 unit exclusive freehold condominium development on Shelford Road; Wilkie Studio, a contemporary freehold development in the popular District 9; and The Glyndebourne, a 150 unit freehold condominium development on Trevose Crescent. Prices start at S$2.9 million (US$2.3 million) after discount.

Meanwhile, Hiap Hoe is offering 28 percent discount for four penthouses at Skyline 360, translating to S$9 million to S$12.3 million (US$7.1 million to US$9.7 million). The freehold condominium project is conveniently located close to Somerset MRT station and the Orchard shopping belt. The units are serviced by private lifts and fitted with high quality materials including marble and timber floors, and full height, sliding window and door panels. The development offer expansive views over Orchard Road and Marina Bay

25 percent discount is also offered by Hiap Hoe’s Signature at Lewis which comprise two- to four-bedroom penthouses. Prices are estimated at S$1,500 (US$1,184) per square feet, or between S$4.6 million to S$5.2 million (US$3.6 million to US$4.1 million)

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Singapore Daily

– Food Fuels Me To Talk: Government, how about scrapping ABSD?
– Financial Freedom SG: Are you buying property near the peak?

– Money $mart: What Went Wrong in Singapore’s Resale Flat Market?
– Dewdrop Notes 露语: Venice of Punggol Today
– Singapore Law Watch: Vague clauses in HDB document: Forum

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Planning For Singapore’s Future
Tweaks in Our SG Housing
Further steps to cool Singapore property market
Housing Woes
Our Sg Public Housing
Our Sg Properties
Affordable Housing
Prices of HDB resale flats rise, but can new HDB flats be cheaper?