Property cooling measures to stay amid lower-for-longer rates - AsiaOne

Tuesday, Jul 26, 2016

Jamie Lee

The Business Times

SINGAPORE - The property cooling measures will remain, the Monetary Authority of Singapore (MAS) said on Monday, noting risks of a renewed surge in property prices in this lower-for-longer-rates environment that keeps investors on the hunt for yield.

At a press briefing, MAS managing director Ravi Menon said property prices have adjusted "only modestly" after a run-up that was stronger than that of income growth.

Property prices have fallen by 9.4 per cent cumulatively, from the peak in the third quarter of 2013.

But this follows a surge of 60 per cent between 2009 and 2013; over the same period, nominal incomes was up by just 30 per cent.

"It is not time yet to ease the property cooling measures," said MAS managing director Ravi Menon.

"There is still some way to go, to entrench the gains in stabilising the property market and restoring household debt sustainability."

The FTSE ST Real Estate Index closed 0.31 per cent lower on Monday, in line with the broader market.

In explaining its decision to keep the cooling measures in place, MAS put a distinction between moves to curb leverage in housing, and that of car financing.

MAS's measures in property buying would include tighter loan-to-value ratios, and imposing limits on loan tenure.
The government has also imposed duties to discourage the flipping of multiple properties.

The property cooling measures are meant to not just rein in inflationary pressures and lift financial prudence, but to also promote a stable and sustainable property market, MAS said.

The central bank noted Singapore's household balance sheets is strengthening, with annual growth in household debt moderating to 1.7 per cent in the first quarter of this year. This is down from about 8 per cent over the last five years.

Still, the risk of a renewed surge in property prices is not trivial, MAS said.

"And while the growth in household debt has eased considerably, it will take time for household balance sheets to strengthen and become more resilient to interest rate and income shocks."

By comparison, stringent curbs on car financing were imposed in 2013 mainly to restrain the strong demand for cars and COEs (certificates of entitlement), and thereby, ease pressures on inflation.

As a result, contribution of private road transport - excluding petrol - to headline inflation has eased from 1.3 percentage points in 2011-2012 to a negative 0.5 percentage point in the first quarter of 2016.

In response, MAS relaxed car loan curbs in May.

Buyers can now borrow up to 70 per cent of the purchase price and repay the loan within seven years, up from 60 per cent and five years previously.


This article was first published on July 26, 2016. 

Source: AsiaOne

Property cooling measures unlikely to be removed before 2017, say property analysts - The Edge Property

Home buyers and investors who have been waiting on the side lines for the government to tweak the property cooling measures before committing to a purchase will have to wait a little longer.

“I think the earliest the property cooling measures could be tweaked will be in 2017 because we have not quite reached the double digit price correction that the government wants,” says OCBC head of treasury research and strategy Selena Ling. She was speaking at the Real Estate Developers’ Association of Singapore (REDAS) property market update seminar on July 12.

Market speculation was that the property cooling measures could be relaxed soon, especially for borrowing limits on the second or third and subsequent residential property purchases. Hopes were raised after the Monetary Authority of Singapore eased car loans in May, just three years after introducing restrictions in 2013. “However that does not seem to have happened,” said OCBC’s Ling.

She also sees developers facing greater pricing pressure due to the strong supply pipeline and slowing demand owing to the slower creation of new households, ageing population and tighter manpower policies.

Price cuts of 5% to 25%
According to REDAS President Augustine Tan in his opening address, the pipeline of new supply stood at 57,597 for private residential units and 12,077 for executive condos (EC) as at end May. Meanwhile, unsold units total 15,000 units. In the meantime, developers’ annual new home sales totalled 7,316 and 7,440 units in 2014 and 2015 respectively. This reflects a 42% drop from the average sales volume of 17,683 units per year over the three-year period from 2011 to 2013, adds Tan.

REDAS estimates that some 1,100 to 1,200 unsold units across 17 developments will be hit by Qualifying Certificate (QC) extension charges by end of the year. The estimated charges are said to amount to close to $138 million. About 5,300 units remain unsold in 47 developments. This excludes ECs, where additional buyer’s stamp duty (ABSD) with interest will kick in from end 2016 to 2018. “In order to move sales, developers have cut prices ranging from 5% to 25% for some of their projects,” says Tan.  

However, OCBC’s Ling feels that the downside risk in terms of prices is modest. “We have seen activity pick up in the first six months of the year, especially in the prime residential segment due to the ongoing creative promotions and payment schemes that some developers have rolled out.”

Soft landing?
Ling sees the property market headed for a soft landing as interest rates are still relatively low, and are expected to stay low for some time. OCBC has adjusted its year-end forecast for the three-month Sibor (Singapore inter-bank offer rate) to 1.05% and the SOR (swap offer rate) to 0.9%. She sees the “lower-for-longer” trend continuing as global uncertainties persist.

According to Chua Yang Liang, JLL head of research for Southeast Asia, “there is a lot of hidden value in prime residences in Singapore.” JLL's basket of prime non-landed homes in prime Districts 9, 10 and 11 shows that prices have fallen by some 20% from 2Q2011. Prime residential prices in Singapore today are 165% lower than those in Hong Kong, and 92% lower than prices in London.

The URA 2Q2016 flash estimates show private residential prices having fallen by 9.4% since the peak in 3Q2013. However, the q-o-q price dip of 0.4% is the smallest decline registered over 11 straight quarters of decline. “We think the residential market is close to the trough,” says JLL’s Chua. “But we can expect minor adjustments in values over the next nine to 12 months with slight recovery by mid-2017 and a more pronounced recovery after that, depending on the economic conditions then.”

With residential prices in the Core Central Region and the city fringe (Rest of Central Region) stabilising, there’s less motivation for the government to make any policy changes, adds Chua.

By Michael Lim / Redas Seminar | July 13, 2016 10:14 PM MYT

Source: The Edge Property

Big-ticket condominium transactions total more than S$250 million in H1 2016 - SRX

Singapore

CONDO transactions of S$10 million and above in the January-June period are up sharply from a year ago, marking the strongest showing since the second half of 2013. The strong pick-up was fuelled largely by foreign buying, attractive pricing and a general improvement in property market sentiment in recent months.

According to CBRE Research's analysis of URA Realis caveats data, 19 condos were sold for at least S$10 million each, adding up to S$259 million - more than double the eight transactions totalling S$103 million in H2 2015. The H1 performance is the best since the 21 deals worth S$265 million in H2 2013.

The actual H1 number may be higher as caveats have not been lodged for some high-priced deals, BT understands. Industry observers generally expect the momentum to continue in the second half - though they are not anticipating a big surge. "To begin with, the stock of ultra-luxe condos on the island is limited," said a seasoned property consultant.

Another consultant, Savills Singapore research head Alan Cheong, said that "since the start of June this year, we have noticed a stirring of activity in the S$10 million or more price range for non-landed properties in the prime districts". Previously, most deals were mainly centred around the S$5 million price range, he added.

Buyer nationalities are a mix of Singaporeans, Chinese and Indonesians; the latter have been more active in the past week as they came to town during the Hari Raya holidays in Indonesia, said Mr Cheong.

Among H1's big-ticket condo deals were two last month at The Nassim - at S$20.25 million and S$13.73 million. The larger transaction, which works out to S$2,248 per square foot, is for a ground-floor unit of five bedrooms; about half of the unit's 9,009 sq ft strata area is accounted for by private enclosed spaces and three basement carpark lots. The smaller transaction, for a 4,273 sq ft unit on the fourth level, translates to S$3,214 psf.

The ground-floor unitis understood to have been picked up Sigid Wonowidjojo while a relative bought the fourth floor unit. Mr Wonowidjojo's family controls Indonesian cigarette maker Gudang Garam. Both units in the five-storey freehold project, on the former ANA Hotel site on Nassim Hill, were sold by developer CapitaLand. The project received Temporary Occupation Permit (TOP) in August last year.

Just behind The Nassim, two units at the completed Nassim Park Residences, also a low-rise freehold luxury condominium project, changed hands last month for S$12 million (or S$3,451 psf) and S$12.25 million (S$3,523 psf). The two apartments were sold by a family (Indian citizens) to Naina Buxani, who co-founded the Temptations Jewellery business in Hong Kong and which now has a presence in Singapore.

Ms Buxani is understood to be the wife of Mahesh Buxani, who last year shelled out S$22.5 million or S$3,271 psf for a 6,900 sq ft penthouse in the same development; the luxurious duplex comes with its own pool.

Two units were also sold at Tomlinson Heights recently - at S$11.9 million and S$11.53 million.

In February this year, three units were transacted at Boulevard Vue along Cuscaden Walk at S$3,280-3,550 psf. In the same month, an apartment at St Regis Residences Singapore around the 20th floor was sold for S$15 million or S$2,706 psf to an Indonesian.

Also in February, a company said to be linked to Akbar Khan, who was in the limelight here in the late 1990s when he came up with a plan to free up frozen Clob shares, acquired a four-bedroom apartment above the 20th level at the completed TwentyOne Angullia Park for slightly over S$12.05 million or S$3,600 psf.

The unit was sold by the project's developer, a unit of China Sonangol. To date, the developer has sold 10 of the project's 54 units. It is understood to have trimmed the average price by 10 per cent to S$3,600 psf this year - from S$4,000 psf in 2012-2013.

According to market talk, GuocoLand recently sold two penthouses at Goodwood Residence and a unit at Leedon Residence - all three at above S$10 million each. Caveats have not been lodged for these transactions.

Property agents and developers told BT that new Singapore citizens and foreigners are dominating condo purchases in the S$10 million and above band. Desmond Sim, CBRE Research's Singapore and South-East Asia head, said: "Foreigners are drawn to higher price range condos as they see an opportunity to own a trophy home in Singapore's prime residential districts."

Samuel Eyo, managing director of Singapore Christie's International Real Estate: "In the price range (S$10 million or more), Singaporeans would prefer to go for landed properties."

Foreigners require government approval to buy a landed residential property in Singapore.

CBRE's Mr Sim said that the top two nationalities of foreign buyers of luxe condos so far this year would be Indonesians and Chinese, who are likely to have bought for capital preservation.

According to Jerry Tan, founder of JTResi, well-heeled foreigners are looking for properties in good locations and which are well designed and finished. They are predominantly end-users . "It could be their primary residence, a secondary home, a place for their children to live in while they study here.

"People with money still believe in real estate and they want a safe haven. Singapore has a stable currency, good governance, a transparent property market. It ticks all the boxes. These buyers just need to see the right real estate - and there's not many."

According to Mr Eyo, foreign buyers were initially loathe to pay the 15 per cent additional buyer's stamp duty that kicked in in early-2013 but they seem to have come around to the view that Singapore'sstamp duty/taxes for residential property purchases are not the highest among global cities.

Another point to note is that sellers - whether developers or individuals - have generally adjusted their price expectations downwards. For instance, CapitaLand began selling The Nassim this year at about S$3,200 psf on average. It was rumoured to have been considering S$4,000 psf a few years ago given the ultra-prime Nassim address, said Mr Eyo.

The Business Times

Source: SRX (15 Jul 2016)

How can CPF make your home purchase more affordable - AsiaOne

Wednesday, Jul 06, 2016

Peter Lin

MoneySmart

You know that period of time in your life when all your Facebook friends are taking turns to get married? I'm on the tail end of it, which means that my Facebook feed is currently filled with announcements about buying a house as a couple and then moving in. And babies. Non-stop babies. But that's a discussion for another day. Right now I want to focus about housing for a new couple in Singapore.

Unless husband and wife have had experience in the property market, chances are that they're both new to the concept of buying a house. It's ironic then that such a big financial decision - arguably the biggest commitment outside of marriage - is often made by two people who don't really know any better about what they're getting themselves into. The good thing is that there are means in which this process can be made less of a financial burden.

Use my CPF to help pay for my house? How's that possible?
We're not saying that you need to have accumulated almost a million dollars in your CPF account before you can think of owning a house. In fact, if you have been working for several years, chances are that you already have a substantial sum in your CPF Ordinary Account that you can use to buy a house. Let me explain.

Let's assume Ms Lee is currently 24 and is earning $2,500 a month. Since she's below 35 years of age, this is the breakdown of contributions to her CPF accounts:


The CPF Special Account is primarily set aside for retirement, and you cannot use the funds until you reach retirement age. The CPF MediSave Account is set aside solely for hospitalisation expenses and medical insurance purposes.

The Ordinary Account, on the other hand, can be used for a variety of purposes, such as insurance, investment and education. Almost all Singaporeans, however, use most of it to pay for their housing. So in Ms Lee's case, 23 per cent out of the total 37 per cent contributed is put into the Ordinary Account, or $575 each month.

In a year, assuming no bonuses, that's $6,900. In 5 years, assuming no bonuses and no change in salary, that's $34,500 in her CPF Ordinary Account. For simplicity's sake, let's assume Ms Lee then meets her special someone, and he conveniently also earns $2,500 a month and has accumulated $34,500 in his CPF Ordinary Account after 5 years as well.

Wow! $34,500 seems like a lot, but compared to the price of a house, it's not very much, is it?
However, let's look at just how much it costs Ms Lee and her fiance to buy a 4-room HDB flat in Sengkang, where the selling prices start from $267,000.

For ease of calculation, let's assume the flat costs $300,000 and that the flat has a lease balance of at least 60 years. Aside from peripheral costs like stamp duty and legal fees, the biggest initial cost is the down payment.

If you take an HDB housing loan, your down payment is at least 10 per cent of your purchase price. If you are ineligible for an HDB housing loan, or if you prefer to take a home loan from a bank, your down payment is at least 20 per cent of the purchase price, of which at least 5 per cent needs to be in cash. If we assume Ms Lee and her fiance choose the latter option, they will need to have at least $45,000 in their CPF, so that they will only need to pay $15,000 out of their pocket, and not put too much pressure on their monthly cash flow. If they choose to take an HDB loan, they will only need to pay a combined total of $30,000 for the down payment.

Although Ms Lee and her fiance are earning only $2,500 each per month, they already have a total of $69,000 in their CPF Ordinary Accounts after working for 5 years. This means that they have more than enough to pay for their flat's down payment. Getting a HDB concessionary loan means that besides paying the down payment, Ms Lee and her fiance are also required by HDB to use the balance of their OA savings towards the purchase.

So, they will wipe out their OA savings initially, but this also means that they end up borrowing less, subsequently paying less for their monthly repayments. And this is before even taking into account the grants available to them.

If that's the case, why don't they apply for a more expensive flat? Surely they could afford to?
While it's important to ensure that you have enough CPF savings for your down payment to avoid paying out of your pocket, it's also important to ensure that your monthly loan payment doesn't affect your cash flow.

Understanding this, the government has introduced measures to limit the size of a housing loan that Singaporeans are eligible for.

The first of these regulations is the Mortgage Servicing Ratio of 30 per cent. This means that your monthly mortgage loan repayment should not exceed 30 per cent of your monthly salary. In fact, we believe that 30 per cent is already a generous limit.

A prudent gauge therefore, is to set aside 20 per cent to 25 per cent of your monthly salary at most for your home loan repayment. The ideal is to be able to fully pay off your home loan by the time you're ready to retire. In life, however, we cannot ensure that our monthly salary is consistent. By reducing the repayment commitment from the beginning, you are giving yourself more breathing room should anything happen to your ability to earn at any point in your life.

Remember that while you're below 35 years of age, your CPF Ordinary Account gets 23 per cent of your salary each month. As you get older, that drops to 21 per cent. Above 45years, less than 20 per cent of your salary goes into your CPF Ordinary Account. So if you set it at 20 per cent of your monthly income, you would be able to repay your home loan using your CPF Ordinary Account alone, without ever needing to pay off your loan in cash, whilst still earning some money in your CPF OA account.

There's also another benefit of keeping your monthly repayment amount low!
Taking on a home loan where your monthly repayment is 20 per cent to 25 per cent of your current monthly salary ensures that you'll be able to use most if not all of your CPF Ordinary Account to pay off your home loan.

But as your monthly salary grows, this means that there will be enough funds in your CPF Ordinary Account for the other purposes mentioned above. Also, it's important not to forget that you continue to earn 2.5 per cent interest on the money inside your OA in excess of how much you are paying for your loan instalments, which means that you are able to grow your money while still paying off your home loan.

Ultimately, when you reach 55, the money in that account will be added to the money you've already set aside in the Special Account to form the Retirement Account. The amount in your Retirement Account determines how much you will get each month from CPF LIFE.

At the end of the day, as much as Singaporeans are focused on buying a dream house, it's important to have a more long-term mindset when it comes to managing your CPF money. There's really no point in sacrificing your future financial freedom to have a fancy house now. So by making the right decision when buying a house with your partner, and by understanding how your CPF can help you, you're also ensuring that you will have more funds set aside for your retirement.

This article first appeared on MoneySmart.


MoneySmart.sg is Singapore’s leading personal finance portal, and aims to help people maximise their money with powerful tools and engaging content.

Source: AsiaOne

5-room flat in Ghim Moh fetches $963,888, 2nd most expensive in area this year - AsiaOne

Friday, Jul 01, 2016

Sean Yap

AsiaOne

SINGAPORE - A five-room flat at Ghim Moh recently became the second most expensive public flat ever in the Queenstown area.

According to data published on the Housing and Development Board (HDB) website, the unit at Ghim Moh Link fetched $963,888 in June.

It is located between the 19th and 21st storey at Block 23, and has an area of 1,216.32 square feet.
The price tag works out to approximately $792 per square foot.
Ghim Moh Link is conveniently located within 400m from both the Buona Vista and Holland Village MRT stations.

It is also close to The Star Vista shopping mall, while the trendy bars and restaurants at Holland Village are just 10 minutes away by car.

Schools nearby include Ghim Moh Primary School, Henry Park Primary School, Fairfield Methodist Primary School, and Anglo Chinese Junior College.



According to the HDB website, this is the tenth five-room flat in the Queenstown estate to fetch $900,000 or more so far this year. In 2015, 15 such flats in the area changed hands for prices in the same range.

Another Ghim Moh Link five-roomer was the first in the area to be sold for over $900,000 this year, when it fetched an auspicious-sounding $948,888. In December last year, two other flats at Block 22 and Block 28 were sold for $955,000 and $930,000.

Prices of flats in the estate have remained in the high range despite news of a weaker property market this year.

The most expensive so far this year was the $968,000 high-floor unit at Buona Vista Court along Holland Drive.



Mr Zavier Zhang, associate senior marketing director at Huttons Asia, told AsiaOne that the high prices in Queenstown were not surprising due to the estate's central location and limited supply of land.

"Units along Ghim Moh Link, in particular, will be pricey as it is a new development and is fairly well-connected, being within walking distance to the Buona Vista MRT station," he said.





seanyap@sph.com.sg

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Source: AsiaOne