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06 October 2012

6th October, Saturday




35-year limit set on home loans

Source: The Straits Times

In a move that took the market by surprise, the Government introduced new measures Friday designed to cool the property market and stop home buyers from over-extending themselves.

From today, the Monetary Authority of Singapore (MAS) will restrict all home loans to a maximum of 35 years. Home buyers who take a loan that lasts more than 30 years, or extends past their retirement age of 65, will now have to fork out significantly more in cash.

Such long loans can now only be up to 60 per cent of the property's value if this is the buyer's first mortgage. That means that he must pay 40 per cent of the price upfront, in cash. If this is his second or more property loan, the loan limit shrinks to just 40 per cent of the property's value.

The new loan limits and rules also apply to home owners who refinance their loans.

Analysts said the moves will affect a broad swathe of property buyers and leave only young buyers under the age of 30 untouched.

In a statement Friday night, MAS explained that it is acting to curb upward pressure on property prices from the current low interest rates worldwide, and the rapid credit growth driven by the US' latest round of quantitative easing (QE3).

MAS said that this is why it is acting now to prevent prices from spiking beyond sustainable levels, so that the eventual correction "which will hurt borrowers and destabilise our financial system" can be softened, if not avoided.

The central bank also revealed the impact of easy credit on home loans over the last three years. The average tenure for new home loans has risen from 25 to 29 years and currently, more than 45 per cent of new home loans have tenures exceeding 30 years. Long-tenure loans, said MAS, cause buyers to over-estimate their financial wherewithal.

A rising property market also gives buyers and lenders "false confidence" that the property can always be sold off for a profit if the loan becomes difficult to service.

Analysts interviewed Friday do not expect property prices to fall drastically in reaction, but they predicted some buyers will exit the market, transaction volumes will cool and price rises will moderate.

The new changes, said observers, would land hardest on older buyers, especially those with more than one property. Young buyers should get away with just paying a shade more every month.

For example, a 40-year-old buyer can now take a loan of only 25 years if he wants to continue to be able to pay the usual 20 per cent down payment. But if he were to take out the shorter 25-year loan of $800,000 for a $1 million property, this would now mean monthly payments of $3,051, at current interest rates of 1.1 per cent. This is $400 more than if he had a 30-year loan.


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Mortgage limits may deter older investors

Source: The Straits Times

The latest changes to mortgage rules could deter many house-hunters from buying a new property - or at least give them serious pause, analysts and property market watchers said Friday.

Chief among this group will be older investors looking to buy a second or third investment property, they noted.

And HDB upgraders who want to get on the private property ladder will also not be spared.

From today, the Monetary Authority of Singapore (MAS) will cap all new housing loans at a maximum allowable tenure of 35 years.

Tighter rules will also apply to borrowers taking loans longer than 30 years, or have their loan periods extend beyond the retirement age of 65.

•           If they have no outstanding mortgage, the cash down payment is now 40 per cent of the property's valuation instead of the usual 20 per cent.

•           If they already have an existing mortgage and want to take another one for another property, the cash down payment is 60 per cent, instead of the current 40 per cent.

For these borrowers, the only way to avoid paying the additional 20 per cent cash down payment is to opt for shorter loan tenures that do not extend past the age of 65.

But this will mean higher monthly instalments.

An analyst said that the new rules will hit those who buy investment properties the hardest.

Dennis Wee Group spokesman Lee Sze Teck said this will make buyers think carefully before signing on the dotted line. If loan tenures are capped, monthly instalments could well end up higher than monthly rentals that an investment property can fetch.

"Renters will also rethink buying," he said. And if investors want to take a longer loan to keep instalments low, they will need to come up with 60 per cent cash, he added.

"Think of it this way: you'll be unaffected only if you are young and buying an affordable mass market condo or a flat direct from HDB," said Mr Lee.

Another analyst agreed, saying: "This will affect buyers for all types of property, particularly older borderline investors who are already financially stretched and are on the cusp of investing more. "The immediate effect is house-hunters are going to take a step back to see if asking prices soften. This might also result in a drop in transactions for the third quarter," he predicted.


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Market unlikely to be hit hard: Redas

Source: The Straits Times

Many developers seem to feel the new cooling measures will not have a big impact although those with more exposure to the local market could feel the pinch.

The response to Friday's announcement from the Monetary Authority of Singapore (MAS) of the new rules was low key.

The Real Estate Developers' Association of Singapore (Redas) issued a statement saying that the cap "will not have significant impact on the property market". "Based on past experience, not many buyers take long tenure loans," it said.

Mr Cheang Kok Kheong, chief executive of Frasers Centrepoint Homes, said: "We have always been supportive of the Government's measures aimed at curbing excessive speculative activities, as we believe in the importance of having a stable and sustainable housing market." He said the move "is not expected to have a significant impact on the residential market".

A Keppel Land spokesman said: "We believe that there is still genuine demand for homes and well-located properties with good attributes should continue to see healthy sales."

Two other developers which declined to be named also said the new measure was not a big issue.

Far East Organization, City Developments, Hong Leong and CapitaLand declined to comment.

Consultants said the new rule to cap mortgages at 35 years could hit sales as investors and those who are stretching themselves financially will likely stay away from the market.

An analyst said: "If you limit the amount of the loan, you will push borderline cases out of the market." It will also discourage investors who were hoping to buy the property and then use rentals to pay the mortgage," he said.

Although he did not expect any drastic action in the next week, he said buyers could be more cautious and hold back on purchases as they make sense of how the new measures would affect them. He added that launches with many small units, which generally target investors, may see the most impact.

Dennis Wee Group's senior manager of training, research and consultancy, Mr Lee Sze Teck, called the move a "pre-emptive" one to "counter any effects of QE3". "If funds from QE3 do flow in, it will keep interest rates low and might encourage more borrowing," he said.

Mr Lee expects younger buyers to be more prudent and not over- commit. HDB upgraders may also think twice, especially if they have to pay 60 per cent in cash.

Skies Miltonia by TG Development and Qingjian Realty's Waterbay executive condominium are launched today.

One analyst expects it to be business as usual at showflats.


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Non-landed private home resale prices up 3.2%

Source: Business Times

Resale prices of non-landed private homes rose in the third quarter, even as transaction volumes fell 7.3 per cent.

Overall resale prices gained 3.2 per cent to hit a record $1,156 per sq ft (psf), led by a 2.5 per cent month-on-month increase in September, data from the latest SRX Residential Property Flash Report released Friday showed.

The rest of central region (RCR) posted the strongest quarterly gain of 7.1 per cent for resale non-landed in 3Q, hitting an historic high of $1,199 psf. This was followed by a smaller gain of 3 per cent in outside of central region (OCR) to $921 psf, and a muted increase of 0.75 per cent in the core central region (CCR) to $1,738 psf.

Resale transaction volume fell 7.3 per cent to 3,296 transactions from 3,555 transactions in 2Q. RCR recorded the largest drop in transaction volume, by 10.9 per cent to 854 transactions, followed by CCR which saw transactions drop 6.2 per cent to 662 transactions. Transaction volumes in OCR fell 5.8 per cent to 1,780 sales.

The new sales market registered an even larger drop, largely due to fewer new launches in 3Q, noted Lee Sze Teck, senior manager, training, research and consultancy at DWG. This pushed most of the transaction activity into the resale market.

"The new sales market suffered the biggest drop of more than 50 per cent as home buyers and developers refrained from buying and launching projects during the lunar seventh month which straddled half of August and September," said Mr Lee.

This resulted in transactions in the private residential market plummeting to 5,394 deals in 3Q, from 10,780 deals a quarter ago, he noted, citing Urban Redevelopment Authority (URA) caveats.

Meanwhile, rental volumes fell 5.2 per cent in 3Q, to 7,723 transactions. Only RCR posted a marginal 0.25 per cent increase in rental transactions, to 2,423. OCR posted the largest drop of 8.5 per cent to 2,777 transactions while CCR saw rental transactions slip 6.2 per cent to 2,523.

Overall rental prices per square foot rose 2.9 per cent to $3.87 psf in 3Q. Rents for CCR were $4.68 psf, $4.01 for RCR, and $3.05 for OCR. Gross rental yields remained stable at 4 per cent in 3Q due to a corresponding increase in rental prices compared with resale prices.

By comparison, URA's flash estimate released earlier this month showed that home prices had inched up 0.5 per cent in 3Q. This took into account new sales, which fell 2.2 per cent. It also did not take into account the last three weeks of September sales. URA uses a different methodology from the average psf pricing approach, which is adopted by the SRX index.


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Punggol EC expected to be well received

Source: The Straits Times

Yet another executive condominium (EC) is being launched today, the seventh EC to be put on the market this year.

Property consultants expect Waterbay, in Punggol, to garner healthy interest from buyers, thanks, in part, to its location.

Projects in Punggol and Sengkang have been "generally well received" despite the many private housing projects launched in that area, said an analyst.

Waterbay, a 383-unit project at the junction of Punggol Central and Edgedale Plains, is being built by Chinese developer Qingjian Realty (South Pacific).

The smallest unit in Waterbay, a two-bedder, is 753 sq ft and has an indicative price of about $590,000 or about $780 psf. Unusually for an EC, five-bedders are also available. These 1,496 sq ft units will cost about $1.05 million or about $700 psf.

Dual key units, which allow for multi-generational living or leasing, are also on offer.

Noting that most EC projects have achieved good take-up rates of over 70 per cent, he said that "the demand for ECs has been encouraging and will continue to be so, although some moderation is expected going forward".

The EC market may also face a potential supply glut as the Government rolls out a record number of EC sites.

Not all launches this year have done well, industry watchers said, noting that buyers have been selective about price and location. For instance, the 416-unit Watercolours at Pasir Ris was almost twice oversubscribed, but was only 56 per cent sold as of end August.

Interested buyers for Waterbay can submit e-applications between 12 October and 16 October. If demand outstrips supply, a ballot will be held. Successful applicants can choose their units from 19 October.


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Watertown in Punggol almost 97% sold

Source: The Straits Times

The Watertown integrated development in Punggol is almost 97per cent sold, according to developer Far East Organization Friday.

The remaining 34 units are mainly those with three or four bedrooms, and range in size from 1,173 sq ft to 1,550 sq ft.

These are among the "best-facing units within the development overlooking the Punggol Waterway", said Far East, which is co-developing the project with Sekisui House.

Watertown is Punggol's first project with both a retail and residential component.

The retail portion, called Waterway Point, will feature a "24-hour basement" level, with a FairPrice Finest supermarket and Shaw Theatres operating round the clock. FairPrice Finest will occupy about 30,000 sq ft of space at Waterway Point, making it one of the chain's largest outlets here.

Shops will occupy 40per cent of Waterway Point, while eateries will take up 30per cent. The rest will be occupied by entertainment and other service providers, such as educational establishments, banks, and civic and community amenities.

Construction of the retail component has just started and is scheduled for completion by 2015. The residential component is expected to be completed by 2017.

Separately, Far East said it has sold 96per cent of the units at another of its mixed-use projects, The Hillier at Hillview Avenue. The 528-unit development was launched in January and 21 units are left.


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