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12 January 2013

12th January, Saturday




Govt brings out Big Chiller to freeze property prices

Source: Business Times

The government Friday announced its seventh and most sweeping package of property cooling measures in over three years.

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam described the package as the "most significant to date" and stronger than those introduced in previous rounds. Some measures will be temporary and will be reviewed later, once prices soften, while others are likely to stay for the long term.

"We're not intending to engineer a market crash," he added.

Effective today, residential property buyers are being slapped with steeper additional buyer's stamp duty (ABSD) rates to tighten property investment as well as foreign buying, while loan-to-value limits are being lowered and minimum cash downpayment raised on housing loans to discourage excessive borrowing.

For the first time, the authorities have introduced a seller's stamp duty (5 to 15 per cent) for those who sell industrial properties within three years of purchase - to discourage speculation in this market segment which has heated up from a diversion of monies from the residential sector.

In addition, curbs have been announced for executive condo (EC) developments with a maximum unit size specified for the first time for an EC unit at 160 sq m (1,722 sq ft).

Private enclosed spaces and private roof terraces will be counted as part of the 10 per cent bonus gross floor area (GFA) for all non-landed residential developments including ECs and private condos, and subject to payment of development charges/differential premium. Currently, such spaces are excluded from GFA computation and hence considered "free area" for developers to sell.

As for strata commercial and industrial projects, the private enclosed space and private roof terrace will be computed as part of the maximum gross floor area stipulated under the Master Plan.

In the public housing sphere, tighter loan eligibility for the purchase of HDB flats has been introduced.

In addition, permanent residential households will be disallowed from subletting their entire HDB flats. PRs owning HDB flats must sell their flats within six months of buying a private residential property in Singapore.

The finance minister also grouped the measures into two sets.

The first group, which are temporary, counter-cyclical measures - comprising the increase in ABSD rates, tighter LTV and higher cash downpayment on housing loans - are aimed at calming the property cycle and will be reviewed once the market has cooled.

The second group are more permanent, structural measures - such as those pertaining to ECs and rules for PRs' owner-occupation of HDB flats - and are likely to be retained.

"Both groups of measures work in the same direction in the short term - to cool the market. But the measures which are cyclical and temporary will be reviewed once the market softens," he said.

The revised ABSD structure will take effect on residential properties bought from today. Buyers granted options to purchase on and before 11 January and who exercise them on or before 1 February (without any extension of the option validity period) may apply to the taxman for remission so that the old ABSD rate will apply.

LTV ratios will be lowered by 10 percentage points for second housing loans and by 20 percentage points on third and subsequent housing loans. In addition, minimum cash downpayment for individuals applying for second or subsequent home mortgages has been raised from 10 per cent to 25 per cent. For non-individual borrowers such as corporates and funds, their LTV limit has been lowered again, from 40 per cent to 20 per cent.


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HDB flats, ECs will feel brunt of new measures

Source: Business Times

The public housing sector, as well as the hybrid executive condominium (EC) market, will bear a significant load from the slew of cooling measures introduced by the government Friday.

The EC market, which has been in the limelight over escalating prices and whether it has served its purpose to cater to the sandwiched class, will see several measures put in place from Friday.

First, the maximum strata floor space for new EC homes will be capped at 160 sq m (1,722 sq ft), effectively spelling the end of super-sized penthouses and the high prices that come with them.

Also, private roof terraces and private enclosed spaces will be counted as part of the 10 per cent bonus gross floor area (GFA) for all non-landed residential developments, including ECs and private condos, and subject to payment to development charges or differential premium.

Lee Sze Teck, senior manager for training, research and consultancy at DWG, said this will increase costs for developers, who may now build these spaces for more units to distribute the costs.

"This is also a fairer approach; otherwise buyers of units with no private roof terraces and private enclosed space will be subsidising those buyers of units with such spaces."

New dual-key EC units will also be restricted to multi-generational families. This will prevent abuse by investors looking to rent out the smaller unit for income, Mr Lee said.

The final new measure for the EC market is that developers for future EC sale sites from the Government Land Sales programme can only launch units for sale 15 months from the award of the sites or after foundation works are completed, whichever comes first.

An analyst said this will ensure that "developers cannot alter plans in accordance to buyers' demands, which are fast changing in today's volatile property market context."

As for the public housing sector, the Government is tightening the eligibility for loans to buy Housing and Development Board (HDB) flats.

From Friday, the Mortgage Servicing Ratios (MSRs) for housing loans will be capped at 35 per cent of a borrower's gross monthly income if it was from HDB, and 30 per cent if the loan was from a financial institution.

DWG's Mr Lee said it is good to instil financial prudence in buyers of HDB flats. "The MSR can be as high as 60% in some loan applications for HDB flats and private residential properties. Buyers will be in financial trouble should one of them loses the job."

Further, permanent residents (PRs) will also be barred from subletting their entire HDB flat if they own it. This applies to existing owners, and those intending to get a resale flat, but not to those who had obtained HDB approval before today.

PRs must now also sell their HDB units within six months of buying a private residence. This excludes those who had received permission from HDB to own a private property before today.

One analyst believes this will increase the supply of flats in the resale HDB market, but cautioned that this will take some time as PRs who are affected will take some time to assess how the new measures play out.

A separate measure to tighten the terms for granting HDB loans and using CPF savings to buy flats with fewer than 60 years' lease left will take effect on 1 July.


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Tighter loan limits, more cash upfront

Source: The Straits Times

Home buyers will now have to stump up even more cash upfront after the Government moved to cool the property market in an environment of "extraordinarily low" interest rates.

The additional buyer's stamp duty (ABSD) - first introduced in December 2011 - will be raised between 5 and 7 percentage points across the board.

And the proportion of a home's value that a buyer can borrow, known as the loan-to-value (LTV) limit, will be slashed to as low as 20 per cent for certain buyers. The minimum down payment for some buyers will also be hiked to 25 per cent. These changes affect those with at least one outstanding housing loan.

For individuals getting a second housing loan on top of an outstanding one, the LTV limit will be cut to 50 per cent from 60 per cent. It will fall to 30 per cent if the loan term is more than 30 years or extends past the age of 65 of the buyer.

Those taking a third or subsequent housing loan will see their LTV slashed to 40 per cent or to 20 per cent if the loan term is more than 30 years or extends past age 65 of the buyer. The LTV limit will also be lowered to 20 per cent from 40 per cent before for non-individual borrowers such as companies.

In addition, the minimum cash down payment required for borrowers who have one or more outstanding housing loans will be raised to 25 per cent from 10 per cent previously.

The ABSD will also be raised further and imposed on two new groups of buyers. Permanent residents purchasing their first home will now be slapped with an ABSD of 5 per cent while Singaporeans buying their second property will be charged a 7 per cent ABSD.

Certain reliefs will be provided, for instance, to eligible couples who have bought a second home but will dispose of the first.

Mr Lee Sze Teck, senior manager of training, research and consultancy at Dennis Wee Group, said it is worth noting that the Government said the ABSD measures and LTV regulations are temporary and will be reviewed later depending on market conditions.

"The Government is probably trying to reassure the market that they are not against foreigners and PRs investing in Singapore's property market. They imposed these measures because of extenuating factors in the market."


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Permanent residents hit by changes

Source: The Straits Times

Permanent residents (PRs) now face unprecedented limits on their ability to buy property in Singapore.

To buy a first property, whether a private unit or a Housing Board resale flat, PRs must pay an additional 5 per cent stamp duty. If they buy a second or subsequent property, the stamp duty is an extra 10 per cent, up from the current 3 per cent more.

Also, PRs who own an HDB flat can no longer sub-let their entire flats, although they may still rent out individual rooms. Those already sub-letting their flats can do so only until the end of the current approved period.

Finally, while Singaporean flat owners can buy a private property and keep their HDB flats too, PRs will no longer be allowed this dual ownership: On buying a private property, they must sell off their flats within six months.

The changes take effect Saturday.


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Scramble to beat the clock

Source: The Straits Times

Buyers rushed to showflats that either opened early or kept running late into the night to allow people to beat the deadline for new cooling measures that kicked in at midnight.

The hottest ticket in town seemed to be the showflat of La Fiesta, a development that was not due to launch until Tuesday.

Hundreds of potential buyers - and jostling agents - flocked to the flat in Sengkang last night, queuing to get inside to beat the midnight deadline.

Other developers, including Far East Organization and MCC Land, kept their showflats open till late while agents tried to convince prospective buyers to close deals.


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Mixed views on impact of new cooling measures

Source: Today

Property analysts and others reacted with surprise towards the extent of the cooling measures announced by the Government Friday, but were divided over just what their impact would be.

However, several of those contacted agreed that the immediate effect would be a short-term withdrawal from the market as buyers adopt a wait-and-see attitude.

One analyst expects that - in the public housing sector, at least - that period might last only a month or so. "If the overall sentiment remains positive, they will come back in again after that," he said.

But another analyst sees potential for a more sustained impact. "Overall, the impact will be felt over a quarter to half a year, during which we will see a drastic drop in the buying activities for private homes; the impact on the HDB market won't be as great, as demand will still be there."

Meanwhile, the comprehensiveness of the measures raised eyebrows among those interviewed.

The Real Estate Developers' Association of Singapore reacted cautiously to the announcement, saying that it "will evaluate the impact of these measures on the sustainability of the property market. It is in the interest of the market to have a gradual trend in growth and value for home owners and investors in the long term."

Some observers welcomed the measures as timely in the current economic environment.

"There is still significant liquidity in the market and possibility of QE3 funds flowing into the property market," said Mr Lee Sze Teck, DWG's Senior Manager for Training, Research and Consultancy, pointing to the measure to tighten the loan to value (LTV) ratio as an important move. "With the economy likely to see tepid growth in 2013 ... this change is crucial to protect buyers and the financial sector should the market turn," said Mr Lee.

But some concern was expressed that there is a danger the measures could go too far.

An analyst noted that the flagging global and Singapore economy, as well as the large number of units in the pipeline, could mean that the market may have arrived at a tipping point and is primed for a correction. "The Government will need to maintain a sharp focus to ensure these measures do not send the market into a downward spiral," he added.


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Q4 resale prices of private homes up 6.6%

Source: Business Times

Resale prices of non-landed private residences grew at a faster pace last year despite a fall in transaction volumes from the year before.

Buyers paid an average of $1,233 per sq ft (psf) in the fourth quarter of 2012, the Singapore Real Estate Exchange (SRX) said Friday. That was 6.6 per cent higher than the third quarter's $1,157 psf.

That means prices rose 13.4 per cent last year compared with the previous year, and outpaced the 10.4 per cent growth in 2011.

This was despite fewer units changing hands. About 12,500 private non-landed homes were sold in 2012, down 7 per cent from 2011.

SRX put the drop down to the introduction of the additional buyer's stamp duty in late 2011, which led to a slump in the first half of 2012 even as sales picked up strongly afterwards.

Resale prices rose across all the regions. The Outside Central Region (OCR) saw the biggest increase of 4.8 per cent. The Core Central Region (CCR) followed with 4.6 per cent, while the Rest of Central Region (RCR) was up by 3.6 per cent.

As for the rental market for non-landed private homes, rates softened in the fourth quarter of last year, falling one per cent to $3.91 psf from the previous quarter. This dragged rental yield down to 3.8 per cent, from 4.1 per cent in 3Q.

Analysts expect a moderation in growth for the resale private non-landed home market in 2013 due to an uncertain economic outlook and the likelihood of further cooling measures.

On the public housing front, there was little sign of relief from a bouyant resale market.

SRX said the median cash- over-valuation (COV) for resale Housing and Development Board (HDB) homes rose to $34,000 in the last three months of 2012, up $4,000 from Q3. As a result, the median price for an HDB resale flat hit a new high of $455,000, 1.1 per cent higher than the previous quarter. Median rents for HDB homes stayed flat at $2,400 per month.


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Property sector's new buzzword: Penthouse

Source: The Straits Times

Move over, shoebox apartments. Penthouse units have claimed the spotlight ever since the launch of a 4,349 sq ft penthouse suite at an executive condominium (EC) in Tampines last month.

The unit, including a 1,600 sq ft roof terrace, was sold for $2.05 million - the most expensive EC penthouse ever sold.

But just what is a penthouse unit? The definition is fuzzy, apart from the apartment being rather swanky and on the top floor. No fixed criteria apply and the term is mainly used as a marketing tool.

"In the past, penthouses were an exclusive lot found in city or central locations. But the line has been blurred such that any unit on the top floor is being marketed as a penthouse," said Mr Lee Sze Teck, senior manager at DWG.

Penthouses generally have a large floor area compared with the other units in a project.

Some analysts set the minimum size at between 2,000 and 2,300 sq ft. A penthouse usually includes a balcony or roof terrace, a private lift lobby and more than two bedrooms. It also has two or three storeys, analysts added.

At the top end of the market are "super penthouses" with huge floor areas commanding high absolute prices. For example, an 8,740 sq ft penthouse in Ardmore Park is being marketed for $35 million. A 13,000 sq ft penthouse in Chatsworth Court has an asking price of $50 million while another 11,200 sq ft penthouse at Boulevard Vue is listed at $68 million.

Penthouses appeal to a select group of buyers for their spaciousness, exclusivity and accompanying bragging rights, analysts said.

The typical penthouse buyer is often a wealthy executive, though lately, multi-generational families have pooled their cash to buy such units as well.

But the downside is that penthouse owners who do not intend to occupy the unit for the long term may find it harder to sell it later, for a few reasons.

One is that penthouse buyers are a select group of people, so the resale value of a penthouse depends on limited demand.

Another factor is that the proliferation of so-called "penthouses" in many developments is undermining the term's prestige, said DWG's Mr Lee.

Third, there are very few comparable sales and leases that can be used to benchmark prices because of the scarcity and exclusivity of penthouses.


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New curbs may delay January launches

Source: The Straits Times

A slew of new residential projects that were expected to be launched this month may be delayed as a result of new curbs announced by the Government Friday.

Experts say the string of new launches this month caters to various budgets with both suburban and higher-end launches coming onto the market.

But one project is going ahead. EL Development's 810-unit project La Fiesta, next to Sengkang MRT station, was launched Friday. It will feature 13 blocks of 15 storeys comprising one- to five-bedroom units. Dual-key apartments will also be for sale. Unit sizes at the 99-year leasehold development range from 431 sq ft for a one-bedroom unit to 1,765 sq ft for a ground-floor apartment while average prices are expected to be between $1,100 and $1,200 per sq ft (psf).

The 630-unit Q Bay Residences in Tampines Avenue 10, a joint venture by Frasers Centrepoint, Far East Organization and Sekisui House, is also expected to preview next Friday. Agents say average prices are around $1,050 psf.

The freehold 183-unit Spottiswoode Suites also had its soft launch recently with about 110 units sold at average prices of $2,200 psf. The official launch by developers Lian Beng Group and Centurion Properties is expected this month.

Agents are also out drumming up interest for Urban Vista in Tanah Merah by Fragrance Group and World Class Land. The project will have 582 homes and three commercial units and is expected to preview at the end of this month or early next month. Marketing material suggests that prices will start from $650,000 with agents giving an indicative price of more than $1,400 psf on average.

But some of this month's launches have already done well. The freehold 52-unit development SeaSuites in Pasir Panjang, launched earlier this month, is almost sold out. Prices were at an average of $1,650 psf.

Mr Lee Sze Teck, senior manager of training, research and consultancy at Dennis Wee Group, said that developers are pushing out new projects as they had held back many of their launches in November and last month.

The year-end school holiday period and Christmas festivities typically keep home buyers away from the market.

But experts say the total number of new home sales this year might not surpass the record number last year as a cap on the number of homes that can be built on a site - which limits the number of tiny shoebox homes that can be built in a project - takes effect.


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Commercial hub shaping up in Jurong Gateway

Source: The Straits Times

Jurong Gateway, the area around Jurong East MRT station, is well on the way to becoming a major commercial hub in the western part of Singapore.

Upcoming launches of more shopping malls, a hospital, a hotel and office space will add buzz to the district, which used to be hilly jungle land dotted with prawn ponds and crocodile- infested rivers.

But analysts note that the area has few private residential projects, with most condominiums being nearer to the Lakeside district, west of Jurong Gateway. The only private condo homes are the 280-unit Westmere, an executive condominium launched in 1996, and Ivory Heights, a former HUDC project.

But a new condo is on the cards. A residential site at Boon Lay Way, launched last April, attracted 12 bids, with the top bid at $705 per sq ft. Analysts said this reflected positive sentiment from developers. The site is estimated to yield 590 homes.

But office space is limited, analysts said. The main office buildings in the area are JTC Summit and the CPF Jurong Building. There is about 1.1 million sq ft of office space.

But this will grow because a 1.1ha site with a potential gross floor area of nearly 700,000 sq ft along Venture Avenue to be developed predominantly for office use is listed on the Government Land Sales confirmed list.

Business parks, retail malls and institutional facilities form most of the existing developments in Jurong Gateway. Business parks completed in the past five years include 1A International Business Park, Icon@IBP and 29A International Business Park.

New malls being built include Jem by Lend Lease, Westgate by CapitaLand and the Big Box Retail development by TT International.

Jurong Gateway will also get a new hospital and hotel. The 700-bed Ng Teng Fong General Hospital is slated for completion next year. Also, the first hotel site in Jurong was awarded last November to Tamerton, a unit of Genting Singapore. This site has a potential gross floor area of about 204,500 sq ft.

Analysts are positive on the outlook for the area, though they warn that congestion could become a problem.


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Stamp duty for industrial property sold within 3 years

Source: Business Times

A seller's stamp duty (SSD) is being introduced on industrial properties for the first time, as the government tries to rein in market speculation that has caused a doubling in prices over the past three years, outpacing rental increases.

Specifically, a respective SSD of 15 per cent, 10 per cent, and 5 per cent will be imposed on industrial properties sold within the first, second, and third year of purchase.

The SSD will apply for industrial properties and land bought on or after Jan 12, 2013.

One analyst felt the measure was expected and perhaps long overdue given the substantial run-up in strata factory prices.

Speculation was cited as the key reason for the introduction of the cooling measure.

The spillover of speculative demand has largely been from the residential market, which saw a range of cooling measures including SSD, more stringent loan-to-value ratios, and an additional buyers stamp duty.

This resulted in more investors buying strata industrial properties despite yields being compressed, with a significant increase in buyers flipping their properties before completion, some within a few months of buying, said Lee Sze Teck, senior manager, training, research and consultancy, at DWG.

A significant supply of industrial space being completed this year and next, coupled with anaemic growth in the manufacturing sector, may result in space not being fully absorbed.

"If the industrial space cannot be absorbed, it means that investors will have to bear the mortgage instalments for at least one year. Investors are likely to reassess their options and decide whether they have the finances to invest," said Mr Lee.

Another analyst reckoned the measure was "reasonable", since it was aimed at speculators and not investors.

"This effectively removes the element of speculators. So when developers bid for land, they will know the element of speculation is no longer there and this will translate to lower prices," he said.

"If you are an end-user or an investor looking to invest over the mid-term (between one and two years), this is a non-issue, and you have nothing to fear . . . but for people thinking they want to flip in the near future and make a happy gain, think again."


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International Markets


Johor may double floor price for foreign buyers

Source: Business Times

In a bid to rein in prices because of the growing interest in Iskandar Malaysia, Johor is mulling a doubling of the floor price for properties bought by foreigners in the state to RM1 million (S$404,240) from RM500,000 at present. If implemented, Singaporeans as the largest group of foreign buyers would be the most affected by the tightening of such guidelines.

Local government, housing, arts, culture and heritage committee chairman Ahmad Zahri Jamil revealed that the state economic planning unit is looking into the matter and would make a decision on the matter later this year.

If Johor opts to raise the price floor, it would be the second state after Penang to do so. Last year, the Penang state government increased the threshold to RM1 million for apartments on the island acquired by foreigners, and double that amount for landed property.

However a property consultant does not think such a move would aid local purchasers. On the contrary he believes it could result in a "pull-up effect" for Malaysian buyers.

He thinks developers will just adjust prices upwards to meet the criteria. "If I am selling a semi-D at RM700,000 I will just increase the price to RM1 million."

Instead, he suggests a two-tier taxation system, foreigners paying more through higher real property gains tax or stamp duties.


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