New loan rules may stay to stabilise property market Measures aimed at investors, not potential home owners: Khaw Source: Straits Times By Melissa Lin And Chia Yan Min TOUGHER new rules on property financing effective last Saturday are likely to be permanent and structural to stabilise the property market, Minister for National Development Khaw Boon Wan said yesterday. "It's not really a cooling measure as such, but it's a measure which will be quite permanent. It's a structural measure which is good to ensure a more stable property market," he said, noting that the current low interest rates are not sustainable. The Monetary Authority of Singapore (MAS) announced last Friday that banks have to use a standardised set of guidelines to assess property buyers' eligibility to borrow. Banks will not be able to approve a loan if the monthly repayments of a buyer's total debt obligations exceed 60 per cent of his gross monthly income. Mr Khaw noted that the new rules are targeted at investors, and are "not an issue" for potential home owners. "We do have buyers stretching themselves, buying second or third properties," he said. "And these are the people we worry about because when interest rates go up and they find that they cannot afford the increased mortgage, they may be forced to liquidate." He was speaking on the sidelines of the launch of the Sembawang GRC Memory Project at Fuchun Community Club, aimed at collecting memories of Sembawang from long-time residents. These will be collated into a book. Economists say the new rules are aimed at not just individual borrowers but also banks, so that they can better manage the impact when interest rates eventually start rising again. Central banks in the United States and Japan, among others, have been rolling out huge monetary stimuli ranging from holding down interest rates to multibillion-dollar bond purchases in an attempt to kick- start lacklustre economies. But the US Federal Reserve is expected to start curtailing its money- printing operations by the year end at the latest - a move that will put an end to the low interest rates driving stock market and real estate booms here and in the region. The new property curbs are a "prudent reminder" from MAS that "both lenders and borrowers should not get carried away", said CIMB economist Song Seng Wun. "There is a possibility that we are at the tail end of the prolonged low interest-rate environment and easy-credit situation. "The measures will ensure the integrity of the banking system should interest rates start to climb, and also ensure that borrowers at the margin don't overstretch themselves," he said. To prevent borrowers from overextending in their property purchases, MAS has also stipulated a floor in calculating interest payable on loans, even if prevailing rates are lower. For residential property loans, the minimum rate is 3.5 per cent, while the rate for non-residential property is 4.5 per cent. The new rules will prepare both banks and property buyers for the eventuality of higher interest rates, especially since the Fed's moves to "taper" its stimulus measures could come earlier than expected, said Bank of America Merrill Lynch economist Chua Hak Bin. OCBC economist Selena Ling agreed, adding: "The measures will ensure that if interest rates spike faster or earlier than expected, banks do not end up with a lot of non-payments or foreclosures on mortgages." As property loans have a long borrowing horizon, it "makes sense to use a more normalised interest rate", Ms Ling noted. Dr Chua said that while household borrowing has not been increasing at an "overly drastic" rate, low interest rates and a strong job market have propped up credit growth in recent years. mellinjm@sph.com.sg chiaym@sph.com.sg PROTECTING INVESTORS We do have buyers stretching themselves, buying second or third properties. And these are the people we worry about because when interest rates go up and they find that they cannot afford the increased mortgage, they may be forced to liquidate. - Minister for National Development Khaw Boon Wan URA releases flash 2nd Quarter 2013 private residential property price index Source: URA The Urban Redevelopment Authority (URA) released the flash estimate of the price index for private residential property for 2nd Quarter 2013 today. Overall, the private residential property index rose 1.7 points from 213.2 points in 1st Quarter 2013 to 214.9 points in 2nd Quarter 2013. This represents a moderate increase of 0.8%, compared to 0.6% in the previous quarter. Prices of non-landed private residential properties in Core Central Region declined by 0.2% in 2nd Quarter 2013, compared to the 0.6% increase in the previous quarter. Prices in Rest of Central Region saw the same 0.2% rate of increase as the previous quarter. For Outside Central Region, prices increased by 3.0% in 2nd Quarter 2013, compared to 1.4% in the previous quarter. The flash estimates are compiled based on transaction prices given in caveats lodged during the first ten weeks of the quarter, supplemented by information on new units sold by developers in the first two months of the quarter. The statistics will be updated 4 weeks later when URA releases the full real estate statistics for 2nd Quarter 2013, which captures more data on the caveats lodged and the take-up of new projects. Past data have shown that the difference between the quarterly price changes indicated by the flash estimate and the actual price changes could be significant when the change is small. The public is advised to interpret the flash estimates with caution. HDB coffee shop in Hougang sold for record $23.8m Source: Straits Times By Melissa Lin A COFFEE shop in Hougang Avenue 4 has reportedly been sold for $23.8 million - a record price for a Housing Board coffee shop. According to a report yesterday by Chinese newspaper Lianhe Wanbao, the Broadway Group has entered into a resale agreement to buy the shop, called Coffee Express 2000, at that eye-popping price. The group, which owns a chain of eating houses in Singapore, opened its first outlet in 1997. It filed a caveat on the Hougang shop on March 28 but the transaction will be completed only in September, the report said. Attempts to reach Broadway and the shop owner were unsuccessful. But stallholders at the 4,025 sq ft shop, which has 17 stalls, said they were notified more than a month ago about the change in ownership. They did not know how much it was sold for until the media report appeared. The previous record was $15 million, according to Wanbao. The exact price for the Hougang shop - $23,888,888 - sounds auspicious in Cantonese. A stall assistant who did not want to be named said he was worried that stall rentals would rise as a result. Director Ong Kah Seng at property consultancy R'ST Research said the price was "on the high side" but justifiable. "Coffee shops are still relevant today, and their investment potential is pretty strong," he said. "They're still a popular meeting place, and there are not many new ones coming up." He added that Hougang is an established housing estate with a large catchment of residents. However, patrons said they will go elsewhere if the shop raises its prices. There are at least four other coffee shops nearby. Ms Kelly Tan, a 49-year-old clerk, said she frequents the cooked food stall at Coffee Express 2000 at least once a week because "its packet of hor fun (flat rice noodles) is bigger". "But if the price increases by more than 50 cents, I will just go to another shop," she said. mellinjm@sph.com.sg |