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24 July 2013

Private units under $1,000 psf still available
OrangeTee Research identifies 10 such projects with unsold apartments

Source: Straits Times | Money 
By Rachel Scully

PRIVATE home units going for less than $1,000 per sq ft (psf) may seem rare these days but there are still projects offering homes at this level.

Property consultancy OrangeTee Research has pinpointed 10 developments with units below what has become a key price point for buyers.

Ms Christine Li, head of research and consultancy at OrangeTee, told The Straits Times: "It has become less common for developers to sell at this price level (or under $1,000 psf) amid rising land prices.

"Our estimates for upcoming launches in the second half of this year, assuming developers get a 20 per cent profit margin, show that none of them are selling units at less than $1,000 psf."

However, new units selling at less than $1,000 psf do exist.

OrangeTee cites the 882-unit A Treasure Trove condo at Punggol Walk, which has had a median transacted price of $916 psf for units sold since 2011.

The development is near Punggol MRT station on the North-East Line.

The project has nine unsold units, including ground floor units as well as penthouses, priced from $1.04 million as of yesterday.

It also had the lowest transacted price - $609 psf - for units sold at the 10 projects since January.

The Interlace at Depot Road has the highest transacted price this year at $1,312 psf among the 10 developments singled out by OrangeTee.

Units at the 1,040-unit condo have been sold at a median price of $1,053 psf since its launch in 2009.

There are 216 unsold apartments at The Interlace - three- and four-bedders, penthouses and garden homes.

The Beverly at Toh Tuck Road, in the west, also has units selling at under $1,000 psf.

Each apartment in the 118-unit development is served by a private lift.

As of yesterday, seven units were still on the market.

The condo had transacted prices ranging from $761 to $830 psf for units sold this year.

OrangeTee's Ms Li sees a more subdued market ahead, with developers likely to be more nimble with pricing to avoid hitting buyers' resistance levels.

She believes this trend will be more pronounced following the implementation of a 60 per cent total debt servicing ratio threshold last month.

"This new framework could potentially cause sales volumes to fall by as much as 40 per cent (this month) due to the initial knee-jerk reactions to the tighter lending rules, as buyers adopt a wait-and-see attitude before purchasing their next property," Ms Li added.

She foresees a trend of existing home owners who are still keen to invest in real estate looking toward smaller homes which are priced at a lower quantum.

"Prices are unlikely to be affected much as developers have strong holding power... (and can) hold back some project launches in view of the cautious market sentiment," she said.

"I'd expect sales of smaller homes to take the lead in the market once the appetite for new homes returns."


I'd expect sales of smaller homes to take the lead in the market once the appetite for new homes returns.

- Ms Christine Li, head of research and consultancy at OrangeTee

One in 10 borrowers overstretched, warns MAS
Hike in rates and fall in property prices may pose risks to financial stability

Source: Straits Times
By Yasmine Yahya

HOUSEHOLDS here are borrowing more amid low interest rates and combined with soaring home prices, the mix poses "significant risks" to Singapore's financial stability, the Monetary Authority of Singapore (MAS) has warned.

The central bank said 5 per cent to 10 per cent of borrowers here have likely taken on too much debt to buy a home. In other words, their total monthly debt repayments exceed 60 per cent of their income, said MAS managing director Ravi Menon yesterday.

This proportion of "at risk" borrowers could hit 10 per cent to 15 per cent if mortgage rates rise by 3 percentage points, he added.

While Singapore households as a whole have more cash and deposits than debt, individual households may not be in such good financial shape, Mr Menon said at the release of the MAS annual report. Households with lower income, less savings or longer loan periods may find it a strain to repay debts if interest rates rise.

"The combination of low interest rates, growing leverage, and surging property prices poses significant risks to financial stability," Mr Menon said.

"When interest rates rise and if property prices fall, any risks built up will materialise."

He added: "So when interest rates rise, long before any bank gets into trouble - and they won't - some households will."

Bank housing loans here have risen 18 per cent a year in the last three years, and home loans as a share of gross domestic product (GDP) have jumped from 35 per cent to 46 per cent in the period.

This has led Singapore's debt as a share of GDP to rise from 200 per cent to 270 per cent over the last three years, while resident debt to GDP has risen from 125 per cent to 155 per cent, Mr Menon said.

Economists have sounded similar alarms. Standard Chartered noted this month that Singapore households are among the most indebted in Asia relative to what they earn, while Moody's Investors Service recently downgraded its outlook for Singapore's banking system due to mounting debt.

Barclays economist Joey Chew pointed out that Singaporeans have one of the highest savings rates in the world. OCBC economist Selena Ling added that while debt is not a major problem now, the MAS wants to ensure that people do not assume interest rates will be low forever.

The MAS last month unveiled a new framework for home-buyers' loans, to ensure that a borrower's repayments on all his debt does not exceed 60 per cent of his gross monthly income. The move came as MAS wants banks to practise responsible lending. It had noted some "worrying practices" during bank inspections.

One couple with a total monthly income of $6,000 were granted a new home loan of $400,000 on top of their existing debt, as they had a savings deposit of $90,000. But their total monthly loan repayments came to more than 90 per cent of their income.

Some car buyers also borrowed almost the full car price, which is not prudent as cars are depreciating assets, Mr Menon said.

While the MAS is concerned about household debt, it is less worried about the local banks as they are financially strong and have healthy buffers against home price falls. The average housing loan-to-value ratio for banks is just under 50 per cent, he said.

A report yesterday by the National University of Singapore's Risk Management Institute said the probability of default for each of the local banks is now near lows not seen since early 2011.