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29th June 2013

New lending rules 'could reduce home sales'
Analysts say investors may opt for foreign property and smaller homes

Source: Straits Times | Money 
By Melissa Tan

THE Government's latest move to tighten borrowing rules for property buyers could reduce sales here and push more investors to foreign property and smaller homes.

Analysts also said the policy shift might reflect a steeper rise in home prices in the second quarter than the first. Second-quarter flash estimates on home prices will be out on Monday.

The Monetary Authority of Singapore (MAS) said yesterday that banks have to use a standardised set of guidelines to assess property buyers' ability to borrow. This total debt servicing ratio (TDSR) framework applies to all property loans to individuals, the MAS said. It takes effect today.

"We think the TDSR framework is first and foremost, a measure aimed at ensuring financial stability, rather than at directly cooling property prices - although there will certainly be an impact," Barclays economist Joey Chew said yesterday.

"Investors who were intending to enter the property market now to lock in a low rate of interest may be thwarted, particularly if they are already highly leveraged," she added.

HSR special adviser Donald Han said the impact of the MAS move would be most felt by those buying their second or subsequent properties, and home buyers may turn to smaller homes with cheaper overall prices.

"There will be a slowdown in demand... But it's like trying to stop the tide. The money will have to go somewhere," he told The Straits Times.

Mr Han reckons that sales volumes could drop by 10 per cent to 20 per cent over next month and August, but residential prices are unlikely to be hit. "Developers have strong enough balance sheets to hold their stock for longer than that," he said.

Property investor Michelle Ang, 37, a corporate treasurer in a multinational corporation, told The Straits Times yesterday that she may now look overseas for future property investments.

Mr Han also said it would become more tedious for banks to evaluate mortgages as they would have to exchange information with each other to get the full picture of a property buyer's borrowing capacity.

A DBS Bank spokesman said yesterday that the bank "has a robust mortgage framework in place and key considerations for approving mortgage loans include the customer's existing financial commitments as well as their ability to make repayments".

OCBC head of group corporate communications Koh Ching Ching said: "This set of new guidelines on the debt servicing ratio of a home loan is significant. With the implementation taking place tomorrow, we are reviewing our processes to ensure that we comply with it."

The Straits Times understands United Overseas Bank is using a framework that already closely follows the one laid out by MAS.

In response to the MAS announcement, the Urban Redevelopment Authority (URA) said it was extending the tender period for a residential site at Tampines Avenue 10 (Parcel B). The tender was supposed to close on July 2 but will now close on July 16. The extension will give developers more time to account for the new MAS rules when submitting bids, said a URA statement yesterday.


Investors who were intending to enter the property market now to lock in a low rate of interest may be thwarted, particularly if they are already highly leveraged.

- Barclays economist Joey Chew

Rare HDB terrace house sold for $1.02m
266 sq m corner home with a garden is one of just 285 HDB 'landed' properties

Source: Straits Times
By Charissa Yong And Daryl Chin

A RARE HDB corner terrace house in Whampoa commanded $1.02 million in April, exceeding the previous record-setter, a Bishan Street 13 maisonette, which was sold for $1.01 million in January.

It is the fourth Housing Board resale unit to be sold for $1 million or more, the Singapore Real Estate Exchange (SRX) told The Straits Times.

But property analysts emphasised that such record-breakers are rare exceptions to the norm.

The latest, for example, is one of Singapore's 285 "landed" public homes, located in Whampoa and Queenstown.

They were built in the 1960s by HDB's predecessor, the Singapore Improvement Trust.

The million-dollar home, a 266sqm three-room house with a garden, has 59 years left on its 99-year lease.

It was sold to a neighbour who lived in a smaller 92 sq m terrace house farther down the road, revealed PropNex senior vice-president Lim Yong Hock.

"The buyer has been living there for a long time and they wanted to stay on in this kind of property, so they switched over and moved nearby," he said, declining to reveal more except to say that they are Singaporeans.

The price tag, which includes $140,000 cash over valuation (COV), works out to an approximate rate of $360 per sq ft (psf).

Public residences that cross the million-dollar mark are unusually large units in prime locations, he said.

The new record holder is about three to four times the size of a normal HDB three-room flat, he noted. All the previous price leaders have been executive flats.

Last September, a large executive apartment measuring 150 sq m at Mei Ling Street in Queenstown made HDB resale history when it was sold for $1 million.

On its heels came the $1.01 million resale of the 163 sq m Bishan maisonette. In April, another maisonette, in Toh Yi Drive, fetched $1 million, SRX data showed.

"They are all very rare units you don't get to see everywhere," said Mr Lim. "Even within the same block, there are only one or two units with that kind of layout and size."

Mr Chris Koh, director of property firm Chris International, said: "All of these have the X-factor that normal flats do not. People are willing to pay a premium."

Such outliers have been commanding higher prices.

Despite the seventh round of property cooling measures in January and lower median COVs, more flats have crossed the $900,000 mark this year.

There were 21 such sales last year, but this year has already seen 35 so far. HDB resale data showed that they are five-room or larger units in good locations such as Toa Payoh Lorong 2 and Marine Drive.

Prices have spiked for the rare HDB terrace houses too.

Since last year, until the latest record, they traded for between $688,000 and $988,888, according to Housing Board figures.

The charm is obvious in Whampoa estate, along Jalan Ma'mor, where the latest record-setter is located.

Terracotta-and-cream terrace houses hug the sleepy side road, a quiet enclave on the city fringe.

Retired teleprinter Saini Armri, 70, who has lived next door to the million-dollar home since 1975, said he enjoys the estate's peacefulness and privacy.

"I have a lot of memories here. My four children grew up here. I bought this house to live in."


266 sq m three-room corner terrace with a garden
59 years left on its 99-year lease
$1.02 million sale price includes $140,000 cash over valuation; works out to be about $360 psf

Resale home prices fell last month
Fears over higher interest rates, slew of new launches pull prices down

Source: Straits Times | Money 
By Cheryl Ong

RESALE home prices dropped for the first time in four months in May, as growing fears over higher interest rates dampened buyer sentiment.

Prices of resale homes last month fell 0.2 per cent from April, according to the flash Singapore Residential Price Index (SRPI) released yesterday. In April, prices rose 1.9 per cent from March.

Suburban and smaller homes led the dip in resale prices, while prices of homes in the central region continued to rise at a slower pace, the index showed.

In the suburban region, resale prices of completed condos fell 1.6 per cent last month from April, with prices of completed small apartments - 506 sq ft

or smaller - 1.3 per cent lower.

Property consultants said that the fall was partly caused by buyers' concerns over US Federal Reserve chairman Ben Bernanke's recent comments on tapering of quantitative easing.

Once the United States central bank embarks on such a move, interest rates are expected to shoot up, putting pressure on home loans.

Orange Tee's head of research and consultancy Christine Li said the price fall last month was essentially a correction in the market after a strong surge for the January to April period.

Resale volumes decreased by 48 per cent from 1,136 transactions a year earlier to 594 transactions last month, Ms Li added.

Prices of resale properties in May were also affected by a slew of new launches that month, said R'ST Research director Ong Kah Seng.

"In months where there are fewer new projects launched, buyers tend to be more open to resale homes," said Mr Ong.

"But in months where there are more projects on offer, buyers who can afford to wait for the completion of the new home in about three years will definitely hesitate in buying a resale property."

Last month, statistics showed that 1,939 new private homes, including 418 executive condominium units, were sold, he said.

The SRPI showed that resale prices of completed properties in the central region rose by a smaller 1.5 per cent last month, compared with an increase of 1.9 per cent previously.

Mr Ong said: "This is encouraging although general buyers' interest for completed homes in the Central Region (districts 1 to 4) remains weak on the back of large unsold stock (from developers and new completions)."

"Prices for central properties will decline moderately as there are still a large number of high- end and luxury condo developments with unsold units even though they were completed two or three years ago," ERA's key executive officer Eugene Lim pointed out.

With about 16,742 new private homes projected to receive Temporary Occupation Permit status this year, the impending supply of new homes and the effects of the property cooling measures will work together to cause demand for completed homes to slow down, Mr Lim said.


In months where there are more projects on offer, buyers who can afford to wait for the completion of the new home in about three years will definitely hesitate in buying a resale property.

- R'ST Research director Ong Kah Seng

Jurong East condo almost sold out on launch day

Source: Straits Times | Money

TWO property launches drew plenty of potential buyers yesterday with the J Gateway condominium setting the pace.

The project in Jurong East drew a blistering response from homeseekers although the Forestville executive condominium (EC) had its admirers as well.

The J Gateway showflat has been open for two weeks, allowing buyers to check out the 99-year leasehold development and lodge an interest.

About 1,400 blank cheques had been placed with the developer MCL Land before yesterday and 1,500 people in all turned up for the balloting process.

By the end of the day, 736 units in the 738-unit complex had been sold.

This is the first time since January's tough property cooling measures that buyers have snapped up almost all the units on the first day of a launch.

Units were sold at an average of $1,480 per sq ft (psf), said MCL Land chief executive Koh Teck Chuan. The one-bedders went for about $1,778 psf, beating initial expectations of $1,650 psf, while four-bedders were sold at $1,400 psf.

Mr Koh added that the buyers mostly had local addresses and were living in the Jurong vicinity.

Buyers told The Straits Times that they were attracted by the condo's proximity to Jurong East MRT station and four malls earmarked for the area. A hotel to be developed by Resorts World Singapore will also be built.

"No other area has this," said Mr Lee Fatt, 50, who lives in Jurong and bought a two-bedroom unit at J Gateway for $1.2 million.

Another buyer, Madam Shirlyn Ng, 36, said that though prices were slightly high on a psf basis, she had no problem with it as she expects strong rental demand from expats working at the nearby International Business Park.

Meanwhile, the Forestville EC in Woodlands was being launched for the second time after developer MCC Land was found to have made changes to the development plans without approval.

MCC Land said about 210 units out of 653 had been sold as at 5pm, on the first day of sales.

This includes units that were sold to applicants who had lodged an expression of interest in December and were invited to place their bookings last weekend.

The Straits Times understands that about 80 out of 180 buyers who showed up last weekend bought a unit.

The Ecopolitan EC showflat in Punggol was open yesterday for prospective buyers to submit e-applications, but they were not able to buy units.

Applicants can start booking from Aug 3. Developer Qingjian Realty declined to comment on application figures.

There will be more buyers out today when Hong Leong Holdings launches One Balmoral in District 10. The 91-unit freehold project comprises one- to four-bedders, ranging in size from 592 sq ft to 1,657 sq ft.

Prices start at $1.5 million, said a Hong Leong spokesman.


Fresh curbs on property loans
Factoring in all debt obligations among steps to encourage financial prudence

Source: Straits Times
By Aaron Low Assistant Money Editor

TOUGHER rules have been imposed on mortgages to stop home buyers getting in too deep and to plug loopholes that let people dodge tougher loan limits on second and subsequent properties.

The new curbs are not seen by the Government as another step to cool soaring prices, but property experts say they will still have some effect by reining in borrowing.

The rules, which take effect today, demand that lenders consider a borrower's total debt obligations, including other mortgages and loans for cars, before granting a new home loan.

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.

Take a property buyer who has a monthly income of $10,000 and debt obligations, including his car, credit card and other such loans, of $3,000.

If the new mortgage's monthly repayment exceeds $3,000, that would bring his total repayments to over $6,000 - and total debt obligations to over 60 per cent.

Banks would then have to relook how much they can lend to him under the new Total Debt Servicing Ratio framework - which applies to loans for all property types - announced by the Monetary Authority of Singapore (MAS) last night.

MAS said the rules also apply to borrowers looking to refinance, and said the 60 per cent limit will be reviewed over time.

Borrowers on a mortgage will also now have to be named as the owners of the property.

This and other changes to the loan-to-valuation rules are to prevent borrowers from getting round tougher limits for second and subsequent housing loans.

The changes will prevent parents from using their children's names to buy a second property, said Orange Tee's head of research and consultancy Christine Li.

"The old rules essentially encouraged two generations to service one housing loan," she said. "The move plugs the loophole and will encourage more prudent borrowing on home purchases."

MAS said last night that the new framework "will strengthen credit underwriting practices by financial institutions and encourage financial prudence among borrowers".

It added that its checks of the banks' residential loans last year showed that different lenders used different standards to approve property loans.

The new rules, which follow seven rounds of cooling measures, are aimed at giving financial institutions a "robust basis for assessing the debt ability of borrowers applying for property loans".

MAS said the measures are structural and meant for the long term. However, it said the current loan-to-valuation limits for housing loans are not permanent and will be reviewed depending on the state of the property market.

MAS noted that while the new rules "are not targeted to address the current property cycle, they are consistent with previous measures aimed at promoting sustainable conditions in the property market".

These moves to cool the red- hot market - the latest came in January - have only partially dampened demand as the J Gateway, a new 99-year leasehold development in Jurong East, showed yesterday when 99 per cent of the units were sold on the first day of its launch.

Barclays Capital economist Joey Chew noted that the central bank is keeping an eye on the prospect of higher interest rates following signals from the United States Federal Reserve.

"Investors who were intending to enter the property market now to lock in a low rate of interest may be thwarted, particularly if they are already highly leveraged."



Total Debt Servicing Ratio (TDSR) framework to be used

Consider monthly repayments of new loan and all other debt.
Calculate new loan repayments using medium-term interest rate (3.5per cent for home loans) or prevailing interest rate, whichever is higher.
Discount variable income and bonuses by at least 30 per cent.
Discount financial assets if used in calculating income.

Loan-to-valuation rule changes

Borrower of loan must be mortgagor of the home.
If borrower fails to meet TDSR threshold, his guarantor to be included as co-borrower.
Use income-weighted average age of joint borrowers in deciding loan tenure.

For instance, if the father has a higher income than his son, it may mean an older average age and shorter loan tenure.

Condos near town without steep prices
Checking out the page views on the STProperty website gives an instant snapshot of what projects buyers are keen on. This week, we look at developments in districts 13 and 14 that have drawn the most attention.

Source: Straits Times | Money 
By Rachel Scully

THE appeal of city-fringe districts 13 and 14 is a no-brainer: A central location without the sky-high prices.

Home buyers like the combination and have long been zeroing in on developments in both areas.

District 13 covers Potong Pasir and MacPherson, which are served by the North East and Circle MRT lines.

Page views on STProperty's website from June 17 to 23 show that 99-year leasehold Bartley Ridge led the way for private homes.

The 868-unit condominium, which is less than five minutes away from the Bartley MRT station, has an average asking price of $1,241 per sq ft (psf) for its one-, two- and three- or more bedder units. This value was the lowest among the top five projects in the district.

Launched in March, its average transacted price between December last year and last month was $1,291 psf, according to Urban Redevelopment Authority (URA) data.

The four other projects in the top five by page views were smaller and included the 330-unit 8@Woodleigh, which had the highest average asking price of $1,627 psf.

Farther east in District 14, which covers Geylang, Eunos, Kembangan and Paya Lebar, a mix of 99-year leasehold and freehold projects enticed home-seekers.

The locations are easily accessible with stations on the East- West and Circle lines, and are also famous for their food outlets.

Waterbank at Dakota topped the list by page views on STProperty, with an average asking price of $1,615 psf in the June 17 to 23 period, the highest among the other projects in the district.

The 99-year leasehold project has 616 units in a mix of one-, two- and three- or more bedders.

It is a stone's throw from the Dakota MRT station on the Circle Line.

The project also registered the highest average transacted price of $1,516 psf, based on URA

data from last December to last month.

Vacanza@East was second by page views and had an average asking price of $1,335 psf for its one- to three- or more bedder units.

The freehold project has 473 units with an average transacted price of $1,262 psf, based on units sold between last December and last month.

The project is near the Kembangan MRT station on the East- West line.

Simsville, a 522-unit condo, the 348-unit Dakota Residences and 228-unit Le Crescendo rounded out the top five in District 14.