Published January 29, 2011

HDB resale prices up 2.5% in Q4 2010
Up to 22,000 new flats may be offered under the build-to-order system

By UMA SHANKARI

HDB resale prices rose by 2.5 per cent in the fourth quarter of 2010 - a tad higher than the 2.4 per cent climb estimated earlier this month - even as the number of deals and the cash-over-valuation (COV) amounts commanded by flats fell.

Data from the Housing & Development Board (HDB) released yesterday showed that the official resale price index climbed to yet another new high in Q4 2010. For the whole of 2010, HDB resale prices rose by 14.1 per cent.

Prices rose even as the median COV amount among all resale transactions fell by $7,000 (or 23 per cent) from $30,000 in Q3 2010 to $23,000 in Q4 2010.

But prices still rose as valuations of most types of HDB flats climbed in Q4, analysts said.

The number of resale transactions fell by about 21 per cent, from 8,205 in Q3 2010 to 6,454 in Q4 2010. The total number of resale transactions in 2010 fell to 32,257, a decline of 13 per cent over 2009's volume.

Analysts said that HDB flat valuations still increased in Q4 2010, in spite of a number of cooling measures introduced in August 2010, as there is usually a lag time of about six to eight weeks before price corrections would align with the actual sentiment in the market.

But resale prices could soon plateau, PropNex chief executive Mohamed Ismail said.

HDB's Q4 2010 data shows that median resale prices of 3-room, 4-room, 5-room and executive flats stood at $300,000, $385,000, $460,000 and $548,000 respectively, he said.

But PropNex's in-house data for deals done in January shows median resale prices of $298,000, $393,000, $466,000 and $538,000 respectively - a 1.8 per cent drop to 2.1 per cent increase from Q4 2010.

'It must also be highlighted that some of our data reflects transactions that took place before the additional cooling measures announced on Jan 13, 2011,' added Mr Mohd Ismail. 'Feedback from the ground has indicated that there is less movement among the current HDB dwellers due to the (new) 60 per cent loan-to-value (LTV) cap. Therefore, it is possible to see a further dip, though not drastic one, for median COVs and sales volume in Q1 2011.'

HDB plans to offer up to 22,000 new flats under the build-to-order (BTO) system if demand is sustained.

The BTO supply will also be supplemented by the upcoming supply of flats under the design, build & sell scheme (DBSS) and the executive condominium (EC) housing scheme. Four more EC developments in Punggol, Pasir Ris, Bukit Panjang and Tampines will be launched for sale in the coming months by private developers.


Source: www.businesstimes.com.sg

PRIVATE home prices in 2011 could fall by up to 5 per cent but will be largely stable, says a new report by DTZ Research.

The firm expects recent government cooling measures to reduce sales volume, but not cause a significant fall in prices.

Sales volume is expected to fall as short-term speculators will be weeded out by the hefty seller's stamp duty (SSD) of up to 16 per cent within the first year of purchase. However, not all investors will withdraw from the market as some may find the 4 per cent SSD by the fourth year of sale to be surmountable. They could shift their focus to buying uncompleted units with completion dates three to four years later, said DTZ.

The property consultancy expects prices this year to be underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar and inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong.

In particular, landed homes, small apartments and high-end apartments will be be less affected by the measures, said DTZ's executive director for residential, Margaret Thean.

'Small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units. The four-year seller's stamp duty will have little impact on landed homes as most purchase them for long-term owner-occupation. And high-end apartments will continue to see foreign interest,' Ms Thean said.

But DTZ does not rule out the possibility of more government measures should demand remain at a high level after a period of cooling off.

The report also noted other challenges in the form of a spike in the number of completed units in a few years' time as the government is releasing a record high number of homes through the public housing and government land sales programmes. There is also uncertainty over the strength of recovery of the major western economies. If they recover well, interest rates will increase and reduce the affordability of mortgage payments. On the other hand, if they continue to languish, sentiment in Singapore's property market could eventually be hit.

Published January 28, 2011

By UMA SHANKARI

Source: www.businesstimes.com.sg

SINGAPORE - The recent Government measures to cool Singapore's property market will bring down sales volumes but may not cause a significant fall in prices, according to real estate consultant DTZ Research.

In a report issued yesterday, DTZ said it expected prices to be largely stable this year, with a possible decline of not more than 5 per cent for the whole year.

DTZ said the hefty seller's stamp duty of up to 16 per cent for sales on properties sold within the first year of purchase will weed out short-term speculators and cause sales volumes to fall.

But not all investors will withdraw from the market, DTZ said, as some may find the 4-per-cent stamp duty on properties sold in the fourth year after purchase to be surmountable. Buyers may also shift their focus to purchasing uncompleted units that are set for completion in three to four years.

"Landed homes, small apartments and high-end apartments are envisaged to be less affected by the measures," said Ms Margaret Thean, DTZ's South-east Asia executive director for residential properties. She added that "small units with their low price quantum will continue to attract investors with spare cash, or singles wanting their own units".

She said that the four-year seller's stamp duty will also have little impact on landed homes, as most of them are purchased by long-term owner-occupiers. The same goes for high-end apartments, which will continue to garner interest from foreign buyers.

Ms Chua Chor Hoon, head of South-east Asia Research at DTZ, said price stability would be underpinned by economic growth, low interest rates, strong holding power of developers and the appreciation of the Singapore dollar.

Property clampdowns in China and Hong Kong could also prompt more mainland Chinese to set their sights on overseas markets such as Singapore. The number of these Chinese property buyers grew to 19 per cent last year, from 7 per cent in 2007.

Among foreign buyers, the Chinese were on par with Indonesian and Malaysian buyers during the fourth quarter of last year, DTZ said.

The property consultancy said it did not rule out the possibility of another set of Government measures to cool the property market in Singapore should demand rebound after levelling off.

But DTZ added that with a healthy supply pipeline, prices and rentals could come under pressure.

As a record number of units are offered through public housing and Government land sales programmes, DTZ estimates close to 33,000 units to be completed every year over the next four years, assuming that all sites are released. This is almost double the average for the last 10 years.

DTZ said Singapore's property market would also face challenges due to continued uncertainty of recovery in major Western economies. If they recover well, interest rates will move up and reduce the affordability of mortgage payments. On the other hand, if they continue to languish, this will eventually have an impact on the Singapore economy and optimism in the property market.

As the residential market faces numerous challenges, DTZ said investors would likely identify opportunities in other segments of the property market. Some attractive options include commercial and industrial properties where rental rates are recovering.

by Jonathan Peeris

05:55 AM Jan 28, 2011

Source: www.todayonline.com

Some wonder if they should wait and see if the recent cooling measures push down prices significantly

by Ong Teck Hui

05:55 AM Jan 28, 2011

The Government's latest round of measures to cool the residential property market was clearly targeted at short-term investors and speculators.

Effective since Jan 14, they include the highly punitive stamp duties which apply to the resale of residential properties within four years of purchase, the reduced loan limit of 60 per cent for buyers with one or more outstanding mortgages, as well as the 50-per-cent loan limit for buyers who are non-individuals, for example companies and trusts.

It would appear that the measures have been applied to slow down the market to avoid the growth of a property bubble, as well as to allow genuine buyers the opportunity to purchase their dream homes without runaway prices.

Genuine home buyers do form a significant demand pool, and many have planned to make their purchases in the near term. The introduction of the fresh measures has led them to wonder whether prices would soften and whether it might be worth their while to wait. Some are hoping for a substantial price correction, "maybe 20 per cent or more", before deciding to buy.



SEEING PRICE DECLINES IN PERSPECTIVE

But would the residential property market correct by that magnitude - 20 per cent or more - due to the measures alone? It would be useful for us to analyse past declines in prices to arrive at an informed conclusion on the price outlook.

The most recent price correction in the residential property market was due to the economic recession arising from the global financial crisis. From the peak in mid-2008 to trough in mid-2009, prices softened by 25 per cent, according to the Urban Redevelopment Authority's residential property price index. The impact of the new measures will certainly be nowhere as catastrophic as that of the global financial crisis.

Another benchmark is the decline in prices following the announcement of the anti-speculation measures in May 1996. The very harsh measures, which included a 20-per-cent upfront downpayment in cash for all property purchases and taxes on gains from properties sold within three years of purchase, affected the entire residential market, bringing transaction volumes down by 75 per cent. Prices eased by 8.9 per cent over a one-year period before being dragged down by a further 40 per cent by the Asian financial crisis.

In contrast, the current measures have been calibrated to discourage shorter-term investors and speculators, leaving genuine home buyers relatively unaffected.

Barring external shocks or economic downturns, the measures by themselves are unlikely to drag prices down significantly, if at all. Under the present positive market conditions, sellers are on a stable footing and under no pressure to slash prices.



BUYERS' IMPATIENCE

After the set of measures announced on Aug 30 last year, potential buyers retreated to the sidelines to watch how the residential market would pan out.

Last August, developers launched 1,165 units and sold 1,259. What potential buyers saw was a slightly slower market in September, with 1,058 units launched and 911 sold. Activity in October picked up, with 1,070 units launched and 1,066 sold, but that was the month when two new executive condominiums (ECs) were launched, generating much hype and interest. Including ECs, 2,049 units were launched in October and 1,596 sold.

The market also watched developers' response to the sale of residential sites. Tenders for mediocre residential and EC sites were met with fair response and cautious bids, while the more attractive sites saw strong competitive bidding.

The URA's property price index for 3Q2010 showed that residential property prices rose 2.9 per cent, although it would have captured primarily pre-measures pricing. Market behaviour and evidence would have led most potential buyers to conclude that the residential market was holding up well against the measures, transactional activity was resuming and prices were unlikely to soften.

By November, the residential property market picked up with a vengeance with several major launches and good take-up. Including ECs, 2,331 units were launched and 2,092 sold, making November almost the busiest month last year. The December figures for homes launched and sold (including ECs) were lower at 1,859 and 1,699, respectively, but this was expected as it was the typical year-end holiday period.

When the 4Q2010 price index was released, it showed residential property prices continuing to climb by 2.7 per cent, notwithstanding the effect of the measures. It only served to confirm potential buyers' fear that prices would continue to rise.




TO WAIT OR NOT TO WAIT?

Potential buyers' behaviour over the next few months would determine the direction of the residential property market for the rest of this year. If buying sentiment recovers in the short term, transactional activity would pick up, leading to firm prices with, perhaps, some upside. However, if the market slows without an improvement in sentiment, prices could eventually soften.

The dilemma that many genuine home buyers face is whether to continue with their intended purchases or to hold off in the hope that prices will correct significantly.

It would be worthwhile waiting if prices do eventually decline substantially, but delaying also runs two main risks: Higher interest rates and stronger measures imposed by the Government that may affect even genuine home buyers. On the other hand, higher interest rates and stronger Government measures could result in price softening, but that would mean postponing one's purchase even longer.

Historical experience may show that prices are unlikely to correct significantly due to measures such as those recently introduced. But it is what potential home buyers believe or perceive that will drive their behaviour, which will, in turn, influence the market.

The residential property market may have been jolted by the Jan 14 measures, but market fundamentals remain favourable. Together with inflation concerns, the current low interest rates and expectations of long-term capital appreciation, it appears that buyers would likely be drawn back to the residential property market after an expected period of hesitation.



Ong Teck Hui is executive director of research and consultancy at Credo Real Estate.


Source: www.todayonline.com

Last year was a bright year for Singapore's private residential market. Indeed, it was a year of records, particularly for developer sales activity and prices of suburban private homes. However, with the announcement of the latest Government cooling measures effective on Jan 14, such exceptional performance will cease to be relevant for extrapolating future private residential market performance.

In the latest Government cooling measures, sellers' stamp duty was hiked and the loan-to-value ratio for second and subsequent homes was reduced, reflecting its persistence to minimise speculation and investment in private homes.



CONVENTIONAL PERCEPTIONS

The common belief is that the first hit by these measures will be speculators - the main culprits behind the price escalations, particularly those of suburban condominiums.

Indeed, with the revision in sellers' stamp duty, buyers are less likely to have the intention to re-sell and profit in the short run, unless property prices can grow well in excess of 16 per cent over a year or 12 per cent in two years, considering other costs and financing.

Speculators aside, investments are discouraged, particularly with the lowering of the loan-to-value ratio for subsequent homes.

Genuine buyers and high-end residential property buyers may be less impacted but with the demand pool shrinking, it is widely anticipated that property prices will fall.

Notwithstanding the pessimism, there is hope for the private residential market, underpinned by a sustained economic recovery and lit by ample liquidity.

While the tough measures can dampen sentiment, this may be viewed as moderating home buying interest until the sentiment eventually reaches a steady state - as buyers remain cautious while adjusting to the new environment.

Also, a reduction in home sales this year may not necessarily mean a significant price correction - for it leads to a more sustainable base in home buying that is not fuelled by speculation and excessive financing.

Some speculation is necessary to drive market momentum but excessive flipping that leads to asset bubbles can cripple home prices.

The new round of measures is harsh to many, for it eliminates speculators and, most importantly, it deters investors.

It must be recognised that investments in private residential properties are not detrimental for the market. But in times of overwhelming housing demand, the priority of genuine owner occupiers should prevail, to assist every aspiring eligible buyer to have an opportunity in private home ownership.

Additionally, many investors and speculators would have already profited from previous housing booms and may be seen to have a weaker case to compete with the rest, such as younger entrants, who have yet to enjoy the benefits of a private residential property.




SELF-FULFILLING PROPHECY

The common question asked about the impact of the cooling measures is: How much are prices expected to fall in the year?

While there are various well-supported forecasts, it should be appreciated that price falls are often sticky in economic viable times.

Price falls can be a result of a self-fulfilling prophecy as well - where prices can indeed correct as home buyers persistently believe in an imminent decline and refuse to enter the market. In such a context, buyers have also been consistently advised prices may suffer drastic falls.

If a short-term price correction is almost a certainty given the severity of the cooling measures, the more crucial question would be how long this may last - and thereafter, what are the chances of a revival? If the economic recovery can be sustained this year, with ample liquidity, a 5- to 7 per-cent-price-correction for suburban condominiums in H1 '11 can be potentially stabilised or gradually revived in H1 '11, bringing prices at the end of this year to be comparable or slightly lower than the beginning of the year.

Moreover, experience has shown that when assets are attractively repriced, it can potentially encourage sidelined buyers to enter the market if overall economic fundamentals are in place.

Although the current cooling measures may be very restrictive, a potential buyer may still purchase after much deliberation if prices ultimately become affordable. Suitable property repricing can release latent demand from prospective owner occupiers, providing support to overall demand base.

And if prices see continual correction throughout the year, there would be significant opportunities for a turnaround after the year as the new demand base may emerge stronger, if economic fundamentals stay firm.


STRUCTURAL CHANGE IN BUYING PREFERENCES?

It is a challenge to cater to competing concerns of all stakeholders and further so to achieve market equilibrium.

To achieve the steady state, fine-tuning policies may even be necessary, such as the withdrawing or mitigating of some of the cooling measures along the way.

But before the equilibrium is reached, the pain from the calibration process can be relieved with nimble adjustments from market participants.

For one, developers are likely to hold phased launches of selected projects in H1 '11 to test overall home buying interest, pricing and observe structural changes in buying preferences.

A structural change can develop as forthcoming home buyers would likely be mainly owner-occupiers instead of investors and speculators.

A different product mix may have implications for a project's breakeven cost and land tender prices.

The recent home buying euphoria had created unnecessary anxiety among many potential buyers.

Prior to the cooling measures, there were many who bought with a view that not buying a property will mean losing the opportunity ahead. While they are not speculators, they may have created undue stress for themselves and everyone - aggravated by some who stretched affordability even if they are genuine buyers.

The material justification for a genuine home buyer should be his confidence in financing his home and not simply his intention to own a piece of property for occupation.

The slowdown in home buying can provide many stakeholders time to compare aspirations with the reality, where home buying is after all a major decision involving huge capital.

If the calibration is successful, it may ultimately sculpt an environment where genuine homebuyers are completely confident in the buying decision, including considering financial contingencies.


by Ong Kah Seng

05:55 AM Jan 28, 2011

Ong Kah Seng is senior manager, Research - Asia Pacific at Cushman & Wakefield.





Source: www.todayonline.com

by Tan Kok Keong
05:55 AM Jan 28, 2011

The Government's move to introduce a new set of property market cooling measures two weeks ago was widely anticipated but the harshness of the measures surprised many.

The initial reaction from buyers was mixed. On the weekend immediately after the Jan 14 measures, buyers at Spottiswoode 18 snapped up 170 out of the 251 units launched, surprising many observers. The nonchalant reaction could be because the cooling measures were already a known market risk. These buyers had already overcome their reservations during the pre-launch marketing period and were primed and ready to buy.

This was somewhat similar to the good response to the launch of NV Residences after the earlier round of cooling measures on Aug 30 last year.

In contrast, over the same weekend after the Jan 14 measures, sales cooled in Austville Residences - an executive condominium project - despite earlier reports of potential buyers queueing overnight.

Beyond these anecdotal examples, we collaborated with the research team at leading real estate portal PropertyGuru.com to get a clearer picture of pre-transaction activities.

The number of visitor sessions to the website fell 10.7 per cent in the week after the measures compared with the week before. Comparatively, visitor sessions only fell by 3.5 per cent following the Aug 30, 2010 measures. Visitors searching for resale HDB flats saw the sharpest decline (Chart 1A and 1B). In addition, the number of new listings fell by 6 per cent, while the number of listings rose 2 per cent following the Aug 30 measures.

While there are many other factors that affect the visitor numbers, the comparison gives us a clearer picture of market activity following the measures.

The statistics above reinforce the consensus view that overall marketing activity has fallen. If this persists, transaction volumes will decline. Based on historical analysis, a drop in total sales volume over four quarters tends to lead to a fall in the overall Urban Redevelopment Authority's private residential price index thereafter. This happened at two most recent turning points for prices - in Q2 '00 and Q2 '08. The question remains as to whether the current market cooling measures would lead to a persistent fall in volume and thus prices.

To answer this, an analysis of events after the May 1996 market cooling measures could be a good gauge, as that was the last time when a similarly harsh set of measures was introduced.

Within a year from May 1996, overall private home prices fell 8.9 per cent. While there can be no doubt that market cooling measures played an important role, a closer look suggests that other factors could have contributed to the plunge in prices.

Firstly, the rental market weakened over the same period. Overall occupancy rate fell from 93.8 per cent in Q2 '96 to 91.7 per cent in Q2 '97 due to an increase in the number of units completed. As a result, rents also fell by 9.9 per cent over the same period. In addition, interbank three-month Sibor rose slightly to 5.94 per cent from 5.75 per cent over that period. Buying property for investment became less appealing.

Secondly, the stock market also began to decline over the same period. The benchmark Straits Times Index fell 13.4 per cent within a year from June 1996. To add to the woes, the Asian Financial Crisis started in mid-1997. The loss in wealth in the stock market probably motivated investors to sell assets, which could be another important factor that precipitated the continued fall in property prices.

The above analysis shows that for the current set of market cooling measures to cause another prolonged period of price decline, other conditions need to fall in place. This could come in the form of a decline in the stock market or the business environment, higher unemployment and a deterioration of property market basics. The lack of "wealth destructive" factors was the key reason for the ineffectiveness of the last two rounds of market cooling measures, in my opinion.

Going into the new year, the wealth creation effect appears to be largely on track. According to various equity strategists, the Singapore stock market is expected to perform well this year, on the basis that forward price-to-earnings ratios are still undemanding compared with previous peaks. Business prospects look more promising and employers are planning to expand hiring and increase wages and bonuses.

For the property market, the occupancy rate looks like it could remain above historical average of 92 per cent as completions in 2011 are expected to reach only 6,722 units - below the historical average, according to Urban Redevelopment Authority numbers.

Meanwhile, the prospect for a sharp increase in interest rate appears to be muted. Taken together, this suggests that the slowdown in transaction activity and price growth might again turn out to be temporary. Ironically, if that is the case, we should expect more market cooling measures, which will remain as a market risk in 2011. But by themselves, the measures may not be enough to turn sentiment.

In conclusion, while I expect the market to face immediate downward pressure on volume and prices, the year-on-year price fall in 2011 could be marginal. In the meantime, people interested in properties should keep watch for any of the "wealth destruction" catalysts, which in some instances can fall into place very fast.

Buyers should also note the potential for a weaker rental market from next year due to the large number of housing units to be completed from then onwards. Buyers who are stretching their last dollar to buy their dream home might want to dream less and work their numbers based on more prudent assumptions and exit strategies.



Tan Kok Keong is Head of Research and Consultancy at Orange Tee.


Source: www.todayonline.com

While the Government has to act to prevent the property market from getting beyond the reach of most Singaporeans, I am however not very comfortable that the latest steps - announced last week - are the best means of dealing with the issue.

Not only are the measures fairly drastic, they appear to be dealing more with curbing demand than raising supply.

The Government has claimed that there is no shortage of supply. It points out that the sites awarded last year under the Government Land Sales Programme (GLS) will yield about 13,300 units. For the first half of this year, it says it will make available sites that would be able to yield about 14,300 units.

Further, as at the end of the third quarter of last year, there were about 64,400 uncompleted units in the pipeline, of which roughly half were still unsold. These compare with the annual take-up rate of about 12,700 units between 2007 and last year. Unfortunately, there is a lag period between the site award and the sale of the property.

The latest attempt to cool the property market may have the unintended effect of reducing supply as developers decide to take a wait-and-see approach. They might be even willing to pay the penalties for missing completion deadlines rather than sell at a loss. It could also see the bigger developers with the financial muscle to hold being able to take advantage of those who can't hang on to their sites.

And will the new rules which took effect the day after they were announced - Jan 13 - force buyers to give up options, now that financing will be more difficult to obtain?

Under the new rules, financial institutions can only grant loans amounting to half the value of the properties purchased by non-individuals, such as companies, trusts and collective investment schemes. Individuals with existing outstanding mortgages can now borrow only up to 60 per cent of the value of their next property purchase.

Another unintended effect could be that those who have the financial resources will be able to get more properties on the cheap - to sell when prices recover later.

But should the Government be overly concerned with private-sector housing? Should it be going all out to prevent a fool from parting with his money?

Despite numerous warnings about the dangers of a property bubble bursting and that the current low interest rate regime might not last for too long, property prices, prior to the latest measures, continued to climb.

I believe the Government should be more concerned about housing the masses. It has done a marvellous job, having built more than one million units since the Housing and Development Board (HDB) was established. At present, some 900,000 units house more than four-fifths of the population. For the vast majority of newly-weds, their first home is likely to be an HDB flat. These are the people whom the Government has to be concerned with.

The Government has said it will be building more HDB flats - up to 22,000 Build-To-Order flats this year - to accommodate the masses. Will these be enough?

It should perhaps also get out of building executive condominiums (EC) units which provide condo-like facilities and the Design, Build and Sell Scheme (DBSS) units. The HDB says land for some 8,000 of these could be launched this year. Why should the HDB be catering to the needs of this select group?

Look at what is happening to the estates that were built by the HUDC for an earlier group of the so-called sandwiched class. Some like Farrer Court, Amberville and Bedok Reservoir, have been sold en bloc to private developers. The remaining ones - Shunfu, Braddell Heights, Pine Grove, Laguna Park, Neptune Court, Chancery Court and Eunosville - have been privatised or are in the process of being privatised in anticipation of en bloc sales. Why must public funds be used to cater to such profiteering?

Rather than be all things to all people, the Government should concentrate on housing the masses.

by Conrad Raj
05:55 AM Jan 21, 2011

Conrad Raj is editor-at-large with Today.

Source: www.todayonline.com

SINGAPORE - In a survey conducted at property blog www.propwise.sg, 66 per cent of the 269 respondents believe that the latest round of cooling measures by the Government is sufficiently harsh to prevent a property market bubble in Singapore, while the other 34 per cent do not think so.

Some 41 per cent of the respondents believe that property prices will go down this year as a result of the measures, a sharp contrast to the majority of analysts who had forecast continued property price appreciation for this year prior to the latest measures.

Many believe that the measures will severely restrict the buying pool to mainly new homebuyers, making it difficult for investors and even genuine upgraders from buying. The high amount of cash required to buy the second property would present a significant stumbling block for the average Singaporean.

A significant 30 per cent feel that the market will stay flat, hovering within plus/minus 5 per cent of current price levels.

The remaining 29 per cent feel that prices will continue to appreciate this year, citing low interest rates, the strong economy and the low unemployment levels as reasons for the continued strength of the market.

Some 31 per cent of respondents say they will put off further property investments for the time being, suggesting that the near term pool of buyers would shrink. As holding costs remain attractively low, only 7 per cent of respondents are looking to sell their property as they believe prices may drop further. With buyers holding back and sellers not under pressure to sell, transaction volumes will likely plummet.

Investors will be forced to think hard about keeping their property for the long term as they cannot expect to divest for a profit before TOP as they have done in the past - their focus will have to shift from capital appreciation to include rental yield. Also, with the higher downpayment required for second or further mortgages, the return on capital will decline, making property a less attractive investment for some.

Interestingly, long-term investors have not been deterred by the measures - 55 per cent of the respondents are keen on making a property investment if prices fall. Some respondents thought a fall in prices of 10 to 15 per cent would be sufficient to lure them back into the market. Ku Swee Yong, IPA

05:55 AM Jan 21, 2011
Source: www.todayonline.com

Published January 14, 2011


New steps rain on speculators' parade
Big hike in seller's stamp duty and mortgage restrictions to cool property market

By UMA SHANKARI

(SINGAPORE) Starting today, speculators in the Singapore property market will find their ardour cooled by a severe new regime. The seller's stamp duty for private homes will rise to as high as 16 per cent, from up to 3 per cent previously, while tighter mortgage restrictions will be put in place.

The government yesterday unveiled a new and stronger round of demand-side cooling measures - the third set in less than 12 months.

The killer move, according to analysts, is a sharp hike in the seller's stamp duty to 16 per cent, 12 per cent, 8 per cent and 4 per cent respectively for properties that are bought on or after Jan 14 this year and are sold in the first, second, third and fourth year after purchase.

Previously, owners who sold houses and apartments less than three years after buying them had to pay a seller's stamp duty of only up to 3 per cent.

Related link:


Click here to read the government's news release



Singapore also further slashed the Loan-To-Value (LTV) limit on housing loans for both individual and corporate buyers.

Its move follows Hong Kong's, which in late November 2010 announced some of its toughest-ever measures to cool the property market - including a stamp duty of as high as 15 per cent on apartments sold within six months of purchase. Hong Kong also tightened mortgage restrictions.

Analysts expect the higher seller's stamp duty will wipe out most speculators' gains and keep them out of Singapore's property market.

'For those buyers who intend to flip their properties within one or two years, the increased seller's stamp duty erases their potential gains,' said Merrill Lynch economist Chua Hak Bin. 'So this measure is pretty targeted and will take away a big chunk of these potential investors.'

But most analysts found the unexpected sharp hike in the seller's stamp duty to be harsh. In addition to hindering short and medium-term investors, it could also hurt genuine owner-occupiers looking to change homes.

International Property Advisor chief executive Ku Swee Yong said that a staggered-down capital gains tax - one that could perhaps be imposed only on capital gains from real estate - might have been more advisable. This would spare those who sell their properties at a loss.

'The government's intention of forcing people to treat real estate as a long-term investment is admirable,' said Mr Ku. 'But this (the higher seller's stamp duty) will force people to hold, including some genuine cases where there might be a real need to sell off a property.'

In addition, Singapore lowered the LTV limit on housing loans from 70 per cent to 60 per cent for individual buyers with one or more outstanding housing loans at the time of the new home purchase.

And for corporate purchasers (such as firms, trusts and collective investment schemes), the LTV limit has been cut to an even lower 50 per cent - regardless of the number of outstanding housing loans at the time of the new home purchase.

In August 2010, the government reduced the LTV ratio from 80 per cent to 70 per cent.

Yesterday's measures follow three gentler sets in September 2009, and February and August 2010.

'Previous government measures have to some extent moderated the market, but sentiment remains buoyant,' said the National Development and Finance Ministries in a joint statement with Singapore's central bank, the Monetary Authority of Singapore.

'Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals.'

Private home prices rose 17.6 per cent last year, according to flash estimates. A record 15,500-16,500 new private homes are also estimated to have been sold in 2010.

In a statement, the Real Estate Developers' Association of Singapore (Redas) said it has 'taken note' of the latest measures.

The measures will discourage speculative demand and will encourage longer-term holding of properties which will contribute to the stability of the market, Redas said: 'It is in the interest of the market to see a more gradual trend in growth and value for genuine home owners and investors.'

Merrill Lynch's Dr Chua also said that in addition to curbing speculators, the government could be concerned by aggressive mortgage lending by banks.

Analysts expect the volume of new home sales to fall in 2011 but were spilt on whether the new measures will cause private home prices to decline.

'There will be a sense of uncertainty in the market leading to hesitation among buyers and sellers and we can expect to see transactions easing in the short term,' said Credo Real Estate executive director Ong Teck Hui.

But the measures may not lead to an immediate price decline in Q1 2011, he said. This round of measures is still not as severe as the anti-speculation measures announced in May 1996, which resulted in a 1.9 per cent drop in prices in Q3 1996. But any upside in prices in Q1 2011 will be 'minimal', Mr Ong added.

But in any case, analysts said that the 5-10 per cent growth in private home prices for the whole of 2011, which they predicted just one week ago, now looks highly unlikely. They also expect property stocks to fall today in reaction.


Source;www.businesstimes.com.sg

by Chris Howells

Updated 11:12 AM Jan 14, 2011

SINGAPORE - A knee-jerk reaction to the latest round of property cooling measures is expected to hit banks and developers but industry players believe that normal service will resume.

For now though, banks here are likely to see a dip in new housing loan applications, while developers may postpone new launches.

Commenting on the latest measures, the Real Estate Developers' Association of Singapore (REDAS) said it expects these measures to discourage speculative demand but remains confident that the local "property market will continue to be underpinned by sound economic fundamentals and a favourable business environment".

Still, analysts expect developers to hold back on new launches.

Referring to the last round of cooling measures, which were rolled out on Aug 30 last year, Credo Real Estate managing director Karamjit Singh noted that, this time around, developers would also "hold back temporarily, as they assess demand and sentiment before launching their projects".

As a result, sales volumes would drop in the short term, he said.

Describing the latest measures as "a fourth and more decisive wave of prudential curbs", Barclays Capital economist Wai Ho Leong said any impact on prices may only be gradual.

Said Mr Leong: "We maintain that the risks for property prices and rents over the next four years are to the downside. Even so, the downward correction will occur gradually, given that Singapore is in the midst of a strong cycle of wealth creation, which has been fuelled by a surge in inward migration and rising asset values."

The cooling measures come at a time when home buyers have been keen to leverage on the low interest rates - and a fall in demand for mortgage loans could put further pressure on the profitability of banks here.

OCBC Bank head of consumer secured lending Phang Lah Hwa said: "The new property measures will have an impact on new housing loan applications, as we expect potential home buyers to be more cautious and will take their time to review their options."

Ms Lui Su Kian, DBS Bank's senior vice-president and head of deposits and secured lending, noted that the measures would mean investors would have to commit higher cash amount for their downpayments.

But with the Chinese New Year - traditionally a quiet period for the property market - around the corner, Ms Lui noted that it would take some time before the impact could be ascertained.

RBS head of South East Asian equity research Trevor Kalcic said: "There is very likely to be a slightly negative impact on the banks ... but it won't be a material impact. The reason is that mortgages are a relatively small component of overall earnings."

Source: www.todayonline.com