Published February 2, 2011

PM Lee pledges to keep housing affordable
Government to do more to stabilise the market should it become necessary

By JOYCE HOOI

(SINGAPORE) The government will do more to stabilise the property market should the occasion call for it, Prime Minister Lee Hsien Loong said in his Chinese New Year address this year.

'The government has acted to curb speculation and cool the property market. We will do more to stabilise the market if and when this becomes necessary,' he said yesterday.

'We will keep housing affordable to Singaporeans, especially public housing. At the same time, in a prospering economy, home owners should see their properties appreciating in value over the long term.'

The government had recently announced new rules that would raise the seller's stamp duty on properties to as much as 16 per cent of the sale price if the home is sold within a year, and lower the limit that banks can lend to home buyers for a second property to 60 per cent of the property's value.

On the immigration front, while the prime minister acknowledged the 'sense of dislocation and unfamiliarity' felt by some Singaporeans, he stressed the need to keep up with the world or face stagnation and decline.

'We need immigrants to reinforce our ranks, but we must maintain a clear majority of local-born Singaporeans who set the tone of our society, and uphold our core values and ethos.

'We are managing the inflow of foreigners who want to live and work here. Many want to become permanent residents and new citizens, but we will only select those who can add value to Singapore.'

He pointed out that last year, the nation's total fertility rate fell to an all-time low of 1.16. The Chinese fared worse than the national average, at 1.02, but the decrease in the fertility rate was observed across the board.

'It could have been because of the Year of the Tiger, or perhaps the economic uncertainties the year before, in 2009. Whatever the reasons, I hope more couples will start or add to their families in the Year of the Rabbit,' said the prime minister.

'Chinese New Year is the time for families to come together in celebration, and more babies can only mean more joy in the years to come.'

As part of the effort to ensure the longevity of values and culture, the nation's mother tongues needs to be kept alive, he said.

'We regularly update and improve the teaching of mother tongue languages in our schools, to keep it current and effective.

'Hence, the recent measures announced by the Ministry of Education, which will help a new generation to use their mother tongue languages freely in a changing language environment.'


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

SINGAPORE - Banks should take into account potentially higher interest rates in their credit assessments and not assume that the current low cost of funds will last indefinitely, the head of the Monetary Authority of Singapore (MAS) said on Friday, as he underlined the need to guard against the risks of asset bubbles.

"Many parts of Asia in particular are vulnerable to property bubbles, not only because of current liquidity conditions but also because many investors believe that, in a growing economy, the property market can only move up," Mr Heng Swee Keat, the managing director of the MAS, said at the opening of French business school EDHEC's Risk Institute Asia.

"Many have forgotten how the property markets in the region slumped during the 1997/98 Asian Financial Crisis," he said.

He said policy makers must leave no doubt of their resolve to tackle the potential build-up of risks and must be willing to take progressively tougher measures, as MAS and other agencies in Singapore had done recently to cool the property market.

The measures, effective from Jan 14, included seller stamp duties imposed at 16, 12, 8 and 4 per cent, respectively, for homes sold in the first, second, third and fourth year from purchase, as well as the lowering of the loan-to-value ratio to 60 per cent for individuals with outstanding mortgages. Also, 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.

Urging banks to continue prudent lending practices, Mr Heng said the MAS will monitor bank activities closely.

Mr Heng also said the MAS will require all local banks and significant insurers to form a specific committee that will look into how they manage risks.

He said these institutions must have a dedicated Risk Management committee in place after their annual general meetings this year and members of this committee must have the right skills and expertise to perform their duties.

Starting this year, all board members of local banks will also be required to undergo training but MAS didn't provide details on what the training should comprise.

Analysts said the announcement on Friday provided a clear and positive direction for local banks.

"The timing is right," said Ms Annie Koh, associate professor of finance at Singapore Management University (SMU), adding that having a good risk management committee will be most relevant since many local financial institutions are taking on more cross-border expansions.

A DBS spokesman said that for over a decade, the bank has had in place a board risk management committee comprising seasoned bankers and professionals who have deep knowledge of risk management.

"DBS also provides ongoing training for the entire board to help them keep abreast of the latest developments in risk management, capital management, accounting policy changes and regulatory changes," the spokesperson added.

OCBC's Risk Management Committee has been in place since August 2004. It reviews and approves the bank's overall risk management philosophy, risk management frameworks, major risk policies and risk models.

"Our progressive efforts over the years to strengthen risk management practices has enabled the Bank to weather the recent financial crisis with sound asset quality and credit losses below industry level," said Mr Gilbert Kohnke, Group Chief Risk Officer, OCBC.

Meanwhile, a UOB spokesperson said the bank's Executive Committee of Directors has been assisting the Board to manage risks.

"Going forward, a dedicated Risk Management Committee will take over from the Exco, the role of assisting the board in managing the risks arising from the growing complexity of the financial landscape," the spokesperson added.

by Millet Enriquez
05:55 AM Jan 22, 2011

Source: www.todayonline.com

Government measures are most effective when they are unexpected. That was why I concluded last week that the single most effective move was not the measures themselves but the timing of their introduction.

In economics, this topic is covered under the expectations theory. If the market expects the announcement, players will take positions that will nullify some of its effectiveness.

Looking at the latest round of cooling measures, the tools are not very different from the previous rounds except that they come with more punitive conditions.

The hike in sellers' stamp duty penalises early resale but tellingly, no mention was made of how big the problem was, unless the purpose was to deter property buying for investment by making it less attractive. Indirectly, this confirms for the first time that overly strong sales are also viewed as a problem, not just rapid price growth.

Seller's stamp duty on new properties was raised as much as 16 per cent of the sale price if the home is offloaded within a year of purchase, dropping by 4 per cent each subsequent year till the fourth year.

Given Singapore's strong fundamentals and steady - if not buoyant - economic growth, both local and foreign property investors can do no worse than park their monies in properties here than elsewhere, even if it is for four years. Lest we forget, investment purchases by foreign investors may even grow without any price increases if our local currency appreciates substantially against their home currencies.

Some have commented that the revised stamp duties are like taking a sledgehammer to the market. Are we not underestimating the extent of the problem here? Could anyone have foreseen that we would have reached our fourth set of cooling measures in just sixteen months after the first in September 2009. This works out to be about one set every five months!

Others expect sales volume and home prices in all segments, except at the top-end, to fall.

Let us put ourselves in the shoes of a hypothetical investor. By now, prices have already risen to quite high levels and we are closer to the peak.

Let us say that the investor has resources to buy only one high-end property or four mass market ones. Which is the preferred option? I am almost certain, nine out of 10 will pick the latter. Should the market correct unexpectedly, it is a lot easier to dispose of the lower-priced properties. In a sharp correction, most buyers are owner-occupiers and they have affordability issues.

The comment that prices of suburban homes are most vulnerable is also tantamount to saying that many of the developers who participated in the state sales of suburban sites last year did not do their homework if demand is indeed so fragile. You can question their bids but you cannot deny the demand. Let us give them some credit. They are putting their money where their mouths are - it is not just coffee shop talk.

Many are also expecting a price correction for the whole year. I can foresee a short-term correction, if any, because of panic sales in the secondary market. But a correction for the whole year, led presumably by price cuts from developers? Has anyone taken a recent look at their balance sheets after record sales for 2009 and last year? Are these knee-jerk analyses?

In the latest set of measures, we expect potential buyers to act "rationally" and pull back their buying. But are we expecting too much? This is the same group of people who have irrationally ignored the fact that there is more than ample supply in the market. We know that the authorities have been highlighting this fact at every opportunity. Can this group still feign ignorance?

We cannot simply brush this "selective rational thinking" aside because then our line of argument lacks consistency. Then we believe only what we want to believe.

For sure, with each set of measures, a slice of potential buyers are removed from the market but are many of us continuing to under-estimate the depth of liquidity in the markets?

It is worth repeating here what a local pre-eminent economist concluded in a published e-mail exchange with another last year. It is that loose monetary policy invariably leads to asset inflation. There are no two ways about it.

For the economist, the crux of the problem is low interest rates. Not many have bought into or fully understood this yet. Have the latest measures addressed that? If not, I am convinced more cooling measures will be needed until the liquidity problem fully dissipates.

by Colin Tan
05:55 AM Jan 21, 2011


Colin Tan is Head, Research & Consultancy at Chesterton Suntec International.

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

Published January 17, 2011

Speculation curbs to hit all and sundry

By SIOW LI SEN


THE latest clampdown on mortgages is pretty severe, prompting one observer to say that there is '100 per cent certainty' that the measures will cool the market.


The Monetary Authority of Singapore (MAS) has followed up to close a potential loophole, by proposing to impose the same lower loan limits on mortgage equity financing.

To recap, last Thursday, the government said that the loan-to-value (LTV) limit for more than one home loan is now 60 per cent, down from 70 per cent, and for non-individuals, it's 50 per cent. This is in addition to slapping a sellers' stamp duty of as high as 16 per cent, up from 3 per cent previously.

If the measures are going to work 100 per cent as the property market observer says, it follows that the banks will be 100 per cent affected, with the most immediate impact being lower loans growth.

Home loans which grew over 22 per cent in November, based on the latest data available, was the driving force of bank lending last year.

The new measures could signal an almost immediate contraction in home loans growth. But the ripples will spread as loans to contractors and developers could also shrink, along with lower demand for related support services, such as those provided by lawyers, agents, and retailers of furnishing and fittings.

Consumer spending could be pinched too because people spend more when they feel wealthy. If home prices slide, they will feel less rich.

With the additional clamp on mortgage equity financing, other sectors of the economy may also feel the impact of the new measures. Potential borrowers could have intended to use the funds for share financing, a holiday or for their children's education.

Bankers have so far put on a brave front. All agree that the latest measures will weed out speculators and make for a more sustainable property market in the longer term.

If banks had only been more prudent by lending only 50 or 60 per cent of the value of the property, the government might not have needed to act.

The latest measures are very drastic, certainly more harsh than those Hong Kong imposed last November to cool its property market.

Perhaps the Singapore government is trying to pre-empt the flow of hot money from China that could be diverted to Singapore after Hong Kong imposed restrictions on its property market.

'The unprecedented measures were due to uncertainties that emerge from the large amount of liquidity from quantitative easing in the developed countries,' said a United Overseas Bank research note. 'The new measures might turn away overseas speculators and hence could curtail the additional inflows that resulted as China and Hong Kong further clamp down on their real estate markets. In turn, this could reduce the pace of Singapore dollar appreciation ahead of the monetary policy meeting in April.'

So the multiplier effect could also reach the Singapore dollar which, up to last week, was expected to continue to appreciate.

The list of imponderables is going to be a headache for banks which have been struggling with low interest margins.

Will this lead to a new round of interest rate wars as banks fight hard to hang on to their customers? It's going to be an interesting 2011!


Source:/www.businesstimes.com.sg

Published January 15, 2011

Sitting pretty in the new property landscape
The latest property curbs are tough, but two groups might find themselves in a sweet spot

By UMA SHANKARI

THE latest round of measures to cool Singapore's property market, introduced on Thursday, have to be viewed together with all the government interventions in the market over the last two years.


Analysts believe that this last blow could kill off any positive sentiment left in the property market.

The last three rounds of demand-side cooling measures were introduced in September 2009, February 2010 and August 2010. These caused short-lived declines in volumes but had no visible impact on pricing - similar to what happened in Hong Kong.

But this time, it will be different. A significant fall in transaction volume is expected almost immediately. Analysts also expect private home prices to correct by 5-10 per cent in 2011 as the government's two-pronged strategy of releasing more land and controlling demand makes its impact.

Market watchers will remember that together with measures to curb demand, the government has boosted supply significantly over the last two years. It released record supplies of land for residential development in both H2 2010 and H1 2011. This, together with the latest measures, may prompt some investors to exit the market.

'We think owners are more likely to sell their units given the persistent measures and large upcoming supply due for completion in 2013 of 11,600 private and 18,300 HDB units,' said Morgan Stanley analysts Brian Wee and Wilson Ng.

The pool of available buyers will also shrink. Noted Citigroup analyst Wendy Koh: 'Except for genuine home buyers and long-term investors, potential buyers are likely to think twice before committing to a property now.'

It now appears that two sets of buyers are in a sweet spot: first-time home buyers, and buyers with deep pockets (a large number of whom are foreigners). They can now wait for prices to fall before choosing homes from the boosted supply.

Buyers looking to buy their first property remain untouched by the new rules. The government's move to slash the loan-to-value (LTV) limit on housing loans from 70 per cent to 60 per cent for individual buyers only affects those with one or more outstanding housing loans.

Buyers with deep pockets will also benefit. Analysts say that the most severe measure 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 sold in the first, second, third and fourth year after purchase.

This is a sharp increase from previously when sellers were subject to a stamp duty of only up to 3 per cent if they sold within the first three years. The new rule applies for properties that are bought on or after Jan 14.

Buyers with deep pockets can now take advantage of falling prices to hunt for luxury homes and trophy assets, and wait out the four years before re-selling their properties. They are also unlikely to be deterred by having to fork out 40 per cent in cash upfront.

Cash-rich foreign buyers fall into this category. The government has not introduced any specific measures to control property purchases by foreigners.

Looking forward, three segments of the market may prove to be interesting:


New launches

The new measures could put off property investors at recent launches. It remains to be seen how many will let their options lapse.

Those who exercised their options before Jan 14 will not be affected by the new LTV and seller's stamp duty changes. Those who didn't will now be subject to the harsher regime. One view is that buying decisions could be put off for up to one year as investors wait for the market to settle.


Secondary market

Units in the secondary market as well as newly-completed properties with Temporary Occupation Permits (TOPs) may prove to be somewhat more resilient than new launches.

If a buyer is genuinely looking to upgrade, he can sell his existing property and apply for a new loan for his new home.

The new loan will then be classified as the buyer's first loan, allowing him to borrow up to 80 per cent of the property's value. In this scenario, completed properties have an edge over new launches as units will be ready to move into.


Collective sales market

The latest round of measures could kill off the fledgling collective sales market.

Developers BT spoke to said that owners' asking prices are already too high. With these measures, home prices are likely to come down, making it even harder for a developer to break even after paying a high price for land.

'Reports of en bloc activity for smaller land plots at rising prices have intensified of late,' said CIMB analyst Donald Chua. '(This) could now ease as developers adjust pricing and demand expectations of final products.'

Corporate buyers looking for bulk purchases in residential properties will also be discouraged. The government has reduced LTV limits for corporate buyers to just 50 per cent.

'This will curb price growth for en bloc transactions and prime property bulk deals by private funds may dwindle,' said Royal Bank of Scotland (RBS) in a note.

All said, the latest measures will shake up the local property sector and expose the weak players.

In short, it will separate the men from the boys.


Source: www.businesstimes.com.sg

Published January 14, 2011

COMMENTARY
A cold shower on hot money

By KALPANA RASHIWALA

THE Singapore government yesterday acted defensively to stem the tide of hot money flowing into the island's housing market. This comes in the light of recent steps taken by Chinese and Hong Kong authorities to guard against property asset bubbles in their markets.


The latest measures are also the most severe announced till now to cool Singapore's housing market. Analysts say transactions will slide and so will prices. 'There's 100 per cent certainty these measures will work to cool the market,' declared Knight Frank chairman Tan Tiong Cheng.

The sharp spike in seller's stamp duties is even harsher than the May 1996 anti-speculation measures that had treated gains from sales of properties within three years of purchase as taxable income. Whereas that tax applied only to those who profited from flipping their properties, the latest set of hefty seller's stamp duties must be paid regardless of whether the seller makes a gain or loss.

Now, even if a property speculator or investor decides to simply cut a loss in future, he'll be liable to pay the hefty seller's stamp duty (SSD). This is a more severe deterrent to investing or speculating in property than the old 1996 tax.

In letter, the new SSD rates apply to those who buy a private home from today. In reality, they will also frustrate existing home owners' efforts to offload their properties as buyers become scarce since anyone who buys from today will be hit with the new SSD regime.

For those who buy a private residential property from today and sell it within the next 12 months, the seller's stamp duty will be 16 per cent of the sale consideration (much higher than the up to 3 per cent currently). If the property is disposed of in its second year of purchase, the SSD is 12 per cent (again higher than the up to 2 per cent currently). The SSD is fixed at 8 per cent if the property is sold in its third year of purchase (higher than up to 1 per cent currently). The government is also extending SSD for sale of properties in the fourth year of purchase, with the rate fixed at 4 per cent.

What the new SSD rates effectively mean is that short-term speculators would have to be confident of being able to clear a profit hurdle of about 20 per cent (comprising the 3 per cent stamp duty payable when buying the property and the 16 per cent SSD when divesting it within a year) before they'd find it worth their while to enter the market.

Following HK's example

The SSD package is somewhat similar to what Hong Kong authorities announced in November. Under those measures, homes sold within six months of purchase attract an extra 15 per cent stamp duty; the rate is 10 per cent for properties resold between 6 and 12 months; and 5 per cent for those resold between 12 and 24 months.

The Hong Kong government also raised downpayments for homes (depending on their value) and lowered the loan-to-value (LTV) limit for non-owner occupied residential properties and those held by corporates to 50 per cent.

Yesterday, Singapore's authorities too announced a lowering of the LTV limit (from 70 or 80 per cent currently) to 50 per cent on housing loans granted to corporates, trusts and other non-individual buyers.

Analysts suggest that this measure could have been triggered by recent bulk purchases of units in new residential developments which help developers achieve more pricing power.

As well, the Singapore authorities are further reducing the LTV limit on housing loans from 70 per cent to 60 per cent for new purchases by individual home buyers with one or more existing housing loans. This should further foster financial prudence and reduce over-exposure to the property market among Singapore households. After all, the hot money coming in from overseas can easily leave the local property market, and Singaporeans may be left holding the baby from a property downturn.

The latest package is the biggest bomb the government has dropped from its arsenal to cool the property market - and this will no doubt unnerve market players.

But the measures are not intended to cause a severe crash in the market and if that threatens to happen, the government can quite easily withdraw them.

On a brighter note, those who have been waiting for a price correction to enter the market may now see their wish fulfilled.


Source; www.businesstimes.com.sg

Published January 14, 2011

New measures expected to slow down home loans
They will eliminate speculators, rein in prices, say bankers

By SIOW LI SEN

(SINGAPORE) Bankers are bracing for a slowdown in home loans as buyers take stock of the government's latest property measures to dent the buoyant market.

The latest restrictions, the third in 12 months, are considered fairly drastic as they call for cash of as much as 50 per cent to buy a property in some cases. They could eliminate a lot of potential buyers.

In addition to increasing the holding period to four years from three for seller's stamp duty, the lower loan-to-value (LTV) for property purchasers who are not individuals is now 50 per cent.

That means a buyer will have to fork out $500,000 in cash for a $1 million home. And for individuals with one or more outstanding housing loans, the LTV limit on home loans will be lowered from 70 per cent to 60 per cent.

The latest measures will weed out speculative activities and further deter potential investors because of the higher cash outlay and a higher breakeven price to be achieved with a significant increase in stamp duty when the property is sold within four years, said a UOB spokeswoman.

Lui Su Kian, DBS senior vice-president and head of deposits and secured lending, said the bank has always encouraged home buyers to be prudent as a home loan is a long-term commitment.

'These new measures are likely to affect investors who would have to commit higher cash amounts for their down payments,' said Ms Lui.

As it is nearing the Chinese New Year, generally a quiet period for the market, it will take some time to ascertain the impact of the new measures, she added.

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

Housing loans have been the biggest driver of bank loan growth, though there are signs of slowing growth. In November 2010, the latest data available, housing loans rose 1.7 per cent over the month - and 22.1 per cent over the year - to $110.9 billion at end-November. The annual pace of growth has been slowing since August, when it reached 23.4 per cent.

The 50 per cent LTV will hit a lot of mini-developers, sometimes comprising small groups of friends or relatives who join hands to buy a few, typically older properties, do them up and sell for a quick profit.

'I know of friends who banded together to buy two old properties. One of them is a contractor so he did them up cheaply, and they've sold them and they've made half a million,' said one banker.

Bankers expect the latest measures to rein in property prices, unlike those announced last year, which had little impact.

Vibha Coburn, Citibank Singapore business director, secured finance solutions, said a stable property market is good for the economy and Singaporeans.

'These new measures will help to reduce speculation in the market and owner-occupiers will continue to have opportunities to get their dream homes.'

Dennis Khoo, Standard Chartered Bank Singapore head of consumer banking, said the new measures will curb speculation and create greater home ownership opportunities. 'We'd like to reinforce that, the majority of the mortgage customers are homeowners. In this regard, while we will continue to monitor customer sentiments closely, we feel that the new measures will have minimum adverse impact on the bank.'


Source; www.businesstimes.com.sg

What the Govt property measures mean to you

by Phang Lah Hwa
05:55 AM Jan 15, 2011

With the latest round of Government measures, there might be concerns among first-time home buyers, those looking to upgrade their properties as well as property investors on how they will be impacted. Let me share my views:


First-Time Home Buyers and Property Upgraders

For first-time home buyers, you need not worry as these measures do not impact you directly. You will still be able to obtain loans of up to 80 per cent of the property value or purchase price, whichever is lower, if you fulfil the borrowing criteria of the bank.

As for property upgraders, you may still qualify for an 80-per-cent loan if the document for the sale of your existing property and the loan redemption statement can be submitted at the point of applying for a new loan.



Property Investors

The latest measures will have an immediate impact for those who are considering to invest in a second or subsequent property and have an existing mortgage loan.

Foremost, the capital outlay will be increased as a result of the drop in the permissible loan quantum at 60 per cent. The mandatory cash component remains unchanged at 10 per cent of the property value.

To illustrate, if the intended property to be purchased is $1 million, you can obtain a maximum loan of $600,000. A minimum $100,000 (10 per cent of the property value) must be paid in cash, while the remaining $300,000 can be funded with a combination of cash and CPF.

Your next concern will be the significant increase in the seller's stamp duty. If the property is sold within the first year from purchase date, the applicable stamp duty will be a hefty 16 per cent.

This percentage reduces to 12 per cent, 8 per cent and 4 per cent, if your property is sold in the second, third and fourth year respectively.

Hence, you should be prepared to hold for a longer term, at least four years from the date of purchase. Should you wish to sell within the four-year period, you should carefully weigh your capital gains versus the stamp duty and other ownership cost such as interest, legal charges and taxation.

For those who are considering setting up an investment holding company for your property portfolio, you should note that the permissible loan quantum is now capped at 50 per cent.

Putting regulatory impact aside, it is important for you to be comfortable with the overall financial commitments, such as your home loan instalment and maintenance fees.

Hence you should carefully review the variety of loan packages in the market, in order to select one that meets your needs. Only then can you benefit from your investment.



The writer is OCBC Bank's head of consumer secured lending.


Source: www.todayonline.com