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Market nervous over possible steps to cool property sector - 3 August
The surprise hike in the development charge (DC) rate last week cost the stock market 4.2% and some nerve and confusion among investors. Many interpreted the move as a prelude to more drastic measures against property speculation.
However, property experts tend to agree with the reassurance given by the Minister for National Development which basically said that the Government would not hit the brake but would rather tamper with the supply-side of the equation by increasing land sales. The hefty increase in DC rate is such a supply-side measure that would cool collective sales; but such measures could take years to work. On the contrary, the demand-side measures are strong medicine but the damage can take years to repair.
In the interim, axing the deferred payment scheme may still be considered by the authority as such incentive was largely responsible for the increase in private home sale and the subsequent speculative sub-sales.
The deferred payment scheme allows speculators to put off paying the bulk of the purchase until the property is ready for occupation a few years down the road. It therefore allows speculators to buy and sell without investing much equity. The Government could also allow a lower loan quantum for purchases, forcing buyers to cough up more cash. At the moment, the loan-to-value ratio is 90% of the market value or the purchase price, whatever is lower. A move to reduce the ratio back to 80% may still be considered by the government.
Banks could also be encouraged to lend less and reduce their exposure to real estate security. The gain tax, which taxes profit earned from property deals, may also be re-introduced.
Govenment will not intervene in the property market - 6 July
Minister for National Development, Mr Mah Bow Tan, has assured the public that the Government was not about to intervene in the property market by clamping the rising prices but instead would moderate prices by increasing the supply of homes and offices and providing sufficient data on prices to ensure greater transparency and to allow the market forces function on their own.
Mr Mah said the supply crunch was a short-term problem that required a short-term solution. As such, the Government would study the feasibility of releasing temporary premises and providing ‘transitional’ office sites as a way of helping the supply side of the equation.
He advised the public to be cautious when reading data analysis provided by property analysts and to look at hard facts provided by the authorities. He maintained that data by URA and HDB reflected the reality better.
Home prices jump 7.9% in second quater - 4 July
Singapore home prices rose an impressive 7.9% between April and June, compared to 4.8% in the first quarter. This has been the 13th time home prices have climbed in a row.
Statistics released by Urban Redevelopment Authority (URA) showed that compared to the second quarter of 2006, home prices are up 20.6%. To ensure that there will be sufficient supply of residential properties to meet rising demand, there will be government land sales programmes for the second half of 2007, which aim to create a potential supply of about 8,000 private homes including executive condominium.
If necessary, there will be more GLS programmes next year.
To allay apprehension that there might not be enough supply of private homes, the URA said that between second half of 2007 and 2010, there would be about 42,200 new units of private housing ready for occupation. Out of these, about 22,700 units have not been launched yet.
Here are the price movements of non-landed private homes in second quarter:
- In the Core Central Region, prices increased 7.6% on a quarterly basis in second quarter. This region comprises the traditional prime districts 9, 10 and 11 and Downtown Core (including Marina Bay) and Sentosa.
- In the Rest of Central Region, prices increased 7.9% on a quarterly basis in the second quarter. This region comprises locations like Queenstown, Bukit Merah, Outram, Bishan, Kallang and Marine Parade.
- Outside Central Region, prices increased 6.5% in the same period. This region comprises locations like Woodlands, Jurong, Hougang, Ang Mo Kio, and all the outlaying areas.
HDB resale flats price index registered a 2.9% increase in the second quarter over the first quarter’s meagre 1.3%.
Orchard rental near previous peak - 2 July
Shop rents in Orchard Road areas are almost back to their previous peak before the Asian currency meltdown.
Retail rents there recorded an average of $34.40 per sq ft (psf) per month in the second quarter of 2007. During the last market peak in 1996, a monthly average rent in Orchard Road was $35.10 psf per month. There is now only a 2% difference in rental amount between the two time periods.
One of the main reasons of the rise in retail rents is the dearth of good quality retail space in Orchard, following the extensive refurbishment activities going on there as building owners respond to the government’s initiative to re-brand Orchard Road as the world’s premier shopping street. The push factor has been the upcoming integrated resorts (IRs). Following the government’s announcement on the IR, more new brands from Europe, the United States and Australia started to take up prominent shop space in Orchard and in the process shoring up rents there.
Furthermore, local brands such as Tangs and Robinsons are also going through re-branding to give the invading global brands a good run of their money.
As such, Orchard Road mall rents are expected to rise between 4% and 7% this year bringing them to a new height not seen since 1996.
Rivershireon Lornie Hill Road for collective sale - 2 July
Rivershire on Leonie Hill Road is up for collective sale for an asking price of about $348 million or $2,200 psf ppr.
The project has a land size of 56,400 sq ft and a plot ratio of 2.8 which gives it a maximum height of 36 storeys. The buyer would be able to build an estimated 88 units averaging 1,800 sq ft each. Currently, Rivershire has 74 units. There will be no development charge payable for this project due to a high development baseline.
Previously put up for sale in April for $237 million or $1,500 psf ppr, the project was unable to secure the minimum 80% consent. However, things have shown up in recent months and the marketing agent is now able to garner sufficient signatures to get the collective sale off the ground and in good measure add $111 million in asking price.
The selling point of Rivershire is its location, being near other prestigious residential projects such as The Trillium, Tribeca and St Thomas Suites.
New CPF minimum sum on 1 July 2007 - 28 June
From the first of July, the CPF minimum sum will be increased to $99,600 from $94,600. The new amount will apply to CPF members who turn 55 between 1 July 2007 and 30 June 2008. The CPF minimum sum will be raised to $120,000 by 2013. This sum is to ensure that Singaporeans have sufficient savings for their retirement.
Likewise, the Medisave minimum sum will also be raised on the same day from $28,000 to $28,500. This ‘set aside’ savings cannot be withdrawn when members make their CPF savings withdrawn after 55 years old. The Medisave minimum sum will be saved for rainy days.
In the meantime, the Medisave contribution ceiling will be raised from $33,000 to $33,500. Any Medisave contribution in excess of the prevailing Medisave contribution ceiling will be transferred to the member's Special Account if he or she is below 55 years old; or Retirement Account if he or she is above 55 years old.
Let foreigners own landed homes in Singapore - 28 June
A top US Bank, Goldman Sachs has in a research paper said that it is timely for Singapore to relax restrictions on overseas ownership of landed properties.
The paper argued that the relaxation could spur further foreign buying of private properties in Singapore and cause a healthy spill-over from rising landed property prices to condominiums and apartments. The paper also indicated that the average price of a high-end bungalow is 35% lower than that of a comparable condominium, which sells for about $26.3 million. It reckoned that the relaxation of curb on foreign ownership on landed properties would narrow the price gap.
Currently, foreigners including permanent residents here must first obtain a ‘special approval’ before they are allowed to own a landed property. Moreover, they can own only one such property for own stay. The paper claimed that such a move would signal a pro-immigration stand by Singapore government and that would help accelerate the country’s efforts to attract foreign talent.
However, the Ministry of Law has responded that it had no plan to allow foreigners to own landed properties in Singapore before they become a permanent resident.
Minister urges public not to panic - 28 June
Mr Mah Bow Tan has reiterated that the government is monitoring the supply-demand situation very closely. The Government Land Sale (GLS) programme will respond quickly to any market changes. In fact, it has reacted to the strong take-up rate of the land parcels in the recent GLS programme and decided to push up the supply.
The two-tier system in the GLS programme which incorporates land in the confirmed list and reserved lists will ensure that the government will not oversupply, nor allow a shortage. On the recent record-breaking sale of two HDB resale flats in central areas, Mr Mah said that the buyers are not really average HDB upgraders. They paid cash for the flats and didn't even ask for valuations nor take a loan. He reckoned that they were more the exception rather than the rule.
Mr Mah believes that the general market is in fact quite steady. The increase in prices is in line with the increase in the strength of the economy and job growth. Mr Mah also reassures the public that the government will continue to keep a close eye on the market and to ensure that there is sufficient supply. And if the demand goes up, there will be new sites released. As such, there is no need for people to panic.
Mr Mah feels that the fundamental reason behind an en bloc redevelopment is really to make sure that older parts of Singapore have a chance to be rejuvenated and redevelop themselves. The process will ensure that Singapore will not have a static situation where things are going to run down and there is no opportunity for people to actually redevelop.
At the same time, the Ministry of Law and Singapore Land Authority are undertaking a consultation exercise and try to make sure that the needs of the minority are taken care of in this self-renewal process (i.e. the en bloc sales).
The largest GLS programme since 1997 - 27 June
In bid to check the soaring property prices and rents, the government yesterday announced that it would offer 14 new sites for sale in the second half of the year.
The biggest ever government land sales (GLS) programme is meant to ensure sufficiency in supply of office space and to tamper with the phenomenal rise in property prices and rents which may well erode the island city’s competitiveness. On top of the 14 new sites, the government has also added 27 in the reserve list, which will be released only on successful application by developers. In all, the new sites can potentially yield 8,000 private homes and 3.8 million sq ft gross floor area (GFA) of commercial space. About 900,000 sq ft of new office space will be from the Marina View commercial site.
Already in the first half of the year, 40 sites (seven in confirmed list and 32 in reserve list) can yield 5,475 private homes, 5.3 million sq ft of commercial GFA and 5,285 hotel rooms. Of these, 6.9 million sq ft of office space will be completed by 2010, including the first phase of Marina Bay Financial Centre. The last time the government offered some many new sites was in 1997, but the programme was brought to an abrupt halt due to the Asian currency crisis.
The latest government’s move is hailed as an answer to the mounting complaints from businesses about the skyrocketing office rents in the past year.
HDB resale flat prices rising again - 26 June
A 5-room HDB resale flat at Jalan Membina was sold this month for $675,000, setting a record sale price for a public flat. It is believed that the buyer is someone who had just received a windfall from a collective sale.
Sold without a valuation report being done, the five-year-old 16-storey unit is close to amenities and just minutes from Orchard Road. Going by the average valuation price of about $550,000 for a five-room flat at Jalan Membina area, the buyer would have to pay about $125,000 in upfront cash for the transaction.
Meanwhile, good HDB resale units elsewhere are also making waves. A five-year-old, 30-storey five-room flat in Toa Payoh was sold last month for $571,000. Another five-room flat at Kim Tian Place was sold for $720,000 a day after the record was set at Jalan Membina. Many resale HDB flats that have come onto the resale market now are asking for anything from $50,000 upwards in cash above their value.
However, most agents do not believe that these high performing deals are representative of the overall market. Most of them believe that such high-cash deals would only happen in central areas.
Landlords cut lease period up rentals - 27 June
The usual three-year lease plus three-year option is a thing of the past, for now. A one-year lease is becoming the norm in this hot rental property market. And the heat is getting more intense each day.
Many tenants have their rude awakening recently when their current leases expire. With more expatriates arriving and the economy charging forward, more landlords are upping the ante, especially so in the residential market. This is because home prices are continually rising and landlords would not want to lose out by signing a long lease. Short-term leases are the way to go for landlords to stay competitive and to constantly update rents. For example 1,000 sq ft two-bedroom apartment in River Valley Road is now going for $5,000 a month for a one-year deal. With the prospect of home prices looking very rosy, no landlord will be willing to sign any deal beyond one year.
Likewise, retailers are feeling the heat. The typical three-plus-three year leases are now being replaced by a simple three-year lease in many shopping malls. While private landlords openly admitting that they are milking the situation, developers however claim that they keep leases short to ensure vibrancy in their malls. Only office tenants are spared the anxiety. Major developers in the Central Business District are staying with standard lease terms of about two to three years.
This trend is expected to last until the opening of the casino in 2009.
Sellers' market has returned to the public housing sector - 14 June
The ripple effect of the property boom in the private property segment has caused prices of bigger HDB flats to rise.
Reportedly, the recent spate of private estate collective sales has created many cash-rich individuals who are ‘down-grading’ to larger resale HDB flats. With the windfall from their earlier collective sales, they could well afford to pay top dollar for big flats in good location. Meanwhile, the soaring of private apartment rents has also stoked rents of HDB units. Experts have put the rent hike of HDB flats to as high as 35% compared to last year. With rental yield improving, fewer flat owners are putting their flats up for sale. This has caused more tenants to want to own a flat more urgently. And such severe constraint in the demand and supply situation is certainly pushing prices further up.
Bigger flats tend to benefit more from the current situation because of the higher rent that they command in today’s market. Many executive flats are now selling for about $20,000 above their value. Just last year, an ordinary E-flat, as they are called, would have to settle for just the market valuation prices. When a flat is bought at a cash premium above its market valuation price, the buyer cannot use his Central Provident Fund savings or a home loan to pay for the difference. The cash premium has to be settled with upfront cash within ten days of the first HDB appointment.
Prices of resale HDB flats may have inched up only 1.3% in the first quarter as compared to the 4.6% achieved by private properties, the acute shortage of private rental properties will definitely improve things in the HDB resale arena. It used to be that four people would respond to each HDB property advertised. Currently, more than 10 people would respond to the same advertisement.
However, the basic fundamental of the resale market remains the same. It all boils down to the flats’ location. Right now, the boom is felt for flats closest to the city centre - like those near Tiong Bahru, Redhill and Queenstown MRT stations. Those flats in outlaying areas and newer towns such as Punggol or Sengkang will continue to face selling pressure because of the availability of unsold new HDB flats.
More Singaporeans own more than one house – 28 May
The number of Singaporeans with at least two mortgages to service has doubled compared to two years ago.
This phenomenon is a direct result of the current bull sentiment in the property market. In fact, in the first quarter, there were 41,078 individuals whose names appeared in more than two properties. In 2005, there were only 19,901 such individuals around. Many of them had mortgage debts of more than $1 million.
The number of borrowers with multiple mortgages that totaled more than $1 million has gone up to 2,925 in March 2007. This is slightly more than 105% increase compared to two years ago.
Banks are naturally elated about the growing trend, though customers with more than one mortgage and over $1 million make up only 7% of the total number of borrowers. But the lenders are expecting more such individuals to avail themselves.
In fact, in the past 12 months ending March, the number of bank customers with two or more mortgages was up by 15,101, or an increase of 58%. For example, Citibank saw a 10% jump in the number of customers with more than one mortgage and Standard Chartered Bank said the number had doubled.
In fact, besides taking more mortgages, the borrowers are also borrowing higher loan amounts in tandem with the 18.8% home price appreciation over the two years to March. United Overseas Bank's average case size has gone up to $750,000, from $500,000; while Standchart’s has up to $1 million on the average.
The number of consumers with higher-value mortgages has also gone up. The total number of borrowers who had taken out more than $1 million in mortgage loans, including those with a single mortgage is 4,291 in March. This number represented a 33% increase from a year prior, and 85% better compared to March 2005.
The Credit Bureau of Singapore said that about 960 more home owners crossed the $1 million mark in mortgage value by taking out their second or third home loan in the 12 months ended March. This is almost 50% increase from last year.
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