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| Home Loan Singapore Newsletter Oct 27, 2008 |
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What to look out for when hunting for that perfect condo or house THE recession has resulted in a 25-per-cent fall in private-property prices from their market peak, and with prices expected to dip further next year, there may be opportunities to pick up some bargains. However, buyers of properties – whether for investment or occupancy – should do their homework before committing to such big-ticket items. Here are 10 tips to keep firmly in mind. 1 CONSIDER LANDED The executive director of HSR Property Group, Mr Eric Cheng, feels that if buyers are willing to fork out $1.2 million to $1.3 million for a condominium, they should consider buying landed property instead. Due to land scarcity in Singapore, there is always more demand than supply for landed property, which is not the case with condos, said Mr Cheng. 2 INSTALMENT RESERVE Mr Cheng said it is important to invest within your means. Have a reserve of at least one year’s worth of instalments in case of shocks, like a loss of income. 3 LEASING OR LIVING? Mr Arvin Sylvester Lim, division director of Century 21 SHL Realty, said it is important to be sure if you plan to live in the property or rent it out. If you are making it your home, the equation is simple: Find something that you like and can afford. If you are looking to invest and rent out, do your research to see if there is good demand in an area, and if the rent will be enough to cover the instalment payment and still allow a profit. 4 DON’T WAIT TOO LONG While one should hold back until one finds something ideal, Mr Lim does not encourage overspeculating on trends. “Buying a house is not like buying a car. The moment you drive the car...the value drops, but with property the value can go up or down,” he said. Even though prices are expected to fall further, “a home is a must”, Mr Lim said. He advises against pegging buying one to unpredictable market movements. 5 MAKE OFFERS FAST Buyers who bought too many properties or can’t afford to keep up with payments, given the weak economy, will be selling off their investments now, said Mr Shannan Govindarajoo, marketing manager at ERA. He suggests you start looking and making reasonable offers as he thinks more buyers will be entering the market, which could mean prices for these “must-sell” properties may rise. 6 CHECK MASTER PLAN Look at the Urban Redevelopment Authority’s master plan and invest where the Government is pumping in money, said Mr Govindarajoo. For instance, he thinks those interested in the Marina area should strike now, as prices are down by 40 per cent, compared to last year’s. Mr Lim said investing in property in that area will reap great returns when the integrated resort is ready as “a lot of the management staff will be living there, so rentals will be high”. 7 SHOP FOR A LOAN Banks are now becoming more cautious with making home loans and how much they are willing to lend, said Mr Govindarajoo. He advised shopping around for a good home loan first, so that you do not commit yourself to a seller before knowing how much you have to work with. 8 PRICE VS VALUATION Check the valuations of the property you are considering at different banks to make sure you’re getting a good deal, said Mr Govindarajoo. 9 OLDER CONDOS Mr Parthiban Sadagopal, a PropNex realtor, suggests buying a condo “between seven and 10 years old in the outskirts”, like Pasir Ris or Tampines. Judging from the trend seen after the 2003 recession, such condos are good buys for living in and investment, as you could hope to buy one at $400,000 to $500,000 now and sell it for up to $800,000 when the economy picks up. Renting it out could fetch $3,000 a month as well. 10 DISTRICT 15 Keep your sights on the East Coast area of District 15, said Mr Cheng, as prices there are unlikely to dip drastically. Good schools, malls and eateries add value, making it a good option for those who feel prime locations are too expensive. Meyer Road, Ceylon Road, Telok Kurau and Crane Road are some of the best places to buy a house, according to him. Mr Govindarajoo agrees, saying District 15 is “evergreen”. snaidu@sph.com.sg Return to TOP | View Home Page | Recommend this page to your friend |
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Developers offer soft discounts, for example, by absorbing legal fees Private home prices are falling – and they will fall even more next year. Property developers may disagree, but there is no question about it, if you ask industry observers. The economy has slowed considerably and there have been retrenchments and wage cuts. Sales volume of new homes looks set to reach an 18-year low this year, while supply is far from lacking. “In every bear market, no matter what the developers say, it will happen,” Mr Leong Sze Hian, the president of the Society of Financial Service Professionals, said of the price falls. The only unknown, he added, is the extent of the fall. Manpower Ministry data already shows that average monthly real earnings – pay minus the effect of inflation – fell by 17 per cent from $3,982 in the first quarter to $3,307 in the third quarter. Also, on an annualised quarter-on-quarter basis, gross domestic product growth in the third quarter declined by 6.8 per cent, continuing the 5.3 per cent contraction experienced in the second quarter. “All these will filter through to the property market,” said Mr Leong. Right now, most buyers are remaining on the sidelines. New launches are few, and there are not many desperate sellers out there yet. “Most are not feeling any pain from the recession yet. In the secondary market, many sellers are still hoping to do sub-sale at a profit,” said Knight Frank’s director of research and consultancy, Mr Nicholas Mak. The result? There are no major price reductions yet, he said. Going forward, though, there could be more speculators desperate to get rid of their properties because they do not want to be saddled with huge loans, experts say. These are people who bought properties when the market was booming under the deferred payment scheme, which means they will have to pay the full sum for the property upon completion. The Government has said some 10,450 units of private homes sold under the deferred payment scheme have yet to be completed. Some 2,540 units – largely bought during last year’s boom – will be completed in 2010. In the new homes market, there will be more new property launches or re-launches after Chinese New Year late next month, consultants say. Frasers Centrepoint, for one, has plans to release Caspian, its 700-unit condo near the Lakeside MRT station. “The smaller projects or those in less attractive locations will likely need to offer more discount,” said Mr Mak. “Others may offer soft discount, so that the prices reflected in the caveats will not be reduced.” Soft discounts can take the form of furniture vouchers or the absorption of legal fees or stamp duty. There could be price cuts in some mid-tier or prime developments where prices are “fairly toppish”, Mr Mak said. “They would, thus, have to adjust their prices to a more reasonable level.” Novelty Group, for one, last month cut its price for the 75-unit Luma at River Valley Grove from $2,800 per sq ft (psf) to $1,450 psf. Recently, City Developments adjusted its price for the 77-unit Shelford Suites in Shelford Road to $1,400 psf from a preview price of $1,600 psf on average in June. The price then was already lower than expected, as two units were sold in March at $1,869 psf and $1,905 psf. Those seeking information on new launches can check out the Urban Redevelopment Authority’s (URA’s) website, which offers monthly sales and price data on the 15th of every month. It shows the number of units sold in the past month, as well as the median, lowest and highest prices done. The URA website also has information on individual caveats lodged for properties sold, so you can find out the prices done at a particular condo. The problem here is that the information is not very up-to- date because deals take time to complete and caveats take time to lodge. The price data can easily be two to three months old, which can be a long time in today’s fast-moving market. Potential buyers should check with their agents to ascertain the previous price levels done or check classified advertisements for the latest asking prices, experts say. They should also try to get a bank valuation on the property they are eyeing, said HSR Property Group executive director Eric Cheng. Those who want to buy a resale property now can bid below individual sellers’ asking prices. They could aim for 5 per cent to 8 per cent below asking levels, said Mr Cheng. Also, buyers should look for tenanted resale properties that can offer a 4 per cent to 5 per cent rental yield for at least the next year, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore. “In today’s market, it is wise to buy something that you can see and profit from immediately,” he said. The risk with new projects is that they could be delayed or their prices could fall from today’s levels, he said. But, be prudent and patient, warned Mr Cheng. “Don’t buy on impulse.” joyceteo@sph.com.sg Buying opportunity Those who want to buy a resale property now can bid below individual sellers’ asking prices. They could aim for 5 to 8 per cent below asking levels, said HSR Property Group executive director Eric Cheng. Return to TOP | View Home Page | Recommend this page to your friend |
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Job insecurity will deter buyers, says DTZ, as economic gloom prevails AMID difficult economic conditions, home sales are expected to remain weak next year, said real estate firm DTZ in a research report yesterday. Job insecurity and further weakness in the market will deter buyers from committing to property purchases, it added. This will weigh on consumer spending and create a “contagion effect on the property market”. Already, residential sales in the past two months have been “dismal”, said DTZ, adding that only 112 units were sold in October. This was the lowest figure since the Urban Redevelopment Authority (URA) started releasing monthly sales data in June last year. Last month was slightly better with 192 units sold, but it was still a dramatic drop from the monthly average of 444 units sold in the first nine months of the year. URA data showed that while 38,100 units were sold last year, only a third or so of this figure changed hands this year. DTZ called these results a “complete reversal of the trend in the private residential market”, and said the fall in home prices gathered pace in the fourth quarter “on the back of worsening sentiment”. Non-landed properties were hit hardest, as prices of non-landed freehold private homes in the prime districts fell by 14per cent in the fourth quarter from the quarter before. This was after the sector had already fallen by 4.5per cent in each of the previous two quarters. Overall, average prices fell 21.6per cent from the year before, to $1,160 per sqft – a level not seen since the second quarter of last year. Even landed housing prices, which had held firm up to the third quarter, “succumbed to the weak conditions” and fell in the fourth quarter, said DTZ. However, these did not fall as drastically as other sectors, with freehold prices slipping between 3.8 and 5.7per cent from the third quarter. Rents have also been dropping. DTZ said rents of non-landed private residential properties, which first corrected in the third quarter, “continued to head southwards as more expatriates are being repatriated”. It added that tenants, possessing lower housing budgets, are increasingly moving from prime locations to the suburbs, or downgrading to smaller units. Average monthly rents of prime non-landed homes fell 9.4per cent from the previous quarter to $4.36 per sqft. There is, however, a silver lining amid the gloom, observed DTZ. Ms Margaret Thean, the firm’s executive director, said: “Housing loan rates are low despite more cautious lending from banks, and there are investors waiting to enter the market when prices have fallen to attractive levels.” michtay@sph.com.sg Return to TOP | View Home Page | Recommend this page to your friend |
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Uncertainty in the market being caused now by the scheme should not be treated lightly. By Kalpana Rashiwala THE deferred payment scheme (DPS) was scrapped over a year ago but it has left a lingering uncertainty in the market that may not clear for some time yet – a fact that should not be taken lightly in examining the merits of reviving the scheme, as some developers are urging the authorities to. Developers say bringing back DPS will stimulate property demand and point out the scheme did help genuine home buyers tide over temporary cashflow issues. However, DPS has also been blamed for creating excesses during the recent property bull run. It fuelled speculative buying, since buyers needed to pay only 10-20 per cent of a property’s purchase price to the developer, with the rest only upon the project’s completion. Amidst the current property slump, DPS has also created a “time bomb” that is ticking away as projects sold on the scheme near completion, which is when buyers have to pay the chunk of their purchase price to the developer. Buyers who have not secured a housing loan yet may find it difficult to get one, with the current tight lending regime being practised by financial institutions. Without a housing loan, these buyers may not be able to meet their payment to the developer to complete their purchase. This will have consequences. The government recently revealed that 10,450 private homes sold in uncompleted projects were under DPS as at Nov 30, 2008 and has even given a breakdown of this figure by location and expected year of completion. Of course, not all DPS buyers are speculators. Nevertheless, the debate continues to rage on how big an impact there will be on Singapore’s property market from buyers failing to complete their purchase when projects receive Temporary Occupation Permit (TOP). Predicting the size of the blast from the DPS “time bomb” is tricky. For one thing, no one knows how many of these buyers who purchased on DPS have already secured a housing loan. For those who have, paying that big instalment to the developer at TOP may not be an issue. Those without a loan may start to panic. Other factors affecting the magnitude of the problem created by DPS include: how buyers are affected by the ongoing recession, prospects for their jobs or businesses, the economic and property market outlook at the time, and whether banks relent on their current tight lending policy. So the impact of DPS is unclear. And the fate of buyers and developers remains uncertain. Much has been said about DPS buyers defaulting on their purchases by walking away and returning units to developers. The reality is not so simple. The right to repudiate the sale-and-purchase agreement lies with the developer, not the buyer. Even so, some foreign buyers may get away with absconding from the deal and limiting their damage to the 10 or 20 per cent deposit paid. However, local buyers who fail to complete their purchase risk being sued by developers to either complete the transaction or to compensate the developer for the shortfall between the original contracted purchase price and what the developer manages to sell the unit for later. On the other hand, if buyers try to offload their units in a weak market, this may accelerate the tailspin in property prices. Another point to note is that those who sell their units at a loss in the subsale or secondary market will still have to cough up the difference and pay the developer. For instance, if a buyer had picked up a $1 million property on DPS, has paid the developer a 20 per cent or $200,000 deposit and manages to sell his property to another buyer for say, $700,000 in the downmarket, the first buyer has to pay the developer the $100,000 shortfall before it agrees to transfer the title to the second buyer. Developers too will have to count the cost of this whole episode, including the damage to their image if they drag financially strapped buyers to court. The global financial crash has already dealt a big blow to sentiment in the Singapore property market. This is being exacerbated by the uncertainty over the likely fallout from DPS. Defusing the time bomb What can be done to defuse this time bomb? If buyers say they can’t secure housing loans or sufficient loan quantums from banks to complete their purchase of properties bought on DPS, some of the stronger developers may be game to provide second mortgages for buyers – if the authorities allow that. Alternatively, developers could record the outstanding payments from problem DPS buyers as debt owed to them. So these buyers become debtors to the developers, who may charge them interest on the unpaid amount until the sum is settled by buyers, as allowed under the sale-and-purchase agreement. Developers may, however, be deluged with buyers taking refuge in such arrangements. And these arrangements can only be made with the support of the developers’ banks. Already, many mid-sized and smaller developers are highly geared. Whichever way you look at it, somebody will have to pay the price for the problems created by DPS – be it buyers having to sell their units at a loss or being sued by the developer, or developers ending up financing buyers to help them complete their purchase. Sentiment is so weak now that reviving DPS alone probably won’t do the trick in jumpstarting private home sales. Banks are tight-fisted now, but it is a matter of time before they have to relax on home mortgages. The business of financing will then be best left to them. In the months gone by, some banks had even devised novel schemes like zero instalment and interest absorption that mimicked DPS – and served the needs of genuine home buyers with temporary cashflow problems, just as well as DPS did. The good thing about this approach is that banks will have to do checks on borrowers to ensure they are credit worthy – to minimise the risk of non-performing loans manifesting later from giving loans to poor-quality borrowers dabbling in properties beyond their means. Developers, on the other hand, are not in the business of assessing the creditworthiness of potential buyers. Their business is to sell homes – to as many people as possible and at as high a price as possible. If developers are again allowed to offer DPS in its old form to home buyers, it may once more draw speculators with weak credit standing and create another round of excesses. Some have suggested ways to temper DPS. For example, buyers could be required to pay an additional 10 per cent – say 18 months after they have paid the initial 20 per cent to the developer. The idea is that buyers would need to apply for and draw down a housing loan, bringing banks into the picture earlier. That may help to sift out financially weaker speculators. DPS helps HDB upgraders to buy private property, as they don’t have to sell their existing HDB flats immediately to make progress payments on their new home. But the problems being caused by DPS should not be treated lightly amidst calls to reinstate the scheme. The Singapore property market will eventually recover after the dust from the global financial crash settles and the Remaking Singapore Story takes centre stage once again. In future, high-net worth individuals from overseas and other investors looking for places to park their monies may develop a distate for places brimming with excesses. After all, buying a property is a long-term commitment, best made within one’s means. kalpana@sph.com.sg Return to TOP | View Home Page | Recommend this page to your friend |
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What a tumultuous year it has been for economics. The ‘dismal science’ has not seen such a 12-month period before – the year started on a boom and is ending with theories overturned, conventions abandoned and economies worldwide simultaneously falling into recession. Fiona Chan recaps the top 10 economic trends in a year where uncertainty has been the only constant 1 Inflation, deflation and stagflation BEFORE the financial crisis exploded in September, inflation was set to be the year’s biggest economic story. As fuel and food costs skyrocketed, consumer prices soared to record highs around the region, including in Japan, South Korea, Thailand and Indonesia. In Singapore, inflation hit a 26-year high of 7.5 per cent in April and May, partly due to the rise in the Goods and Services Tax over the previous year. In response, the Monetary Authority of Singapore (MAS) gave the Singapore dollar an immediate boost to help offset more expensive imported goods. But the spectre of recession was looming ever closer, prompting predictions of the dreaded stagflation: low economic growth coupled with high inflation. Then the financial crisis arrived, jamming the brakes on consumption in developed nations, export demand and oil prices. Inflation worries transformed into warnings of deflation as asset prices started to plummet. The MAS reversed its Singdollar position in October, adopting a neutral stance that signalled its change of priorities from targeting inflation to stimulating economic growth. Inflation here is now expected to dive to between 1 and 2 per cent next year, after clocking in at 6.7 per cent in the first 11 months of this year. But while deflation seems likely in the near term, economists warn of higher inflation in the middle term due to massive government spending and the need to aggressively boost money supply in the face of tighter bank lending. This, in turn, could end up in stagflation if the downturn proves prolonged. Only one thing is definite: we have not seen the end of the inflation story yet. 2 Oil: What goes up must come down OIL prices dominated headlines for much of the year, whether they were shooting up to a record US$147 per barrel in July or crashing to below US$34 just two weeks ago. In the first half of the year, high demand from India and China, combined with rampant speculation, pushed up prices, which peaked at the height of tensions between Iran and the West. Predictions of oil at US$200 a barrel seemed feasible – until the market turmoil in September caused prices to plunge. Recent moves by the Organisation of Petroleum Exporting Countries to cut supply appear to have had little effect on falling prices, reflecting the extent of uncertainty in the market and the bleak outlook for global growth next year. Other commodities also had a roller- coaster ride this year. Gold, however, breached US$1,000 per troy ounce in March and stayed high through the year as risk-averse investors literally poured their money into gilt assets. 3 Nationalisation and bailouts DECADES of privatisation and lobbying for the liberalisation of markets came to a dramatic end this year as banking titans and giant companies, tottering on the verge of collapse from the unravelling web of bad mortgage loans, went hat in hand to governments for assistance. Bankers that turned beggars included Wall Street’s five hallowed investment banks: Bear Stearns was subsumed by JPMorgan Chase in March, Lehman Brothers collapsed in September, Merrill Lynch sold itself to Bank of America, and Morgan Stanley and Goldman Sachs transformed themselves into traditional bank holding companies. More buyouts, bailouts and mergers were cobbled together as huge organisations such as insurer AIG, mortgage behemoths Fannie Mae and Freddie Mac and savings and loan company Washington Mutual hovered at the cliff’s edge. After an intense round of political jockeying, the United States unveiled a US$700 billion (S$1 trillion) bailout plan in late September. Britain followed about a week later with a £500 billion (S$1 trillion) bank rescue package, while European nations also acted together to save their banks. The auto industry is the latest to jump on the bailout bandwagon, sparking an uproar over how much government help is too much. General Motors and Chrysler have obtained more than US$13 billion in US taxpayer funds to stay in business after they warned earlier this month that they would run out of cash in a matter of weeks. 4 Zero interest rates SINCE October, central banks have been cutting interest rates in a bid to encourage borrowing and spending. None have been more aggressive than the US Federal Reserve, which has cut its rate by 325 basis points since January. It used up its last interest rate bullet earlier than expected when it slashed rates two weeks ago to between zero and 0.25 per cent, an unprecedented level. Having exhausted its main ammunition with little effect on the economy, the Fed must now turn to more creative and drastic measures, such as quantitative easing, to spur confidence and jumpstart growth. 5 Quantitative easing IF YOU had to choose just one economic catchphrase to take into next year, this would be a good one. This extreme policy of printing money and force feeding it into the system is adopted by governments only after traditional tools have been used up – for instance, when interest rates are already lowered to zero and cannot go further. The Bank of Japan adopted this measure in the early 2000s during the country’s battle with deflation. It flooded banks with money by buying government and commercial securities and avoided a liquidity crunch. The US Federal Reserve appears to be going down a similar path. It is extending credit to banks through a wide array of facilities, providing them with more liquidity than they need with the aim of increasing money supply. The Fed hopes this will boost confidence in the banks, encourage lending and economic activity, and even lift inflation, preventing a deflationary spiral. 6 Fiscal stimulus and the revival of Keynes AS INTEREST rates reach new lows and the outlook worsens, governments around the world have taken a leaf out of the book of famed economist John Maynard Keynes and rolled out aggressive spending plans to keep their economies going as consumers cut back. The US has taken the lead, with President-elect Barack Obama planning a stimulus package that could reach US$1 trillion. Europe has announced a ¤200 billion (S$411 billion) spending scheme, while China, Japan, South Korea and Canada have also unveiled stimulus plans in recent weeks. Singapore has offered S$2.3 billion in loan and credit facilities for companies and S$600 million to retrain workers. The Government has also indicated that it will bring back some of the S$4.7 billion construction projects it deferred over the past year. But the biggest fiscal boost is expected in next month’s Budget, where individuals, households and companies are likely to get help to survive the downturn. 7 Decoupling debunked PERHAPS the biggest economic myth to be demolished this year was the assertion that emerging economies in Asia and Europe had sufficient steam of their own to continue growing even when the US was in a recession. Until June, economists were still arguing in favour of decoupling, pointing to China’s continued strong economic growth as evidence that the region was insulated from Western problems. But the credit crunch finally put paid to that theory, as the US proved once again that it has the capacity to throw a spanner into the works of the world economy. The synchronised economic slowdown since then has illustrated how dependent emerging economies still are on export demand, a trend that is unlikely to disappear for as long as trade flourishes. 8 Bank deposit guarantees SOME economists say the one thing that kept this year’s recession from spiralling into the Great Depression 2.0 was the absence of bank runs by the public. Learning from the lessons of the 1930s, governments moved quickly to shore up confidence in the banking system, with extraordinary measures such as guaranteeing deposits in all banks. The US Federal Deposit Insurance Corp increased its guarantee of bank deposits to US$250,000. Many governments, including those in Ireland, Germany, Switzerland, Australia, New Zealand, the United Arab Emirates, Kuwait, Hong Kong and Malaysia, also moved to guarantee deposits. In Singapore, the MAS set aside S$150 billion in October to guarantee all the bank deposits of individuals and companies here until the end of 2010. 9 Recessions, technical and real SINGAPORE became the first Asian country to enter a technical recession – its first since the dot.com bust of 2001 – when growth contracted in the third quarter. It followed similar contractions in the second quarter. Hong Kong, Japan and New Zealand followed swiftly into recession. Outside the region, the US has been in recession for a year while the Eurozone has slipped into the red as well. A global recession next year is now on the cards, according to the World Bank. 10 Currency volatility CURRENCY traders had a rough ride this year as the financial meltdown hit “riskier” commodity currencies and pushed up “safer” ones. The Australian dollar lost a third of its value against the US dollar within three months, while fears of a wrenching UK recession pushed the pound down to a new low against the euro earlier this month. But the US dollar gained despite the American-made crisis, as countries and investors around the world bought into “safe” US government bonds. The Japanese yen has also shot up amid waves of global deleveraging. fiochan@sph.com.sg Return to TOP | View Home Page | Recommend this page to your friend |
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FINANCIAL ADVICE FOR 2009 What a roller-coaster ride the year 2008 has been. Stock markets have tanked, rallied, then tanked again. Home prices are dipping, the economy is shrinking, and wages have hit a plateau. And let’s not even talk about the people who have lost millions and millions in Lehman Brothers- linked structured products. While the peaks have been few and far between, the troughs have left people scrambling to find the bottom – and everybody is tightening their (seat)belts and hanging on for dear life. Yet, despite the projected gloom in 2009, the new year represents a new start for many. If you still have the funds to invest, should you buy stocks, a car or a house? What lessons have financial experts learnt that you can also glean wisdom from? Invest brings you the best investment advice from 10 savvy investors. Download PDF copy of "How to make money in 2009" Return to TOP | View Home Page | Recommend this page to your friend | |
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Source is from the straits times, government website and other medias. Written and edited by: Media & P.R Dept, Home Loan Singapore |
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