Apply caution when investing in overseas property

Managing a property portfolio is becoming increasingly popular, and those with considerably less cash to spare are looking out of Singapore especially in Malaysia.

As marketing and sales of properties in the Iskandar region ramps up, it also becomes more difficult to cut through all the industry speak and potential dangers of over-promising agents and developers. Mr. Khaw Boon Wan, the National Development Minister, has warned Singaporeans not to ignore the additional regulatory and legal restrictions that come with the low prices.

D'inspire JohorThe Council for Estate Agencies (CEA) will be stepping up efforts to regulate the industry, and also provide general tips. They have release an online guide which will help investors tick against a checklist before making the decision:

  • Motivation behind the investment
  • Financial assessment to ascertain affordability
  • Hidden costs such as legal fees, stamp duties, taxes, maintenance fees
  • Total loan amount
  • Monthly Mortgage repayments

One point which many investors may forget to consider is the currency risk. Even though it may seem cheaper on the onset to purchase property in Malaysia, it may also be harder to sell and should the ringgit weaken, the loss may be comparable to the initial savings.

Ultimately, the crucial question to ask could be “Why am I buying this?” And if the practicalities balance out with the value, then the answer might be clear.

BTO supply shrink

2013 was the year for new properties, private and public. Bumper crops of new BTO HDB flats were launched almost every two months and an average of 4,190 units were offered up at each launch. In the first launch this year, the number was a reduced 3,139 units.

Although smaller in number, HDB is happy to offer eco-friendly features in their latest launch such as motion-sensor lighting and recycling chutes. New BTO flats were offered across Bukit Batok, Jurong West, Punggol, Woodlands and Serangoon. Prices ranged between $73, 000 for 2-room flats to $433, 000 for 3-Gen units. 3-Generation flats are mainly four-room HDB flats reserved for married applicants submitting purchase requests with their parents.

Bukit Gombak Vista

Photo source: HDB

National Development Minister, Mr Khaw Boon Wan, has announced last year that BTO supply will be reduced this year as demand has been mostly satisfied. The authorities are however considering offering more 2-room flats as singles aged 35 and above are now eligible to apply for new HDB flats. Previously they were only allowed to purchase off the resale market.

As expected, Wednesday’s launch saw the most activity in the 2-room flats department. 5, 000 of these smaller units will be made available through out this year. 455 studio apartments in Jurong West were also included in the current launch. There will be a decrease in the number of three- to five-room flats however.  It seems the authorities are working hard to cover all ground and assuring citizens a fair chance at owning a home.

More smaller HDB flats to be built

Though the supply of HDB flats may be reduced starting next year, National Development Minister Khaw Boon Wan has said that these may apply only to the larger four- and five-room flats. Smaller two-room and studio flats will still be steadily supplied in the coming year or two.

5,000 new two-room flats are targeted for 2014, and since response from singles applying for new HDB flats have been overwhelming, with 58 applicants for 1 unit since the scheme began in July this year, this will be greeted with much cheer.

Photo Source: Ministry of National Development.

Some larger HDB flats will also be made available to second-time applicants. But this shift in supply is to balance out demand for BTO (build-to-order) flats between singles and families. And since demand from families have mostly been met, the shift to releasing smaller units will allow for more success from other applicants such as singles, divorced families and young couples.

Is this halt to releasing larger HDB flats an effective way to adjusting the dynamics in the housing market? Will there be a kickback reaction in the private property market? What is the percentage of the population who are able to afford private housing and will that percentage increase five years down the road or will the building of HDB flats continue to dominate much of the nation’s housing supply?

Reduced BTO launches will not affect resales market

2013 was a year of new BTO HDB flats. With a sales launch almost every couple of months, it may have taken the shine off resale HDB flats. Coupled with the decreasing COV prices, will this mean a a weakening resale market?

National Development Minister, Mr Khaw Boon Wan recently announced that starting 2014, HDB’s “massive construction programme” will slow as the pent-up demand for public housing units have been largely elevated by the continuous supply of BTO flats over the past 3 years. Industry analysts are not expecting the resale market to be overly affected by this announcement, especially since the pool of buyers usually have different motivating factors. Most BTO flat applicants are young families and first-time buyers. Now that application rates have fallen from 5.3 to 2 in 2 years’ time, there seems reason enough for the authorities to put the brakes on the building programme.

East Lawn Canberra HDB FlatIn comparison, the resale market has suffered slightly, with stricter loan limits, competition from the private property market, and recent COV prices have come to show for it. With the median at an all-time low, many are wondering if the cease of supply of new HDB flats will once again bring resale flat prices up. But this may be unlikely, at least for the next half year or so. As long as the loan limits and private residential options remain and especially since demand has been largely fulfilled,

It will be an interesting year for Singapore’s real estate sector. Which way will the wind blow?

Waterfront Singapore

URA Master Plan 2013As an island country, waterfront living seems like it should be a buzz word. And it certainly will be, come as early as 2023. A new blueprint, the Draft Master Plan 2013, for nation planning has been put in place, with promises of more and better homes, and a more sustainable green and ecological living environment. National Development Minister, Mr Khaw Boon Wan, has said in his blog post that “the underlying philosophy of making Singapore an endearing home and a clean, green, livable city remains unchanged”.

About half a million new homes have been planned for new housing areas. These include Bidadari, Tampines North and Punggol Matilda. Other older HDB estates will also see the injection of some new blood, in Sembawang, Yishun, Hougang and Choa Chu Kang. A strong focal point of the Master Plan is the Greater Southern Waterfront, a 1,000 hectare development along the south coastline.

Punggol Matilda HDB1And as recent property news have signaled, the Kampong Bugis and Marina South areas will be a hotbed for private residential home activity, with the possible yield of 13, 000 new homes. Out of the 13,000, 9,000 private properties are designated for the Marina South area, which will only be developed once the Thomson Line is completed in 2017 or 2018. And cyclists may have something to cheer for, with URA setting the wheels in place to make Singapore more cyclist-friendly.

As the nation becomes more congested, it now becomes less practical to travel too far from home for work, and the constant development and setting up of regional commercial centres will make the most sense. The Woodlands Regional Centre and North Coast Innovation Corridor are just two of the many scattered around the country.  There were also talks about a new commercial centre in Punggol, and new industrial sites at the Seletar Aerospace Park, and also in Defu and an area called 2 West near the Nanyang Technological University. Since properties near commercial and financial hubs usually fetch the highest prices,  could this also cause property prices to rise overall?

204, 500 properties to be completed by 2016

At 6,508 more units than the 197,566 units projected earlier this year, there will be 204,500 executive condominium and private apartment units built by 2016, according to data released by the Urban Redevelopment Authority (URA).

Completed condominium units are increasing in number as developers pour fresh new stock into the market mix. Despite having held back on some major launches as the year-end lull draws close, the number of properties available in the market continues to rise. Industry experts are however expecting developers to lower their launch prices in order to boost sales.

The CreekFrom the looks of the recent Inflora condominium launch, selling prices, of new properties at least, may indeed be on the slippery slope. But that perhaps might be good news for those looking to invest. Properties in the prime city centre spots are dropping by as much as 0.5 per cent whereas city fringe and suburban areas enjoy continued growth, however slight.

Over the next 3 years, 4, 884 more private homes will be built as National Development Minister, Mr. Khaw Boon Wan considers it “making good progress in our ramp-up of the home-building programme”. The number of HDB flats to be built will remain the same as projected. 1, 355 executive condominiums will be ready within the same time frame. What does this heightened supply mean for Singapore’s housing market and will the population growth be a reflection of a cause of this increased property growth?

New Property Loan Rules

Over the weekend, new loan rules were put in place. Tougher rules targeted at reining in property investment, according the Minister for  National Development, Khaw Boon Wan. These new rules look set to be a permanent fixture in the financial landscape as the government looks to stablising Singapore’s real estate market.

money-imageAs such, they are refraining from calling it a cooling measure. It is structured in a way to better stablise the property market here as the current low interest rates are not sustainable. Implemented by the Monetary Authority of Singapore (MAS), banks now have to follow the new guidelines when assessing the property buyer’s loan eligibility.

Should the monthly repayments of a buyer’s total debt obligations exceed 60 per cent of his gross monthly income, the bank will have to decline his loan application. Mr Khaw says that these new rules will not affect buyers truly looking for a home, since it will essentially apply for those looking to purchase their second or third properties. The inability to afford rising mortgage as interest rates fluctuate, which then results in a more rapid rate of asset liquidation may be what they are attempting to catch before the wave happens.

Besides property investors, these new rule will also help banks better understand and manage the potential changes as interest rates eventually bounce back up. Is this an effective and timely move by the Singapore Government to curb a potential housing bubble? How will this affect the upcoming property launches?

No quick-fix to managing HDB flat prices

So says National Development Minister Khaw Boon Wan.

Ever since the Government announced that new HDB flats will come at a lower price, HDB flat owners have been expressing fears of losing their nest egg should prices of flats drop. But as new flats are limited to only certain groups and limited in terms of type and location, will there necessarily be a drastic drop in resale flat prices and are we worrying too early? Though the number of resale flat transactions have decreased, prices continue to remain high. And there will always be those who wish to choose a flat of their liking in a location they prefer, as opposed to trying perhaps numerous times in the HDB ballot queue.

HDB Flats THinkStockMr Khaw reassured Singaporeans that while prices of HDB flat will only drop “a few per cent over the next few years”, but in the same breath said that the prices of HDB flats cannot keep rising forever. “If housing prices keep rising,it won’t be good. When I came into the MND (Ministry of National Development) two years ago, that was my target”. And much has been done since then, with the ramp up of BTO flat supply, changes in income ceiling, limits on HDB flat sizes, increase in number of allocated flats for both first and second-timers, and even allowing singles to buy new HDB flats.

During the recent Our Singapore Conversation (OSC) dialogue, the idea of selling back new flats only to the Housing Board was faced with much opposition. Homeowners naturally worry that their homes will lose  their value and cut them off from the profit they can earn by selling it in the open market. Mr Khaw admits that resale flat prices are difficult to manage as they are largely subjected to the market demand. SLP International executive director Nicholas Mak speculates that one way of gently letting resale HDB flat prices drop is to decrease the prices of new HDB flats in the same estate.

Forestville Executive Condominium.

Forestville Executive Condominium.

Recent debate also surround the Executive Condominium (EC) scheme\. While some have said that those who can afford an EC should not receive subsidies from the Government, the scheme was specifically initiated to help those who may not qualify for other HDB subsidy schemes. Thus should ECs still be considered a value-added profit-making asset for their owners?