Home loan refinancing may become easier

Property cooling measures putting a kink in your investment or financial planning? There may be some relief in that arena soon.

money-imageDespite emphasis that the property cooling measures are here to stay, the Monetary Authority of Singapore (MAS) is fine-tuning part of the regulations to help owner-occupiers take a quicker step towards purchasing their own home. The current total debt servicing ration (TDSR) framework is strict and keeps a huge number of borrowers from refinancing their loans by taking advantage of the low interest rates; only properties purchase before the implementation of the TDSR framework in June 2013 can be exempted. Soon, all owner-occupiers will be able to apply for exemption from the TDSR rule and more home buyers will be able to refinance their loans more easily.

For buyers purchasing properties for investment purposes, current regulations stipulates that these loans can only be refinanced above the 60 per cent TDSR threshold if application is done before June 2017 and the borrower commits to a debt reduction plan. But now,the borrower only has to commit to replay at least 3 per cent of the loan’s total outstanding balance over 3 years.

Treasure CrestThese moves will help those who might have been affected by the oil and gas industry lapses and weakening global economy and who may need help with their existing home loans. The TDSR will still apply for new loans and industry experts continue to expect a certain amount of foreclosures on property owners who may have overstretched themselves financially or have been hit hard by unexpected income adjustments.

Market not ready for property cooling measure to be lifted

The Monetary Authority of Singapore (MAS) has said that it is still too early for the property cooling measures to go away. Unlike the car financing sector, the housing sector has yet to achieve the intended levels. The authorities are cautious about a sudden forward surge in the market should the measures be prematurely lifted.

c22aa9c3d5354ad6858cc5cec7ca1854Household debt levels have become more manageable as the debt servicing ratio helped keep new loans portfolios realistic and banks are feeling a reduction in the percentage of non-performing loans. The ultimate aim is a sustainable pathway for the property market – a balance between growth and affordability.

Though the market feels like it has been slowing down for quite a few quarters now, the numbers tell another story. Property prices have fallen 9.4 percent since it’s peak in Q3 of 2013, but between 2009 and 2013, prices rose 60 percent while income rose only 30 percent. Clearly the numbers are disproportionate and it will be some time yet before the market reaches a comfortable equilibrium.

Moving forward, the private resale market is showing signs of bottoming out, and investors who have been sitting in the sidelines may come back into the fold as long as interest rates remain low and home prices steady.

 

Cool moves to boost property market take off

Property buyers and investors are certainly flexing their shopping muscles this year by weighing their many options carefully and taking time to do so. It has been the buyers’ market for sometime now, with sellers and developers realising that the ball is over in the other court.

Twin Peaks2Purchasing activity has certainly not ceased, but buyers are taking their time to shop their options, with most seeing about 10 to 15 units before taking the plunge. Thus interest is definitely still evident, but the speed and volume of sales may have to take a backseat for now. Some developers have taken to new and creative ways to push sales. OUE for example has offered a deferred payment scheme for their 99-year leasehold condominium Twin Peaks. The move has helped them sell around 100 more units since end March and also put them in the race against freehold properties nearby such as Ardmore Three and Gramercy Park. Average prices at Twin peaks stand at $2,300 psf while units at Ardmore Three are going for around $2,700 psf and the upcoming Gramercy Park has prices set at around $2,600 psf.

LloydSixtyFiveIn a move to help their customers tide over property cooling curbs, in particular the Additional Buyers’ Stamp Duty (ABSD), the developer of Lloyd Sixty-Five, TG development, is offering an “experimental purchaser scheme” which allows the buyer to pay only 12.5 per cent of the purchase price to occupy the unit without having to pay the maintenance fees and property tax for a stipulated period of time till such time when the property cooling measures may be lifted.

843 new private homes sold in March

And that is a 8-month high, especially since the last new property launch was 4 months ago – The Poiz Residences in November 2015. That could be the glimmer of hope the local property market has been waiting for, though some analysts are still cautious about a obvious rebound as the government has tightened their grip on land supply this year.

WIsteria YishunThe rise in transactions of new units last month could be partly due to the pent up demand over the Chinese new year lull in February and the lack of new launches in the first 2 months of the year. Only 209 units were launched in February while the number more than tripled to 682 in March. The number of units sold doubled from 303 in February to 843 in March. The 2 new launches in March were Cairnhill Nine and The Wisteria.

Although the government has announced that they will be unlikely to ease up on the property cooling measures anytime soon, some buyers who may have been waiting in the sidelines for better deals may be coming to realise that prices will not be falling drastically this year and may have finally made the purchase move last month.

Overall, market sentiment is picking up and buyers are picking off bargains and affordable units before the winds change. New mass market suburban properties are capturing eyeballs and wallets.

Resale HDB flat prices hold steady

At this point of the property market cycle, prices holding steady could be a positive sign, indicating effectiveness on part of the cooling measures which did not crash the market but rather, merely realigned the prices gently. The change evolved over a long period of time, which is more palatable for sellers and the lowering prices may have also increased sales volume by enticing buyers.

BidadariPhoto credit: HDB

A 0.3 per cent fall in HDB resale flat prices indicate a slowly stabilising market. Although prices have been falling for 9 quarters straight, the last quarter showed the lowest rate of decline. In 2014, overall resale HDB flat prices fell 6 per cent. Industry analysts are expecting a smaller dip this year of 2 to 2.5 per cent. Some buyers may have been holding back on buying in the open resale market, in wait of November’s major launch of new Build-to-order (BTO) flats which includes prime units in Bidadari and Punggol Northshore.

Suburban resale private property prices are falling at a steeper rate of 1.3 per cent and if the prices fall even further and at a quicker rate than HDB resale flat prices, the gap between the 2 market segments will narrow. This could then draw a substantial pool of buyers from the resale flat market into the private property market, which could then give sales volume a boost and slow down the price decline in the private property sector.

Sims Urban Oasis

Photo: Sims Urban Oasis

Property developers are keeping a close eye on whether cooling measures will be adjusted, and pricing their units accordingly. We could also expect a more staggered schedule of new launches as developers become more careful about not cannibalising on one another’s market share. More so than before, it may be a matter of timing and opportunity.

Should the ABSD be removed?

ABSD – Additional Buyer’s Stamp Duty. Though mentioned less this year as other property cooling measures take over in significance, this nevertheless is a rather big hump investors have to get over should they wish to purchase properties for investment purposes.

Implemented in 2011 by the Monetary Authority of Singapore (MAS), it applies to foreign investors, Singapore PRs (permanent residents) purchasing their second and subsequent properties and Singaporeans purchasing their third and subsequent properties. This and other property cooling measures have successfully curbed the blossoming of a potential housing bubble which threatened to grow in 2009 and 2010. Combined with the Seller’s Stamp Duty (SSD), of up to 16 per cent, property speculation is significantly lower than before. The highly affluent are rarely affected but it has helped keep individuals relatively debt-free.

SantoriniAnother positive that came out of the previous couple of years of policy adjustments is more transparent industry practices. Developers are now required to submit weekly transaction data to the Controller of Housing, including incentives provided to buyers such as furniture vouchers, cash rebates, stamp fee or legal fees absorption and sales volume. That will help project a truer image of how the industry is fairing and what are the actual market prices and keep pricing more realistic.

The restrictive loan-to-value limit has perhaps affected the industry a tad more as it has brought prices down and maintained a level playing field. Whether the government has brought property prices to a level affordable for majority of Singaporeans is yet to be seen clearly, but with the recent election just over, all eyes could be on the new government to see what else they can or will do.

When will property cooling measures cool off ?

The past two years have seen the implementation, and perhaps effects, of a series of property cooling measures. From increased stamp duties to revised subsidies and the strictest of which, the TDSR (total debt servicing ratio) framework, restrictions have certainly risen the heat on the property industry.

Singapore still has some way to go before the property market achieves the sophistication it requires to reach new heights. Economist are estimating the second half of 2015 as the earliest the authorities are likely to cool off with the cooling measures. That is when most households would have managed to reduce their debt levels. However, property prices can be expected to fall by more than 10 per cent in the first half of next year, or at least show a substantial decline before curbs are removed. In fact, by 2016, property prices are expected to fall by up to 20 per cent due to the oversupply at that time.

Prices have stablised somewhat since the implementation of the property cooling measures, but the fall has only be about 3 per cent, which means the authorities could be waiting for a significant fall in figures, or a recession, before amending the rules. The fear could be the sudden upward rebound of prices which may far surpass the watershed of 2009. With the elections coming in 2016, 2015 seems like the turning point for the market and buyers and sellers alike may be watching closely to catch any opportunities  they can before things change once more.

Could 2015 be the year for home buyers? How will landlords, developers and sellers fare?

Authorities not ready to ease property curbs

The property industry has been hoping for a respite from the several rounds of property cooling measures rolled out over this year and the last. But the Monetary Authority of Singapore (MAS) managing director, Ravi Menon, recently said that even though home prices has ease somewhat and has leveled the playing field slightly, there are still risk factors which prevents them to being able to release their hold on the reins.

Home prices have risen an astounding 60 per cent from 2009 and over the past year, it has only fallen 3.3 per cent. Though it is quite impossible for home prices to fall to the level before the 2009 boom, they are hoping nevertheless to keep the markets stable before easing the restrictions.

Singapore real estateThe measure which affected the market the most could be the mortgage loan curb. The TDSR (total debt servicing ratio) framework has put many buyers hoping for a home loan out of reach of their desired property. This has indirectly caused developers to shake a little on their footing and prices of new properties dropped slightly over the last 3 quarters. But property prices are still relatively high and the fear is that any relaxation of the current rulings might cause an upward spiral process which might be more detrimental in the long run.

Battling inflation has been one of the key issues for the country’s rulers and with housing becoming an increasingly crucial factor of nation development, the property market here would be largely linked to policy-making.