Tags: ABSD / cooling measures

Minister Khaw: Not time yet to relax property cooling measures...

- August 4, 2014 No Comments

Existing concessions are already in place for those looking to upgrade their properties, and these are "reasonable and sufficient", said Minister for National Development Khaw Boon Wan on Monday (Aug 4).

MP Foo Mee Har asked in Parliament on Monday if the Government will consider relaxing some property cooling measure such as those relating to Additional Buyer's Stamp Duty so Singaporeans who meet the total debt obligation cap of 60% can upgrade their properties while remaining financially prudent.

In response, Mr Khaw said: "The property market cooling measures are intended to keep our housing market stable and sustainable. They aim to encourage financial prudence among home-buyers and moderate property prices.

"Various concessions are already in place to benefit upgraders. The existing concessions are reasonable and sufficient. Any move to relax the cooling measures, including broadening these concessions, is premature under market conditions."

The minister said such a move could lead to an upswing in demand, which would increase the number of transactions and raise housing prices. "This would not be welcome to Singaporean home-buyers, particularly those with aspirations to upgrade," Mr Khaw added.

Source: CNA

 

Call us ignorant but can someone enlighten us on the "various concessions" that are already in place to benefit upgraders please?  The only one that the wife and I are aware of is the refund on Additional Buyer's Stamp Duty for married couples if they sell their existing home within a stipulated period after the purchase of their new home...

Update (Aug 5th):   Here's one more "concession" that we read about today - an upgrader may qualify for the highest loan-to-value limit of 80% on his second loan if he is able to provide documents to his bank to show that he will be selling his existing home. However, there is no mention of  what the "grace period" is (6 month?) and what happen if the upgrader is unable to find a buyer at the end of the grace period.

Tags: ABSD / cooling measures / TDSR

What gives, Singapore property prices?

- August 1, 2014 1 Comment

So what does the experts think about the current status with the Singaporeproperty prices and when is the right time for our government to consider winding back some of the existing cooling measures? 

These are our main take-away from the round-table session organized by The Strait Times late last month, which was reported in the ST today. The panellists included Mr Donald Han (managing director of property consultancy Chestertons), Mr Song Seng Wun (regional economist at CIMB Bank), Mr Eric Cheng (group chief executive of real estate agency ECG Holdings) and Mr Li Jun (general manager of property developer Qingjian Realty):    
 

1. The market has seen a slow but sure decrease in pricing since 4Q'2013. While prices were expected to fall between 5 - 8% at the beginning of 2014, we will probably see prices falling 8 - 10% for the rest of the year. 

2. Barring any external shocks that may accelerate price decline, prices may fall 10 to 15% by the end of 2015. 

3. The current property downturn is likely to be different from previous ones, such as the Asian financial crisis and global financial crisis because

 

• Unlike previous times, Singapore currently still enjoy positive economic growth, very strong employment and very high liquidity. Given such, strong buying interests still remain as long as prices from developer is "right". So those 30% (global financial crisis) or 60% (Asian financial crisis) drop are unlikely to happen this time around.

 

• Even if a rude shock were to happen, we can expect policy response to be much faster this time around. So any downturn or recession will be better cushioned and compressed.

 

• Fundamentally, our banks are also much stronger and amongst the most liquid in the world.

 

• Buyers are also more liquid and just waiting for the right opportunity to enter the market. Developers are also equally liquid these days. So we hardly see any distressed sales, both by home owners and developers, unlike during the global financial crisis. 

4. A 20% drop in home prices is probably the psychological threshold that policymaker will come in to ease off on cooling measures. If you purchase a property 3 to 4 years ago, your LTV (loan-to value) is about 80%. So banks will start asking for top-ups if home values drop 20%.  

5. As it stands, only a sharp drop in property prices within a short period, or a groundswell of unhappiness from a large number of home owners, could prompt the government to act faster to relax on cooling measures. 

6. Home buyers are advised to wait before taking the plunge as prices are likely to get more competitive.

 

So we have heard from the experts. The magical number is still 20.

 

After reading the ST article today, here are some thoughts from us "non experts" in line with the round-table discussion for anyone that wants our 2-cents:   
 

1)      Although the Singaporeeconomy remains somewhat positive, subtle signs of a slow-down are beginning to show - GDP is shrinking, economic growth rate forecasts are being cut and new job creation rate has hit new lows.  
 

2)      There have been increasing "sound bites" from banks about NPL (non-performing loans) on the home mortgage front. Despite the number being still low and "manageable" by the banks' standards, this is certainly a cause for at least some concerns.  
 

3)      In addition, interest rates are moving up slowly but surely. This will put further pressure on existing home owners with significant amount of mortgages. 
 

4)      The current geopolitical situation around the world are not giving us much comfort either. Any of the "hotspots" may explode overnight and causes dire effects to global financial markets. While Singapore may be more resilient to deal with a financial crisis as compared to 1997 or 2007, there is probably little we can do to mitigate the damage if the rest of the financial world goes into a tail-spin. 
 

5)      If our memories served us right, things started unravelling fairly quickly during 1999 and 2007. The property markets were down in a matter of weeks and at astonishing pace. All the buyers simply disappeared! So any counter-actions to try and prop/revive the market at that point in time were more or less futile.  
 

6)      While a price drop of 20% in property prices tomorrow may benefit certain groups of people (the "cash rich" and "risk taker" as per our previous post), it may led to rather serious repercussions and even negative equity for some. Despite all the talks about high level of liquidity out there, the wife and I believe (rightly or wrongly) that this only resides in the hands of a small group of potential buyers. There are many people out there that are seeking to "upgrade" and are primarily dependent on the money that they are able to generate from selling their existing homes to do so. So a sudden and severe price drop may not necessarily benefit this group of buyers. 
 

7)      So what is the "right" time to enter the property market or "upgrade"? Our mantra has always been that one can almost never catch the highest (for sellers) or lowest (for buyers) price point. At least we have never managed to do over the past 5 or 6 properties that we have bought and sold. Our "right" time is a combination of "gut feel", comfort level (especially if we are going to stay in it) and more importantly, affordability (are we stretching ourselves too thin in terms of the cash component and can we reasonably afford the mortgage payment over the course of the next 5 years?). And as long as you possess the "holding power" and given that the property market comes and goes in cycles, you wouldn't go too wrong even if you enter the market now. This approach has served us rather well thus far (*fingers crossed*). 
 

8)      So where do we see the market in 6 months' time? We have often been off the mark when comes to this question. But sticking our necks out (again), the wife and I reckon that private property prices will probably fall by some 10% by the end of the year. This is assuming that everything (government policies, global and local economic/political situation etc.) remains status quo.  

 

Tags: ABSD / cooling measures / TDSR

20's the magic number when comes to easing of cooling measures?

- July 31, 2014 8 Comments

According to an internet survey conducted by our Lianhe Zaobao, 70% of the 1,262 respondents said that it is still not time for our government to ease off on property cooling measures. 40% of them even go as far as saying that such considerations should only be made if property prices fall by at least another 20%. 

In addition, 18% of the respondents felt that more cooling measures should be imposed to curb rising private home prices, as current measures seemed to have insignificant effects. 

The Lianhe Zaobao survey seemed to suggest that a 20% price drop is the "physiological barrier" for most respondents when comes to easing of current cooling measures. Conversely, only 27% of those who responded felt that the existing measures should be relaxed now. 

 

The wife and I wonder if the survey conducted is really an accurate reflection of the current sentiments on the ground. To be fair, 1,200+ respondents is only a small proportion of those who read Lianhe Zaobao (even for their online version). The figure is even smaller if you consider the number of existing/potential participants in the private home market. 

But let us assume that the "20% price drop" is really what home buyers want before they deem it necessary for the government to ease off on the cooling measures. We wonder if those respondents that made this call have considered the repercussions of such a 20% drop carefully enough. One might ask at this juncture: if private home prices will to drop by 20%, surely this is a good thing especially for those who are waiting to enter the market. So what possible repercussions are there? 

The wife and I believe that those who are waiting to enter the private home market largely fall under 3 broad groups: 

The "Cash Rich"

They can jolly well enter the market yesterday already if they choose to, but are remaining on the sideline and waiting for the market to hit their "ideal" price before entering. You be surprised how many of our HDB dwellers actually belong to this group. 

The "Risk Taker"

Those who have sold their property earlier or are selling their existing property now (while the market is still lukewarm), and betting that prices will fall drastically in the near future so that they can re-enter the market again. Meantime, they will go on rental or move back to live with their parents. 

The "Upgraders" 

Those who want to move from HDB to private or a small private to a bigger private apartment, but need to sell their existing homes before they have enough cash to make the switch.

For the "Cash Rich" and "Risk Taker", they will probably want cooling measures to stay till the property market crashes, if possible. The bigger the price drop, the better it is for them as it increases the potential upside in value of the property that they eventually buy. 

But for the "Upgraders", a significant price drop in private home prices may not necessarily be a blessing. History do indicate that when prices of new private home fall significantly, it will bound to have a "knock on" effect on private resale and eventually HDB resale prices. Although the degree of price drop in the three housing sectors may not be proportional, the price gap that the "Upgrader" group needs to bridge may still remain too wide for them to upgrade. And to make things worse, they now find themselves in a double whammy whereby their existing properties have fallen in value and also become more difficult to sell in a bear market.

So depending on which group of potential market entrant you belong to, a 20% drop in private home prices may not spell tragedy for developers alone...