Residential Market News Extract - 13 July 2012

Mixed views on direction of home prices

Property prices will continue their upward climb, and the government will roll out more cooling measures - these are the views of many of the 300 respondents to a Credit Suisse survey.

Some 47 per cent of those surveyed in the bank's inaugural proprietary housing survey believe that homes here will cost more within the next year, with almost three in 10 predicting price increases of up to 10 per cent.

Yet many also believe that the opposite is true: 35 per cent of respondents expect prices to fall within the next 12 months.

This shows that "the market has quite a mixed view on the direction of prices", said Credit Suisse research analysts Yvonne Voon and Chok Sing Ping in a report on the survey findings. However, "there is a slightly heavier weight towards the expectations of rising prices within the next 12 months".

What is much clearer in the minds of the public is the likelihood of government intervention, with 6 in 10 predicting that another round of cooling measures will hit the property market. This could happen within a year, say 40 per cent of respondents.

Those who expect property prices to keep rising cite "genuine demand" from buyers, and the ability to afford a home.

Six in 10 respondents say they will consider buying a residential property within three years, with just 31 per cent of these potential buyers saying that their purchases are for investment purposes.

The bulk of those looking to buy residential property say they want a new home to live in, while a number want to upgrade from their current home. Some also say that they are planning to buy a house for their children or parents.

And at least 76 per cent of those surveyed reported a monthly household income of above $5,000, allowing them to afford a property "fairly easily", observed Ms Voon and Ms Chok in the report.

Assuming that the average household (with an income between $5,000-$7,500) does not spend more than 30-40 per cent of their income on mortgage repayment, and assuming a 30-year HDB (Housing and Development Board) loan and a 90 per cent LTV (loan-to-value), the average household would be able to afford a property worth about $420,000 to $830,000, said Ms Voon and Ms Chok.

At current resale prices, this would allow them to buy a four- to five-room HDB flat including the living area, they added.

At the same time, 47 per cent of respondents do not have an existing mortgage, while 30 per cent of the average survey population has over $100,000 in liquid assets (cash-in-hand).

However, the two noted that the caution is beginning to set in within the property market, with only 21 per cent of respondents saying they will consider buying a home within the year. Many also say they prefer to hold cash than park their money elsewhere.

The survey also touched on shoebox apartments, with 6 in 10 saying that they would not buy an apartment that is less than 500 square feet in size.

Source: Business Times – 13 July 2012

 

Developers' body wants extension of sales period

The Government is studying a proposal from the Real Estate Developers' Association of Singapore (Redas) to extend the two-year period in which developers must sell units in new projects after they have been completed.

The Ministry of Law said in a statement that it was 'considering the feedback' from Redas.

The Straits Times understands that developers of about half a dozen projects have sought extensions to the two-year window. Of the six, extension charges have been paid by three.

Developers pay 8 per cent, 16 per cent and 24 per cent of the property purchase price for the first, second and third extra years, respectively. The amount is pro-rated based on the proportion of unsold units.

Experts said the projects needing extensions are likely to be high-end ones in prime areas rather than mass-market homes, which have been selling well due to cheaper absolute prices.

Under the Residential Property Act, housing developers whose shareholders and directors are not all Singaporeans have to get a Qualifying Certificate (QC) to buy residential property.

'QC holders are given permission to purchase residential land and property solely for development and sale of the units, and not for investment purposes. These conditions are imposed to control foreign ownership of land in Singapore,' the Singapore Land Authority said.

This requires them to sell all units within two years of obtaining the temporary occupation permit (TOP). They are not allowed to rent out unsold units.

Redas president Wong Heang Fine told reporters yesterday on the sidelines of a Redas seminar at Mandarin Orchard hotel that since 'projects are getting bigger', it is 'quite reasonable' to expect them to

'Projects that have unsold units are mostly high-end properties targeted at high-net-worth buyers, who include many foreigners,' said Mr Lee Liat Yeang, a partner at Rodyk & Davidson's Real Estate Practice Group.

'The prices of such properties are so high that a mere reduction in price may not draw in buyers immediately,' he added.

Lowering prices too much would 'affect goodwill' with previous buyers and place the developer at risk of not recovering its investment.

Companies are cautious in expatriates' housing allowances, hence leasing demand is experiencing some soft landing.

The Law Ministry said in its statement: 'Variations in market conditions are generally not considered as valid grounds for waiver of the charge for extension of time to sell the units.'

Source: The Straits Times – 13 July 2012