Residential Market News Extract - 25 July 2012

UBS forecasts dip in home prices by 10%-15%

Residential property prices might fall 10 to 15 per cent in the next 12 months, a new report said.

UBS said last week that while the market has remained resilient despite the Government's cooling efforts, it is near a tipping point.

This forecast is, however, considerably more pessimistic than other experts' views, which mostly predict either stable prices or smaller falls of up to 5 per cent.

But it is still less grim than estimates last December when experts said prices could correct by as much as 30 per cent on the back of that month's cooling measures.

While UBS acknowledged that tight residential supply and low interest rates are keeping prices resilient, it said other factors point to a more cautious outlook over the next 12 months.

For instance, Singapore's economic growth, while still recovering, is more uncertain now.

The Government's residential property cooling measures are also likely to continue to discourage foreign buyers and resale market activity.

Meanwhile, the population growth rate has also slowed and is likely to decline further given the recent tightening of immigration policy.

And while the supply of homes is still tight, the expected ramp- up from next year onwards should help to compensate fully for the earlier supply shortage by 2014 or 2015, the report noted.

UBS expects 140,000 to 150,000 homes to be completed from this year to 2015, higher than its estimated cumulative supply shortfall of 90,000 units built up from 2000 to 2011.

This mix of negative factors has turned the bank sour on the property market's prospects, leading to its prediction of a 'moderate' 10 to 15 per cent correction.

'Property developers still have strong balance sheets, which may lower the probability of their having to significantly lower the prices of their residential projects to generate cash flow.

'We currently see a higher risk for mass-market private homes (versus prime ones) as this segment has largely led the current recovery, and (is likely) the bulk of private residential supply over the next few years,' the report said.

Private home prices inched up 0.4 per cent in the second quarter, according to preliminary estimates, reversing a 0.1 per cent dip in the first quarter.

Source: The Straits Times – 25 July 2012

 

Homebuyers likely to opt for shorter term mortgage

Homebuyers in Singapore will likely opt for mortgage loans with shorter repayment periods.

That’s despite the availability of new home loans that offer up to 50-year tenors.

Experts said more are taking into account their retirement age and interest costs when servicing their loans.

Currently Singapore banks are offering home loans with a maximum term of 35 to 40 years with age capped at 70 to 75.

UOB has come up with a first by offering home loans that stretches repayment to 50 years and a maximum age of 80.

UOB said that for the maximum tenor of 50 years, the requirement is to have at least 35 years remaining on the lease for leasehold property and no more than 80 years of age at end of loan tenor.

Still, some market players said such loans may be more suited for investors.

For ordinary home buyers, experts said they should tailor their loan repayment period to the age they want to retire.

DBS Bank’s head of deposits and secured lending, Ms Lui Su Kian, said: “The average loan period we are seeing now for customers is about 30 years. In general, I think, especially in Asia, we do see that our customers are prudent when it comes to managing their mortgage, so most of them do not stretch out to the maximum period.”

While a 50-year tenor may reduce monthly repayments, experts said interest could push the loan’s amount by up by 15 to 20 per cent.

And comments from Channel NewsAsia’s Facebook page show most buyers are averse to half a decade loans, with some saying 25 to 30 years is their threshold.

HousingLoansSG.com, which sees 20 to 30 enquiries a day, said around 70 per cent of its clients opt for 25 to 30-year loans, while 15 per cent go for the 30 to 35 year loans. The rest prefer terms of less than 25 years.

Ms Phang Lah Hwa, Head of Consumer Secured Lending at OCBC Bank said customers generally take up to the maximum loan tenor as they can repay or make capital repayment along the loan tenor.

Mr Harmander Mahal, Head of Customer Value Management at HSBC Singapore, said: “We observe that customers who take up housing loans with longer tenor (30 to 35 years) tend to be younger in the age group of 35 years old and below.

HSBC said its housing loan portfolio has seen double-digit growth over the last five years with an increase in market share.

In its 2011 annual results, residential mortgages have increased 21 per cent in value year-on-year for 2011 compared to 2010.

Source : Channel NewsAsia – 23 Jul 2012