Residential Market News Extract - 6 August 2012

50-year home loan a 'gimmick', says Khaw

In the midst of global economic uncertainties, Singaporeans should stay focused, be prudent and spend within their means, said Minister for National Development Khaw Boon Wan yesterday.

He also advised Singaporeans against taking up 50-year housing loans, which at least one bank here has recently started offering.

Last month, The Straits Times reported that United Overseas Bank (UOB) had started offering home loans spanning 50 years, likely the longest-term loan available here. Among other banks, loans range from an average of 20 to 40 years.

Mr Khaw said he checked on the take-up rate of this new 50-year loan and "so far, the number is very few, which I think is a good sign, that Singaporeans know we should always be prudent".

When asked, UOB's head of secured loans, Ms Chia Siew Cheng, said the majority of those who take up a home loan with the bank still tend to apply for loans with a tenor ranging from 25 to 30 years.

The bank also carefully assesses each application for all types of home loans, and applicants cannot be above the age of 80 at the end of the loan period, she said.

Analyst said that while a 50-year loan would allow people to take a bigger loan and buy a more expensive property, there would not be much room to manoeuvre if the interest rate were to go up, or if the person were to lose his source of income, and the borrower might be caught in a financial vice.

Source: The Straits Times – 6 August 2012

Chinese foreigners buy fewer homes here

Hefty new stamp duty and a slowing economy at home are deterring Chinese nationals from buying property here, according to new sales figures.

Once the biggest group of foreign buyers, the Chinese fell to second in the first six months of the year, purchasing 259 homes behind the 372 bought by Indonesians, according to caveats lodged with the Urban Redevelopment Authority.

Additional buyer's stamp duty has dampened foreign home demand, with overseas buyers accounting for just 7 per cent of the deals in the first half of the year, down from 20 per cent in the same period last year.

This can be seen clearly from last year's sales numbers. Chinese buyers bought 799 homes in the first six months of last year, while Indonesians bought 614 units.

Landed and non-landed sales - both new and resale - are included, but executive condominiums are excluded.

Landed sales here refer to homes sold at Sentosa Cove, as foreigners are barred from buying landed property elsewhere in Singapore.

Agents say some Chinese buyers might now be turning to the non-residential sector to avoid paying the 10per cent additional buyer's stamp duty.

Mr Terence Teo, investment manager at developer Tong Eng Brothers, said foreigners seem to be more cautious now and are sitting on the sidelines, possibly waiting for the extra stamp duty to be lifted.

Source: The Straits Times – 6 August 2012

ECs enjoy pricing edge over condos

Lower construction costs have given executive condominiums (ECs) a pricing edge as developers chase buyers in a competitive market.

Cheaper building expenses mean firms can pitch the units at levels below that of private apartments, but that initial price gap narrows as an EC gets closer to completing its minimum occupancy period and resale restrictions ease.

ECs - an upmarket hybrid of public and private housing - can be built for about 22 per cent cheaper than their private counterparts. This lower cost is partly why EC projects are typically priced about 25 per cent below comparable private mass market homes, experts say.

Experts pointed out various other possible differences between ECs and private residential projects but these are usually small and not of huge significance.

For instance, the fittings and furnishings - floor tiles, kitchen appliances and sanitary ware - are typically of a lower grade in ECs.

EL Development managing director Lim Yew Soon said private condos might opt for branded European appliances while ECs could use lower-grade appliances although they might not necessarily be of poorer quality.

"But when contractors tender for an EC project, they might factor in a discount and a lower bud-get because the perception is for ECs to be more basic."

The aesthetics of the project might also differ, with private projects having "more flair" - for instance, more curvature in its external design or a swanky clubhouse - that would cost more to build.

Source: The Straits Times – 4 August 2012

Serangoon Garden continues to charm buyers

Serangoon Garden is one of Singapore's oldest housing estates, yet it has held its own despite the many new towns that have surfaced over the years.

The upper middle-class enclave, built to house British soldiers, keeps pulling in buyers with its wide choice of landed homes and lifestyle amenities.

Residents are mostly Singaporeans, but more expatriate families are moving in, due to several international schools in the area.

Gains in home prices are also typically higher than the national average, say experts.

Terrace home prices in Serangoon Garden have risen by 44 per cent in the past two years while semi-detached values have climbed 50 per cent.

Islandwide, terrace prices have gone up 36 per cent in that period and semi-detached home prices have risen 30 per cent, according to the Urban Redevelopment Authority's data on prices.

Rental yields of landed homes range from 2 to 3.5 per cent in Serangoon Garden, with Farleigh Avenue, Conway Circle and Tavistock Avenue popular with tenants. But compared with landed homes in nearby Braddell, Serangoon Garden rents are lower.

Homes in Braddell estate, especially in areas such as Dunsfold Drive and Cotswold Close, are closer to the Australian International School and Stamford American International School and so more appealing to expat tenants. Rents here are about 5 to 10 per cent higher.

The estate is also self-sufficient, with amenities like the myVillage mall and popular hawker centre Chomp Chomp.

Most buyers are also owner-occupiers keen on capital appreciation rather than rental yields in land-scarce Singapore.

However, the popularity of the area has led to plenty of parking problems.

But the outlook remains fairly positive, with a recent 99-year leasehold landed housing project, Haus@Serangoon Gardens, enjoying healthy take-up rates and fetching prices close to $1,500 per sq ft. Other recent launches include Cardiff Residence and Verdana Villas.

Rents in Serangoon Garden are likely to keep stable in the long-term.

Rents in prime areas are expected to continue to soften over the next six to nine months, especially on the back of a weaker global economy. This could exert some downside pressure on rents in outlying areas to keep the rental gap between prime and non- prime markets stable.

Source: The Straits Times – 4 August 2012

Split-second home loans? Hold it . . .

Getting an approval for a home loan by the United Overseas Bank might not be as instant as it was marketed to be, following a clarification from the Monetary Authority of Singapore (MAS).

MAS has put a dampener on the bank's latest offering, the Split-Second Home Loan approval service, by saying that home loan approvals cannot be done from temporary locations at property launch sites.

Launched earlier this week, the loan service, which is directly linked to the Credit Bureau of Singapore and UOB's credit evaluation system, is said to provide home buyers with a quicker credit evaluation and approval process using the latest technologies.

It allows instant loan approval for the purchase of new homes as well as the refinancing of private property home loans, HDB home loans and commercial property loans.

MAS issued a clarification yesterday stating: "MAS rules allow banks to set up a temporary location at a property launch site to receive applications for residential property loans. We do not permit loan applications for residential property to be approved at such temporary locations, whether in-principle or otherwise, verbal or in writing. MAS has instructed banks that this is not allowed under our rules."

The authority also highlighted that a residential property loan is a long-term financial commitment, and by allowing banks to approve applications at temporary locations, imprudent lending by banks might occur.

Said an MAS spokesman: "In granting residential property loans, MAS expects banks to conduct credit assessment of borrowers in a thorough and prudent manner. When banks entice consumers with loan approvals at temporary locations, consumers may be rushed into accepting a long-term financial commitment, even if a cooling off period is incorporated within the approval."

When approached by BT regarding MAS's statement about the service, a UOB spokesman commented: "UOB's new service assesses a serious homebuyer's eligibility for a home loan instantly at selected showflats.

"The homebuyer's eligibility for a home loan can be determined instantly because UOB has streamlined and automated some of its back office processes for faster credit evaluation. The bank continues to use the same strict credit review parameters, including a credit check with the Credit Bureau (Singapore)."

Process-wise, UOB's mortgage bankers use an iPad to input an applicant's information into the system. From there, the home buyer's loan application will continue to be processed and approved at the head office and will be subject to the terms and conditions set out in the letter of offer such as UOB's verification of the applicant's documents.

The bank also pointed out that should the home buyer ultimately choose to take up the loan, he will still have to go down to a UOB branch to submit and finalise certain documents in order for the bank to issue a letter of offer.

As such, the Split-Second Home Loan approval service still requires a fair amount of time and effort before a home buyer can indeed be sure of his home loan approval.

Source: Business Times – 4 August 2012