MAS imposes cap on housing loan tenures
Singapore regulators signalled their concerns over still rising home
prices yesterday, announcing fresh mortgage curbs to cap upward price
pressures caused by low interest rates and fast credit growth.
The Monetary Authority of Singapore (MAS) said it will set an absolute
limit of 35 years on the tenure of all residential property loans - both
new loans and refinancings. It will also lower loan-to-value (LTV)
ratios for new loans with a tenure of more than 30 years. The new rules
will apply to both private homes and HDB flats and will take effect
today.
"Monetary conditions worldwide are far from normal," said Deputy Prime
Minister Tharman Shanmugaratnam, noting that the latest round of
quantitative easing (QE3) in the United States and low interest rates
have made credit easy, though this will eventually change.
"We are taking this step now to require more prudent lending, and will
continue to watch the property market carefully," said Mr Tharman, who
is also Finance Minister and MAS chairman. "We will do what it takes to
cool the market, and avoid a bubble that will eventually hurt borrowers
and destabilise our financial system."
The new rules - Singapore's sixth round of cooling measures - look set
to affect not just home buyers and existing owners looking to refinance
their mortgages, but also property developers and banks.
According to the central bank, over 45 per cent of new home loans have tenures exceeding 30 years.
MAS will cap the tenure of all new residential property loans at 35 years
For refinancings, the tenure of the refinancing facility and the number
of years since the first home loan for that property was disbursed
cannot add up to more than 35 years.
Also, MAS will lower the LTV ratio for new home loans to individual
borrowers if the tenure exceeds 30 years, or the loan period extends
beyond the retirement age of 65 years.
The LTV will be 60 per cent for a borrower with no outstanding
residential property loan, compared with 80 per cent previously, and 40
per cent for a borrower with one or more outstanding home loans,
compared with 60 per cent before the new rules.
For non-individual borrowers, the LTV ratio for home loans will be lowered to 40 per cent from 50 per cent.
The MAS move comes after the Hong Kong Monetary Authority announced a
30-year limit on the maximum term of all new mortgages last month,
following the launch of QE3. With the Federal Reserve looking to pump
US$40 billion into the US economy each month until sustained jobs growth
kicks in, worries about hot money inflows into Asia and asset price
inflation have again emerged.
Stretched tenures
Previous rounds of cooling measures had a moderating effect on home
prices in Singapore, and a significant supply of housing will also come
onstream in the next two years, MAS noted. "However, prices in both the
HDB resale market and private residential property have continued to
rise in Q2 and Q3 of 2012."
According to official flash estimates on Monday, HDB resale prices rose
2 per cent in Q3 from Q2, while private home prices gained 0.5 per cent
over the same period. Separately, the SRX Residential Property Flash
Report yesterday showed resale prices of non-landed private homes rising
3.2 per cent in Q3.
Low interest rates globally and locally are likely to persist and will
continue to spur residential property demand, pushing up prices beyond
sustainable levels, MAS warned, stressing that "the eventual correction
could be painful to borrowers and destabilise the economy".
Meanwhile, financial institutions have stretched the durations of home
loans, and long tenure loans pose risks to both lenders and borrowers,
the central bank said. The average tenure for new residential property
loans climbed to 29 from 25 years over the last three years, it
revealed. Also, more than 45 per cent of new home loans granted by
financial institutions have tenures exceeding 30 years.
Lower initial monthly repayments from long loan tenures and low
interest rates may cause borrowers to overestimate their loan servicing
ability and take a bigger loan than they can afford, MAS said. In fact,
long tenure loans create a larger debt repayment burden as interest
accumulates over a longer period.
"When interest rates eventually rise, borrowers who have overextended
themselves will have difficulties repaying their loans," MAS said. "If
property prices fall, financial institutions may be caught holding the
bad loans."
Banks which offer home loans with a tenure of over 35 years will feel
the impact of the new rules almost immediately. DBS and OCBC are among
those providing mortgages stretching up to 40 years.
"We will reduce our existing maximum home loan tenure of 40 years to 35
years, with immediate effect," said OCBC group corporate communications
head Koh Ching Ching.
A DBS spokeswoman said that most of the bank's home loans have a tenure
of under 35 years. "It will take some time to ascertain the impact of
the new measures while homebuyers assess the market."
Resale impact
United Overseas Bank (UOB), which introduced 50-year housing loans in
July, did not respond to media queries. Some market watchers then had
questioned if the product would cause borrowers to overextend
themselves, and National Development Minister Khaw Boon Wan subsequently
called it a "gimmick".
Maybank said its maximum loan tenure for home loans is 35 years. "With
an ageing population and couples marrying and setting up home at a later
age, the new rules will have impact on these segments," said Alan Yet,
head of lending (consumer banking) for Singapore.
The jury is out on how the new rules will affect the residential
property market. The Real Estate Developers' Association of Singapore
(Redas) does not expect a significant impact. "Based on past experience,
not many buyers take long tenure loans," it said. Just last week, Redas
said the property sector does not need more cooling measures - at least
not before a thorough review of the impact of earlier policies.
Source: Business Times – 6 October 2012
Mortgage limits may deter older investors
The latest changes to mortgage rules could deter many house-hunters
from buying a new property - or at least give them serious pause,
analysts and property market watchers said yesterday.
Chief among this group will be older investors looking to buy a second or third investment property, they noted.
And HDB upgraders who want to get on the private property ladder will also not be spared.
From today, the Monetary Authority of Singapore (MAS) will cap all new housing loans at a maximum allowable tenure of 35 years.
Tighter rules will also apply to borrowers taking loans longer than 30
years, or have their loan periods extend beyond the retirement age of
65.
If they have no outstanding mortgage, the cash down payment is now 40
per cent of the property's valuation instead of the usual 20 per cent.
If they already have an existing mortgage and want to take another one
for another property, the cash down payment is 60 per cent, instead of
the current 40 per cent.
For these borrowers, the only way to avoid paying the additional 20 per
cent cash down payment is to opt for shorter loan tenures that do not
extend past the age of 65.
But this will mean higher monthly installments.
Source: The Straits Times – 6 October 2012
Market unlikely to be hit hard: Redas
Many developers seem to feel the new cooling measures will not have a
big impact although those with more exposure to the local market could
feel the pinch.
The response to yesterday's announcement from the Monetary Authority of Singapore (MAS) of the new rules was low key.
The Real Estate Developers' Association of Singapore (Redas) issued a
statement saying that the cap "will not have significant impact on the
property market".
"Based on past experience, not many buyers take long tenure loans," it said.
Mr Cheang Kok Kheong, chief executive of Frasers Centrepoint Homes,
said: "We have always been supportive of the Government's measures aimed
at curbing excessive speculative activities, as we believe in the
importance of having a stable and sustainable housing market."
He said the move "is not expected to have a significant impact on the residential market".
A Keppel Land spokesman said: "We believe that there is still genuine
demand for homes and well-located properties with good attributes should
continue to see healthy sales."
Two other developers which declined to be named also said the new measure was not a big issue.
Far East Organization, City Developments, Hong Leong and CapitaLand declined to comment.
Consultants said the new rule to cap mortgages at 35 years could hit
sales as investors and those who are stretching themselves financially
will likely stay away from the market.
Source: The Straits Times – 6 October 2012
Banks wait to gauge impact
Banks could take a hit from the new rules on mortgage tenure but just how much they will be impacted remains unclear.
The Monetary Authority of Singapore (MAS) announced yesterday that a
lower loan-to-value ratio will be imposed on loans with tenure of more
than 30 years, or if the loan tenure extends beyond the borrower's
retirement age of 65.
Bankers said the measures will certainly affect those taking out new
loans and the mortgage-refinancing side of the lending business.
The most practical impact will be seen on older home-buyers. Those over
35 will have to take up a loan tenure of less than 30 years if they do
not want to be affected by the lower loan-to-value ratio linked to the
retirement age of 65.
Mr Dwaipayan Sadhu, Standard Chartered Bank's head of consumer
transaction banking and mortgage for Singapore and South-east Asia,
believes the new rules may also impact younger customers. He said:
"Their monthly cash outflow would increase should they opt for 30-year
loans instead of the current 35."
Maybank Singapore's head of lending business (consumer banking), Mr
Alan Yet, agreed the refinancing market will likely be affected, but
noted that as with earlier cooling measures, it does take time before
the effects are seen.
Other experts think, however, that the impact could be muted.
Source: Business Times – 6 October 2012
Non-landed private home resale prices up 3.2%
Resale prices of non-landed private homes rose in the third quarter, even as transaction volumes fell 7.3 per cent.
Overall resale prices gained 3.2 per cent to hit a record $1,156 per
square foot (psf), led by a 2.5 per cent month-on-month increase in
September, data from the latest SRX Residential Property Flash Report
released yesterday showed.
The rest of central region (RCR) posted the strongest quarterly gain of
7.1 per cent for resale non-landed in Q3, hitting an historic high of
$1,199 psf. This was followed by a smaller gain of 3 per cent in outside
of central region (OCR) to $921 psf, and a muted increase of 0.75 per
cent in the core central region (CCR) to $1,738 psf.
Resale transaction volume fell 7.3 per cent to 3,296 transactions from 3,555 transactions in Q2.
RCR recorded the largest drop in transaction volume, by 10.9 per cent
to 854 transactions, followed by CCR which saw transactions drop 6.2 per
cent to 662 transactions. Transaction volumes in OCR fell 5.8 per cent
to 1,780 sales.
Meanwhile, rental volumes fell 5.2 per cent in Q3, to 7,723
transactions. Only RCR posted a marginal 0.25 per cent increase in
rental transactions, to 2,423. OCR posted the largest drop of 8.5 per
cent to 2,777 transactions while CCR saw rental transactions slip 6.2
per cent to 2,523.
Overall rental prices per square foot rose 2.9 per cent to $3.87 psf in
Q3. Rents for CCR were $4.68 psf, $4.01 for RCR, and $3.05 for OCR.
Gross rental yields remained stable at 4 per cent in Q3 due to a
corresponding increase in rental prices compared with resale prices.
By comparison, URA's flash estimate released earlier this month showed
that home prices had inched up 0.5 per cent in Q3. This took into
account new sales, which fell 2.2 per cent. It also did not take into
account the last three weeks of September sales. URA uses a different
methodology from the average psf pricing approach, which is adopted by
the SRX index.
Source: Business Times – 6 October 2012
Sentosa Cove bungalow market picks up after post-ABSD freeze
Activity in Sentosa Cove's bungalow market has picked up considerably
in the last four to six weeks, following a relatively dry period
following last December's introduction of the additional buyer's stamp
duty (ABSD) targeting foreign buying of residential properties.
BT understands that owners have issued options to buyers for about a
dozen homes in the past two months. The buyers are predominantly
foreigners, mostly China nationals.
These bungalows are said to include two homes on Pearl Island, both of
which sold at $2,200-plus per sq ft on land area. A unit on Paradise
Island went for about $22 million or slightly over $2,380 psf based on
land area of 9,236 sq ft; a property on Coral Island changed hands at
$16.5 million or $1,743 psf on land area of 9,464 sq ft.
A seafronting property at Cove Grove boasting views
of the Southern Islands is believed to have been sold for around $26
million, or $2,600 psf. This is in the neighbourhood of the one BT
Weekend reported on Sept 15 as being sold for around $24 million or
$2,470 psf.
The same edition of BT also reported two transactions on Cove Drive for
units facing the waterway and Tanjong Golf Course at $15-plus million
each. One was sold to a Myanmar citizen at $15.3 million or $2,202 psf.
Since then, BT has learnt of another purchase of a property a little
further away on the same road, but also facing the waterway and golf
course. The price is thought to be $16.8 million or $2,308 psf.
Homes on Sentosa Cove have 99-year leasehold tenure.
Market watchers attribute the recent revival in both viewings and
transactions to a cocktail of factors - the stockmarket run-up, which in
turn has boosted sentiment, QE3 and a narrowing in the bid-ask gap that
kickstarted the first few deals in the latest resurgence.
A point to note, however, is that while there is anecdotal evidence of a
string of options for bungalow purchases in the upscale waterfront
housing district being granted in recent weeks, evidence of caveats is
relatively scarce, as most of the options have yet to be exercised by
the buyers.
Caveats were lodged for six Sentosa Cove bungalow purchases in the
first half of this year, followed by two more since then. This compares
with 25 caveats for the whole of last year.
Sources suggest some foreign buyers may have sought longer than the standard two-week option period with a view to securing Singapore permanent resident (PR) status in a bid to lower their stamp duty outlay.
In addition to the 3 per cent standard buyer's stamp duty payable for
all property purchases in Singapore, including those by Singapore
citizens, a Singapore PR pays a 3 per cent ABSD for his second and
subsequent residential property purchases here.
For non-PR foreigners, a 10 per cent ABSD is payable on all residential property purchases.
Hence, if a foreigner obtains PR status, he would be able to "save" 7
per cent on ABSD, or $1.4 million on a $20 million bungalow purchase on
Sentosa Cove, assuming he already owns an existing non-landed
residential property here.
But if this PR does not own any other existing residential property
here, he does not have to pay ABSD at all - translating to a "saving" of
10 per cent or $2 million.
Word on the Cove is that some foreign buyers have been granted long
option periods ranging from six weeks to three months, or even longer.
In exchange for this, owners would typically demand a higher option fee,
say 5 to 10 per cent of the property price, compared with one per cent
in a standard deal.
Typically, a buyer in the resale market who fails to exercise an option would have to forfeit the option deposit.
Some owners who have entered into such deals on Sentosa Cove are
keeping their fingers crossed that the options will be exercised.
Market watchers note that the Singapore authorities have tightened criteria for issuing PR status to high-net-worth foreigners.
On unit land price, the highest price achieved this year is $2,787 psf in May, for a seafronting property along Cove Drive.
The record price for a bungalow in Sentosa Cove was set in October
2010, by a seafronting property on Ocean Drive facing Singapore's city
container ports. It transacted at $2,989 psf. Among waterway fronting
bungalows, the highest price achieved was in September last year -
$2,613 psf for a property on Cove Drive.
The recent run-up in deals and QE3 have boosted confidence among some owners, who have started to raise asking prices.
Source: Business Times – 6 October 2012
Punggol EC expected to be well received
Yet another executive condominium (EC) is being launched today, the seventh EC to be put on the market this year.
Property consultants expect Waterbay, in Punggol, to garner healthy interest from buyers, thanks, in part, to its location.
Waterbay, a 383-unit project at the junction of Punggol Central and
Edgedale Plains, is being built by Chinese developer Qingjian Realty
(South Pacific).
The company is behind several other upcoming condos in the area such as River Isles and Riversound Residence.
The smallest unit in Waterbay, a two-bedder, is 753 sq ft and has an indicative price of about $590,000 or about $780 psf.
Unusually for an EC, five-bedders are also available. These 1,496 sq ft units will cost about $1.05 million or about $700 psf.
Dual key units, which allow for multi-generational living or leasing, are also on offer.
Waterbay's launch comes about two weeks after the launch of Heron Bay EC at Upper Serangoon View, where there were 1,664 interested buyers for just 394 units.
Not all launches this year have done well, industry watchers said,
noting that buyers have been selective about price and location.
For instance, the 416-unit Watercolours at Pasir Ris was almost twice
oversubscribed, but was only 56 per cent sold as of end August.
Interested buyers for Waterbay can submit e-applications between Oct 12
and Oct 16. If demand outstrips supply, a ballot will be held.
Successful applicants can choose their units from Oct 19.
Source: The Straits Times – 6 October 2012
Watertown in Punggol almost 97% sold
The Watertown integrated development in Punggol is almost 97per cent
sold, according to developer Far East Organization yesterday.
The remaining 34 units are mainly those with three or four bedrooms, and range in size from 1,173 sq ft to 1,550 sq ft.
These are among the "best-facing units within the development
overlooking the Punggol Waterway", said Far East, which is co-developing
the project with Sekisui House.
Watertown is Punggol's first project with both a retail and residential component.
The retail portion, called Waterway Point, will feature a "24-hour
basement" level, with a FairPrice Finest supermarket and Shaw Theatres
operating round the clock.
FairPrice Finest will occupy about 30,000 sq ft of space at Waterway Point, making it one of the chain's largest outlets here.
Mr Christopher Tang, the chief executive of Frasers Centrepoint
Commercial, said yesterday: "We are delighted that NTUC FairPrice Finest
has committed to be one of the early anchor tenants.
"We are confident that the mall will be the centre of attraction at Punggol waterfront."
With total development costs estimated at over $1.6 billion, Watertown
is the largest private development in the Punggol Central master plan,
Far East added.
Shops will occupy 40per cent of Waterway Point, while eateries will
take up 30per cent. The rest will be occupied by entertainment and other
service providers, such as educational establishments, banks, and civic
and community amenities.
In August, Hyundai Engineering &
Construction was awarded the main construction contract, worth
US$380million (S$466million), for the Watertown development.
Construction of the retail component has just started and is scheduled
for completion by 2015. The residential component is expected to be
completed by 2017.
Separately, Far East said it has sold 96per cent of the units at
another of its mixed-use projects, The Hillier at Hillview Avenue.
The 528-unit development was launched in January and 21 units are left.
Source: The Straits Times – 6 October 2012
Home buyers unfazed by loan curbs
Despite new restrictions on the length of home loans that took effect
yesterday, house hunters did not stay away from condominium showflats
islandwide.
At new launches like Riversails along the Punggol waterfront and Cityscape at Farrer Park, showrooms were packed.
At a 748-unit development in Bedok South called eCO, for example, at least 20 units were sold yesterday.
The Monetary Authority of Singapore (MAS) said on Friday that it was capping the length of a home loan at 35 years.
It also lowered the loan limits for those who take loans past 30 years, or which extend beyond the retirement age of 65.
Such buyers can take a loan of only 60 per cent of the property's value, down from 80 per cent, starting yesterday.
This means an upfront payment in cash of 40 per cent of the property's price.
If it is their second or more loan, the loan limit shrinks further to
40 per cent - they must fork out a cash down payment of 60 per cent of
the property's value.
House hunters The Sunday Times spoke to yesterday said they were aware of the latest changes but they were undeterred.
Source: The Straits Times – 7 October 2012
Showflats continue to see good traffic
Neither the new restrictions on home loans nor the rain kept prospective buyers from condominium showflats over the weekend.
Indeed, it was "business as usual" at newly launched projects Riversails at Upper Serangoon View and Skies Miltonia at Yishun.
According to agents, more than 300 units have been sold at Allgreen
Properties' 920-unit Riversails, with at least 20 homes sold over the
weekend. Prices of the larger units average slightly over $800 per
square foot (psf), while the one-bedroom units average $1,000 psf.
The larger units (three-bedrooms and above) at the 99-year project have
been doing well, with quite a few sold to upgraders, noted an agent who
did not wish to be named. At the other end of the spectrum, three out
of the five stacks of one-bedroom units launched have been sold.
Separately, some 67 per cent of units at the 420-unit Skies Miltonia
have found buyers; the developer is offering an 18 per cent discount,
and throwing in the option for buyers of certain units to upgrade their
flooring to marble.
The 748-unit eCO in Bedok South threw in an additional 2 per cent
furniture voucher in addition to an array of discounts offered.
The Monetary Authority of Singapore (MAS) said on Friday that it will
set an absolute limit of 35 years on the tenure of all residential
property loans. It also lowered loan-to-value (LTV) ratios for new loans
with a tenure of more than 30 years.
According to the central bank, the average tenure for new residential
property loans jumped from 25 years to 29 over the last three years.
Over 45 per cent of new home loans have tenures exceeding 30 years.
Lower initial monthly repayments from long loan tenures and low
interest rates may cause borrowers to overestimate their loan servicing
ability, warned MAS.
Source: Business Times – 8 October 2012
A policy resolve to rein in asset prices
When the Monetary Authority of Singapore (MAS) last Friday announced
fresh mortgage curbs to prevent new bubbles from forming in the property
market, much of the attention focused on the measures and their impact.
But arguably, what is even more significant is the signal Singapore policy makers are sending to the market.
After the US unveiled a third round of quantitative easing (QE3) last
month, a BT article raised the threat of fresh liquidity flows and the
likelihood of more cooling measures to keep asset bubbles away. It was,
at the time, not the consensus view, with many
arguing, as they still do now, that existing policies are sufficient to
keep prices in check. This was especially (and not surprisingly) the view
of the real estate sector, and as recently as the end of September, the
Real Estate Developers' Association of Singapore (Redas) said the
property sector did not need another round of cooling measures, and that
a thorough review of earlier measures put in place should be done
first.
Such views, while reasonable enough in
themselves, miss the bigger point. And that is that in any robust policy
making framework, the imperative is to stay ahead of the curve.
Existing cooling measures may or may not have already reined in property
prices, but that does not define current scenarios.
A new situation has arrived with QE3. The Federal Reserve's decision to
pump US$40 billion into the US economy each month until sustained jobs
growth kicks in, while welcome news for the
struggling global economy, also created the risk that loose monetary
conditions in the US may push funds into the region in search of yields
and fan asset price inflation, with Singapore a likely prime target for
such flows. Indeed, QE3 also marks the start of what many see as an
extended round of global easing, with all the associated liquidity
risks.
It is in this context that the MAS is acting. "Monetary conditions
worldwide are far from normal," said Deputy Prime Minister Tharman
Shanmugaratnam, noting that the latest round of QE3 in the US and low
interest rates have made credit easy, though this will eventually
change.
"We are taking this step now to require more prudent lending, and will
continue to watch the property market carefully," said Mr Tharman, who
is also Finance Minister and MAS chairman.
And Singapore has signalled clearly it will not lag behind the
regulatory curve. Hong Kong, notably, moved to introduce mortgage curbs
immediately after QE3 was announced. In its fifth round of
mortgage-tightening measures, the Hong Kong Monetary Authority announced
that it would limit the maximum term of all new mortgages to 30 years.
Additionally, mortgage payments for investment properties cannot be more
than 40 per cent of buyer's monthly incomes, compared with 50 per cent
previously.
There is some debate over whether the MAS could be acting prematurely
in the domestic context because property price increases recently have
not been so marked. Official data showed that HDB resale prices rose 2
per cent in Q3 from Q2, while private home prices gained 0.5 per cent
over the same period. Separately, the SRX Residential Property Flash
Report showed resale prices of non-landed private homes rising 3.2 per
cent in Q3.
However, it's worth pointing out that the stated policy objective has
always been that property values should move in tandem with economic
fundamentals. Economists now expect advance estimates for Q3 to show
that the economy shrank 1.8 per cent over the July to September period.
Add to Q2's seasonally adjusted 0.7 per cent quarter-on-quarter
annualised drop in GDP, and Singapore would have suffered a technical
recession, or two consecutive quarters of quarter-on-quarter
contraction. Viewed in this context, even a modest rise in property
prices could be fundamentally out of line.
So far, the property sector's reaction to the new measures has been
mixed. The changes include setting an absolute limit of 35 years on the
tenure of all residential property loans and tightening loan-to-value
(LTV) ratios for certain new loans. Redas said the measures will not
have a major impact, and the initial assessments suggest that the new
rules will affect mostly older buyers, and those looking to own more
than one property. But again, this may not be the most crucial point.
The most important point that the market should take away from the
latest MAS measures is the underlying policy resolve to keep asset
prices here in check. Singapore regulators have signalled their
intention to act, again and again if necessary, to ensure that the
runaway prices of the last cycle will not be repeated.
Last Friday's measures may be confined to the residential market and a
specific group of buyers, but the evidence is clear enough that policy
makers are prepared to introduce more measures to cool prices in
non-residential sectors for instance - where there have been some signs
of overheating - or to further curb foreign buying interest, if needed.
"We will do what it takes to cool the market, and avoid a bubble that
will eventually hurt borrowers and destabilise our financial system," Mr
Tharman said. That is as explicit as it can get.
Source: Business Times – 8 October 2012
