Wednesday, October 24, 2012

Fewer people investing in residential units


Proportion of investors among homebuyers drops significantly
Oct 24, 2012
By Rachel Chang

The proportion of investors looking to profit from the residential property market has fallen significantly among homebuyers in recent years, according to latest figures from Credit Bureau Singapore.

After several rounds of cooling measures, the percentage of those taking out new home loans who already have existing mortgages has fallen from 38per cent in 2010 to 33.5per cent last year.

And for the first eight months of this year, it has dropped further, to 31.8per cent.
With more cooling measures introduced earlier this month, analysts foresee the full 12-month figure for this year to be even lower.

But despite the fall in the proportion of homebuyers who are investing in a second property or more, they still account for a sizeable proportion of the market, numbering almost one in three.

This investor group took out 2,037 mortgages for the first eight months of this year. Last year, the annual figure was 2,142 loans.

This, said analysts, may partly have accounted for the latest move to cap the tenures of home loans.

The latest curbs include capping the length of home loans at 35 years. The new rules also require a buyer who wants to take a loan past 30 years, or which extends beyond the retirement age of 65, to stump up a higher downpayment of 40per cent for the first loan and 60per cent for the second or subsequent loan.

These measures will further lower the proportion of investors among new homebuyers, said R'ST Research director Ong Kah Seng.

But it would be "at an incremental pace as the aspirations for private housing among HDB owners is still very intense, and the ongoing low interest rates will still encourage home buying," he said.

The government measure that has brought the proportion of investors down most effectively thus far is the January 2011 round of restrictions, said analysts like Savills Singapore research head Alan Cheong.

At the time, speculative activity was "decimated", he said.

The January 2011 changes included raising the downpayment for a second or subsequent property from 30per cent to 40per cent, and imposing a stamp duty of up to 16per cent on owners selling property within a year.

But some investors found a way to escape the tighter financing rules, by using their children's names for their second or third mortgage, said International Property Advisor chief executive Ku Swee Yong.

"Due to the young age of the new borrowers, the loan tenure has been stretched so that they can afford bigger apartments based on their current income," he noted.

It led to the latest cooling measure, he said, referring to the capping of loan tenure.

Investor Betty Chang, who has four home mortgages, taken out in 2008 and 2009, said she knows of "one or two" investors who used their children's names.

The accounting manager, 58, has no children and counts herself fortunate that she "got into the market earlier".

"If I was starting from zero now, I would not be able to sustain so many properties."

In the pool of mortgages held by major banks here, multiple-property owners took out 55,701 mortgages, which make up 12.5 per cent of all home mortgages. This is a rise from 9.7 per cent in 2007, said the credit bureau, which gathers data from the banks.

This group is also slightly more in debt than compared to five years ago. Among those holding multiple home loans, the average is 2.5 loans, up from 2.3 in 2007.


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