Monday, September 16, 2013

Property market set for 2016 supply avalanche

The Business Times - August 12, 2013
SSD scheme may work against govt's intention, say market players

[SINGAPORE] With previously locked-up homes getting ready to hit the market, it is timely to relook the sellers stamp duty (SSD), to prevent a head-on collision with the record number of private homes that are expected to make it to the market in 2016, say market observers.

According to data provided by Orange Tee, a total of 33,555 units are expected to make it to the market in 2016, compared with the 15,503 units that are available this year.

Of this, 27,181 units will originate from newly launched projects while the remaining 6,374 units will be from the stash of previously locked-up units, assuming that owners choose to hold onto their properties and not incur any SSD.

This follows enhancements to the SSD scheme in 2011, which saw the holding period raised from three to four years, and rates increased steeply up to 16 per cent.

Specifically, properties bought from Jan 14, 2011 and sold within the first year of purchase, will be hit with an SSD of 16 per cent versus 3 per cent previously. Properties sold in their second and third year respectively will be levied with a 12 per cent and 8 per cent SSD respectively (from 2 per cent and one per cent previously). A 4 per cent SSD will be levied on properties sold in the fourth year (that is, properties held for more than three years but below four years).

While the sheer quantum of units waiting in the wings looks intimidating, it is important to view them in the context of other factors including market conditions, economic prospects, interest rate movements, and the rental market, said property veteran Donald Han.

"Also, assuming that measures remain as they are, if you sell your property and decide to enter the market again, you will be hit by the Additional Buyer's Stamp Duty (ABSD), and that will have a considerable impact on decision making," pointed out Mr Han.

"The resale market is quiet at the moment, but not entirely because demand has softened. One reason that the secondary market has nose-dived is that sellers are thinking: if I sell now, I won't be able to buy at a competitive rate because of the ABSD. Plus, the rental market is strong, and they know they are sitting on healthy capital gains, so why should they sell?

"So the decision-making process (will include questions like) - can I rent out my unit? Can my yields counter any potential increase in interest rates? How many units am I holding? If I have only one other unit and I sell that, when I re-enter the market, I will be hit by the ABSD."

Ironically, while intended as a targeted measure to cool the property market, and, specifically, dissuade investors who were looking to make a quick buck, the policy has reduced the number of resale homes available in the market in the short term.

"Our research shows that out of the 19,874 estimated completions in 2015, 31.8 per cent (6,313) are not available for sale in the open market due to SSD," said Christine Li, research head of Orange Tee.

The actual number could be about 10 to 20 per cent higher because caveats data is typically lower than the actual number of units sold by developers, she added.

"When buyers do not have enough choices in the secondary market, the primary market will still be the main source of buying interest and this could potentially push up demand for private residential properties despite record completions in the pipeline," said Ms Li.

"The SSD could then work against the government's intention to have a sustained price growth for residential properties in line with economic fundamentals."

It could also potentially weigh down the rental market given that units not available for sale at the time of attaining their temporary occupation permit (TOP) might go into the rental market.

Mr Han agreed. "I think the biggest problem in 2016, or even next year, is that it might take longer to find tenants. That long waiting game might inspire some people to take profit and sell."

According to Mr Han, rental demand averaged 42,000 per year over the past few years. This was however, while the economy was fairly strong. With an economic slowdown in view, and potential oversupply, some adjustments to the rental market in the form of lower rents might be seen, he said.

It is for these reasons that it is timely to relook the SSD scheme, said Ms Li.

While retaining the 16 per cent SSD for properties sold within one year, it might be timely to replace the SSD with a capital gains tax for properties sold after a year as this will allow flexibility in disposing of units, she said.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

Collective sales of private homes slowed down 13% in Q2  |  POSTED: 09 Sep 2013 9:32 PM

The collective sales or en bloc sales market for private residential properties saw a slowdown of 13 per cent in the second quarter compared to the first three months of the year.

SINGAPORE: The collective sales or en bloc sales market for private residential properties saw a slowdown of 13 per cent in the second quarter (Q2) compared to the first three months of the year.

The collective sales market in Q2 remained lukewarm as only four small sites were sold for a total of S$215.4 million. This is compared to the three deals worth S$247.8 million done in the first quarter.

Analysts said this is due to cooling measures such as the Additional Buyer's Stamp Duty (ABSD) that kicked off in January.

Going forward, analysts expect sales to slow down further.

This could be due to the Total Debt Servicing Ratio (TTSR) which could further dampen the en bloc market, said Savills Singapore’s senior director of research & consultancy, Alan Cheong.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

Balance sheets of S'pore households "generally in good shape": MAS  |  POSTED: 12 Sep 2013 11:12 PM

The balance sheets of Singapore households are "generally in good shape", according to the Monetary Authority of Singapore.

SINGAPORE: The balance sheets of Singapore households are "generally in good shape", according to the Monetary Authority of Singapore (MAS).

In an exclusive interview with Channel NewsAsia on Thursday, MAS said the latest measures announced on Wednesday aim to prevent individuals with credit card problems from getting further into debt.

Meanwhile, analysts have said the various debt reducing moves by the central bank are a prudent move to curb borrowings in a low interest rate environment.

A slew of measures has been implemented to curb the burgeoning household debt in Singapore.

Restrictions on the loan tenure for residential properties were introduced in October 2012.

Then came financing restrictions on motor vehicle loans in February 2013.

Property loans got hit again when the Total Debt Servicing Framework was introduced in June 2013.

The latest measures involve new rules to curb credit card and unsecured debt.

Wong Nai Seng, assistant managing director at Monetary Authority of Singapore, said: "MAS has taken a series of measures to restrain borrowings for various types of household debt, including car loans and mortgages, and the objective really is to avoid households getting into too much debt and borrowing beyond their means."

He added: "The MoneySENSE financial education programme is working with the industry and consumer groups to encourage responsible borrowing. MAS will continue to encourage prudence both in lending and borrowing."

Compared to other economies' debt in the region, analysts said Singapore fits somewhere in the middle.

Vishnu Varathan, a senior economist at Mizuho Bank, said: "You have Malaysia and Thailand who are well ahead, 80 per cent for Thailand's case as a percentage of GDP. Korea is leading the way, about 90 per cent. And Singapore is - depending on how you take the measure - either in the 60 plus per cent or going to hit 75 per cent of GDP. All of this we want to keep in context... net household assets are also very high in Singapore."

He added: "The collateral that is pledged against this debt for example, mortgages, you have house prices. With higher interest rates, there could be the issues of prices coming down and rentals coming down, so these things are inter-related. (This) is why there needs to be a pre-emptive move.

"And to frame things, while nominal GDP has grown just below 25 per cent since the end of 2009, you actually have mortgages growing about 75 per cent, so three times as fast. Which means we have accumulated debt exposed to the property sector a lot faster. Credit cards debts are also similar, though at a slower rate, at 40 per cent. So these are the reasons why the government has to step in."

MAS said Singapore's household debt is not that dire and analysts said the latest measures are meant to rein in rollover and credit card debts. So when interest rates start rising and financing burdens for cars and homes start to rise as well, these households will be in better shape to pay back those loans.

As for banks in Singapore, experts said these measures will have little impact.

Karen Loon, banking leader at PwC Singapore, said: "The credit card and unsecured business is reasonably small for the banks, so we do not expect a big impact. There could be a small impact on interest income.

"The other things we have noted as well is that... these similar rules in other countries have not had a big impact on banks in those markets."

These markets include the US, Australia and the UK where there have been a big push towards responsible lending and consumer protection.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

Sentosa villa comes with serious flaws, says owner

Sep 16, 2013 -

The exclusive residential enclave of Sentosa Cove has been rocked again by another complaint of shoddy construction work, this time at YTL Group’s Sandy Island.

Just last week, it was reported that Ho Bee was being sued by homeowners at The Coast at Sentosa Cove, for defects such as staircase flooding and termite infestations. 

Thio Keng They, the owner of a villa at Sandy Island, claimed that the two-storey five-bedroom property he acquired for about S$14 million had some “serious” defects, media reports said.

He revealed that when he took possession of the 8,000 sq ft bungalow in March 2012, it had water leakage in the living area, most of the rooms, “gourmet kitchen” and basement garage. There were also defects on bathroom doors and scratches on glass panes and the timber floor.

“I bought the house as I was told by the salesman that it was of top quality and it was a nice development. What I discovered is that it was not so,” said property investor Thio, who also served as former Deputy Managing Director at Malaysia Dairy Industries.

“I was surprised and have never seen anything like this in terms of the scale and extent of the defects. I'm more aggrieved by the substantial defects such as the water ingress and bathroom doors,” he added.

He raised these concerns to YTL, which offered to pay between S$110,000 and S$130,000 for enhancement works and S$20,000 to fix the defects in December. However, he refused the offer saying it wasn’t enough.

“YTL wants to do the repairs but if they use the same people, same materials and same methods, the problems will reappear,” Thio said.

Meanhwhile, YTL said that it had promptly responded to Thio's complaints.

“To the fullest extent possible, we have sought to accommodate Mr Thio's requests even though we considered many, if not all to be non-contractual...However, Mr Thio had imposed various conditions on us before he would allow us to access the premises,” said a YTL spokesman.

“We stress that we have always remained ready, willing and able to resolve all genuine defects.”

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)