Tag Archives: cooling measures

Singapore Primary home sales soar 82%

The recent government figures on private home sales signal a turnaround in the market. Figures showed that, in the primary market, developers sold 1,780 new private homes last month, the strongest showing since the 1,806 units moved in June 2013. This was when sales were still buoyant just before the rollout of the Total Debt Servicing Ratio (TDSR) framework.

The March 2017 sales volume is up nearly 82 per cent from February’s 979 units, and a 111 per cent jump from the 843 units sold in March 2016.

Two well-received new launches (Grandeur Park Residences and Park Place Residences at PLQ) have great sales, while continuing sales in earlier projects (such as Parc Riviera, The Santorini and The Clement Canopy), attributed to the confidence-booster from the government’s maiden tweaks to the cooling measures announced on March 10. The best-selling private-housing project in March was Chip Eng Seng’s Grandeur Park Residences next to Tanah Merah MRT Station, with 484 units sold at a median price of S$1,406 psf; this was followed by Park Place Residences at PLQ, where 217 units were transacted at a median price of S$1,805 psf.

The jubilant home-buying mood was reflected not only in the data from the Urban Redevelopment Authority (URA), based on its survey of licensed developers, but also in the secondary market.

Resale transactions of private homes rose to 942 units in March, translating to increases of more than 50 per cent month on month and year on year. The URA’s definition of resales includes developers’ sales in delicensed projects.

Based on the latest data released by the URA, the preliminary Q1 2017 figure for new sales of private homes stands at 3,141 – up from 2,316 units in Q4 2016 and 1,419 units in Q1 2016; the Q1 2017 figure was also the strongest showing since Q2 2013’s 4,538 units.

Developers also sold 578 executive condominium (EC) units last month, higher than the 329 units moved in February, and the 485 moved in March last year. The preliminary Q1 2017 new EC sales by developers is 1,091 units, surpassing the 734 units in the previous quarter and the 762 units in Q1 2016.

Among ECs, Qingjian Realty’s iNz Residence in Choa Chu Kang was the top seller; it sold 187 units at a median price of S$774 psf.The developers’ new private home sales at the new two major new launches – Seaside Residences in Siglap Road and Artra next to Redhill MRT Station were well received as well. Seaside Residences moved almost 400 units while Artra moved 130 units a few days ago.

Joint Statement for property measures by MOF/MND/MAS

Ministry of Finance (MOF) has issued a joint press release with MND and MAS with regard to property measures.

1. Additional Buyer’s Stamp Duties (ABSD) and Loan to Value (LTV) Limits

The Government is therefore retaining the current ABSD rates and LTV limits.

2. Seller’s Stamp Duties (SSD)
The SSD is currently payable by those who sell a residential property within 4 years of purchase, at rates of between 4% and 16% of the property’s value

The Government will therefore revise the SSD as follows:

a) Impose SSD on holding periods of up to 3 years, down from the current 4 years; and
b) Lower the SSD rate by four percentage points for each tier. The new SSD rates will range from 4% (for properties sold in the third year) to 12% (for those sold within the first year).

The new SSD rates will apply to all residential property purchased on and after 11 March 2017. Details of the revised SSD rates are in the Annex.
Existing and new Seller’s Stamp Duty (SSD) rates for residential properties

SSD Rates on the actual price or market value based on date of purchase or date of change of zoning/use
14 Jan 2011 to 10 March 2017 (both dates inclusive) On and after 11 March 2017
Holding Period Up to 1 year 16% 12%
More than 1 year and up to 2 years 12% 8%
More than 2 years and up to 3 years 8% 4%
More than 3 years and up to 4 years 4% No SSD payable
More than 4 years No SSD payable

3. Total Debt Servicing Ratio (TDSR)

MAS will no longer apply the TDSR framework to mortgage equity withdrawal loans with LTV ratios of 50% and below.

4. Stamp Duties on Transfer of Equity Interest in Entities whose Primary Tangible Assets Are Residential Properties in Singapore

The 2nd Minister for Finance will be introducing legislative changes in Parliament today aimed at treating transactions in residential properties on the same basis irrespective of whether the properties are transacted directly or through a transfer of equity interest in an entity holding residential properties. Significant owners of residential property-holding entities or PHEs will be subject to the usual stamp duties when they transfer equity interest in such entities, similar to what would happen if they were to buy or sell the properties directly.

TDSR framework exempted from home mortgage refinancing 

MAS announced in September that borrowers may be exempted from Total Debt Servicing Ratio (TDSR) framework when refinancing their homes. The TDSR rules still apply to new housing loans. The authority also noted that this is not an easing of property cooling measures. This measure is seen to be providing some stability to the property market in the current lull, as well as the current labour market.  

In another report, private home prices may drop up to 15% over the next 2 years

In yesterday’s BT, an article reported OCBC’s projection of private home prices here to  slip between 5 to 15% over 2016-2017. In the same article OCBC projected that primary home sales will be between 6K to 9K units, and home rents may drop up to 15% over the same period. The bank though made a caveat that there is a still a strong demand from buyers entering the market at lower price points so price crash beyond 20% would be improbable.

The following market drivers would loom over the next 2 years:
– home oversupply
– rising mortgage rates
– potential reversals of the existing cooling measures should the market crash.

The cooling measures that are keeping current home prices at bay includes the sellers’ stamp duty (SSD), additional buyer stamp duty (ABSD) and total debt servicing ratio (TDSR). The former two are believed to be targets of adjustment by the authorities should the market plunges deep into further south territory.

Property curbs: Which should stay and which should go?

EVERY few months, property industry players renew their call for cooling measures to be lifted, pointing to the sluggish property market.

The most recent suggestion came, albeit indirectly, from the Real Estate Developers’ Association of Singapore.

In September, it warned that if cooling measures cause consumer sentiment to decline too much, “there could be a broader impact on the economy”.

But it stopped short of calling for specific changes – unlike property developers in August, who did not hold back.

Each time the topic is broached, however, the Government reiterates its stance that it is still too early to do so.

Of course, the cooling measures will be relooked “sooner or later”, as National Development Minister Khaw Boon Wan put it during a Chinese news programme last week. There has been much speculation about when this might happen.

But apart from timing, there is another question about this eventual relaxation: Exactly which measures will or should be lifted?

A whole range of policies are referred to as “cooling measures”, but some are arguably important not just as short-term moves to bring a soaring property market down, but as basic safeguards.

Even if prices cool as planned, some measures may be worth keeping.

One is the 35-year cap on the tenure of home loans. At its introduction in October 2012, the Monetary Authority of Singapore (MAS) said it was part of the “broader aim of avoiding a price bubble and fostering long-term stability in the property market”.

In other words, it was important not just as an immediate cooling measure, but also as part of a more stable property market.

The cap was also meant to protect both borrowers and lenders.

The MAS noted then that low initial monthly repayments, made possible by long tenures and low interest rates, might lead borrowers to take a larger loan than they can truly afford, and to have the repayments stretch over a longer period.The number of residents aged 65 and over with outstanding private mortgages has almost tripled since 2008, reaching 15,506 this July.

While some may be financing investment homes and are not in financial difficulties, others may be in danger of being saddled with a loan they cannot afford to keep servicing. The 35-year loan tenure cap for private property should help avoid that situation.

R’ST Research director Ong Kah Seng considers the cap “a good measure to keep, irrespective of market conditions”.

Similarly, other cooling measures that keep homeowners from overstretching themselves should be retained for that purpose.

“Loan-related measures should be removed last, as these measures encourage financial prudence,” says OrangeTee managing director Steven Tan.

Take the Total Debt Servicing Ratio (TDSR) of 60 per cent, introduced last June. This means financial institutions cannot extend a home loan if prospective borrowers’ monthly repayments – for all their loans – exceed 60 per cent of their gross monthly income.

This protects borrowers from over-extending. It also reduces the risk of bank overexposure to bad loans by filtering out borrowers more likely to default, notes PropNex Realty chief executive office Mohamed Ismail Gafoor, who also thinks it should remain.

Playing a similar role to the TDSR is the Mortgage Servicing Ratio limit of 30 per cent. This is the proportion of gross income that can be used to service a loan for a Housing Board flat.

As it promotes financial prudence, it would make sense to retain this- at least in part – to ensure that buyers do not overstretch themselves.

In contrast to these cooling measures are those which seem to aim simply at reducing demand. These include the Additional Buyer’s Stamp Duty (ABSD), introduced in 2011 and increased last year.

Singaporean property owners must pay 7 per cent on their second property, and 10 per cent on subsequent ones. The duty is higher for permanent residents and foreigners, with the latter paying 15 per cent on any property bought.

Experts point to this as the first of the cooling measures that should be tweaked or removed.

As a tax on property purchases, it merely discourages buyers.

Administratively, removing ABSD is also the easiest move if the Government wants to adjust any cooling measures, notes SLP International Property Consultants head of research Nicholas Mak. It will not affect existing properties, unlike loan curb changes which have implications for refinancing, for instance.

After ABSD, the next cooling measure which could be relooked is Seller Stamp Duty, say experts.

Payable on properties sold within four years of their purchase, it aims to discourage speculation and “flipping” of properties. “In times of a downturn, the SSD can prove to be a double-edged sword, amplifying losses for investors who need to liquidate their property investments,” says Mr Tan.

Possible Reason why cooling measures not removed: Rise caveats in Q2

Here’s a possible reason why the authorities are not inclined to remove any property cooling measures just yet: There was an across-the-board increase in caveats lodged for private home purchases in the second quarter compared to the previous quarter.

DTZ’s analysis of URA Realis caveats database shows a 37.1 per cent quarter-on-quarter increase in the total number of private homes transacted to 3,369 units in Q2.

A segmental breakdown showed that the number of units picked up in the resale market climbed nearly 41 per cent or 386 units to 1,328 units in Q2 from 942 units in Q1 – ending three consecutive quarters of decline.

New sales by developers too rose by 511 units or 36.8 per cent to 1,898 units. In the subsale market, 143 units changed hands in Q2, up 11.7 per cent from Q1.

http://www.businesstimes.com.sg/premium/top-stories/sharp-rise-private-home-purchases-q2-20140724

Purchases by Singaporeans rose nearly 45 per cent quarter-on-quarter to 2,491 units in Q2. The number of private homes picked up by Singapore permanent residents climbed 24 per cent to 574 units, while purchases by non-PR foreigners rose 2 per cent to 260 units.

Those with HDB addresses bought 1,629 units in Q2, up 41.3 per cent from Q1. The number of private homes acquired by those with private addresses climbed 33.4 per cent to 1,740 units.

Despite the recovery in Q2, the 5,826 total private homes sold in the first-half of this year is not even half the 13,651 units transacted in the first-half last year – reflecting the dent on transactions created by the Total Debt Servicing Ratio (TDSR) framework since its introduction in late-June 2013, notes Lee Lay Keng, regional head (SEA), research at DTZ.

Still the pick-up in the Q2 caveats would give the policy makers a reason to pause and reflect, amid calls by developers and other parties urging the authorities to start rolling back cooling measures such as the additional buyer’s stamp duty and the seller’s stamp duty, she added.

Most industry watchers accept that TDSR is here to stay for the long term. Under the framework, banks granting new property loans to individuals have to ensure a borrower’s total monthly debt obligations (including car loan and credit card repayments) do not exceed 60 per cent of gross monthly income.

“The reason caveats have recovered in Q2,” said Savills Singapore research head Alan Cheong, “is that demand is extremely price elastic or price sensitive. Even a slight price decline would lure many potential buyers back to the market”.

“In 2012 and 2013, the market was fixated with new property launches. In 2014, the genuine upgraders and even investors who are not overwrought by new-fangled small-format homes have started to look at the resale market where more habitable, larger apartments are to be found, and they have started to plunge into the market.

“And the sellers of such properties being individuals, unlike developers, have little bargaining power and acceded to the buyer’s price offers. Hence, prices in the resale market have gone down.”

DTZ’s Ms Lee said the strong new home sales in Q2 was amid an increase in launches by developers.

“Based on preliminary monthly numbers, developers launched 2,843 private homes in Q2, compared with 1,964 units launched in Q1. Big projects were released in Q2 in good locations and at attractive prices – such as Commonwealth Towers, Lakeville, Coco Palms and The Sorrento – resulting in relatively good sales,” said Ms Lee.

“Moreover, some previously launched projects saw renewed interest after new units were released at lower prices in Q2. For instance, the developers of The Panorama and Sky Habitat sold another 149 units and 153 units, respectively in Q2 after median prices were reduced by 10-15 per cent since these developments were first launched in Q1 2014 and Q2 2012, respectively.”

DTZ’s caveats analysis also showed that because Singaporeans’ share of private home purchases rose at a faster clip in Q2 compared with the more modest increases in buying by PRs and foreigners, the proportion of units bought by Singaporeans rose four percentage points quarter-on-quarter to 74 per cent.

Conversely, PRs saw a two percentage point retreat in their share to 17 per cent in Q2. Foreigners too posted a three percentage point fall in their share to 8 per cent.

Another finding is that 58 per cent of private homes picked up by Singaporeans in Q2 were new sales by developers. Among foreigners, the figure was 62 per cent. For PRs, however, it was a roughly equal split of the source of units between new sales and resales. Of the 574 units PRs acquired in the second quarter, 47 per cent comprised new sales, and 46 per cent resales, with the balance 7 per cent involving subsale transactions.

“It appears that a higher proportion of PRs are buying for owner occupation and hence want a completed property they can move into immediately,” suggests Ms Lee.

Government says it is still too early to roll back property cooling measures

According to the Ministry of National Development (MND) yesterday, it is still too early to roll back property cooling measures. It said that despite home sales have decreased, prices have remained relatively stable.

The moves to rein in property prices included extra stamp duties to curb speculative buying and the total debt servicing ratio framework which was introduced a year ago.

MND noted that private home prices had surged 60 per cent during the most recent market upswing that began in mid-2009.

The MND’s comments came as prominent developer Kwek Leng Beng warned of a potential impact on Singapore’s reputation as a global city, and called for a review of the policy measures.

The National University of Singapore’s Residential Price Index out yesterday showed that prices of resale homes climbed 0.8 per cent in May from April, after falling for nine months. The Urban Redevelopment Authority’s flash estimates for private home prices will be out today.

http://news.asiaone.com/news/singapore/too-early-relax-property-cooling-measures-says-mnd