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Published September 9, 2010

New project hints at impact of cooling

First-day sales at NV Residences hit slightly; some banks see drop in loan applications

By KALPANA RASHIWALA AND EMILYN YAP


(SINGAPORE) The chill from the property cooling measures is making itself felt. It has touched bank loans and even had some impact on the first major residential project to be released since Aug 30, when the measures were announced.

At the widely watched preview of NV Residences in Pasir Ris yesterday, the developers had sold about 160 units of the 200 units released in the 642-unit, 99-year leasehold private condo by 6pm. The average price was $830 per square foot (psf).

That's not deemed a bad outcome but market watchers could not help comparing this result with the 300 units sold on the first day of preview of the Tree House condo in Chestnut Avenue in April. That 99-year leasehold project was priced at about $800 psf on average.

Both projects are being developed by City Developments and Hong Leong Group.

Hong Leong Group spokesman Gerry de Silva, commenting on NV Residences' sales, acknowledged that 'there's definitely some impact on our sales from the property measures. We would have sold many more units if not for the measures. But we're quite happy with the sales outcome.

'Some of the speculators are out. Some potential buyers may be checking how their financing will be affected by the new rules before they commit.'

OCBC Bank admits it is already feeling the impact of fewer home loan applications as the recent property measures begin to bite.

But other banks including DBS, the nation's largest mortgage provider, told BT that it's still pretty much business as usual though all are dealing with a spike in queries from clients about how the new rules will impact them.

'It's true there are a few cancellations but it's mainly a spike in terms of queries,' said one banker from a foreign bank.

Housing loans have been the biggest driver of loans growth for banks here throughout the economic downturn, and the recovery since.

Total housing loans grew 22 per cent over the year to end-June, to $101.1 billion - a third of all Singapore-dollar loans by banks here, Monetary Authority of Singapore data show.

In July housing loans continued to gain, up 2.4 per cent to $103.57 billion from $101.13 billion in June, outpacing the 0.7 per cent growth in total bank lending.

Since the government announced the measures last week, a number of home seekers have retreated from the market to evaluate the impact of the changes. Buyers with outstanding home loans would be hit if they buy another property because they can borrow only up to 70 per cent of the new unit's value, down from 80 per cent.

Those who are simply moving homes would have to prove this with relevant documents to borrow up to 80 per cent.

'Over the past week, we have seen fewer applications for home loans as potential home buyers take a step back to assess how the recent announcements regarding the property market would impact them,' said Phang Lah Hwa, OCBC Bank's head of consumer secured lending.

That's why observers are keenly studying NV Residences for signs of impact. More units will be released over the rest of this week. 'We might think of marginally adjusting the price upward,' said Mr de Silva.

Market watchers say the project had been pre-marketed, ahead of yesterday's preview, for about a month. And the average pricing indication given earlier was in the mid-$800 psf range, according to some sources, although one agent said he had seen emails pitching the project at an even higher average price of about $875 psf.

Asked if CDL/Hong Leong had toned down their price expectations, Mr de Silva said: 'We are priced to sell in this current market.'

CDL said that about 75 per cent of NV Residences' buyers were Singaporeans, with foreigners (including permanent residents) making up the rest.

CB Richard Ellis executive director Joseph Tan - who is not marketing the project - said: 'It's a good outcome given the measures. It shows that essentially Singaporeans over the past couple of years have built up their assets and are able to come up with the additional 10 per cent equity - CPF and cash - arising from the tighter financing rules.'

DBS said it has not seen a significant difference in the number of loan applications received, although more inquiries from customers were coming in, said Jeremy Soo, DBS managing director and head, consumer banking group (Singapore).

At Standard Chartered, some clients 'provided feedback that they are thinking of putting their purchases on hold in anticipation of a drop in property prices', said Dennis Khoo, general manager of retail banking products for the bank in Singapore and Malaysia.

Property consultants expect more developers to take the cue from CDL. 'I think 99-year suburban private condos priced on average around the $800 psf level should be affordable,' CBRE's Mr Tan said.

Another property consultant said: 'Other developers were watching NV Residences before deciding whether to release their projects. I think they will be more realistic, not so bullish on the pricing.'

CDL said the 200 units released yesterday were priced between $557,000 for a 506 sq ft one bedder on the second floor (working out to $1,100 psf) to $1.9 million ($761 psf) for a penthouse.

- With additional reporting by Siow Li Sen