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View Full Version : Just how many multiple-properties owners are there in Singapore



princess_morbucks
19-11-14, 17:18
https://sg.finance.yahoo.com/news/just-many-multiple-properties-owners-090833679.html


Not so long ago, I came across an article that talked about how more high-end homeowners are defaulting on their mortgage payments (https://sg.finance.yahoo.com/news/more-high-end-homeowners-default-payments-034203939—sector.html). The article wrote about how some borrowers are finding it hard to sell their units as many buyers are currently waiting on the side-lines. Even if there is interest, many buyers are also facing difficulty securing loans due to the stringent loan criteria. After more than a year since the Total Debt Servicing Ratio (TDSR) measures were introduced, it is beyond a doubt that the policies have been effective.

While owners of high-end properties are among those impacted, another group that could potentially be affected by the cooling sentiments are multiple property owners. Anecdotally, I know quite a handful of people who own and/or co-own multiple properties in Singapore, however there is currently no official data on how many households own more than one property. Hence in this article, I will also be attempting to size up the potential number of affected owners to give readers a sense of the issue.

Head winds ahead?

In the wake of the Global Financial Crisis in 2008, many governments around the world aggressively flooded the banking systems with liquidity to avoid a financial meltdown. As a result of the excess cash, bank-lending rates were at historic lows, which in turn caused asset prices to skyrocket. In Singapore, with bank lending rates at not more than 2%, residential, commercial as well as industrial properties had correspondingly shot up to reach record levels in 2013/2014. However, with the US Federal Reserves officially ending the quantitative easing program in Oct 2014, the flow of funds in search for investment would potentially be lesser than before. Hence, it would just be a matter of time before mortgage rates start to normalise to pre-crisis levels, which in turn will translate to high mortgage repayments.

Apart from the end of quantitative easing, there are also dangers of an economic slowdown. At the point of writing, Japan’s economy just entered into a technical recession as it shrank for the second consecutive quarter. Compounding that is China’s slowing economic growth. With the world’s second and third largest economies not being as vibrant as before, there would unavoidably be some negative spill-over effects on countries (as well as companies) that rely on these countries for business.

Closer to home, the government is also limiting the issuance of permanent residencies as well as work permits. Even the criteria for the Economic Development Board’s (EDB) Global Investors Programme (GIP) has become significantly more onerous than before. Hence, the number of foreign buyers as well as tenants is no longer as many as before, adding to the head winds that multiple-property owners face. Taken together, all the factors highlighted above will inevitably put further strain on the already weak buying sentiments, which in turn could impact property prices and valuations. This brings us to the next question…

So how many multiple property owners could potentially be impacted

To start off, let us first look at the number of resident households to get some indication of how big that potential pool is. Based on the latest figures from 2013, the resident households in Singapore is 1.17million.

Next, let us take a look at the available number of residential units. Based on 2014Q3 figures, there were 317,134 private residential properties and executive condominiums units available. Based on the 2012/2013 HDB annual report, there was a total of 1,044,466 HDB flats. If these 2 numbers are added, the total number of dwelling units amounts to about 1,361,600. Assuming the entire 1.17million households own only 1 unit each, the would be a difference of 191,600 units.

While some may conclude that as many as 191,600 households could own up to 2 residential properties, assuming that the supply of properties is fully taken up, we are actually only halfway through the calculation.

This is because part of the 191,600 units is bought by foreigners, who may not have been factored into the 1.17million resident household figures (if they are not permanent residents). Since 1995, the number of caveats lodged with URA for private properties bought by non-Singaporeans was 106,140. Hence the difference between 191,600 and 106,140 is 85,460 – which is the maximum number of resident households that can own more than 1 unit. Putting things into perspective, this seems like a plausible figure as it works out to be around 6% of the total number of resident households of 1.17million.

Even at this point, it is still not the complete picture, as we also need to factor non-residential property ownerships into the equation. This is because, with the exception of some shop-houses, commercial and industrial properties are typically not primary residences. In other words, those who own non-residential properties are automatically multiple-property owners (when their primary residences are considered). Based on caveats of new launches lodged in URA since 1995, there were a total of 4714 and 13,167 commercial and industrial units respectively. If we add that to the 85,460, the total number of multiple-properties owners can be as high as 103,341, which works out to about 9% of the total households – which is still a plausible figure.

Conclusion

Ultimately, those who borrowed excessively to buy multiple properties in Singapore need to remember that leverage is a double-edged sword. In a rising market, the net wealth of multiple-property owners will grow significantly, as the wealth is compounded based on the number of properties they own.

On the other hand, in a declining market, the net wealth of this group of owners will be adversely affected due to the drop in value being correspondingly compounded. That is not to say that all multiple property owners are having sleepless nights, as there are definitely a lot of wealthy individuals who have the financial strength to weather the current market uncertainty. However, for those who have over-stretched themselves just so that they can own multiple properties, the day of reckoning could be closer than expected.

At this point, I must emphasize that I am not trying to be a “fear-monger”, and paint a dooms-day scenario of a property market collapse. The calculation is also not to be an exact science and there were numerous assumptions made. Nonetheless, taken in the right context, what I am trying to do is to put some perspective on how the weak property market can impact consumers – specifically those who over-invested. While I have sold most of my properties in Singapore and have urged investors to be prudent, unfortunately not all were able to monetise their assets in time.

Warren Buffett says it aptly with the following comment, “Only when the tide goes out do you discover who’s been swimming naked.” What this means is that those who have over committed in the Singapore property market should be mentally prepared to sit tight. Quite often, people forget that property markets are full of peaks and troughs. Unless there is any government intervention and some of the cooling measures are removed, there is unlikely to be an immediate end to the pain for those who own multiple properties.

Arcachon
19-11-14, 20:23
What is the MORAL OF THE STORY.

When Southbank TOP, one agent was carrying 18 access card another 5 access card from the same owner.

SGD 18,000,000 and SGD 5,000,000 profit.

Look like he did not know about what is multiple unit owner.

el loco
19-11-14, 21:07
Provided u can sell...if not it is juz paper profit

gsmsimmax3
19-11-14, 21:31
Commercial and Industrial properties held by pte ltd company will be separate entity altogether.

Arcachon
19-11-14, 22:24
Provided u can sell...if not it is juz paper profit

18 unit rental income SGD 4000 x 18 = SGD 72,000. a month.

Sell than put money in the Bank to depreciate over time ????????

NorthernStar
20-11-14, 07:10
almost all my neighbours having HDB/condo. Some of them stay in condo but some of them choose to rent out the units. From my conversation with them, most of their HDB already fully paid. i see the over-leverage cases in SG are very low. some more the 40%-50% down-payment was implemented 3-4 years ago.

MY most likely yes before the cooling measure this year. 10% down-payment and developer give you 10% discount --> almost 0% down-payment.

Arcachon
20-11-14, 14:09
my neighbors bought Southbank in 2006, if he pay 20% then his monthly mortgage should be SGD 1700 a month, he rent out his HDB every month positive cash follow. Most of the neighbors I met got more than one unit. When you buy the first condo, buying the second one is easy.

Arcachon
20-11-14, 14:30
https://scontent-a-cdg.xx.fbcdn.net/hphotos-xpa1/v/t1.0-9/10710920_10203917461429837_2819375529249740094_n.jpg?oh=b3240bf21a5f2061754ce43f9568e231&oe=54E495DB

https://scontent-b-cdg.xx.fbcdn.net/hphotos-xpf1/v/t1.0-9/10374994_10203917461549840_3453567480431605615_n.jpg?oh=356c4d46efe195bd1aaec66f5bbd7787&oe=5518B317