5-10% borrowers over-leveraged on property purchases: MAS

[eng81157]

u really buy his story? I happen to noe a yowe in another forum not sure if they r the same person though

of course i don't buy his story lah. 9 persons + a dog in a 2BR unit?? only 9 mad persons will agree to it.

let's do a simple stats - 50/50 yes or no

minus 2 non-consenting kids,
the probability of all consenting to this mad plan = 0.5**7 = 0.78%

[economist]

Advise people that there could be risks in the market is called having hidden agenda arh?

Wahlaueh, like that just say all the things most like to hear and then everyone here will praise I am handsome.

Warn you about the risks involve and suddenly I become not handsome liao arh ?

As I said in my other post, I'm supportive of prudent financing, and enough cash buffer, and i'm against over-leveraging, for which I'm glad govt has implemented many policies.

I was merely pointing out you have been exaggerating in some of your posts.

You still handsome.

[taggy]

That terrace will be $2 - 3 million now. My view remains the same : Properties are bought to be kept, especially FH and in good locations

Jlrx!!!!!! Welcome back!

let's revise:

http://forums.condosingapore.com/sho...10&postcount=7
http://forums.condosingapore.com/sho...3&postcount=23

That's because of

PROPERTISM Rule No. 1 - Property prices always go up in the long term hence properties should only be bought and not sold.

Did the government listen to Mr. "No Longer Afford" below and reduce New Town HDB 3-room price from $16,400 back to $13,800 because Mr. "No Longer Afford" can "no longer afford"?

I wonder what happened to Mr. "No Longer Afford"?

PROPERTISM Rule No. 2 - Land is more valuable than air.

[mcmlxxvi]

blastfrom the past indeed!

[Amber Woods]

Analyst: 9,000 troubled units could be on market

Up to 9,000 Singapore private property owners could be forced to sell their homes if interest rates rise in the city-state, according to an analyst report published today.

On the back of news that up to 10 percent of Singapore households may have already over-leveraged their private property purchases beyond the new 60 percent limit that was recently imposed by the Monetary Authority of Singapore (MAS), wealth management firm Religare Enterprises has cautioned its clients to avoid investing in Singapore property developers.

In its ASEAN Property Pulse report released today, the research arm of the India-based firm explained that between 10 -15 percent of borrowers could be in financial trouble should interest rates rise in Singapore.

MAS has reported that between five to 10 percent of Singapore households could have over-extended themselves, fuelled by low interest rates and stretched loan tenures. The majority of mortgage loans in Singapore are floating rate packages, according to the company, which means households will face higher monthly repayments when interest rates normalise.

Religare has predicted that a rise in interest rates could see more than 9,000 financially troubled properties being listed on the market – assuming a figure of 10 percent of the 90,000 private homes that are scheduled to be completed between now and 2016.

The authors of the report said: “Another worrying statistic is that only 70 percent of the loans are for owner-occupied homes, meaning investor demand in private homes is running quite high.”

Housing Development Board (HDB) properties and executive condominiums (ECs) have to be purchased for self-occupation, the company noted, so all property investment demand is in the private property sector.

“A little wobble in prices combined with higher interest rates might shake up a few property investors as well and add to the possible troubled units on the market,” the report said.

The company has advised its clients to be cautious on the Singapore residential property market and against investing in Singapore property developer shares.

“We expect prices and rents to correct over 2014-15 on the back of completion of more than 90,000 units between 2H 2013 and 2016,” it predicted.



Andrew Batt, International Group Editor of PropertyGuru, wrote this story. To contact him about this or other stories email [email protected]

[economist]

"only 70 percent of the loans are for owner-occupied homes"

-- "only" - is it an appropriate word? I thought it is comforting to know that 70% of the loans are for owner-occupied... but then, as an economist, I knew this already, MAS revealed it in its financial stability report.

[eng81157]

there's another way of reading this.
we can assume that those who are over-leveraging are investors with risky appetite and hence, leaving owner-occupied units out of the equation


Number of units: 90000
Portion that are owner-occupied: 70%

Number of units that bought for investment = 90000 x 30% = 27000
Since 5-10% of these investors are at risk, number of units = 1350 -2700 units

[indomie]

"only 70 percent of the loans are for owner-occupied homes"

-- "only" - is it an appropriate word? I thought it is comforting to know that 70% of the loans are for owner-occupied... but then, as an economist, I knew this already, MAS revealed it in its financial stability report.

What u can see, cannot hurt you. Its what you don't see that does the most damage.

[Autumnwinds]

there's another way of reading this.
we can assume that those who are over-leveraging are investors with risky appetite and hence, leaving owner-occupied units out of the equation


Number of units: 90000
Portion that are owner-occupied: 70%

Number of units that bought for investment = 90000 x 30% = 27000
Since 5-10% of these investors are at risk, number of units = 1350 -2700 units

Agreed, the correct way would be over-leveraged investors. And not buyers for own-stay. No matter what, I believe home stay will die die not give up.

[eng81157]

there lies the fallacy of "expert analyst" reports

[狮子王]

When the over-leveragers brought down a property market, the innocent commoners who are real house dwellers will also see their asset value collapsed as well. That is, the 10% will be bringing down the 90% together with them.

I know what they are going to do next. Those developers are going to start asking lower prices to push their remaining unsold units in the new projects. They are going to accelerate this process.

Then a scenario will emerge. But I do not wish to reveal what will happen here because people will start saying I have a hidden agenda.

Just go to the new showflats ( Those projects that are launched a few months and still having unsold units ) and see for yourselves.

Up to you to ignore me, someone here say I am a nobody what... not a billionaire anyway.

[狮子王]

Like I said, you guys are just too lucky to have PAP watch out the investment risks for you.

In other countries, look what happened to the over-leveragers and caused market collapses?

You guys are the REAL selfish ones with hidden agenda.

Although I am still holding properties, I am not so black hearted that want the prices to go out of control so that I can make a few more bucks from the next fool.

If so is the case, where then is the joy of being an investor?

I am not so selfish like some to hide the risks factor in the current property market from the new entrants to our property market so that one can make just a little more profits.

One forumer even went as far to ask : "is PAP your Ah Gong " so as to stop me for sending my message across to the readers here?

How different are you from those unscrupulous businessmen who only want to make the maximum profits out of the customers without leaving even a little margin for their customers ?

[狮子王]

You see, many do not understand this risk involved. This is especially true for some of our foreigner brothers and sisters who were brought up under a totally different kind of financial or economic system.

The lack of understanding of the Western Capitalist Free Market makes these brothers and sisters very bold in investing.

You are very lucky to be protected same like us by our PAP government when you invest into our system.

My advice is to be prudent and alert when investing in a Western type of Free Market Capitalist System like Hong Kong or Singapore. It has a track record of resetting and redistributing the wealth in the system when the chance arises

[狮子王]

For different reasons, banks do assess the current value of the property... CMV, FSV, discounted CMV/FSV....

In the standard contract, banks do have the right to ask for top-up...


For the past 20+ years, what had happened....

For fully disbursed loans, borrowers were almost never asked to top up their principal reducing loans regardless of valuation...

For partially disbursed loans, yes, some had been asked to top up.

For interest only loans (recently banned by MAS), top-up to certain maintenance LTV is almost a certainty.

So, for those who recently bought and paid 20% downpayment, you could be in danger.... if there is a price correction.... i.e. if loan approved with valuation at $1m, if dropped to $0.8m, bank could disburse up to 80% of $0.8m, with the rest as top-up amount....

But, what happened in the past might not hold in future...
So, good luck!

Regards

Thanks Good brother, at least you are honest about the facts.

[狮子王]

Many misunderstood FIXED RATES LOANS.

Fixed rate meaning Prime + Fixed rate. The second portion is fixed, but the PRIME RATES are not. During my time, they used the term PRIME rates, now I think they call it differently you have to ask your bankers.

[狮子王]

In 1980, 1997, and 2008 there were 3 unexpected crisis. ( Oil Crisis, Currency Crisis and Systemic Liquidity dried up )

The overleveragers were not killed by interest rate increases, but 2 very sharp spikes in interest rates for a short duration. The rates were 10% and 20% respectively for 1980 and 1997. That 2 rates were enough to make many investors missed their loan payments and hence compounded their interest payments.

In 2008, supposedly after the Lehman's collapse; this should happen, that is, a sharp spike in interest rates to beyond 20%. But that never happen BECAUSE FED PUMPED THE MONEY INTO THE SYSTEM.

Last month, on fear, China market also experience a short spike of 30%.


Don't believe go and do your own research and see for yourselves what killed the overleveragers.

[jwong71]

Thanks Good brother, at least you are honest about the facts.

however most do not believe..about the top up lolx..

most say these are "bull"-shit

[狮子王]

however most do not believe..about the top up lolx..

most say these are "bull"-shit

That is the sad part about the younger middle class now, good brother.

I suspect many in the market before the CMs are really over leveraged. From the simple tell of how the small landed terrace transacting since 2010, I can sense a possible bubble in that segment. How so ?

Very simply, the mass markets or majority of OCR buyers are less at risks of over leveraging. This is because this group are less risk taking.

Cannot say the same for the rest of the 5%. Because this 5% can be the rotten apple of the whole lot.

So MAS and MND are indeed wise to tame this group before they went out of control and fall onto the ground sitting the musical chair game.

[indomie]

Things are getting more interesting now

[repanse71]

however most do not believe..about the top up lolx..

most say these are "bull"-shit

hahaha...
Imagine sample checking letters every month to same borrowers...
" Dear.... your monthly instalment has been revised to XXXX, kindly...."
Imagine receiving such letter every other month....

Actually, the $50-$100 increment is not scary... the top-up letter is...

If you could afford, buy completed units.... less worries....

Regards

[indomie]

For those 5-10% over leveragers, ask yourself a question. Had u not over leveraged and did not bought yourself that property.
1. Can u buy that property now?
2. How does it effect your current net wealth? (Are u richer or poorer without that property)
3. How does it effect your current cash flow? (Eg. If monthly rental income more than mortgage payment, it actually improve your cash flow even if you are over leveraging)

[indomie]

Now we can't over leveraging even if want to. Those 5-10% over leveragers has beat the system.

[economist]

Things are getting more interesting now

What is more interesting?

[smartboy2]

however most do not believe..about the top up lolx..

most say these are "bull"-shit

it's called the "on-margin call"
you have to top up cash when the val of your ppty fall

[Secretariat]

Aiyo brudder, I already said I not buying wat. I downsized my Botannia to waterview in terms of quantum but I made more from waterview on paper today compared with if I had kept waterview leh.
Both % wise and also $ wise. Somemore I managed to keep money into my bank after sales of Botannia and putting in 40% down payment for waterview leh? Hahahaha

Please read my post properly leh....

Why are you not buying?

Why should you forfeit the Botannia rental incomes and buy Waterview?

Cheers!

[狮子王]

it's called the "on-margin call"
you have to top up cash when the val of your ppty fall

That is correct, good brother. For those with 1 or 2 properties, they should not worry too much if their income is at least 3 times their mortgage payments. However, cannot say the same for overleverager.
Here is my quick example for a TYPICAL OVERLEVERAGER WHO thought they can afford:

Current Scenario 1

Household income : $10,000 ( Typical Young Professional Couple)
Exisiting Housing Loan: $1,000,000
Value of Current Property: $1,800,000
Own Cash Saving already used to paid for the property : $800,000 ( Assuming all savings used to balance the 80% Loans typically disbursed to borrowers last time, it will be worse if they borrowed up to 90% and tenure of 35years or more. )
Monthly Payment current @ low interest rates 1.5% is around $3500 ( Assuming Tenure is 30 years for young couple)
Exisiting Monthly Car loan : $1200 ( Assuming Typical Toyota Camry)
Electricity Bill and other msc like property maintenance and car maintenance : $1200

Cash Left for Household Expenses: $4,100

( Still Looks good right ? )
================================================

NOT When this happens: Interest Rates increase to only 4.5%

Scenario 2: Rates Increase ( Slight Only )

Income:$10000
Home Loan will be $5100
Car Loan : $1200
Msc Billings: $1200
Saving: NIL ( MOst Overleveragers will not keep much cash )

Cash Left for Household Expenses: $1,500

================================================

You think $1,500 is enough for emergency or Household Expenses?

That is like a person with initially $4,100 Salary now living only on $1,500.

What will happen to all aspects of this family's life?

I predict they will start to take up personal loans or even underground loans to protect their main asset which is property if they missed only one payment.

The slight interest rates normalising to only a mere 4.5% is enough to erode the cash left for spending by more than 2.5 times.

Can you imagine, the higher their household income, because of HIGH PROPERTY VALUATION, the overlevergers will had definately had borrowed more in our current property market because of GREED.

You know, what if it is an interest rate spike of 25% when a BlackSwan event arrives? Not saying it will happen, but just think how easy is it to make this household leg weak.

Of course, if you are not the 5% overleveragers, nothing to worry about what. Since the 5% usually holds more than 3 properties: ( 1 own stay , 2 small investment properties like MMs ) BUT also can be the greedy ones that has only 1 own stay and one other OVERPAID investment property.

Good Luck, and DO THINK OVER ABOUT WHAT I SAID CAREFULLY.

Your Very Handsome Uncle,
Blackjack21Trader

a.k.a 狮子王，神龙股圣，The Illuminated， The Third Eye

[狮子王]

For those 5-10% over leveragers, ask yourself a question. Had u not over leveraged and did not bought yourself that property.
1. Can u buy that property now?
2. How does it effect your current net wealth? (Are u richer or poorer without that property)
3. How does it effect your current cash flow? (Eg. If monthly rental income more than mortgage payment, it actually improve your cash flow even if you are over leveraging)

As long as you did not unload your investment properties, the profits are just paper profits and NOT actual realised profits. Paper profits can go up and down.

And typically when I see how my staffs did the spreadshits, they tend to overlook or underestimate a hell lots of real life or unforseen stuffs.

[Secretariat]

That is correct, good brother. For those with 1 or 2 properties, they should not worry too much if their income is at least 3 times their mortgage payments. However, cannot say the same for overleverager.
Here is my quick example for a TYPICAL OVERLEVERAGER WHO thought they can afford:

Current Scenario 1

Household income : $10,000 ( Typical Young Professional Couple)
Exisiting Housing Loan: $1,000,000
Value of Current Property: $1,800,000
Own Cash Saving already used to paid for the property : $800,000 ( Assuming all savings used to balance the 80% Loans typically disbursed to borrowers last time, it will be worse if they borrowed up to 90% and tenure of 35years or more. )
Monthly Payment current @ low interest rates 1.5% is around $3500 ( Assuming Tenure is 30 years for young couple)
Exisiting Monthly Car loan : $1200 ( Assuming Typical Toyota Camry)
Electricity Bill and other msc like property maintenance and car maintenance : $1200

Cash Left for Household Expenses: $4,100

( Still Looks good right ? )
================================================

NOT When this happens: Interest Rates increase to only 4.5%

Scenario 2: Rates Increase ( Slight Only )

Income:$10000
Home Loan will be $5100
Car Loan : $1200
Msc Billings: $1200
Saving: NIL ( MOst Overleveragers will not keep much cash )

Cash Left for Household Expenses: $1,500

================================================

You think $1,500 is enough for emergency or Household Expenses?

That is like a person with initially $4,100 Salary now living only on $1,500.

What will happen to all aspects of this family's life?

I predict they will start to take up personal loans or even underground loans to protect their main asset which is property if they missed only one payment.

The slight interest rates normalising to only a mere 4.5% is enough to erode the cash left for spending by more than 2.5 times.

Can you imagine, the higher their household income, because of HIGH PROPERTY VALUATION, the overlevergers will had definately had borrowed more in our current property market because of GREED.

You know, what if it is an interest rate spike of 25% when a BlackSwan event arrives? Not saying it will happen, but just think how easy is it to make this household leg weak.

Of course, if you are not the 5% overleveragers, nothing to worry about what. Since the 5% usually holds more than 3 properties: ( 1 own stay , 2 small investment properties like MMs ) BUT also can be the greedy ones that has only 1 own stay and one other OVERPAID investment property.

Good Luck, and DO THINK OVER ABOUT WHAT I SAID CAREFULLY.

Your Very Handsome Uncle,
Blackjack21Trader

a.k.a 狮子王，神龙股圣，The Illuminated， The Third Eye

Many are calculating, what if interest rate goes up to 3% or 5% whatever, and sort of concluded that "no problem, people could handle it".

It is missing the big picture.

They overlook what other investors (the next buyers of your properties) could do in this scenario? These investors have the choice where they want to put their money, example bonds which would have fallen in price therefore raising the effective yield.

Is property the same risk class as bond? Vic, who writes only in the Bond thread, consistently look at risk versus reward.

Cheers!

[狮子王]

Many are calculating, what if interest rate goes up to 3% or 5% whatever, and sort of concluded that "no problem, people could handle it".

It is missing the big picture.

They overlook what other investors (the next buyers of your properties) could do in this scenario? These investors have the choice where they want to put their money, example bonds which would have fallen in price therefore raising the effective yield.

Is property the same risk class as bond? Vic, who writes only in the Bond thread, consistently look at risk versus reward.

Cheers!

Yes I agree. Whether there is a next buyer is a crucial point to consider.

[Secretariat]

Many are calculating, what if interest rate goes up to 3% or 5% whatever, and sort of concluded that "no problem, people could handle it".

It is missing the big picture.

They overlook what other investors (the next buyers of your properties) could do in this scenario? These investors have the choice where they want to put their money, example bonds which would have fallen in price therefore raising the effective yield.

Is property the same risk class as bond? Vic, who writes only in the Bond thread, consistently look at risk versus reward.

Cheers!

MAS said 5-10% of borrowers is overleveraged.

Posters said 5-10% of some investors is overleveraged.

So, who has the hidden agenda?

Cheers!