http://www.straitstimes.com/archive/...flats-20130907

New loan rules drive up prices of resale private flats

Published on Sep 07, 2013

By Cheryl Ong


PRICES of non-landed private homes on the resale market picked up last month after a new, stricter loan framework drove buyers to look for alternatives to new homes sold by developers.

Prices of these homes rose 1.5 per cent islandwide in August from a month earlier, according to figures released by the Singapore Real Estate Exchange yesterday.

Industry experts said the total debt servicing ratio (TDSR) unveiled by the Monetary Authority of Singapore in June has led buyers to look for properties on the resale market as they are usually cheaper.

The tighter borrowing rules under the TDSR were introduced to restrict home loans to overstretched borrowers such that their total monthly debt repayments do not exceed 60 per cent of their gross monthly income.

"Some buyers now see resale units - which are lower-cost properties - as a better fit into their debt servicing ratio," said R'ST Research director Ong Kah Seng.

"A resale property usually costs about 20 per cent lower than a unit bought directly from developers."

ERA Realty's key executive officer, Mr Eugene Lim, added that more buyers are also looking at resale units in the range of $800,000 to $1 million.

He said units in this range are typically smaller, under 900 sq ft.

This means that transacted prices on a per sq ft (psf) basis would be higher, compared with transactions for larger units, which typically have a lower psf price.

"With more transactions with a high psf price, it explains why the indices have all increased," said Mr Lim.

While prices of resale non-landed private homes picked up in all regions, units in the city fringes led the increase, gaining 2.4 per cent.

In the city centre, resale prices rose by 1.8 per cent, while resale homes in the suburbs inched up 0.2 per cent, according to the Singapore Real Estate Exchange data.

Mr Ong said resale homes in the city fringes are highly sought after, as they can be rented out immediately and rental demand from expatriates for units in that area has traditionally been strong.

However, the slight jump in prices of resale homes in the city centre does not reflect a turnaround in buying interest there, he said.

Rather, it could be that buyers have turned their attention to smaller resale units that are less than 1,000 sq ft.

"Smaller units in the (city centre) have higher leasing demand than luxury units as expatriates are on limited housing allowances," said Mr Ong.

On the rental front, rents of non-landed resale private homes slipped 0.1 per cent from the previous month.

This was despite a 0.5 per cent rise in rental prices in the suburbs.

City centre rents in fell by 0.2 per cent, while rents slid by a softer 0.1 per cent in the city fringes.

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