Singapore Property Downcycle

[Ringo33]

Just thinking aloud, what would be the value of a leasehold condo at 90 years old compared with a fh property, if it isn't en bloc?

What kind of value will a sub 10 years condo have vis a vis a freehold one? I echo the thoughts of some forumers here that Singapore is still a young nation and with such a surge in properties, won't be surprised to see many condos without en bloc potential at end of lease.

The value of FH will always be higher than LH (about 20%) if you are comparing apple to apple, but that is beside the point. Our discussion here is about teddybear suggesting that keeping your FH condo FOREVER which we know is impossible unless you own the entire development plus the land like Peter Lim.

Developers are always on the look out for land for development, the only reason why it cant go en bloc is usually price. Then again, this has got nothing to do keeping FH condo FOREVER.

[seletar]

Please kindly do not argue about FH/LH in this thread, you can start another thread to argue about it if you want to. Thanks.

I will start posting some earlier articles relating to this downcycle for reference.

[seletar]

The Govt was well aware of the impending oversupply and with this change they will not lose any tax revenue from vacant properties. Investors with vacant properties now face double whammy of servicing their mortgage, maintenance fees and property tax without rental income.


No more tax refunds on vacant properties

The Business Times
Monday, Feb 25, 2013


THE government will do away with the current concession that provides tax refunds on vacant properties in order to achieve "consistency and equity" in tax treatment.

This, said Finance Minister Tharman Shanmugaratnam on Monday in his annual Budget speech, is a "fair" move given the new measures to have a more progressive property tax schedule on residential properties.

"Property tax is a tax on property ownership and should be levied irrespective of whether the property is vacant or occupied," said Mr Tharman.

These changes will take effect from January 1, 2014.

[seletar]

http://sbr.com.sg/residential-proper....QHuCIl5l.dpuf
Published: 21 Jan 13

Singapore must brace itself for 200,000 new homes


In a blog post, Minister for National Development Khaw Boon Wan said that some 200,000 new housing units will be constructed. 80,000 of which are private properties, 10,000 are ECs and about 110,000 are public housing. "This is equivalent to the building of four new Ang Mo Kio towns by 2016, and we are still building more," he wrote.

[seletar]

Singapore property tax is a tax on property wealth, not usage.


http://www.todayonline.com/business/...y-tax-feedback
Published 04 Sep 2013

MOF rejects property tax feedback


SINGAPORE — The Ministry of Finance (MOF) has dismissed all eight suggestions it received in relation to proposed property tax changes announced during the Budget Speech in February, saying the feedback was “inconsistent with the policy objectives of the proposed legislative changes”.

The tax changes announced included the removal of property tax refunds for unoccupied residential and non-residential properties “to ensure consistency in the tax treatment of all vacant properties and to align with the policy intent of property tax, which is to tax property wealth rather than use”.

The MOF received six suggestions, which included recommendations to allow vacancy refunds for unoccupied properties owned by Singaporeans residing abroad due to work or for charitable causes, as well as to reduce business costs of commercial and industrial property owners whose premises are vacant.

The feedback was rejected as it was “not in line with the policy intent of property tax, which is to tax property wealth rather than use”, said the MOF.

The remaining two suggestions were for the proposed change to clarify the definitions of residential versus non-residential properties, to enable the introduction of the progressive property tax structure on all residential dwellings.

The public consultation on the draft Property Tax (Amendment) Bill 2013 was sought between July 25 and Aug 14.

[prunes]

2015 supplies are mostly appearing in 2014 as TOP tends to be about 1 year ahead of schedule. Those in 2016 are likely to appear in 2015. Beyond 2015 the supplies are likely to stagnant or dwindle as evident by lower supply of GLS and BTOs. In early 2015, the US economy should have picked up sufficient momentum to boost Singapore's economy, employment and inflow of foreign labour.

SMEs 'modestly upbeat for next 6 months'
PUBLISHED OCTOBER 04, 2014
http://www.businesstimes.com.sg/prem...onths-20141004

[teddybear]

Think you are right, so we should see OCR private properties prices crashing by end of 2015.................

2015 supplies are mostly appearing in 2014 as TOP tends to be about 1 year ahead of schedule. Those in 2016 are likely to appear in 2015. Beyond 2015 the supplies are likely to stagnant or dwindle as evident by lower supply of GLS and BTOs. In early 2015, the US economy should have picked up sufficient momentum to boost Singapore's economy, employment and inflow of foreign labour.

SMEs 'modestly upbeat for next 6 months'
PUBLISHED OCTOBER 04, 2014
http://www.businesstimes.com.sg/prem...onths-20141004

[prunes]

Think you are right, so we should see OCR private properties prices crashing by end of 2015.................

A mild correction in early part of 2015 can be expected for a few oversupplied OCR areas. There are no major retrenchments so I don't expect any crash.

CCR is clearly over-priced so significant correction can still be expected. Due to the big quantum, the holding power of weaker investors will be severely tested.

[seletar]

Not only no more tax exemptions for vacant homes, the Govt also increase property tax in 2014 and 2015 for non-owner-occupied homes, especially the high value homes. The Govt getting more tax revenue from property investors.


http://www.iras.gov.sg/irashome/page04.aspx?id=12186

New Property Tax Computations for Non-Owner-Occupied (include Let-Out/ Vacant) Residential Buildings


The Government announced the introduction of progressive tax rates for all residential properties from 1 Jan 2014 and 1 Jan 2015. See revised rates below.

A) Progressive Tax Rates for Residential Properties (Exclude residential land)
Progressive Tax Rates
Annual Value($) Effective 1 Jan 2014
First 30,000 10%
Next 15,000 11%
Next 15,000 13%
Next 15,000 15%
Next 15,000 17%
AV in excess of $90,000 19%

Annual Value($) Effective 1 Jan 2015 First 30,000 10%
Next 15,000 12%
Next 15,000 14%
Next 15,000 16%
Next 15,000 18%
AV in excess of $90,000 20%


1 Illustrations of Property Tax Computations for Non-Owner-Occupied
(include Let-Out/ Vacant) Residential Buildings

Example 1: Annual Value: $95,000

Property Tax based on Year 2013 property tax rate:
$95,000 @ 10% = $9,500
Property tax payable before 2014 = $9,500 [A]

Property Tax based on new residential rates with effect from 1 January
2014:

First $30,000 @ 10% = $3,000
Next $15,000 @ 11% = $1,650
Next $15,000 @ 13% = $1,950
Next $15,000 @ 15% = $2,250
Next $15,000 @ 17% = $2,550
Remaining $5,000 @ 19% = $950__
Property tax payable from 2014 = $12,350 [B]

Tax increase = $2,850 [B-A]


2 Illustrations of Property Tax Computations for Non-Owner-Occupied
(include Let-Out/ Vacant) Residential Buildings

Example 2: Annual Value: $95,000

Property Tax based on residential tax rates with effect from 1 January
2014:

First $30,000 @ 10% = $3,000
Next $15,000 @ 11% = $1,650
Next $15,000 @ 13% = $1,950
Next $15,000 @ 15% = $2,250
Next $15,000 @ 17% = $2,550
Remaining $5,000 @ 19% = $950__
Property tax payable from 2014 = $12,350 [A]

Property Tax based on residential tax rates with effect from 1 January
2015:

First $30,000 @ 10% = $3,000
Next $15,000 @ 12% = $1,800
Next $15,000 @ 14% = $2,100
Next $15,000 @ 16% = $2,400
Next $15,000 @ 18% = $2,700
Remaining $5,000 @ 20% = $1,000__
Property tax payable from 2015 = $13,000 [B]

Tax increase = $650 [B-A]

[teddybear]

On the contrary, I am expecting something >30% crash for OCR private property prices, given that OCR private has gone up by >140% since 2009 lows.

On the other hand, CCR only gone up by about 30% since 2009 lows (as of current price after crashing about 30+%), and comparing >140% increase vs 30% increase, I would say OCR is the one much more seriously over-priced and hence will crash much more when it comes!

Let's wait and see, end 2015 to end 2017 will be interesting times, where we see OCR crashing like no tomorrow (unless govt relax the cooling measures!). Let's watch the show that is starting to unfold..................

A mild correction in early part of 2015 can be expected for a few oversupplied OCR areas. There are no major retrenchments so I don't expect any crash.

CCR is clearly over-priced so significant correction can still be expected. Due to the big quantum, the holding power of weaker investors will be severely tested.

[seletar]

http://www.businesstimes.com.sg/prem...anche-20130812

Business Times
Published August 12, 2013

Property market set for 2016 supply avalanche

SSD scheme may work against govt's intention, say market players


[SINGAPORE] With previously locked-up homes getting ready to hit the market, it is timely to relook the sellers stamp duty (SSD), to prevent a head-on collision with the record number of private homes that are expected to make it to the market in 2016, say market observers.

According to data provided by Orange Tee, a total of 33,555 units are expected to make it to the market in 2016, compared with the 15,503 units that are available this year.

Of this, 27,181 units will originate from newly launched projects while the remaining 6,374 units will be from the stash of previously locked-up units, assuming that owners choose to hold onto their properties and not incur any SSD.

This follows enhancements to the SSD scheme in 2011, which saw the holding period raised from three to four years, and rates increased steeply up to 16 per cent.

[seletar]

Singapore's domestic private debt-to-GDP ratio has now risen to very high 162% in Q3 2014 ($604.6 billion), this private debt does not include those that borrow from CPF to pay for their HDB flats.


http://sbr.com.sg/economy/news/chart....o5Cx8f5C.dpuf
Published 14 Aug 2013

Chart of the Day: Here's proof that Singapore's loan growth outstripped nominal GDP 8 times


According to Nomura, Singapore's nominal GDP growth fell to 1.3% y-o-y in Q1 2013, yet loan growth picked up to a sizzling 19.2% (it eased to 18.8% in Q2; nominal GDP data for Q2 are not yet available).

So loans growth outpaced nominal GDP by 18.0 percentage points in Q1, and likely by a similar margin in Q2.

Singapore's credit-GDP growth gap is the largest in Asia.

Here's more from Nomura:

Since quarterly data began in 1981, loans growth has outpaced nominal GDP by more than 18pp on eight occasions: Q2, Q3 and Q4 in 2008, Q2, Q3 and Q4 2012, Q1 2012 and Q1 2013.

All are since the global financial crisis. One reason for this is that Singapore's main monetary policy target is the exchange rate, and so its short-term interest rates closely mimic the near-rock bottom rates in the US.

The upshot is that Singapore's domestic private credit-to-GDP ratio has risen sharply, from 101% in Q4 2008 to 149% in Q1 2013. It is not only the level, but the speed of the debt build-up that is a concern.

Unless the debt build-up is brought under control, Singapore will be very exposed when the US Fed eventually does raise rates.

[seletar]

Housing debt slavery : How it can occur....


My friend who is an economist was terrified when he bought a private condo. He and his wife were thrifty penny pinchers who paid down the housing loan as fast as possible. Why was he so fearful? Being an economist he knew a lot of economic history and knew that many things can go wrong when one has a large debt. Somehow these few years, people don't think too much about borrowing half a million or a million to buy a home - sometimes they do it because others are doing it. Sometimes they think they are okay as long as they stay employed.

15 years ago a friend of mind show me the terrible situation got in with his housing loan. He computed that he paid a total of $200K in installments but the outstanding loan decreased by only $60K. How is this possible? During the Asian crisis interest rates went up to 6-8% depending on which bank you got your loan. 8% on a 800K loan is a whopping $64K a year roughly $5K a month on interest alone. Not to mention the depreciation of the property during that time. Interest rates today are artificially low. They may be low now but if you look at a window of 2 decades chances are you will hit a duration of extremely high rates.

Another situation that can arise is negative equity. When the price of the home falls very quickly, the market price of the home can fall below the outstanding loan you have with the bank. When this happens, the banks can ask you to pay down part of your loan immediately so that you get back to positive equity. This clause I believe is found in all housing loan agreements today. It didn't happen in Singapore but home buyers in Hong Kong got hit by this during the Asian Crisis and were at the mercy of the banks that had the right to foreclose on the property.

During boom times, there is always this tempting strategy of buying a home then taking loan with a long tenure then servicing the loan with rental income. I've seen a number of people who get into trouble with this strategy - they can afford one condo but buy two thinking the 2nd property can pay for itself via rental income. To get into real trouble buy 3 condos. when you can only afford one. If your timing is perfect perhaps you can get away with it but many people do this during the boom time when property prices are high. When rental yields fall, they end up slaving away to hold on to the property.

[seletar]

'Beware oversupply of shoebox apartments'

Experts warn investors that thousands of them are set to flood market

The Straits Times


PROPERTY analysts have issued a blunt warning to investors keen to buy so-called shoebox apartments in hopes of capital gains and good rental returns.

The strong interest in these units - mainly 500 sq ft or smaller - is playing a central role in fuelling the robust demand in the overall private property market.

Analysts at major research firms cautioned that investors should look before they leap even though the price tags look tempting, given the units' small size.

They said investors should understand that thousands of these tiny homes are set to flood the market in the next year or so, which could mean headaches in getting a tenant - or a good resale price.

The analysts said most buyers for such units tended to be investors rather than owner occupiers, many of whom lived in HDB flats that were larger than the shoebox units they were buying.

A report by BNP Paribas Group noted a spike in private units purchased by HDB dwellers since 2008, many of which were shoebox-size, 'which we believe is not for owner occupation'.

A research report by Nomura Group pointed out that the number of completed shoebox units could triple next year. Most units scheduled for completion are mass and mid-market projects and more than half of such units were purchased by HDB dwellers, it said.



The BNP report also stated that tighter immigration rules may mean investors would face even more difficulty finding enough tenants for the units.

'Facing an uncertain demand ahead, we believe the physical market could start to feel the first pains of oversupply as early as next year via softening rents and buyer sentiments,' it said.

The researchers also warned that rising interest rates could dampen home demand. 'Coupled with other risks such as an earlier-than-expected climb in interest rates, this could indeed have a significant impact on the financial well-being of HDB households, which typically have less holding power,' said Nomura.

Likewise, the BNP report warned that a rise in mortgage rates could hurt home affordability, 'unless household income rises faster or home prices fall faster'.


Shoebox unit prices did the worst in the 08/09 crash, performing well below the property price index

[seletar]

http://www.channelnewsasia.com/news/...-a/729458.html
Channel News Asia
POSTED: 30 Jun 2013 8:29 PM

New home loan rules a "structural measure": Khaw


SINGAPORE: National Development Minister Khaw Boon Wan said the recent tightening of property loan rules granted by financial institutions is a structural measure to ensure a more stable property market, and is expected to be "quite permanent".

The new rules, which kicked in on Saturday, are also meant to ensure that monthly loan repayments by property buyers do not exceed 60 per cent of their income.

On Friday, Singapore's central bank introduced a Total Debt Servicing Ratio (TDSR) framework and tighter Loan-to-Value (LTV) limits on housing loans. It said the move will strengthen credit underwriting practices among banks and encourage financial prudence among borrowers.

Mr Khaw said: "Our observation is I think those people buying for home ownership is not an issue, but we do have buyers who are stretching themselves, buying second property, third property for investments, and those are the people we worry about, because when interest rates go up, and when they find themselves (being unable to) afford the increased mortgage, what would they do? They may be forced to liquidate, and who knows, if that time combines with a time where there's a bit of a glut in the property market, they may suffer financially. So I think the new rules are a good reminder."

Mr Khaw also noted that the current low interest rate is not sustainable.

He said: "If you assume that today's mortgage rate is 1.5 per cent, and let's say you buy a property, let's say your monthly mortgage is S$1,500. But it won't stay 1.5 per cent forever… Interest rates will adjust and let's say if it goes up to 3.5 per cent or 4 per cent or even higher, as not too long ago, then your monthly mortgage will suddenly increase in a very big way. And will you still be able to afford it? So I think all these prudential rules are very important, it's for the interests of the buyers.”

[seletar]

http://www.stasiareport.com/breaking....Cy2pn9mp.dpuf
The Straits Times
Published 24 July 2013

One in 10 borrowers overstretched, warns MAS

Hike in rates and fall in property prices may pose risks to financial stability


HOUSEHOLDS here are borrowing more amid low interest rates and combined with soaring home prices, the mix poses "significant risks" to Singapore's financial stability, the Monetary Authority of Singapore (MAS) has warned.

The central bank said 5 per cent to 10 per cent of borrowers here have likely taken on too much debt to buy a home. In other words, their total monthly debt repayments exceed 60 per cent of their income, said MAS managing director Ravi Menon yesterday.

This proportion of "at risk" borrowers could hit 10 per cent to 15 per cent if mortgage rates rise by 3 percentage points, he added.

While Singapore households as a whole have more cash and deposits than debt, individual households may not be in such good financial shape, Mr Menon said at the release of the MAS annual report. Households with lower income, less savings or longer loan periods may find it a strain to repay debts if interest rates rise.

"The combination of low interest rates, growing leverage, and surging property prices poses significant risks to financial stability," Mr Menon said.

"When interest rates rise and if property prices fall, any risks built up will materialize."

He added: "So when interest rates rise, long before any bank gets into trouble - and they won't - some households will."

Bank housing loans here have risen 18 per cent a year in the last three years, and home loans as a share of gross domestic product (GDP) have jumped from 35 per cent to 46 percent in the period.

This has led Singapore's debt as a share of GDP to rise from 200 per cent to 270 percent over the last three years, while resident debt to GDP has risen from 125 per cent to 155 per cent, Mr Menon said.

Economists have sounded similar alarms. Standard Chartered noted this month that Singapore households are among the most indebted in Asia relative to what they earn, while Moody's Investors Service recently downgraded its outlook for Singapore's banking system due to mounting debt.

The MAS last month unveiled a new framework for home buyers' loans, to ensure that a borrower's repayments on all debts does not exceed 60 per cent of his gross monthly income. The move came as MAS wants banks to practice lending. It had noted some "worrying practices" during bank inspections.

One couple with a total monthly income of $6000 were granted a new home loan of $400,000 on top of their existing debt, as they had a savings deposit of $90,000. But their total monthly loan repayments came to more than 90 per cent of their income.

Some car buyers also borrowed almost the full car price, which is not prudent as cars are depreciating assets, Mr Menon said.

[seletar]

http://www.todayonline.com/singapore...-tenure#inside

HDB cuts loan tenure as interest rate hikes loom

Move among initiatives to boost financial prudence, improve affordability of public housing

TODAY
Published 28 Aug 2013


SINGAPORE — To encourage financial prudence and mitigate an impending rise in interest rates, the Housing and Development Board (HDB) announced yesterday that it would cut, with immediate effect, the maximum loan tenure from 30 years to 25 years for its housing loans, and reduce the mortgage servicing ratio (MSR) limit from 35 per cent to 30 per cent of the borrower’s gross monthly salary.

And with effect from today, financial institutions will shorten the maximum tenure of their new housing loans and re-financing facilities from 35 years to 30 years.

The measures were announced yesterday by the HDB as part of a raft of housing initiatives — including details of the enhanced Special CPF Housing Grant that was announced during the National Day Rally and a pilot launch of multi-generation flats — that sought to achieve various outcomes such as improving affordability and encouraging extended families to live together or in close proximity.

Permanent resident (PR) households will now also have to wait three years after obtaining their PR status before they can buy a resale flat — a move that National Development Minister Khaw Boon Wan described as a “judgment call” to allow PRs to sink roots here and save up before buying a flat. Previously, PR households could buy resale HDB flats as soon as they acquired PR status.

The objective of the revised mortgage loan terms was to “ensure financial prudence in purchase of public housing and discourage over-consumption”, the HDB and the Ministry of National Development said in a joint press release. This comes after the Monetary Authority of Singapore introduced a Total Debt Servicing Ratio (TDSR) framework about two months ago to cap total debt obligations at not more than 60 per cent of an individual’s gross monthly income.

It was only in January that the authorities announced that the MSR limits for housing loans from banks and the HDB would be capped at 30 per cent and 35 per cent of a flat buyer’s gross monthly income, respectively. With yesterday’s announcement, the MSR limit for HDB loans will be the same as for bank loans.

Speaking to reporters at Toa Payoh HDB Hub, Mr Khaw reiterated that the changes were meant to align HDB loan policy with that of the banks.

Referring to the current “unrealistic and artificial” interest rates, he said: “People think they can buy a bigger flat or a condo, when we all know that over the lifetime of the mortgage, interest rates won’t stay that low and then what? Then there will be trouble.”

Analysts whom TODAY spoke to reiterated that the latest measures were primarily targeted at “preparing the ground” for the looming interest rate hikes.

[Arcachon]

]Housing debt slavery : How it can occur....

My friend who is an economist was terrified when he bought a private condo. He and his wife were thrifty penny pinchers who paid down the housing loan as fast as possible. (Normal, everyone was told by their parent, teacher, friends to do so) Why was he so fearful? Being an economist he knew a lot of economic history and knew that many things can go wrong when one has a large debt. Somehow these few years, people don't think too much about borrowing half a million or a million to buy a home - sometimes they do it because others are doing it. Sometimes they think they are okay as long as they stay employed.

15 years ago a friend of mind show me the terrible situation got in with his housing loan. He computed that he paid a total of $200K in installments but the outstanding loan decreased by only $60K. How is this possible? During the Asian crisis interest rates went up to 6-8% depending on which bank you got your loan. 8% on a 800K loan is a whopping $64K a year roughly $5K a month on interest alone. Not to mention the depreciation of the property during that time. Interest rates today are artificially low. They may be low now but if you look at a window of 2 decades chances are you will hit a duration of extremely high rates.(Normal, everyone was told by their parent, teacher, friends)

Another situation that can arise is negative equity. When the price of the home falls very quickly, the market price of the home can fall below the outstanding loan you have with the bank. When this happens, the banks can ask you to pay down part of your loan immediately so that you get back to positive equity. This clause I believe is found in all housing loan agreements today. It didn't happen in Singapore but home buyers in Hong Kong got hit by this during the Asian Crisis and were at the mercy of the banks that had the right to foreclose on the property.(Normal, everyone was told by their parent, teacher, friends)

During boom times, there is always this tempting strategy of buying a home then taking loan with a long tenure then servicing the loan with rental income. I've seen a number of people who get into trouble with this strategy - they can afford one condo but buy two thinking the 2nd property can pay for itself via rental income. To get into real trouble buy 3 condos. when you can only afford one. If your timing is perfect perhaps you can get away with it but many people do this during the boom time when property prices are high. When rental yields fall, they end up slaving away to hold on to the property.

(Normal, everyone was told by their parent, teacher, friends)

Question : Did your friend watch this video, if not it is good to watch the video ROI very high. Ask him whether is there any truth in the video.

[walkthetiger]

(Normal, everyone was told by their parent, teacher, friends)

Question : Did your friend watch this video, if not it is good to watch the video ROI very high. Ask him whether is there any truth in the video.

Both have some truths in it...

"During boom times, there is always this tempting strategy of buying a home then taking loan with a long tenure then servicing the loan with rental income. I've seen a number of people who get into trouble with this strategy - they can afford one condo but buy two thinking the 2nd property can pay for itself via rental income. To get into real trouble buy 3 condos. when you can only afford one. If your timing is perfect perhaps you can get away with it but many people do this during the boom time when property prices are high. When rental yields fall, they end up slaving away to hold on to the property. "

But, it is the understanding of timing that helps to win more, or avoid a lose.

[Ringo33]

A mild correction in early part of 2015 can be expected for a few oversupplied OCR areas. There are no major retrenchments so I don't expect any crash.

CCR is clearly over-priced so significant correction can still be expected. Due to the big quantum, the holding power of weaker investors will be severely tested.

Thats correct, any correction in the OCR will likely to be mild as demand for OCR apartments will be supported by hdb upgraders, down graders, newlywed who are unable to qualify for public housing, as well as new demand created by government decentralizing effort.

The luxury property in CCR region are likely to take the biggest hit as such luxury apartment equipped with expensive fixtures will suffer high depreciation and that lack of big budget tenants will mean lousy or negative yield eventually for such property. For those non luxury CCR property with big quantum, it will be cheaper to actually rent them instead of buying and the poor yield will likely continue as more international schools move to outskirt of Singapore.

[DC33_2008]

CCR is always first to be hit and it will send the ripple to the OCR soon. Good to watch for the period 2015-2017. A good barometer to measure is the price of resale flats with those in CCR as compared to those OCR. In addition, flats in CCR still somewhat able to hold for rental but not for OCR. A lot of them are looking for tenants even now. So imagine, when those with hdb flats owners who want to sell or rent their hdb flats to support the financing of their OCR PCs will be a challenge. They are worried now especially the rising interest rate.

A mild correction in early part of 2015 can be expected for a few oversupplied OCR areas. There are no major retrenchments so I don't expect any crash.

CCR is clearly over-priced so significant correction can still be expected. Due to the big quantum, the holding power of weaker investors will be severely tested.

[Ringo33]

CCR is always first to be hit and it will send the ripple to the OCR soon. Good to watch for the period 2015-2017. A good barometer to measure is the price of resale flats with those in CCR as compared to those OCR. In addition, flats in CCR still somewhat able to hold for rental but not for OCR. A lot of them are looking for tenants even now. So imagine, when those with hdb flats owners who want to sell or rent their hdb flats to support the financing of their OCR PCs will be a challenge. They are worried now especially the rising interest rate.

Most CCR property has already been lagging behind OCR in terms of yield and price appreciation since 2008/9, which is around 5 years ago, and till now it doesnt looks like the price trend for CCR is going to change its course anytime soon, in fact we are now starting to see many resale CCR apartment selling at loss, something which we havent really see in the OCR yet.

In terms of rental yield, its a known fact that OCR property will promise better rental return so I am surprise that when you say CCR is able to hold for rental and not OCR? Could you elaborate? https://www.squarefoot.com.sg/market-watch/rental-yield. A rise in interest rate will hit property with the largest quantum first, worst hit will be the landed property and CCR segment due to both having lousy yield and larger loan

[Arcachon]

How would you advise someone who have the following in 2011.

1. 5 room HDB with CPF can fully pay but chose to pay for another 10 years.
2. 2 Bedroom brought for SGD 535,000 pay 20% (SGD 108,000) value for SGD 1,500,000 in 2010.
3. Age 47.
4. Annual income SGD 44k.
5. No other loan.

[seletar]

http://www.ft.com/cms/s/2/af96c30a-0...#ixzz2dEVQTwZd
Financial Times
August 20, 2013 1:21 pm

Asia’s debt conundrum reawakens ghosts of 1990s crisis



When China unleashed the largest stimulus package in its history in response to the 2008 crisis and slowing export markets in the west, it came at a price. Today China is grappling with a bill that some economists say has driven total debt to gross domestic product past 200 per cent.

While China offers the most extreme example of using debt to fund growth, it is a pattern that has been repeated across Asia. Without exports, central banks turned on the taps, leading to a jump in household and corporate borrowing.

Now, as the US Federal Reserve considers a reversal of its ultra-loose monetary policy, the region faces a new challenge: coping with life after debt. And as investors gauge the impact of that transition, the ghosts of the 1997-98 Asian financial crisis have been reawakened.

“All this QE [quantitative easing] money has lead to a massive credit inflation bubble in Asia,” said Kevin Lai, chief regional economist at Daiwa Securities. “The crime has been committed, we just have to deal with the aftermath. During that process there will be a lot of damage . . . It’s like a margin call. Households will need to sell their assets. There will be a lot of wealth destruction.”

Echoes of the Asian financial crisis are easy enough to hear. Credit growth since 2008 has been rapid, leading to a run-up in house prices, high growth rates and corporate mega-deals. In April, Thailand recorded both its biggest ever domestic takeover and its largest equity listing, according to Dealogic data.

But as the tide of cheap money from overseas rolls back from emerging economies across the region, analysts warn that Asia could be at the start of a series of currency and credit crises, not unlike the experience of the 1990s.

Most of the focus has so far been on India and Indonesia, the two countries in Asia with the biggest current account deficits, making them the most reliant on foreign capital to make ends meet. Both have seen their currencies and their equity markets plunge in the past week.

But the risks of contagion across the region are beginning to rise, say economists, made worse by the slowdown in China, Asia’s biggest growth engine.

In Thailand, which slipped into technical recession in the second quarter, household debt to GDP has risen from 55 per cent in 2009 to almost 80 per cent today. Total debt to GDP now stands at 180 per cent, according to data compiled by HSBC.

Oil-rich Malaysia has seen a similar increase in debt levels, helping to power consumption and housing booms. But poor trade figures have raised the prospect of it slipping into deficit this year, after a decade of running surpluses.

And last week Indonesia reported a sharp widening of its current account deficit, its worst since 1996, thanks mainly to a fall in the value of its commodity exports.

“We’re going into a period of stagnation in growth over the next couple of years,” said Fred Neumann, chief Asia economist at HSBC. “It was a sweet spot and that’s now coming to an end. Asian economies had an easy ride because they bought themselves growth through leverage. They should have used that time to carry out structural reforms. Instead they’ve used the cheap money and enjoyed the high growth rates. That opportunity has now gone.”

The falling growth rates across Asia also serve as evidence of a deterioration in productivity. Credit intensity – a measure of how much debt is needed to create a single unit of economic growth – has risen sharply almost everywhere. In Hong Kong, it has almost tripled since 2007, while in Singapore it has jumped more than fourfold.

“A lot of this new credit is going into housing and property across the region. That area is not the most productive, it doesn’t bring new value into the system,” says Jimmy Koh, head of economic-treasury research at United Overseas Bank in Singapore.

For policy makers, the rise in credit and fall in growth leaves little room to move. Indonesia chose to raise rates in an attempt to prevent a run on the currency, while India has introduced measures to support the rupee. So far, neither tack has produced the desired results.

“The choice is either you protect your currency or you protect domestic growth. You can only do one or the other. There is no easy way out,” Mr Lai said.

[seletar]

http://www.channelnewsasia.com/news/...be/807728.html

S'pore, Hong Kong to be hardest hit if credit tightening occurs: DBS

Channel News Asia
POSTED: 09 Sep 2013 11:46 PM


SINGAPORE: Banks with large property loan portfolios will face higher risks when interest rates start to rise -- this as highly-leveraged households begin to have difficulty paying their mortgages.

Economists said this could lead to credit tightening by banks, and a hard landing for the property sector.

If that happens, DBS Bank said Singapore and Hong Kong will be hardest hit within Asia.

To spur growth, central banks in the developed world have kept global interest rates low for the last five years. However, that produced unintended consequences for Asia, where growth is chugging along just fine.

The access to cheap money has helped fuel a property up-cycle for the past four years. At the same time, it has also caused household debt to hit record levels.

In Singapore and Hong Kong, household debt has outpaced average household income growth.

According to a recent Goldman Sachs report, for the period from 2005 to 2012, household debt in Singapore grew by 63 per cent, outpacing the average household income growth of 57 per cent.

Irvin Seah, a senior economist with DBS Bank, said: "Among Asian economies, Singapore and Hong Kong will be the most vulnerable to an interest rates hike because of the rapid increase in leverage ratios over the last few years (in) a low interest rate environment.

In Singapore for example, the number of property loan holders has risen to almost 480,000 this year. That is up 66 per cent from five years ago, according to Credit Bureau Singapore.

The number of property loan holders with more than one property loan has jumped 78 per cent over the same period to 48,782.

Singapore's central bank warned in July that about one in ten of borrowers could have over-leveraged on their property purchases, and the proportion of borrowers at risk could reach 10-15 per cent if mortgage rates were to rise by 3 percentage points.

Mortgage rates in Singapore currently hover at 1.5 per cent.

According to Goldman Sachs, if mortgage rates in Singapore were to rise to around 3.5 per cent from 1.5 per cent, a household looking to upgrade from a HDB flat to a private home will see mortgage payments increase by 25 per cent, and the household's savings rate could drop to just 8 per cent of household monthly income, from 15 per cent previously.

Other economies in Asia where rising household debt is also a concern are Malaysia and Thailand.

Rajiv Biswas, Asia-Pacific chief economist at IHS, said: "We have seen rising levels of leverage in Malaysia and Thailand, and I think both the central banks in those two countries are concerned about rising household debt levels.

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Deposit growth is almost zero, but bank loans grew 11.8% from Sep 2013 to Sep 2014. Singapore's banks' loan-to-deposit ratio has now risen to 113% in Q3 2014.


http://sbr.com.sg/economy/news/fears....FnET5ZRX.dpuf
Published 12 Sep 2013

Fears escalate as rising household debt, property bubble hit Singapore


The pace of debt increase is alarming.

According to Barclays, it is increasingly concerned about rising household leverage and the “bubbly” property market in Singapore

Here's more from Barclays:

Apart from its tendency to import a crisis, we think Singapore has some domestic vulnerabilities of its own.

Our main concern is rising household debt, a bubbly property market and the related exposure of the banking sector.

Households have taken advantage of very low interest rates in the past few years and borrowed extensively to purchase property in Singapore.

Moreover, 30% of outstanding loans are for investment purposes, rather than owner occupation. Residential property prices have risen by more than 60% from the trough in Q2 2009 and are at historical highs, notwithstanding nine rounds of cooling measures implemented by the government and the MAS.

As a result, household leverage, and household and banks’ exposures to the property market are higher today than during previous property price peaks.

The pace of the increase is also concerning. Household debt stood at 75% of GDP as at Q2 2013, up from a recent trough of 63% in Q1 2010. While household debt has risen 41% over this period, household income has increased by only 25% and wages by even less, just 15%.

Bank loans for building and construction, and mortgages also total 79% of GDP, up from 62% over the same period, and banks’ loan-to-deposit ratio has risen from 71% to 100%.

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http://www.cnbc.com/id/101027950

Household debt: Singapore’s ‘Achilles heel’?

CNBC - Published: Thursday, 12 Sep 2013 | 2:25 AM ET


Singapore stepped up efforts to contain a rapid increase in household debt by tightening rules around unsecured credit late Wednesday – a move viewed by economists as a preemptive strike ahead of a rise in borrowing costs in the country.

"The central bank is being pre-emptive. Taken together with the previous measures announced, including the Total Debt Servicing Ratio (TDSR) framework for property loans, they will likely be effective," Michael Wan, economist at Credit Suisse told CNBC on Thursday, referring to a measure which caps monthly mortgage payments to 60 percent of a borrower's monthly income.

Among the new rules on unsecured credit, the Monetary Authority of Singapore, the country's central bank, requires banks to review a borrower's total debt and credit limit before granting a new credit card.

In addition, financial institutions will not be allowed to grant further unsecured credit to individuals who have outstanding debt of more than 60 days with the institution

While expectations are for short-term interest rates to begin rising in 2015, a hawkish Federal Reserve chairman could mean that an increase in borrowing costs comes sooner, said economists. When interest rates rise, households will have to pay a higher monthly mortgage payment as a portion of their income.

The benchmark Singapore interbank overnight rate (SIBOR), used to price housing loans, tracks rates in the U.S.

"Rapid acceleration in household debt and bank lending are vulnerabilities for Singapore's economy, which could be destabilizing in the event of potential capital outflows and higher interest rates," Joey Chew, economist at Barclays wrote in a report titled "Openness and household debt – the Achilles' heel" on Wednesday.

The country has among the highest level of household borrowing relative to gross domestic product (GDP) in Asia at 75 percent, rising from around 63 percent in 2010, according to the bank, as record low interest rates in the recent years encouraged borrowing.

"While household debt has risen 41 percent over this period, household income has increased by only 25 percent and wages by even less, just 15 percent," she said.

Chew added that the nation's extensive trade, investment and financial links with the region, also pose a threat to the stability of its economy.

"Regardless of fundamentals, Singapore will never be completely immune to a contagion event. One of the economy's main strengths, its extreme openness, is also its Achilles heel," she said.

"Any shock originating from an ASEAN-4 economy (Indonesia, Malaysia, Philippines, and Thailand) would quickly affect Singapore," she added.

Singapore's exports to the four countries, for example, make up almost 30 percent of total exports.

[seletar]

http://sbr.com.sg/economy/news/42-si....nnuJaxEv.dpuf
Published 17 Oct 2013

42% of Singaporeans know people having trouble meeting mortgage payments


More will join if interest rates rose.

"Although the household balance sheet looks healthy on headlines, our sentiment indicators highlight that 42% of the respondents to our survey know of people who are having trouble meeting mortgage repayments or people with mortgage repayments who are living on an extremely tight budget," reports Credit Suisse, citing data from its most recent housing survey.

"46% would become overstretched if monthly instalments rise by up to 30%. We estimate that a 200 bp increase in interest rate implies a 25% increase in mortgage repayments," it added.

[seletar]

http://www.channelnewsasia.com/news/...to/861670.html

Over 200,000 homes to be ready by 2016: Khaw

Channel News Asia
POSTED: 25 Oct 2013 19:33


SINGAPORE: Good progress has been made in the ramp-up of the Housing Development Board’s (HDB) home building programme, said National Development Minister Khaw Boon Wan.

Writing on his Facebook page, Mr Khaw said 204,461 public and private residential units will be ready for occupation in the next three years.

The projected increase in units will come from executive condominiums (ECs) and private units.

The number of ECs projected to be completed by 2016 has gone up from 2,200 previously, to 4,955.

As for the private residential units, the projection has gone up from 18,400 units previously, to 26,355.

Mr Khaw said for this year, more than 21,000 homes have already been built.

Another 9,220 units will be ready by year-end.

[seletar]

A forecast of 12% home vacancy rate in 2016.


http://sbr.com.sg/residential-proper....dfbsR4uj.dpuf
Published 18 Nov 2013

Chart of the Day: Home vacancies predicted to hit historical highs in 2014-2016



According to Macquarie Research, 2014 will see the completion of 19,302 units (+6.6% in inventory), which would result in a vacancy rate of 9.3%.

Historically, property price declines have coincided with vacancies of 8% and above.