http://www.straitstimes.com/News/Hom...ry_575029.html
Sep 5, 2010
Many backing out of planned home purchases
By Jessica Cheam
Home buyers have already begun to retreat from planned purchases since new government rules to cool the property market kicked in last Monday.
Property agency bosses and agents told The Sunday Times the early effects of the new measures are emerging as buyers back out of option to purchase (OTP) agreements - especially for Housing Board (HDB) flats.
The new regulations include tighter lending rules for home owners with existing mortgages looking to buy another property. They can borrow up to only 70 per cent of the value, down from 80 per cent.
Those who buy an HDB resale flat on or after Aug 30 must also dispose of their private property - including any held overseas - within six months of the HDB purchase.
Those having second thoughts about home purchases either no longer qualify for an 80 per cent loan, or believe that prices are going to crash following the measures, said DTZ's head of South-east Asia research Chua Chor Hoon.
Then there are the private property owners who bought HDB flats and have no intention of selling their private homes.
ERA Asia Pacific associate director Eugene Lim estimates that 10 per cent to 20 per cent of buyers of HDB resale flats belong to this group.
On average, about 3,000 resale flats change hands each month. This means up to 600 sales are at risk of buyers backing out, depending on which stage of the sales process they were at when the rules were announced, said Mr Lim.
'The dust is still settling. Buyers are checking whether they can appeal and they will have to make some hard decisions,' he added.
Dennis Wee Group director Chris Koh said agents have already reported cases where buyers of HDB flats have walked away from deals, choosing to lose the $1,000 option fee instead of going ahead.
These are buyers who have been granted an OTP but have not exercised it. Those who have exercised their options are legally required to complete the purchase.
Malaysian permanent resident May Lee, 30, is one buyer caught in a bind. She had saved for 11 years to buy an HDB resale flat and last week had finally paid the option fee to buy a $260,000 three-room HDB flat in Aljunied.
But as she owns a private property in Malaysia - which she cannot sell because her parents are living there - she now has to give up the HDB flat and lose $1,000.
'The new rules are very unfair as PRs are drastically affected,' she said. 'I cannot ask my parents in Malaysia to move, and yet, my dream to have a permanent HDB home in Singapore for my family has been shattered.'
Ms Lee intends to appeal.
When contacted, the HDB told The Sunday Times that buyers who have already been granted or exercised their OTP but have yet to submit an application 'may approach HDB's Resale Office to see how best they could be assisted'.
The new rules apply to resale applications submitted on or after Aug 30, but many buyers, such as Ms Lee, would have already committed to a purchase although their resale application would not have reached HDB by Aug 30.
HDB said it is 'prepared to exercise flexibility... depending on the merits of each case'.
It added that by last Thursday, it had received about 4,000 inquiries and 100 appeals related to the policy changes.
The ramifications of the new rules have also hit the private property segment.
ERA agent Cindy Chew, 44, said she had a buyer of a private property who had paid the option fee of $14,600 for a unit but had cancelled the cheque when news of the measures broke last Monday.
'Buyers now think prices are going to come down, so they are changing their minds,' said Ms Chew.
Cancelling the cheque, however, is not allowed technically, and the case is now being referred to the lawyers, she said.
DTZ agent Leslie Chan said two of the last 10 buyers who bought HDB flats through him recently have backed out of their deals.
'Buyers think the $1,000 fee is cheap, in the light of prices falling potentially,' he said. 'But I expect that in the next few months, sales volumes will actually increase because sellers will become more realistic and cash-over-valuation amounts will also drop. Thus, there will be a matching of expectations between buyers and sellers.'
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