S’pore private home prices dip 6.1% in Q4 as recession continues
January 23, 2009
SINGAPORE: Private home prices fell by 6.1 per cent in the fourth quarter of 2008 as Singapore continues to face recession woes.
The decrease marked the second quarterly decline in residential property prices following a 2.4 per cent fall in the third quarter ended September.
The latest decline, announced in data released by the Urban Redevelopment Authority (URA) on Friday, was worse than expected. Initial estimates earlier this month had forecast a 5.7 per cent drop.
The URA also said that rents in the fourth quarter slipped 5.3 per cent.
Analysts said the trending down in prices came as no surprise as demand for new homes has been softening amid the economic downturn.
For 2008 as a whole, prices of private residential properties fell by 4.7 per cent. This is a turnaround from the 31.2 per cent jump in the previous year.
According to URA, 706 uncompleted units were launched for sale by developers in the fourth quarter, down from 2,244 units in the previous three months.
Sales also slipped, with 407 deals done compared to 1,452 units sold in the previous quarter.
Meanwhile, the public housing sector remains more resilient. Resale prices of HDB flats in the fourth quarter rose by 1.4 per cent, albeit lower than the 4.2 per cent increase recorded in the third quarter.
Resale transactions fell by 24 per cent to about 6,190 units, while the median cash-over-valuation amount dropped by S$4,000 to S$15,000 in the fourth quarter.
Source: Channelnewsasia.com
Don’t overpay for your home loan
January 17, 2009
WHAT interest rate are you paying on your housing loan? If you are paying 3.5 per cent or more, you might be overpaying. With the US Federal Reserve cutting interest rates, the Singapore Inter-bank Offered Rate, or Sibor, has been on a downward trend. Sibor is the rate at which banks lend to one another. Currently, the three-month Sibor has fallen to about 1.4 per cent, down from about 2.5 per cent last year.
Banks have started lowering interest rates offered on housing loans to as low as 2.08 per cent. Thus, if you’re paying an interest rate of 3.5 per cent or more, it might make sense for you to refinance your housing loan to enjoy interest savings.
For example, if your outstanding loan is $500,000 and you’re currently paying 3.5 per cent interest with a remaining loan period of 20 years, the total interest savings for the next three years from refinancing can work out to $13,831.38. After factoring in the cost of refinancing, the net interest saving still works out to $13,331.38. Thus, by refinancing, you can be ‘richer’ by over $10,000.
Floating rate vs Sibor/SOR pegged packages: Each bank will usually set its own board rate and after deducting a ‘discount factor’, arrive at the floating (adjustable) interest rate charged to clients. The problem is that each bank will set its own board rate arbitrarily and there might be occasions when Sibor rates fall, and banks don’t reduce the interest rates charged on floating (adjustable) rate packages. Thus, in a bid to increase the transparency, some banks have recently introduced housing loan packages with interest rates pegged to Sibor or Swap Offer Rates (SOR).
The advantage of such packages is that as and when inter-bank offer rates move up or down, your interest rate would be adjusted as well - it would not be at the bank’s discretion. Currently, Sibor/SOR have fallen below 1.4 per cent and interest rates charged on such loans can be as low as 2.08 per cent.
With the US expected to continue cutting interest rates in the next few months, Sibor is expected to remain low or even fall further in the next six to 12 months. Thus, if consumers hold the view that interest rates are likely to fall, choosing a housing loan package pegged to Sibor would enable them to automatically enjoy lower interest rates as Sibor moves lower.
Beware: Fixed rate packages typically come with lock-in periods. Some banks recently also adjusted interest rates charged on their fixed rate packages downwards to an average of 2.58 per cent for the first three years. However, such packages come with a penalty period of three years. Thus, such packages might not be suitable for consumers who intend to sell their property within the next three years, as they are liable to a penalty fee.
Should you apply for a housing loan now for properties purchased on a deferred payment scheme? You might have purchased a property on a deferred payment scheme and only need to take a loan when the project gets its Temporary Occupation Permit (TOP), which might be in 2009 or 2010. Should you apply for a housing loan now?
By applying for a loan now, you eliminate the risk of loan rejection should there be any adverse change in your financial situation in future, for instance, a pay cut or job loss when the property is ready. You also eliminate the risk of banks granting a lower loan quantum should the property market turn and prices fall. To safeguard your interests, you can choose a loan package that allows you a free loan conversion so that you can switch to a better package should one be available nearer TOP.
Cash in on your property without selling it: With property prices having gone up in the past three years, you might now own a property whose value has doubled. In that case, your current debt-to-asset ratio might have fallen considerably.
For instance, say you bought a $1 million property three years ago and took an 80 per cent loan, or $800,000. Currently, the loan outstanding is about $750,000, while the current value of this property might have gone up to $2 million. This means your current debt-to-asset ratio is only 37.5 per cent.
How can you benefit from the rise in the property price without selling your property? You can consider taking an equity loan on the property. For instance, in the above example, subject to your credit score, banks might grant you an additional equity loan of up to $850,000. To be conservative, you can consider taking up a lower equity loan of, say, $450,000, bringing your debt-to-asset ratio to a comfortable 60 per cent. You can use the $450,000 equity loan granted by the bank to start a business, or even to invest in another property. The interest rate on equity loans in Singapore is very low and can be as low as 2.2 per cent currently.
Should you pay off or reduce your housing loan?: The Singapore government has projected the inflation rate in 2008 to be about 5 per cent. On the other hand, the interest rate on housing loans is about 2.2 per cent. Thus, we have a rare scenario of negative interest rates, that is, a person who takes a housing loan is actually ahead of someone who saves money in bank deposits because of the shrinkage of money from inflation.
On the other hand, interest rates on bank deposits have fallen to about 1.5 per cent. With inflation at 5 per cent, it means that a consumer is losing 3.5 per cent a year by putting money in bank deposits.
Instead of paying down your housing loan which charges low interest rates of less than 3 per cent, you can consider investing your cash in a stable investment that is not subject to large price fluctuations and offers higher returns than fixed deposits. One example is UK-traded endowments, which have a guaranteed cash value and generate annual returns of 6-8 per cent.
How to choose a suitable housing loan?: There are over 113 different housing loan packages available in Singapore at any one time. Each package has its own unique features, with its own pros and cons and different terms and conditions. Consumers might be confused by the wide array of choices. In the last few years, with the emergence of independent mortgage brokers in Singapore, home loan shopping and comparison have been made easier.
Basically, an independent mortgage broker who knows your requirements can help you zoom in on the most attractive home loan packages suitable to your needs. You typically do not have to pay for the service of a mortgage broker as banks pay them a fee.
In more advanced countries such as the US and Australia, people usually apply for home loans through a mortgage broker rather than go to the bank directly. In Singapore, many people are still unaware of the services and benefits of engaging a mortgage broker, but things are likely to change with public education and increasing awareness.
Take advantage of the falling SIBOR rates now! Contact Justin Ng to service your refinancing needs today.
Source: http://property.st701.com/articles/view/1481
Private home launches in Dec 2008 at record low
January 16, 2009
SINGAPORE: Islandwide launches of new private homes in December 2008 slumped to a record low since the Urban Redevelopment Authority (URA) started releasing the monthly figures in June 2007.
Developers placed just 157 units for sale last month, down by 59 per cent from November.
Analysts said there has been softening demand for homes. But the low launch volume could also be due to seasonal adjustment and developers holding out for the government’s Budget announcement next Thursday.
Analysts, however, said that not all developers can afford to delay projects.
Donald Han, managing director, Cushman & Wakefield, said: “Smaller developers may decide to sell in order to move assets and move their inventory. So, price cutting may happen at a strategic level for smaller developments… and also the secondary markets where there will be fiercer price cuts.”
Overall, market watchers said they expect property prices to erode by another 5 to 7 per cent in the first quarter this year.
They said prices in the luxury home segment could see a 25 per cent drop, while suburban and mid-tier properties may be 10 to 20 per cent cheaper over the next 12 months.
December sales volume also fell, dropping 32 per cent on-month to 131 units, as home buyers continued to be cautious.
Analysts said that even the fairly resilient mass market segment is starting to feel the strain of the economic downturn. However, data also showed that home hunters are still in the market for good buys.
Dr Chua Yang Liang, head of research & consultancy at Jones Lang LaSalle, said: “The Ritz Carlton Residences, back in December 2007, some 3 transactions were reported at a median price of some S$5,000 per square foot. Now, some 8 transactions were reported by the developer at a median price of some S$3,000 per square foot.”
Projects in prime areas like Newton Edge also saw good take-up, with 40 units sold in December at an average price of S$1,200 per square foot. Analysts said this translates to less than S$1 million for a unit, which is the threshold for most buyers in the current market.
For the whole of 2008, developers sold an estimated total of 4,287 units, 71 per cent shy of the 14,811 new units sold in 2007, bringing developers’ sales volume to a nine-year low.
Industry players expect the property market to remain quiet over the next six months until there is a clearer indication of where the economy is heading.
They hope the Budget statement, to be announced next Thursday, will provide measures to support companies and save jobs, which will have an impact on the property market.
The items on their wish-list include vouchers to boost domestic spending and tax cuts to lower business costs.
Source: Channelnewsasia.com
Private home prices down 5.7% in Q4, HDB resale flat prices still up
January 3, 2009
SINGAPORE: Prices of private, non-landed residential properties in Singapore fell 5.7 per cent in the last quarter of 2008.
The quarter-on-quarter drop in private home prices is more than double the 2.4 per cent decrease in the July-September quarter.
Experts said the steep fall is fuelled by deteriorating sentiment. Market players are also matching prices to falling valuations.
Nicholas Mak, consultancy and research, Knight Frank, said: “The individual sellers are being more realistic in their offer price, though there are some segments of sellers who are still resisting, or still hoping to sell at break-even (prices) or at a profit.”
In contrast to the decline in private home prices, new HDB data on Friday showed HDB resale flats continued to buck the trend, climbing 1.5 per cent in the fourth quarter - following a 4.2 per cent increase in the third quarter.
Experts said this resistance to downward pressure in the HDB resale market is expected to continue despite the economic downturn.
Eugene Lim, associate director, ERA Asia Pacific, said: “Buyers are coming from people who are upgrading (and) people who are downgrading… also, from the increase in the population of PRs (permanent residents). So the (demand for) HDB resale flats is very strong.”
Observers said they expect flat or slow declines for public housing prices compared to steeper devaluations in the private home sector. They added this is the trend during times of uncertainty when home buyers opt for the safer option of HDB flats.
Knight Frank estimated that by the end of 2009, private home prices could come down as much as 20 per cent, while HDB flat prices could decline by 5 to 10 per cent.
In a statement released on Friday, the Urban Redevelopment Authority (URA) also reported price changes in three geographical regions for the fourth quarter.
Non-landed private residential property came down by 6.3 per cent in the Core Central Region, while it dipped 5.5 per cent in the rest of the Central area. In areas outside the Central Region, prices slid by about 4.7 per cent.
Source: Channelnewsasia.com