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Sunday, December 29, 2013
Sunday, December 1, 2013
Should You Avoid Frivolous And Multiple AIP Home Loan Applications?
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Best Home Mortgage Loan Provider Summary
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Sunday, November 24, 2013
Sunday, November 17, 2013
TDSR Causes Home Loan Refinancing Hardships
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Thursday, October 31, 2013
The Zenith Of High-end Living
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Monday, October 21, 2013
Straddle Two Worlds At The Creek@Bukit
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Tuesday, October 8, 2013
Modern City Life At Onze @ Tanjong Pagar
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Tuesday, October 1, 2013
At The Skywoods Nature Beckons
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Tuesday, September 24, 2013
Reach For A New Experience At Sky Park
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Monday, September 16, 2013
Monday, September 9, 2013
Explaining a Flat Rate Loan
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Monday, September 2, 2013
Home Loans With Different Rests: Computing Their Effective Rates
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Monday, August 26, 2013
Home Loans: How To Compute The Effective And Nominal Interest Rates?
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Monday, August 19, 2013
Home Loans With Different Rests: Creating Their Amortization Schedule
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Wednesday, August 14, 2013
Monday, August 5, 2013
Home Insurance Explained
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Tuesday, July 30, 2013
Basic Mortgage Loan Facts You Must Know
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Saturday, July 20, 2013
FAQs About SOHO
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Friday, July 12, 2013
Monday, July 8, 2013
How A Mortgage Broker Can Help You?
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Tuesday, July 2, 2013
Thursday, June 20, 2013
Taking a Mortgage Loan for the Self-Employed
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Monday, June 10, 2013
Why You Should Have a Mortgage Insurance
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Tuesday, June 4, 2013
How Do I Compare Home Loans in Singapore?
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Monday, May 27, 2013
Should You Buy or Rent a Property in Singapore
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Monday, May 20, 2013
Factors to Consider When Buying a Residential Property in Singapore
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Tuesday, May 14, 2013
Tuesday, May 7, 2013
If Your Home Loan is Turned Down, ...
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Monday, April 29, 2013
The Drawbacks of HDB Loans
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Thursday, April 18, 2013
Thursday, April 11, 2013
A Quick Guide to Being a Guarantor for a Home Loan
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Wednesday, April 3, 2013
Fixed Rate Versus Floating Rate Home Loan Packages In Singapore: Which One Is Right For You?
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Monday, March 25, 2013
What An Expatriate Need To Know About Home Ownership in Singapore
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Monday, March 18, 2013
All About Using Home Loan Consultancy Sites
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Monday, March 11, 2013
Tuesday, March 5, 2013
Understanding Building-Under-Construction (BUC) Loans in Singapore
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Thursday, February 28, 2013
Million-dollar Public Housing in Singapore: A Look at Recent Developments
By SUSAN TEO
Last year and the start of this saw the public and semi-public housing landscape in Singapore experiencing a furor with the exorbitant prices that some HDB and HUDC flats are fetching on the open market.
Most recently in January, a second million-dollar HDB flat was born when an executive maisonette in Bishan was sold for a hefty S$1.01 million.
This broke the previous record of an executive maisonette at Block 149 Mei Ling Street in Queenstown which changed hands for S$1 million in September 2012. A high-rise unit in a 16-story block, its unobstructed view and proximity to the MRT have been cited as reasons for its record-breaking price. At that time, it also sets the record for the highest per square feet (psf) price at S$619. The three-bedroom flat, that comes with a study, was built in 1995, and has an area of 150 square metres. With a cash premium of S$195,000, while not the highest seen, it is still well above the median COV – normally below $100,000 (HDB InfoWeb) according to figures released by HDB.
Trailing behind, just a week before the Queenstown deal was closed, is a Bishan maisonette which changed hands for S$980,000 with a cash premium of S$200,000 despite its simple furnishings. The main selling points of this flat are its unique roof terrace and roomy interior of 1,800 square feet. It is also near to amenities and transportation networks.
Apart from the above two sales, last year also saw other pricey transactions. In May in Toa Payoh, an executive flat changed hands for S$910,000.
Meanwhile, HUDC (Housing and Urban Development Company) also witnessed a blip in prices.
HUDC (Housing and Urban Development Company) are semi-public housing with the possibility of being privatised from 1995. So far, 12 out of the 18 HUDC estates across the country, have been successfully privatised. HUDC was first built in the 1970s and 1980s to meet the lifestyle aspiration of the middle class. All are on 99-year lease. There are larger that the typical HDB flats. The average size of a HUDC is 1,650 square feet, whereas a five-room HDB flat averages1,200 square feet. However HDB stopped churning out these spacious flats in 1997.
In spite of the older facilities in HUDC, two HUDC maisonettes along Shunfu Road set records when they were sold for over S$1.2 million each. One unit was sold in July 2012 for a whopping S$1.28 million or approximately S$761 per square feet. While the other, in the same area, earned the seller of the 1,668 square feet flat the sum of S$1.22 million in 2011. Buyers of HUDC are often attracted by the spaciousness and en-bloc potential of the flats. Thus far, five of the privatised HUDC estates have been sold en-bloc.
Last year, the sky-high prices of these flats stirred up a minor frenzy, that prompted National Development Minister Khaw Boon Wan to urge the public to look at the“larger picture” and consider such prices as outliers. Property analysts agree that more million-dollar deals could be sealed for flats with exceptional features in prime locations. A case in point is The Pinnacle@Duxton – an award-winning HDB residential complex, that boosts a sky garden and superior interiors, among other unique features and facilities. All, including Mr Khaw, foresee seven-figure flats when the five-year Minimum Occupation Period (MOP) is met in a few years' time for this residential complex.
Another category of flats that will likely breach the $1 million mark is executive maisonette, fueled by HDB announcement on October 2012 that it will not be building any more of such flats. Already before this announcement, according to the Straits Times, in 2012 half of the eight units that crossed the S$900,000 selling mark were executive maisonettes.
Only two months into 2013, but 16 HDB flats are already sold for S$900,000 and above, with just over half being 5-room flats and the rest executive flats. 3 of these flats are only 11 years old and under. The newest is a 5-year-old 5-room flat in Jalan Membina. Its attraction lies in its proximity to Tiong Bahru MRT station and the city.
HUDC once again lead in crossing the million-dollar mark. Of the 4 HUDC sold in the two months, 3 went for over S$1 million, with the highest priced at S$1.25 million. All the 3 HUDC estates, where these units are located in are undergoing privatisation.
Table 1 illustrates the resale prices of the 20 HDB and HUDC units that are transacted at S$900,000 or more this year.
Source: HDB Resale Flat Prices
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SingaporeHomeLoan.net/blog/
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Last year and the start of this saw the public and semi-public housing landscape in Singapore experiencing a furor with the exorbitant prices that some HDB and HUDC flats are fetching on the open market.
Most recently in January, a second million-dollar HDB flat was born when an executive maisonette in Bishan was sold for a hefty S$1.01 million.
This broke the previous record of an executive maisonette at Block 149 Mei Ling Street in Queenstown which changed hands for S$1 million in September 2012. A high-rise unit in a 16-story block, its unobstructed view and proximity to the MRT have been cited as reasons for its record-breaking price. At that time, it also sets the record for the highest per square feet (psf) price at S$619. The three-bedroom flat, that comes with a study, was built in 1995, and has an area of 150 square metres. With a cash premium of S$195,000, while not the highest seen, it is still well above the median COV – normally below $100,000 (HDB InfoWeb) according to figures released by HDB.
Trailing behind, just a week before the Queenstown deal was closed, is a Bishan maisonette which changed hands for S$980,000 with a cash premium of S$200,000 despite its simple furnishings. The main selling points of this flat are its unique roof terrace and roomy interior of 1,800 square feet. It is also near to amenities and transportation networks.
Apart from the above two sales, last year also saw other pricey transactions. In May in Toa Payoh, an executive flat changed hands for S$910,000.
Meanwhile, HUDC (Housing and Urban Development Company) also witnessed a blip in prices.
HUDC (Housing and Urban Development Company) are semi-public housing with the possibility of being privatised from 1995. So far, 12 out of the 18 HUDC estates across the country, have been successfully privatised. HUDC was first built in the 1970s and 1980s to meet the lifestyle aspiration of the middle class. All are on 99-year lease. There are larger that the typical HDB flats. The average size of a HUDC is 1,650 square feet, whereas a five-room HDB flat averages1,200 square feet. However HDB stopped churning out these spacious flats in 1997.
In spite of the older facilities in HUDC, two HUDC maisonettes along Shunfu Road set records when they were sold for over S$1.2 million each. One unit was sold in July 2012 for a whopping S$1.28 million or approximately S$761 per square feet. While the other, in the same area, earned the seller of the 1,668 square feet flat the sum of S$1.22 million in 2011. Buyers of HUDC are often attracted by the spaciousness and en-bloc potential of the flats. Thus far, five of the privatised HUDC estates have been sold en-bloc.
Last year, the sky-high prices of these flats stirred up a minor frenzy, that prompted National Development Minister Khaw Boon Wan to urge the public to look at the“larger picture” and consider such prices as outliers. Property analysts agree that more million-dollar deals could be sealed for flats with exceptional features in prime locations. A case in point is The Pinnacle@Duxton – an award-winning HDB residential complex, that boosts a sky garden and superior interiors, among other unique features and facilities. All, including Mr Khaw, foresee seven-figure flats when the five-year Minimum Occupation Period (MOP) is met in a few years' time for this residential complex.
Another category of flats that will likely breach the $1 million mark is executive maisonette, fueled by HDB announcement on October 2012 that it will not be building any more of such flats. Already before this announcement, according to the Straits Times, in 2012 half of the eight units that crossed the S$900,000 selling mark were executive maisonettes.
Only two months into 2013, but 16 HDB flats are already sold for S$900,000 and above, with just over half being 5-room flats and the rest executive flats. 3 of these flats are only 11 years old and under. The newest is a 5-year-old 5-room flat in Jalan Membina. Its attraction lies in its proximity to Tiong Bahru MRT station and the city.
HUDC once again lead in crossing the million-dollar mark. Of the 4 HUDC sold in the two months, 3 went for over S$1 million, with the highest priced at S$1.25 million. All the 3 HUDC estates, where these units are located in are undergoing privatisation.
Table 1 illustrates the resale prices of the 20 HDB and HUDC units that are transacted at S$900,000 or more this year.
Table 1
| HDB Town | Flat Type | Lease Commencement | Resale Price | Resale Approval Date |
| Bendemeer Rd | Executive |
1994
|
$918,000.00
|
Jan-13
|
| Bishan St 13 | Executive |
1987
|
$940,000.00
|
Jan-13
|
| Bishan St 13 | Executive |
1987
|
$1,010,000.00
|
Jan-13
|
| Bishan St 22 | Executive |
1992
|
$901,888.00
|
Feb-13
|
| Bishan St 22 | Executive |
1992
|
$938,000.00
|
Jan-13
|
| Bishan St 23 | Executive |
1992
|
$902,000.00
|
Jan-13
|
| Geylang East Ave 1 | Executive |
1987
|
$900,000.00
|
Jan-13
|
| Holland Dr | 5 Room |
1975
|
$920,000.00
|
Jan-13
|
| Jln Membina | 5 Room |
2008
|
$925,000.00
|
Feb-13
|
| Jln Membina | 5 Room |
2003
|
$930,000.00
|
Jan-13
|
| Marine Cres | 5 Room |
1975
|
$935,000.00
|
Jan-13
|
| Marine Dr | 5 Room |
1977
|
$910,000.00
|
Jan-13
|
| Marine Ter | 5 Room |
1975
|
$905,000.00
|
Jan-13
|
| Queen'S Cl | 5 Room |
1996
|
$900,000.00
|
Jan-13
|
| Strathmore Ave | 5 Room |
2006
|
$901,888.00
|
Feb-13
|
| Tg Pagar Plaza | 5 Room |
1977
|
$965,000.00
|
Jan-13
|
| Hougang Ave 2 | HUDC |
1990
|
$1,065,000.00
|
Jan-13
|
| Hougang Ave 2 | HUDC |
1988
|
$960,000.00
|
Jan-13
|
| Hougang Ave 7 | HUDC |
1986
|
$1,040,000.00
|
Jan-13
|
| Shunfu Rd | HUDC |
1986
|
$1,250,000.00
|
Jan-13
|
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SIBOR vs. SOR Based Home Loans in Singapore
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Wednesday, February 27, 2013
A Quick Guide to Approval-in-Principle (AIP) for Home Mortgages
By SUSAN TEO
Approval-in-principle (AIP) for home loans, or mortgage prequalification, are conditional approval. AIP can be sought for loans of private residential properties or HDB flats. Such loans are known as pre-approved loans. The time between submitting an application for an AIP and knowing the outcome can be as fast as 15 to 60 minutes. The validity period of the AIP varies between 14 to 30 days. During this period, financial documents have to be submitted to obtain a formal offer. After which, a Letter of Offer will be issued if the loan is approved. If the required documents are not submitted within this period, you can still re-apply for the AIP.
Having an AIP lets you know the loan quantum you are eligible for and the monthly repayment amount.
An AIP is non-binding for both the applicant and the financier; therefore you are allowed to change financiers even after obtaining an approval-in-principle loan from the financier. You may even change loan package with the same financier that you have obtained the AIP from.
If you are confused about AIP, you can have a FREE discussion with a Singapore home loan consultant.
and lay down the booking fee, before you have obtained the loan.
But this may not be the best course of action as you may not be able to obtain an ideal loan with a favourable rate, or even if you do it may be with a lower loan quantum. In the latter case, the deal may fall through if you do not have sufficient cash or CPF fund to top up the shortfall.
Should the deal fall through, you will have to forfeit part or all of the booking fee (The booking fee and forfeit amount will depend on whether it is a private house or HDB flat and if it new or resale).
In another scenario, you may be able to obtain the maximum loan-to-value ratio (LTV), but the valuation of the property has fallen during the interval in which you had signed the option and obtained the loan.
For example, the purchase price you agreed on is $1.5m, but when you have obtained the loan the valuation of the property has dropped to $1.2m. Assuming that you are eligible for a 80% LTV, you thought you could obtain financing up to $1.2m, but because of the lower valuation you can only secure $960,000. If you do not have the means to make up for the $240,000 difference, you cannot seal the transaction. However, such situations are extremely rare and only happen during financial crises.
Just because an AIP is provisional does not mean you should randomly select a bank from which to obtain an AIP, thinking you can secure the same loan quantum from other banks later. That particular bank may be offering uncompetitive rates and loan features. And you may later discover that you are not eligible for the same quantum from other banks.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
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Approval-in-principle (AIP) for home loans, or mortgage prequalification, are conditional approval. AIP can be sought for loans of private residential properties or HDB flats. Such loans are known as pre-approved loans. The time between submitting an application for an AIP and knowing the outcome can be as fast as 15 to 60 minutes. The validity period of the AIP varies between 14 to 30 days. During this period, financial documents have to be submitted to obtain a formal offer. After which, a Letter of Offer will be issued if the loan is approved. If the required documents are not submitted within this period, you can still re-apply for the AIP.
Having an AIP lets you know the loan quantum you are eligible for and the monthly repayment amount.
An AIP is non-binding for both the applicant and the financier; therefore you are allowed to change financiers even after obtaining an approval-in-principle loan from the financier. You may even change loan package with the same financier that you have obtained the AIP from.
If you are confused about AIP, you can have a FREE discussion with a Singapore home loan consultant.
Why you should have an AIP?
Narrow down the property search
Having an AIP lets you zero in on the property you know you can afford to buy. Thus you will not be wasting time viewing properties that you later find to be out of your budget when you apply for that loan. This also explains why some property agents only work with buyers who already obtained an AIP.Fast commitment
Being certain that you can afford that property allows you to commit immediately when you have found your ideal property. There is no waste in time between obtaining the loan and closing the transaction. Indeed during that interval, some other buyers may beat you in buying the property.Forfeit of booking fee
To prevent other buyers from buying, you may choose to sign the option to purchase (OTP)and lay down the booking fee, before you have obtained the loan.
But this may not be the best course of action as you may not be able to obtain an ideal loan with a favourable rate, or even if you do it may be with a lower loan quantum. In the latter case, the deal may fall through if you do not have sufficient cash or CPF fund to top up the shortfall.
Should the deal fall through, you will have to forfeit part or all of the booking fee (The booking fee and forfeit amount will depend on whether it is a private house or HDB flat and if it new or resale).
In another scenario, you may be able to obtain the maximum loan-to-value ratio (LTV), but the valuation of the property has fallen during the interval in which you had signed the option and obtained the loan.
For example, the purchase price you agreed on is $1.5m, but when you have obtained the loan the valuation of the property has dropped to $1.2m. Assuming that you are eligible for a 80% LTV, you thought you could obtain financing up to $1.2m, but because of the lower valuation you can only secure $960,000. If you do not have the means to make up for the $240,000 difference, you cannot seal the transaction. However, such situations are extremely rare and only happen during financial crises.
Things to be cautious about
As an AIP is provisional, the bank still can reject the application if there are any changes to your financial status. So avoid taking other loans or changing jobs before the Letter of Offer is issued.Just because an AIP is provisional does not mean you should randomly select a bank from which to obtain an AIP, thinking you can secure the same loan quantum from other banks later. That particular bank may be offering uncompetitive rates and loan features. And you may later discover that you are not eligible for the same quantum from other banks.
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Thursday, February 21, 2013
Freehold Residential Property: The Advantages of Acquiring One
by SUSAN TEO
Homes in Singapore come with different lease periods:
*A
land at Jalan Jurong Kechil is the first 60-year-lease plot to be sold
(on 15 November 2012) for residential development; thus 60-year-lease
homes will be available soon.
Most housings in Singapore either fall into freehold or 99-year lease, with the latter making up the bulk.
A 999-year lease is almost equivalent to freehold.
While 30-year-lease HDB studio apartments come in short supply and are only meant for elderly residents.
Private developments with a 103-year lease period (the lease period is determined by the developer) on freehold land are few and far between. At the expiry of the lease, the non-governmental land owner has the right to re-acquire the land (i.e. reversionary right), sell the freehold tenure or extend the lease for a price.
Residential properties with 60-year lease are not available yet, but will be in a few years' time when development on the first 60-year leasehold residential land plot at Jalan Jurong Kechil is completed.
Homes in Singapore are predominantly 99-year leasehold because the government sells most lands on 99-year tenure due to land scarcity in this country. At the end of the lease period, the state can acquire the land without any compensation to the home owners. Currently, the government does not offer freehold land parcels for sales anymore, except for the sale of remnant State land to the adjoining landowner whose existing private land is already held under a freehold title.
However, topping up of the lease of leasehold private housings is allowed.
Lessees may apply for a renewal of the lease with the SLA (Singapore Land Authority). The granting of extension is on a case-by-case basis and will be considered if the development is in line with Government's planning intentions, supported by relevant agencies, and results in land use intensification, mitigation of property decay and preservation of community (SLA, “Waiver of Building Premium”). If the extension is approved, a land premium, decided by the Chief Valuer, will be charged. The new lease will not exceed the original, and it will be the shorter of the original or the lease in line with URA's planning intention.
In addition, near the end of the lease period the State may require the land to be returned in its original conditions. If so, demolition of buildings, land fillings, etc. will have to be borne by the current lessees.
For HDB flats, legally the flat will be returned to HDB at the end of the lease. HDB does not have to make any monetary compensation, or offer a replacement flat to the owners. The owners may also be required to remove any fixtures fitting.
Only a handful of banks will grant housing loans for properties with less than 60 years of remaining lease, and it is on a case-by-case basis. The loan if granted may have a shorter tenure or lower quantum. Thus, if you purchase a freehold property it will save you from the disappointment of loan rejections, or unfavourable loan terms, because of the lease of the property.
Further, you may have a easier time selling off the property since the potential buyer will have a higher probability of obtaining the necessary funding.
2. Use of CPF funds
For freehold residential properties, you do not have to fret about not being able to dip into your CPF saving, or to do so at a lower withdrawal limit, for your purchase because of the property's expiring lease.
This is because you are not allowed to use your CPF funds for the purchase of private houses with under 30 years of lease left.
For houses with remaining lease between 30 and 60 years, the withdrawal amount is tied to the buyer's age and the remaining lease.
Withdrawal Limit
= (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x Valuation Limit*
Valuation Limit is the lower of the purchase price or the value of the flat/property at the time of purchase.
(Source: CPF Ask Us, “What are these additional conditions to use CPF for flats/properties with remaining lease of at least 30 years but below 60 years?” )
These CPF withdrawal rules and the attendant limits will affect HDB flats from 1 July 2013.
3. En bloc sales
Homeowners of freehold properties have higher chances of profiteering from collective sales.
Developers may prefer to acquire freehold over 99-year leasehold properties because they do not have to incur a hefty land premium to top up the lease (of which the approval is not even guaranteed), which eats into their profit margins.
Even if developers do acquire 99-year lease lands, they may offer a relatively lower price as they factor in the land premium they have to pay.
4. Long-term stability in value
Leasehold housings nearing the end of their tenure will always fall steeply in value. But you will never have to face this problem with a freehold.
However this is not saying a freehold property will not depreciate in value over time. This can also occur due to the decay of the building. When this happens, the redevelopment value of the land may exceed the value of the building; thus resulting in a collective sale.
Another warning. If you are attracted to freehold because you are harbouring hopes of bequeathing the property to your descendants till perpetuity, you might want to perish that thought. En bloc sales could go through as long as there is a majority consent. Further, under the Land Acquisition Act, the State has the authority to acquire the freehold property “for public and certain other specified purposes”, with due compensation. This Act also applies to leasehold property.
When all said and done, leasehold homes will still remain attractive to buyers due to their affordable prices and proximity to amenities.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
Homes in Singapore come with different lease periods:
|
Most housings in Singapore either fall into freehold or 99-year lease, with the latter making up the bulk.
A 999-year lease is almost equivalent to freehold.
While 30-year-lease HDB studio apartments come in short supply and are only meant for elderly residents.
Private developments with a 103-year lease period (the lease period is determined by the developer) on freehold land are few and far between. At the expiry of the lease, the non-governmental land owner has the right to re-acquire the land (i.e. reversionary right), sell the freehold tenure or extend the lease for a price.
Residential properties with 60-year lease are not available yet, but will be in a few years' time when development on the first 60-year leasehold residential land plot at Jalan Jurong Kechil is completed.
Homes in Singapore are predominantly 99-year leasehold because the government sells most lands on 99-year tenure due to land scarcity in this country. At the end of the lease period, the state can acquire the land without any compensation to the home owners. Currently, the government does not offer freehold land parcels for sales anymore, except for the sale of remnant State land to the adjoining landowner whose existing private land is already held under a freehold title.
However, topping up of the lease of leasehold private housings is allowed.
Lessees may apply for a renewal of the lease with the SLA (Singapore Land Authority). The granting of extension is on a case-by-case basis and will be considered if the development is in line with Government's planning intentions, supported by relevant agencies, and results in land use intensification, mitigation of property decay and preservation of community (SLA, “Waiver of Building Premium”). If the extension is approved, a land premium, decided by the Chief Valuer, will be charged. The new lease will not exceed the original, and it will be the shorter of the original or the lease in line with URA's planning intention.
In addition, near the end of the lease period the State may require the land to be returned in its original conditions. If so, demolition of buildings, land fillings, etc. will have to be borne by the current lessees.
For HDB flats, legally the flat will be returned to HDB at the end of the lease. HDB does not have to make any monetary compensation, or offer a replacement flat to the owners. The owners may also be required to remove any fixtures fitting.
Advantages of buying a freehold or 999-year leasehold home
1. Loan Approval
Only a handful of banks will grant housing loans for properties with less than 60 years of remaining lease, and it is on a case-by-case basis. The loan if granted may have a shorter tenure or lower quantum. Thus, if you purchase a freehold property it will save you from the disappointment of loan rejections, or unfavourable loan terms, because of the lease of the property.
Further, you may have a easier time selling off the property since the potential buyer will have a higher probability of obtaining the necessary funding.
2. Use of CPF funds
For freehold residential properties, you do not have to fret about not being able to dip into your CPF saving, or to do so at a lower withdrawal limit, for your purchase because of the property's expiring lease.
This is because you are not allowed to use your CPF funds for the purchase of private houses with under 30 years of lease left.
For houses with remaining lease between 30 and 60 years, the withdrawal amount is tied to the buyer's age and the remaining lease.
Withdrawal Limit
= (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x Valuation Limit*
Valuation Limit is the lower of the purchase price or the value of the flat/property at the time of purchase.
(Source: CPF Ask Us, “What are these additional conditions to use CPF for flats/properties with remaining lease of at least 30 years but below 60 years?” )
These CPF withdrawal rules and the attendant limits will affect HDB flats from 1 July 2013.
3. En bloc sales
Homeowners of freehold properties have higher chances of profiteering from collective sales.
Developers may prefer to acquire freehold over 99-year leasehold properties because they do not have to incur a hefty land premium to top up the lease (of which the approval is not even guaranteed), which eats into their profit margins.
Even if developers do acquire 99-year lease lands, they may offer a relatively lower price as they factor in the land premium they have to pay.
4. Long-term stability in value
Leasehold housings nearing the end of their tenure will always fall steeply in value. But you will never have to face this problem with a freehold.
However this is not saying a freehold property will not depreciate in value over time. This can also occur due to the decay of the building. When this happens, the redevelopment value of the land may exceed the value of the building; thus resulting in a collective sale.
In summary
Generally, freehold residential properties cost more than leasehold ones. But less clear-cut is which category enjoys a higher rate of price appreciation. If you are considering residential real estate as an investment vehicle to reap capital gain, you should be looking at the rate of price appreciation.
Another warning. If you are attracted to freehold because you are harbouring hopes of bequeathing the property to your descendants till perpetuity, you might want to perish that thought. En bloc sales could go through as long as there is a majority consent. Further, under the Land Acquisition Act, the State has the authority to acquire the freehold property “for public and certain other specified purposes”, with due compensation. This Act also applies to leasehold property.
When all said and done, leasehold homes will still remain attractive to buyers due to their affordable prices and proximity to amenities.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
Monday, February 18, 2013
Why Singapore Property Prices Go Crazy
By PROPERTY BUYER
“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property prices expected to continue to rise despite govt measures, Karamjit Singh)
There is a nice table at
http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html
which shows the relative growth rates of HDB.
We are not against importing talent, but we think Singapore had been over-doing it, without studying the strain the additional populace will make on the country's basic infrastructure like transportation and housing. The miscalculation by the Government resulted in an inadequate supply of HDB flats to meet demand. This, we believe, is one of the causes of Singapore's escalating property prices.
Table 2 shows the number of new HDB flats (Source: HDB Press Release) rolled out each year from 2006 -2012 and the estimated housing demand in those years.
Based on the latest Census of Population 2010, the average household size stands at 3.5 people (Source: Department of Statistics), we divide the Annual Increase in Total Population by 3.5 to obtain the Estimated Housing Demand, the latent demand (rental + purchase)
Since 80% of the Singapore's population lives in HDB flats, we estimate that the Estimated HDB Housing Demand from foreigners to follow the same trend as 80% of total demand.
(Source: www.PropertyBuyer.com.sg, Singstat and HDB Press Release)
This is the total latent demand as all foreigners arriving into Singapore will need to have a place to stay. In other words, these form largely the total demand (Rental + Purchase).
Annual increase in population based on Table 1 (in 000s), is 54.5 in 2005, 58.1 in 2006 and 57.2 in 2007, 59.6 in 2008, 91.2 in 2009 and 37.8 in 2010, 17.6 in 2011, 28.9 in 2012.
Using Table 1, 3,818,200 (2012) – 3,467,800 (2005), the total population increase is 350,400.
As can be seen, a large part of these increases are due to NEW Permanent Residents and new Singaporeans (naturalised citizens) (Figure 2) with a small part contributed from local born Singaporeans.
And HDB has only built or announced to build 106,239 units. There is an estimated shortage of over 100,000 units.
Demand from household formation (marriages) comes in at a range of 19,761 to 22,840.
These newly married couples surely need somewhere to stay.
Why didn’t HDB anticipate the demand?
Marriage rates is something which is very easy to estimate and very consistent over the years. Why didn’t HDB anticipate the demand?
HDB property prices are being pushed up.
Faced with a lack of choices, Singaporeans will be forced to choose HDB flats in previously less desirable locations such as Punggol or Sengkang which has excess units. Not only that, some Singaporeans may choose not to wait and instead buy private housing directly if they can afford to.
For HDB flat owners whose property valuations have risen, they may consider selling their flats. After the sale, they will find buying another HDB flat too expensive; hence they may opt for private housing instead.
There is currently no shortage of total private properties in pipeline, which stands at 83,975 (Source: URA Release of 3rd Quarter 2012 Real Estate Statistics). This is easily 7 to 8 years of supply based on the average consumption trend.
The end effect is that a greater proportion of people will end up living in condominiums and private apartments. This will gradually deplete supplies and bring smiles to property developers in Singapore.
The Singapore government on the other hand will be happy that prices of land will rise and reach the land’s minimum reserve price to trigger a bidding process. More land sales equal more revenues for the government. And more developers bidding for land means higher prices. These higher prices are then translated into higher priced condominiums. Singaporeans will have to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the major price component is the land price.
Singapore has perfected the art of micro-management.
At $10,000 household income, HDB income ceiling, you cannot buy HDB flats.
At $12,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore.
At a household income of $12,000 onwards, the Singapore government strongly encourage you to move upwards in consumption.
Consumptions helps increase tax revenues (annual property tax, stamp duty, transaction fees for property agents which translate into taxes, sale of furniture, construction, work for lawyers, etc.), and helps the economy in creating jobs.
These subtle or not so subtle policy directions will either enrich or impoverish you. And when you consider your Singapore home loans, you ought also to take care to choose the right structure to capitalize on these unwritten government policies or mis-calculations.
We do not support or reject any government policies, we only highlight such policies to the attention of our readers so that they can find ways to benefit from these policies or outcomes of government’s miscalculations.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property prices expected to continue to rise despite govt measures, Karamjit Singh)
We read Mr. Karamjit Singh’s comments and we did a bit more research. So here is what we found.
Singapore’s population according to the Singapore Department of Statistics are: -
Table 1: Singapore's Population 2000-2012
| Total Population ('000) | Resident Population (Citizen + PR) ('000) | Annual Increase in Resident Population + Local Citizens ('000) | Annual Increase in Total Population ('000) | |
2000
|
4,027.9
|
3,273.4
| ||
2001
|
4,138.0
|
3,325.9
|
52.5
| 110.1 |
2002
|
4,176.0
|
3,382.9
|
57.0
| 38.0 |
2003
|
4,114.8
|
3,366.9
|
-16.0
| -61.2 |
2004
|
4,166.7
|
3,413.3
|
46.4
| 51.9 |
2005
|
4,265.8
|
3,467.8
|
54.5
| 99.1 |
2006
|
4,401.4
|
3,525.9
|
58.1
| 135.6 |
2007
|
4,588.6
|
3,583.1
|
57.2
| 187.2 |
2008
|
4,839.4
|
3,642.7
|
59.6
| 250.8 |
2009
|
4,987.6
|
3,733.9
|
91.2
| 148.2 |
2010
|
5,076.7
|
3,771.7
|
37.8
| 89.1 |
2011
|
5,183.7
|
3,789.3
|
17.6
| 107.0 |
2012
|
5,312.4
|
3,818.2
|
28.9
| 128.7 |
Figure 1: Detailed Statistical Table (Singstat)
There is a nice table at
http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html
which shows the relative growth rates of HDB.
We are not against importing talent, but we think Singapore had been over-doing it, without studying the strain the additional populace will make on the country's basic infrastructure like transportation and housing. The miscalculation by the Government resulted in an inadequate supply of HDB flats to meet demand. This, we believe, is one of the causes of Singapore's escalating property prices.
Table 2 shows the number of new HDB flats (Source: HDB Press Release) rolled out each year from 2006 -2012 and the estimated housing demand in those years.
Based on the latest Census of Population 2010, the average household size stands at 3.5 people (Source: Department of Statistics), we divide the Annual Increase in Total Population by 3.5 to obtain the Estimated Housing Demand, the latent demand (rental + purchase)
Since 80% of the Singapore's population lives in HDB flats, we estimate that the Estimated HDB Housing Demand from foreigners to follow the same trend as 80% of total demand.
Table 2: Singapore's Estimated Housing Demand and HDB Housing Supply
| Estimated Housing Demand (Annual Increase in Total Population / 3.5 per household) | Estimated HDB Housing Demand at 80% of Total Demand | HDB Supply of New Flats (estimated) | |
2006
|
38,743
|
30,994
|
2,733
|
2007
|
53,486
|
42,789
|
5,063
|
2008
|
71,657
|
57,326
|
7,793
|
2009
|
42,343
|
33,874
| 13,500 |
2010
|
25,457
|
20,366
| 17,713 |
2011
|
30,571
|
24,457
| 25,200 |
2012
|
36,771
|
29,417
|
34,237
|
Total
|
293,600
|
106,239
|
This is the total latent demand as all foreigners arriving into Singapore will need to have a place to stay. In other words, these form largely the total demand (Rental + Purchase).
ACTUAL DEMAND IMPACT ON HDB
Now let’s take a look at the number of immigrants eligible for HDB purchase. Only Singapore citizens can buy HDB flats directly from HDB. Permanent Residents (PRs) are allowed to buy HDB flats only from the resale market.
Figure 2: Singstat, popinbrief2012a.pdf
Annual increase in population based on Table 1 (in 000s), is 54.5 in 2005, 58.1 in 2006 and 57.2 in 2007, 59.6 in 2008, 91.2 in 2009 and 37.8 in 2010, 17.6 in 2011, 28.9 in 2012.
Using Table 1, 3,818,200 (2012) – 3,467,800 (2005), the total population increase is 350,400.
As can be seen, a large part of these increases are due to NEW Permanent Residents and new Singaporeans (naturalised citizens) (Figure 2) with a small part contributed from local born Singaporeans.
Assumption of HDB demand caused by population increase
The increase in population is largely due to New Permanent Residents and New Citizens (Figure 2), with a small part contributed by increase in local born Singaporeans.Assumption 1: 80% of the 350,400 population increase buys HDB.
Let’s assume that 80% of these new population increase buys HDB, that is a total of 280,320 people.Assumption 2: 3.5 people to a household
Let’s assume that there will be 3.5 people to a household. 280,320 / 3.5 = 80,091 units of HDB demand arising from Permanent Residents and new Singaporeans.- 80,091 HDB units of NEW Demand of HDBs from 2005 to 2012!!!
LOCAL HDB Demand
There is also the annual household formation of 19,000 to 22,000 per year. Assume that 80% of these households would want to buy HDBs. So let’s say 80% of 20,000 would buy HDB, that would equate to 16,000 a year. 2005 to 2012, there would be a 128,000 of demand of HDB units.- 128,000 HDB units of Local Demand of HDBs from 2006 to 2012!!!
And HDB has only built or announced to build 106,239 units. There is an estimated shortage of over 100,000 units.
MASS MARKET HDB BEING PROPPED UP
Many of these new supplies were “Built-to-order” flats which can take 3 to 4 years to complete adding to acute shortages of HDB flats, further adding to the demand.Demand from household formation (marriages) comes in at a range of 19,761 to 22,840.
These newly married couples surely need somewhere to stay.
Why didn’t HDB anticipate the demand?
Marriage rates is something which is very easy to estimate and very consistent over the years. Why didn’t HDB anticipate the demand?
WHAT IS THE LIKELY EFFECT OF MASSIVE IMMIGRATION?
Rental rates are being pushed up.HDB property prices are being pushed up.
Faced with a lack of choices, Singaporeans will be forced to choose HDB flats in previously less desirable locations such as Punggol or Sengkang which has excess units. Not only that, some Singaporeans may choose not to wait and instead buy private housing directly if they can afford to.
For HDB flat owners whose property valuations have risen, they may consider selling their flats. After the sale, they will find buying another HDB flat too expensive; hence they may opt for private housing instead.
There is currently no shortage of total private properties in pipeline, which stands at 83,975 (Source: URA Release of 3rd Quarter 2012 Real Estate Statistics). This is easily 7 to 8 years of supply based on the average consumption trend.
The end effect is that a greater proportion of people will end up living in condominiums and private apartments. This will gradually deplete supplies and bring smiles to property developers in Singapore.
The Singapore government on the other hand will be happy that prices of land will rise and reach the land’s minimum reserve price to trigger a bidding process. More land sales equal more revenues for the government. And more developers bidding for land means higher prices. These higher prices are then translated into higher priced condominiums. Singaporeans will have to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the major price component is the land price.
PERFECTING THE ART OF MICRO MANAGEMENT
Although it is a market driven economy, various policy levers which the government has access to means that it is not a 100% market driven economy. Though many countries are also similar.Singapore has perfected the art of micro-management.
At $10,000 household income, HDB income ceiling, you cannot buy HDB flats.
At $12,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore.
At a household income of $12,000 onwards, the Singapore government strongly encourage you to move upwards in consumption.
Consumptions helps increase tax revenues (annual property tax, stamp duty, transaction fees for property agents which translate into taxes, sale of furniture, construction, work for lawyers, etc.), and helps the economy in creating jobs.
WHAT THIS MEANS FOR THE SINGAPORE PROPERTY BUYERS AND THEIR HOUSING LOANS?
If you are a Singapore Property Buyer, you have to be mindful that there is a gradual shift in Singapore Government policy in play. The government is the largest land-owner, it can regulate supply to influence prices. Being an honest and efficient Singapore government bent on maximising land productivity, hence the Singapore government is now releasing a lot of HDB land with these elevated prices to maximize revenues. If you already own land, good for you, if you do not own any property, you could be price out.These subtle or not so subtle policy directions will either enrich or impoverish you. And when you consider your Singapore home loans, you ought also to take care to choose the right structure to capitalize on these unwritten government policies or mis-calculations.
We do not support or reject any government policies, we only highlight such policies to the attention of our readers so that they can find ways to benefit from these policies or outcomes of government’s miscalculations.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
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