Elevated Risks for Uncompleted under-construction Pre-TOP Properties

Singapore Mortgage and Home Loan: Elevated Risk for Uncompleted pre-TOP Properties


Elevated Risk for yet to be complete Pre-top properties.
Courtesy of www.PropertyBUYER.com.sg

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Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php

Financial Institution reduces loan quantum for Rivergate Condominium

Singapore

There is now elevated risks for home owners with building under construction (pre-top)

properties. Some of these properties were sold during the boom time in

2006 and 2007 with TOP in 2009, 2010 and beyond. Valuations have

dropped, some heartless financial institutions do not stand behind their

home owner.

Rivergate Condo owner gets "betrayed" by Financial institution.

Someone who has bought a Rivergate Condominium unit during the launch

around 2007. He told us he bought it for $2000 per square feet for a property

of 2025 sq feet. The price bought was $4 million dollars.


At that time, he arranged financing for 80% of $4 million from a financial

institution (which we shall not name, there are more than 1). The loan size at full

disbursement is $3.2 million dollars.


Recently, just 3 days prior to the TOP, the financial institution sent valuers to

re-value the place. They arrived at a figure of $1200 per square feet. This

valued the property at $2.4 million. A 80% loan to valuation equals $1.92

million. From a loan size of $3.2 million to $1.92!!!


This leaves the home owner short of $1.28 million dollars!!!


He has to let go of the property at fire sale prices or work out a plan with the

developer. The consequences are dire. A few more such cases can

really sink an already weak economy. Yet another bad example of

pro-cyclical behaviour.


Financial institutions have every right in their legal contract to exercise this

adjustment in loan size. However such a scenario was never fully explained

by the bankers on lending him the money.


The owner has a choice, forfeit all the proceeds paid up till this point or work

out a mutually acceptable plan with the developer. But the consequences

are dire as the properties may be dumped into the market with few buyers

depressing the prices for all properties, which in turn lead to more financial

institutions pulling the plug on borrowers.


Our question has always been, why lend in the first place and then to pull it

back at the very last moment?


This is another example of pro-cyclical behaviour that typically makes a

recession worse or a boom time bubble bigger than it is. This totally

destroyed that person's wealth as there is no way he could have come up

with $1.28 million in 3 days and he may have to dump his assets cheaply.


Opinions

There is now an elevated risk of buying new launches of uncompleted and

yet to be TOP properties. Home buyers who commit to pre-top and

uncompleted properties with completion dates in 2009, 2010 and perhaps

even 2011 is likely to be exposed to risks whereby the financial institution(s)

reduce the loan size at their whims and fancy. Do think twice.

contact them at:
loans@propertybuyer.com.sg