Singapore Mortgage Refinance Rates and Valuations overview 2006 to 2009

Refinance Home loans - Window of opportunity

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Singapore Mortgage Refinance rates and time-line and Valuation overview from 2006 to 2009

2006 to Q3, 2009 Recap.

The years between 2006 to 2009 have been an eventful ride. We have seen property prices run up from around 2006 onwards to 2007, followed by the blow-up in 2007 of sub-prime housing debt.

In 2008, we see the collapse of near collapse of financial institutions of substantial sizes such as lehman brothers, Bear sterns, Merrill Lynch, AIG, UBS, Citibank and Madoff fraud just to name a few.

Together these financial institutions held assets worth over 4 to 5 trillion US dollars at book value, which if they failed, these assets will be dumped onto the market with no buyers. An apocalypse nearly happened.

US Federal Reserve Set interest rates to almost ZERO in 2009 and China Stimulates its economy

In 2009, US federal reserve set interest rates to nearly 0% while pumping in US$700 billion of funds to rescue the banks. These measures were also matched with the China government committing to pump more than 4 Trillion Yuan (~US$600Bilion) into their own economy over a several year period to maintain worldwide economic stability.

Consequently in Singapore, we are not spared from this roller-coaster ride. Interest rates have fallen from ~3.5% to 0.68% based on the 3 months Singapore Inter-bank borrowing rate (SIBOR – 3months).

What happened to property valuations between 2006 to Q4, 2007

During the year 2006 to end 2007, property valuations in Singapore have reached a feverish pitch. In the year alone in 2007, Singapore population grew by 5.5% (Source: http://www.singstat.gov.sg/stats/keyind.html or www.PropertyBUYER.com.sg) mainly through Singapore in-bound expatriates.

Expats fueled the Singapore Property Yields

This fueled increase in rental yields which in turn fuels property prices. There was a mad rush by Property investors novice or experts to speculate and buy properties in Singapore in which we at www.propertybuyer.com.sg urged caution.

Property prices swing up in 2007

This led to a huge increase in property prices in some locations of over 100% rises, such as Marina Sail, a 99 year leasehold condominium which went from S$900+ psf to more than S$2000 psf. This pattern is repeated across the all Singapore properties with varying degrees of price increases.

Novice property investors were caught out.

Many novice property investors were caught up in the hype. Those novice property investors and speculators who bought properties in the hype ended up buying into very expensive properties.

What happened to property valuations between 2008 to 1Q, 2009

What happened to property valuations between 2008 to 1Q, 2009, property valuations have started to fall. The fall in property valuations in Singapore properties accelerated towards 3Q and 4Q of 2008 with the melt down of financial institutions.

People who bought in 2006 and 2007 end up with high rates and cannot refinance
Many people who bought their properties in 2006, 2007 at high interest rates cannot refinance their properties due to the fall in valuations.

For example, many places whose valuation have fallen 10 to 30% in the very least. Those in Singapore’s District 9, district 10 and district 11 have seen valuations fall equally drastically.

Especially so for those prime areas within District 9, 10 and 11, a lot of our clients called us at 6100 0608 to speak with us, propertybuyer Singapore mortgage consultants, however due to the valuation drop, banks are refusing to lend.

Some Banks stopped lending to District 9, 10 and 11 in Q1, 2009

During this time 2008 to 1Q, 2009, some banks have unofficially stopped lending for properties in District 9, 10 and 11 pending further review.

Some bankers privately disclosed that the banks are no longer able to accurately value properties in these areas as valuation gaps opened up. Sometimes as wide at 20 to 30% difference between the highest valuation and the lowest ones.

Between March 2009 till end Q3 2009

The property prices have enjoyed a revival (although we shall not go into whether that revival is justified, that will be reviewed in another research which we are preparing, but do email us at loans@propertybuyer.com.sg to enquire).

Although the statistics reported sliding valuations and lowered selling prices, some places within District 9, 10 and 11 have enjoyed spectacular revival of property prices and valuations.

Park Infinia Prices Swing

Between January and June alone, as an example, Park Infinia located in Newton area went from around S$1100 per square feet to S$1200 per square feet between January to March 2009. And between March to June 2009, the valuation at Park Infinia in Newton went to S$1400 per square feet. It was easily a 30% increase.

We have seen valuations rising in the Singapore property mass market areas as well.
With a revival of valuations from between 10 to 30% in some districts or for some projects, for those who were unable to refinance due to fallen valuations in January to April 2009, now may be a good time to check valuations again whether they can refinance Singapore properties.

Now is a window of opportunity to refinance since valuations have recovered a bit
Although the singapore property prices have not recovered to pre-crisis levels in 2007 levels, even if some of these Singapore property investors – buyers who cannot meet the valuation levels to qualify for a 80% loan (Loan to valuation), they would nonetheless still be able to refinance their properties at 90% loan.

The current interest rates would still easily beat the previous rates and provide savings to the tune of around 1.5% per year. Over 2 years, Singapore home owners can expect to save around S$30,000 of interest costs or more, based on a loan size of S$1m.

What is the Singapore economic outlook for 2010?

It’s really a tough call, but by all measures the risk of a severe financial system melt-down is much reduced. There are many conflicting economic forecasts, some good and some bad.

None of the so called “Green shoots of recovery” have fully developed into a sustainable trend, but neither are the pessimists having their predictions correct. The economic statistics are flip-flopping from good to bad to good to bad.

So analysts are similarly divided on where the economy is headed.
We are mindful that substantial risks remained, economic fundamentals have not really improved.

Anyway, let us just call these forecasts by economists “analyst opinions”.
Since there are various economic modeling used, and each of these “Analyst opinions” have foundations based on facts and statistics (one way or the other), we can simply aggregate these opinions to get a proxy of the economic directions.

In 2008, economic analyst opinions were almost all negative and doom. Now in Q3, 209, we have quite a few very positive opinions, some moderate and some negative, this is a marked improvement from 2008.

On a balance of probabilities as well as on a fundamental economic basis, the worldwide economy is on the mend.

There is now a higher probability of economic recovery (however slight it may be) and possible inflation.

Going forward, there is a chance that interest rates may rise. Refinancing will then safe you less money.

So now may be the only window of opportunity to refinance Singapore property where the interest rates are still low and the valuations have somewhat recovered. Property Buyer Home loans and Singapore Mortgage Consultants like us do not charge you a fee because the banks pay us directly, therefore there is no cost to you and you have someone to do the work for you.

Why not try to contact us at loans@propertybuyer.com.sg or SMS us at +65 9782 - 8606 for a free valuation check and after that, we can help you compare Singapore home loans or compare refinance home loans.

If refinance interest rates go up or if property valuations fall towards the end of the year, the opportunity is lost.