Should You Buy or Rent a Property in Singapore

Should You Buy or Rent a Property in Singapore from Property Buyer Singapore

Read the full article here.  

Join us on Facebook:  
www.facebook.com/iCompareLoans  
www.facebook.com/SGpropertyBuyer  
www.facebook.com/sghomeloan

Factors to Consider When Buying a Residential Property in Singapore

Factors To Consider When Buying a Residential Property in Singapore from Property Buyer Singapore

Read the full article here.  

Join us on Facebook:  
www.facebook.com/iCompareLoans  
www.facebook.com/SGpropertyBuyer  
www.facebook.com/sghomeloan

If Your Home Loan is Turned Down, ...

If Your Home Loan Is Turned Down from Property Buyer Singapore

Read the full article here.  

Join us on Facebook:  
www.facebook.com/iCompareLoans  
www.facebook.com/SGpropertyBuyer  
www.facebook.com/sghomeloan

The Drawbacks of HDB Loans

The Drawbacks of HDB Loans from Property Buyer Singapore

Read the full article here.  

Join us on Facebook:  
www.facebook.com/iCompareLoans  
www.facebook.com/SGpropertyBuyer  
www.facebook.com/sghomeloan

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)

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

(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).

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!!!

From 2006 to 2012, total numbers of HDB built and those that is announced and not yet completed are 106,239. But, since Permanent Residents cannot buy directly from HDB they will be competing for these flats after the minimum occupancy period (MOP) of 5 years when these flats can be sold on the open market.

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!!!

Therefore, the total demand is estimated to be 208,091 units of HDB.

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/

A Quick Look at the Drawbacks of HDB Loans

by SUSAN TEO

In the last article, I discussed about the pros of using a HDB loan. Here, we look at the opposite instead.

1. No saving left in your CPF (Central Provident Fund) Ordinary Account 

Before you are allowed to take a HDB loan, it is mandatory that all the balance (after setting aside an amount for the miscellaneous fees of the flat purchase) in your CPF Ordinary Account up to the valuation limit (the lower of the purchase price or valuation at the time of purchase) if applicable, be utilised first. After that, HDB will decide on the loan quantum based on the outstanding amount to be paid for the flat.

As the savings in the CPF Ordinary Account generate an interest, which has remained at 2.5% p.a. since July 1999, you lose this interest earning when you use the savings to pay for the flat.

However, you save on the interest payable for the HDB loan which is 0.1% above the interest rate for the Ordinary Account. In other words, the loan rate is 2.5% + 0.1% = 2.6% p.a..

Had you not utilised the savings in the CPF Ordinary Account, you would have to use the loan. The below illustrates the loss:

• CPF Ordinary Account Saving = S$50,000

• Interest earned at 2.5% p.a.= S$1,250

• Interest payable on loan at 2.6% p.a.= S$1,300

• Loss = S$1,300 – S$1,250 = S$50

Nevertheless, it is still possible than you would have been better off if the saving had remained in the Ordinary Account. Because the first S$60,000 in all the 3 CPF accounts (Ordinary, Special and Medisave) earns an additional 1% interest, with up to S$20,000 from the Ordinary account. So if you need to rely on the balances in your Ordinary account to make up the S$60,000, you forfeit this additional 1% of interest. The below is a simple illustration using the maximum amount of S$20,000 that can earns the additiona1 interest in the Ordinary account.

Loss from using your CPF balances instead of the HDB loan:

• Interest Rate Loss

= 3.5% (interest in CPF Ordinary Account) - 2.6% (interest on HDB loan) = 0.9% p.a.

• Annual Loss

= 0.9% x S$20,000 = S$180

Further, when the flat is sold, all CPF saving used and interest that would have been accrued if the sum had remained in the account, will be deducted from the sales proceeds, and refunded to the Ordinary Account. This will reduce the cash proceeds which you may need for other purposes. Anyhow, if you had financed the flat with a loan (bank or HDB), you would still need to repay the outstanding loan amount from the sales proceeds.

Another drawback of depleting your CPF Ordinary Account savings is that in the event of a job loss there might not be adequate balance to service the monthly home loan repayment; hence you may be required to service it with cash.

A way to circumvent having to use the CPF Ordinary Account balances to pay for the flat is to invest it before you make the flat purchase. You can do so for the savings in excess of S$20,000 under the CPF Investment Scheme - Ordinary Account. Or instead you can transfer the monies in your Ordinary Account to the Special Account which interest rate has remained at 4% p.a from 2000 till now. This transfer is irreversible and there is a limit to it - the balance in the account (inclusive of the amount withdrawn under the CPF Investment Scheme for the Special Account) after the transfer cannot exceed the prevailing Minimum Sum. Once the monies are in the Special Account, you cannot utilise it for your housing purchases anymore.

2. Possibly relatively higher interest and opportunity cost 

During a high interest-rate environment, a financing institution will, in all likelihood, offers a loan with a lower interest rate as compared to a HDB loan.

So the opportunity cost (best foregone alternative) for not using a private loan becomes higher. In addition, you also lose the 1% of additional interest on the savings (capped at S$20,000) in your CPF Ordinary account.

Whether you decide on a HDB loan or a bank loan, do bear in mind that you are not allowed to refinance to a HDB loan once you have taken a bank loan.  

Read more articles at  
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/  
iCompareLoan.com/resources/category/faq/

Singapore Property Buyer forecast for 2010 and 2011

Singapore Property BUYER forecast for 2010 and 2011.

Recently the government has done the people a favour by releasing land and stopping the property prices from going out of hand.

We felt that the error was created in the first place because there was a squeeze in the HDB supply side. HDB was building massively inadequate supply for annual demand.

Although HDB can say that there is nobody queueing up for their BTO flats, but it could also be that the flats are priced too expensive due to benchmarking it to resale prices. Therefore if people cannot afford HDB flats, does it mean that there is no demand for it?

So the supply shortage in HDB is leading to a bottom up rise in prices of HDBs. This is pushing a wave of HDB upgrades into Private housing and condominium.

This demand is then pushing upwards and depleting supplies in the lower end of the private property segment (at least for this year 2010 and maybe next 2011) leading to massive demand for land. (Strangely so, as the supply in the pipeline is still some 60,000 units at at March 2010, equal to easily 6 to 7 years supply)

We can only speculate that perhaps it is because: -

1. Those supply of property in the pipeline is concentrated mainly amongst the big players.
2. Those supply of property in the pipeline is concentrated in certain districts or in certain price ranges, while demand is coming from the "MASS segment".

With increased demand for land due to HDB's miscalculation of demand by under-building, this leads to huge demand for land. Property developers seeing a possible opportunity may want to get in on the act by bidding for land.

Singapore government is happy to release land for sale
Singapore government is in turn happy, because it can be seen to be doing the public a favour by releasing land and cooling the market, whilst at the same time, the property developers are frantically meeting the land reserve price and starting a bidding war for land.

Our guess can only be that Property developers see this as a start of a price hike in land and therefore property prices. What this means is that if the Property developers bid and win at the early part of this property supply imbalance cycle, design and launch the properties quickly (say within 1 year), they can get out at the peak of the market or before the peak of the market. While during this time, the property prices are rising, so by the time they launch for sale, they could be sitting on massive profits.

But not all property developers will be lucky. Some smaller ones and those that mis-time their purchase can go bankrupt. While if again it is the big property developers who win, Singaporeans and Singapore property buyers will be unlucky. This is because with their holding power, they will then be able to continue to set new price benchmarks.

Will Singapore land supply catch up fast enough?

The supply of land will need around 2 to 4 years to be ready. So during this time, the property prices will continue to be squeezed from the mass market end all the way pushing up to the mass and mid market Private housing.

Singapore government and it's coffers are the major beneficiaries

So this time round, the Singapore government is the major beneficiary as it yet again was able to release land for sale at very high prices on the run up to the peak. And it is sparing no effort to sell much land to maximize land productivity.

Singapore government shows hand in wanting to make smaller HDB flats

Singapore government wants to make smaller flats - essentially raising prices.
Commentary by www.PropertyBUYER.com.sg

"SINGAPORE: Instead of reducing the HDB flat lease of 99 years to make the flats more affordable, the government prefers to use other methods to help those with a lower income own a flat, said National Development Minister Mah Bow Tan.

Mr Mah told Parliament the HDB now provides additional grants to the lower-income group and builds smaller flats that are priced more affordably. Another way is to make sure higher-income flat applicants do not compete with them for the same flat - this is why the HDB has a income ceiling for applicants of two-and three-room flats. "With all these in place, we do not see any problem in making HDB flats affordable for first time lower-income families."

Having shorter leases of 60 years for young couples could also be an issue with time - "we are going to run into trouble especially when that particular family grows old", said the minister."

Mr Mah was also asked by MP Cedric Foo if Singaporeans are not buying the flats situated in poorer locations because they are not "priced correctly".

(TODAY, Ong Dai Lin, Grants, smaller flats instead of shorter lease tenure, 9 March 2010)

Voila, Singapore Government finally shows hand in one of the most blunt admission that it is building ever smaller flats. We predicted this in many earlier articles in Q4, 2009 and early this year that the government land sales program will lead to 2 possible outcomes.

One outcome is that the property prices quantum rise. If affordability is not there, the developer will instead sell a smaller size unit at higher per square feet (PSF) to maintain their margins after paying through their nose for land.

Another outcome is that property developers will sell a lesser lease. As seen in quite a few developments already, the property developer maintains a master lease of Freehold or 999 years leasehold and sells the property as a 103 years lease hold.

Now even HDB wants to it's flats at rock solid prices. If you cannot afford those properties at the prices HDB is asking, then HDB will help you afford it.

HDB will offer you smaller size flats.

Isn't this great? At least you will not be left behind.

HDB is indeed benevolent.


www.PropertyBUYER.com.sg Singapore Mortgage Consultants

Tel : 6100 0608
SMS : 9782 8606

SKYPE: propertybuyersg

email: loans@propertyBUYER.com.sg