Showing posts with label Property. Show all posts
Showing posts with label Property. Show all posts

Wednesday, June 3

Selling HDB below valuation

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Given that the property market is softening now, it is more common to see HDB flats selling near or at their valuation. In fact, it is possible to see that there are HDB flats selling below valuation. If you are contemplating to sell your HDB flat below valuation and you have used CPF funds to finance your HDB flat, do keep in mind that you may be required to refund back any shortfall in your CPF refund if the sales proceed is insufficient to pay back this refund. This CPF refund is the amount which you have drawn out from CPF to service your housing loan plus accrued interest. This can be illustrated by a simplified example below.

Valuation       : $400,000
Sale Price       : $380,000
Outstanding Housing Loan     : $300,000
Amount left        : $80,000

CPF refund with accrued interest : $120,000
Shortfall         : $40,000

The sales proceed received will be used to pay off the outstanding housing loan first, which can be from HDB or the banks. The amount left after paying off the loan will be used to pay off the housing levy if there is any to be paid before it is being used to pay the CPF refund as explained earlier. In the example, the seller of the flat was left with $80,000 after paying off the outstanding housing loan. However, the seller of the flat is required to pay $120,000 back to the CPF board. As such, there is a shortfall of $40,000. Since the flat was sold below valuation, the CPF Board may ask the seller to top up the CPF shortfall by the amount sold below valuation. Thus, do think carefully about the consequences and whether you will be affected by this if you are planning to sell your HDB flat below valuation.
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Friday, May 15

Choosing HDB for 1st home

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It has been a trend these days that the proportion of young couples that chooses private properties such as condominiums or private apartments as their first home, are increasing as opposed to HDB flats. After all, private properties come with more amenities and facilities and there is a certain prestige associated with staying in such form of housing. If the combined income of the couple is less than the HDB income ceiling that qualifies them for certain incentives and schemes, that currently stands at $8000, they may lose out monetarily if they choose to stay in private properties.

1. New flats discounted from market prices
If the couple's combined income is less than the income ceiling, they will be eligible to apply for new HDB flats. These new HDB flats are at a discount as compared to the market price of similar HDB flats. The couple could save a significant amount of money if they choose new HDB flats. The drawback though is that the couple will have to go through balloting to buy new HDB flats and thus they are not guaranteed of being able purchase the new HDB flats.

2. Housing Grants
HDB will offer housing grant which is known as the CPF housing grant for couples who are buying a HDB flat for the 1st time and have not enjoyed a housing subsidy before, if they are buying a resale flat. This housing grant can be used to pay for the initial purchase of the flat or to reduce the mortgage loan of the flat. The amount can range from $15,000 to $40,000 depending on the type of grant given and this is illustrated in the diagram below.



3. HDB Concessionary Loan
Similary, a couple will be eligible to apply for the HDB Concessionary Loan if their combined income is less than the income ceiling, along with other factors. The interest rate of this loan is currently set at 0.1% above the interest rate in the CPF Ordinary Account. Currently, the interest rate of the HDB Concessionary Loan is at 2.6% and this is often significantly lower than the interest rates that the banks are offering.

As such, with all the above mentioned incentives, it would be advisable for couples who are buying their first home to choose HDB flats instead of private properties if their combined income is less than the income ceiling.
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Thursday, April 23

Upgrading from HDB to private property

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If you look at the HDB Resale Flats Price Index, the index is still hovering near its previous peak and the price has been stable for the last 3 quarters. However, the index has been falling for the past few quarters for the Private Residential Property Price index. This would mean that homeowners of HDB flats can take advantage of this difference by upgrading to a private property without making significant loss in the sale of their HDB flats. Furthermore, their purchase of a private property will be at a discount from the peak of the index. However, this is inferred from the indices only.
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Sunday, January 4

Property Cycles and Recessions

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There was an informative discussion in the chatbox on bullythebear.blogspot.com about the correlation between property cycles and recessions a few days ago and an fellow investor, who has a lot of experience in the property market, shared with us some of the observations on the property cycle along with a historical chart of the Private Residential Property Price Index or in short, PPI.



I have attached a snapshot of the PPI above. There are some interesting observations about the charts.

1. Property lags behind the economy as an asset class. The previous recessions occurred in 1985, 1997 and 2002. However, the property market only bottomed in 2Q of 1986 and 4Q of 1998. As for the technical recession in 2002, the property market did not rebound from the bottom sharply. It consolidated for a while from 2002 to 2004 before moving towards the upside gradually in 3Q of 2004

2. Timing of entry into the property market is of utmost importance. Those who bought at the peak of the bullish property market in 2Q of 1996 are probably still having losses for their properties at this point of time. This is rather similar to those who bought near the peak of the stock market in October 2007. I wonder how long will it take for them to break even on their investments in stocks.

Going by these past examples, the current recession is confirmed in 4Q of 2008 thus the earliest time that the property market will probably be in late 2009 or early 2010. Any comments or opinions regarding this ?
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Monday, December 29

Singapore's private home sales, prices & rents fall sharply in Q4

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Singapore's private home sales, prices & rents fall sharply in Q4
By Timothy Ouyang, Channel NewsAsia | Posted: 29 December 2008 1447 hrs

SINGAPORE: Private home sales in Singapore have taken a sharp fall in the fourth quarter of this year.

According to a report released Monday by property consultant DTZ, only 112 private homes were sold in the primary market in October, and 192 units sold in November.

This, compared to the monthly average of 444 units sold in the first nine months of the year.

The October sales volume is the lowest since the release of official monthly sales data by the Urban Redevelopment Authority (URA) in June 2007.

For the full year, DTZ estimated that the number of home sales in the primary and secondary markets will only make up about 35 per cent of last year's sales, which saw some 38,100 units sold.

The figure is based on caveats lodged with the URA so far.

At the same time, the fall in private home prices have started to gather pace in the fourth quarter, with prime non-landed properties the hardest hit.

Prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter in the three months ended December, according to DTZ Research.

Overall, average private home prices have fallen 21.6 per cent year-on-year to S$1,160 per square feet, below the level of S$1,200 per sq ft in the second quarter of 2007.

Meanwhile, average monthly rents of prime non-landed homes have fallen 9.2 per cent to S$4.36 per square feet.

DTZ expects home sales to remain low next year as the recession takes its toll and homebuyers are concerned over job security.

- CNA/yb
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Friday, December 19

Smaller flats coming up

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Smaller flats coming up
Supply over the next two years is a marked increase to meet demand
By Jessica Cheam

SMALLER flats are making a comeback, with the Housing Board (HDB) ramping up supply to around 4,000 over the next two years to meet surging demand.

It marks a dramatic turnaround for a style of flat that had not been been built for about 20 years.

Next year 2,000 three-room and smaller flats will be built, almost double the amount put up this year, with a further 2000 earmarked for 2010.

The HDB move will mean a steady supply of smaller flats for lower income families and homeowners who need to downgrade amid grimmer economic times.

National Development Minister Mah Bow Tan flagged the strategy in Parliament last month.

HDB deputy chief executive Tan Poh Hong said yesterday that the board has revived smaller flats on a large scale as 'there are are more people who will need to downgrade, as well as first-timer families who would also like to start with smaller flats to be financially prudent'.

Analysts anticipate a good take-up as 'difficult economic conditions' encourage homebuyers to 'start small'.

Buyers like nurse Liu Li, 29, a home-hunter on the look-out for such affordable flats, said: 'A bigger pool of new, small flats will widen choices for first-timers like me.'

Prices will start from as low as $76,000 for the new small units.

The HDB stopped building two- and three-roomers in the 1980s as growing families fuelled demand for bigger flats.

But they were re-introduced in 2004 and two years ago, the HDB said it would resume building two-roomers to meet increasing demand.

Demand for smaller flats has been red hot recently. HDB sales have attracted over 10 times more applicants than homes available. An October sale of 150 small flats was swamped with 2,426 applications in just a week.

Mr Kelvin Wang, who recently bought a three-roomer in Tiong Bahru, said he had difficulty finding the home, his first, because there were so few small ones around.

'The increased supply will help ease demand for such homes,' said the 24-year-old engineer.

Some of the new smaller flats form part of a new standard project launched by the HDB yesterday.

Dew Spring @ Yishun at the junction of Yishun Ring Road and Yishun Street 41 offers 504 four-room, 216 three-roomers and 144 two-room units.

The build-to-order (BTO) project has the largest number of smaller flat types among HDB's BTO launches this year. BTO projects are built only when a certain level of demand is reached.

HDB's Ms Tan stressed that the homes will be kept affordable.

Two-roomers at Dew Spring start at $76,000 to $90,000; three-roomers go for between $120,000 and $146,000 with four-roomers at $197,000 to $238,000.

For the first time, the HDB has released comparable prices of resale flats in the same area to show the affordability of the new flats being launched.

Prices of 20-year-old three-roomers nearby of similar size, for example, are selling for $175,000 to $180,000 - higher than the launch price, the HDB said.

PropNex chief executive Mohamed Ismail said that Dew Spring flats 'are priced very attractively. The smaller units are below $200 psf (per square foot), which is much lower than the median resale prices for that area in the last quarter'.

The HDB has launched 6,600 homes this year under its BTO scheme, of which 883, or 13 per cent, were two-room and three-room flats.

It plans to launch a further 1,180 units in the next two weeks, which will include 280 studio apartments, two-room and three-room homes.

jcheam@sph.com.sg
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Thursday, December 18

Long-term property investors should bet on S’pore

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SINGAPORE looks a pretty good bet for long-term property investors, given its strong savings rate, low corporate taxes and near-full employment, according to a key real estate player here yesterday.

And if prices fall further next year, it would be a good time to buy, said Mr Christopher Fossick, Jones Lang LaSalle’s managing director for Singapore and South-east Asia at a media briefing at the firm’s office. There is a consensus that the economy will go through a tough time next year, which means it will be tough for everybody, including those in property, he said.

‘If prices are lower, that provides opportunities,’ Mr Fossick added. He pointed out that Asia, particularly Singapore, given its status as a financial services hub, is better off economically than the United States and Europe. The level of household borrowings and corporate loans here is lower than in the US and Britain, he said.

He quoted a recent report commissioned by London Mayor Boris Johnson that said that the rising status of regional hubs such as Dubai and Singapore is threatening London’s position as the world’s financial capital.

He listed some of the key factors that should continue to attract investors here. Singapore’s corporate tax rate of 18 per cent, he said, is a tad above Hong Kong’s 17 per cent but below the 29 per cent rate in Britain and the 40 per cent levy in the US.

There is near full employment and a strong savings culture here. Singapore has a gross national savings rate of 45 per cent, compared with 11 per cent in the US, 14 per cent in Britain and 32 per cent in Hong Kong. Also, about 76.5 per cent of Singapore’s population are working, compared with 67.1 per cent in the US and Britain.

Property is always a medium- to long-term proposition, he added. Most investors treat it as such and have an investment horizon of more than 24 months. Jones Lang LaSalle’s regional director and head of markets, Mr Chris Archibold, said the office market will have a lower take-up rate over the next year but most of the expected new supply will not come to market until late next year anyway.

There are a lot of institutional investors on the sidelines waiting to enter the Singapore market, according to Mr Fossick.

‘They are saying, come 2009 and 2010, there will be opportunities to buy properties in Singapore,’ he said. ‘Obviously, it’s going to be at some discount from prices we saw in 2007.’

Straits Times - 18 Dec 2008
Properties are definitely looking very attractive to purchase given the current economic turmoil. The property market tends to lag behind the stock market. If the current consolidation in the stock market is seen as a sign that the market has bottomed, it is likely that there is still some time to go before the property market will reach its bottom.
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