Monday, July 20, 2009

Home Sales Still Going Strong

Source : The Sunday Times, July 19, 2009

Far from fizzling out, demand for entry-level homes has spilled over to high-end projects

When private home sales unexpectedly jumped in February, in the thick of Singapore's worst-ever recession, pundits called it a false dawn and warned that the rally would not last.

The Orchard Residences saw units sold above the benchmark price of $3,000 psf last month.-- PHOTO: ORCHARD TURN DEVELOPMENTS.

But now, the market has sustained its rebound for five straight months and is expected to keep growing.

Figures released last Wednesday showed that last month's new home sales hit a record high of 1,825, while recent news reports indicate that this month's sales figures will still be strong.

All this has prompted previously sceptical analysts to turn more decidedly positive on the sector.

At least three research houses - UOB Kay Hian, DMG & Partners and DBS Vickers - are now overweight on Singapore property, which means they see property stocks as better valued compared with stocks in other sectors.

Why the change in sentiment? Recent data offers a whole host of reasons, according to the analysts.

One is that the worst of the economic crisis is over, and Singapore in particular looks to have turned the corner. Last Tuesday, the Government said the economy jumped 20.4 per cent between March and June to rise out of recession, pulling up market confidence and the full-year growth forecast along with it.

In the same quarter, developers sold 4,714 brand-new units - already more than the 4,370 they sold for the whole of last year.

The improvement in home sales is also spreading to more segments of the market, said UOB Kay Hian's property analyst Vikrant Pandey.

While the rally in private home sales started in entry-level homes - a result of pent-up demand from HDB upgraders and genuine owner-occupiers shut out of the last property boom - the positive sentiment has widened to include pricier units.

Sales of high-end and luxury homes have gained traction recently, with 'a steady increase noted in the number of transactions above $1,500 per sq ft since the beginning of this year', said Mr Pandey.

Last month, high-end sales were boosted by the 146 units sold in One Devonshire in Somerset, at a median price of $1,771 psf. Three units were also sold above the benchmark price of $3,000 psf: at The Orchard Residences, Nassim Park Residences and The Ritz-Carlton Residences.

Most importantly, the rebound is pushing property prices up in some projects - and buyers are still biting.

Despite prices increasing by 5.2 per cent on average last month, buyers seemed undeterred, said DMG analyst Brandon Lee.

'We attribute it to the buoyant HDB upgrader demand, pent-up demand, low interest rates and improved macro-economic landscape.'

More pent-up demand may still be on the way, from buyers who sold their previous units en bloc and have yet to buy another home, said DBS Vickers analysts Adrian Chua and Lock Mun Yee in a report published last week.

They also take heart from the fact that long-held fears of an impending surge of new units have failed to deflate the market.

'We believe we should not see a short-lived spike unless prices rise beyond economic fundamentals,' they added.

But not all analysts are so upbeat.

OCBC's Mr Foo Sze Ming has maintained a neutral rating on the property sector because he thinks that there will be no additional impetus for home sales to keep rising.

In fact, he said the number of unsold suburban homes rose last month for the first time in four months - evidence that the pent-up demand from HDB upgraders has been gradually met.

What is now helping to drive demand for new homes is sideline liquidity from investors who see a chance to get in on the action.

But he said it remains uncertain as to how long this can last. Unless wages start rising again or foreign funds start coming in to buy Singapore property - neither of which Mr Foo thinks is likely to happen soon - the recovery may well peter out.

Of the stocks that analysts are now bullish about, City Developments seems one of the most popular due to its relatively large exposure to the Singapore residential market.

UOB Kay Hian and DBS also like Ho Bee, which has both mid-end and high-end projects, and Allgreen, which has at least two mid-tier projects launch-ready.

50-60 Units Sold At Volari, 120 At Waterfront Key

Source : The Business Times, July 20, 2009

PROPERTY sales over the past few days continued to post encouraging numbers.

City Developments is understood to have sold between 50 and 60 units of its 85-unit Volari@Balmoral condo at Balmoral Road. The 12-storey freehold project, priced at about $2,000 psf on average, will be built on the current Garden Hotel site. Residents will enjoy views of the lush greenery of the Goodwood Hill area. It was released for sale late last week.

Returning confidence: Far East Organization and Frasers Centrepoint have sold 120 units of Waterfront Key at an average price of $735 psf. Nearly all the buyers opted for normal progressive payments

Over at Bedok Reservoir, Far East Organization and Frasers Centrepoint have sold 120 units of Waterfront Key at an average price of $735 psf.

This pricing is about 5-8 per cent higher than the $680-700 psf average price at which the two developers are selling units at the adjacent Waterfront Waves, which was 78 per cent sold as of last Thursday. Both projects are 99-year leasehold.

As for their latest condo, the 437-unit Waterfront Key, 176 units have been released since Friday. Far East said that in terms of absolute quantum, prices range from $593,000 for a two-bedroom unit of 840 sq ft to $1.42 million for a 1,518 sq apartment with four bedrooms. The sole penthouse in the initial batch of 176 units is a 2,992 sq ft unit priced at $3.14 million.

Buyers of nearly all the 120 units sold did not opt for an interest absorption scheme (IAS), which comes at a 4 per cent price premium. The units released so far comprise a good mix of reservoir-facing, park-fronting and pool-view apartments. The 15-storey condo has a total of eight blocks.

Volari's prices range from $1,800 psf to $2,300 psf. BT understands that an IAS is included in the price. However, the majority of buyers are understood to have opted for normal progressive payments, which means that they save 2 per cent on the pricing.

Developers have sold over 7,300 private homes in Singapore in the first six months of this year, surpassing the measly 4,264 units sold for the whole of last year. This has started to give developers some pricing power.

A seasoned property developer said that typically, price stability sets in when developers sell about 5,500 to 6,000 units over a 12-month period.

Increasingly, property analysts are predicting an increase in private home prices for the whole of this year and see the trend gaining momentum in 2010. Analysts' estimates of full-year sales for this year range from around 9,000 to 14,000 units.

The strong home buying in recent months runs counter to the backdrop of wage cuts and job losses amid the recession.

Analysts credit the revival in home buying to developers' strategy of chopping prices earlier this year, pent-up demand, the stock-market rally, a low interest rate environment, lack of trust among investors in financial instruments after Lehman's collapse and the appeal of property as an anti-inflationary hedge.

Cap In Hike Of Resale Prices Unrealistic

Source : The Straits Times, July 20, 2009

A CAP on increases in the resale prices of HDB flats would be 'unrealistic', Parliament heard on Monday.

Senior Minister of State (National Development) Grace Fu argued that prices of properties - especially HDB flats which are owned by 85 per cent of Singaporeans - should be a reflection of Singaporeans' wealth, and hence it was 'not such a bad idea for prices to move steadily over time'.

Referring to a letter published in the Straits Times' Forum page last Saturday, she noted there are Singaporeans who bought their flats at the height of the property boom in 1996 and are waiting for prices to return to that level so that they will no longer be in 'negative equity' - with their flats worth less than the loans they took out.

Ms Fu was replying to a question from Madam Ho Geok Choo (West Coast GRC), who asked if a cap should be imposed on rising HDB resale prices.

Mdm Ho highlighted public concerns about whether or not HDB resale prices were being artificially propped up by inflated valuations.

Responding, Ms Fu pointed out that HDB valuations were not done by the government, but by independent valuers based on recent transacted prices.

She said the HDB resale price index has fluctuated within a narrow range of between plus 1 percent and minus one percent in the last few quarters, suggesting that prices have stabilised.

In fact, the cash over valuation or COV amounts have fallen - from a high of $22,000 in the fourth quarter of 2007 to below $5,000 in the second quarter of this year, said Ms Fu.

The COV refers to the amount that a seller wants over and above the valuation of his flat.

A lower COV means that the buyer has to fork out less in cash, as banks lend only up to a certain percentage of the valuation amount.

Read the full report in Tuesday's edition of The Straits Times.

Tips On Refinancing Your Home Loan

Source : The Sunday Times, July 19 2009

Your existing lender may give you a lower rate, but it may not be the best deal.

With banks aggressively marketing their promotional packages, some home owners are looking into their current home loan interest rates and contemplating refinancing.

Refinancing refers to a situation where the property owners move from one mortgage loan package to another with the intention of (1) saving money by reducing interest rates; (2) restructuring the loan by including cash term loan or overdraft facilities; (3) moving to a different loan structure, such as from the conventional interest rate package to one that is linked to the interest rate of a current account.

However, do bear in mind that the low rates that are advertised may come with certain terms and conditions which may not suit your financial planning requirements. Here are some things to consider:

Flexibility: If you are planning to sell your property in the short term - say in one year or so - you may not

want to get into a new package that locks you in for a period longer than you intend to keep the loan. If you do go ahead, be prepared to pay a lock-in penalty which is usually between 1per cent and 2 per cent of the loan amount as well as 'claw back' amounts.

The lock-in period is usually a percentage of the original or reducing loan amount. And claw back applies to the amount that must be returned to the lending bank should you terminate the loan. This usually includes legal subsidy, valuation, fire insurance or cash rebates.

Certainty: If you are currently in a fixed rate package where there is certainty and predictability, are you comfortable about moving to a variable package with volatility and uncertainty? Variable loan packages linked to the Singapore Interbank Offered Rate or the Swap Offer Rate are key products offered by most banks.

Before you sign into a seemingly attractive loan rate from a competing bank, check if your existing lender can offer you the same rates or terms that first drew your attention. Most lenders - once they know their borrowers wish to refinance - will be inclined to beat their competitors, particularly if the client is one with good financial standing and payment record.

For clients without fantastic payment records, it may be difficult to refinance as the new bank may not want to take them in. In such situations, there is more reason for the home owner to try to negotiate for better rates from his existing lender.

Advantages of staying with existing lender

To keep loans that they might otherwise lose, many lenders have loyalty programmes designed to recapture borrowers who are determined to refinance.

If you are currently in a lock-in period, it may be more advantageous to stay with your current bank and re-negotiate rates as moving to another bank may be costly. For instance, you have to incur a settlement cost with your existing lender before you move to a different bank and this may include a lock-in penalty and claw back amounts. Sometimes, the new lender may entice you by offering to pay the penalty subsidy, that is, absorbing all your present settlement cost. But this often comes with conditions, such as longer lock-in periods, some up to seven years.

Moreover, if you are not looking to take any cash out of your home loan but only seeking to reduce the interest rate, the lender may elect simply to reduce the interest rate on your current loan rather than refinance. This avoids all settlement costs except for some charges required for changing the contract.

Disadvantages of re-pricing with your current lender

Most banks do expect their existing client to re-negotiate loan rates. As such, they have in place a standard 'rate change package'. However, though the rate offered by such packages is usually lower than your existing rate, it is higher than current market rates offered to new customers.

For example, if the market loan rate is 2 per cent, the lender might offer you 3 per cent because your mortgage rate is currently 4 per cent. But a similar borrower moving to another bank may be offered 2 per cent.

In addition, you may not get the best service from your existing lender, since there is little incentive for the lender to close a deal at a lower mortgage rate than previously. This may not be deliberate but new loans are generally being signed faster than re-pricing loans. However, of late, most banks have set up a special re-pricing team and hence service levels for existing customers have improved.

Refinancing with the same bank is not cost-free either, as most would charge at least $500 to $800 to cover costs like the mortgage stamp fee.

On the flipside, most banks offer a legal subsidy to new customers who are refinancing. So as long as the refinancing results in net savings, the client will consider doing so.

Finally, do note that whether it is re-pricing with the current bank or refinancing with another bank, once you have signed the Letter of Offer, there is no turning back and the cancellation penalty kicks in if you change your mind.

The writer is the managing director of mortgage consultancy firm Global Creatif Financial.

Grangeford Owner Gets Court Order To Recover Units

Source : The Straits Times, July 18, 2009

COVE Development, the property owner of Grangeford condominium in Leonie Hill, has obtained a court order to recover the 171 apartment units which were previously leased to Ideal Accommodation.

Ideal's former tenants who are still staying there have until noon next Wednesday to move out or Cove will apply for a writ of possession.

This is the latest in the long-running saga between Cove and Ideal, which have been tussling over tenants since Cove terminated its master tenancy agreement with Ideal last month.

This was after the Urban Redevelopment Authority (URA) had found that Ideal had illegally partitioned 140 apartments into 600 units for subletting and ordered the units to be reverted to their original state by June 3.

But Ideal told the tenants only a few days before the deadline, creating an uproar among those living there.

In a press statement posted on the Singapore Exchange website yesterday, Cove said it had been 'doing its utmost' to meet URA's deadline of July 27 to complete demolition works.

However, at the time of hearing of its court application on July 13, it had managed to recover only about 14 affected apartment units to carry out the works.

It had not been able to recover units still occupied by Ideal's former tenants who have 'shown resistance in vacating Grangeford'.

It declined to say how many more apartment units it has been able to recover since the hearing.

US June Housing Starts Show Biggest Rise In 5 Years

Source : The Business Times, July 18, 2009

(Washington)HOUSING starts in the US unexpectedly rose last month as construction of single-family dwellings jumped by the most since 2004, signalling that the market is stabilising.

The 3.6 per cent increase brought starts to an annual rate of 582,000, the highest level since November, and followed a 562,000 pace in May that was higher than previously estimated, the Commerce Department said yesterday.

Building permits, a sign of future construction, rose the most in a year. Building permits climbed 8.7 per cent to a 563,000 annual rate, the highest level of the year.

Construction of single-family homes jumped 14 per cent, the biggest gain since December 2004, to a 470,000 rate. The fourth consecutive increase brought single-family starts to the highest level since last October. Work on multi-family homes, such as townhouses and apartment buildings, dropped 26 per cent after surging 66 per cent in May.

The increase in starts of single-family homes adds to signs that the housing slump may be nearing a bottom. Combined sales of existing and new homes climbed to a 5.1 million annual rate in May, the highest level so far this year. -- Bloomberg

Property Transactions For Districts 17 To 28 With Contract Dates Between June 24th - 30th, 2009

Economic Outlook Still Uncertain

Source : The Straits Times, July 19, 2009

THE Singapore economy grew faster than expected in the second quarter of this year, but Prime Minister Lee Hsien Loong warned last night that the outlook remained uncertain.

Speaking at a constituency event, he called on Singaporeans to work together as a team.

The Government recently revised the GDP growth forecast for this year, from a contraction of between 6 per cent and 9 per cent to a smaller shrinkage of between 4 per cent and 6 per cent.

'It's still quite a severe year and it's something that's not over yet because for the second half of the year, we don't know how the economy will grow,' Mr Lee said.

'And for the next couple of years, 2010, 2011, we don't know how the world economy will be, and how that will affect us and what we can do about it,' he said.

He said Singapore is fortunate to have a population that understood and supported what the Government had to do.

Mr Lee also launched a one-stop helpline for private estate residents of Ang Mo Kio GRC and Yio Chu Kang. The two-year pilot project allows these residents to dial a toll-free number - 1800 CALL 123, or 1800-2255-123 - whenever they need help with maintenance matters, ranging from tree pruning and drain chokage to mosquito breeding. The line is open from 8.30am to 5.30pm on weekdays and 8.30am to 12.30pm on Saturdays.

During this year's Budget debate, Ang Mo Kio GRC MP Lee Bee Wah suggested the helpline, which will be funded by the Ministry of Finance. Ms Lee said unlike HDB estate residents who could approach their town councils for help, private estate residents did not have a one-stop centre to turn to.

Mr Wilson Zhuang, 58, chairman of Springleaf Neighbourhood Committee and a Springside Estate resident, called Traffic Police last year about neighbours who used rubbish bins to reserve parking space outside their terrace houses.

The Traffic Police asked him to called the Land Transport Authority, which in turn asked him to call the National Environment Agency since the matter involved rubbish bins.The Traffic Police took action when Ms Lee stepped in last November.