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Govt: Beware oversupply in Iskandar

Posted on 16 May 2015 | Comments Off

Real estate investments in other countries could suffer losses and it would be hard to find tenants if there is a flood of properties, according to Minister for Culture, Community and Youth Lawrence Wong, who was speaking on behalf of Deputy Prime Minister and MAS Chairman Tharman Shanmugaratnam during a parliamentary session on Monday.

He was responding to reports about the aggressive construction activity in Johor and Iskandar, and also fielded questions from MP Lee Bee Wah on how many Singaporeans have purchased properties in Iskandar and how are local banks protected if many of these individuals default on their mortgages.

“There is indeed a real concern about future oversupply in the property market there and hence the potential decline in value of homes.

“Based on data from Malaysia’s National Property Information Centre (NAPIC), there are around 336,000 new private residential units in the pipeline — more than the total number of private homes in Singapore,” he said.

This number excludes the planned properties for the 1,400ha reclaimed land near Tuas Second Link that are expected to enter the market by 2020, Wong noted.

Given the situation, buyers have become more cautious and the number of Malaysian properties purchased through local property agencies has plummeted to 838 in 2014 from 2,609 in the previous year.

However, not all Singaporeans are aware of this, so the central bank and the Council for Estate Agencies (CEA) will continue to warn them about the risks involved in foreign property purchases.

Mr Wong also said the exposure of Singapore banks to overseas real estate is very small as they are strict on granting mortgages for such properties. In fact, such loans account for only two percent of the mortgage portfolios of major financial institutions in Singapore.

“In addition, the Total Debt Servicing Ratio (TDSR) framework introduced by MAS in June 2013 requires lenders to assess the debt servicing ability of their customers for all new property loans, regardless of whether the property is in Singapore or overseas,” he added.

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Posted in Overseas Property

Tagged foreign property, Iskandar, Iskandar Malaysia, Johor, Malaysia, new private residential property, Real estate, Real estate investments

Recovering investment money can be arduous

Posted on 8 May 2015 | Comments Off

Singaporeans who have invested in overseas properties but ran into problems are finding it tough to get their money back, as filing legal complaints against foreign developers is hard due to the unfamiliar rules abroad, revealed media reports.

Moreover, class action suits tend to drag on if all the claimants do not agree on decisions, said an attorney who is working with several clients to recover their monies from foreign developers, including EcoHouse.

Reportedly, the property firm promised a return of 20 percent for a 12-month contract with a minimum investment amount of £23,000 (S$46,467) per Brazilian housing unit. However, many investors have yet to receive their capital or the promised returns.

In another case, his clients invested around US$20,000 (S$40,398) in a US property fund, but the returns have yet to materialise.

Despite the arduous process of filing legal complaints against foreign entities, Singaporeans can turn to the Council for Estate Agencies (CEA) for cases involving local agents who have marketed foreign properties.

According to CEA, estate agents and salespeople must adhere to the Estate Agents Act when marketing overseas properties in Singapore. Those who flout the rules could receive a warning letter, pay a fine, or have their licence suspended depending on the severity of the crime.

On average, the agency receives 800 complaints each year. Specifically, there were nine complaints involving foreign property purchases from 2013 until now. These include delayed construction, winding-up of foreign developers and loss of entire deposits after cancelling the transaction. However, CEA did not reveal the outcome of the complaints.

Based on data from the Monetary Authority of Singapore (MAS), the estimated losses stemming from such cases are not small, considering that foreign property transactions surged from S$1.9 billion in 2012 to S$3 billion the following year, before easing to S$1.1 billion in the first half of 2014.

Furthermore, about 600 to 1,000 overseas property units are transacted here each year, compared to around 6,000 units sold in the local housing market, noted Chestertons managing director Donald Han.