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Shoebox units may grow 70 percent over next three years

Posted on 28 Jun 2012 | Comments Off

From around 2,500 units, the number of completed shoebox homes could grow to 9,700 by 2015, according to Khaw Boon Wan, Minister for National Development.

He added that 80 percent of shoebox units are located in the central region.

In addition, OCBC Research noted that the number of shoebox units in the OCR (Outside Central Region) could grow more than 450 percent by 2015.

But with the limited supply of completed units, the rental market in the OCR remains untested. One major risk is that buyers of uncompleted units in the primary market are basing their decisions on current rental levels, which could be skewed upwards by a small completed supply.

“If rental levels fall due as supply spikes dramatically after 2015, then capital values are likely to face corresponding downward pressure. This is particularly so if interest rates start to increase as well, reversing the virtuous cycle of liquidity fuelled demand,” OCBC said.

It added that the number of households in Singapore that can afford a S$1 million condo have increased by 86 percent. This is due to the fact that the income hurdle in buying such property fell by 18 percent.

“From 2008, we saw interest rates decline from ~2.5 percent to their current levels around 0.4 percent,” it noted.

Using a S$1.0 million condo as a benchmark, OCBC noted that monthly mortgage payments dropped by about 18 percent in Q1 2012 from S$3,400 to S$2,600.

“Assuming mortgage payments constitute at most 30 percent of household (HH) income, the income hurdle for a S$1.0 million property fell 18 percent from S$10,600 to S$8,700 per month.”

Source : PropertyGuru – 2012 Jun 27

Singapore’s mortgage rates are lowest in Asia

Posted on 28 Jun 2012 | Comments Off

Home buyers in Singapore are taking advantage of mortgage rates that are at an all-time low despite record-high housing prices, said a Bloomberg report.

For instance, Shivram Anantharaman, a private banker at ICICI Bank Ltd, used to pay a monthly rent of S$2,650 until March. Now, he’s paying just S$2,610 per month for the mortgage of the three-bedroom condo he bought.

“The clincher in Singapore is that monthly installments toward repayment of your loan are lower than what you would pay in rent,” said Anantharaman, who took out a S$1.04 million loan for his S$1.3 million property.

“It’s one of the few countries in the world where that is possible,” because of low interest rates, stated Anantharaman.

Housing affordability has climbed to its highest level in a decade due to flexible payment options offered to buyers and historically low interest rates, according to Jefferies Group Inc.

Maybank Kim Eng said average mortgage rates are 70 basis points above the Singapore Interbank Offered Rate (Sibor).

Data compiled by Bloomberg shows that the three-month Sibor is less than 0.4 percent compared to its peak of 3.56 percent in 2006.

The interest rate of Anantharaman’s 40-year mortgage is 55 basis points over Sibor, which translates to a home loan rate of less than one percent.

Sanjay Sain, an analyst at Credit Suisse Group AG, said Singapore’s mortgage rates are the lowest in the region, followed by Hong Kong. Meanwhile, Barclays Plc. noted that the average mortgage rate in Hong Kong is around 2.15 percent while China stands at 7.43 percent.

Source : PropertyGuru – 2012 Jun 27