Tag Archives: TDSR

Sharp rise in private home purchases in Q2

Posted on 25 Jul 2014 | Comments Off on Sharp rise in private home purchases in Q2

Here’s a possible reason why the authorities are not inclined to remove any property cooling measures just yet: There was an across-the-board increase in caveats lodged for private home purchases in the second quarter compared to the previous quarter.

DTZ’s analysis of URA Realis caveats database shows a 37.1 per cent quarter-on-quarter increase in the total number of private homes transacted to 3,369 units in Q2.

A segmental breakdown showed that the number of units picked up in the resale market climbed nearly 41 per cent or 386 units to 1,328 units in Q2 from 942 units in Q1 – ending three consecutive quarters of decline.

New sales by developers too rose by 511 units or 36.8 per cent to 1,898 units. In the subsale market, 143 units changed hands in Q2, up 11.7 per cent from Q1.

Resales refer to transactions of completed properties. Subsales refer to secondary market deals involving uncompleted properties.

Across buyer segments, too, there were increases. Singaporeans, PRs and foreigners all bought more homes in Q2 than they did in Q1.

Purchases by Singaporeans rose nearly 45 per cent quarter-on-quarter to 2,491 units in Q2. The number of private homes picked up by Singapore permanent residents climbed 24 per cent to 574 units, while purchases by non-PR foreigners rose 2 per cent to 260 units.

Those with HDB addresses bought 1,629 units in Q2, up 41.3 per cent from Q1. The number of private homes acquired by those with private addresses climbed 33.4 per cent to 1,740 units.

Despite the recovery in Q2, the 5,826 total private homes sold in the first-half of this year is not even half the 13,651 units transacted in the first-half last year – reflecting the dent on transactions created by the Total Debt Servicing Ratio (TDSR) framework since its introduction in late-June 2013, notes Lee Lay Keng, regional head (SEA), research at DTZ.

Still the pick-up in the Q2 caveats would give the policy makers a reason to pause and reflect, amid calls by developers and other parties urging the authorities to start rolling back cooling measures such as the additional buyer’s stamp duty and the seller’s stamp duty, she added.

Most industry watchers accept that TDSR is here to stay for the long term. Under the framework, banks granting new property loans to individuals have to ensure a borrower’s total monthly debt obligations (including car loan and credit card repayments) do not exceed 60 per cent of gross monthly income.

“The reason caveats have recovered in Q2,” said Savills Singapore research head Alan Cheong, “is that demand is extremely price elastic or price sensitive. Even a slight price decline would lure many potential buyers back to the market”.

“In 2012 and 2013, the market was fixated with new property launches. In 2014, the genuine upgraders and even investors who are not overwrought by new-fangled small-format homes have started to look at the resale market where more habitable, larger apartments are to be found, and they have started to plunge into the market.

“And the sellers of such properties being individuals, unlike developers, have little bargaining power and acceded to the buyer’s price offers. Hence, prices in the resale market have gone down.”

DTZ’s Ms Lee said the strong new home sales in Q2 was amid an increase in launches by developers.

“Based on preliminary monthly numbers, developers launched 2,843 private homes in Q2, compared with 1,964 units launched in Q1. Big projects were released in Q2 in good locations and at attractive prices – such as Commonwealth Towers, Lakeville, Coco Palms and The Sorrento – resulting in relatively good sales,” said Ms Lee.

“Moreover, some previously launched projects saw renewed interest after new units were released at lower prices in Q2. For instance, the developers of The Panorama and Sky Habitat sold another 149 units and 153 units, respectively in Q2 after median prices were reduced by 10-15 per cent since these developments were first launched in Q1 2014 and Q2 2012, respectively.”

DTZ’s caveats analysis also showed that because Singaporeans’ share of private home purchases rose at a faster clip in Q2 compared with the more modest increases in buying by PRs and foreigners, the proportion of units bought by Singaporeans rose four percentage points quarter-on-quarter to 74 per cent.

Conversely, PRs saw a two percentage point retreat in their share to 17 per cent in Q2. Foreigners too posted a three percentage point fall in their share to 8 per cent.

Another finding is that 58 per cent of private homes picked up by Singaporeans in Q2 were new sales by developers. Among foreigners, the figure was 62 per cent. For PRs, however, it was a roughly equal split of the source of units between new sales and resales. Of the 574 units PRs acquired in the second quarter, 47 per cent comprised new sales, and 46 per cent resales, with the balance 7 per cent involving subsale transactions.

“It appears that a higher proportion of PRs are buying for owner occupation and hence want a completed property they can move into immediately,” suggests Ms Lee.

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Ease ABSD for Singaporeans, urges Wing Tai boss

Posted on 24 Jul 2014 | Comments Off on Ease ABSD for Singaporeans, urges Wing Tai boss

Wing Tai chairman Cheng Wai Keung has a solution for the property sector’s angst over the ABSD (additional buyer’s stamp duty): “Keep ABSD for foreign buyers but fine-tune it for Singaporeans who wish to buy more than one property.”

He argues that the ABSD should be retained for foreigners who buy residential property, as the danger posed by foreign hot money still lurks.

However, there is scope to fine-tune the ABSD for Singaporeans, given that the total debt servicing ratio (TDSR) framework is in place to limit their debt exposure.

Foreigners buying any residential property here pay 15 per cent ABSD; the same rate applies to buyers that are corporate entities.

Singaporeans are spared ABSD when they buy their first residential property. But they have to pay 7 per cent ABSD when they buy a second property, and 10 per cent for third and subsequent purchases.

While many players lament a drying-up of foreign buying – especially in the high-end residential sector due to the punitive ABSD rate, and hope that the authorities would reduce the rate, if not do away with the charge altogether – Mr Cheng shared a different perspective in an interview with BT.

“ABSD is still necessary to deal with foreign hot money. Recall the original intent of the ABSD: it is to deal with excessive liquidity flooding in from developed countries’ monetary policies. Looking at the global economy now, the conditions that necessitated the introduction of the ABSD by MAS (the Monetary Authority of Singapore) have not abated.

“Notwithstanding QE (quantitative easing) tapering moves in the US, interest rates are still expected to stay low, and countries like Japan and Europe are still expanding their liquidity policy. Hence, for now, it is prudent for government not to remove the ABSD, to effectively manage the influx of foreign hot money and to stabilise our economy.”

However, Singaporeans who wish to purchase additional residential properties here for investment should be given relief from the ABSD, he added. “Why should they be dealing with three policies – SSD, ABSD and TDSR? Especially with the TDSR in place to limit debt exposure and SSD to prevent short-term trading, I believe that it is redundant to continue imposing ABSD on Singaporeans who have the financial ability and wish to invest locally in real estate.”

SSD is the seller’s stamp duty, payable on residential properties sold within four years of purchase. Under the TDSR framework introduced in June last year, financial institutions (when granting new property loans to individuals) have to ensure a borrower’s total monthly debt obligations (including car loan repayments and credit card bills) do not exceed 60 per cent of gross monthly income.

Given that the market has already responded to the cooling measures – demand has shrunk and prices softened – it is timely for the government to consider opening up options for Singaporean investors so that they may invest their excess funds in the local property market, which provides greater protection for buyers and is considered relatively less risky than foreign property markets.

“This can be a win-win situation for both the industry and the domestic investor market,” Mr Cheng said, adding that Wing Tai would continue to price its properties at “what market can bear, without eroding market confidence”.

He argued that there was a need to consider market segmentation in adjusting prices. The reaction to a price cut is different in the mass and high-end markets. A price chop for the mass market, where buyers are more price-sensitive, is more likely to be met with an immediate increase in sales, whereas a price drop at the high end could magnify buyers’ wait-and-see attitude.

“That is why pricing has to be calibrated in order not to dampen market confidence and cause an unnecessary downward spiral.”

When asked if Singaporeans’ affinity for property reflects an Asian trait, Mr Cheng said: “I don’t see it as a specific Asian trait. I’ve also observed that in Anglo-Saxon economies generally, real estate investment has become an important factor of growth.

“Today, given a lacklustre stock market, people are putting their investments in fixed assets to hedge against inflation. For long-term returns, if you have the financial means to sustain that investment – that is, to ride out the cycles – real estate is a good investment. Which is why, at certain points in time, governments do encourage their people to invest in property.”

He says Singaporeans will learn that when they invest in property, they need to stay prudent and consider their ability to pay. “They would understand that all business has a cycle and that the government, from time to time, would intervene in the (property) market, for the overall good of the economy.

“They will need to have sustainable financial means to help them ride out the cycles and tide over the storms, so that they can continue holding the investment for the long run in order to generate a superior return from the investment.”

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