Over the last 4 weeks since we restarted The Straits Times Property News Heat Map, news flow has actually been pretty slow. With 53 articles talking about the property market in 4 weeks, that’s an average of 13.25 articles per week or 1.89 articles per day. In Season 1 (9 Sep 12 – 19 Jan 13), there were 273 articles in 19 weeks, or 14.37 articles per week, or 2.05 articles per day on average.
The proportion of articles that were positive, neutral or negative is also instructive. We had 7 negative (13%), 33 neutral (62%) and 13 positive (25%) articles in the last 4 weeks. In Season 1, we had 10% negative, 49% neutral and 40% positive.
With interest rates staying at all-time lows, mortgage loans have been so affordable that the government has almost been forced to throw measure after measure at the property market to cool demand. However, conventional wisdom tells us that this abnormally protracted period of low interest rates cannot last, and that interest rates should revert to its long-term mean of about 2 – 2.5% pa, or implied mortgage rates of around 3.5% pa vs current mortgage rates of around 1.1% pa. It doesn’t really sound like much until you actually calculate your monthly payments in dollar terms. For every $1 million of loan of 30-year tenure, the monthly payment is going to increase from $3,263 to $4,490, a whopping 38% increase!
Now that the government has clamped down on buying and selling of property, perhaps it is time to look at other ways you can invest in property. One of these ways is to buy shares of companies that deal with property, whether as developer, contractor or owner-manager. Some such counters are Capitaland (developer), Ho Bee (developer), Wee Hur (developer, contractor), Suntec REIT (owner-manager).
Last week, Finance Minister Tharman Shanmugaratnam gave his Budget Speech for 2013. Amongst the main themes of the speech, the most glaring to me was the re-distribution of costs from the lower-income/lower-wealth group to the higher-income/higher-wealth group. This is a natural progression in a maturing economy and should be expected. Of the items listed as part of this theme, those that pertain to the property market are:
Now that the new cooling measures and the White Paper on population has had time to sink in, it’s time to figure out what the effects are, and how they will impact the property buying/selling decision.
We originally planned to retire this section with the start of 2013, but have received a couple of requests for it since. In the interests of dedicating our time and efforts to topics/segments that our readers wish to read, we’re holding a poll. If we have 50 or more interested readers, we’ll start up this section again! Please vote! You may also wish to let us know which topics/areas you would like us to cover in the near future.
Below is the press release from URA regarding the new shock and awe cooling measure, starting 12 Jan 2013.
11 January 2013
Additional Measure to Ensure a Stable and Sustainable Property Market
The Government announced today a comprehensive package of measures to cool the residential property market. It also introduced a Seller’s Stamp Duty on industrial properties for the first time, to discourage speculative activity in the industrial market.
Cooling Measures for the Residential Property Market
The Government has implemented several rounds of measures to cool demand and expand supply, so as to moderate the increase in housing prices. While these measures have dampened speculative buying, the demand for residential property remains firm and prices have continued to rise.
Here’s an update on what has happened since my post on the subject:
1. On 19 Dec, the offer documents were despatched to shareholders
2. On 26 Dec, SC Global’s IFA, PrimePartners Corporate Finance, released a statement to offer their opinion that the offer was fair and reasonable, being 15 – 20% discount to their calculated RNAV
3. On 30 Dec, Simon Cheong released a statement that he has no intention of raising the offer. As such, the Takeover Code forbids him from subsequently changing the offer.
4. In response to an analyst’s speculation that there may be a chance for the privatisation to go through with joint privatisation of Wheelock, the Board of SC Global released a statement affirming that there are no talks with Wheelock and that the Code forbids any such transaction.
Talk about throwing a spanner in the works! Well, now we know 2 things. The first is that $1.80 is the only game in town for now with no chance of increase. The second is that the privatisation will fail, assuming that Wheelock stick to their guns.
Executive condomiums (“ECs”), in case you weren’t familiar with the term, are 99-year leasehold properties that are developed and sold by private developers within certain restrictions imposed by HDB. ECs have condo facilities such as pools, gym, etc.
To be eligible to purchase from the developer, buyers have to be Singaporean and the joint purchaser has to be Singaporean or PR, the buyers have to form a proper family nucleus, purchasers cannot own or dispose properties 30 months prior to application, buyers cannot earn more than $12,000 per month etc. Click here for the full requirements at the HDB website. Eligible direct buyers are able to obtain housing grants from HDB.
Additionally, purchasers of units have to be the principal occupiers of the property for the first 5 years starting from the TOP of the project, meaning that they cannot sell the place or rent out the whole unit. From the 6th year from TOP, Singaporeans and PRs can buy resale without restrictions. From the 11th year onwards, foreigners can buy without restrictions. Buyers of resale ECs are not eligible for HDB subsidies. From the 6th year onwards, the whole unit can be rented out.
In other words, ECs are condos that are meant for own-stay buyers who intend to stay there for at least 5 years. After that, they can pretty much sell it as a private condo (subject to citizenship restrictions).