Hot off the Press: MAS Introduces Debt Servicing Framework for Property Loans

MAS has just announced the introduction of a debt servicing ratio framework, with effect from tomorrow, 29 June 2013.

Whilst the cap of 60% on debt servicing ratios (monthly debt obligations versus monthly income) is not something drastically different from banks’ current practices, my focus would be the impact of the following restrictions:-

  • borrowers named on a property loan must now also be mortgagors (ie. co-owners) of the residential property for which the loan is taken;
  • “guarantors” who are standing guarantee for borrowers otherwise assessed by the bank at the point of application for the housing loan not to meet the TDSR threshold for a property loan are to be brought in as co-borrowers (and therefore, must also become co-owners); and
  • in the case of joint borrowers, that banks use the income-weighted average age of borrowers (based on borrowers’ gross monthly income) when applying the rules on loan tenure (i.e. lower LTV-ceilings for loan tenures exceeding 30 years or extending past a borrower’s 65th birthday ). Continue reading “Hot off the Press: MAS Introduces Debt Servicing Framework for Property Loans”

Singapore Luxury Property: A Dormant Market Worth Exploring

With personal income tax capped at a modest 20% and no capital-gains tax, it’s unsurprising that Singapore has become a magnet for wealth around the region. In a recent survey of 1,000 mobile millionaires, Singapore was deemed the most desirable place to call home in Asia – billionaires Richard Chandler and Eduardo Saverin are amongst the notable individuals who have chosen Singapore as their home-away-from-home.

According to Boston Consulting Group’s 2012 Global Wealth Report, Singapore has the world’s highest density of millionaire households at 17.1% or 188,000 households. At the same time, its popularity as an offshore banking hub is also growing in leaps and bounds, with wealth under management set to overtake Switzerland by 2020. Switzerland currently manages some $2.8trillion in assets, whereas Singapore has seen assets under management grow from just $50billion in 2000, to $550billion by end-2011.

It is somewhat counter-intuitive then that Singapore’s luxury property market has performed dismally in recent years, particularly when the property market as a whole has had a spectacular run. One could blame it all on the whopping 15% additional buyer’s stamp duty payable by foreigners, but ABSD was initially introduced only in December 2011 and raised only recently in January 2013, whereas the luxury market has been slow since the financial crisis of 2008, never recovering its shine unlike the mass-market sector which experienced a rapid rebound beyond previous highs. Sales of non-landed homes above S$5M screeched to a halt between October 2008 to March 2009, and barely hit 400 transactions in the whole of 2012. In 2007, there were more than triple that number of transactions, at a time when there was a lot less money and a lot more exciting alternative investment options competing for a share of the pie.

The Marq by SC Global
The Marq by SC Global
The Ritz-Carlton Residences
The Ritz-Carlton Residences

Continue reading “Singapore Luxury Property: A Dormant Market Worth Exploring”

Stratum – First Impressions

522147_525729584144783_1303542157_n

Let me start by stating upfront that my agency SLP is one of the joint marketing agents for this project, thus it would be improper for me to voice overly critical views on Stratum. Happily for me, after studying the marketing information provided to agents and conducted my own independent research, I have to say I’m suitably impressed and feel I’m able air my opinions here without fear of offending the developers. As I believe there’s sufficient marketing material available to readers, I shall be sharing my own personal viewpoints here, so excuse the semi-casual tone of this piece.

When assessing a real estate target, my usual practice is to start with rental yields as leading indicators for future price movement. I was heartened to see that based on 2012 Q4 rental data, projects around the area like Livia and Ris Grandeur both enjoyed a healthy 3.9%p.a. gross yield.

Bearing in mind that there are several residential projects underway, one would be concerned about new supplies putting downward pressure on the rental yields. However, my sense is that this is a neighbourhood with relatively high owner-occupancy rates, thus the supply of units available for rent should form a low percentage of the total number of units coming online over the next few years.

The numbers appear to support my hypothesis. Thanks to the good folks at squarefoot.com.sg, I was able to determine that there were a total of 43 rental contracts concluded at Ris Grandeur in the year 2012. Assuming that most units are leased for 2-year periods, and that the average number of rentals concluded each year is fairly stable, I estimate that roughly 86 or so units at the 453-unit Ris Grandeur are likely to be investor units, a low 20% of the total number of homes there. And of course, with the Additional Buyers Stamp Duty introduced since 7 December 2011 and further increased on 11 January 2013, the percentage of investor owners of upcoming projects in the vicinity is likely to remain low. I don’t expect rentals to be too badly affected by the supplies of new units coming online over the next few years, as the bulk are being bought by end-users. Continue reading “Stratum – First Impressions”

Beyond psf- what’s your property’s bright-&-airy quotient?

In a recent Bloomberg article on Asian Millionaires taking charge of their own wealth, Akbar Shah, Head of Southeast Asia and Australia for Citigroup’s private-banking unit, describes real estate markets as hands-on markets that require a feel. I respectfully agree with her opinion. As I’ve mentioned on several occasions, both verbally and in writing, property analysis is more than just dollar-per-square-foot.

I’m struck by the number of times I’ve heard comments from clients like, “It’s pretty old, kinda rundown even… but somehow I just have a good feel about this place!” or “It’s a pleasant-enough place, but somehow it just doesn’t feel quite right?”

Obviously, when it comes to choosing a place to stay, there’s a wide spectrum of lifestyle needs, tastes and preferences. But one trait that almost all home-seekers unanimously favour in a home is the “bright and airy” factor. I believe this is something that contributes greatly to whether a home conjures up a feeling of spaciousness or not, perhaps even more so than whether a home is 1,200 square foot or 1,400 square foot. In a sense, this also echoes some of the principles of Fengshui – “qi” flows easily in a place that enjoys a good breeze and ample natural light, and in theory makes for a more auspicious home.

Continue reading “Beyond psf- what’s your property’s bright-&-airy quotient?”

New launch versus Resale

I think as with all material things, “brand new” is highly desirable when it comes to property acquisitions. Personally, I feel that it’s an overrated quality as far as Singapore property is concerned.

During my work as a conveyancing lawyer, I saw many clients who expressed disappointment or even shock when they finally picked up their keys upon the T.O.P. of their brand new properties and were finally struck with the reality of what they plonked down good money for. Perhaps with all the new regulations on showflats, the disparity between what buyers perceive themselves to be buying and what they actually buy will be less pronounced going forward. Continue reading “New launch versus Resale”