Singapore Property Weekly Market Wrap: Week 42 - Oct 14, 2008

Quoted from: "Singapore Property Weekly Market Wrap: Week 42 - Oct 14, 2008 "

Gomes Candice Armindo

URA and DTZ Data Capture Trend in Decreasing Private Property Prices
Real estate adviser DTZ has reported that prices of non-landed private residential properties have dropped as suggested by data collected in the 3Q 2008. Areas worst hit have been said to be prime districts that have been struck by a 4.2% quarter on quarter price drop. ( Yap 2008 )
URA data has captured similar trends but of differing magnitudes. URA has estimated that Core Central residential properties have slipped by 2%. The Rest of Central regions similarly reflected price reductions of 2.1%. However not all property segments have exprienced drops as prices of property situated in the Outside Central Region residential have increased by a marginal 0.1%. ( Yap 2008 )
Further reductions in the private residential market are expected to ensue as the US financial crisis reverberates throughout the Asian region. Its impacts have already been felt with regards to private residential launches. The 3Q of 2008 only saw the launch of small boutique projects and the sale of 320 units in August. ( Yap 2008 )
Tenants Face Five Year Ban Buying/Renting HDB Flats if Caught Illegal-Subletting
2008 hit a new record for the number of tenants caught illegal-subletting their rental flats. 147 rental flats were discovered to have been illegally sublet this year, which is a stark comparison to the meager 20 that were indentified in 2005 and 2006. Many of the flats have been let out to foreign workers or students from Malaysia, China and India. ( Cheam 2008 )
HDB has reiterated that tenants caught illegally renting out their flats will be liable to losing them. Tenants will also be slapped with a five year ban on renting or buying HDB property. ( Cheam 2008 )
HDB Launches 683 New Flats, Application Deadline Thursday 16th October
HDB had recently launched 683 flats for sale of which 288 are in Sengkang, 153 in Punggol, 77 in Jurong West and the rest spread across various other estates. The number of applications for the 683 flats was once again overwhelming; The HDB website registering a total number of 2,626 applications for the three room premium to executive type flats by 5pm, the day of the launch. Prices for the units have been said to range from $160,000 for a four room flat in Woodlands to $565,000 for five room flats in Bukit Merah. ( Straits Times 2008 )
Households with gross monthly incomes of up to $8,000 are eligible to apply for HDB flats. Applications are to be submitted by the HDB website, www. hdb.gov.sg by Thursday 16th of October. ( Straits Times 2008 )
HDB also plans to launch an additional 8,400 Built-To-Order flats later this year. ( Straits Times 2008 )
Experts Advice Home Owners to Opt for Fixed Rate Home Loans
Market volatilities have made home buyers think twice about the type of home loans they wish to take up. Sibor-linked loans entail paying interest rates in relation to the Interbank Offering Rate. This implies that monthly mortgage installments can be high or low, depending on Sibor rates moving upward or downward respectively. Fixed rate home loans on the other hand entail paying a fixed monthly mortgage installment. However, consumers opting for the convenience of fixed rate loans have to pay hefty premiums. ( Teo 2008 )
As of this year, Sibor has fluctuated significantly. In August, it stood at 1%, in September it took on a value of 2.23% and has now dropped to 1.5521%. Such fluctuations are serving as an impetus for many home owners to eschew variable rate loans. Experts too are suggesting that risk-adverse consumers refrain from opting for short-term variable rate loans as the market is highly unstable and unpredictable at this point in time. ( Teo 2008 )
There are of course individuals who contest such advice. Mr Leong Sze Hian, president of the Society of Financial Service Professionals has expressed his belief that interest rates tend to drop amid a recession. Expressing a converse sentiment is Alvin Liew, economist at Standard Chartered. He supports the argument that Sibor will rise amid the recession. Morgan Stanley Research on the other hand has indicated that Sibor rates will stay at 2% and reach almost 3% by next year end. ( Teo 2008 )
Consumers facing indecision on Sibor linked mortgages can also choose to look at CPF Ordinary Account (OA) rate pegged home loans. CPF OA rates have remained at 2.5% since July 1999.
References
Cheam, J 2008, Five times more rental flats recovered - 147 units seized from tenants who made profit from illegal sub-letting, Straits Times, The ( Singapore ), October 6
Straits Times 2008, HDB offers 683 new flats, Straits Times, The ( Singapore ), October 11
Teo, J 2008, Finding best home loan as rates see-saw - Home owners may want to lock in longer-term interest rate to avoid any volatility ahead, say experts , Sunday Times, The ( Singapore ) - October 12, 2008
Yap, E 2008, Prime non-landed home prices fall 4.2% in Q3, Business Times, The ( Singapore ), October 8