News Roundup (March 2017)

Our top Singapore property stories.

Fitch: Looser property curbs won’t stop price falls

Housing prices in Singapore are likely to continue falling even as the government may gradually ease the property cooling measures, Fitch Ratings said recently.

The ratings agency noted that Singapore’s efforts to curb property speculation in an environment of low global interest rates were effective.

Speculative purchases fell from 2009 as the government introduced stricter restrictions on mortgage lending while increasing stamp duties.

With this, house prices have fallen over the last three years, while housing loan growth has slowed since 2011.

However, the government’s “first modest move” to “reversing macro-prudential tightening” – which was introduced on 10 March – is unlikely to have a significant impact on the housing market.

“Macro-prudential settings are still tight, while high vacancy ratios, a slower pace of immigration, subdued economic conditions and a weakening labour market are all likely to continue weighing on prices,” noted Fitch.

In addition, local interest rates are expected to increase from their current low levels, while house prices are still expected to fall by another two to five percent in the next two years.

Nonetheless, Fitch said banks are well-positioned to withstand a sharper drop in property prices, partly as a result of macro-prudential tightening.

This is because “average loan-to-value ratios are low, loan-loss coverage is adequate, and capital and liquidity buffers are strong”.

“Households also have healthy balance sheets and well-diversified assets,” it added.

US Fed hike to affect Singapore housing loans

Analysts expect the three-month Singapore interbank offered rate (Sibor), to which most housing loans are pegged, to increase to between 1.45 percent and 1.85 percent by the end of the year, reported TODAYonline.

This comes as the US Federal Reserve earlier increased its rates by 25 basis points to a range of 0.75 percent to one percent. The Fed predicts two more hikes for this year.

The Sibor hovered at 0.942 percent on 16 March, from 0.940 percent during the previous week, while the three-month Swap offer rate (Sor), which is a benchmark for commercial loans, stood at 0.907 percent, up from 0.890 percent previously.

“The contributing factor to the rise in Sibor and Sor for this year is the rise in Libor (London interbank offered rate), which is due to the expectations of two more rate hikes this year,” said Francis Tan, an economist at UOB. Libor is a benchmark rate that some of the leading banks in the world charge one another for short-term loans.

With this, Tan believes the increase in Sibor may cause a strain to borrowers. “The cost side for consumers is going up, as they feel the impact of the rise in interest rates for their mortgages, especially now with the rise in (the) resident jobless rate and weak consumer sentiment on economic growth.”

After hovering at about 2.8 percent for four years, the annual average unemployment rate rose three percent in 2016, revealed the Ministry of Manpower’s 2016 labour market report.

“It is inevitable for local rates to move up,” said CIMB economist Song Seng Wun. “The three-month Sibor and Sor are likely to return to the rates we saw early last year.”

URA launches residential site in Tampines

The Urban Redevelopment Authority (URA) in March put a residential site at Tampines Avenue 10 (Parcel C) up for sale by public tender.

The 2.17ha site is located between two upcoming condominium projects – The Alps Residences and The Santorini. Launched for sale under the confirmed list of the first half 2017 Government Land Sales (GLS) Programme, it can yield up to 715 housing units.

The URA noted that the site is linked to other parts of the island via major roads and expressways, such as the Pan Island Expressway and Tampines Expressway.

The future residential development is ideal for families with school-going children, as it is near various schools including United World College of South East Asia (East Campus), Temasek Polytechnic and St. Hilda’s Primary and Secondary Schools.

Industry analysts, however, expect cautious bidding in the tender due to the large housing supply within the vicinity, reported TODAYonline.

“While there are many cash-rich developers wanting to deploy their cash, the location attributes of the site can be challenging. The United World College is much-desired for expats with school-going children, but there is already a large supply of condominiums in the vicinity that could satisfy the needs of these parents, and demand may be insufficient,” said Ku Swee Yong, CEO of International Property Advisor.

He expects the tender to attract five to seven bids, with the top bid ranging from $450 to $550 psf per plot ratio. This works out to approximately $295 million to $360 million.

The tender for the 99-year leasehold land parcel will close on 25 April, said the URA.

Location map of Tampines Avenue 10 site

Braddell View privatisation closes HUDC chapter

Braddell View, the last Housing Urban Development Company (HUDC) estate, was converted into a strata-titled estate under the Land Titles (Strata) Act in March, revealed the Housing and Development Board (HDB).

This comes after the estate obtained the required 75 percent majority support from flat owners to proceed with the privatisation.

With this, Braddell View’s individual owners will own their respective strata units and the common property as tenants-in-common.

The Land Titles (Strata) Act also provides that the existing Management Committee will assume the role of the council of the Management Corporation, while the committee members are deemed to have been elected as the council members.

Comprising 918 flats and two shops, Braddell View is the largest of the 18 HUDC estates. Its privatisation marks the end of the government’s privatisation programme for HUDC estates.

“The privatisation of HUDC estates was announced in 1995 as part of the government’s effort to meet the rising aspirations of Singaporeans to own private housing. It also gave flat owners greater control over the management and maintenance of their estate,” noted the HDB.

The privatisation of Braddell View brings the total number of privatised housing units to 7,731.

 

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