It’s important to insure home loans in case breadwinner dies early

The house we own is easily a family’s biggest of big-ticket items, but only three out of 10 home loan customers here buy mortgage insurance.

While we believe we have insurance for nearly all of our needs, from children’s education to hospitalisation, some of us do not realise that our home loans need to be insured too.

Mortgage insurance offers decreasing coverage over the duration of your policy to align itself with your outstanding mortgage loan. Cover can also be extended to cover permanent disability, critical illness and unemployment.

Without a suitable mortgage cover or the means to pay up the mortgage if the breadwinner dies prematurely, the bereaved family stands to lose the roof over their heads should the bank repossesses the house.

Mr Dennis Ng, founder of mortgage consultancy portal Housing LoanSG.com, pointed out that although mortgage insurance is compulsory for an HDB flat owner who uses his Central Provident Fund Board savings, it is not a bank requirement for private home owners.

The good news is that DBS Bank and HSBC have started bundling mortgage insurance into some of their home loan packages.

DBS incorporates Aviva’s MyProtector Mortgage in some of its schemes, thereby protecting its customers in the event of death, total and permanent disability and critical illness.

Although the insurance does not come free, it saves home owners the hassle of looking for their own mortgage insurance.

Experts believe mortgage insurance is an important part of an overall financial plan.

‘This is because our home is most likely our biggest purchase and financial commitment in our lifetime. It is important to ensure that, in the event of unforeseen circumstances, our family members will not be burdened with the cost of outstanding home repayments, or worse, face the possibility of having to sell their home,’ said insurance firm Aviva Singapore’s chief executive Simon Newman.

This is something the Lee family realised when breadwinner Andrew Lee (not his real name) died from cancer in 2007, leaving an outstanding housing loan of nearly $300,000.

Fortunately, Mr Lee had bought a Manulife mortgage decreasing term plan in 1998 which mirrored his housing loan of $475,000 over a 29-year term. It covered death and total and permanent disability, with the reducing home loan spread out over 29 years. The annual premium was $988.

At the point of Mr Lee’s death, the insurance proceeds from his mortgage policy were about $397,000. His family received an initial $150,000 payout from Manulife in 2007. The rest was paid last year when the grant of probate was completed.

The family can pay off the housing loan in a lump sum or continue the mortgage instalments. In this case, there is a surplus of insurance proceeds over the outstanding loan which the family can use for their needs.

If there had been no policy, the family could have lost their home if they were unable to meet the loan repayments.

The policy Mr Lee bought is widely available from most insurers and contains a feature of reducing insurance cover over a period of time.

OCBC Bank’s vice-president of wealth management, Ms Anne Tay, said such a feature tries to mirror your outstanding mortgage loan.

‘You may start with a $500,000 mortgage on your home but as you make your monthly mortgage payments, your outstanding loan will reduce over the loan period. Accordingly, your mortgage liability will reduce too,’ says Ms Tay.

And by providing insurance cover on a reducing term basis, the premium will be relatively cheaper compared to a typical level term-life insurance policy.

Despite the importance of mortgage insurance, DBS Bank’s Mr Rick Vargo, managing director of bancassurance, said that only 25 per cent to 30 per cent of the bank’s home loan customers have such cover. This is consistent with the overall estimate provided by Mr Ng.

Mortgage insurance is not to be confused with fire insurance which the banks do require home loan customers to take up, and this may be provided free by the banks in the first year.

Tips on mortgage insurance

Home owners should understand their needs first when shopping around for a suitable mortgage cover. Here are some considerations.

1 The amount of cover

Aviva suggests that consumers should consider if they already have existing insurance plans that can cover the outstanding mortgage loan liabilities before buying mortgage insurance.

Some people may decide to buy mortgage insurance to cover a portion of the loan amount as they may have other insurance or other means to meet repayments if needed, said Mr Ng.

‘But if you do not have any other funding source, it is best to cover 100 per cent of the loan amount instead,’ he added.

Another consideration is whether you want to be covered for just death or to include total and permanent disability, terminal illness and critical illness as well.

2 Buy on a joint life basis

If you own a property jointly with another person, it is prudent to get mortgage insurance on a joint life basis so that it pays out the sum assured if either owner dies. Getting a separate insurance cover for each owner would result in a much higher premium, said Mr Ng.

3 Buy early

Ms Tay observed that there is a tendency for most people to procrastinate and buy mortgage insurance only when they are older. But the older you are, the higher the premium you have to pay.

For example, a 20-year $500,000 mortgage reducing term assurance plan will cost a male property owner aged 50 an annual premium of $2,305. The same policy will cost a 40-year-old male just $814 in annual premiums. The difference of $1,491 is the cost of a 10-year procrastination, she added.

4 Interest rate assumption

The sum assured and the time period of a mortgage reducing term assurance plan are usually matched to the mortgage loan amount and tenure. As the coverage is on a reducing basis, how fast or slowly the loan reduces over time is based on the assumed loan interest rate, which is decided at the inception of cover.

Mr Patrick Lim, associate director at financial advisory firm PromiseLand Independent, noted that some insurers may limit interest rates to a range of say, 3 per cent to 7 per cent, as in the case of Prudential Assurance’s PRUmortgage.

On the other hand, insurer TM Asia Life offers a wider range from 0 per cent to 9.75 per cent in even increments of 0.25 per cent.

‘It is important for consumers not to be restricted in their choice of a suitable interest rate,’ said Mr Lim.

Mr Ng suggests that policyholders assume 4 per cent so that the sum assured will be reduced at a slower pace than a lower interest rate. If the interest rate is assumed too low, there is a risk that the insurance proceeds might not be enough to pay off the outstanding loan.

5 Guaranteed premiums

It is worth checking if the annual premiums are guaranteed upon renewal, said Mr Lim. He noted that in the case of AIA’s mortgage reducing term assurance plan, the product summary states that the premiums are not guaranteed.

But this is not the norm as the premiums for the basic mortgage plan are usually priced to be non-reviewable and guaranteed.

6 Check the supplementary benefits

One area of concern is the cap on benefits such as total and permanent disability.

Mr Lim pointed out that permanent disability is capped at $2 million at AXA Life but $3 million at AIA.

Another consideration is when the benefits expire. For most insurers, the total and permanent disability benefit expires on the policyholder’s 65th birthday.

Aviva’s MyProtector Mortgage extends the benefit expiration to just before the 70th birthday. At Overseas Assurance Corp (OAC), it is the 66th birthday, said Mr Lim.

Also, check the definition of what constitutes total and permanent disability and whether the payout comes in a lump sum or as instalments spread out over a few years. Lump sums are better.

Both Mr Lim and Prudential Assurance’s director of product management, Mr Daniel Lum, recommend that consumers go for a mortgage cover that offers to waive the premiums if the insured is diagnosed with critical illness.

Other home-related insurance covers

Besides mortgage insurance, home owners should consider fire insurance that covers the building structures, and home contents insurance. The latter also covers personal belongings that are taken outside the home like hi-fi systems, said the General Insurance Association of Singapore.

————————————————————————–
Don’t burden family members

‘Our home is most likely our biggest purchase and financial commitment in our lifetime. It is important to ensure that, in the event of unforeseen circumstances, our family members will not be burdened with the cost of outstanding home repayments, or worse, face the possibility of having to sell their home.’

MR SIMON NEWMAN, chief executive of insurance firm Aviva Singapore

Source: Sunday Times, 18 Jul 2010

Sale proceedings may have begun at up to 80 developments, with many more to follow

They were a feature of the last boom but fast fell out of favour when markets went south, yet there are signs that another collective sale rush is in the making.

There have been at least 16 collective sales this year, not counting many smaller ones that may have gone unreported.

This is in stark contrast to last year, when only one collective sale was sealed. There were 10 in 2008 but most were late spillover deals from the boom of 2006 and 2007.

The greatest spell of collective sales remains the first six months of 2007, when at least 55 projects were sold for an astounding $9.3 billion.

The slow start this year is not due to a lack of demand for collective sales, but a shortage in supply arising from the extra time needed to meet the tougher legal formalities and more detailed logistical arrangements when gathering owners’ consent.

We should certainly see more collective sales over the remaining months of the year as the organisational momentum picks up pace.

As many as 80 developments are believed to have formally embarked on steps to sell their properties en bloc, although the actual figure may well be more. But not all will secure the 80 per cent owners’ mandate or find a buyer.

Numbers aside, larger projects are also expected to be introduced this year and next.

The average deal size of the 16 successful cases this year is $50 million – a far cry from the average deal size of $170 million in the first half of 2007.

The 52-unit Goodrich Park near Kovan MRT station was sold in a collective sale to BBR Holdings for $86 million this month, but as the deal has not won unanimous approval from owners, it may need approval from the Strata Titles Board (STB).

Each of its owners is set to receive gross sale proceeds of between $1.55 million and $1.72 million – or about 70 to 80 per cent more than the market price.

In April, Culford Gardens in Siglap was also sold to Fragrance Properties for $39 million.

Despite the dominance of the Government Land Sales (GLS) programme this year, we believe that collective sales are still relevant in today’s market as they fill the void left by the programme.

GLS sites have leasehold tenure and are mostly located in suburban areas, and their large-sized plots mean they typically cater mainly to bigger developers.

In most cases, collective sales complement the GLS programme, especially when they produce large prime freehold sites, which are in short supply.

However, leasehold collective sales in mass-market locations might find it harder to make large profits as developers might prefer the relative ease and certainty that GLS sites offer.

Owners contemplating such sales should also understand that sale activity takes place in waves since the factors that give rise to price differentials do not stack up for very long.

Many owners get concerned over the rising cost of replacement homes but this paradox is always present as collective sales inherently occur only when the market is buoyant. Acting decisively might help offset the risks of being caught cold.

It is also important for owners to elect objective and honest leaders, appoint and listen to competent lawyers and property consultants, set realistic prices, act decisively and stay united to ensure a happy ending.

Some owners might also wonder if there is a possibility that we will see another Horizon Towers dispute.

Horizon Towers was the most high-profile property sold in early 2007, just before the steep run-up in land prices. This factor and other technical irregularities resulted in the Leonie Hill Road condo becoming embroiled in one legal suit after another before the deal finally collapsed.

Since then, the laws have been refined. They now load more work and costs upfront for the owners, providing relief for developers with clearer rules.

Recent changes include the STB being relieved of its role of making rulings in disputed cases. The STB will continue its mediatory role, but this will be limited to 60 days – again to expedite the resolution of disputes over contentious sales.

In other words, warring parties can head to the High Court earlier in the process to have their disputes resolved, reducing the time taken to resolve the more difficult cases.

Minority owners are now unlikely to find as many faults as most of the typical grouses in the past have been adequately addressed. As a result, we expect fewer cases to reach the High Court and the Court of Appeal.

As we also do not see the market moving this year and next as dramatically as it did in the boom years, the motivation for a minority owner to challenge a sale may not be as strong as in 2007.

The laws are more robust and structured now and should make collective sales less controversial and more predictable.

Karamjit Singh is managing director and Pamela Kow the senior manager of Credo Real Estate.
———————————————————
More legal formalities

The slow start this year is not due to a lack of demand for collective sales, but a shortage in supply arising from the extra time needed to meet the tougher legal formalities and more detailed logistical arrangements when gathering owners’ consent.

Source: Straits Times, 18 Jul 2010

Trends in other cities show demand for luxury apartments in S’pore may grow yet

Singapore has long been seen as a safe investment haven – and foreigners are responding by snapping up property across the island.

About 23,000 non-landed private homes have been bought by foreigners since 2007 – of which about 35 per cent are high-end homes in districts 1, 2, 4, 9, 10 and 11 – based on the Urban Redevelopment Authority’s (URA) record of caveats lodged.

Yet, the high-end apartments sector still has room for growth if trends in other cities are anything to go by.

Data from Savills shows that the average price of high-end apartments was $2,154 per sq ft (psf) in the second quarter, while that of super luxury private homes was $3,055 psf.

Super luxury homes – a subset of high-end homes – are defined as developments that achieved an average of $2,500 psf in the fourth quarter of 2006.

In Hong Kong, however, prices for high-end residences in the same quarter hit HK$14,520 (S$2,570) psf, 20 per cent higher than those here. As common spaces like corridors are taken into account in computing unit prices in Hong Kong, the actual price disparity could be even greater.

In fact, prices for high-end apartments in Hong Kong rose 47 per cent last year, raising concerns about an already overheated market. On the other hand, high-end values here went up by only 3.9 per cent last year.

Moreover, the most expensive private apartment in Hong Kong is a 6,830 sq ft unit at The Albany – which sold for HK$49,488 psf, or HK$338 million in total, this year. This is about 58 per cent more than Singapore’s priciest apartment, a 5,048 sq ft home at Orchard Residences, which sold for $28.3 million, or $5,600 psf, in 2007.

In addition, Sydney apartment prices are about 28 per cent up on Singapore’s while London’s values are an eye-watering 41 per cent higher.

China, however, is a mixed story. While prices in its two major cities are lower, they shot up 32 per cent in Shanghai last year and 15 per cent in Beijing – and are both at record levels, marginalising any potential short-term capital gains.

Furthermore, the high-end market in Singapore is the only sector where prices are still below previous peaks. Prices of high-end apartments are 11 per cent below record levels set in the fourth quarter of 2007 while super luxury prices are 17 per cent cheaper.

In contrast, mass market prices in May were already 15 per cent over previous peaks with mid-tier apartments a more modest 5 per cent above. As positive economic prospects for Singapore are likely to continue into the second half of this year, it is possible that prices of high-end apartments could reach previous peak levels by early next year.

Compared to the full year of 2009, the number of apartments sold above $2,500 psf has already more than trebled over the last six months, with some even falling in the $3,500 to $4,000 psf range.

With rising anxiety over bubble risks and fears of more tightening measures that could derail prices, many East Asian investors may shift their funds to Singapore.

The government imposed 11 cooling measures in China earlier this year, helping to send new home sales plummeting 60 to 70 per cent in Beijing, Shanghai and Shenzhen in May alone.

As a result, more foreign buyers, especially mainland Chinese, have flocked to Singapore, at times buying with full cash payments.

They have displaced Malaysians this year as the No. 2 buyers of super luxury homes priced $5 million and above.

The growing number of high net worth individuals and millionaire Singaporeans could also see an increasing demand for luxury homes.

However, prime redevelopment sites for sale are lacking. The average take-up rate of high-end homes between 2005 and last year is 3,500 units per year, sitting comfortably above the average of 2,500 units being constructed yearly from this year to 2014.

Therefore, the supply of luxury homes is expected to be limited in the coming years and this imbalance should continue to sustain prices.

Luxury apartment prices are expected to rise by 5 to 8 per cent in the second half of this year.

Optimism surrounding the integrated resorts and robust GDP growth – and the increased expatriate employment it brings – should keep drawing affluent foreign buyers here.

This should help sustain demand for high-end homes even as an approximate 1,800 luxury apartments are expected to be launched in the second half of this year.

The writer is the senior manager, research & consultancy of Savills Singapore

Source: Sunday Times, 18 Jul 2010

Buying a home is one of the biggest purchases you will make in your lifetime, so it’s important to do your homework before you apply for that loan.

# Prepare in advance

You must pay at least 1 per cent of the purchase price in exchange for an option to purchase. After that, you have 14 days to decide whether to proceed with the deal and pay the balance of 9 per cent for a completed property or 4 per cent for one under construction.

At this point, consult a mortgage specialist about financing. Mortgage documentation takes about 10 to 12 weeks to complete, so apply early.

Note that most banks charge a cancellation fee of up to 1.5 per cent on the loan amount if you pull out later.

Banks determine the maximum loan amount by applying a debt servicing ratio of between 30 and 35 per cent of your monthly income.

Therefore your total monthly repayment should not exceed this ratio when compared to your monthly income. Other commitments, such as a car loan, will be taken into consideration as part of your monthly commitments.

# Select your loan tenure

Generally, the maximum loan tenure is 35 years, but it depends on the borrower’s age. In the case of joint applicants, the maximum tenure will be based on the age of the youngest borrower as long as the loan tenure plus the age of the youngest borrower does not exceed 70 years on loan maturity.

For example, if a borrower wanted to select the maximum loan tenure of 35 years, he must not be more than 35 years old.

Here are some useful tips:

# Choose the right package according to your needs

Most banks offer three types of home loan packages: fixed-rate, variable-rate and market-pegged packages.

It is important to understand your needs and intentions before you decide which package suits you.

A fixed-rate package is suitable for those who want peace of mind as during the fixed-rate period, there will be no rate volatility.

But it is not recommended if you want to make a partial prepayment or full settlement during this period as there will be penalties.

A variable-rate package is one where the rate is pegged against the bank’s reference or board rate. This allows the borrower to make prepayments.

If you have a good understanding of market-pegged rates and you do not mind rate movements, go for the market-pegged package.

The rate offered by banks in Singapore is generally pegged to the Singapore Inter Bank Offer Rate (Sibor).

It also allows you to make loan prepayment without penalty for no lock-in packages on specific rollover dates.

# Get mortgage insurance for protection

Mortgage insurance – or Mortgage Reducing Term Assurance – covers the home loan balance in the event that the borrower dies or is totally and permanently disabled.

Although not compulsory, it is recommended. If an unfortunate event strikes, the loan repayments will be covered by the insurance.

Have difficulty in your repayments? Talk to your bankers. Late charges or non-repayment penalties are but a deterrent for non-payment. More importantly, promptly seek help in managing an overdue debt.

Banks try to help customers work through such difficult times. It might include allowing customers to pay only the interest portion of the loan for a short period, stretching the loan period so as to reduce the monthly repayment amount.

Help might also come in the form of allowing borrowers to include a second loan applicant to help service the initial loan.

It is not in the bank’s interest to foreclose on home loans. We advise customers who have loans to pay off and are close to running into the risk of not being able to make payments, to speak to their bank officers before their situation gets worse.

The writer is OCBC Bank’s head of secured lending.

Source: Sunday Times, 18 Jul 2010

HDB flats also can be a tool for making money as owners move into the private market

You don’t have to own a condo near Orchard Road to be on the path to property riches; your HDB flat can serve as a fine investment springboard.

After all, even if you have a mortgage on your home, the fact that you are an owner and not renter means you are already a property investor.

So view your HDB home as a tool for making you more money as you move into the private market.

Assume you bought a three-room HDB flat in Tampines for about $180,000 five years ago. You could rent out the flat today for about $1,600 a month – an investment yield of about 10.7 per cent.

This is a very good yield and is unique to smaller units. By contrast, a five-room HDB flat in Marine Parade bought five years ago cost about $485,000 and would fetch a monthly rental now of $2,500 – a yield of about 6.2 per cent.

However, HDB flats are primarily meant for public housing and should not really be retained by owners for investment purposes.

That is why there are many restrictions put in place by the HDB, such as a Minimum Occupation Period (MOP).

Flat owners can rent out their home only after occupying it for three years if it is a resale flat bought without any Central Provident Fund grants. The term is five years if it was bought directly from the HDB, or a resale flat purchased with a CPF grant.

Timing is paramount when upgrading from HDB to private property. The idea is to make the jump from public to private housing when the price gap between the two narrows.

HDB flat prices are almost guaranteed to slowly but steadily increase, while private home prices tend to fluctuate depending on factors such as the global economy and the supply of new homes.

That three-room Tampines flat used as an example earlier could be sold today for around $300,000.

As a seller, you would then have realised a profit of about $120,000. Naturally you would have to plough some of that back into your CPF account with accrued interest, but essentially you would now have cash to buy a new property.

You could buy a slightly larger unit in the nearby freehold Ferraria Park Condominium in Tampines. That would cost about $630,000.

After paying $126,000 or 20 per cent of the sale price in cash and CPF, a loan for the remaining 80 per cent, or $504,000, would involve a monthly instalment of less than $2,200 for the next 25 years, based on prevailing interest rates of 2 per cent.

In February, the Government introduced tougher rules on bank loans that allow lending institutions to lend only up to 80 per cent of the purchase price in a bid to cool the market by weeding out overzealous investors.

If you empty your CPF account to reduce the loan, you could reduce the amount for a shorter mortgage term or lower monthly instalments.

Alternatively, if you had bought a four-room build-to-order flat in Treelodge@Punggol at $231,000 in March 2007, the same flat would be worth around $369,000 on the resale market today.

Imagine the value of the flat when you collect your keys next year, and when you are eligible to sell your flat in 2016, especially given the blossoming Punggol neighbourhood.

However, note that all property investments require a mid- to long-term view. Whether you are a first-time buyer having to fulfil an MOP or not, expect to stay in your property for at least five to 10 years.

Then do your research on the flats in your targeted area. Are they old and due for an en bloc sale? Will there be an MRT station or a mall close by in a couple of years? These are just some of the many factors which will enhance the value of your property over time.

It also helps to always buy within your means. It is not advisable to wipe out your CPF account and savings, and then take a massive loan and hefty mortgage repayments just to acquire a more expensive apartment.

You might also need interim accommodation and furniture storage when upgrading from HDB to private property, as well as funds for renovations.

HDB resale prices are still growing slowly but steadily, both in terms of cash-over-valuation as well as the Resale Price Index.

Prices should go up by another 5 per cent over the next six months for an overall growth of 10 per cent this year.

The writer is corporate communications manager of PropNex Realty.

Source: Sunday Times, 18 Jul 2010

More developers are engaging world-class architects as buyers get more sophisticated

It is hard to miss the striking high-rise residential projects in central Singapore, some designed by internationally renowned architects.

In recent years, these internationally acclaimed names include German Ole Scheeren – who was behind The Interlace in the Alexandra Road area – and American Daniel Libeskind, who designed Reflections at Keppel Bay.

Equally famed Zaha Hadid is behind a huge condominium project on the former Farrer Court site, which has yet to be launched for sale.

Developers say it is crucial to differentiate their products in a challenging market where buyers are becoming more discerning.

Far East Organization, Singapore’s largest private developer, launched an ultra luxury brand called ‘Inessence’ last month.

Apart from allowing it to tap further into the rapidly growing wealth in the Asia-Pacific region, the developer said its move is a testament to Singapore’s strong foundations and transformation into a vibrant global city.

Mr Augustine Tan, chief executive officer, Singapore residential, Keppel Land, said: ‘With increasing globalisation, home buyers have also becoming increasingly sophisticated, so much so that owning a home is beyond the brick and mortar but involves the considerations of prestige, lifestyle and other value propositions associated with the development, such as designer architects.’

Property experts say that condos designed by world-renowned architects have a particular appeal to brand-conscious buyers.

Furthermore, these architects are believed to be able to design condos with superior layout and lifestyle concepts – for both the individual apartments and the overall development, said Colliers International’s director for research and advisory Tay Huey Ying.

Many of these designer condos are then able to command a pre- mium.

‘It’s one of the marketing tools for developers to help them achieve their price target,’ said ERA Asia-Pacific associate director Eugene Lim.

‘If I put a brand-name architect to a high-end project, I can push the price slightly higher. The pre- mium is possible because of the product differentiation.

‘People have to associate what they are paying for with what they are getting. It’s about selling an image, a lifestyle and status.’

The price premium, said Ms Tay, is, however, not guaranteed.

‘More often, they are differentiators that can help to move sales, particularly in a competitive market.’

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said buyers will be willing to pay a premium only if the property comes with other attributes – such as a desirable location and a sensible layout.

And developers do change the designs to fit the market if needed. Far East Organization, for instance, did away with an eye-catching design by Mr Scheeren for Scotts Tower as the market had changed significantly.

It had wanted to launch the project – which had only 67 large units – back in late 2007 but the high-end market had started to show signs of slowing.

It has since replaced the original design, featuring four suspended towers, with a creation by Mr Ben van Berkel of UNStudio.

Singapore can expect to see more designer condos, but they would not be flooding the market any time soon. They will remain in a class of their own.

‘Not all developers can afford to pay for the services of a world-renowned architect. Moreover, such architects may also be selective in the projects that they want to be a part of,’ said Ms Tay.

‘As such, it is unlikely that designer condos will be the norm one day, although such condos could grow in numbers, particularly in the higher-end segments.’

Source: Sunday Times, 18 Jul 2010

Sales picking up after quiet June with World Cup, school holidays

SALES have stayed fairly hot at a new condominium in Bukit Timah with 114 flats in the 172-unit estate now sold in just over a week, including 24 of the 30 pricey penthouses.

Ten apartments were snapped up at the official launch of the Terrene yesterday following the 104 that have been sold since a private preview started on July 8, UOL Group said.

The 999-year leasehold condo in Jalan Jurong Kechil is priced at an average of $1,250 per sq ft (psf) for a typical unit, with a one-bedroom flat starting from $719,000.

The penthouses are priced from $1.7 million for a three-bedroom unit to $2.79 million for a five-bedder.

Terrene is a 50-50 joint venture between UOL and La Salle Asia Investment Management.

The newly released 368 Thomson has also done well.

City Developments (CDL) said yesterday that it has sold more than 90 per cent of the 157-unit freehold condo in Thomson Road since it started a private preview on July 8.

The Straits Times understands that 144 units have been sold, leaving a balance of 13 units.

Last Friday, CDL announced that it had sold 96 out of 120 launched units. Prices were about $1,350 psf, or from $918,000 for a one-plus-study unit to $4.4 million for a five-bedroom penthouse.

Since then, the developer has released more units with prices 2 to 3 per cent higher.

The market for new private homes quietened last month with buyers distracted by the euro zone debt crisis, school holidays and the World Cup. A certain amount of price resistance had also set in.

But this month will be a slightly busier month, say property consultants.

Hong Leong Holdings said in a statement yesterday that it will launch the 99-year leasehold The Scala at the end of this month.

The Scala, which is in Serangoon Avenue 3 and near the Circle Line’s Lorong Chuan MRT station, will have 468 units. It has one- to four-bedroom units ranging from 474 sq ft to 2,142 sq ft.

Hong Leong said the condo will have seven pavilions, each designed to give residents a different interactive experience. One will be an Italian pavilion with a wood-fired oven for residents to make their own pizzas.

More property launches can certainly be expected from September, after the traditionally quiet Hungry Ghost Month, experts say.

CDL said its 642-unit, joint venture condo in Pasir Ris will be released in the third quarter.

Source: Sunday Times, 18 Jul 2010

Prices now start from a higher base and attractive prime sites have already been sold

Last Wednesday, a relatively small property, Melrose Court, off Balestier Road, was launched for collective sale.

Owners of the 32 freehold units there are

asking for $48 million, and hoping to reap between $1.23 million and $2.46 million each.

Marketing agent Colliers International said the ‘en bloc’ premium each seller will get is around

40 per cent to 50 per cent more than what he can get if he were to sell his unit on his own.

Compared with those of the collective sale boom of 2006-2007, the premiums are lower these days because existing apartment values are high, said Mr Ho Eng Joo, the firm’s executive director of investment sales.

Property pundits say the market recovery last year has been fast and furious, so prices are now starting from a higher base.

‘We see an erosion of en bloc premiums today. In 2006 and 2007, the premiums can easily be 80 per cent to 100 per cent. Today, they are more like 30 per cent to 50 per cent,’ said Mr Jeffrey Goh, head of investment sales at HSR International.

Some investors may want to cash in fast before the collective sale. This will close the gap between the potential collective sale price and the individual sale price, experts said.

But the higher prices they fetch may not be a true reflection of the market, said Knight Frank executive director Nicholas Wong.

‘A handful of them may be able to sell at higher prices before the collective sale. But if all the owners were to go out and sell their units individually, they wouldn’t get those kinds of prices,’ he said.

The rest of the owners who may now want to pull out of the collective sale after some sell at higher prices, or who then become unhappy with the collective sale prices, should be aware of the risks of a failed sale, as the value of their estate will likely come down if that happens.

Also, today’s new rules mean that a two-year restriction period will kick in, making it harder to restart the collective sale process after a failed attempt, Mr Wong said.

An expert, who declined to be named, said: ‘The en bloc premium is relative. It just has to be a level that can get people excited, with which they think they are able to find a replacement property. This would be around 50 per cent more than what they can sell at individually.’

Besides prices having moved up to a higher base, most of the attractive prime sites have already been sold in previous collective sale booms over the past 15 years, property experts say.

‘Nowadays, sites that have been sold or put up for sale are in the city fringes and are small,’ said Ms Suzie Mok, director of investment sales at Savills Singapore.

‘The en bloc premiums for prime spots tend to be higher than those for suburban estates as they are the more sought-after sites. The prime spots appeal to the bigger developers who are willing to pay more because of their scarcity and the appeal of the posh address.’

While there are still underbuilt sites out there, many of the estates eyeing collective sales today are very old developments and may have low redevelopment potential, experts said.

Some of these estates have already used up their maximum built-up area allowed, and may thus get a lower premium when they want to sell en bloc, the experts pointed out.

Source: Sunday Times, 18 Jul 2010

A large number of new properties are set to be launched in the next six to 12 months. The Sunday Times looks at what savvy buyers should look out for.

Sovereign debt crises may have hobbled property markets elsewhere, but not here it seems.

Buoyed by Singapore’s strong economic recovery, optimism has staged a vigorous comeback, with property developers set to launch at least 3,500 new homes by year-end on top of about 8,500 they have already released so far this year.

This will result in an estimated total of between 12,000 and 14,000 new units this year.

And the supply of available building land shows no sign of drying up: 31 residential sites will be up for grabs from the Government Land Sales (GLS) programme in the second half of this year.

In the years ahead, new residential enclaves are predicted to emerge with the completion of the Circle Line, boosting once sleepy areas such as Paya Lebar, Mountbatten and Dakota.

Up, up and away

Analysts say that despite the uncertainty triggered by eurozone sovereign debt issues, overall buying interest here remains positive – especially in mass-market and mid-tier projects.

Although the overall upbeat sentiment has dipped slightly of late, with lower volume and slower price increases, the residential market looks set to remain largely strong given the strength of the economic rebound.

The Government forecasts a stunning 13 to 15 per cent growth in gross domestic product (GDP) this year, up sharply from an earlier prediction of 7 to 9 per cent, due mainly to the huge recent surge in manufacturing.

DTZ South-east Asia research head Chua Chor Hoon is upbeat about the market. ‘There is still buying interest and more new developments are being planned for launch in the coming months. If they are well taken up, that would motivate more developers to launch other projects and stimulate more buyer interest,’ she said.

Knight Frank manager of consultancy and research Ong Kah Seng is slightly more cautious about prospects, but still thinks the outlook is good.

‘Buyers are likely to rethink about rushing into home purchases and adopt a wait-and-see attitude… However, although sales will moderate, it is still reflective of a healthy residential market.’

Against this broadly bullish backdrop, prices have continued to climb ever higher.

Official estimates show they rose a higher-than-expected 5.2 per cent in the second quarter of this year after a 5.6 per cent jump in the first.

Prices are now 1.5 per cent above their peak in the second quarter of 1996.

And property experts are pencilling in price increases for the full year of between 12 per cent and 20 per cent, with the average estimate at about 15 per cent.

CB Richard Ellis (CBRE) residential director Joseph Tan thinks that because economic fundamentals ‘are still intact’, home prices will increase slightly in the second half of the year.

‘Projects which are well located and are close to main transport nodes could still enjoy a slight premium,’ he added.

Prime pickings

With developers looking to make the most of this positive market, Knight Frank is anticipating another 17 major launches (of at least 50 units each) within the next six months – a total of 4,056 apartments added to the market.

Upscale residences in districts 9, 10 and 11 are likely to make up almost half of these major launches, but a surge of mid and mass-market developments is slated from next year onwards as GLS land sites situated mainly outside the central regions are released, Mr Ong said.

CBRE notes that 38 apartment launches – inclusive of small to mid-size projects – are likely within the next six months.

Of these, 22 are located in the core central region, 10 in the rest of the central region and six outside the central region – allowing home buyers to cherry pick according to their budgets.

They range from Allgreen Properties’ prime 360-unit Skysuites @ Anson in Enggor Street to the mass market 408-unit executive condominium project in Yishun Avenue 10 by MCC Land.

In addition, experts say that prime developments are beginning to appear in numbers on the horizon as developers scent rising prices.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said developers may have held back many of their high-end launch-ready projects, some of which were prime freehold sites from the ‘en bloc’ fever three years ago.

‘Some developers may have decided that high-end prices may take even longer to reach their desired levels. Given that there are still risks ahead, they may decide to make the best of an uncertain situation and launch within the next few weeks and months,’ he added.

A buyer’s spread

With 15 residential sites sold through the GLS programme in the first half of this year (four of which were executive condominiums) – and more than double that number planned for the second half – the property pipeline shows no sign of drying up.

Mass and mid-market homes are likely to be launched on these sites in areas such as Simei Street 3 and Hougang Avenue 2 as the Government attempts to dampen demand.

The plots are certainly being snapped up by developers eager to replenish their land banks and willing to pay top dollar for well-located plots.

A 99-year leasehold residential site at Simei Street was released for tender in March received a total of 18 bids, with the top bid at $152.7 million or $523 psf per plot ratio (ppr) coming from developer Chip Eng Seng. This was well above market expectations of between $300 and $400 psf ppr.

UOB Kay Hian property analyst Vikrant Pandey estimates the break-even price for the site to be in the range of $800 to $850 psf and, assuming a 15 per cent development margin, the average selling price to upwards of $970 psf.

‘Resale prices for the secondary market projects in the vicinity are in the range of $600 to $800 psf. The top bid is quite aggressive, factoring in a 20 to 30 per cent future price appreciation in the region,’ he said.

Similarly, the hotly contested tender of a choice residential plot in Boon Lay Way next to Lakeside MRT station attracted a whopping 14 bids in May, with Keppel Land (Mayfair) putting in the top bid of $499 psf ppr, or $302.98 million.

Property experts estimate the break-even level for units on the site will be $800 to $850 psf, with an eventual selling price of about $950 psf – which factors in a 10 to 20 per cent future rise in prices within the next year.

DTZ’s Ms Chua said that developers were already inching up prices at new projects, with many recent launches being priced higher than neighbouring projects.

However, the bumper release of 31 residential sites by the GLS programme in the second half of this year could dampen some of the exuberance in the market, moderating mass market prices.

There are 18 residential or residential/commercial sites on the programme for confirmed sale, with another 13 sites for residential use put on the reserve list.

The plots – which include 20 that are new and not rolled over – could accommodate 13,905 new homes and are anticipated for launch next year.

They are located in areas such as Jurong West and Pasir Ris but also in mass-market areas like Hougang and Tampines.

The sites commanding the most attention are, predictably, those with the best locations and amenities.

CBRE’s Mr Tan said sites with better amenities and close to MRT stations will generally attract more interest from developers. And mixed-use sites located at the town centre of HDB estates are likely to be vied for.

One of the most attractive sites is the land parcel at the junction of Woodland Avenue 1 and Woodgrove Avenue, he said, which is located within the American expatriate enclave and close to the Singapore American School.

Mr Tan pointed out that condominiums and landed homes in the nearby Woodgrove Estate were enjoying strong rentals, and the last condominium project launched in this location – Rosewood Suites in November 2008 – was fully sold.

Elsewhere, the commercial- cum-residential site in New Upper Changi Road and Bedok North Drive is expected to attract strong bidding, given that it will be the first comprehensive development in Bedok New Town and comprise a retail mall, residential units and a bus interchange.

Knight Frank’s Mr Ong added that close proximity to existing and upcoming MRT sites could well drive prices higher at a number of new plots.

These include the Alexandra Road site, the Tanah Merah Kechil site – near existing condos East Meadows and Optima@Tanah Merah – and the Petir site next to City Developments’ recently launched 429-unit Tree House.

Chesterton’s Mr Tan said: ‘The fact that there are still en bloc transactions taking place – most of which are in the suburbs – indicates that developers will still bid for land.’

However, with economists predicting a slowdown in growth in the second half of this year due to concerns over the European debt crisis and the bumper supply of land released, some analysts are less bullish.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that with an average of three tenders a month, developers were both limited in their budget and manpower resources.

‘We might see the level of interest in GLS sites drop towards the end of this year… If signs of economic uncertainty re-emerge and if companies start putting their expansion plans on the backburner, developers might start bidding more cautiously,’ he said.

Source: Sunday Times, 18 Jul 2010

Non-traditional prime areas have emerged as the property boom spreads to the suburbs

For years, Districts 9, 10 and 11 – covering Orchard, Holland, Newton and Bukit Timah – have been the must-have residential areas in Singapore.

But as the recent property boom spreads to the suburbs, a number of newly popular districts have emerged outside these traditional prime areas.

Developers with a keen eye snapped up land around city-fringe locations and suburban MRT stations, and have been launching projects in these areas over the last few months to great demand.

Some of these new sizzling spots may come as no surprise. District 2, for instance, comprises mainly the Tanjong Pagar area around the Central Business District, which is evolving into an inner-city residential hub. Recent launches such as City Developments’ 76 Shenton and Far East Organization’s Altez have been well-received.

Slightly farther from the city is District 14, where Waterbank @ Dakota and Casa Aerata have been sell-outs, and Dakota Residences is 95 per cent sold.

Property consultants say the opening of the two integrated resorts this year has boosted the popularity of these more centrally located areas.

Mr Joseph Tan, executive director for residential services at real estate consultancy CB Richard Ellis, said: ‘Not only do they attract people who bought for their own use, they also attract a good number of property investors with a view to future price appreciation or rental income.’

Ms Tay Huey Ying, director of research and advisory at Colliers International, explained: ‘District 2 has grown in popularity since 2006 and 2007 when the development of the two integrated resorts and Marina Bay Financial Centre popularised inner-city living.’

She added that homes there have remained popular since then, although sales have slowed, owing to their relatively high price tags, and especially with investors turning more cautious following the global financial crisis.

But there are also other ‘hot’ districts that may be less obvious, including District 5 in the West Coast and District 16 in Upper East Coast.

In District 5, recent launches such as Hundred Trees and The Vision were 95 per cent sold within three months, and Parc Imperial was 100 per cent sold, according to data from DTZ Debenham Tie Leung. Over in District 16, Optima @ Tanah Merah sold out in just three days.

These areas have drawn interest because of their proximity to current or future MRT stations, good local schools and international schools, said Mr Tan. Buyers of homes in the area are mostly locals – HDB upgraders and private homeowners – and also permanent residents settling down here.

‘These properties tend to be more affordably priced than those situated in the city or at the city fringe,’ he said.

Ms Chua Chor Hoon, head of South-east Asia research at DTZ Debenham Tie Leung, said in general, there are more ‘hot’ areas in Singapore now than in the past because of two main reasons: collective sales of estates in older areas and deliberate government policies to decentralise office hubs.

With more people, including expats, working outside the CBD, there is higher demand for rental homes – and hence more potential for property investors – in other parts of the island now, she said.

CBRE’s Mr Tan agreed: ‘With new initiatives to chart the progress of the country, future growth areas like Marina Bay, Jurong East, Kallang Riverside and Punggol Waterfront town are becoming more and more attractive because there is still room to encompass new ideas.’

It helps that the Government is constructing more MRT lines, consultants said. ‘The MRT network is reaching more areas of Singapore, making outlying places more accessible and desirable,’ said Ms Chua.

In the years to come, Ms Tay believes new emerging districts would include those with newly opened or soon-to-be-constructed MRT lines, as well as districts within growth areas designated by the Government.

These could include District 22 in Jurong and Boon Lay, which could benefit from the Government’s plan to develop the Jurong Lake District, and District 23 – Bukit Batok and Hillview – which would get a double boost from the construction of the MRT’s Downtown Line stage 2 as well as the spillover effects of the development of the Jurong Lake District.

Still, property consultants maintain that the traditional prime residential districts of 9, 10 and 11 will always retain their charm.

‘The exclusivity and prestige attached to certain addresses cannot be fully replicated in the new growth areas,’ concluded Mr Tan.

Source: Sunday Times, 18 Jul 2010