PLANS to redevelop UIC Building have materialised after United Industrial Corp (UIC) yesterday paid an estimated development charge of $160.1 million to the Urban Redevelopment Authority (URA) to intensify the use of the land.

The building at 5 Shenton Way will be torn down to make way for a mixed development project comprising 60 per cent residential and 40 per cent commercial space, with a gross floor area of 926,589 sq ft.

According to an earlier report, the residential component may yield 593 units.

Analysts expect the residential units to be well received. Units at nearby One Shenton, which is 93 per cent sold, have regularly transacted at above the $2,000 per sq ft mark.

In February, UOL group chief executive Gwee Lian Kheng disclosed that UIC had won in-principle approval from the URA to convert UIC Building into a mainly residential development.

No firm decision was made then as the UIC board was assessing all alternatives to ensure the best use for the property.

UIC is a 32 per cent-owned associate of UOL.

In its statement yesterday, UIC said the redevelopment of the Shenton Way building will be financed by internal funds and bank borrowings.

UIC shares, which are thinly traded, eased one cent to $2.18 on a turnover of 98,000 units.

UOL shares fell five cents to $3.93 on a turnover of 471,000 units.

Source: Straits Times, 31 Aug 2010

CPIB director to be seconded to help head new regulatory body
A TOP cop will help helm the new Council for Estate Agencies (CEA) – a regulatory body which is tasked to regulate the property agents.

Mr Soh Kee Hean, director of the Corrupt Practices Investigation Bureau (CPIB) since 2005, will be seconded to the Ministry of National Development (MND) to take up the position of deputy executive director (designate) of the CEA.

The new statutory board will be formed later this year and will take over the Inland Revenue Authority of Singapore’s (Iras) role in licensing real estate agencies and their agents.

CEA will have the power to investigate consumer complaints against housing agents and agencies, and will have the authority to mete out penalties, such as suspensions and fines.

Rogue housing agents have plagued the property market of late, with the Consumers Association of Singapore (Case) receiving an average of over 1,000 complaints a year.

In the first four months of this year, Case received 358 complaints. Last year, 1,079 cases were brought to its attention, while the figure was 1,100 in 2008.

Complaints ranged from agents failing to give proper advice and using misleading sales tactics, to the non-honouring of agreements. There were other questionable practices, such as agents taking commissions from both buyers and sellers of flats.

There are about 25,000 real estate agents and 1,700 agencies in Singapore.

When contacted, local real estate companies welcomed the news.

ERA Asia-Pacific associate director Eugene Lim felt that Mr Soh’s new appointment will benefit the industry, by weeding out the crooks.

He said that as ‘Mr Soh comes from a background dealing with corrupt practices’, he believed the intention was to tackle the problem of ‘shady agents’.

Likewise, PropNex chief executive Mohamed Ismail felt that this move showed the determination of the MND in ensuring that the new council ‘will work effectively in upgrading the professionalism of the real estate industry’.

Mr Soh, a former deputy director of the Criminal Investigation Department (CID) as well as a former commander of the Geylang Police Division, will be replaced by Mr Eric Tan Chong Sian.

Mr Tan, the commissioner of the Immigration and Checkpoints Authority (ICA), will relinquish his current position tomorrow and will take office as CPIB director on Oct 1.

When contacted, both Mr Soh and Mr Tan declined to comment as they have yet to take up their new roles.

Taking over Mr Tan will be Mr Clarence Yeo Gek Leong, the current deputy commissioner (operations) of ICA.

Source: Straits Times, 31 Aug 2010

IF YOU already have a mortgage on a home, you will need more cash on hand to buy a second property – under new rules announced yesterday.

Buyers with one or more outstanding housing loans will now have to stump up a downpayment of 30 per cent of the property’s price, up from 20 per cent previously. At least 10 per cent must be in cash – up from 5 per cent before – but the remainder can come from their Central Provident Fund (CPF) accounts.

This means that buyers will now be able to borrow up to only 70 per cent of the property’s purchase price, instead of 80 per cent previously.

These new financing rules are more significant measures to cool the housing market, experts said. They added that these moves would weed out speculative activity from the market and prevent buyers from overextending themselves – while leaving first-time buyers unaffected.

The Ministry of National Development said in a statement yesterday that while non-performing loans made up less than 1 per cent of all loans as at the second quarter, there are signs that more borrowers are taking loans of more than 70 per cent of a property’s price.

Local banks yesterday told The Straits Times that they have seen an increasing number of home owners investing in multiple properties in recent years.

United Overseas Bank said most of these home buyers took up financing of up to 80 per cent of the purchase price.

OCBC Bank said that while the majority of its loan applications are for home-owner occupation, it has seen an increase in the number of applications for investment purposes – compared with a year ago. An increasing number of home-loan applicants have applied for loans of more than 70 per cent of the property price, it added.

Kim Eng analyst Wilson Liew said the new measures would ensure that banks remain prudent in their lending practices.

DMG & Partners property analyst Brandon Lee said the rules would also effectively force out speculators.

‘They would have to think twice before buying as the cash outlay now is reasonably higher… Sales volume will probably be hurt across all segments,’ he said.

ERA Asia-Pacific associate director Eugene Lim said the measures would affect demand in the mass-market private property segment.

HSR chief executive Patrick Liew said speculators made up about 20 per cent of the mass-market segment, and that the new measures might flatten the sector for the next two quarters.

Demand could drop by up to 20 per cent in the next few months, as buyers react in a knee-jerk fashion and speculators stay on the sidelines, he said.

However, since economic fundamentals are strong and the market had already been slowing, he does not expect prices to head south.

Instead, Mr Liew thinks prices will hold at current levels before gradually increasing again from the second quarter of next year, because there is still genuine demand in the housing market.

ERA’s Mr Lim said that a significant number of mass-market condo buyers live in HDB flats with outstanding mortgages, so demand for such private homes might take a beating now that the required downpayment has been increased.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said the steps ‘had more bite’ than previous ones. It would most affect demand from high-risk buyers who are highly leveraged, he said.

‘These measures will help to soak up the liquidity in the market as those who could previously afford three similarly priced homes, fully leveraged… would now be able to afford only two, lessening demand by a third,’ he added.

However, owners who are just selling their home to buy another need to get their timing right and ensure the first mortgage is fully paid before taking out a new loan.

If not, they will be allowed to take out only a 70 per cent loan for the new home and would have to pay the remaining 30 per cent upfront.

Source: Straits Times, 31 Aug 2010

Home-owners who wish to upgrade, downgrade or move are affected too

THE Hungry Ghost month is almost over, but the property market got a new scare yesterday.

To rein in soaring home prices, National Development Minister Mah Bow Tan unveiled an array of measures to temper demand for both private homes and Housing Board (HDB) flats.

He stressed that the steps, while ‘comprehensive’, were ‘calibrated’ to target those who already own a home and are buying another for investment or speculative purposes.

First-time buyers and those buying for their own stay, Mr Mah added, would be generally unaffected by the new rules.

But would this be always the case?

Yes and no. It is true that if you are buying a home for the first time, none of the curbs will directly affect you.

But if you are the average home-owner paying off a mortgage, chances are you could be stuck in your current home for some time.

This is because a genuine home-buyer who already owns a home and wants to upgrade, or downgrade, or simply move house, will have to jump through many more hoops than in the past.

Take the new rule that home-owners with outstanding mortgages must fork out a higher downpayment for a new property. They will now have to pay at least 30 per cent of the purchase price upfront, up from 20 per cent previously.

This restriction is meant to deter property investors or speculators from owning more than one property. But it will also, inadvertently perhaps, make life difficult for people moving house.

Many people buy their dream home first before selling their existing one, to make sure they have plenty of time to move, and banks ease these back-to-back transactions by providing bridging loans.

But now home-owners who still have a mortgage will have to sell well before they buy, if they want to avoid paying the higher downpayment for their new home.

They then have to obtain a bank letter saying their existing home has been sold, and the mortgage will be paid off at a certain date, before they can apply for a loan for their new home – and even then they will get only an in-principle approval.

Because property transactions take about three months to complete, these buyers may have to find somewhere to stay in between selling and buying.

Aspiring upgraders or home-owners who want to buy and live in newly launched private homes, which take about three years to build, will have to stay somewhere else for even longer.

The new rules don’t mean that these owner-occupiers cannot buy new homes to live in, but it does make the timing of when they buy and sell their homes absolutely crucial.

One wrong step and they will need to fork out more cash and CPF savings in upfront downpayments. That risk alone will make anyone think twice about swopping their homes for better ones.

But this is not the only curb that casts a wider net than it appears to at first. There is also the new maxim that private property owners must sell their homes within six months if they buy a HDB resale flat.

The aim of this is to dissuade would-be property investors from dabbling in the market for HDB flats – which should be prioritised for owner-occupiers – and pushing up their prices.

But any HDB owner who already owns a private property for investment may now find himself stuck as well.

If he wants to move, say to another HDB flat closer to his parents, he will have to sell his current flat first before buying a new one.

But the moment he sells the flat, he becomes classified as a private property owner because of his investment property. That means that if he then buys another HDB flat, he will have to sell his private property within six months – even though he is just moving house.

In effect, he may now never be able to move to another HDB flat for the rest of his life unless he is willing to sell both his current properties.

This makes private property a particularly risky investment asset for HDB flat-owners, for reasons completely unrelated to affordability.

Even buyers of private properties, while free of HDB restrictions, must now put more thought into their purchases.

Whatever home they buy, they must be prepared to live in it for at least three years – or pay a penalty in the form of a sellers’ stamp duty, which can go up to 3 per cent of the purchase price.

This could affect shoebox apartments, many of which are bought as starter or investment homes, to be resold after a year or two.

So however you slice and dice it, it seems that the latest measures really leave only two groups of people completely unaffected.

The first are those rich enough to be unfettered by the new rules. By throwing various obstacles in the way of owning more than one home, the Government is sending a very clear signal that property is an investable asset class – with no restrictions – only for those who can afford it with money to spare.

The other group of people who will view the measures with equanimity are those who plan to buy only one home and stay in it for the rest of their lives.

Indeed, one of the main aims of the measures, said Mr Mah yesterday, is to ensure that all Singaporeans are able to secure a home – not an investment – for themselves. As Prime Minister Lee Hsien Loong has said, ‘property is for people to buy to live in’, meant as a nest egg and not as an easy way to make a quick buck.

If you subscribe to this view, and also think that property buyers should be a lot more prudent to start with, then the new measures tick all the right boxes.

But if you like the idea of moving from one home to another as your needs and lifestyle change, the slew of curbs would restrict your options, unless you are willing to stump up more upfront cash and accept lower levels of loan financing.

Buying a home will now be more of a long-term commitment than ever, and buyers must really think about their life plans for at least the next few years before taking that leap.

The housing market may become more stable, but it is also likely to be much less vibrant. And with the cooling moves coming just as Singapore’s economy is entering an uncertain second half, there is a risk of the property market paling precipitously.

The important thing now is for the Government to closely watch if the impact of the measures turns out to be more widely felt than expected, and adjust them accordingly.

Source: Straits Times, 31 Aug 2010

HOME-buyers can look forward to an unprecedented surge in supply of new Housing Board (HDB) flats this year and next – enough to fill a town as big as Toa Payoh.

The HDB said yesterday it will offer 16,000 new flats this year, and up to 22,000 next year under its build-to-order (BTO) scheme. Taken together, the number surpasses the 35,400 flats in Toa Payoh today.

It will also release more land for tender for executive condominiums (ECs) and its design, build and sell scheme (DBSS), where private sector operators develop public housing projects.

These could yield 7,000 DBSS flats and 8,000 EC units over the next two years if demand is sustained.

In contrast, only 4,000 units have been launched for sale under the DBSS scheme since it started in 2005 and 10,000 flats for ECs in the last 10 years.

The ramp-up of supply follows Prime Minister Lee Hsien Loong’s announcement in his National Day Rally speech on Sunday that the $8,000 a month income ceiling will be slightly relaxed for the ‘sandwich group’ of home-buyers.

Those with a monthly household income of between $8,000 and $10,000 will now also be eligible to buy DBSS flats – where previously their only option apart from private property was EC units.

They will be allowed to buy the flats with a CPF Housing Grant of $30,000.

Speaking at a briefing yesterday, National Development Minister Mah Bow Tan said the increase in supply will ensure that there are enough flats for those who wish to buy. He said this would also dampen prices, although other factors such as the economy, jobs and interest rates would also play a part.

The new DBSS homes will be built in mature towns such as Yishun, Tampines, Bedok, Hougang and Jurong West, said the HDB.

The new EC homes will be spread across new and mature estates such as Sengkang, Yishun, Punggol, Pasir Ris and Bukit Panjang.

Asked if the increase in supply could create a housing supply glut in the future, Mr Mah said that supply could be adjusted to demand based on HDB’s BTO system, which builds only when a certain level of demand is reached.

He added that the measures will have an impact on the market but ‘it will not cause a great problem… but we still need to watch it’.

Mr Mah also said that the completion time for new flats will be cut from three years to 2-1/2 years for projects launched from the middle of next year onwards. This will be achieved by streamlining HDB’s internal processes and awarding the tenders for projects earlier, he said.

CBRE Research executive director Li Hiaw Ho said yesterday that first-time home-buyers ‘stand to benefit most from the measures, not only from the increase in supply providing more options, but also from an expected reduction in competition from buyers who are purchasing second and subsequent properties’.

‘The main thrust of these revised measures… reiterates the Government’s stand that HDB homes are primarily for owner-occupation and should remain so,’ he added.

Source: Straits Times, 31 Aug 2010

DEVELOPERS took a hit on the share market yesterday following the announcement of new measures aimed at cooling the real estate boom.

It was far from a bloodbath – shares dipped around 4 to 5 per cent although Allgreen Properties dived 7 per cent – but experts are uncertain where the market is headed.

Analysts expect downward pressure on shares to continue in the short term.

Although similar cooling measures have been introduced over recent months, yesterday’s steps are more broad-based and possibly of greater magnitude, said CIMB analyst Donald Chua.

Mr Brandon Lee, an analyst at DMG & Partners, added that much will depend on how the real estate market dynamics play out and how sales fare and markets perform.

Companies like CapitaLand and Keppel Land are expected to be less susceptible to the effects of the measures given their diversified business models and geographic exposure, Kim Eng analyst Wilson Liew noted in a report yesterday.

Real estate investment trusts or Reits with exposure to retail and commercial assets are also expected to fare better.

Market observers note that the new steps can heighten uncertainty about the market’s stability.

Although the measures come across as a ‘mild warning from the Government’, a report from Daiwa Capital Markets stated, if price increases persist, things could be different.

If prices continue to rise by over 5 per cent per quarter, Daiwa expects more ‘severe’ measures could come our way.

On the shares front, Allgreen closed at $1.06 while City Developments, Singapore’s biggest property developer after CapitaLand, slumped 50 cents or 4.18 per cent to $11.46. Wing Tai was down 4.6 per cent to $1.65, while the Ho Bee Group was off 3.77 per cent to $1.53.

Losses were smaller elsewhere. CapitaLand shares dropped just half a per cent to $3.98, Keppel Land kept losses to 2 per cent at $3.85 and UOL lost only 1.26 per cent to $3.93. Luxury property developer SC Global fell 1.25 per cent to $1.58.

Source: Straits Times, 31 Aug 2010

Private home-owners and speculators effectively shut out

THE red-hot public housing market is set to cool significantly now that private home-owners including speculators have been effectively shut out of the market.

Market watchers say recent rapid growth in HDB resale prices will moderate as the pool of potential buyers grows smaller, and more flats are put on sale.

The new rules, unveiled yesterday, ‘will have great ramifications’ on the market, said property agency PropNex’s chief executive Mohamed Ismail, as they will ‘reduce speculation and short-term investment’.

He predicts that HDB resale transactions will fall in the second half of the year by 10 per cent from the same period last year.

Median values of cash upfront paid by buyers – known as cash-over-valuation – which hit a record $30,000 in the second quarter, may dip 10 per cent by year’s end and by 20 per cent next year, he said.

HDB resale flat prices shot up 4.1 per cent in the second quarter, smashing records for the eighth straight quarter, prompting concerns that prices were beyond the reach of Singaporeans.

Jones Lang LaSalle’s head of research for Singapore and South-east Asia, Dr Chua Yang Liang, said the new policy was well directed as it is ‘more targeted at reducing speculative buying and not affecting (genuine) occupier demand’.

‘This would promote a healthier investment climate for the Singapore residential market in the longer term… HDB resale flat prices could moderate to 1 to 2 per cent per quarter,’ said Dr Chua.

He also observed that while the Government has maintained its stand about not interfering with the pricing of HDB resale flats, the stricter rules on ownership have now placed these properties firmly in the ‘public housing’ category.

Some home-seekers had lobbied the Government to cap or remove the cash-over-valuation payments for resale flats, but this aspect ‘is more about market transactions, so they’ve left that to the market’, Dr Chua said. ‘But when it comes to ownership, I think it’s more of a larger policy issue. The Government does not want people to hoard public housing and cause prices to go up.’

National Development Minister Mah Bow Tan said at a briefing yesterday that the new rules were meant to ‘ensure equitable treatment’ of all flat-owners during the minimum occupation period, which is now five years, up from three years.

He said that the measures will dampen demand for flats, and that combined with an increase in the supply of flats, ‘hopefully the market will slow down’.

As prices surged in recent months, some critics had argued that private property owners were speculating on the HDB market as resale flats typically generate healthy rental returns – resulting in a high rental yield. They could also reap gains from a higher eventual sale price.

Mr Mah emphasised that the Government aims to ‘pre-empt the overheating of the market’ and will ‘take whatever steps necessary to stabilise the market’.

‘Obviously the intention is not to crash the market, but at the same time, if we don’t rein in the market, and the bubble bursts then it will be even worse for everyone concerned, the economy as well as for individual buyers.’

Mr Mah said currently an average one in 10 resale flat-buyers owns private property. The new rules mean the buyers’ pool for resale flats will be smaller.

Records indicate that out of the pool of private property owners who buy HDB resale flats, about half sell their private property, while the other half keep it.

Mr Mah said first-timers should welcome the change in policy ‘as it means more choice for them’ and does not affect those genuine home-buyers.

Assistant accountant Edward Kwa, 27, told The Straits Times that if the new rules mean lower resale prices, it will help in his house hunt.

Mr Kwa, who is getting married next year, has been balloting for build-to-order (BTO) flats since last year but has yet to be offered one. ‘I’m glad to hear that there will be more choices and that the wait for a new flat will be shortened,’ he said.

Source: Straits Times, 31 Aug 2010

New restrictions expected to cool property market; prices tipped to soften

A SERIES of sweeping measures designed to take the heat out of the booming property market and rein in investors and speculators were announced yesterday.

The buy-at-any-cost sentiment that has been boiling away in recent months is expected to take an immediate hit, with prices tipped to soften.

The restrictions, like cooling measures last September and in February, are designed to stop a housing bubble forming.

They target owners who try to sell – or flip – their properties for a quick buck, while those aiming to buy investment properties in addition to their existing home will find it far more costly.

The new rules – which came in yesterday – also make it harder for Housing Board and private home owners to dabble in each other’s markets.

National Development Minister Mah Bow Tan, who announced the moves, told a briefing: ‘We think that if we do nothing, there’s going to be a bubble.’

He said the ‘calibrated’ steps would stabilise the private property market and prevent it from overheating.

With Singapore’s strong economic growth expected to moderate in the second half, a property bubble will likely form if the current momentum in the market continues, said Mr Mah.

‘And when the bubble bursts – not if – there will be severe implications for individuals as well as for the economy as a whole,’ he said.

‘Furthermore, the very low interest rates we are seeing today are not sustainable. And when they eventually rise… there will be severe implications for buyers who have overextended themselves.’

He said the Government had taken several small steps to cool buying sentiment, unlike its ‘big-bang approach’ in 1996, when tough measures like a capital gains tax caused a market crash.

‘All the measures are meant to affect people who intend to buy and sell … the speculators in the market,’ he added. ‘If you are a genuine buyer, if you are an owner-occupier, to all intents and purposes, these measures will not affect you.’

Property experts believe the new rules will hit sentiment instantly, with buyers likely to hold back while prices of private homes and resale flats stabilise or even fall over the longer term.

‘We may have an extended Hungry Ghost Festival this year,’ said Knight Frank chairman Tan Tiong Cheng.

But first-time buyers will have reason to celebrate, as they may find fewer potential buyers competing with them and, possibly, softer prices.

Civil servant Joshua Yap, 28, is one: ‘I will definitely resume my house search after putting it on hold for the past few months. I am very thankful for the measures because they will serve to cool the irrational market.’

The Government is also bumping up the supply of public housing, including executive condominiums.

The private housing market has so far resisted two earlier rounds of cooling measures. Private home prices surged 38.2per cent in the year to June, exceeding the historical peak of 1996.

Experts say many local buyers have been maxing out loans, but the new measures may prove a spanner in the works.

Buyers already servicing mortgages must now fork out double the cash amount to buy a second property, so the mass market private homes segment will be hit, say experts.

‘The impact will be huge for the mass market as this is where the buyers do not have that much cash,’ said a developer, adding that the market for newly-launched, uncompleted private homes will be harder hit.

‘For new project sales, I would say that the bulk of the buyers are those getting a second home. Now, upgraders will not be able to buy properties under construction if they don’t have the cash and CPF savings for the 10 (per cent) and 20 per cent down payment respectively,’ he said.

DTZ’s head of South-east Asia research, Ms Chua Chor Hoon, said: ‘Developers are likely to lengthen the period of ongoing previews and soft launches to test the market.

‘The impact will be felt more in the public resale and mass market segments due to the double whammy of a cutback in demand and increase in supply.’

The Real Estate Developers’ Association of Singapore said the new measures may affect affordability due to the higher upfront cash component, but will not hit genuine home buyers.

Cash-over-valuation levels in the HDB resale market are expected to dip, thanks largely to the huge upcoming supply of flats and a move barring private home owners from buying a resale flat while holding on to their private property.

Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, believes yesterday’s measures were motivated largely by the unabated rise in public housing prices. But demand should cool for HDB resale flats.

Some property consultants expect price rises for private homes to moderate. Jones Lang LaSalle forecasts that prices will now rise by 2-3 per cent per quarter for the rest of the year.

Others are less optimistic. Ms Chua believes mass-market prices will slip by a few percentage points over the next six months, citing the backdrop of uncertainty in the global economy, slower sales activity and growing price resistance.

Mr Tan added: ‘When things are moving fast, there are people who feel that they are priced out of the private market. Now, their opportunity has arrived if prices flatten out or move south.’

Property share prices fell by about 4-5 per cent in reaction to the changes.

Asked if the new measures had to do with the upcoming general election, Mr Mah said: ‘Housing has been a hot topic for as long as I can remember. (It is a) hot topic before all elections, and will be a hot topic in the next election, whenever that is.’

Source: Straits Times, 31 Aug 2010

(LONDON) UK home values dropped in August by the most in 16 months as the housing market endured a ‘modest re-pricing’ that is likely to last as long as a year, Hometrack Ltd said.

The average cost of a home fell 0.3 per cent from the previous month to £158,200 (S$332,430), the London-based property researcher said in an e-mailed statement yesterday.

That was the biggest drop since April 2009. Hometrack’s index is based on a survey of 5,100 real estate agents and surveyors.

The report adds to mounting evidence that the housing market is weakening, and economists predict data today may show that banks granted the fewest mortgages in more than a year last month. Britain’s economy ‘remains fragile’ and officials may need to expand their emergency stimulus to aid the recovery, Bank of England deputy governor Charles Bean said on Aug 28.

‘The housing market is in the process of a modest re-pricing that is likely to run for the next six to 12 months,’ Richard Donnell, Hometrack’s director of research, said in the statement. There is also ‘growing weakness on the demand side, a weakness which represents more than just a seasonal blip’.

From a year earlier, prices rose 1.5 per cent, the least in five months, Hometrack said. Demand for homes, measured by the change in new buyers registering with real estate agents, fell for a second month, dropping by 2.2 per cent.

The supply of homes ‘has improved markedly and this has reduced the support for house prices provided by the scarcity of housing for sale over 2009 and early 2010′, Mr Donnell said. Prices fell in every region apart from Wales, where they were unchanged, the report showed.

‘The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet to be worked off,’ Mr Bean said at a conference in Jackson Hole, Wyoming. ‘Further policy action may yet be necessary.’

UK banks probably approved 46,500 mortgages in July, the least in 14 months, according to the median forecast of 19 economists in a Bloomberg News survey. The Bank of England will release that data today. — Bloomberg

Source: Business Times, 31 Aug 2010