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    7 Questions Singapore Property Buyers Want Answered for 2017

    Which area should I look out for if I am keen to buy? Buyers should zoom in on untenanted resale units originally bought in 2013 for investment purposes and negotiate hard for a good deal. In 2017, we estimate that ~20K units will be approaching the end of their 4-year SSD lock-up period. More importantly, 2013 was the year where prices peaked. With vacancy rates at an all-time high, some property investors are finding themselves stuck with vacant, untenanted units. For those who bought into the market in 2013, 2017 is the year to cut losses without attracting SSD. This presents an attractive opportunity for buyers today to negotiate hard. DREA has shortlisted a number of condominiums with units that fulfil these criteria.

    Source: DREA

    Are Townhouses worth considering?

    Townhouses are the luxurious hybrids of private landed property and condominiums. In addition to having your own backyard and carpark, Townhouses offer recreational facilities like swimming pools, gyms, playgrounds and more – all within the estate itself. Since Townhouses are essentially gated communities, there is also the added benefit of having 24/7 security guard services just like most other Condominiums. Aside from having good facilities, newly completed Townhouses are usually in move-in condition. Unlike landed properties, you also do not have to hassle with maintenance and repair work on an on-going basis as this is usually handled by the estate’s management committee. Townhouses therefore offer the best of both worlds in terms of amenities, convenience and maintenance. Owning a Townhouse Following a April 2012 rule change, there has been a lack of clarity around foreigners’ eligibility to own Townhouses in Singapore. Previously, Townhouses that were built together with other condominium units were classified as condominium developments and foreigners were allowed to buy such units. Under the new rule, new developments with both condominium units and strata landed townhouses would no longer be granted condominium status and foreigners would no longer be eligible to buy it unless they have been granted a special exemption by URA. These are extremely rare and newly built projects such as Hillsta, Seahill and eCO are among the very few Townhouse developments which can be purchased and owned by foreigners. As an asset class, Townhouses are also a good preserver of capital value. Over the past 10 years, Median Per-square-foot (“PSF”) prices of Townhouses have increased 5.1% p.a. (compounded) through-cycle. Even after the introduction of various cooling measures, prices have remained relatively resilient. Keep a lookout for new Townhouse developments Townhouse developments are few and far between. Resale units at ideal prices are also difficult to find given that there are limited units in the market. For those keen on Townhouses, you should definitely be on the lookout for new projects and developments. In particular, you might want to be on the lookout for Townhouse projects which you may one day be able to sell freely, to both Singaporeans and foreigners alike – in other words, look out for townhouses within approved condominium developments. There’s simply greater flexibility and negotiation leverage when you do decide to sell the unit. This in our view offers a slight leg up on other landed properties. An example of which is eCO, a Far East Organization’s development in Bedok South which is slated for completion in 2017. While eCO itself is a 750 unit development, it features 34 exclusive Townhouses, each with 2 dedicated carpark lots. Located within 1 Km of Temasek Primary School, it is also a short 5 mins walk from Tanah Merah MRT station. What’s really interesting is eCO’s “green” features which include vertical greenery and a community garden for residents to grow their own vegetables. You should also be excited to hear that the remaining eCO Townhouses are now for sale at affordable prices from S$2.98 million. Read more about eCo at DREA.sg http://www.drea.com.sg/web/sg-property/condos/485/ECO/

    Source: DREA

    Brexit Aftermath: Can you still get a loan for a Property in London?

    One of Singapore’s three homegrown lenders, United Overseas Bank (UOB), announced that it would be temporarily suspending loans to anyone wanting to buy property in London, citing uncertainty from Britain’s vote to quit the EU.

    UOB currently has the biggest share of loans for London property, among the top 3 Singapore lenders. UOB announced that it would monitor the market closely to determine when the loans would resume.

    Other Singapore banks are also advising their clients to be cautious over political and foreign exchange risks post Brexit as gains from an increase in the value of a property could be easily eroded by a depreciation in exchange rate.

    The remaining two homegrown lenders, DBS and OCBC, announced that they would continue to make financing available for London property purchases but indicated that they would be monitoring the situation closely. Thus far, the initial impact of the Brexit vote on the London property market has been mixed with some buyers scrambling to purchase properties while others have withdrawn from the market.

    Buyers have also rushed to renegotiate deals in the market. A number of high profile deals have proven to be at risk including the sale of Cannon Place in the city of London for approximately £465m and the acquisition of 1 Wood Street in the City.

    We expect Asian investors to continue to find the UK property market attractive in the near term on the basis of high liquidity. Nicholas Holt, Head of Research for Asia Pacific at Knight Frank also said “The significant drop in the value of pound could lead to an uptick of interest by Asian investors, who over the past few months have adopted a wait-and-see approach to the referendum and will now see their buying power increase”.

    The tourism market has also seen a boost as the weaker pound makes British goods and services cheaper. Searches by people for UK holidays began to surge after news of Brexit broke. We wouldn’t be surprised to see a surge in the number of Chinese and Middle East tourists to UK in the near term as their purchasing value increases.

    Source: DREA

    Guocoland bids $595m for Martin Place

    The tender for one of the prime residential sites released under the Confirmed List of the 1H2016 Government Land Sales programme was officially closed yesterday. The Martin Place site in River Valley is a 99-year leasehold site located close to the future Great World MRT station. The 171,535 sqft site has a maximum GFA of 480,307sqft which can potentially accommodate 450 condo units. The tender attracted interest from 13 bidders with the highest bidder, Guocoland bidding $595m. Guocoland which is controlled by Malaysian Quek Leng Chan, submitted the top bid at $1,239psf. This was slightly above the next bid of $588m by City Developments Unit Verwood Holdings, Hong Leong Holdings unit Intrepid Investments, TID Residential and Hong Realty unit Garden Estates. Nearby condominiums include Starlight Suites, Martin 38 and Oleanas Residence. Based on DREA’s analysis, condos between size of 500-1000 and 1000-1500 are the most liquid and leasehold condos within 1km of the site have historically transacted at a median price of $2,262psf to $2,635psf

    Source: DREA

    Exemption from TDSR?

    In our previous post, we discussed what Total Debt Servicing Ratio is and how it impacts you. In this post, we touch on how existing home owners may be able to seek exemption from the Total Debt Servicing Ratio requirement In 2013, after the introduction of the TDSR requirements, Monetary Authority of Singapore (“MAS”) started receiving significant feedback from existing borrowers who struggled to refinance their loans. At that point in time, many in the market had already committed to home purchases and mortgages that were well above the 60% limit.

    In February 2014, MAS announced that it would exempt residential property loan borrowers from the 60% TDSR limit so long as:
    • They can show that they purchased the property before 29 June 2013
    • They are the owner-occupier of the property

    Unlike previous cases, they also do not need to show that they do not own any other property or have any other outstanding property loan

    However, the above exemptions only apply to owner-occupied property. For property purchased for investment reasons, the TDSR limit will remain at 60%. For those affected, MAS has instead granted a concession by permitting them to refinance in excess of the 60% TDSR threshold, if they fulfil the following criteria:
    • Property was purchased prior to 29 June 2013
    • Borrower satisfies bank’s credit assessment criteria
    • Commit to a debt reduction plan at point of refinancing
    • Date of application must be before 30 June 2017

    These changes would help ease the debt burden of owners of residential private property and mitigate risk of forced sales in Singapore. Separately, based on DREA’s insights, we note that SIBOR rates are expected to gradually increase in the near term and with the application deadline approaching, it may be a good time to begin considering refinancing options


    Source: DREA

    What is Total Debt Servicing Ratio?

    TDSR, or commonly known as the Total Debt Servicing Ratio framework was implemented on 28 June 2013 to prevent buyers from becoming overburdened by debt due to property purchase. This framework replaces the former Debt Servicing Ratio of 50% that is used to determine the amount of income that can be spent on servicing debt.

    How does TDSR work? Read on

    TDSR works by limiting the amount of loan you can obtain to 60% of your gross monthly income less your total monthly debt obligations. For individuals earning variable income (e.g commission based professionals, business owners or landlords), the TDSR will apply a 30% haircut on your gross monthly income before taking into account your monthly debt obligations

    Let's see how this works out

    Assuming that your current gross monthly income is S$8,000
    The total amount you have available to service all your debts monthly is S$4,800 (60% X S$8,000 = S$4,800). This however assumes that you have no existing monthly debt obligations. If you have monthly debt repayments of $1,500, this means your income available for mortgage repayment is $3,300. Assuming a stress-test interest rate of 3.5%, this means the maximum home loan you will be able to take is ~$730,000

    What can you do if you exceed the 60% TDSR Cap?

    1. Consider repaying some of your outstanding loans to reduce your monthly debt obligations
    2. Adjust the loan tenor or reduce the loan quantum until you are below the required 60% threshold
    3. It may be possible to seek an exemption from the bank, however this is subject to approval

    Exemptions
    Borrowers can potentially seek exemption from the TDSR framework if you currently occupy the property and you do not own any other property or property loans

    In theory, the use of TDSR is designed to impact individuals who have borrowed heavily for other reasons. So for those looking to buy private property in the near term, we would recommend holding off on all major purchases until then.

    Source: DREA

    DREA's Take on Gem Residences

    More than 50% of Gem Residences' units have been snapped up ahead of its public launch, marking one of the highest launch take-up rates in recent years. The strong sales were largely attributed to the prime location, demographics in the area and its 24-hour concierge service.

    Based on DREA's Insights, its planning area, Toa Payoh, has seen real HDB upgrading demand with almost ~10% increase in the number of residents residing in condominiums in the last 4 years. This segment represents 7% of the total population in the planning area and is lower than the average of 19% across 55 planning areas in Singapore. This is in contrast to areas like Bukit Batok, where 18% of its population reside in condos.

    We also see limited supply risk for Gem Residences in the next 4 years with limited new developments in the next 2 years. Units sold at the VIP launch were sold at an average of $1,426 psf, slightly higher than the leasehold prices in the area of $1,062psf - $1,365psf in the last 12 months, yet slightly lower than prices of new projects in Alexandra (>$1,600psf) and Bishan (>$1,500psf). We have seen limited new developments in Toa Payoh in recent years, and this could be an attractive option for those who seek city-fringe convenience and luxury living at a price that is still slightly lower than new projects in comparable areas.

    Source: DREA

    Most Popular Condo in April

    We reveal the most popular condo last month and how it managed to sell over 40% of its 305 units during its VIP preview. Sturdee Residences, developed by Sustained Land, emerged as the most popular condo last month with highly encouraging sales numbers.

    Located along Jalan Besar, Sturdee Residences is a Leasehold development expected to TOP in 2019. Most of the units were one and two bedroom units and were transacted at a price range of $1,500 PSF - $1,800 PSF. Based on DREA’s Insights, one and two bedroom units have the highest rental liquidity in the area. The strong demand also validates the appetite for city-fringe projects with good train connectivity and accessibility. Given the strong sales response, the developer has been considering a slight adjustment in the selling prices.

    Source: DREA

    Property Investors – What should you be looking out for?

    By profiling the various rental segments in Q1 2016 across bedroom types and districts, DREA has identified the Top 8 most resilient rental segments that offered its investors both positive rental rate growth and rental volume growth in the last quarter.

    DREA’s Top 8 most resilient rental segments in Q1 2016 are:
    - 1 bedroom units in District 4 (Harbourfront)
    - 2 bedroom units in District 18 (Pasir Ris / Tampines)
    - 2 bedroom units in District 2 (Chinatown / Tanjong Pagar)
    - 2 bedroom units in District 23 (Bukit Batok / Bukit Panjang)
    - 4 Bedroom units in District 16 (Bedok / Upper East Coast)
    - 4 Bedroom units in District 9 (Orchard / River Valley)
    - 4 Bedroom units in District 5 (Buona Vista / West Coast / Clementi New Town)
    - 4 Bedroom units in District 22 (Boon Lay / Jurong / Tuas)

    Property investors would likely exercise caution for rental segments such as 1 bedroom units in Upper East Coast and 3 bedroom units in Eunos / Geylang where rental rate and rental volume has been decreasing

    Source: DREA

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