Monday, October 4, 2010

Overview of Singapore's Property Market in the Next 6 Months

There has been a steep recovery for property prices in the past few months. Looking ahead, investors are faced with two questions: what can be expected of the property market in the next 6 months and what does it mean for them?

According to our in-house indicators, property prices will continue to increase, but only in moderation. The sustained increase in property prices can be attributed to several factors, one of which is the general positive outlook on the economy in Singapore and in Asia. Singapore's economy grew a robust 15.5% on a year-on-year basis in Q1 2010; meanwhile the Ministry of Trade and Industry (MTI) projects a healthy 7% to 9% GDP growth in 2010. These indicators point toward an economy on the up-swing and possibly better job prospects, thus fuelling demand in the property market. In fact, according to URA, the volume of transaction for private homes increased 25% in April from March to 2207 units. Also, a recent poll by PropertyGuru shows that 70% of potential homebuyers will purchase a property in the next 24 months, evidence that homebuyers' demand for property can still be sustained for the next 2 quarters.

Another factor contributing to the sustained increase in property prices is the recent opening of the two Integrated Resorts (IRs), Resorts World Sentosa and Marina Bay Sands, which casts a spotlight on Singapore and serves as a catalyst in attracting potential global investors to Singapore's property market. It is hopeful that these investors are suitably impressed with Singapore's sound infrastructure and political stability and want to invest here, hence fuelling demand for luxury residential and commercial projects and pushing up property prices.
We might also consider the recent opening of MRT stations on the Circle Line as a contributing factor, as they serve to increase the value of residential homes nearby.
However, one should note that this sustained property price increase will only occur in moderation due to several downside factors, one of which is the Eurozone Greek debt crisis. Given the uncertainty faced by the European economy and its domino effects on the global economy (and subsequently the Singapore economy), investor confidence might be rattled. Doubts cast on job stability could force investors to reconsider purchasing a property, easing demand on property and dampening any excessive price increase.

Another factor that might impede the growth of property prices is the anti-speculative measures introduced by the government in September 2009 and February 2010 to prevent the property market from over-heating. These measures have since gained traction and serve to stem excessive growth of property prices.

To conclude, property prices have been on the rise and will continue to be, albeit in moderation, due to an uncertain global economic outlook attributed to the Eurozone Greek debt crisis and anti-speculative measures implemented by the Singapore government. We feel that a conservative stance should be adopted and advise investors to tread with caution because the investment objective of capital appreciation might not be substantially met. However, this does not entirely rule out the possibility of investing in property for the next 6 months. Long term investors such as homebuyers or investors banking on rental income may still consider the option of purchasing property.

(ArticlesBase SC #2531030)


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Ascendant Assets - About the Author:
The above article is written by Tan Shu Xian, an intern with Ascendant Assets Pte Ltd. Shu Xian is currently in her third year of study at National University of Singapore (NUS), Faculty of Science.



Singapore Property Cooling Measures

Will Singapore Property Cooling Measures Work?
The Government announced the following measures to maintain a stable and sustainable property market:
1. Increase the holding period for imposition of Seller's Stamp Duty (SSD) from the current 1 year to 3 years (the 1-year SSD was imposed only in February 2010).

The stamp duty levied on residential properties stays at 3% of the selling price less S$5,400 for properties sold within one year. However, for properties sold in the second year, the rate is 67% of this 3% stamp-duty rate. Sellers of properties within the third year of purchase will incur 33% of the 3% rate.

Presumably, most investors of a second private property will seek financing for their purchase. For these buyers, the new measures will lower their future Return on Equity (assuming sale within three years) as the benefits of cheap leverage from current low interest rates are significantly reduced. Some have commented that the SSD resembles a capital gains tax.

For property buyers who already have one or more outstanding housing loans at the time of the new housing purchase:

2. Increase the minimum cash payment from 5% to 10% of the valuation limit;

This means the amount of CPF monies plus housing loan that can be used for purchase of a property will be reduced from 95% to 90%.

3. Decrease the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS to these buyers from the current 80% to 70%.

If you consider a $1m home, you have to pay $100k in cash and can borrow up to $700k of housing loans. The remaining $200k will be from CPF/cash.
In addition, the HDB announced some additional actions that are aimed at increasing public housing supply and dampening demand from those not in urgent need of housing.
The HDB announced measures to:
1. Increase the supply of new HDB flats, Design, Build and Sell Scheme (DBSS) flats, and Executive Condominiums (EC);
2. Allow households earning between $8,000 and $10,000, to buy new DBSS flats with a $30,000 CPF Housing Grant;
3. Shorten the completion time of Build-To-Order (BTO) flats;
4. Increase the Minimum Occupation Period (MOP) for non-subsidized HDB flats from 3 years to 5 years; and
5. Disallow concurrent ownership of both HDB flats and private residential properties within the MOP.

Previously, buyers who owned non-subsidized HDB flats could own private properties during the minimum occupation period, as long as they lived in the HDB flats. This was also true vice versa. Buyers of subsidized HDB flats, however, are now not allowed to own private residential properties within the 5-year minimum occupation period. The change in ruling appears aimed at addressing the disparity in the treatment of the two groups and provide more help for first-time home buyers of public housing.

The HDB measure to lengthen the MOP and the concurrent ownership of private residential properties during the period will likely restrict investment demand for HDB resale flats as well as in the upgrader, mass-market segment.

The changes in HDB rules will also affect demand. A record 22k HDB flats will potentially be released in 2011 to satisfy demand. For 2010, HDB plans to release 3k units of design-build-sell (DBSS) flats and 4k executive condominiums for tender. Owners of non-subsidized HDB flats are also now barred from buying private properties within the minimum occupation period. While the purpose is to ensure HDB flats are purchased for owners' stay, the latest measure appears to preclude buyers currently living in resale HDB flats for less than five years from investing in private properties for rental yields too. Based on URA estimates, around 40% of the buyers of new private units have HDB addresses.


Not Yet The Peak of Policy Risks

The Government has repeatedly warned that more measures would be introduced if the froth in property prices does not abate. This set of measures is further demonstration of its willingness to take steps to ensure a sustainable property market. CIMB Research writes "if prices and volumes continue to climb, we believe other measures could include: 1) extending the 70% LTV limit to first-time buyers with no outstanding loans; 2) a capital-gains tax; and 3) credit restrictions for foreign buyers." Daiwa Capital Markets Research believes that if "the market continues to remain buoyant (with price increases of over 5% per quarter), we should expect even more severe measures".


Speculator Standpoint

While this latest regulation seems to be a "mild warning" especially for HDB speculators, it is uncertain if it can halt the bull run of the private property market for the following reasons:

1. Increase in foreign demand resulting from Singapore's push into the international scene with the Youth Olympic Games, Formula 1, Casinos and new tourist attractions. More and more foreigners are bringing their children to study in Singapore; evident from the rise in foreign children in our public school classrooms. We are also attracting foreign talent/workers across the economic value chain. All these will increasingly spur the demand for private property on our sunny island.

2. HDB is clearly a disadvantaged asset segment (compared to private property) with a 5 year holding period, slower capital appreciation, restriction on rental, and restriction on multiple property holdings. This may cause investors, assuming they are still bullish on property, to shift their capital to the private property segment in the near term. Fueling this trend will be genuine homebuyers who can afford private property, and who choose to give up "starting out" with a subsidized HDB to enjoy the freedom of private property from the onset.

(ArticlesBase SC #3219845)


Read more: http://www.articlesbase.com/real-estate-articles/singapore-property-cooling-measures-3219845.html#ixzz11SpWDI3D
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Glenn Ho - About the Author:
AsiaPacFinance.com is an online resource for financial information/news and investment education, with primary focus within the Asia Pacific region:
http://asiapacfinance.com/

Learn to Invest:
http://asiapacfinance.com/video



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Saturday, October 2, 2010

The Base

By mathakoz Prakard.com