Singapore - Housing 01 (May 08 - Oct 08)

[-dol-]

Hi Lena,

If the statistic is reliable, it does seem that Singaporeans are under-leveraged (compared to the Americans!).

On further thought, it is probably not surprising. From my conversations with people (may not be a very representative sample), it seems that Singaporeans generally abhor debt. I know this fellow who is so aggressive in chanelling all his available cash toward repayment of his freehold landed property that I think he will attain nirvana when he becomes totally debt-free.

He belongs to the group (and it seems like a big one) who distrust stocks and only believe in solid stuff like cash and bricks & mortars. It also seems to be common for many HDB dwellers to want to pay down their debt as soon as possible despite the very low rates that they are incurring on a long-term perspective - not a bad idea if one can lose double-digit in the market but "sure-win" if one no longer need to incur 2.6% p.a. interest.

If the motivation is to be debt-free, I am not so sure that it will be the motivation of these people to take on another debt when they have spent a significant time of their early productive life to service the first debt. It does not seem very fun working so hard to pay down debt with no end in sight - if the idea is to get the 2nd/3rd/4th property... It's like working very hard to earn mega bucks but having no time to spend them...

[iam802]

The statistics may not track whether people have investments in oversea properties.

So, that is something to think about as well.

[LenaHuat]

Hi dol

At last U've found us here! A very warm welcome to U .

I'm not sure Singaporeans generally abhor debt (look at the no of young bankrupts due to misuse of credit cards, visitors to the debt counselling centre and the leverages taken out on renovation loans & car loans & property loans) BUT it is certainly obvious that we are less leveraged than the average American. That's a great saving grace.

The 2nd saving grace is what U had written abt : "The determination to speedily pay down debt quickly". Your friend and I share this similar experience of attaining nirvana when we fully paid up our first property loan. My rationale for this is "loss aversion" as aptly described by Prof Daniel Kahneman but with a different twist. In this case, the pte housing loan is a certain liability (tenure and sum) and the opportunity cost of foregone investment returns is only an expectation. The pain of losing a property outweighs the joy of potentially winning investment returns However, if the loan taken out is a direct HDB loan, I might consider otherwise.

Abt this bit :

If the motivation is to be debt-free, I am not so sure that it will be the motivation of these people to take on another debt when they have spent a significant time of their early productive life to service the first debt. It does not seem very fun working so hard to pay down debt with no end in sight - if the idea is to get the 2nd/3rd/4th property... It's like working very hard to earn mega bucks but having no time to spend them...

I've travelled along this path too. 2day's Sunday Times quoted the UOB Life Assurance Chief as saying that he believed 80% of the rich got wealthy through property transactions. So, leave your options open.

Hi iam802
It definitely does not include overseas properties unless the buyer took up a local bank loan to service an overseas property.

[kennynah]

maybe, as 802 pointed out, many singaporeans already spent their investable money buying up overseas properties...so dont wanna overcommit on singapore properties? afterall, it's not as if our properties are that cheap here...

[-dol-]

Thanks Lena!

Indeed, many have become wealthy through property investments. Also, the leverage involved meant that a smart purchase can pay off very well. I personally know more people who have done well in properties than in stocks. Perhaps that explain why there is still relatively good interest in the recent property launches like Clover, Dakota and Livia. Singaporeans love their properties and cars!

[LenaHuat]

Hi dol
Yes, indeed.

Hi K
These statistics came from the local credit bureau and so I rather infer from 'noise' or what was disclosed. Like I hve often said : what's left unspoken, unwritten, ungathered is often more N.B. than what was.
U could be right but it's difficult and often dangerous to infer from 'silence'.

[kennynah]

L : concur

[winston]

Bad news coming out of the United States last week took its toll on property sales in Singapore over the weekend. Two newly released projects sold fewer than 20 units each, as homebuyers' caution deepened after the collapse of U.S. bank IndyMac and the forced rescue of mortgage giants Freddie Mac and Fannie Mae.

[LenaHuat]

With these current spate of bombings in India, Pakistan and Turkey, I wonder if more rich will uproot their young families to settle in SAFE Singapore. If so, that's going to be the bright spot for local developers.

[millionairemind]

I think the property prices peaked last year and is on its way down... Supply might be overwhelming demand soon...

July 27, 2008
Record 13,400 homes to be completed next year
Rents expected to fall, especially in prime districts and East Coast. Fiona Chan reports.

Next year is likely to be a bad one for landlords.
A bumper crop of newly completed homes is scheduled to flood the market, making more apartments available for rent and pushing down rents, which saw record rises last year.

And with lower rents, private home prices - which industry observers say have reached their peak - may drop further, especially those in the prime districts.

A massive 13,399 new private homes will be ready for occupation next year. This is double the average in recent years and the most in a single year, according to property consultancy CB Richard Ellis (CBRE).

Official supply numbers show 10,500 completions next year and 11,800 the year after, but CBRE's analysis, based on construction progress and delays, reveals more completions next year.

It expects this new supply to depress rents by 5 to 10 per cent on average next year, coming on top of a global economic slowdown that might lead firms to hire fewer expatriates, the main source of tenants.

In the prime areas, rents could slide up to 15 per cent next year, on top of a decline that has already begun this year, predicted CBRE.

Popular rental areas such as the East Coast and Orchard will be among the worst hit as keen demand for homes there in recent years led developers to build aggressively.

An 'alarming' 3,341 new homes will be completed in the East Coast next year, double the number this year, CBRE said. Major projects in the area, which covers Katong and Marine Parade to Bedok and Changi, include the 562-unit One Amber and the 556-unit Casa Merah.

In the prime districts 9, 10 and 11, some 4,240 homes will be ready in areas such as Orchard, Holland, River Valley, Tanglin and Newton. RiverGate, with 545 units, is the biggest condominium scheduled to open its doors.

Suburban areas will also see a large jump in finished homes next year. In the north and north-west, for example, there will be 10 times more than this year.

But this is unlikely to result in a glut or lower rents as most suburban home buyers intend to occupy their units.

Property experts warn that many major prime projects to be ready this year and next are those that had attracted investors rather than owner-occupiers, which means their units will add to the rental supply.

'Some big condos in the downtown areas have a higher proportion of investors,' said Mr Colin Tan of property firm Chesterton International. These include the 1,111-unit Sail @ Marina Bay, which will be fully completed by the end of this year, and the 312-unit Clift in McCallum Road, expected next year.

'We don't even have to wait for the 14,000 homes next year; rents are already moderating and should come down in the third quarter,' he said, adding that landlords are lowering their asking rentals.

He cited the case of The Sea View in Amber Road, whose 546 units were completed this year. 'I asked someone there, how are the rents? He said: 'I'm not sure really, there's no demand'.'

This will be welcome news for renters, who have had to face ever-increasing rents over the last two years.

Rents have shot up 60 per cent on average since 2006 and even doubled in some places, thanks to an influx of expats and a shortage of rental homes.

For example, in Cuscaden Residences in the Tanglin area, a typical 1,485 sq ft unit could fetch $9,200 in monthly rents last year, from about $6,500 in 2005. This year, it has fallen to $8,100, according to recent reports. Next year, it could fall by another 10 per cent to $7,300, if CBRE's predictions come true.

Entrepreneur Sebastien Dechamps, 29, who came here from France three years ago and started a website for expatriates, said high rents have seen more expatriates moving away from the city to places in the north and the east.

'The fall in rental prices is definitely good news. It might encourage expats to move to the city, which is great because they can put more vibrancy back into the city and into its nightlife,' he said.

A fall in rentals generally leads to a fall in home prices for two reasons: landlords, less able to service their mortgages, are willing to let go of their units more cheaply, while would-be investors will only pay as much as a home can fetch in rents.

The supply situation is not likely to improve beyond 2010: The latest official data shows that apart from the 21,000 or so homes to be completed over the next two years, there are another 20,000 homes scheduled to be built in 2011.

But Savills Singapore's director of business development and marketing, Mr Ku Swee Yong, is still optimistic.

He expects higher than average housing demand during 'the next few years of growth', and believes that after accounting for demolitions of collective sale estates, the 'net supply should be balanced by demand'.