Singapore - Housing 01 (May 08 - Oct 08)

[memphisb]

Thanks mates. It sure sounds like a simple method of generating alternative passive income. I do not believe it is as simple as it sounds frankly.

Risks involved
1. Unable to lease out the property (cashflow of auto generating loan payment from rental income)
2. Involves alot of sunken cash for first payment(20 % for est $700k condo) and sequent loan payment
3. Need to have a extra roof overheard (in this case, a hdb. Perfect if its fully paid up. Otherwise more risk with 2 loans to clear)
4. Admin charges.
5. Heavier property tax

The reason I am assessing this because presently I am living with my folks with the hdb fully paid up and in future I would take care of them. So besides investing, another could be as describe above. Anyone else has done something similar and able to share?

[caseyc]

no restriction on this. but you would have to stay in the HDB flat; ie.you wont be allowed to stay in that private housing and rent out your hdb flat

Yes, this is correct for the 1st 3 (or 5, depending on your loan/CPF usage conditions) years. After that, u can apply to HDB to lease out the whole HDB while staying in your private.

If you're keen on private property investment, u may want to check out the skyscrappercity forum. A number of the local gurus (less mortgage brokers )hang out there:

http://www.skyscrapercity.com/forumdisplay.php?f=399

[blid2def]

Oh... can do this liao? Since when did they approve this ah?

[memphisb]

no restriction on this. but you would have to stay in the HDB flat; ie.you wont be allowed to stay in that private housing and rent out your hdb flat

Yes, this is correct for the 1st 3 (or 5, depending on your loan/CPF usage conditions) years. After that, u can apply to HDB to lease out the whole HDB while staying in your private.

If you're keen on private property investment, u may want to check out the skyscrappercity forum. A number of the local gurus (less mortgage brokers )hang out there:

http://www.skyscrapercity.com/forumdisplay.php?f=399

thanks I will have a look once I am free. And good to see fellow ex WS forumers hanging around

[kennynah]

Oh... can do this liao? Since when did they approve this ah?

GR, this is true... HDB usually will agree...you just need to good story...and apply that thru the town council...

[winston]

From CIMB:-

Where are we now in terms of valuations? Share prices of Singapore developers have fallen 33% YTD vs. a 22% fall in the FSSTI in the same period. As investors continue to search for the bottom amid increasingly bearish outlook in the property
sector, we turn to history as guidance on current valuations. While RNAV discounts and P/B ratios of some of the small-mid cap developers are starting to enter territories unseen in the last decade, we estimate, big cap property stocks are now
trading at 30-40% discounts to their RNAVs, still far off from the 55-80% discounts to RNAVs in 1997-98 and 45-55% discounts to RNAVs in 2003. Based on historical trough levels, we think valuations in the sector may not have bottomed-out yet.

• Share prices imply hefty declines in physical prices. Assuming:-
1) commercial property values fall by 30-40% to levels witnessed during the SARs outbreak in 2003 and
2) physical prices in other regional markets such as China and Vietnam de-rate by another 30% from current levels, we estimate that current valuations are implying a 25-60% fall in ASPs. For some of the purer developers under our
coverage, ASPs implied by current share prices for their respective landbanks have fallen below development costs, based on our estimates. Stocks that are trading below equity values include Allgreen, Hobee, UOL and Wheelock.• However, share prices may not reflect all of the bad news yet. While stock valuations have taken a beating, physical prices have remained somewhat resilient amid very thin transaction volumes. As stock markets are typically forward-looking,
more downside can be expected if physical prices begin to free fall. We believe more potential bad news on the worsening global economy and unwinding of speculative interests of properties could continue to weigh down on the sector. So far, we believe there haven’t been many cases of panic selling as yet. We believe the test will come in 2009 when more projects receive TOP status.

• Wholesale upgrade looks premature now, take selective bets instead.
Valuations for property stocks are looking cheap at the moment. However, with the lack of visible re-rating catalysts coupled with the possibility of more bad news to come, we continue to maintain our Neutral stance on the sector. With the market
still searching for the bottom, we suggest investors pull the trigger wholesale on property stocks only when valuations in the sector draw closer to historical trough levels in the near term. In our coverage universe, we continue to favour property
stocks with strong balance sheets and proven management capabilities in the past.

CityDev remains our top pick in the sector. Trading at historical trough valuations, Hobee and Wheelock continue to be our preferred picks in the small-mid cap space.

[winston]

From DBS:-

Pre-dawn showers

Grave Expectations: Singapore property developers unveiled 1H08 results that were largely in-line or below expectations, mainly on the back of slower sales and moderated increases in revaluation gains.

Macroeconomic factors have deteriorated in recent months despite a pick up in physical property sales from the trough in the first quarter of 2008, and burgeoning fears of significantly slower global growth have emerged more strongly, suggesting that a recovery may be more drawn out. Added to this, DBS economists have recently downgraded Singapore’s GDP growth forecasts from 5.1% to 4.2% for 2008 and from 6.8% to 5.6% for 2009.

Turning Back Time: While we believe market environment in Singapore are nowhere near conditions seen in previous cycle, uncertainties over global market circumstances in the next 6-12 months would mean investors are likely to remain very risk averse and would likely look to price stocks on trough conditions as a measure of downside risks from hereon.

In this respect, we look at the 2001-2003 equity and property downcycle as the most comparable to current climes as the downturn was the result of external factors, which dampened foreign investments into Singapore as well as our GDP growth given Singapore’s open economy. In addition, we have changed our office and hotel valuation assumptions to reflect bottom cycle conditions. Even under these assumptions, stocks appear inexpensive, trading at 34% discount to trough RNAVs.

The Future For Free: Our 12-month sector call remains optimistic as we believe the medium term fundamentals of the Singapore economy remain robust, and it is likely to reap the fruits from its ‘remaking Singapore’ efforts. Our strategy would be to advocate stock selection, preferring the large caps such as City Dev, which has resilient core earnings as well as a cheap landbank across all the market segments; and bombed out mid- and small-cap stocks such as Allgreen and Ho Bee, the latter of which has locked in a good portion of its earnings for FY09.

[winston]

Singapore Property - JPMorgan said in a report on Tuesday that Singapore property stocks should underperform their Hong Kong counterparts in the short term. The firm said it preferred developers to real estate investment trusts (REITs) as the latter face ongoing fund-raising issues and higher financing costs.

City Developments was the top pick in the sector due to its substantial domestic exposure.

[millionairemind]

Just TOL - Is the property market is such dire straits and the banks so desperate that they are coming out with such measures to boost consumption???

Published September 2, 2008
Now, deferred payments with a twist
Credit-worthy buyers offered loans with no interest and instalment payment until TOP
By SIOW LI SEN

(SINGAPORE) The deferred payment scheme may have been banned, but something strikingly similar is doing the rounds to help developers sell their properties.

The interest absorption scheme (IAS) and the zero instalment scheme allow the buyer to make a 20 per cent downpayment - and then pay nothing until the temporary occupation permit, which may still be up to three years down the road.

Maybank, OCBC Bank and United Overseas Bank (UOB) are currently offering the scheme. Standard Chartered Bank is launching it soon, according to Dennis Khoo, its general manager of lending. Interestingly, DBS Bank has decided to stop offering such schemes.

The deferred payment scheme was banned by the government last October to dampen excessive speculation. It was offered by buyers and you did not even have to qualify as a borrower to buy property worth millions of dollars - as long as you had funds for the downpayment.

Under the new schemes, the buyers have to sign up to a bank loan for the property. 'The buyer has to be credit-worthy,' said Nicholas Mak, Knight Frank's director of research and consultancy. Once the creditworthiness is established, the buyer pays nothing more till TOP. During that period, it is the developer that pays interest to the bank, under the IAS.

Some small projects such as Chepstow Ville and Lynwood Grove are practically sold out after resorting to the IAS. However, the developer of another project who asked not to be named said the IAS has not helped his sales and he thinks it is the pricing that could be critical.

DBS Bank used to offer a zero instalment home loan scheme until TOP to buyers. The results were not always clear-cut. At the preview period of the 724-unit Livia, 160 units were sold in early July when DBS Bank offered a zero instalment home loan scheme. Subsequently, sales at the Livia slowed down and by end-July, it had sold 301 units, according to the latest data from the URA.

DBS said that the bank no longer offers the scheme. 'We had targeted the HDB upgraders on a project-by-project basis,' said Koh Kar Siong, DBS' head of deposits and secured loans. Some observers say such schemes could come back to bite the banks if the value of the properties fall. Last month, Citi analyst Wendy Koh said she expects a 20-30 per cent price correction for high-end properties from their recent peak, and reckons the mid-tier is likely to decline 10-20 per cent.

Said Helen Neo, Maybank Singapore head of consumer banking: 'Our credit assessment policy has always been to ensure that the buyer has the capacity to repay. It boils down to repayment capability.'

Kevin Lam, UOB head of loans, said the assessment of the customer is key. 'If the profile of the customer is good for a regular loan, he is good enough for this.' He also noted that the risks to the developer is lower with the IAS because the bank will disburse the loan to the developer according to the progressive payment schedule during construction. 'Unlike the deferred payment scheme, the developer gets no money from the buyers during the construction period.'

Gregory Chan, OCBC Bank head of secured lending, noted: 'Under the interest absorption scheme, the bank will not be exposed to additional risk as loan applicants are assessed based on their ability to repay both the principal and the subsequent instalments.'

[ishak]

Singapore Property
03 Sep 2008

Lehman Brothers downgraded the Singapore property sector to "neutral" from "positive" on Wednesday, and said a near-term economic slowdown was likely to hamper private housing and office markets over the next 12 months. It prefers real estate investment trusts (REITS) to developers, and cited Suntec REIT and CapitaLand as its top picks.