Saturday, December 20, 2008
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JUST how vulnerable is Singapore’s :souring economy to a wave of defaults from private home buyers who had made use of the popular Deferred Payment Scheme (DPS)?
.
:It’s a question that continues to split analysts, even as the Urban Redevelopment Authority (URA): on Friday released, for the first time, data on private homes sold under the DPS, a decade-old plan scrapped in October last year.
.
To “provide transparency”, the agency revealed that 10,450 uncompleted private homes had been sold under the scheme as at end-November.
.
As the DPS tends to be used by speculators, the data breakdown reflects the potential number of homes that could be returned to developers, should buyers fail to secure financing by the time a project is completed and receives the Temporary Occupation Permit (TOP).
.
For many, D-day approaches: Most of the units — 4,560 — will be ready next year, followed by another 2,540 units in 2010.
.
With these two years likely to be weighed down by a global economic slump, buyers with shallow pockets will have difficulty coughing up the bulk of the price tag by the TOP date, especially as banks have become tight-fisted. If the purchase falls through, units will return to the market, possibly depressing prices.
.
To Chesteron Suntec International research director Colin Tan, the statistics paint a grim picture.
.
“If we assume all the people buying under DPS meant to flip, the 4,560 units represent one year of supply for a bad year. It’s bad,” Mr Tan told Today.
.
Only 4,000 to 5,000 new private homes are expected to be sold this year, he said, way below last year’s 14,800.
.
Under the DPS, the downpayment is :only 10 to 20 per cent of the unit’s price and the customer makes no other payments during the construction period — typically two to three years — until completion. The arrangement appeals to speculators who, during boom time, made just a small payment upfront and managed to “flip” the unit for a quick buck before the TOP date.
.
:Some feel the DPS may create a local version of a sub-prime meltdown. Will the market soon be flooded with desperados cancelling purchases or defaulting? Developers are putting up a brave front.
.
:“We note that DPS cases will peak in 2009. These units would have been purchased in 2005/6 before property prices peaked in late 2007. As the purchase prices of these units are likely to be below current market price, we are confident that such property purchasers will want to proceed with completion of ====:their sale, upon their unit’s grant of the TOP,” the Real Estate Developers’ :Association of Singapore (Redas) said in a statement.
.
:Redas also stressed that buyers have no right to cancel sale-and-purchase agreements; only the developer does. So if the buyer fails to adhere to the contract, the developer could not only keep the downpayment but also demand claims and resell the property.
.
:Redas did not say if their members were witnessing an increase in customers asking to repudiate contracts.
.
:According to Knight Frank director of consultancy and research Nicholas Mak, people who bought units outside the Core Central Region – plum areas including Orchard and Sentosa – are “less at risk of default because a relatively higher proportion of these homes were bought for owners’ occupation”.
.
:Two-thirds of the unfinished homes bought on DPS are outside the Core Central Region.
.
:In the first place, said Savills Singapore director of marketing and business development Ku Swee Yong, DPS customers do include genuine home buyers, not just speculators.
.
:Mr Mak said even if the property market weakened further next year, homebuyers collecting their keys “could either lease out the homes at relatively good returns or sell the homes at their breakeven level or with a profit”.
.
:As for those taking delivery in 2010, they are unlikely to be pressured to sell at distress prices as “we expect the property market to stabilise in 2010 and may show some signs of recovery”:.
CNA 20 Dec 2008
May also want to read:
99 Leasehold Property: Calculation of Depreciation Rate based on Singapore Land Authority Data
Spore Property History 1960-2008
Property Investment Tip: Don't put all your eggs in one basket
HDB Resale Price Index 1990-2008: Graph & Chart
D-Day for homebuyers
7,100 units ready in next two years, buyers may face difficulties: AnalystsJUST how vulnerable is Singapore’s :souring economy to a wave of defaults from private home buyers who had made use of the popular Deferred Payment Scheme (DPS)?
.
:It’s a question that continues to split analysts, even as the Urban Redevelopment Authority (URA): on Friday released, for the first time, data on private homes sold under the DPS, a decade-old plan scrapped in October last year.
.
To “provide transparency”, the agency revealed that 10,450 uncompleted private homes had been sold under the scheme as at end-November.
.
As the DPS tends to be used by speculators, the data breakdown reflects the potential number of homes that could be returned to developers, should buyers fail to secure financing by the time a project is completed and receives the Temporary Occupation Permit (TOP).
.
For many, D-day approaches: Most of the units — 4,560 — will be ready next year, followed by another 2,540 units in 2010.
.
With these two years likely to be weighed down by a global economic slump, buyers with shallow pockets will have difficulty coughing up the bulk of the price tag by the TOP date, especially as banks have become tight-fisted. If the purchase falls through, units will return to the market, possibly depressing prices.
.
To Chesteron Suntec International research director Colin Tan, the statistics paint a grim picture.
.
“If we assume all the people buying under DPS meant to flip, the 4,560 units represent one year of supply for a bad year. It’s bad,” Mr Tan told Today.
.
Only 4,000 to 5,000 new private homes are expected to be sold this year, he said, way below last year’s 14,800.
.
Under the DPS, the downpayment is :only 10 to 20 per cent of the unit’s price and the customer makes no other payments during the construction period — typically two to three years — until completion. The arrangement appeals to speculators who, during boom time, made just a small payment upfront and managed to “flip” the unit for a quick buck before the TOP date.
.
:Some feel the DPS may create a local version of a sub-prime meltdown. Will the market soon be flooded with desperados cancelling purchases or defaulting? Developers are putting up a brave front.
.
:“We note that DPS cases will peak in 2009. These units would have been purchased in 2005/6 before property prices peaked in late 2007. As the purchase prices of these units are likely to be below current market price, we are confident that such property purchasers will want to proceed with completion of ====:their sale, upon their unit’s grant of the TOP,” the Real Estate Developers’ :Association of Singapore (Redas) said in a statement.
.
:Redas also stressed that buyers have no right to cancel sale-and-purchase agreements; only the developer does. So if the buyer fails to adhere to the contract, the developer could not only keep the downpayment but also demand claims and resell the property.
.
:Redas did not say if their members were witnessing an increase in customers asking to repudiate contracts.
.
:According to Knight Frank director of consultancy and research Nicholas Mak, people who bought units outside the Core Central Region – plum areas including Orchard and Sentosa – are “less at risk of default because a relatively higher proportion of these homes were bought for owners’ occupation”.
.
:Two-thirds of the unfinished homes bought on DPS are outside the Core Central Region.
.
:In the first place, said Savills Singapore director of marketing and business development Ku Swee Yong, DPS customers do include genuine home buyers, not just speculators.
.
:Mr Mak said even if the property market weakened further next year, homebuyers collecting their keys “could either lease out the homes at relatively good returns or sell the homes at their breakeven level or with a profit”.
.
:As for those taking delivery in 2010, they are unlikely to be pressured to sell at distress prices as “we expect the property market to stabilise in 2010 and may show some signs of recovery”:.
CNA 20 Dec 2008
May also want to read:
99 Leasehold Property: Calculation of Depreciation Rate based on Singapore Land Authority Data
Spore Property History 1960-2008
Property Investment Tip: Don't put all your eggs in one basket
HDB Resale Price Index 1990-2008: Graph & Chart
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3 comments:
I must disagree with all the comments made by those above, obviously they must have vested deeply into Singapore property, smart buyers out there pls be wise and see for yourself in the next 2 years, it will be interesting to re-visit the above comments in june 09 and laugh at how absurd and optimistic these people are. Things will be very much worst than we can imagine, pls buyers out there, use your own judgement, no gurus are as good a guru as yourself!!
i think this coming property downturn will be the worst in Singapore history - over-bloated bubble building up from the global tsunami
World-wide economy will implode next year due to:
1) Economy depression in the US resulting from excessive leverage consumptions (there may be as such as 4 trillion US$ of sub-prime mortgages that became bad debts).
2) Countries that produce goods and services for the US (e.g. China, India, Japan, etc) will also go into a very bad slump due to diminished demands from the US. [e.g. Toyota making first operating loss in 7 decades]
3) Commodities producing countries such as Australia, Brazil, Russia, Arab will be hit very badly as if production goes down, raw materials (especially industrial commodities such as Iron Ore, Steel, Nikel, Zinc, Tin, Lead, Copper, etc) and energy (oil, gas, etc) requirements will also dive due to demand destruction.
All of the above will lead to a vicious cycle downwards in the economies.
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This is my humble suggestions:
1) Sell your private property (if it is your 2nd, 3rd, Nth ones), and downgrade to a HDB 4 room flat for the time being. The price of private property right now is SOFT but have not collapsed yet. It will collapse and bottom up in 2012 (property downturn is slower than stock market and people usually want to hold up as long as they can in their beautiful home). So, sell now and buy another one later at a much much cheaper price.
2) Reduce leverage (ie. Debts). Interest on bank saving is miserable but the interests on your loan from the bank may go UP as banks are all worry about their balance sheet and are very risk averse in lending out monies. To compensate for their risk, they will charge you at a higher interest rate sooner or later. Hence, don't be held hostages by the banks/financial institutions that lend monies to you.
3) Treat your boss nice (if you still got a job). Or treat your customer nice (if you are running a business).
4) Stay healthy as medial costs are high in Singapore and unless you have very comprehensive medical insurance coverages.
Marc.
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The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.
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