Private Property prices......still up or down? Part II

[Showster]

For those with 1 property, this is the most dangerous thing to do. Keep the proceeds and wait out in the hope prices will dip. This is called `trying to time the marketâ and often times, itâs really not worth the effort as one has to pay rent to the land lord and not have a place call home. I mean, its not impossible but the effort imo is really not worth it.

 

With $2.8m, i canât imagine he canât find a comparable unit 1,700 sqf near his old place now. Later maybe, now? The reason why he cant find a unit is because he is trying to `upgradeâ either in terms of size, location or tenure of property.

Actually no need to worry about those who were actual beneficiaries of property. They will know what to do when the time comes.

 

The current limiting factor in the market is actually vacancy rate. It’s a good thing they choose to rent.

 

Vacancy rate goes to low rate, rent index will grow and price will start to grow faster then as well. They would know what to do then.

 

If all buy and nobody rent then have to sell some more and build more density without rental support. There is danger in that scenario to all as well.

[Sdf4786k]

So any idea which area is gearing up for major building?

 

I only know tengah and ubi n paya labar area. Other potential buying n redevelopment are the beauty world area. I suppose this will improve process at Hillview and jurong kechil

[Passat57]

Thanks Bro @Bancoe for the input, real time info on what's really happening on the ground.

As mention previously, many fail to realize the cause and effect with the current enbloc fever. Enbloc millionaires with only one property have to buy asap, dun mind paying a premium for choice unit, thus setting new sale price benchmark for nearby condos, elevating resale prices. Those into retirement or go hdb, the hdb seller may then go private, creating even more demand to private.

 

Some updates back for you/your friend.

 

Mandarin- currently in process enbloc

Bayshore- one 2,239 sq ft four-bedder unit just sold $2.2 million ($983 psf) on Feb 7. Old project enbloc potential but risk on lease run down on LH status

Villa Marina- nice low rise resort feel old project, may enbloc but risk on lease run down on LH status

Windy Heights- FH old project may enbloc

 

So i agree with your friend, go FH so no worries, or those new recent TOP LH projects, stay 10-20 years and when 2030 comes around, can choose to unload for 100% profit (MS)

unless he wanna go huat with another round enbloc again

Windy Heights enbloc going for open tender on 28th Feb

[BanCoe]

Windy Heights enbloc going for open tender on 28th Feb

..... the sellers are holding back their units ( not wanting to sell ) they are good size units of about 2400 sq ft ; at one time very few would have thought about this condo ; now it’s in the lime light

[BanCoe]

Deleted double post

Edited February 25, 2018 by BanCoe

[F10_Blackhawk]

Actually no need to worry about those who were actual beneficiaries of property. They will know what to do when the time comes.

 

The current limiting factor in the market is actually vacancy rate. It’s a good thing they choose to rent.

 

Vacancy rate goes to low rate, rent index will grow and price will start to grow faster then as well. They would know what to do then.

 

If all buy and nobody rent then have to sell some more and build more density without rental support. There is danger in that scenario to all as well.

Agree, but can’t `like’ you anymore lol

 

Just that my `advice’ was like a buddy to buddy talk. Sincere advice if this is my friend. But of course for investors like us, the more who rent, the better it is indeed.

[Invigorated]

So any idea which area is gearing up for major building?

 

I only know tengah and ubi n paya labar area. Other potential buying n redevelopment are the beauty world area. I suppose this will improve process at Hillview and jurong kechil

I have seen the planned developments in tengah and paya lebar but do not see any news on ubi except news on the recent bto. What is going on around the area?

[Showster]

Agree, but canât `likeâ you anymore lol

 

Just that my `adviceâ was like a buddy to buddy talk. Sincere advice if this is my friend. But of course for investors like us, the more who rent, the better it is indeed.

What we say won’t reach the friend also.

 

People have their own preferences and baggage.

 

They will still bet that way even if we tell them not to as friends.

[therock]

http://www.straitstimes.com/business/property/rates-are-up-it-may-be-time-to-review-the-home-loan

 

 

Rates are up - it may be time to review the home loan

 Housing Board flats in Ang Mo Kio. Banks have hiked interest rates for both fixed and floating home loan packages recently by 10 to 30 basis points. S

Housing Board flats in Ang Mo Kio. Banks have hiked interest rates for both fixed and floating home loan packages recently by 10 to 30 basis points. ST PHOTO: LIM YAOHUI

 

Here are some options home owners can consider to manage their mortgage commitments

Lorna TanInvest Editor/Senior Correspondent 

Rising interest rates are raising the spectre of higher monthly mortgage payments for many home owners, especially those with floating home loan packages.

 

No one needs reminding that home loan repayments form a large part of our monthly expenses, so it is important to look at cash flow and set aside more funds to prepare for higher rates, says Ms Tok Geok Peng, executive director of secured lending at DBS Bank.

 

Home owners should also review their mortgage package from time to time to ensure it stays relevant to their life stage, financial needs and cash flow situation, says Mr Matthias Dekan, head of customer value management at HSBC Bank (Singapore).

 

"Typically, for most mortgage packages, interest rates may start to increase from the third or fourth year onwards, hence it is an ideal time to review for more attractive mortgage packages that would help to save on interest," he notes.

 

He cited a new HSBC report that surveyed about 1,000 home owners here. It indicated that 62 per cent of mortgage holders switched providers, either to get a better deal or because of interest rate rises.

 

Banks have hiked interest rates for both fixed and floating home loan packages recently by 10 to 30 basis points.

 

DBS has been offering two new fixed-rate packages, both at 1.85 per cent for the first two years since the start of this month. Customers can also choose the floating rate or a fixed rate of 1.88 per cent for one more year.

 

Last week, UOB revised its three-year fixed-rate package to 1.95 per cent a year for each of the three years.

 

With the rate rises from the United States Federal Reserve last year and the expectation of three to four hikes this year, market rates have been heading north in tandem.

 

With expectations of more rises this year, it is no wonder that some customers are refinancing their home loans to get some savings.

 

The Sunday Times highlights the options home owners can consider to manage their mortgage commitments.

 

WHAT ARE THE DIFFERENT TYPES OF HOME LOANS?

Home loan pricing packages are based on interest rates that reference a benchmark, also known as a reference rate, says Ms Phang Lah Hwa, OCBC Bank's head of consumer secured lending. The three main categories rates are:

 

•Market-pegged: This is determined by the market, and a single bank does not influence the value. One example is the one-month or three-month Singapore interbank offered rate (Sibor), which is typically used to price home loans.

 

•Bank-managed: A bank decides on the benchmark value and can change it, usually offering customers 30 days' notice. Examples include the OCBC Home Rate, OCBC Variable Rate (Mortgage Board Rate) and fixed deposit-pegged rates offered by most banks.

 

•Fixed: A bank determines the fixed rate for one to three years. After that the loan switches to a market-pegged or bank-managed rate, perhaps the one-year to three-year fixed-rate package most banks offer.

 

 

(Top row, from left to right) Ms Tok Geok Peng, Mr Matthias Dekan, Ms Phang Lah Hwa; (bottom row, from left to right) Mr Lim Beng Hua, Ms Selena Ling and Mr Heng Koon How. PHOTOS: DBS BANK, HSBC BANK, OCBC, UOB

Mr Lim Beng Hua, United Overseas Bank's head of secured loans here, says fixed-rate loans offer more stability as they generally come with rates that are set for the first few years.

 

"When considering such loans, you should keep in mind they usually come with a premium. These loans are suitable for owner occupiers and those with a longer investment time horizon as partial repayments are generally restricted and come with a penalty," he adds.

 

On the other hand, home loans pegged to the Sibor allow buyers to capitalise on current low interest rates, but they will change along with interest rate movements.

 

Likewise, home loans pegged to fixed-deposit rates will be impacted by interest rates movements.

 

Note that the difference between the two is that fixed-deposit rates loans are subject to change at the discretion of the bank.

 

Mr Lim adds that UOB customers can choose a fixed-rate loan, a floating-rate one such as those pegged to the Sibor or FD rates, or a combination of both.

 

WHAT IS THE INTEREST RATE OUTLOOK?

Financial experts expect interest rates to rise this year. Last Friday morning, the three-month Sibor was about 1.25 per cent and the three-month swap offer rate (SOR) was about 1.3 per cent as of last Thursday.

 

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, says: "We expect that as global monetary conditions normalise, they should also gradually rise to around 1.55 per cent (for Sibor) and 1.5 per cent (for SOR) by the end of 2018."

 

Mr Heng Koon How, head of markets strategy, global economics and markets research at UOB, expects rates here to be driven higher by stronger economic growth, higher inflation and further increases in US rates. "The pace of interest rate increases in Singapore will depend on the pace of inflation in both the US and Singapore. Stronger-than-expected inflation will lead to a faster interest rate rise," he says.

 

"Our forecast for Sibor at the end of 2018 is 1.85 per cent compared with 1.13 per cent as at Feb 19. Our forecast for the three-month swap offer rates at the end of this year is 1.65 per cent, compared with 1.08 per cent as at Feb 19."

 

WHAT ARE THE OPTIONS TO MANAGE HOME LOAN COMMITMENTS?

There are several options to manage your home loan commitments, such as switching your loan to another package, right-sizing your loan amount via capital repayments or lengthening your loan tenor, says DBS' Ms Tok.

 

She adds that as a home loan is a long-term commitment that requires careful planning, borrowers are encouraged to ask their bank's specialists to assess their needs and select the most suitable option.

 

WHAT ARE THE FACTORS TO CONSIDER?

HSBC's Mr Dekan notes that some owners are likely facing their first time refinancing.

 

Before taking the plunge, he says they should check for any penalty as most home loan packages have a two-to three-year lock-in period.

 

Also, consider changes to your life and financial needs and evaluate if a refinancing package gives the flexibility to cater to key changes, such as the intention to sell the property and rising interest rates.

 

Another important consideration is to work out the cost of making a switch.

 

Mr Dekan says: "There are usually costs involved to refinance a mortgage or home loan to another bank like legal fees and valuation cost, which can come up to around $2,500.

 

"However, some banks including HSBC offer cash incentive or legal fee subsidy to help customers defray some of these costs."

 

 

 

Ms Tok points out that some banks charge fees for an early redemption before maturity, or impose a three-month notice period. Home owners should also understand the terms of the new loan as some may impose a lock-in period or the interest rate might be adjusted at the bank's discretion.

 

OCBC's Ms Phang says you should consider refinancing your home loan with another bank only if there are tangible benefits, such as interest savings - less cost of refinancing - or if you are able to secure an additional facility.

 

Keep in mind that interest savings will diminish as rates rise.

 

Property is a long-term commitment and you should consider your ability to pay your mortgage when interest rates change or when you enter into a different stage of life. It is prudent to ensure that you have sufficient funds set aside to cover your expenses, including home loan repayments.

 

UOB's Mr Lim suggests that you review your circumstances thoroughly, know your total debt servicing ratio (TDSR) and mortgage servicing ratio, and be conscious that the retirement age is 65, which is an important influence on your refinancing application. The maximum loan tenure for a private property is 35 years while that of an HDB flat is 30 years.

 

"You should also be aware of the additional costs such as penalty fees, legal fees, valuation fees and processing fees that may come with refinancing and switching banks," he adds.

 

"You may also need to commit to a debt reduction plan or shorter loan tenure. Shorter loan tenures would require higher monthly repayments and a higher TDSR."

 

Financial experts advise that borrowers should speak to their mortgage provider to find out what pricing options they offer existing customers.

 

And do shop around. Many people are not aware that they can engage mortgage brokers to compare loan packages.

 

This service is free for the borrowers, as these consultants get a fee from the banks if the transaction goes through.

 

PICKING A SUITABLE PACKAGE

As a mortgage is a long-term financial commitment, Ms Tok says borrowers should choose loan packages based on their needs instead of the short-term interest savings.

 

Borrowers who prefer stability in repayments should consider a fixed-rate package as it lets them enjoy a flat interest rate for a period and at the same time protects them from rate rises.

 

But this means the borrower must commit to the loan over the same time period as any prepayment will incur a fee.

 

"For borrowers who want to enjoy the lower floating rate now but worry about future increases in interest rates, they could enjoy the best of both worlds with the DBS Managed Mortgage," says Ms Tok.

 

"This feature allows them to allocate their home loan between a fixed-rate and a floating-rate packages.

 

"In the current lower interest rate environment, they are charged a lower interest on the floating rate package. Yet when interest rate rises, they will be protected by the fixed-rate package.

 

"For HDB flat owners who are usually more prudent, the POSB HDB Home Loan offers them interest savings as compared to the HDB Concessionary Loan, and caps the interest rate at 2.5 per cent, which is 0.1 per cent per annum below the HDB Concessionary Loan rate for the first five years."

 

Regardless of interest rate trends, borrowers are strongly encouraged to set aside funds as a buffer against rate hikes or any unforeseen circumstances.

 

Ideally, you should set aside some cash or liquid assets that can be used to pay monthly instalments for the next two years. This gives you time to restructure a loan or even sell the property if financial issues persist.

 

Borrowers can also consider using cash instead of their Central Provident Fund savings to pay for their monthly home loan instalments.

 

[Roh96]

http://www.straitstimes.com/business/property/rates-are-up-it-may-be-time-to-review-the-home-loan

Rising interest rate will be the real cooling measure.

[Invigorated]

Rising interest rate will be the real cooling measure.

Interest rates have climbed from somewhere between 1.2+ to 1.6% today but do we see prices falling.. In addition, prices actually fell in the last couple of years when interest rates were at their all time low?

 

One has to also see that interest rate increases usually imply stronger economic performance and possibly inflation in the coming years and property becomes a hedge against inflation.

 

Looking at historical charts, the link between interest rates and property prices may not be clearly defined as macro factors such as govt CM, population growth, QE, economic factors play bigger roles in affecting prices than interest rates themselves. (Looking at 1990, interest rates got 7+% but prices continued to climb)

 

Any increase may have to be sudden and significant enough to cause a pronounced effect on prices and an alarming increase in the near term is unlikely.

 

Ultimately, Interest rate is one determinant of prices but one has to adopt a more holistic view than to see that it is the main contributor. If it is so easy to see, one should just buy when interest rates are highest because prices are at the lowest? Makes sense?

Edited February 26, 2018 by Invigorated

[Wt_know]

simi interest rate also cannot cool la
look at MCF thread ... we got millions and millions sitting in bank and stuffing in milo tin and “dont know what to do with it” ... lol

Edited February 26, 2018 by Wt_know

[Roh96]

simi interest rate also cannot cool la

look at MCF thread ... we got millions and millions sittingin bank and stuffing in milo tin and “dont know what to do with it” ... lol

 

Haha..no amount of liang teh can cool it.

Just when I thought COE was stubbornly high and will never fall, but look at it today. So never say impossible.

[Showster]

VES increases most car types costs by $5,000 to $15,000, average about $10,000.

 

Some basic cars not affected by VES increased prices over the last few rounds as COE premium drops.

 

So COE drops but car price (on average) actually did not move much.

 

Car is also a different type of asset - depreciating from day 1.

 

The last clue I can offer you is to think carefully about why car prices (cost of car + COE + dealer profits) did not rise much. Where did those excess liquidity go? It's tough in SG. I really understand that...

 

 

 

Haha..no amount of liang teh can cool it.

Just when I thought COE was stubbornly high and will never fall, but look at it today. So never say impossible.

 

Edited February 26, 2018 by Showster

[Roh96]

Interest rates have climbed from somewhere between 1.2+ to 1.6% today but do we see prices falling.. In addition, prices actually fell in the last couple of years when interest rates were at their all time low?

 

One has to also see that interest rate increases usually imply stronger economic performance and possibly inflation in the coming years and property becomes a hedge against inflation.

 

Looking at historical charts, the link between interest rates and property prices may not be clearly defined as macro factors such as govt CM, population growth, QE, economic factors play bigger roles in affecting prices than interest rates themselves. (Looking at 1990, interest rates got 7+% but prices continued to climb)

 

Any increase may have to be sudden and significant enough to cause a pronounced effect on prices and an alarming increase in the near term is unlikely.

 

Ultimately, Interest rate is one determinant of prices but one has to adopt a more holistic view than to see that it is the main contributor. If it is so easy to see, one should just buy when interest rates are highest because prices are at the lowest? Makes sense?

 

Thanks for the info and chart. If u look carefully, the 7% peak was a short while and the prices did not climb that much. For subsequent peaks in interest, prices were on the downhill.

Anyway, it will be interesting to watch how the market will unfold itself. Rising rate, en-bloc, falling rent, etc..

 

 

  

 

 

[Enye]

how many of the current property investors with multiple bank loans on various properties are going to go through a real downturn unscathed?

 

of course if you choose to believe that nothing is going to happen in the next 30 years and all the properties will be paid up by then.... then i will diam diam already

 

[Roh96]

VES increases most car types costs by $5,000 to $15,000, average about $10,000.

 

Some basic cars not affected by VES increased prices over the last few rounds as COE premium drops.

 

So COE drops but car price (on average) actually did not move much.

 

Car is also a different type of asset - depreciating from day 1.

 

The last clue I can offer you is to think carefully about why car prices (cost of car + COE + dealer profits) did not rise much. Where did those excess liquidity go? It's tough in SG. I really understand that...

 

Transport cost, housing cost, food cost..all these are part of our expenses. Can't run away.

With limited income and resources, there will also be a limit to how much one can afford to dispose on a car and house.

Yah, you are absolutely right. Live is tough.

how many of the current property investors with multiple bank loans on various properties are going to go through a real downturn unscathed?

 

of course if you choose to believe that nothing is going to happen in the next 30 years and all the properties will be paid up by then.... then i will diam diam already

 

 

It seems like more ppl are choosing to be in your 2nd statement. Haha..

[Sdf4786k]

Interest rates have climbed from somewhere between 1.2+ to 1.6% today but do we see prices falling.. In addition, prices actually fell in the last couple of years when interest rates were at their all time low?

 

One has to also see that interest rate increases usually imply stronger economic performance and possibly inflation in the coming years and property becomes a hedge against inflation.

 

Looking at historical charts, the link between interest rates and property prices may not be clearly defined as macro factors such as govt CM, population growth, QE, economic factors play bigger roles in affecting prices than interest rates themselves. (Looking at 1990, interest rates got 7+% but prices continued to climb)

 

Any increase may have to be sudden and significant enough to cause a pronounced effect on prices and an alarming increase in the near term is unlikely.

 

Ultimately, Interest rate is one determinant of prices but one has to adopt a more holistic view than to see that it is the main contributor. If it is so easy to see, one should just buy when interest rates are highest because prices are at the lowest? Makes sense?

I read Sunday articles that if the rate goes to 2 percent 22% will not be able to meet the additional uptick of the mortgage. If it goes to 5%, 54% will not meet the increase.

 

I would imagine that as long as interest rate dont move too fast and those that have saddle themselves with extending it to the max with one unit for staying and two property for investment, may start to sell as they would have make some decent gains from early years. 

 

So not really a big issue?