property prices Archives - Holland Property

7 Mistakes People Make When Comparing Property Prices

hollandproperty — Wed, 19 Aug 2020 15:18:45 +0000

7 Mistakes People Make When Comparing Property Prices

Most of us know that “doing our homework” is a vital step of the property buying process, and this includes comparing property prices. Whether you’re a home owner or pure investor, property is a big-ticket item; one where even a difference of half a percentage point can mean saving tens of thousands of dollars in the long term. However, many property buyers also compare prices incorrectly; and this can lead to unexpected levels of risk or disappointment.

In this article, we’ll address the most common mistakes to avoid:

Mistake 1: Comparing Property Prices Using Listing Prices Instead of Transaction Prices

You would have heard by now that you should compare prices of surrounding properties when buying a home. However, it’s a common mistake to visit property portals and compare listing prices to the property you’re interested in. This erroneous comparison will give you a misleading impression.

For example, you might see that your seller is asking for $1.4 million, but the list prices of comparable properties are all $1.5 million; this may lead you to believe you’re looking at a bargain. But this is a misperception because the listing price is rarely the actual market value of the property (a seller can ask for any price they like, but it doesn’t mean they will succeed at getting it).

Most listing prices have room for negotiation; the actual transaction prices of comparable properties tend to be lower than the listings suggest. This is not to say there aren’t any case when the listings maybe under-value properties.

A more accurate way would be to check the transaction prices by looking at the caveats lodged with URA. Even then, by merely looking at the transaction prices, it still may not paint the whole picture. Data from the URA website don’t show the unit numbers. The actual level and facing of the units will have a bearing in the disparity in prices. For example, you need to take into consideration the difference between quiet facing and road facing, with and without direct west sun, and with blocked and unblocked view.

For more comprehensive data and comparative analysis, drop me a message, and I can help you to check.

Mistake 2: Relying on Transaction Data When The Volume Is Too Low

Even if you have access to real transaction prices, you need to factor in the volume. This is a common problem for boutique developments with very few units and transactions (e.g. Urban Edge @ Holland V, Edge @ Cairnhill), or very old projects where there have only been one of two transactions in the past five years.

In these cases, the average prices can be misleading, as one unusually high or low transaction will skew the figures. For example, if the last unit sold in a 60-unit development happens to be a penthouse or a ground floor unit, the low $PSF price will significantly skew the prices downwards.

And if the last transaction was three years ago, the price will not give an accurate reflection of the current market condition. It is not unusual that the bank’s valuation may not match the current market price because it still relies on outdated transaction prices.

Mistake 3: Forgetting To Include Maintenance Costs When Comparing Condos

Two developments can have broadly similar facilities but have a big difference in maintenance costs.

There are a few factors that can affect the cost of maintenance:

The size of the development: Generally, bigger projects have a lower maintenance fee because the cost is spread over more units. Conversely, the maintenance fee is relatively higher for projects with fewer units.
The age of the development: Older projects are more costly to maintain with more repair and renovation works involved. There is usually a sinking fund component which goes to major works, such as overhauling of lifts, upgrading of facilities, and improvements of the grounds.
Size of the unit: The exact amount of maintenance fee will depend on the share value of each unit, which is determined by the size of the unit.
Ratio of the number of lifts to units: The cost of maintaining the lifts is relatively higher than other facilities, such as pool and gym. So, you can expect a higher maintenance fee for low-rise condos and those with private lifts.
The quality of the management council and its property manager can also affect the cost of maintenance.

Many home buyers often overlook maintenance fee when working out potential yield and return between different developments. So be sure to find out.

Mistake 4: Forgetting To Factor In The Tenure When Comparing Property Prices

When comparing prices between units, don’t forget to check whether you’re comparing condos with similar tenure i.e. freehold vs freehold and leasehold vs leasehold.

This is to ensure an apple-to-apple comparison, as freehold units typically cost about 15 to 20 per cent more than their leasehold counterparts. Hence, don’t expect freehold properties to give as much or higher rental yield than leasehold properties, all other things being equal. Typically, freehold condos give around 2 to 2.5 per cent yield (sometimes even lesser); whereas leasehold condos more than 3 per cent.

If you are planning to buy leasehold properties, don’t forget to factor in lease decay. A property may appear much cheaper despite having similar location and facilities due to the lower remaining lease and the more apparent signs of ageing.

Mistake 5: Ignoring Qualitative Factors or Your Original Intent

Don’t compare property prices so much that you forget your original intent.

For example, if you’re buying for pure home ownership, then you should better focus on non-financial factors such as:

Proximity to the workplace or choice school for your children
Closeness to parents (especially if you need their help to look after your child)
Healthcare needs (is there a hospital, dialysis centre, clinic, etc. nearby?)
Amenities that matter to you (e.g. MRT station, market, malls and park. Or you may prefer quiet enclaves even if there’s no MRT station)

If you are buying for investment, an important consideration would be whether it is easy to find a tenant. Rentability and prices usually go hand in hand. An old walk-up apartment may be cheap but is run down, inconvenient, and unattractive to many tenants. Or potential tenants might be put off due to inaccessibility by public transport or lack of nearby amenities.

Mistake 6: Only Comparing Price-Per-Square-Foot

Generally, home buyers tend to focus on the price-per-square-foot.

Typically, older condos are lower in price-per-square-foot when comparing to the new launches. The same applies to bigger condos versus smaller condos.

By purely looking at the price-per-square-foot to compare property prices may not be the best guide.

In my other article, “Why Do People Still Buy When The Price PSF Is So High?”, I pointed out that there are other factors to consider:

Projected rental yield: A smaller new apartment may be much higher than a bigger older apartment in terms of price-per-square-foot, but the rental yield is higher. If you are buying for investment, rental yield and ease of renting out are more important than size and lower price-per-square-foot. On the other hand, for an own-stay property, your consideration would be different. However, buying for own stay doesn’t mean you should not put on the hat of an investor. Read my article on: “Home Buyers versus Investors: Do You Need A Different Mindset?”.
Lower quantum versus higher price-per-square-foot: Investors are more concerned about affordability (which also means easy to enter and exit) than price-per-square-foot. A bigger condo may have a lower price-per-square-foot, but because of the size, the price may be out of reach.
The difference in the layout: When comparing prices, do take a closer look if there are any oversize balcony and air-con ledge, double-volume ceiling, open roof terrace and bay window. These unusable or impractical spaces make the apartment looks spacious on paper (hence lower price-per-square-foot), but you are not getting what you are paying for.
Facing, level and view: These factors can have a significant bearing on the price, as pointed out in the first point above. For example, the price difference for every level can be between $3,000 to $5,000. When comparing prices, just be sure to use the right criteria as a basis for comparison.

Mistake 7: Confusing The Average With The Median

Some buyers are confused when they see “conflicting” reports, where one report is giving the average unit price, and the other is giving the median. They may also make the mistake of comparing the average price of a property to the median prices of surrounding properties, or vice versa.

To be clear, median and average are not interchangeable terms. The median is the middle price in a range of units, whereas the average adds all the unit prices and then divides them between the units. For example:

Say we have five units in a small block:

Property A – $1.5 million
Property B – $1.55 million
Property C – $1.65 million (Median)
Property D – $2.2 million
Property E – $7.6 million

The median is simply the one in the middle (property C), so the median price in this block is $1.65 million.

The average requires us to add up all the costs ($14.5 million) and divide them between all five units, resulting in an average price of $2.9 million.

(If the average price seems high, it’s because property E costs so much more. This is why some reports use the median, when there’s a risk that exceptionally high or low-cost outliers will skew the results too much).

When you are comparing property prices, be sure that you are clear about these two terms.

Finally, do remember to look beyond price when comparing properties.

You also need to consider some currently intangible factors, such as upcoming future developments, or the specific state of the individual unit (in HDB flats, loan shark activity can make one specific unit very cheap!)

For a second opinion or a more holistic look at a unit, drop me a message and I’d be glad to help. Or you can book me via the calendar below for a zoom meeting.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny has a genuine interest in people and firmly believes in personal integrity. While helping homeowners with their property needs, their interest always takes precedence over his personal gains. Hence, Danny has consistently earned his clients’ complete trust and loyalty. Many of them have become his personal friends.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

SKYE AT HOLLAND

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How Your Property Can Still Provide For Retirement In 2023 And Beyond

PINETREE HILL

The post 7 Mistakes People Make When Comparing Property Prices appeared first on Holland Property.

Is Now A Good Time To Buy Property?

hollandproperty — Mon, 08 Jun 2020 18:16:58 +0000

Is Now A Good Time To Buy Property?

As we face the biggest crisis ever in the name of Covid-19, the big question is: is now a good time to buy property? Will our property market crash under the weight of an unprecedented pandemic?

The Ministry of Trade and Industry (MTI) has further downgraded this year’s GDP growth forecast to -7 to -4 per cent from -4 to -1 per cent. This downturn would be our worst ever contraction. The 2.2 per cent contraction during the 1998 Asian Financial Crisis came in a distant second worst. We are expected to enter into a recession this year.

On May 26, 2020, the government announced the fourth relief package of $33 billion to help fight the devastating impact of Covid-19. More than $72 billion, or almost 80% of the total $93 billion relief funds, are directed at supporting businesses and keeping jobs. This gives a glimpse of the severity of our situation.

The Common Sentiment

It is not surprising that many people whom I talked to felt that the market will have a significant correction. Even after showing them how remarkably resilient is our property market during our past crises, the feeling is that the Covid-19 pandemic is like none other that we had ever faced. It is by far more devastating and widespread in its impact. Hence, most people prefer to adopt a wait-and-see approach until the dust settles down.

In my recent article, “Property Prices Set To Tumble”, I actually offer various reasons why this is unlikely to happen. One of my readers was very skeptical and thought otherwise. I do not have any issue when someone disagree with me.

In his mind, he thought that developers would be desperate to sell off all their balanced units. He actually asked for a discount from the developer for one of the good-selling projects. After his offer was rejected, he totally gave up the idea of buying until he sees the day the property market crashes.

Just very recently, a buyer was about to give a cheque for a new project when he suddenly made a ‘U’ turn. Reason? His friends and relatives ridiculed him for buying a property now. Two days later, he went ahead with the purchase.

Many home buyers will face this dilemma: to buy or not to buy?

Reality On The Ground

Is there any buying activity during this circuit breaker where all showflats are closed, and viewings are prohibited? While the answer is YES, the volume is low.

277 private new homes were sold in April 2020, down from 660 in March. Of the 277, almost 100 were sold after the circuit breaker started on 7 April. While this number is nothing to shout about, it is still remarkable that people are buying when no viewing is allowed, except by virtual viewing.

277 private new homes were sold in April 2020, down from 660 in March. Of the 277, almost 100 were sold after the circuit breaker started on 7 April. While this number is nothing to shout about, it is still remarkable that people are buying when no viewing is allowed, except by virtual viewing.

May 2020 New Home Sales Shot Up By 75%

Despite the circuit breaker, the number of new homes sold in May went up by 75% compared to the month before. This may come as a surprise to many since show flats are all closed during this time, yet it did not deter buyers.

484 is a decent figure considering the circumstances. Looking beyond the number is the positive sentiment on the ground. Buyers are taking advantage of the discounts offered by developers. During normal times, this usually does not happen.

The strong buying interest is evident. My prediction is, once the circuit breaker is lifted, pent-up demand will drive up sales to new record. When that happens, developers will likely remove the discounts, and chances of prices going up is high.

Are There Fire Sales?

There will be fire sales, for sure, but not rampant. If it happens, it is usually in the secondary market where owners may dump their property due to fear or financial distress.

It can also happen to developers, especially amongst smaller developers.

Take Enclave@Holland as an example. Prior to Covid-19, the 26-unit boutique development along Holland Road was selling at an average price of $2,500psf. In March 2020, the developer sold the remaining nine units at an average price of $1,850psf, which is a hefty 26% discount.

Another example is 38 Jervois, a 27-unit boutique development in an exclusive neighbourhood. The developer, Prominent Land, sold 11 units when it was launched in 2016. Only one unit was sold in 2019. The project was TOP in March 2019. The developer had to sell the balance of 16 units by February 202 to avoid paying ABSD. The government gave them a six-month extension because of Covid-19.

On 3 June 2020, Prominent Land decided to launch a fire sale with a total discount of $7.1 million in order to avoid paying a $4.8 million ABSD. Within three days, all the 16 units were snapped up! Buyers enjoyed a discount between $275,000 to $547,230.

The question is when you do come across a fire sale, would you jump at the opportunity or shirk in fear that prices will continue to fall? Will you be fast enough to act?

The question is when you do come across a fire sale, would you jump at the opportunity or shirk in fear that prices will continue to fall? Will you be fast enough to act?

Developers Are More Realistic

During the circuit breaker, Kopar at Newton is the best-selling projects. The developer, Chip Eng Seng, sold 83 units in April, of which 11 units from 7 April. Another 16 units were recorded in May.

Why was Kopar at Newton selling so well despite Covid-19? Partly due to realistic pricing. The sales price starting from $2,125 psf is considered attractive for a D09 project.

New project sales are still moving at a steady pace. This is because developers are offering discounts, mainly in the form of star buys. Developers, while wanting to maintain a certain margin of profitability, are also eager to sell and move their properties. The widespread discounts present to buyers an excellent opportunity to enter the market amidst the crisis.

The widespread discounts present to buyers an excellent opportunity to enter the market amidst the crisis.

Short Term Correction

We can learn so much from history. The stock market and property market seem to move in a certain predictable pattern.

From past crises, we learn that market will experience a sharp fall when there was a sudden turn of drastic unfavourable events. Stock market usually reacted almost immediately, followed by the property market.

Looking at the chart below, we can see the STI dropped drastically followed the dot.com crash (May 31, 2000), 911 attack (Sep 28, 2001), SARS (Mar 31, 2003) and Global Financial Crisis (Feb 27, 2009). After each crisis, there was a V-shaped recovery. Free falls are not indefinite because there are always buyers waiting for good buys.

During the current Covid-19, STI plunged by more than 31 per cent from 3252 to 2233 on March 23, 2020. As of June 10, 2020, STI has recovered by 25 per cent since then to 2800.

How about the property market?

Generally, the sales volume of the private residential market follows the pattern of our GDP growth. It’s simple logic: when GDP is strong, confidence level is high and buying sentiment is positive. During the past crises when we experienced contraction, sales volume dipped.

Our property prices were more susceptible during a financial crisis than a pandemic. Prices dipped drastically during the Asian Financial Crisis in 1998 and Global Financial Crisis in 2008, but they were followed by a V-shaped recovery.

The longest down period for our property market was from the Dot.com crash in 2000 till 2007. Conversely, the STI had a long bullish run from post-SARS till its peak in October 2007. Our property market was a bit laggy, picking up only from April 2007. From what we can see, SARS had very little impact on our property prices.

Looking at Chart 2, you will notice a very unusual trend between 2013 to 2017. During this period, the GDP and the sales volume of homes are both weak while property prices dipped only slightly before they picked up in 2017.

From 2017, on the back of poor economy, sales volume and property prices started to move up, until the government had to introduce one more round of cooling measure on 6 July 2018. Nevertheless, new home sales still hit almost 10,000 in 2019.

What causes the property market to be so robust while the STI performance and GDP are so weak? There are a few possible reasons.

What causes the property market to be so robust while the STI performance and GDP are so weak?

Liquidity

With the US government printing a lot of money, the global financial market is flushed with liquidity. The property market becomes a good place to park these money. Hence we see a boom in property market in many countries. As a result, governments in these countries also introduced their own cooling measures.

Low Interest Rates

Borrowing rates are at about the lowest at the moment. It can be as low as 1.3% and will likely to remain low for quite some time. Low interest rate is definitely an incentive for home buyers because it helps to reduce the cost of home ownership.

SIBOR (Singapore Interbank Offered Rates) has dropped from 1.749% in January 2020 to 0.248% in June 2020.

If you have outstanding housing loan, this is a good time to refinance.

SIBOR (Singapore Interbank Offered Rates) has dropped from 1.749% in January 2020 to 0.248% in June 2020.

A Government-Regulated Market

Learning from the US sub-prime crisis, our government recognizes the danger of property market bubble. To circumvent this potential problem, the government started to introduce rounds of cooling measures since 2009. What these measures have done is to curb speculations and enforce prudence.

In the past, many speculators were burnt because they over-leveraged. Property flipping was a commonplace when quick money could be made. When hit by financial crisis, they could not keep up with the mortgage payments. Many actually went bankrupt.

Now, with Total Debt Servicing Ratio (TDSR) in place, we are able to cushion against the impact of a financial knock. Property owners now have more holding power which is the key to tide through a crisis.

Furthermore, during this Covid-19 pandemic, the government has implelmented home loan deferment scheme for property owners and ABSD extension for property developers. These relief measures help to soften the blow.

Singapore A Safe Haven

The last couple of years have been marked by political unrests and uncertainties in many countries. Brexit in Europe, protests in Hong Kong and political crisis in Malaysia just to name a few. Now we see racial protests in the US which sets a movement in many countries.

Against this background, many now see Singapore as a safe haven because of its political stability, strong governance, quality of life, good educational system and low crime rates. Many high net-worth individuals have to made Singapore their home.

Most recently, Chinese actress Vicki Zhao and her businessman husband bought a $27.65 million penthouse at Ardmore Park condo.

After a long lull period, prime district 09 is now seeing a return of foreign buyers, namely the Chinese. Lately Marine One Residences, TOP in 2017, is also experiencing brisk sales, with 22 units sold since the circuit breaker.

To Buy Or Not To Buy?

None of us has the crystal ball to foresee the future with great certainty. In the next six to twelve months, we may have a clearer picture how vulnerable or resilient our property market is.

On the other hand, if we buy with a relatively long term investment perspective, we should be in good standing with all the strong fundamentals our government has set in place for us.

If property prices do dip, it will present a small window of opportunity to home buyers. Many had reaped the financial benefits in the past when they took the plunge. With all the discounts offered by developers now, it is worth considering to enter the market. In the next couple of years, new home inventory may drop to a level where demand exceeds supply. The inevitability of prices moving up will then follow.

Drop me a note should you need advice on the best course of action for you. I will be more than happy to discuss with you further. You can book for an appointment with me using the calendar below.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

The post Is Now A Good Time To Buy Property? appeared first on Holland Property.

Property Prices Set To Tumble

hollandproperty — Sat, 09 May 2020 15:34:23 +0000

Property Prices Set to Tumble

“Singapore property prices set to tumble”. That was the headline (source Business Times 25 April 2020).

Another headline: “Half the developers likely to cut prices of Singapore new launches”. (Source: Business Times 5 May 2020)

“Analysts predict up to 8% full-year drop in private home prices” (Source: Business Times 8 May 2020)

Sensational headlines like these strike a chord in our hearts almost instantly. It may instill fear in property owners and elicit excitements in property investors…if we take them at face value.

When I first read these headlines, I got very excited. Some home buyers I know have been waiting for the property market to crash to go for the kill. I have been keeping an eye for my clients for fire-sales. I am still waiting, unabated. So far, nothing in sight. Sigh.

Will developers cut their prices? Are they in dire straits with many unsold units? Are they desperate?

But didn’t we just read that WingTai sold over 75% or 392 units of The M condo over two weekends recently?

Didn’t CEL sell 77 units when they launched Kopar at Newton just before the circuit breaker began on 7 April? They sold another 8 units during the circuit breaker.

Examples of projects with units at special discounted prices

I did a quick check on how some other new projects are doing since the circuit breaker (7 April to 9 May):

Florence Residences: 17
Treasure@Tampines: 16
Riverfront Residences: 7
Parc Esta: 5
Stirling Residences: 4
Jadescape: 4

Not too bad considering all show flats are closed. With sales still moving despite the closure, would developers consider big price cut?

I have one buyer who recently tried to ask the developers for discounts for new launches to no avail. Good try.

I then asked the project ICs for various projects to see if any developer is cutting prices. None. Sigh.

Don’t get me wrong, there are ‘star buys‘ at special ‘discounted’ prices in many projects (see above) but the discounts are not across the board discounts. They do not apply to the whole project except for selected units or stacks.

(If you want to know what are other projects that have ‘star buys’, you can write me)

Do these headlines hold water? Or is it a case of expectations and ‘sentiments’ that don’t match reality?

Do these headlines hold water? Or is it a case of expectations and ‘sentiments’ that don’t match reality?

Will Our Property Market Buckle Under The Weight of an Unprecedented Pandemic?

This Covid-19 pandemic is the mother-of-all pandemics in modern history, with 212 countries and territories affected so far and fast reaching the 4 million mark.

In Singapore alone, we have already surpassed the 20,000 mark, with hundreds of new cases reported every day.

During the circuit breaker period from 4 May to 1 June 2020, all show flats are closed, and no house viewing is allowed. Even though there are still cases of transactions taking place via virtual tour and zoom, sale volume has dropped drastically.

There is no doubt the current unprecedented Covid-19 pandemic has a strong adverse impact of Singapore property market. Sales volume will drop for sure. But can we expect prices to tumble? And as much as 8%?

Understandably, there are knee-jerk reactions. Just like our stock market nose-dived by 35% but recovered quickly by 25% level.

Some home buyers decide to sit on the sideline, waiting for the dust to settle so that they can have a clearer picture where the market is going. On the other hand, some are not taking any chances and have gone ahead to buy in case there is a price hike after the Circuit Breaker due to pent-up demand.

Lessons From The Past

Many analysts like to compare our current Covid-19 pandemic with the SARS and H1N1 epidemics.

The Impact of SARS on Property Prices

SARS (Severe Acute Respiratory Syndrome) was first reported in Asia in February 2003. In the next few months that followed, it affected 26 countries and resulted in more than 8,000 cases and 744 deaths. But by 5 July 2003, World Health Organization (WHO) declared SARS contained worldwide.

In Singapore, it was contained two months prior, after 238 Singaporeans were infected and resulted in 33 deaths.

What was the impact of SARS on our property market?

Based on research by OrangeTee & Tie (Figure 1), it shows that in March 2003 during the early stage of SARS, there were only 462 (non-landed) units sold. The average price was $539 psf.

The sales volume surged in July 2003, with a total number of 1,682 units sold, which worked out to an increase of 264.1%. The average price went up marginally to $543 psf, a 0.7% increase.

New homes sales volume increased by 531.9%, while prices dipped 8.7%.

For secondary market, both resale volume and prices increased by 66.7% and 4.7% respectively.

Despite the SARS outbreak, the total number of private property transactions (excluding EC) in 2003 was 10,386 (see Figure 3). The subsequent year, the volume went up by only 14% to 11,853. It was apparent, SARS or no SARS, people were still buying and selling houses.

The Impact of H1N1 on Property Prices

H1N1 was first detected in the United States in April 2009.

Singapore reported its first confirmed case of H1N1 in late May 2009. By February 2010, an estimated 415,000 Singaporeans had been infected and 18 deaths were reported.

During this period of the H1N1 pandemic, how did the property market perform in Singapore?

Research by OrangeTee & Tie (Firgure 1) shows that 2,113 units were sold in April 2009 at an average price of $787 psf.

In February 2010, six months before WHO declared an end to the H1N1 flu pandemic, the number of transactions had gone up to 2,809 units (32.9% increase). What was astonishing was the average price had gone up by 48% to $1,165 psf!

As for new homes, sales volume dipped marginally by 13.3% but prices increased by 45.9%.

For secondary home market, volume went up by 21.3% and prices by 23.7%.

In retrospect, we learn that the previous two pandemics had limited impact on property prices and sales volume.

In retrospect, we learn that the previous two pandemics had limited impact on property prices and sales volume.

What Is Different Now?

Well, some may argue that this time around it’s different. The scale and impact of Covid-19 way surpassed that of SARS and H1N1. More countries are affected. The rates of transmission and death are much higher.

At this point of writing (numbers still going up by the minutes), more than 3.85 million cases have been reported in 212 countries, with more than 270,000 deaths.

SARS and H1N1 paled in comparisons.

With Covid-19, many countries in the world literally came to a standstill. Nations and major cities have lockdown in an attempt to contain the spread of coronavirus.

Singapore is not spared. For the first time in our history, we are going through two-month circuit breaker where offices, schools, travel, places of worship and entertainments are all shut down. Almost all businesses came to a standstill.

To help the nation cope with this unprecedented pandemic, our government unveiled three rounds of relief packages to the tune of $59.9 billion, accounting for around 12% of the country’s gross domestic product. In contrast, the relief package for SARS was $230 million. There were no relief packages during H1N1 because we were recovering strongly from the aftermath of the Global Financial Crisis. The enormous scale of the Covid-10 relief measure speaks volume the magnitude of our current crisis.

Our Finance Minister puts it aptly, “We are in extraordinary times. We need an extraordinary Budget to deal with both short-term and long-term challenges.”

“We are in extraordinary times. We need an extraordinary Budget to deal with both short-term and long-term challenges.”

Finance Minister Heng Swee Keat

Property Market Is More Resilient This Time

We have learned many hard lessons from our past crises.

Thanks to the Lehman Brothers collapse in 2008, which was due to the continuing subprime mortgage crisis, our government had put in place rounds of cooling measures to safeguard the same from happening to us and to prevent our property market bubble from forming.

After the Global Financial Crisis, our property market was recovering very strongly, albeit too strongly. So our government had to tame the wild runaway horse.

Cooling Measures

From 20 February 2010 to 9 December 2013, there were eight rounds of cooling measures. Some of the drastic measures include:

Introduction of Seller’s Stamp Duty (SSD) to stop ‘flipping’
Introduction of Additional Buyer’s Stamp Duty (ABSD)
Limit Loan-To-Value (LTV) for second and subsequent property
Introduction of Mortgage Servicing Ratio (MSR) for HDB and EC
Introduction of Total Debt Servicing Ratio (TDSR)

There were two additional rounds of cooling measures on 17 March 2018 and 6 July 2018.

The underlying principles of these cooling measures are to curb speculations and enforce prudence.

With policies such as TDSR and lower LTV for second and subsequent properties, investors have to commit more cash outlays. With these measures in place, home buyers and investors have more holding power

The underlying principles of these cooling measures are to curb speculations and enforce prudence.

Lifelines for Homeowners from the Government

It is not in the best interest of the nation to see our property market crashes under the weight of Covid-19. Hence our government will do what it takes to hold it up.

Our government recognises the extent of the impact of Covid-19 on many home owners and business owners that they very quickly rolled out some initiatives to alleviate the problems.

Loan Deferment

Banks have now allowed home owners to defer their loan payments up to 31 December 2020. This deferment gives home owners some reprieve to lessen their financial stress. As long as they can hold it together, there is no real urgency to dump their property.

Property owners today have more HOLDING POWER.

Furthermore, with home loan interest rates at a very low level, many eligible home owners are taking the opportunity to refinance, potentially saving them thousands of dollars in interest.

For HDB owners, there is an HDB Mortgage Arrears Relief in place. For those with difficulty in keeping up with their loan payments, they can now enjoy three-month suspension of late payment charges on HDB mortgage arrears and deferred payment of loan instalments for six months. (Source: gov.sg)

Property owners today have more HOLDING POWER.

Extension of Remission of ABSD for Married Couple

Under the ABSD regime, a Singaporean married couple who buy their second residential property can get a refund of the ABSD they had paid if they sell their first matrimonial home within six months. This applies to completed property. If it’s a building under construction (BUC), the six months applies after the issue date of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC).

The government had just announced on 6 May 2020, in view of the impact of the COVID-19 pandemic, this six-month deadline will be extended by a further six months.

To qualify for this extension, the couple’s second residential property must be jointly purchased on or before 1 June 2020. Another condition is the original timeline for sale of the first residential property must also have expired on or after Feb 1, 2020.

For more information, check out URA website.

Lifelines for Developers from the Government

The government not only extended the lifeline to individual home owners but also to developers. This is understandable considering construction works have stopped and show flats are closed during the circuit breaker.

On 6 May 2020, the Ministry of National Development rolled out these relief measures for developers with immediate effect:

Project Completion Period (PCP): Extended by 6 months for all kinds of projects. PCP is calculated from the date the developer was awarded the site until Temporary Occupation Permit (T.O.P.) date, which is five years. To qualify, the land must be bought on or before 1 June 2020, and the original deadline for completion was on or after 1 February 2020.

Remission of the Additional Buyer’s Stamp Duty (ABSD) for developers: Developers have to pay ABSD which is 30 per cent of the land price. If they are able to complete and sell all the units of the project within five years, they can get back 25 per cent. This is also extended by 6 months. To qualify, the land must be bought on or before 1 June 2020 and the original timeline for commencement expires on or before 1 February 2020.

Qualifying Certificate (QC) regime for foreign housing developers: Any developer with foreign ownership (listed companies by default) must complete the project within five years from the time they bought the land and sell every single unit within two years after receiving TOP. If they fail to do so, the 10 per cent banker’s gurantee they paid to the government will be forfeited. With the relief measure, the deadline will be extended by six months.

What is the implication of these temporary relief measures for individual owners and developers? The six-month reprieve means they are not so kan cheong (desperate) to sell.

Will Property Prices Tumble?

So let’s go back to our original questions:

Will resale property prices tumble?
Will developers cut prices?

Honestly, I do hope prices will tumble. But my sentiment does not match reality.

The key is home owners today have more holding power than before. So you have to be very lucky to find a fire sale. And if you find one, most likely someone else will get ahead of you. You know Singaporeans are kiasu.

As for developers, they have already priced the new projects to sell with slim margins. They do recognise the risk and to avoid paying the hefty ABSD. For existing projects that are already launched, it is not realistic to expect them to slash prices (very rarely developers will do that). If they do so, they will incur the wrath of earlier buyers who have paid a higher price.

How would you feel if you have bought a unit at launch (which is supposed to be the cheapest price) only to find out now the prices are lower than yours?

With the current climate, it is a good time to enter the market, be it resale or new launch. For resale property, you might scoop up a good deal. For new launches, all projects are already competitively priced to sell.

Learning from our past, market will rebound after every crisis, and it will rebound with a vengeance!

If you need help or advice, please feel free to whatsapp me or message me for a non-obligatory discussion. Or do like and follow my facebook page so that you can be informed of further update on property prices.

Based on the latest sales reports of new homes, 998 were sold in June 2020 and 1080 in July 2020. These numbers are pre-Covid-19 level.

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Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

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The post Property Prices Set To Tumble appeared first on Holland Property.

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7 Mistakes People Make When Comparing Property Prices

7 Mistakes People Make When Comparing Property Prices

Mistake 1: Comparing Property Prices Using Listing Prices Instead of Transaction Prices

Mistake 2: Relying on Transaction Data When The Volume Is Too Low

Mistake 3: Forgetting To Include Maintenance Costs When Comparing Condos

Mistake 4: Forgetting To Factor In The Tenure When Comparing Property Prices

Mistake 5: Ignoring Qualitative Factors or Your Original Intent

Mistake 6: Only Comparing Price-Per-Square-Foot

Mistake 7: Confusing The Average With The Median

Finally, do remember to look beyond price when comparing properties.

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