from the ground Up

by Jessica Cheam, The Straits Times, July 26 2009
[property]
Renewed interest in property more focused on private, HDB resale sectors
The numbers show it: Singapore has been gripped by a buying frenzy that seems to have pervaded every segment of the property market.
Sales volume for HDB resale flats has surged 58 per cent in the second quarter, [...]

by Jessica Cheam, The Straits Times, July 25 2009
Decline in upfront cash required makes resale flats more affordable
PRICES of Housing Board flats rose 1.4 per cent in the second quarter to a record high, reversing a first-quarter dip of 0.8 per cent.
The number of transactions also soared – up 58 per cent in the three [...]

by Jessica Cheam, The Straits Times, July 9 2009
It will ‘calibrate supply’ to meet some of the demand – but not all
THE Housing and Development Board (HDB) will offer 8,000 new flats this year, or more if the pickup is stronger, said National Development Minister Mah Bow Tan yesterday.
He said the board is monitoring demand [...]

by Jessica Cheam, The Straits Times, July 4 2009
Young couples, families upsizing or downsizing and PRs prop up market
HOME buyers rushed to the HDB resale market in the second quarter and sent sales up as much as 60 per cent over the first quarter, according to property agencies.
These buyers, ranging from young couples to permanent [...]

by Jessica Cheam, The Straits Times, July 2 2009
Surprise increase in index reverses first quarter’s dip to reach new high
PRICES of HDB flats have staged a surprising comeback, reversing a first-quarter dip of 0.8per cent to rise 1.2per cent in the second quarter and reach a historical high.
Flash estimates from the Housing and Development Board [...]

by Jessica Cheam, The Straits Times, June 2 2009
SOME landlords in the heritage-rich Tiong Bahru estate are cashing in on the demand for cheap housing by converting conserved pre-war flats into dormitory-style housing for foreign workers.
Residents are becoming increasingly concerned about the impact on their estate and have complained of noise, littering and overcrowding.
A Straits [...]

by Jessica Cheam, The Straits Times, May 21 2009
TWO key goals will dominate the work of the Ministry of National Development (MND) over the next few years – supporting Singaporeans through the recession and pressing on with efforts to make the Republic an attractive city to live in.
National Development Minister Mah Bow Tan outlined these [...]

by Jessica Cheam, The Straits Times, April 25 2009
Award will recognise those who contribute to creation of liveable cities
WHAT does it take to become a world- class city? Innovative planning projects, policies and solutions that display foresight and good governance, it seems.
These are the qualities that Singapore is looking for in a new award it [...]

by Jessica Cheam, April 16 2009
One-third of sales in the first quarter at or below valuation
GOOD news for home buyers eyeing the resale flat market: About one-third of HDB sales in the first quarter were struck at or below the flat’s valuation price.
The level in some areas was far higher. In Sengkang, for instance, up [...]

by Jessica Cheam, The Straits Times, April 15 2009

[Commentary]

HDB residents buying a condo unit have to do their sums carefully

IN THE midst of Singapore’s worst recession, people are still buying property.
Private condominium sales reached a recent high of 1,323 units in February – the highest since the 1,731 units sold in August 2007, which was the peak of the recent property bull run.
And though official figures are not yet available, the buying frenzy seems to have continued into March.
According to a recent report by DTZ Research, seven out of 10 buyers in the first quarter of this year are HDB upgraders.
This is a jump from the 48 per cent registered in the fourth quarter last year, and the highest number since the 86 per cent achieved in the second quarter of 2002.
HDB upgraders are home buyers with HDB addresses looking to move up the property ladder. They typically buy into mass-market condos, usually in the suburbs.
Experts say the recent brisk sales indicate a “pent-up demand” in the market, especially from buyers who held back during the recent property boom, when prices skyrocketed in 2006 to 2007.
They also point to a unique phenomenon that occurs in a property boom-and -bust cycle where the gap between the price of HDB resale flats and mass market condos has narrowed to an all-time low.
Private property prices fell a quarterly record of 13.8 per cent in the first quarter of this year, compared with the marginal 0.6 per cent drop for HDB resale flats.
This means that HDB flat owners own an asset that has appreciated to more or less record value, at a time when the prices of mid-tier condos have dropped to affordable levels.
Now, the jump from public to private home ownership has always been a tantalising proposition.
But is this really the right time for an HDB upgrader to buy?
The answer, say property experts, depends on two things – when the condo unit the upgrader is buying will be completed, and what view he takes of the Singapore property market over the next couple of years.
Let me explain.
Unlike an investor who is buying for rental yield, the HDB upgrader typically moves out of his HDB flat and into his new condo unit. This means that he sells his flat only when the new condo unit is completed and ready for occupation.
Therefore, it makes the most sense for an upgrader today to buy a completed unit – because he can sell his flat now for a relatively high price and buy the new private condo unit on the cheap.
The problem is that there aren’t many completed suburban developments on the market. Most new condos approaching completion today are in the prime districts, which were the focus of the property boom two years ago.
And the handful of suburban developments that are close to completion aren’t that attractively priced, so the HDB upgrader isn’t getting that good a deal on them.
The fact is: The cheapest suburban condo units today are those being sold “off plan”, meaning that they will be completed only two or three years later.
For HDB upgraders who buy these types of condo units, the fact that they can currently can get a good price for their HDB flats is moot, because they will sell their flats only two or three years down the road.
That brings me to the second point that HDB upgraders must consider before signing on the dotted line.
What will the global economy and the Singapore property market look like in two or three years’ time, when these projects are due for completion?
Home buyers today can no longer rely on the now-defunct deferred payment scheme introduced in 1997. This allowed buyers to pay a 10 or 20 per cent downpayment, and defer taking a bank loan until the project was completed.
Developers have replaced this with the “interest absorption scheme”. Here, the buyer also pays an initial 20 per cent downpayment and defers the rest until the property is completed.
But the big difference now is that the minute buyers commit to a property, they have to take a loan with a bank which the developer has selected. The developer then foots the bill for the buyer in interest payments to the bank during the construction period.
This arrangement carries new risks for the home buyer.
Firstly, if a developer goes under, it will no longer be able to pay the regular interest payments and the bank will go to the buyer for these payments.
This seems quite an unlikely scenario in Singapore as developers who offer this scheme generally have the financial muscle to ride out the tough times. Still, the risk of this happening is higher with smaller developers.
Secondly, the bank reserves the right to revalue a property at any point during the construction, or when the project is completed.
So if the property market heads further south, a bank may revalue properties downwards. This means that it will likely reduce the sum it had earlier agreed to lend to the buyer, who will then have to stump up a hefty sum of cash to make up the difference.
On the one hand, experts say banks are unlikely to revalue properties as long as buyers are able to make the monthly payments. Unlike high-end properties where prices could crash in as little as three months, prices of suburban units are less volatile, say analysts.
But on the other hand, if the market really crashes, HDB upgraders could be hit by a double whammy. They will have to fork out more cash to top up their loans at a time when the values of their resale flats would most likely have crashed along with the general market. And if they back out of buying the new flat, they will lose a 20 per cent deposit.
In the worst-case scenario, they could be saddled with two mortgages for properties, both in negative equity.
Such an optimistic gamble on the future is not for the faint-hearted nor the financially prudent, especially when unemployment is hitting a record high.

But if an HDB upgrader truly has the financial strength to hold on to his properties indefinitely for the long term, it could be a gamble that will pay off when the market finally recovers.

These are sums that one must do carefully, no matter how beautiful and attractive floor plans and showflats now look.

It will ensure that the leap you make from public to private home ownership won’t end up with you falling into the bottom of the chasm in between.