Saturday, 27 July 2013

Property cooling measures give foreign buyers cold feet

Singapore permanent residents (PRs) and other foreigners are buying fewer private homes. The number slipped for the second consecutive quarter in Q2 2013, according to a caveats analysis by DTZ.

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Guanyu 道 said...

Property cooling measures give foreign buyers cold feet

Kalpana Rashiwala
25 July 2013

Singapore permanent residents (PRs) and other foreigners are buying fewer private homes. The number slipped for the second consecutive quarter in Q2 2013, according to a caveats analysis by DTZ.

Conversely, the number of private residential properties purchased by Singaporeans increased 14.4 per cent in the second quarter over the first quarter.

For PRs, the drop is chiefly evident in the secondary market, where they picked up just 348 units in the second quarter - 30.3 per cent less than in the first.

On the other hand, the number of private homes PRs bought in the primary market, that is, from developers, rose 4.2 per cent quarter-on-quarter (q-o-q) to 525 units in Q2.

Overall, PRs picked up 873 units in Q2 2013, which accounted for a q-o-q drop of 13 per cent.

There are strong reasons why PRs seem to be avoiding the secondary market. Lee Lay Keng, head of Singapore research at DTZ, reckons that following cooling measures in January this year, PR owners of existing HDB flats could have held back their purchases due to the new measure that requires them to sell their HDB flats within six months of buying a completed private residential property.

In contrast, if a PR were to buy a private home from a developer, it would typically be in an uncompleted project, for which the PR would get a longer period to dispose of his existing HDB flat. He has to divest his HDB flat within six months of the private residential project’s completion.

DTZ’s caveats analysis showed that the number of private homes bought by non-PR foreigners slipped 17.7 per cent to 480 in the second quarter from 583 in Q1. This was on the back of a 22.3 per cent decline in the number of units they bought in the primary market, compared with a smaller decline of 7.2 per cent in their secondary-market purchases.

“The q-o-q fall in foreign purchases in the primary market in Q2 was amplified from a high base in Q1, when foreign buyers acquired 87 units in D’Leedon as its developer was giving discounts to entice buyers,” said Ms Lee.

In all, non-PR foreign buyers saw their share of the total number of private homes sold going down from 9.8 per cent in Q1 this year to 7.5 per cent in Q2.

Over the same period, PRs’ share too fell from 16.9 per cent to 13.7 per cent. Conversely, Singaporeans’ share rose from 72.8 per cent to 77.7 per cent.

DTZ also did a nationality analysis of the combined pool of PR and other foreign buyers.

Mainland Chinese continued to be the top buyers, with a 28 per cent share in Q2, followed by Malaysians (27 per cent share), Indonesians (18 per cent) and Indians (7 per cent). However the number of units bought by each of these four major groups was lower in Q2 compared with the preceding quarter.

Based on caveats lodged, the most popular project among Singaporean buyers in Q2 was d’Nest in Pasir Ris with 486 units sold, followed by Bartley Ridge (375 units) and Urban Vista in Tanah Merah (290 units).

These were also the top three projects among PR buyers - with 94, 56 and 40 units respectively. For other foreigners, the top three picks were Bartley Ridge, d’Nest and d’Leedon - with 28, 23 and 22 units respectively.

In all, 6,381 private homes were purchased across all categories of buyers in Q2 - 7.3 per cent higher than 5,947 units in Q1. The latter was a 32.7 per cent drop from the Q4 2012 figure of 8,841 units. Market watchers attributed the Q1 decline to cooling measures introduced in January this year.

Ms Lee expects overall transaction volumes for private homes to be lower in Q3, as buyers take time to adjust to the new total debt servicing ratio (TDSR) rules for property loans effective June 29. “The loan application process is likely to be more onerous and could take longer as banks conduct their checks to ensure compliance with the TDSR of 60 per cent. This might deter buyers.”

Guanyu 道 said...

At the same time, MAS has shut a loophole that some property investors had used to buy in the name of proxies to circumvent tighter loan-to-value limits for those with existing housing loans, as well as to avoid paying higher additional buyer’s stamp duty - since property investors disguised as mortgage guarantors now have to be brought in as co-borrowers and hence co-owners for the property, say market watchers.

Ms Lee points out that developers may hold back launches because of the upcoming Hungry Ghosts Month, which could also impact Q3’s transaction volumes.

Jones Lang LaSalle national director Ong Teck Hui too expects private residential sales volumes to ease this quarter. “As to how it will impact the different categories - Singaporeans, PRs, non-PRs - it will be more difficult to size up,” he added.