RESIDENTIAL MARKET
No correction in home prices after measures
No appreciable correction in overall house prices was seen in October, despite the latest round of cooling measures.
Prices of completed private apartments and condominiums (excluding executive condos) rose one per cent in October, fuelled by price increases in the suburban market.
Excluding small units, prices of suburban apartments rose one per cent while homes in the Central Region rose 0.9 per cent. Prices of small units (up to 506 sq ft) islandwide rose 0.6 per cent in October.
This is despite measures rolled out in October, which include a 35-year cap implemented on loan tenures alongside tighter loan-to- value (LTV) ratios.
The findings, which are based on October flash estimates of the Singapore Residential Price Index (SRPI) series, suggest that the macro-prudential levers implemented thus far have had limited effectiveness in mitigating house price inflation, said Lum Sau Kim of the National University of Singapore's Institute of Real Estate Studies (IRES) .
"Where the policy measures have worked is to attenuate house price volatility. The amplitude of monthly house price swings has reduced over time," she said.
The average absolute monthly change seen in the overall SRPI before the cooling measures were implemented was 2.6 per cent per month versus 0.9 per cent per month after the introduction of the measures in October 2009.
While prices of small units have been more volatile than those of the overall market, they too contracted after a policy targeting shoebox units was announced in September this year.
"We believe the control will continue to moderate small unit prices and volume going forward as it takes effect from Nov 4," said Prof Lum.
IRES also released the revised SRPI values for September, which showed that the sub-index for small apartments islandwide increased 2 per cent compared with August. Excluding small units, the sub-index for both the Central Region and Non-Central Region climbed one per cent. The overall SRPI climbed one per cent in September.
Source: Business Times –29 November 2012
Home buyers borrowing less with tougher rules
Home buyers are borrowing less as tougher lending guidelines contained in property cooling measures start to bite.
Mortgages with a loan-to-value (LTV) ratio of more than 80 per cent comprised 4.7 per cent of all loans in the third quarter, down from 4.9 per cent in the same period last year.
This is the lowest since 2004 and is a sharp drop from the peak of 17 per cent in the third quarter of 2009, said the Monetary Authority of Singapore yesterday.
An LTV ratio of 80 means the buyer has borrowed 80 per cent of the home's sale price.
The MAS' Financial Stability Review noted yesterday that housing loan quality remains robust with the proportion of mortgages with negative equity - where the loan exceeds the property's value - remaining negligible.
More than 70 per cent of mortgages are for owner-occupied homes, which tend to have a lower risk profile while non-performing loan (NPL) ratios for property-related lending have stayed low.
However, these trends warrant close monitoring as NPLs are a key indicator of economic conditions and how borrowers are handling their repayment obligations, the MAS noted.
"Banks should be mindful... if the economic outlook worsens, especially if interest rates were to rise," it said, warning that the sector "could face a pronounced increase in NPL ratios".
But it is evident that the cooling measures have dampened the market with growth in property-related loans slowing.
Associate Professor Sing Tien Foo of the National University of Singapore's department of real estate noted that home prices would have to plunge by more than 55 per cent for loans to get into negative equity.
"The slight increase, however, could be due to the high volume of new loans taken in the past year which tend to have higher LTV ratios," he added.
"This could be due to the run up in prices which require buyers to take larger loans and the fact that interest rates remain low."
Source: The Straits Times –29 November 2012
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