Buyers waiting for a major price correction will be disappointed.

The Government’s measures to boost Singapore’s population could prop up demand for property and support prices.

So far, no recent transactions by institutional investors have reflected a repricing in the market.

Sellers here have become more realistic and lowered their expectations.

More investors are coming back to look at properties that may have previously been overpriced but are now open to negotiation.

Currently, there are many more people interested in selling Singapore properties than in buying them.

Now, growth funds and some opportunistic investors are pulling out of the plateauing Singapore market, at a time when owners - including banks, foreign firms and opportunistic funds - are becoming more willing to sell.

Interest in Singapore properties remains high, however, especially in the logistics and industrial market.

Commercial assets in Singapore are also in demand to some extent, but the residential sector is likely to turn in a weak performance in the investment market this year.

While repricing is not an apparent risk in Singapore’s property market, the Asia-Pacific region is facing an average repricing of 25 to 100 basis points, or 0.25 per cent to 1 per cent.

Mortgage consultancy portal www.HousingLoanSG.com has seen a surge of at least 50 per cent in refinancing activities.

At HSBC, the volume of refinancing applications has grown more than 50 per cent in the last three months.

The reason for this trend is the big drop in the Singapore Interbank Offered Rate (Sibor) in the last 18 months from as high as 3.5 per cent to about 1.2 per cent currently.

Sibor is the benchmark rate used by banks to determine mortgage rates for home loans. It is the cost at which banks borrow funds from one another.

The drop in Sibor means that those who took up a housing loan one to two years ago are likely to enjoy significant interest savings if they refinance now.

Refinancing should be considered only when there are no plans to sell the property in the short term so as to avoid paperwork and potential costs.

Pegged rates versus fixed rates

With Sibor falling steadily, it is not surprising that many customers are opting for new Sibor-linked packages or refinancing from a fixed-rate package to a Sibor one.

Still, some customers are confused when faced with a choice of a three-month or a 12-month Sibor-pegged home loan package.

Choosing the 12-month Sibor-pegged package is as good as fixing the interest rate for a year.

Customer enjoys greater certainty or lower volatility with a 12-month Sibor package than a three-month package.

However, the 12-month Sibor rate is typically 0.5 per cent higher than the three-month Sibor = thus equals paying out more interest.

New home loan packages

MortgageOne Sibor

Standard Chartered Bank’s (Stanchart) newly launched MortgageOne Sibor will appeal to those with excess cash.

It comes with an offset feature so that customers can use the interest earned on their deposits to reduce the interest payable on their home loans.

MortgageOne Sibor loans are priced at 0.8 per cent per annum above the three-month Sibor for the first three years.

Customers can enjoy the same interest rate as their mortgage loan on two-thirds of the deposits linked to their loans, subject to a maximum of their outstanding loan amount. The remaining deposits will enjoy an annual rate of 0.5 per cent.

At the same time, they have the flexibility to withdraw their deposits at any time.

Interest-only loans

Some mortgage packages like the DBS Bank’s new interest-only mortgage product launched early this month appear attractive, but experts cautioned that they are not suitable for everyone.

The product allows customers to pay only the interest for the entire duration of their home loan.

The principal amount is payable in one lump sum only at the end of the loan tenure.

The money that would otherwise have formed the principal component of the loan instalments would be available to the customer for investing.

Based on a rate of 3 per cent, a $1 million loan with a 25-year tenure would have a monthly instalment of $4,486.

Of this, $2,083 is paid towards the principal and would thus be available to the customer to meet other needs if he opts for interest-only servicing.

But here’s the potential pitfall. If the customer invests wrongly or, worse still, has no discipline to save and invest, the amount would be frittered away and he still has a loan to pay.

Go for an interest-only loan only under the following situations:

• intention to buy multiple properties and would like to pay only the loan interest and keep every cent possible;
• other alternatives to invest at higher returns; or
• cashflow is very tight.

Consider such a loan package if buying an investment property.

Home owners who opt for such a product would end up paying more interest in the long run compared to conventional loan packages where both the interest and principal components are paid up regularly.

You might end up in financial trouble in the event that property prices correct by say over 20 per cent and plunge him into negative equity.

DBS imposes certain restrictions such as allowing home owners to borrow only up to 70 per cent of the property purchase price.

Volume is still healthy as home seekers continue to check out resale flats.

Demand for HDB resale flats comes mostly from newly formed families and new permanent residents (PRs).

Last year, there were about 78,000 new citizens and PRs. So they may be buying HDB flats which they may not have been eligible to buy previously.

High-priced transactions have been registered in a few estates such as Marine Parade, Queenstown and Bukit Merah. For instance, a $750,000 deal for a 10-year-old, high-floor 124sqm unit in Holland Close in Oueenstown was recorded in June.

However, increasingly, potential buyers are feeling the pinch of rising costs and negotiating harder for a smaller Cash Over Valuation amount, particularly for non-prime flats.

For suburban locations, asking levels for COV amounts have come down.

The resale index rose because of higher valuations, which are made based on historical data.

Going forward, HDB resale prices look set to rise, but likely by a smaller margin.

Expect an overall price rise of 10 to 15 per cent, including an 8.2 per cent rise in the first half of this year.

Last year, HDB resale prices rose by 17.5 per cent.

1: Ion Orchard

Location: Being built at the corner of Orchard Road and Orchard Turn

Top rental range: $60 to $80 per sq foot (psf) per month

Star tenants: Six double-storey stores totalling 50,000 sq ft, including luxury fashion brands Prada, Louis Vuitton and Cartier

2: Wisma Atria

Location: On Orchard Road between Ion and Ngee Ann City

Top rental range: $55 to $70 psf

Star tenants: Double-storey Nike concept store, totalling 8,000 sq ft, which has taken over the former Topshop space.

3: Mandarin Gallery

Location: At the corner of Orchard and Bideford Roads

Top rental range: $50 to $60 psf

Star tenants: Double-storey stores, ranging from 2,700 sq ft to 6,800 sq ft, for Emporio Armani, Marc by Marc Jacobs and D&G.

4: Ngee Ann City

Location: At the corner of Orchard and Bideford Roads

Top rental range: $40 to $60 psf

Star tenants: Luxury giants Chanel and Louis Vuitton on the first floor. They are due to expand into double-storey spaces, or duplexes, over the next two years - Chanel into a 7,000 sq ft store and Louis Vuitton into a 10,500 sq ft one.

5: Paragon

Location: At the corner of Orchard and Bideford Roads

Top rental range: $40 to $60 psf

Star tenants: Four duplexes facing Orchard Road, ranging in size from 3,600 sq ft to more than 10,000 sq ft, to be occupied by luxe labels Gucci, Salvatore Ferragamo, Prada and Tod’s.

Buy Sell Rent Aspen Heights Condo, Singapore
Contact Clinton +65 9851-2159

Buy Sell Rent Ardmore Park Condo, Singapore
Contact Reiss +65 9100-1090

Buy Sell Rent The Balmoral Condo, Singapore
Contact Reiss +65 9100-1090

contact reiss +65 9100-1090