URA Withdraws Deferred Payment Scheme for properties...

[Dennis Ng]

Latest news.

URA just announced withdrawal of Deferred Payment Scheme for property purchase.

Interesting thing is I made this prediction back in July 2007. Below is an email I sent out to my clients on 30 July 2007 on possible anti-proeprty speculation measures govt might introduce and my views on the property market outlook.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com

Source is http://www.ura.gov.sg/


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26 October 2007

Withdrawal of deferred payment scheme for property purchases

The Government announced today the immediate withdrawal of the Deferred Payment Scheme (DPS) for property purchases in view of the strong economic and property market conditions.

Deferred Payment Scheme

In Oct 1997, the Government allowed developers to offer to purchasers of uncompleted private residential and commercial properties the option to defer part of the progress payments due after the initial 20% downpayment, to a later stage.

In Nov 2001, the Government further allowed developers to defer up to half of the initial 20% downpayment up to the issue of Temporary Occupation Permit or any time before that. These DPS were introduced at a time when the property market was lacklustre and the economy was in recession.

Buoyant property market and strong economic growth

The property market has since recovered and has been growing strongly in the last few years, driven by economic fundamentals including our robust economic growth and rise in wages. In view of the current buoyant property market, the Government has decided to withdraw the DPS for the sale of uncompleted private residential, commercial and industrial properties with effect from 26 Oct 2007.

The removal of the DPS will also encourage greater financial prudence, as buyers will have to ensure that they have sufficient funds or are able to secure adequate loans from banks before they commit to buying a property.



Below is an email I sent out to my clients on 30 July 2007 on possible anti-proeprty speculation measures govt might introduce and my views on the property market outlook.

Cheers!

Dennis Ng

As mentioned, based on latest figures released by UR and HDB. Looks like property prices are still about 15% below 1996’s peak prices. (see attached file). My personal opinion is that prices would even exceed 1996’s prices in the next 6 to 12 months.

One main danger is possible collapse of Bond markets and withdrawal of liquidity in market as the risk of default of sub-prime Housing Loans in U.S. might spread to the Capital market as many of these loans were repackaged and sold off to investors as Collateralised Debt Obligaitons in the last few years.

Risks have certainly increased. However, if there is no global crash in stock, bond and property markets in the next few years, Singapore property prices are likely to be higher rather than lower in the next year or so.

Personally, I'm still positive about the property market for the next 6 to 9 months and here are the reasons why:

1. from URA data, it appears that prices are now at about 1994-1995's level, still about 15% more to go before reaches 96's peak. I will not be surprised if prices even exceed 96's peak.

2. supply crunch in the next 6 to 9 months due to en-bloc. Spurt in Demand due to foreigners deciding to buy rather than rent. (this trend is picking up in the last 6 months or so from my experience handling loan applications).

3. euphoria and excitment leading to Formular One race in Sep 2008.

4. economic growth figures for Singapore likely to be at higher end or even exceed MAS's projection of 5% to 7%.

5. increase in expatriates and other foreigners (on local pay terms) coming to Singapore.

The possible property anti-speculation measures Singapore govt might announce include:
1. removal of Deferred Payment Scheme for uncompleted projects
2. removal of 90% financing for properties....maximum financing back to 80%.
3. increase of min Cash payment from 5% back to 10% for private properties.

Please note that above are just my opinion. You can definitely have a different opinion.

Remember whether investing in stocks or properties, be prudent and make sure you invest comfortably. Do NOT over-stretch yourself.

I'm having 30% Cash level now. One way to mitigate risks and still participate in market is to "pyramid your investment dollars". ie. as market goes higher and higher, you should risk less and less of your money instead of more. By doing so, even when market turns, you would at least have protected most of your capital and possibly some of your gains.

I advocate a "balanced approach" in investing (please do not go to extremes ie. over-risky or over-kia see).

And if you are taking Housing Loan, ensure Debt-Service ratio should not exceed 35% (including car loans and all other loans) and you should have some Just In Case Fund (separate from Opportunity Fund) sufficient to pay for 6 to 12 months of Housing Loan instalments and ALL other expenses you have in case of any contingencies.

[Dennis Ng]

these are my thoughts on the impact of the announcement:

I think mass market not affected much.

Becos I think majority of mass market properties are bought by home owners and HDB upgraders (owner occupation).

The properties mainly affected are those with alot of border-line local speculators.

Properties with alot of foreign demand not affected since foreigners can only take max loan of 70% anyway and many do not even take Housing Loans at all.

It also does not affect projects already launched and sold. Since typically, only the first buyer enjoys Deferred Payment. Typically, sub-sale buyers are not granted the deferred payment status by the developer.

I think this is the best chance to grab a good deal in property. Take advantage of weak holders who need to let go of their properties becos they cannot get sufficient Housing Loan approved due to too-high debt-service ratio and or other issues (eg. cannot afford monthly instalments)

After the cooling-off period (next 1 to 2 months), property prices likely to go up further by 20% to 30%.

Above is just my personal opinion. You can certainly have a different opinion.