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Thread: Bigger impact on resale market than on older buyers

  1. #1
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    Default Bigger impact on resale market than on older buyers

    http://www.todayonline.com/Business/...n-older-buyers

    Bigger impact on resale market than on older buyers

    by Colin Tan

    04:45 AM Oct 12, 2012


    The consensus among property watchers appears to be that older buyers will be worst hit by the new home loan curbs, especially those in their 40s and 50s, but the impact of the latest cooling measures will likely be felt more acutely in the resale market.

    Certainly, the mathematics will show older borrowers to be at a disadvantage, everything else being equal. But everything else is not equal. The commonly-held view assumes that most home buyers leverage to the hilt and it ignores the important fact that older home buyers - many of whom may have experienced more than one property cycle - have a lot more cash resources than younger ones.

    Last Friday, the Monetary Authority of Singapore set a maximum tenure of 35 years on all home loans. And the loan-to-value ratios for new mortgages have been lowered for tenures exceeding 30 years, or if the loan extends beyond the retirement age of 65.

    If older buyers are still buying investment properties, this suggests that they are the ones who have made money from the previous housing cycles.

    Taking a longer-term mortgage also does not necessarily mean that buyers have raised their leveraged position to the maximum. Most buyers will try and build in a buffer in their home loans in case they need cash urgently. So, they take a longer term loan than necessary. In times of high inflation as is the case now, it makes more sense to have a bigger debt even if the borrower does not need to borrow more.

    I would say the impact of the latest loan curbs is bigger on the resale market for completed properties than on older buyers. If there is any significant impact on older buyers, the effect is secondary.

    If you are looking for any kind of froth or price exuberance in the housing market, you are likely to find it in the resale segment. Compared to the overall 0.5 per cent rise in housing prices for the third quarter, prices for non-landed completed properties gained 3.2 per cent over the same period. The latter figure is from the SRX Residential Property Flash Report released late last week.

    The newly-released figures also showed that the Rest of Central Region posted the strongest quarterly gain of 7.1 per cent, followed by a smaller gain of 3 per cent in the Outside of Central Region. Meanwhile, the Core Central Region registered a muted 0.75 per cent price gain.

    The Real Estate Developers' Association of Singapore (REDAS) said the new loan curbs "will not have a significant impact on the property market" - or as I read, on new launches. It added that "based on past experience, not many buyers take long tenure loans". I tend to agree with its assessment.

    Homes sold at launches are usually those under construction or where the developer has been quick to secure approval to begin sales, even if foundation work has not started.

    Aside from down payment, the developer collects according to the progress payment construction schedule. This means the full loan does not kick in till completion, which may be three years or more from the launch date.

    Even with the higher mortgage rates from shorter term tenures, the absolute amount of interest payable will still be significantly lower than for a resale home where the full loan kicks in almost immediately.

    When analysed over the entire period of the loan, the difference is minimal but it is critical in the early stages of the loan. We all know how myopic home buyers can be. They do not look further than a few years ahead. If they did, they would have heeded the frequent warnings of a huge impending supply in the pipeline a few years ago.

    It looks like developers may have escaped the chop again, if they were the intended target of the cooling measures. It could be a blessing in disguise for them if the new curbs drive more sales towards the primary market.

    There may also be more demand for smaller apartments in the suburban areas. If not, even more monies could be diverted into the non-housing segments of the property market.

    We shall have to see.



    Colin Tan is Head of Research and Consultancy at Chesterton Suntec International.

  2. #2
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    very logical analysis. but we shall see very soon the true impact of this CM. I believe MAS must have seen something we missed. Good Luck.

  3. #3
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    Resale price affects how HDB prices new BTO flats and not the other way. So for BTO flat price to come down, there is a need to tame the resale price.

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    i am a living example...any reporter want to interview me..

  5. #5
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    maybe writer also is older category now....

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    Hi Bro radha, how about writing to the forum?

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    I felt this latest CM is extremely unfair, why they want to hit the old ones so hard!

    Those in the 40-mid 50, just saved enough to have second propert or dream home...just gone with the wind

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    Should buy launches anyway, thie CM or not.

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    Will this CM help to keep Sibor rates low since there is less borrowing?
    If so then will it spur more people who are cash rich to buy (since they are not affected by the lower LTV)?

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    Quote Originally Posted by Laguna
    I felt this latest CM is extremely unfair, why they want to hit the old ones so hard!

    Those in the 40-mid 50, just saved enough to have second propert or dream home...just gone with the wind

    Might be a good thing the 40-50 might. Loose it all at thias pt. Well. The cash rich 40-50 can still buy. Only the weak ones are lock out.

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    Quote Originally Posted by buttercarp
    Will this CM help to keep Sibor rates low since there is less borrowing?
    If so then will it spur more people who are cash rich to buy (since they are not affected by the lower LTV)?
    Sister buttercarp, sibor is controlled by the angmoh in usa. They determine our fate. They wanna up, here got to up. They say go down, here also go down. the whole world is at their mercy.

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    Quote Originally Posted by leesg123
    Sister buttercarp, sibor is controlled by the angmoh in usa. They determine our fate. They wanna up, here got to up. They say go down, here also go down. the whole world is at their mercy.
    Can sibor up but sor bochap?

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    Quote Originally Posted by Secretariat
    Can sibor up but sor bochap?
    Sor is the twin, sibor up, sor oso up, my brother also up up!

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    I think its good to have some prudence. Too many living and borrowing as if they would live forever. Leave assets rather than loans for your next generation.

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    Quote Originally Posted by buttercarp
    Hi Bro radha, how about writing to the forum?
    sis few years ago i wrote to ST forums...the title was "The changing face of Pasir Ris"...i was very upset by so many devts coming up there...but i waited days/weeks nothing THEY never published my letter...

    Then a few years later i saw an article in the papers VERY VERY similar words to what i had written KNS..then i told myself all these $%#^ reporters just collecting our words..one day the wil use....

    so NO more letters to forum..i only share with my bros and sisters here..

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    Quote Originally Posted by leesg123
    Sor is the twin, sibor up, sor oso up, my brother also up up!
    How come your brother can soar up when SOR is up?
    I thought it should be inversely proportional?

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    Quote Originally Posted by leesg123
    Sister buttercarp, sibor is controlled by the angmoh in usa. They determine our fate. They wanna up, here got to up. They say go down, here also go down. the whole world is at their mercy.
    so if obama looses and botak ben is kicked out what happens..

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    Quote Originally Posted by leesg123
    Sister buttercarp, sibor is controlled by the angmoh in usa. They determine our fate. They wanna up, here got to up. They say go down, here also go down. the whole world is at their mercy.

    If US rates up, and SGD remains very liquid. Say people choose to save than spend then sibor will remain low.

    Sibor has nothing to do with USA rates

    On the other hand. If USA rates up, then SOR(swap offer rate) will go up

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    Quote Originally Posted by buttercarp
    How come your brother can soar up when SOR is up?
    I thought it should be inversely proportional?

    The heat of the meat is proportionate to the angle of the dangle

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    Quote Originally Posted by proud owner
    The heat of the meat is proportionate to the angle of the dangle
    Wow, this one is super chim.
    Math and anatomy must be good.

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    Quote Originally Posted by proud owner
    If US rates up, and SGD remains very liquid. Say people choose to save than spend then sibor will remain low.

    Sibor has nothing to do with USA rates

    On the other hand. If USA rates up, then SOR(swap offer rate) will go up
    Hi proud owner,
    I posted this in the thread on SOR based loan.

    http://forums.condosingapore.com/sho...721#post317721


    http://www.moneysmart.sg/home-loans/...-in-singapore/

    It said this..... Is it true?

    According to the article,

    "When SOR starts rising fast, the SIBOR rate restrains it, because you’re using the average of the two. On the other hand, if SOR rates plummet, it drags down the average of the two, causing you to pay less."

  22. #22
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    Quote Originally Posted by radha08
    sis few years ago i wrote to ST forums...the title was "The changing face of Pasir Ris"...i was very upset by so many devts coming up there...but i waited days/weeks nothing THEY never published my letter...

    Then a few years later i saw an article in the papers VERY VERY similar words to what i had written KNS..then i told myself all these $%#^ reporters just collecting our words..one day the wil use....

    so NO more letters to forum..i only share with my bros and sisters here..
    How do you know there are no reporters here?

  23. #23
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    Like I said. Sibor has no US rate factor. Only SOR has. US rate factor

    So in general sibor tends to be lower than SOR

    So in some way the ave of the 2 shud be lower

    Quote Originally Posted by buttercarp
    Hi proud owner,
    I posted this in the thread on SOR based loan.

    http://forums.condosingapore.com/sho...721#post317721


    http://www.moneysmart.sg/home-loans/...-in-singapore/

    It said this..... Is it true?

    According to the article,

    "When SOR starts rising fast, the SIBOR rate restrains it, because you’re using the average of the two. On the other hand, if SOR rates plummet, it drags down the average of the two, causing you to pay less."

  24. #24
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    Quote Originally Posted by buttercarp
    How come your brother can soar up when SOR is up?
    I thought it should be inversely proportional?
    fri nite still young n u peeps getting so jiggy n juicy already

  25. #25
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    i don't want to be "an older folk"...

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    Quote Originally Posted by proud owner
    Like I said. Sibor has no US rate factor. Only SOR has. US rate factor

    So in general sibor tends to be lower than SOR

    So in some way the ave of the 2 shud be lower
    Thanks bro.
    Now I understand.
    Sibor is determined mainly locally but of course if the whole world is in recession, it will be definitely affected.
    But SOR is determined by USD.

    So sibor and sor are not twins.

    They are brothers.

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    1) I agree that resale property will be affected, BUT only to those which offer lousy rental yield. I believe that property with yield of say >4% will be on the radar for investors affected by the new CM.

    2) New launches might not be affected for NOW, but the tsunami will come in 3 years time when the full loans kicks in. Perhaps that will be the best time to pick up real firesale? in 2016?

    3) New launches in CCR targeting at older investors will be affect unless we have reasons to believe that bank would not factor in the risk of default when full loans kicks in. This is especially more so, when refinancing is getting harder, which mean, bank will be stuck with the mortagees for long haul.

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    So now is not common as SOR is below Sibor.
    Quote Originally Posted by proud owner
    Like I said. Sibor has no US rate factor. Only SOR has. US rate factor

    So in general sibor tends to be lower than SOR

    So in some way the ave of the 2 shud be lower

  29. #29
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    Quote Originally Posted by buttercarp
    Will this CM help to keep Sibor rates low since there is less borrowing?
    If so then will it spur more people who are cash rich to buy (since they are not affected by the lower LTV)?
    Believe Sibor rates is more tied to US bond buying activities/QE than anything else at this moment.........

  30. #30
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    Quote Originally Posted by DC33_2008
    So now is not common as SOR is below Sibor.
    Nothing uncommon. SOR is low because SGD appreciation expectation. SIBOR low because of abundant liquidity. Both are results of QEs.

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