Published October 12, 2006

Overwhelming response to HDB's The Premiere

Buyers will have to prove ability to pay before completing sale: sources


THE Housing and Development Board's (HDB) pilot residential development with Sim Lian Group called The Premiere, Tampines is almost five times oversubscribed.

Condo style: More than 30,000 people have visited the showflat and 3,655 people have applied for the 616 units

The huge success of the first Design, Build and Sell Scheme (DBSS) may have prompted HDB to take measures against 'impulse' buying.

Sources say that HDB is planning to announce a new requirement for buyers of flats to furnish proof of their ability to make monthly instalments before a sale can be completed. The Premiere, which will be sold by ballot, is likely to be the first HDB development to require this.

A property consultant who did not want to be named said that HDB has in the past faced the situation where buyers realise too late that they cannot afford a purchase they have undertaken. 'It causes a lot of problems for the buyer and seller,' he added. The attractiveness of The Premiere will certainly tempt many buyers. It is designed like a private condominium, and HDB has waived the resale levy.

Since the launch of The Premiere last Saturday, Sim Lian says more than 30,000 people have visited the Tampines showflat and by the end of yesterday, 3,655 people had applied for the 616 units.

HDB concessionary loans for The Premiere are available for those eligible, but perhaps expecting more than the average first-time buyer, the showflat has made space available for three banks to offer loans directly at market rates.

The banks involved are POSB, UOB and OCBC.

Kevin Lam, head of UOB's loans division, said: 'We have received many housing loan inquiries following the launch of The Premiere. However, applications have yet to come in as any purchase is subject to the results of ballot by HDB.'

POSB has also received many inquiries. Koh Kar Siong, managing director, secured loans, at DBS, says the loan assessment is similar to its current practice, and the packages offered are comparable to those it has for private properties. 'In our current promotion, customers who sign up for a home loan for The Premiere will receive a $100 shopping voucher,' he said.

The bank home loans come at market rate. 'As for the board rate changes, we will be adjusting our home loan rates for both the private and HDB properties. The new rates will affect only some of our existing housing loan customers and the increase ranges from 0.15 per cent to 0.5 per cent and will take effect from end-October,' Mr Koh said.

DBS last raised its mortgage rates by 0.5 per cent per annum in March for existing customers.

HDB itself stopped making market-rate mortgage loans on Jan 1, 2003 but as Sept 30 this year, it still had over 70,000 outstanding market-rate loans. In addition, there were 498 households paying their upgrading cost by instalment at the HDB market interest rate.

Yesterday, HDB said it would revise the computation basis for the HDB market interest rate peg, the Adjustable Rate Mortgage Index. The board said: 'The revised computation will be based on the average of the non-promotional HDB housing loan rates of the three local banks - DBS (POSB), OCBC and UOB. The HDB market interest rate will continue to be subject to the floor rate of the HDB concessionary interest rate.' Previously, it was a 'complex formula' involving the top six banks.

HDB said the revised computation basis would make the index 'more transparent and easier for mortgagors and the general public to understand'.

Whether more people with these loans have raised concerns about rising interest rates is not known, but Nicholas Mak, director of research and consultancy at Knight Frank, says: 'There is a general perception that HDB owners who borrow from HDB have a safety net and will not have their properties foreclosed by the board.'

In HDB's latest annual report (FY2005-06), the mortgage financing segment reported a deficit of $51 million, as compared with a surplus of $17 million last year.

HDB said the change was mainly due to a refinement in the basis of provisions for mortgage loans that were doubtful.