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Thread: Are banks able to match asking prices?

  1. #1
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    Default Are banks able to match asking prices?

    Hi, have not be looking @ property for the last month cos' asking prices are way above valuation a month back. Has valuation caught up?

    tks.

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    Quote Originally Posted by lyn
    Hi, have not be looking @ property for the last month cos' asking prices are way above valuation a month back. Has valuation caught up?

    tks.
    seems valuations are up only for new launches ... old projects ? wait long long ..

    thats why all the old projects are still cheap compared to new ones ...

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    Old projects are not cheap either now in my opinion. Sellers r often asking much higher price now & bank valuation is still very low. Hence the gap bt selling price & valuation has widen, some people have problems getting bank loans or need to fork out much higher cash.

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    dun buy lor ...

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    Quote Originally Posted by 3dchow
    Old projects are not cheap either now in my opinion. Sellers r often asking much higher price now & bank valuation is still very low. Hence the gap bt selling price & valuation has widen, some people have problems getting bank loans or need to fork out much higher cash.
    they may have to fork out more cash to buy old projects ... but in the long run ...still cheaper than paying ridiculous price for nearby new launches ..

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    How can these old projects be cheaper when the asking is so much higher than valuation? If bank valuations significantly below asking price, does it not mean asking price is too high? No reason banks don't want business right?

    Quote Originally Posted by proud owner
    they may have to fork out more cash to buy old projects ... but in the long run ...still cheaper than paying ridiculous price for nearby new launches ..

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    Quote Originally Posted by 3dchow
    Old projects are not cheap either now in my opinion. Sellers r often asking much higher price now & bank valuation is still very low. Hence the gap bt selling price & valuation has widen, some people have problems getting bank loans or need to fork out much higher cash.
    Bank know the property market very well in the next one year, the new projects only TOP in 2 to 3 years time and buyers need not to pay ( IAS) or pay very little after the project start to build. And after 2 years, the market may improve. The bank are also taking the risk to lend them the money hoping the market will pick up.

    As for the old project, the borrower need to pay after the completion( about 3 months ) immediately. So the bank have to be very careful, in case the market did not pick up.

    The share market also not moving as before ( 2 -3 months ago ), investors do not know when will the market is going to improve.

    Think carefully before you commit.

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    Same here.

    Seller asks for 1400psf
    Banks valued between 900 to 1200psf. Almost 30% lower!

    Asked about why the neighbouring new development can go for a higher psf, the banker just said cos those are normally special tied ups with specific banks. True?

    Anyway I also believe that the banks will not turn away business. I have approval for loans covering more than what I ask. Maybe they are projecting an impending drop in prices? Anyone else seeing this phenomenon?

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    Quote Originally Posted by echotrain
    Same here.

    Seller asks for 1400psf
    Banks valued between 900 to 1200psf. Almost 30% lower!

    Asked about why the neighbouring new development can go for a higher psf, the banker just said cos those are normally special tied ups with specific banks. True?

    Anyway I also believe that the banks will not turn away business. I have approval for loans covering more than what I ask. Maybe they are projecting an impending drop in prices? Anyone else seeing this phenomenon?

    definitely true, sure there is some benefits or risk sharing to the bank from developers for providing loan to new development.

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    Quote Originally Posted by Douk
    definitely true, sure there is some benefits or risk sharing to the bank from developers for providing loan to new development.
    Wow!!! that 's very dangerous for the buyers of new projects.

    These people give wrong impression of the market and people start buying and think that the prices and market had already picked up.

    BIG problem liao.....double standard.....How to settle the cash over valuation...

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    Quote Originally Posted by Honesty
    Wow!!! that 's very dangerous for the buyers of new projects.

    These people give wrong impression of the market and people start buying and think that the prices and market had already picked up.

    BIG problem liao.....double standard.....How to settle the cash over valuation...
    i am looking forward to a price retracement ...

    dont pity stupid buyers ... they need to pay a fee to learn a lesson

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    isn't this a little bit of a local subprime in the making (albeit less risk because 20% downpayment)? enticing buyers of new launches with easy credit and 2 years later if valuations are lower ask them to top up and shocking these buyers?

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    Quote Originally Posted by lyn
    Hi, have not be looking @ property for the last month cos' asking prices are way above valuation a month back. Has valuation caught up?

    tks.
    Hi Lyn, some of my humble opinions for your kind consideration and other for simple sharing. Purely on facts and no comment on the property market movement.

    1. Most valuation has not been catching up to ANY property yet.

    2. Contradicting to what one of the forumer had said, bank do not know very well what the property market will be in the next one year. Bank are not soothsayer, they could only analyse but they do have tons of figures from land bank to individual saving account.

    3. For IAS, buyer has to top up 3%-5% over the normal PPS for a same unit. This translate to an additional margin which is acceptable for risk co-share. BUT, not everyone could pay 20% of the PPS+3-5% and get the bank to work out a finance package which consuming 2-3 years down the road upon TOP. It is far from abnormal to turn down any IAS request.

    4. And going a little bit backward, since the 1st day be it buying a piece of land on private S&P or from President Nathan, bank involvement is there with the developer's financing. Subsequently, builder, be it material trade financing or operating cost, also have bank involvement. And incidentally, some bigger NSC (Nominated Sub-Con), also require financing.

    Then, come to the retail financing which all have been talking about here, like those "tag-rate on sibor", on CPF, etc you see everywhere. All the above mentioned parameters are then input to a matrix system for consideration and a quota is work out.

    So you see, when everything is accumlative, there are many factors to consider before a loan is disburse, be it PPS, DPS, IAS or price over valuation or under valuation to an individual ligation/creditability search.

    Examples; with the break-even cost known, will issuing more IAS allow liquidity to flow to developer which in turn to builder which could pay up? Will disbursing loan to buyer a better margin or a risk adverse way comparing to extending a credit line for developer or builder? Will secure-mortage loan weight us down like toxic asset in few years down the road? Could underwriting insurance company honour like a white knight?

    Financing is never a walk in the park. And to the retail buyers here, some time getting a valuation or loan depend on luck, time, date, market condition when you approaching a bank.. hahhahahhahhaha

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    Come on, banks are not valuers. The people who provide valuation are the licensed valuers.

    It is a simple fact yet so many people get it wrong.

    Quote Originally Posted by echotrain
    Same here.

    Seller asks for 1400psf
    Banks valued between 900 to 1200psf. Almost 30% lower!

    Asked about why the neighbouring new development can go for a higher psf, the banker just said cos those are normally special tied ups with specific banks. True?

    Anyway I also believe that the banks will not turn away business. I have approval for loans covering more than what I ask. Maybe they are projecting an impending drop in prices? Anyone else seeing this phenomenon?

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    Banks also do risk-reward calculation mah. They give higher valuation to those new projects under IAS (or at least starting construction with a long TOP date) because they thought by the time the project is completed 3 years later, most likely economy would have recovered. When they give a loan to those under IAS, developers paid for the interests, buyers pay 20%, banks pay nothing for waiting till 3 years later! (0 risk to bank while locking in a customer!).
    If they give a loan to those with long TOP date, they make progressive payment and if 3 years later when TOP and valuation still below purchase price, they can don't dis-imburse the remaining 30% and ask buyer to top up! (minimal risk to bank again - vs loaning to purchase of resale properties where they have to dis-imburse 80% or so loan straight away and they can't reclaw these back if valuation drops significantly below purchase price). -> So this explains why banks are so eager to grant very high valuations to new under construction properties but market valuations to resale properties! So, in reality is: Is valuation too low or asking price too high?

    Quote Originally Posted by Honesty
    Wow!!! that 's very dangerous for the buyers of new projects.

    These people give wrong impression of the market and people start buying and think that the prices and market had already picked up.

    BIG problem liao.....double standard.....How to settle the cash over valuation...

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    Quote Originally Posted by bargain hunter
    isn't this a little bit of a local subprime in the making (albeit less risk because 20% downpayment)? enticing buyers of new launches with easy credit and 2 years later if valuations are lower ask them to top up and shocking these buyers?

    I have been hearing that property price increase for new launches with easy credit is a local subprime. First of all, do you know what is this subprime before you comment?

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    i think you have read this in the wrong context. what i am simply saying as a reference to the american subprime is the much looser standards for these new launches vs other properties:

    1) valuation able to match for way higher than neighbouring ppties' valuation (sometimes even new benchmarks like Ascentia Sky).
    2) only 20% downpayment required. (few are aware they may need to top up nearer to TOP if valuation falls)

    I am not referring to the US subprime of zero downpayment and no income statements required kind of loans but rather the vastly different double standards for giving out loans for new launches vs completed properties.


    Quote Originally Posted by vin002
    I have been hearing that property price increase for new launches with easy credit is a local subprime. First of all, do you know what is this subprime before you comment?

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    Quote Originally Posted by teddybear
    Banks also do risk-reward calculation mah. They give higher valuation to those new projects under IAS (or at least starting construction with a long TOP date) because they thought by the time the project is completed 3 years later, most likely economy would have recovered. When they give a loan to those under IAS, developers paid for the interests, buyers pay 20%, banks pay nothing for waiting till 3 years later! (0 risk to bank while locking in a customer!).
    If they give a loan to those with long TOP date, they make progressive payment and if 3 years later when TOP and valuation still below purchase price, they can don't dis-imburse the remaining 30% and ask buyer to top up! (minimal risk to bank again - vs loaning to purchase of resale properties where they have to dis-imburse 80% or so loan straight away and they can't reclaw these back if valuation drops significantly below purchase price). -> So this explains why banks are so eager to grant very high valuations to new under construction properties but market valuations to resale properties! So, in reality is: Is valuation too low or asking price too high?
    the original absolute price has been increase for IAS. It the buyer that pay the main bulk of it in the 20%, not developer.

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    Quote Originally Posted by bargain hunter
    i think you have read this in the wrong context. what i am simply saying as a reference to the american subprime is the much looser standards for these new launches vs other properties:

    1) valuation able to match for way higher than neighbouring ppties' valuation (sometimes even new benchmarks like Ascentia Sky).
    2) only 20% downpayment required. (few are aware they may need to top up nearer to TOP if valuation falls)

    I am not referring to the US subprime of zero downpayment and no income statements required kind of loans but rather the vastly different double standards for giving out loans for new launches vs completed properties.
    20% vs zero down payment is a great difference. In addition, with IAS, bank need to assess and approve the loan first. The risk factor has already been assessed despite of a new benchmark set like AS. Assuming if one made a down payment and cannot fulfill the loan requirement, bank is about to sell at 80% of the value. It will become a subprime only if 50% of the buyers all cannot fulfill the loan requirement. When this happened, imagine what is happening to Singapore or world economy. But bank should know how to minimize their risk when giving out such loan approval.

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    Just curious on the IAS part of things.

    If I buy a property and took out a loan via IAS, I know that at upon TOP, it will be converted to another loan which is no longer IAS as the property has TOPed.

    Question is, does the bank that you engaged the IAS loan with guranteed that therewill be not re-valuation on the value of the property?

    More explicitly, do they in Black & White state that upon the completion of the property, their valuation for your property will be the same as when they first extend you the IAS loan???

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    Quote Originally Posted by blackswan
    Just curious on the IAS part of things.

    If I buy a property and took out a loan via IAS, I know that at upon TOP, it will be converted to another loan which is no longer IAS as the property has TOPed.

    Question is, does the bank that you engaged the IAS loan with guranteed that therewill be not re-valuation on the value of the property?

    More explicitly, do they in Black & White state that upon the completion of the property, their valuation for your property will be the same as when they first extend you the IAS loan???
    I just found out from my trust worthy banker. Bank 'can' ask for top up. Subject to teams and conditions.

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    Quote Originally Posted by Property_Owner
    I just found out from my trust worthy banker. Bank 'can' ask for top up. Subject to teams and conditions.
    Looks like have to stick to completed properties then..........
    Too dangerous in these times to assumed anything.
    Thanks for the quick turnaround though. Cheers.

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    Quote Originally Posted by proud owner
    they may have to fork out more cash to buy old projects ... but in the long run ...still cheaper than paying ridiculous price for nearby new launches ..
    Which is a better deal? One Jervios at 12xxpsf or AS at 13xxpsf or higher? OJ bank can't match. AS bank match what you buy. You decide.

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    Ok, tell you about completed properties: For example, seller asking $1.5m, bank's valuation is $1.2m. If buyer buys at $1.5m, he needs to come up with ($1.5m-$1.3m) + 80%*$1.2m + stamp duty $39.6k = $540k (of which at least $354k must be CASH and the other $225k either using CPF or CASH)!

    Quote Originally Posted by blackswan
    Looks like have to stick to completed properties then..........
    Too dangerous in these times to assumed anything.
    Thanks for the quick turnaround though. Cheers.

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    banks are still not matching One Jervois at 12xxpsf?

    if i was interested in one jervois and had the cash, of course prefer one jervois to AS but that's just my personal preference.



    Quote Originally Posted by Property_Owner
    Which is a better deal? One Jervios at 12xxpsf or AS at 13xxpsf or higher? OJ bank can't match. AS bank match what you buy. You decide.

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    Quote Originally Posted by teddybear
    Ok, tell you about completed properties: For example, seller asking $1.5m, bank's valuation is $1.2m. If buyer buys at $1.5m, he needs to come up with ($1.5m-$1.3m) + 80%*$1.2m + stamp duty $39.6k = $540k (of which at least $354k must be CASH and the other $225k either using CPF or CASH)!

    And you forgot to mention.....

    The CASH that you top up above valuation may not help your loan to equity ratio as the bank deems it as you paying extra to the seller. Should the property price drop further, you may need to fork out more cash again.

    Advice after talking to most of the banks here...

    Either

    1. Wait for seller to lower price cos there are not many buyers who are willing to top up in cash, above valuation, especially in these uncertain times.

    2. Wait for valuation to go up but if no one tops up in cash, the valuations will not move much cos the valuation depends a lot upon the sales of neighboring units.

    3. Buy new. Cos the new units are tied up with certain banks who have agreed to the developers price range. Doing this will indirectly help boost valuations of the second hand market, but slowly. But doing this will result in redirecting people to buy new instead of second hand properties.

    Any comments?

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    Quote Originally Posted by Property_Owner
    Which is a better deal? One Jervios at 12xxpsf or AS at 13xxpsf or higher? OJ bank can't match. AS bank match what you buy. You decide.
    Not interested in both at this price. But if I am to choose between the 2, I will go for AS. One man's meat is another man's poison.

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