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Buying a home is one of the biggest purchases you will make in your lifetime, so it’s important to do your homework before you apply for that loan.

Prepare in advance

You must pay at least 1 per cent of the purchase price in exchange for an option to purchase. After that, you have 14 days to decide whether to proceed with the deal and pay the balance of 9 per cent for a completed property or 4 per cent for one under construction.

At this point, consult a mortgage specialist about financing. Mortgage documentation takes about 10 to 12 weeks to complete, so apply early.

Note that most banks charge a cancellation fee of up to 1.5 per cent on the loan amount if you pull out later.

Banks determine the maximum loan amount by applying a debt servicing ratio of between 30 and 35 per cent of your monthly income.

Therefore your total monthly repayment should not exceed this ratio when compared to your monthly income. Other commitments, such as a car loan, will be taken into consideration as part of your monthly commitments.

Select your loan tenure

Generally, the maximum loan tenure is 35 years, but it depends on the borrower’s age. In the case of joint applicants, the maximum tenure will be based on the age of the youngest borrower as long as the loan tenure plus the age of the youngest borrower does not exceed 70 years on loan maturity.

For example, if a borrower wanted to select the maximum loan tenure of 35 years, he must not be more than 35 years old.

Here are some useful tips:

Choose the right package according to your needs

Most banks offer three types of home loan packages: fixed-rate, variable-rate and market-pegged packages.

It is important to understand your needs and intentions before you decide which package suits you.

A fixed-rate package is suitable for those who want peace of mind as during the fixed-rate period, there will be no rate volatility.

But it is not recommended if you want to make a partial prepayment or full settlement during this period as there will be penalties.

A variable-rate package is one where the rate is pegged against the bank’s reference or board rate. This allows the borrower to make prepayments.

If you have a good understanding of market-pegged rates and you do not mind rate movements, go for the market-pegged package.

The rate offered by banks in Singapore is generally pegged to the Singapore Inter Bank Offer Rate (Sibor).

It also allows you to make loan prepayment without penalty for no lock-in packages on specific rollover dates.

Get mortgage insurance for protection

Mortgage insurance – or Mortgage Reducing Term Assurance – covers the home loan balance in the event that the borrower dies or is totally and permanently disabled.

Although not compulsory, it is recommended. If an unfortunate event strikes, the loan repayments will be covered by the insurance.

Have difficulty in your repayments? Talk to your bankers. Late charges or non-repayment penalties are but a deterrent for non-payment. More importantly, promptly seek help in managing an overdue debt.

Banks try to help customers work through such difficult times. It might include allowing customers to pay only the interest portion of the loan for a short period, stretching the loan period so as to reduce the monthly repayment amount.

Help might also come in the form of allowing borrowers to include a second loan applicant to help service the initial loan.

It is not in the bank’s interest to foreclose on home loans. We advise customers who have loans to pay off and are close to running into the risk of not being able to make payments, to speak to their bank officers before their situation gets worse.

By Phang Lah Hwa, OCBC Bank’s head of secured lending

Sale proceedings may have begun at up to 80 developments, with many more to follow

They were a feature of the last boom but fast fell out of favour when markets went south, yet there are signs that another collective sale rush is in the making.

There have been at least 16 collective sales this year, not counting many smaller ones that may have gone unreported.

This is in stark contrast to last year, when only one collective sale was sealed. There were 10 in 2008 but most were late spillover deals from the boom of 2006 and 2007.

The greatest spell of collective sales remains the first six months of 2007, when at least 55 projects were sold for an astounding $9.3 billion.

The slow start this year is not due to a lack of demand for collective sales, but a shortage in supply arising from the extra time needed to meet the tougher legal formalities and more detailed logistical arrangements when gathering owners’ consent.

We should certainly see more collective sales over the remaining months of the year as the organisational momentum picks up pace.

As many as 80 developments are believed to have formally embarked on steps to sell their properties en bloc, although the actual figure may well be more. But not all will secure the 80 per cent owners’ mandate or find a buyer.

Numbers aside, larger projects are also expected to be introduced this year and next.

The average deal size of the 16 successful cases this year is $50 million – a far cry from the average deal size of $170 million in the first half of 2007.

The 52-unit Goodrich Park near Kovan MRT station was sold in a collective sale to BBR Holdings for $86 million this month, but as the deal has not won unanimous approval from owners, it may need approval from the Strata Titles Board (STB).

Each of its owners is set to receive gross sale proceeds of between $1.55 million and $1.72 million – or about 70 to 80 per cent more than the market price.

In April, Culford Gardens in Siglap was also sold to Fragrance Properties for $39 million.

Despite the dominance of the Government Land Sales (GLS) programme this year, we believe that collective sales are still relevant in today’s market as they fill the void left by the programme.

GLS sites have leasehold tenure and are mostly located in suburban areas, and their large-sized plots mean they typically cater mainly to bigger developers.

In most cases, collective sales complement the GLS programme, especially when they produce large prime freehold sites, which are in short supply.

However, leasehold collective sales in mass-market locations might find it harder to make large profits as developers might prefer the relative ease and certainty that GLS sites offer.

Owners contemplating such sales should also understand that sale activity takes place in waves since the factors that give rise to price differentials do not stack up for very long.

Many owners get concerned over the rising cost of replacement homes but this paradox is always present as collective sales inherently occur only when the market is buoyant. Acting decisively might help offset the risks of being caught cold.

It is also important for owners to elect objective and honest leaders, appoint and listen to competent lawyers and property consultants, set realistic prices, act decisively and stay united to ensure a happy ending.

Some owners might also wonder if there is a possibility that we will see another Horizon Towers dispute.

Horizon Towers was the most high-profile property sold in early 2007, just before the steep run-up in land prices. This factor and other technical irregularities resulted in the Leonie Hill Road condo becoming embroiled in one legal suit after another before the deal finally collapsed.

Since then, the laws have been refined. They now load more work and costs upfront for the owners, providing relief for developers with clearer rules.

Recent changes include the STB being relieved of its role of making rulings in disputed cases. The STB will continue its mediatory role, but this will be limited to 60 days – again to expedite the resolution of disputes over contentious sales.

In other words, warring parties can head to the High Court earlier in the process to have their disputes resolved, reducing the time taken to resolve the more difficult cases.

Minority owners are now unlikely to find as many faults as most of the typical grouses in the past have been adequately addressed. As a result, we expect fewer cases to reach the High Court and the Court of Appeal.

As we also do not see the market moving this year and next as dramatically as it did in the boom years, the motivation for a minority owner to challenge a sale may not be as strong as in 2007.

The laws are more robust and structured now and should make collective sales less controversial and more predictable.

By Karamjit Singh, managing director and Pamela Kow, senior manager of Credo Real Estate.

Prices now start from a higher base and attractive prime sites have already been sold

Last Wednesday, a relatively small property, Melrose Court, off Balestier Road, was launched for collective sale.

Owners of the 32 freehold units there are

asking for $48 million, and hoping to reap between $1.23 million and $2.46 million each.

Marketing agent Colliers International said the ‘en bloc’ premium each seller will get is around

40 per cent to 50 per cent more than what he can get if he were to sell his unit on his own.

Compared with those of the collective sale boom of 2006-2007, the premiums are lower these days because existing apartment values are high, said Mr Ho Eng Joo, the firm’s executive director of investment sales.

Property pundits say the market recovery last year has been fast and furious, so prices are now starting from a higher base.

‘We see an erosion of en bloc premiums today. In 2006 and 2007, the premiums can easily be 80 per cent to 100 per cent. Today, they are more like 30 per cent to 50 per cent,’ said Mr Jeffrey Goh, head of investment sales at HSR International.

Some investors may want to cash in fast before the collective sale. This will close the gap between the potential collective sale price and the individual sale price, experts said.

But the higher prices they fetch may not be a true reflection of the market, said Knight Frank executive director Nicholas Wong.

‘A handful of them may be able to sell at higher prices before the collective sale. But if all the owners were to go out and sell their units individually, they wouldn’t get those kinds of prices,’ he said.

The rest of the owners who may now want to pull out of the collective sale after some sell at higher prices, or who then become unhappy with the collective sale prices, should be aware of the risks of a failed sale, as the value of their estate will likely come down if that happens.

Also, today’s new rules mean that a two-year restriction period will kick in, making it harder to restart the collective sale process after a failed attempt, Mr Wong said.

An expert, who declined to be named, said: ‘The en bloc premium is relative. It just has to be a level that can get people excited, with which they think they are able to find a replacement property. This would be around 50 per cent more than what they can sell at individually.’

Besides prices having moved up to a higher base, most of the attractive prime sites have already been sold in previous collective sale booms over the past 15 years, property experts say.

‘Nowadays, sites that have been sold or put up for sale are in the city fringes and are small,’ said Ms Suzie Mok, director of investment sales at Savills Singapore.

‘The en bloc premiums for prime spots tend to be higher than those for suburban estates as they are the more sought-after sites. The prime spots appeal to the bigger developers who are willing to pay more because of their scarcity and the appeal of the posh address.’

While there are still underbuilt sites out there, many of the estates eyeing collective sales today are very old developments and may have low redevelopment potential, experts said.

Some of these estates have already used up their maximum built-up area allowed, and may thus get a lower premium when they want to sell en bloc, the experts pointed out.

Source : Sunday Times – 18 Jul 2010

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A large number of new properties are set to be launched in the next six to 12 months. The Sunday Times looks at what savvy buyers should look out for.

Sovereign debt crises may have hobbled property markets elsewhere, but not here it seems.

Buoyed by Singapore’s strong economic recovery, optimism has staged a vigorous comeback, with property developers set to launch at least 3,500 new homes by year-end on top of about 8,500 they have already released so far this year.

This will result in an estimated total of between 12,000 and 14,000 new units this year.

And the supply of available building land shows no sign of drying up: 31 residential sites will be up for grabs from the Government Land Sales (GLS) programme in the second half of this year.

In the years ahead, new residential enclaves are predicted to emerge with the completion of the Circle Line, boosting once sleepy areas such as Paya Lebar, Mountbatten and Dakota.

Up, up and away

Analysts say that despite the uncertainty triggered by eurozone sovereign debt issues, overall buying interest here remains positive – especially in mass-market and mid-tier projects.

Although the overall upbeat sentiment has dipped slightly of late, with lower volume and slower price increases, the residential market looks set to remain largely strong given the strength of the economic rebound.

The Government forecasts a stunning 13 to 15 per cent growth in gross domestic product (GDP) this year, up sharply from an earlier prediction of 7 to 9 per cent, due mainly to the huge recent surge in manufacturing.

DTZ South-east Asia research head Chua Chor Hoon is upbeat about the market. ‘There is still buying interest and more new developments are being planned for launch in the coming months. If they are well taken up, that would motivate more developers to launch other projects and stimulate more buyer interest,’ she said.

Knight Frank manager of consultancy and research Ong Kah Seng is slightly more cautious about prospects, but still thinks the outlook is good.

‘Buyers are likely to rethink about rushing into home purchases and adopt a wait-and-see attitude… However, although sales will moderate, it is still reflective of a healthy residential market.’

Against this broadly bullish backdrop, prices have continued to climb ever higher.

Official estimates show they rose a higher-than-expected 5.2 per cent in the second quarter of this year after a 5.6 per cent jump in the first.

Prices are now 1.5 per cent above their peak in the second quarter of 1996.

And property experts are pencilling in price increases for the full year of between 12 per cent and 20 per cent, with the average estimate at about 15 per cent.

CB Richard Ellis (CBRE) residential director Joseph Tan thinks that because economic fundamentals ‘are still intact’, home prices will increase slightly in the second half of the year.

‘Projects which are well located and are close to main transport nodes could still enjoy a slight premium,’ he added.

Prime pickings

With developers looking to make the most of this positive market, Knight Frank is anticipating another 17 major launches (of at least 50 units each) within the next six months – a total of 4,056 apartments added to the market.

Upscale residences in districts 9, 10 and 11 are likely to make up almost half of these major launches, but a surge of mid and mass-market developments is slated from next year onwards as GLS land sites situated mainly outside the central regions are released, Mr Ong said.

CBRE notes that 38 apartment launches – inclusive of small to mid-size projects – are likely within the next six months.

Of these, 22 are located in the core central region, 10 in the rest of the central region and six outside the central region – allowing home buyers to cherry pick according to their budgets.

They range from Allgreen Properties’ prime 360-unit Skysuites @ Anson in Enggor Street to the mass market 408-unit executive condominium project in Yishun Avenue 10 by MCC Land.

In addition, experts say that prime developments are beginning to appear in numbers on the horizon as developers scent rising prices.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said developers may have held back many of their high-end launch-ready projects, some of which were prime freehold sites from the ‘en bloc’ fever three years ago.

‘Some developers may have decided that high-end prices may take even longer to reach their desired levels. Given that there are still risks ahead, they may decide to make the best of an uncertain situation and launch within the next few weeks and months,’ he added.

A buyer’s spread

With 15 residential sites sold through the GLS programme in the first half of this year (four of which were executive condominiums) – and more than double that number planned for the second half – the property pipeline shows no sign of drying up.

Mass and mid-market homes are likely to be launched on these sites in areas such as Simei Street 3 and Hougang Avenue 2 as the Government attempts to dampen demand.

The plots are certainly being snapped up by developers eager to replenish their land banks and willing to pay top dollar for well-located plots.

A 99-year leasehold residential site at Simei Street was released for tender in March received a total of 18 bids, with the top bid at $152.7 million or $523 psf per plot ratio (ppr) coming from developer Chip Eng Seng. This was well above market expectations of between $300 and $400 psf ppr.

UOB Kay Hian property analyst Vikrant Pandey estimates the break-even price for the site to be in the range of $800 to $850 psf and, assuming a 15 per cent development margin, the average selling price to be�upwards of $970 psf.

‘Resale prices for the secondary market projects in the vicinity are in the range of $600 to $800 psf.�The top bid is quite aggressive, factoring in a 20 to 30 per cent future price appreciation�in the region,’ he said.

Similarly, the hotly contested tender of a choice residential plot in Boon Lay Way next to Lakeside MRT station attracted a whopping 14 bids in May, with Keppel Land (Mayfair) putting in the top bid of $499 psf ppr, or $302.98 million.

Property experts estimate the break-even level for units on the site will be $800 to $850 psf, with an eventual selling price of about $950 psf – which factors in a 10 to 20 per cent�future rise in prices within the next year.

DTZ’s Ms Chua said that developers were already inching up prices at new projects, with many recent launches being priced higher than neighbouring projects.

However, the bumper release of 31 residential sites by the GLS programme in the second half of this year could dampen some of the exuberance in the market, moderating mass market prices.

There are 18 residential or residential/commercial sites on the programme for confirmed sale, with another 13 sites for residential use put on the reserve list.

The plots – which include 20 that are new and not rolled over – could accommodate 13,905 new homes and are anticipated for launch next year.

They are located in areas such as Jurong West and Pasir Ris but also in mass-market areas like Hougang and Tampines.

The sites commanding the most attention are, predictably, those with the best locations and amenities.

CBRE’s Mr Tan said sites with better amenities and close to MRT stations will generally attract more interest from developers. And mixed-use sites located at the town centre of HDB estates are likely to be vied for.

One of the most attractive sites is the land parcel at the junction of Woodland Avenue 1 and Woodgrove Avenue, he said, which is located within the American expatriate enclave and close to the Singapore American School.

Mr Tan pointed out that condominiums and landed homes in the nearby Woodgrove Estate were enjoying strong rentals, and the last condominium project launched in this location – Rosewood Suites in November 2008 – was fully sold.

Elsewhere, the commercial- cum-residential site in New Upper Changi Road and Bedok North Drive is expected to attract strong bidding, given that it will be the first comprehensive development in Bedok New Town and comprise a retail mall, residential units and a bus interchange.

Knight Frank’s Mr Ong added that close proximity to existing and upcoming MRT sites could well drive prices higher at a number of new plots.

These include the Alexandra Road site, the Tanah Merah Kechil site – near existing condos East Meadows and Optima@Tanah Merah – and the Petir site next to City Developments’ recently launched 429-unit Tree House.

Chesterton’s Mr Tan said: ‘The fact that there are still en bloc transactions taking place – most of which are in the suburbs – indicates that developers will still bid for land.’

However, with economists predicting a slowdown in growth in the second half of this year due to concerns over the European debt crisis and the bumper supply of land released, some analysts are less bullish.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that with an average of three tenders a month, developers were both limited in their budget and manpower resources.

‘We might see the level of interest in GLS sites drop towards the end of this year… If signs of economic uncertainty re-emerge and if companies start putting their expansion plans on the backburner, developers might start bidding more cautiously,’ he said.

Source : Sunday Times – 18 Jul 2010