Archive for September, 2009

Removal of Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL) should curb some speculation

Tuesday, September 15th, 2009

Pt 1(b) is the most interesting statement made by the Government. The Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL) were introduced last year to replace the Deferred Payment Scheme, which the Government banned earlier, to curb speculation.

The main difference between the former and the latter however, is for the IAS and IOL, you had to meet the loan requirements (eg. have the required earnings to prove you can pay for the sale), whereas for the DPS, you didn’t need to sign a loan at all, till the property TOP.

The ban on all such similar schemes with immediate effect would certainly some speculation, because while some may qualify for loans now, not everybody can afford to pay installments for an apartment which they aren’t even living in yet. So while they may chase away speculators, they may also chase away potential buyers, who might decide to look at completed condos instead, which they can move in immediately, or rent out till they are ready to move in.


Measures to ensure a stable and sustainable property market

1 Mr Mah Bow Tan, the Minister for National Development, announced today that the Government would take the following measures to ensure a stable and sustainable property market:

    a. Reinstatement of the Confirmed List for the 1st Half 2010 Government Land Sales (GLS) Programme.

    b. Removal of the Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL), with effect from today, i.e. 14 Sep 2009.

    c. Non-extension of the Jan 2009 Budget assistance measures for the property market when the measures expire.

Reinstating the Confirmed List in 1st Half 2010 GLS Programme

2 Demand for uncompleted private housing units has picked up strongly since Feb 2009. The 10,017 units sold by developers in the first seven months of 2009 had already exceeded the 4,260 units sold for the whole of 2008. In response to the strong demand from home-buyers, developers have triggered four sites to date this year from the Reserve List of the 2nd Half 2009 GLS Programme, which together could yield about 1,600 units.

3 The Government will reinstate the Confirmed List for the GLS Programme in the 1st Half of 2010. While there are still 16 residential sites in the current Reserve List that can be triggered for sale by developers, MND will also replenish the supply when drawing up the 1st Half 2010 Reserve List to meet possible increases in demand. MND will announce the details of the 1st Half 2010 GLS Programme towards the end of the year.

Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL)

4 The Monetary Authority of Singapore will disallow the IAS and IOL with immediate effect from today, i.e. 14 Sep 2009. This measure will apply to all private residential projects. The only exception will be uncompleted private residential projects where the units had already been offered for sale under the IAS before 14 Sep 2009. The IOL will be disallowed with immediate effect.

5 The IAS and IOL are currently offered to buyers of uncompleted private residential properties. These schemes could encourage property speculation in a buoyant market where prices are rising rapidly, as they are forms of housing loans that entirely eliminate or substantially lower regular installment payments for property purchasers in the first few years before the properties are completed i.e. issued Temporary Occupation Permit. Under the schemes, a property purchaser will not have to make any significant payment, apart from the upfront 10-20% down-payment, until the housing project is completed.

6 Genuine home-buyers can continue to purchase private housing under the standard payment scheme. The removal of the Interest Absorption Scheme and Interest-Only Loans will also encourage prospective home-buyers to consider carefully their ability to afford the properties over the long term and not rush into any purchases. This will promote a more healthy and sustainable property market in the long-run.

Property-Related Budget 2009 Assistance Measures

7 A number of measures were announced in Budget 2009 in January this year to help stabilize the property market, in view of the sharp fall in demand and considerable uncertainty in the economic outlook at the time. These measures provided developers greater flexibility to adjust supply in response to a property market downturn.

8 In view of the recent strong demand for private housing and improved conditions in the property market, the measures will not be extended when they expire. The measures are:

    a. Allowing one-year extension of project completion period

    b. Allowing re-assignment of Government Land Sale (GLS) sites and private land owned by foreign developers

    c. Giving developers up to four years to dispose of all private residential units in the development

    d. Allowing developers to rent out unsold private residential units for a maximum of four years

    e. Allowing up to 2 years of property tax deferral for land under development

9 The first four measures will expire on 21 Jan 2010, and the last measure on 21 Jan 2011.

Issued by: Ministry of National Development, Ministry of Finance, Ministry of Law and Monetary Authority of Singapore ⿨Date: 14 September 2009

Let Singles buy HDB

Thursday, September 3rd, 2009

I chanced upon this forum thread created in response to the article “Let single daughter buy HDB“.

Here are some of the views shared:

HDB supply is limited in Singapore (land is limited too?). If age limit of singles scheme is lowered (currently 35), the increase in demand will lead to an increase in property prices. People who really need to buy a flat can’t will have trouble affording one.

– HDB supply is limited.

Yes, ready HDB supply is limited, but definitely not due to lack of land. It can be attributed to poor planning on the part of HDB. In case one has not noticed, new HDB flats are as high as 40 stories these days, and new BTO projects are being launched quite frequently. However, these new flats will not enter the resale flat supply till 8-10 years later [3-5 years to build, 5 years for MOP (minimum occupation period).]

There was a time when HDB overbuilt, and had thousands of new unsold flats in their inventory. Young newly wed couples could immediately pick a flat from the oversupply and move in, and thus not fight for the limited resale supply.

Now new flats are only launched under the Built-to-Order Scheme (BTO), where only when a certain number of units are booked does building commence. This is to prevent oversupply, and also helps to boost resale prices, and at new flat prices at the same time, as new flat prices are pegged to resale prices.

– Allowing younger singles to buy will lead to increase in demand, and increase in prices.

Throughout this recession, HDB prices have not dipped at all. Whether younger singles are allowed to buy or not will not change this fact.

But why do prices keep going up? This is because of the large number of new citizens and PRs we welcome each year. In 2009, new citizens alone accounted for 3600 people! Right now, it’s still cheaper to service a HDB mortgage (approx $1.2k for a 4-5roomer) than to rent a flat each month ($2k-$2.5k). Thus, eligible new citizens and PR families will purchase a resale HDB flat if they can afford the down payment.

Welcoming more new citizens and PRs is something which isn’t going to change. It boils down once again to the lack of supply, which points back to HDB’s planning again.

Abolish HDB. It has outlived its purpose since sg has moved into first world league. Singaporeans should be left on their own to find their houses just like people in other first world countries. The Gov does NOT owe them a housing. Stop pampering to Singaporeans!