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Units are in projects that had approval; developers may opt not to do so though.

UP TO 7,750 unsold homes could still be available for purchase under the deferred payment scheme, even though it was scrapped last week.

The Urban Redevelopment Authority (URA) said these units are in developments that already have approval for the scheme, but which have not sold out yet.

On Friday night, the Government scrapped deferred payments with immediate effect, saying it was no longer relevant given the now-buoyant property market.

The scheme was introduced 10 years ago when the market was down. It allowed homebuyers to defer the bulk of a home’s purchase price until it was completed, which could be up to a few years later.

But the scheme was seen as encouraging speculation, as buyers could profit by reselling their homes before completion without much capital outlay.

Now, buyers will have to make progressive payments as construction proceeds.

The ending of the scheme is seen as a way to cool the hot property market. All developments that had not obtained approval for the scheme by last Friday can no longer offer it.

As at last Friday, 320 out of 443 licensed developers had approval to offer deferred payments for their projects, said the URA yesterday.

And about 140 of these developers still have a total of 7,750 residential units left unsold, it added.

But it is now up to the developers if they want to offer homebuyers the option of using the scheme, URA said.

The units include some in Bukit Sembawang’s 102-unit Paterson Suites in Paterson Road and its 123-unit Vermont on Cairnhill. Ho Bee offers the scheme for the 51 unsold homes in Turquoise, its 91-unit project in Sentosa Cove.

Buyers can also look to CapitaLand’s 327-unit Seafront @ Meyer in Meyer Road, which has 68 units left.

Developers which have approval for the scheme but have yet to start sales include Voda Land, for its 114-unit Amber Residences in Amber Road.

Even before deferred payments were axed, some developers had already dropped it of their own accord or never offered it. Those that did usually added a premium of 3 to 5 per cent of a home’s price to purchases under the scheme.

Many property analysts believe the withdrawal of the deferred payment scheme is likely to hit sentiment only in the short term. They point to factors such as robust demand, low interest rates and favourable sales even when developers do not offer the scheme.

Citigroup economist Chua Hak Bin said ending the scheme seems justified on prudential grounds. ‘There are growing signs of speculation, price distortions and accelerating mortgage growth,’ he wrote in a report.

‘Risk of a property glut longer-term cannot be ruled out if the boom is left unchecked.’

Source : Straits Times - 30 Oct 2007

WARRANTS of property counters drew the attention of investors yesterday, following the withdrawal of the deferred payment scheme last Friday.

Homebuyers in Singapore will now have to make progressive payments in step with the construction process, instead of deferring payment till the property is completed a few years later.

The most heavily traded CapitaLand contract was a Macquarie call warrant with a strike price of $8.50, which expires on Feb 1.

That warrant closed a cent higher at 13 cents with 24.83 million units done.

CapitaLand shares ended five cents higher at $8.10.

Another active property contract was a City Developments call warrant with a strike price of $15.42, which expires on Jan 10.

The warrant finished 4.5 cents lower at 16.5 cents with 2.86 million units traded.

The share closed 50 cents down at $15.80.

A call warrant lets an investor buy into a stock or index at a preset price over a period of three to nine months.

A put warrant allows an investor to sell the stock or index at a preset price over a fixed period of time.

Source : Straits Times - 30 Oct 2007

THE axing of the deferred payment scheme for homebuyers hit home with a vengeance yesterday when property shares dived while the rest of the market soared.

The big guns felt the most pain. City Developments fell 50 cents, or 3.1 per cent, to $15.80. Allgreen Properties was down nine cents, or 5.1 per cent, to $1.69, while Wing Tai Holdings lost 18 cents, or 5 per cent, to $3.44.

Their operations are more centred on the local market, and so they seem to be more vulnerable to a change in financing conditions.

By contrast, CapitaLand, which has extensive overseas operations, rose five cents to $8.10 after falling 20 cents initially.

Analysts remain confident that the selldown was just a knee-jerk reaction to the Government’s surprise move on Friday night. It scrapped the deferred payment scheme, requiring buyers of uncompleted homes to make progressive payments rather than letting them delay the bulk of their payments.

Citigroup analyst Wendy Koh said this will likely affect only a small group of HDB upgraders who cannot afford two mortgages.

It should not affect first-time homebuyers whose ‘affordability remains strong’, she added.

Ms Koh also noted that the run-up in the residential property market is well-supported by strong fundamentals. These include high economic growth, rising rental rates, and a tight supply of new properties coming onto the market.

However, DBS Vickers said that removing deferred payment would dampen home sales as potential buyers might have seen the scheme as a way to come out with a smaller initial outlay in capital.

It also believed the move will curb speculative buying on high-end properties.

Equally bearish is CIMB-GK, which said yesterday that selling prices may fall by 10 to 15 per cent as the speculative froth is removed.

And the worst hit may be the mass market where buyers are ‘typically more cost-sensitive and reliant on deferred payment’.

Investors will not have missed the irony of yesterday’s share market action.

While property was suffering, the rest of the market in Singapore and around the region climbed, cheered by hopes that the United States Federal Reserve will cut interest rates by at least 0.25 percentage point tomorrow. Its aim: to shore up the US property market.

Source : Straits Times - 30 Oct 2007

But Govt keeping close eye on global financial and domestic property markets, says PM

WITH 2007 drawing to a close, Singapore’s economy looks set to end the year on a high.

The Monetary Authority of Singapore — which is due to release its semi-annual Macroeconomic Review and monetary policy statement today — has said that it expects the economy to grow between 7 and 8 per cent this year.

And yesterday, Prime Minister Lee Hsien Loong told some 1,000 unionists and delegates at the National Trades Union Congress National Delegates’ Conference that he was optimistic the economy would grow at “the higher end of this range”.

“The outlook is generally upbeat. The economy is doing very well … With good growth, the labour market has tightened. Many reasons for unionists and workers to smile,” said Mr Lee, noting the stellar job and wage growth.

But in spite of the rosy conditions, Mr Lee said the Government — whose “job is not just to smile but continue to watch for signs of problem” — is keeping a close eye on two issues: The shaky global financial markets and the red-hot domestic property market.

The stock market jitters in recent months might have started from the sub-prime mortgage woes in the United States, but Mr Lee observed that the financial markets had been “over-confident and overdue for some correction”.

Said Mr Lee: “If it’s not been the sub-prime mortgage, it could have been something else.”

While the jury is still out on whether a recession in the US is on the horizon, Mr Lee was in no doubt that the Singaporean economy would be affected should that happen.

Even so, the Republic’s economic links with China and India — which are both growing unimpeded — would “help us weather a US downturn”, the Prime Minister added.

At home, Singapore faces an “acute shortage” of prime office space due to the economic boom. The Government is taking steps to increase the supply over the next two to three years, “to not just stabilise the market but … so that lots more businesses can come and set up in Singapore”.

Policy-makers are also monitoring the residential property market closely — especially in terms of keeping housing affordable, said the Prime Minister.

Last Friday, the Ministry of National Development withdrew its Deferred Payment Scheme for property purchases — a move that Mr Lee said would “help to dampen excessive speculation and inject some reality into the market”.

Other measures will follow if necessary, he assured Singaporeans.

Currently, the Government is releasing more land for Executive Condominiums, targeted at first-time buyers whose household income exceed $8,000 and are thus ineligible for a Central Provident Fund housing grant in buying an HDB flat.

Adding that the move was a response to the “many appeals” on raising the income ceiling, Mr Lee said there “should not be a sandwich group”.

“There is enough land in Singapore. There’s no need for anybody to get alarmed that this is the last chance and if you don’t get on, you will miss the boat,” he said.

At a separate event, Trade and Industry Minister Lim Hng Kiang said the economy is not overheating but the rising oil and commodity prices are causing inflationary pressure.

Adding that the Government still expects inflation to average between 1.5 per cent and 2 per cent this year, Mr Lim said: “I don’t see a serious problem with overheating (in the economy) … There are some supply side constraints and we’re taking steps to address them.”

Source : Today - 30 Oct 2007

Singapore’s Prime Minister Lee Hsien Loong said more measures, if necessary, will be taken to cool the property market.

He was addressing 1,000 unionists at the labour movement’s National Delegates Conference on Monday.

Just last Friday, the government withdrew the deferred payment scheme for property purchases in a move to cool the booming property market.

But PM Lee said other measures will follow, if necessary.

“This step will help to dampen excessive speculation and to inject some reality into the market. But more fundamental than the ups and downs of the property cycle, the government is committed to keeping housing affordable for Singaporeans,” said the Prime Minister.

“We will continue to monitor the property market carefully and watch the trends. If necessary, we will continue to take more action… and make sure that the property market stays in balance over the long term,” he added.

The Prime Minister also added that the government is keeping a close watch on the financial markets, given the recent turmoil over the US housing credit crisis.

PM Lee said: “But the impact is not just the US sub-prime mortgages. It is much wider and has affected the financial markets around the world. There is nervousness and instability. Prices go down even on the Singapore market.

“So the big question is will this cause a recession in the US and affect the real economy. The answer is, ‘We can’t tell, maybe.’ The next question after that is, if there is a recession in America will it affect Singapore? That answer I can tell you is ‘Yes, it must affect Singapore.’ ”

Overall, though, the Prime Minister is keeping to a positive outlook, saying he is confident that Singapore can achieve the higher end of the 7-8 percent growth forecast for the whole of 2007.

Meanwhile, property consultants said the withdrawal of the deferred payment scheme, the new rules governing en bloc sales announced in September, as well as the US housing credit crisis are sufficient to keep the property asset bubble in check.

“We’re seeing a rebound in terms of the mass market and HDB market, so you don’t want to kill that market where the rest of the upper and mid tier have already run up. I think what the government should do is to hear the grounds and not overreact, in terms of introducing subsequent measures,” said Donald Han, MD of Cushman & Wakefield.

Most also don’t think that the current level of speculation deserves the same drastic measures implemented in 1996 - such as the imposition of capital tax gains.

Dr Chua Yang Liang, Head of Research & Consultancy at Jones Lang LaSalle said: “With regards to the level of speculation, the key thing to look at is the price increase. Is it sustainable? Looking at the overall economy, does this price increase matched with wage increases, GDP growth, employment numbers?”

Other cooling tools the government has in the bag, consultants said, include increasing property tax, higher stamp duty, or tightening home mortgage rules.

“What they should probably be concerned about is whether the current market increases the risk to the financial sectors. But I think the banks will be doing their own assessment as well. It’s best to leave the market to its own mechanism to try to find the balance,” said Nicholas Mak, Director of Consultancy & Research at Knight Frank.

“From the buyers’ point of view, I think it’s getting riskier now to speculate in the market and to look for short term gains. That’s because ultimately, investments in real estate should be a medium and long term investment.”

Market watchers said what’s key is not the measures themselves, but when those measures are implemented.

If wrongly timed, external factors like the US sub-prime mortgage issue, could prove to be a double whammy for the property market.

Source : ChannelNewsAsia - 29 Oct 2007