Our First Home

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#1
I think I've said enough about property and the way the media plays up the "affordability" issue, and how "cheap" it is. Decide for yourself after reading these articles! Smile

Dec 4, 2010
Our First Home

Measures to cool market put resale flats within reach of first-time buyers
By Jessica Cheam & Daryl Chin

RECENT measures to cool the property market have received mixed reactions from home owners, but one group that has emerged better off comprises the young, first-time home buyers.

Property agencies and agents interviewed by The Straits Times say this group is returning to the Housing Board resale market, lured by the softening of cash premiums asked by sellers.

Dennis Wee Group director Chris Koh said the number of young buyers approaching the company's agents has started to rise.

'Young buyers now seem more keen to commit to a resale flat, instead of only new flats,' he said.

PropNex chief executive Mohamed Ismail agreed, noting that more young buyers have approached his agents, as resale flats are now increasingly within their budgets.

'Before the measures, many sellers were quite unrealistic and asking for high cash premiums. Since then, they have become more reasonable in their prices,' he said.

The public housing boom of the past two years had priced many first-time buyers out of the resale market. Most opted to buy cheaper new flats directly from the Housing Board.

But the trend seems to be reversing somewhat.

Application numbers at fresh launches under the Housing Board's Build-To-Order scheme have been lower than those at the launches before the cooling measures were announced in August.

At the recently concluded sale of Yishun Greenwalk, for example, there were about three bids for every new flat - lower than the six bids on average seen at previous launches.

Analysts say the key reason for this is that cash-over-valuation (COV) figures have fallen. COV is the amount over and above the valuation of a Housing Board resale flat. This is payable only in cash, and a major financial barrier for young married couples eager to buy a home.

Agency bosses said that, based on the latest Housing Board figures, the median COV has declined from $30,000 for the third quarter to about $20,000 to $25,000 in October and last month, based on their resale sales data.

National Development Minister Mah Bow Tan confirmed last week that Housing Board figures show that the median COV fell to $25,000 in October.

Industry analysts say the fall in COVs is most pronounced in suburban estates like Yishun, Sembawang, Bukit Batok, Jurong East and Jurong West.

They are also coming down for bigger flat types, such as five-room and executive flats.

ERA Asia-Pacific associate director Eugene Lim said an executive flat in Jurong, for example, used to command from $40,000 to $45,000 cash upfront, but the figure has now gone down to $30,000.

Mr Kelvin Teo, 28, and his wife Alberta, 21, for example, recently managed to buy a four-room flat in Bukit Panjang at a COV of $11,000 - much lower than the median amount (see story above).

This is in stark contrast to just six months ago, when the recovery of the economy and the property market pushed median COV levels to as high as $50,000 to $60,000 in mature estates such as Queenstown, putting the flats out of reach of most first-time buyers.

This had prompted many such buyers to complain via letters to the press and online feedback about the affordability of Housing Board flats.

In late August, the Government moved to stabilise the market by tightening rules on financing and home ownership. For example, private property owners were no longer allowed to simultaneously own Housing Board flats.

But even though COV levels have softened, agency bosses warn that they have to fall further before more first- time buyers can benefit.

Even at COV levels of $20,000 to $25,000, some first-timers - who may be just starting out in their careers - still may not be able to afford resale flats, said Mr Lim.

'There's a limit to how much these young buyers can fork out, unless they have parental support,' he added.

The absolute price of a flat also counts.

'Even if COV decreased by about $10,000 or more, it's still only a marginal 1 per cent to 2 per cent decrease in Housing Board resale flat prices,' said Mr Ismail.

Manager Valda Lee, 28, and her fiance are one such couple still waiting for COVs to fall in the estates which they want to live in.

New flats are not an option for the couple because they exceed the $10,000 household income ceiling which makes them eligible for higher-end executive condos or Design, Build and Sell units offered by the Housing Board.

'We are basically stuck, because the COVs for the places I looked at are at killer levels - $40,000 or more,' she said.

But Mr Lim added that even though valuations have not fallen drastically, the recent measures have at least helped to allay concerns of first-timers.

'Runaway prices seem to have been kept in check for now,' he said.

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#2
(05-12-2010, 05:15 PM)Musicwhiz Wrote: Agency bosses said that, based on the latest Housing Board figures, the median COV has declined from $30,000 for the third quarter to about $20,000 to $25,000 in October and last month, based on their resale sales data.

National Development Minister Mah Bow Tan confirmed last week that Housing Board figures show that the median COV fell to $25,000 in October.


'Even if COV decreased by about $10,000 or more, it's still only a marginal 1 per cent to 2 per cent decrease in Housing Board resale flat prices,' said Mr Ismail.

That's a good point..so a decline in COV from 30K to 25K is nothing to shout about.
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#3
I think the point here is that resale flats and EC are already priced so expensively, so that if you factor in the COV (for resale) it becomes even more ridiculous. And all these are pegged to what? Private Condominium prices of course, which makes it even more ludicrous!

For ECs, the pricing is $900,000 for a 3-bedroom flat, which I assume is about 1,400 sq ft or about $650 psf. And this is after the housing grant is given. Wow, so if the grant is not given it can rise to as high as $930,000 or $950,000! Confused
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#4
All these will surely have repurcusions on our next generations. Those who have $$ will leave, those who don't will curse the generation of the era when they could have done something.

Its just a matter of time. EC approaching $1million? Might as well visualising HDB at Tampines approaching $1 million. Anything goes nowadays anyway.
I hope I won't be around to see when the musical chair ends.

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#5
(05-12-2010, 11:03 PM)arthur Wrote: I hope I won't be around to see when the musical chair ends.

Good 1, Arthur san...me too got the same feeling like you...even though my asset from properties growth quite abit since this year but i dun feel comfortable.

The way it go, i fear that the musical chair might stops faster than we expected......actually i expected the property bull to run for another 2 yrs, but now ??? Hmms, Hawk closely at the American suspect that they might come out dirty tricks again come next year.
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#6
(05-12-2010, 11:29 PM)koh_52 Wrote: Good 1, Arthur san...me too got the same feeling like you...even though my asset from properties growth quite abit since this year but i dun feel comfortable.

The way it go, i fear that the musical chair might stops faster than we expected......actually i expected the property bull to run for another 2 yrs, but now ??? Hmms, Hawk closely at the American suspect that they might come out dirty tricks again come next year.

Koh-san.

The way I look at it is simply at 5 sectors of the world economic region.

1. USA: Their QE 1, 2 to infinity will have repurcussions later on. No such thing as printing trillions USD and hoping the magic dollar will solve everything. I just hope they find a way to drain all the excess $$ out of the world. The employment numbers might get better and the States could slowly recover though, thereby leading to another consumerism boom again.

2. Euro region: The austerity measures and threats of sovereign defaults are still in existence. Austerity measures will decrease fiscal measures of which Keyensian theory holds will decrease GDP growth. The sovereign defaults threats on the other hand, may possibly lead to a Euro break up. What happens next is a good guess.

German citizens are well aware of a clause during the Euro region estabishment that says the committment to stick within the Euro region shall be nullified if any country falsely declare their debt to GDP ratio. I think practically every Euro country did that. Germans do not wan to be the bail out nation for Europe.

3. Asia: China, India, Australia and Japan. China is well aware of its properties bubble and taking positive steps to rectify them. Kudos to the CCP but whether they can manage to solve it in time is risky. Their interest rate maneuver should provide another volatility round in coming months. India has implemented its austerity measures to a certain extent. However, it is more well placed than CHina due to its large private sector hand in guiding the economy than the "China model".
Australia is having its commodities boom due to China demand. In other words, high correlation growth with China. Japan on the other hand.. is rowing their sampang along as usual. Nothing will change. They are still in deflationary mode. Nikkel 225 is like a sine curve.
We don't talk about Singapore or SEA. These countries don't lead the world economy, contrary to what the garment and Straits Times are subtly implying.

4. Latin America: Brazil, Chile & Venezula. Brazil and Chile are practically having a commodities boom due to China growth. In fact they are more tied to China than America up north. Another high correlation. Venezula is all about oil. Mr Chavez is just keen to show off how big his balls are and nationalising all Western firms, esp oil and selling to China.

5. Africa: South Africa is the only country that matters and they are also depending on the commodities boom. Rest of Africa excluding Nigeria (OPEC member) doesn't matter cos they are too poor and mismanaged to matter in the 1st place.

The last economic boom was due to China's insatisable demand for everything including oil, copper, steel etc. We had China to drive the economic forces of the world.

The previous bull in the 90s was due to a IT revolution happening in USA that increases trememdously the productivity and connectivity of the world and in returns, bring unknown fortunes and speculations to be made in the technological sector. You, I and all readers wouldn't be reading this if not for the advent of internet and emails.

Unless we can identify a new economic bullish reason.. which till now I could NOT find yet as of now. (If anyone could identify, pls share) I guess the next recession could be earlier than before.
When it is is up to God but the craziness over investment locally is getting my skin to crawl up abit.

Cheers.

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#7
i was thinking along the lines of conflicts....

US will definately want to part of the conflicts in the south / north korean brothers tussle...which really is not US's problem at all.

BUT, since the south/north koreans' conflicts are located right at the doorstep of CHINA, it is to US's advantage to have it!

sad to see bros, south/north koreans up to arms....hope CHINA can help to calm both of them down and wave US back to their own shell... :O
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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