Singapore home prices drop in Q4

[Tiggerbee]

thanks forsharing..sounds a bit scary indeed. also saw the forecast table from edge magazine for 23 dec 2013 publication.

my sense - interest rate unlikely to go up. rental yield indeed may weaken. the way the supply & demand part was handled doesn't indicate a good grip by the chenghu on their soft landing part. perhaps they will scrap off the absd, ssd & the suffocating LTV for 2nd & 3rd purchase soon?

and most importantly, I dun think they have reached to the level of corrective measure suugested by this brilliant guy:-


""In a recent hour-long interview with Yahoo! Singapore, former chief economist at the Government of Investment Corporation Yeoh Lam Keong asked this question.

A former schoolmate of Deputy Prime Minister Tharman Shanmugaratnam’s at the Anglo-Chinese School, and later the London School of Economics, Yeoh spent almost all his adult life working on government economic policy, and in that time experienced a social awakening to what he feels are inherent problems in the system.

“(The current model is) essentially relying on individual and family savings to fund these public services,” said the 54-year-old economist, who left GIC last June after 26 years to spend more time with his family.

“At the same time, it pegs the price of these public services to market prices when they don’t have to.”

Acknowledging that the majority of Singaporeans do have access to these three areas through the HDB scheme, subsidised and compulsory primary school education, as well as subsidised hospitalisation wards, he said nonetheless that the current model used in the delivery of these three services in particular needs to be rethought.

‘Lower cost of housing’

Yeoh gave an example of how Build-to-Order (BTO) flats are linked to general market prices by being pegged to the cost of resale housing.

“Once you do that, BTO prices will rise as general property prices rise, and resale prices are already often five to six times that of low to median (annual) incomes, making housing very unaffordable by most conventional housing industry measures,” he says.

Property market prices tend to be pulled up by the cost of upscale, private and landed property, he explains. These are subject to speculative forces and can be bought by people all over the world, so it tends to move toward price levels in other major cities such as Hong Kong and Beijing, where property prices are notoriously sky-high.

“That will then price out everybody else who falls below the top 20 to 30 per cent of households,” he adds.

In light of this, Yeoh, who himself stays with his wife and two children in a five-room flat in Marine Terrace, says BTO flats should be priced at a range of between two and three times of low to median annual incomes instead of between five and six times, where BTO prices currently stand.

This artificially lower subsidised price would be available only to Singapore citizens. In this situation, however, he notes further measures will be needed to prevent excessive speculation, recommending for example that Singaporean buyers should only be permitted to purchase flats at these lower prices once — for their housing needs — and suitably long “no resale” periods should be imposed""

Interest rate had already gone up. SIBOR has not risen much as Fed funds rate are still kept at 0-0.25%. However, US 10 year treasury note yield has almost doubled from 1.6% to 3% in less than a year, and so has Singapore government bond yield risen from 1.4% to 2.5%. Banks had already increased their buffer rate from 0.7% (in 2012) to 1.25% (in 2014). So the effective home loan interest rate had actually risen from 1.1% to 1.65% (with 3 mth SIBOR at 0.4%) in about a year. Banks will always be ahead of the central banks in raising interest rates because commercial banks derive most of their profits from net interest margin.

Economists are already forecasting the US 10 year treasury note yield to hit 3.38% by end of 2014. It's very likely that the effective home loan interest rate will be hiked up to about 1.9% by 2015 (assuming 0.4% SIBOR and 1.5% buffer rate).

Property investors should be monitoring the US 10 year treasury note yield and Singapore government bond yield like a hawk. They will be extremely lucky if the increased supply of TOP homes does not depressed their rental income, which is the other risk factor they need to look out for. It does not make financial sense for an investor to invest in a property that give less than 2% rental yield if the risk free rate is already above 2%.

[godjira1]

thanks forsharing..sounds a bit scary indeed. also saw the forecast table from edge magazine for 23 dec 2013 publication.

my sense - interest rate unlikely to go up. rental yield indeed may weaken. the way the supply & demand part was handled doesn't indicate a good grip by the chenghu on their soft landing part. perhaps they will scrap off the absd, ssd & the suffocating LTV for 2nd & 3rd purchase soon?

and most importantly, I dun think they have reached to the level of corrective measure suugested by this brilliant guy:-


""In a recent hour-long interview with Yahoo! Singapore, former chief economist at the Government of Investment Corporation Yeoh Lam Keong asked this question.

A former schoolmate of Deputy Prime Minister Tharman Shanmugaratnam’s at the Anglo-Chinese School, and later the London School of Economics, Yeoh spent almost all his adult life working on government economic policy, and in that time experienced a social awakening to what he feels are inherent problems in the system.

“(The current model is) essentially relying on individual and family savings to fund these public services,” said the 54-year-old economist, who left GIC last June after 26 years to spend more time with his family.

“At the same time, it pegs the price of these public services to market prices when they don’t have to.”

Acknowledging that the majority of Singaporeans do have access to these three areas through the HDB scheme, subsidised and compulsory primary school education, as well as subsidised hospitalisation wards, he said nonetheless that the current model used in the delivery of these three services in particular needs to be rethought.

‘Lower cost of housing’

Yeoh gave an example of how Build-to-Order (BTO) flats are linked to general market prices by being pegged to the cost of resale housing.

“Once you do that, BTO prices will rise as general property prices rise, and resale prices are already often five to six times that of low to median (annual) incomes, making housing very unaffordable by most conventional housing industry measures,” he says.

Property market prices tend to be pulled up by the cost of upscale, private and landed property, he explains. These are subject to speculative forces and can be bought by people all over the world, so it tends to move toward price levels in other major cities such as Hong Kong and Beijing, where property prices are notoriously sky-high.

“That will then price out everybody else who falls below the top 20 to 30 per cent of households,” he adds.

In light of this, Yeoh, who himself stays with his wife and two children in a five-room flat in Marine Terrace, says BTO flats should be priced at a range of between two and three times of low to median annual incomes instead of between five and six times, where BTO prices currently stand.

This artificially lower subsidised price would be available only to Singapore citizens. In this situation, however, he notes further measures will be needed to prevent excessive speculation, recommending for example that Singaporean buyers should only be permitted to purchase flats at these lower prices once — for their housing needs — and suitably long “no resale” periods should be imposed""

Interest rate had already gone up. SIBOR has not risen much as Fed funds rate are still kept at 0-0.25%. However, US 10 year treasury note yield has almost doubled from 1.6% to 3% in less than a year, and so has Singapore government bond yield risen from 1.4% to 2.5%. Banks had already increased their buffer rate from 0.7% (in 2012) to 1.25% (in 2014). So the effective home loan interest rate had actually risen from 1.1% to 1.65% (with 3 mth SIBOR at 0.4%) in about a year. Banks will always be ahead of the central banks in raising interest rates because commercial banks derive most of their profits from net interest margin.

Economists are already forecasting the US 10 year treasury note yield to hit 3.38% by end of 2014. It's very likely that the effective home loan interest rate will be hiked up to about 1.9% by 2015 (assuming 0.4% SIBOR and 1.5% buffer rate).

Property investors should be monitoring the US 10 year treasury note yield and Singapore government bond yield like a hawk. They will be extremely lucky if the increased supply of TOP homes does not depressed their rental income, which is the other risk factor they need to look out for. It does not make financial sense for an investor to invest in a property that give less than 2% rental yield if the risk free rate is already above 2%.

tiggerbee, agree with you 101%. those who insist a) i/r will never rise again because of easy CB policies and b) housing prices will keep going up because of a), are basically singing a cover version of "this time it is different".

[opmi]

thanks forsharing..sounds a bit scary indeed. also saw the forecast table from edge magazine for 23 dec 2013 publication.

my sense - interest rate unlikely to go up. rental yield indeed may weaken. the way the supply & demand part was handled doesn't indicate a good grip by the chenghu on their soft landing part. perhaps they will scrap off the absd, ssd & the suffocating LTV for 2nd & 3rd purchase soon?

and most importantly, I dun think they have reached to the level of corrective measure suugested by this brilliant guy:-


""In a recent hour-long interview with Yahoo! Singapore, former chief economist at the Government of Investment Corporation Yeoh Lam Keong asked this question.

A former schoolmate of Deputy Prime Minister Tharman Shanmugaratnam’s at the Anglo-Chinese School, and later the London School of Economics, Yeoh spent almost all his adult life working on government economic policy, and in that time experienced a social awakening to what he feels are inherent problems in the system.

“(The current model is) essentially relying on individual and family savings to fund these public services,” said the 54-year-old economist, who left GIC last June after 26 years to spend more time with his family.

“At the same time, it pegs the price of these public services to market prices when they don’t have to.”

Acknowledging that the majority of Singaporeans do have access to these three areas through the HDB scheme, subsidised and compulsory primary school education, as well as subsidised hospitalisation wards, he said nonetheless that the current model used in the delivery of these three services in particular needs to be rethought.

‘Lower cost of housing’

Yeoh gave an example of how Build-to-Order (BTO) flats are linked to general market prices by being pegged to the cost of resale housing.

“Once you do that, BTO prices will rise as general property prices rise, and resale prices are already often five to six times that of low to median (annual) incomes, making housing very unaffordable by most conventional housing industry measures,” he says.

Property market prices tend to be pulled up by the cost of upscale, private and landed property, he explains. These are subject to speculative forces and can be bought by people all over the world, so it tends to move toward price levels in other major cities such as Hong Kong and Beijing, where property prices are notoriously sky-high.

“That will then price out everybody else who falls below the top 20 to 30 per cent of households,” he adds.

In light of this, Yeoh, who himself stays with his wife and two children in a five-room flat in Marine Terrace, says BTO flats should be priced at a range of between two and three times of low to median annual incomes instead of between five and six times, where BTO prices currently stand.

This artificially lower subsidised price would be available only to Singapore citizens. In this situation, however, he notes further measures will be needed to prevent excessive speculation, recommending for example that Singaporean buyers should only be permitted to purchase flats at these lower prices once — for their housing needs — and suitably long “no resale” periods should be imposed""

Interest rate had already gone up. SIBOR has not risen much as Fed funds rate are still kept at 0-0.25%. However, US 10 year treasury note yield has almost doubled from 1.6% to 3% in less than a year, and so has Singapore government bond yield risen from 1.4% to 2.5%. Banks had already increased their buffer rate from 0.7% (in 2012) to 1.25% (in 2014). So the effective home loan interest rate had actually risen from 1.1% to 1.65% (with 3 mth SIBOR at 0.4%) in about a year. Banks will always be ahead of the central banks in raising interest rates because commercial banks derive most of their profits from net interest margin.

Economists are already forecasting the US 10 year treasury note yield to hit 3.38% by end of 2014. It's very likely that the effective home loan interest rate will be hiked up to about 1.9% by 2015 (assuming 0.4% SIBOR and 1.5% buffer rate).

Property investors should be monitoring the US 10 year treasury note yield and Singapore government bond yield like a hawk. They will be extremely lucky if the increased supply of TOP homes does not depressed their rental income, which is the other risk factor they need to look out for. It does not make financial sense for an investor to invest in a property that give less than 2% rental yield if the risk free rate is already above 2%.

tiggerbee, agree with you 101%. those who insist a) i/r will never rise again because of easy CB policies and b) housing prices will keep going up because of a), are basically singing a cover version of "this time it is different".

Yes. Why would the SG banks lend u 1.25% (with risk) when they can lend the Gov at 2.5% (risk-free, nominally)?

[chialc88]

opmi,
I googled SGS last night quickly:
from my memory now:
6mth - 0.35 (dec 2013)
1 yr - 0.27 (June 2013)
20(or 30) yr - 3.5

And, yes, I thought I can park my $$$ in SGS at 2.5%.

LOL




A Life not Reflected is a Life not Worth Living.

[Tiggerbee]

Property agents should be hoping for property prices to fall further so that transactions will pick up. Brokers benefit from higher transaction volume. Only when prices fall decently, buyers will get itchy and start buying.

[opmi]

opmi,
I googled SGS last night quickly:
from my memory now:
6mth - 0.35 (dec 2013)
1 yr - 0.27 (June 2013)
20(or 30) yr - 3.5

And, yes, I thought I can park my $$$ in SGS at 2.5%.

LOL




A Life not Reflected is a Life not Worth Living.

I am using tiggerbee info..I malu..10yr SGS 1.125% pa.

banks also use 5 to 10 yrs SGS as reference. not t-bills,

[specuvestor]

It does not make financial sense for an investor to invest in a property that give less than 2% rental yield if the risk free rate is already above 2%

People will take lower than risk free yield because of capital appreciation. Same model as hotels and evident in other inverted yield curve countries like Australia in the past with negative rental spreads

[Tiggerbee]

opmi,
I googled SGS last night quickly:
from my memory now:
6mth - 0.35 (dec 2013)
1 yr - 0.27 (June 2013)
20(or 30) yr - 3.5

And, yes, I thought I can park my $$$ in SGS at 2.5%.

LOL




A Life not Reflected is a Life not Worth Living.

I am using tiggerbee info..I malu..10yr SGS 1.125% pa.

banks also use 5 to 10 yrs SGS as reference. not t-bills,

You can refer to this link for the yield rend.
http://www.tradingeconomics.com/singapor...bond-yield

[chialc88]

Tigger,
Thanks for teaching me.
Thank you.

You can refer to this link for the yield rend.
http://www.tradingeconomics.com/singapor...bond-yield

[opmi]

opmi,
I googled SGS last night quickly:
from my memory now:
6mth - 0.35 (dec 2013)
1 yr - 0.27 (June 2013)
20(or 30) yr - 3.5

And, yes, I thought I can park my $$$ in SGS at 2.5%.

LOL




A Life not Reflected is a Life not Worth Living.

I am using tiggerbee info..I malu..10yr SGS 1.125% pa.

banks also use 5 to 10 yrs SGS as reference. not t-bills,

You can refer to this link for the yield rend.
http://www.tradingeconomics.com/singapor...bond-yield

Yes. Tigger is right. I double malu.

https://secure.sgs.gov.sg/fdanet/SgsBenc...rices.aspx