Will the latest cooling measure send more Singaporeans to invest in Nusajaya?

Last Sunday many property investors planning for their 2nd or 3rd property purchase woke up to a rude awakening of another around of cooling measure.

Hot on the heels of a record high HDB resale flat price of over $1 million transacted recently and red hot property launches that are seeing breeze sales, MAS introduced a cap on loans tenure to 35 years and tighter limits for home loans longer than 30 years or which extend beyond age 65. In addition borrower with existing home loans can only borrow up to 40% down from 60%.

Some already pull up the handbrake but is it game over for these group of investors?

Nusajaya Properties looking up

My guess this group of property buyers will start to look for overseas opportunities. One destination that is gaining attention is Iskandar Development Region properties. One area that has been in the Singapore media of late is the Nusajaya township just 10 mins from the 2nd link.

Even before the recent cooling measures were introduced, many more gung-ho Singaporeans and expats in Singapore, who were priced out of Singapore home market, had already ventured into Nusajaya home market as early as 2009.

As security is a major concern for most Singaporeans and expats alike, developers offer gated communities for most their developments in Nusajaya providing tighter security for the safety of their residents.

Better connectivity is another factor that is drawing more Singaporeans across. The new toll free Coastal Highway is ready now and this highway allows commuters to zip through and fro between the 1st link and 2nd link in 20 mins and most amenities such as Legoland, Educity, Medical Centers, Bukit Indah shopping centers, Puteri Harbour marina resorts are all within 10mins drive.

Many of these attractions and amenities have opened this year. Nusajaya township is fast developing and no longer just a pipe dream. Confidence of Singapore property investors have since raised markedly.

Puteri Harbour Developments

For condominium lovers, some Singaporeans are looking to Puteri Harbour properties of late. Of the whole Nusajaya township, Puteri Harbour is the gem in the master plan  The vision is to turn this into a cosmopolitan metropolis with luxurious waterfront living.

Early this year Somerset Puteri Harbour Service Residence launch saw breeze sales with Singaporean buyers making up the majority and some were reportedly made multiple purchases.

It is developed by Nusajaya Consolidated Sdn. Bhd., a joint-venture company with UEM Land, is set to be managed by the Ascott Limited, an internationally distinguished service apartment operator and member of CapitaLand under a pre-arranged 10-year leaseback agreement.

More developments in Puteri Harbour are set to launch this last quarter and early 2013. One development that is geared to launch soon coming end Oct-early November is Encorp Marina. This development is also service-on-demand apartment but with more luxurious facilities in offering and is a taller development, standing 30 storeys high, as compared with Somerset which is a low-rise five and six-storey development, offering stunning marina views.

As Puteri Harbour is only just taking shape, there will be plenty of offerings in the coming year. This, I am sure will be music to Singapore property investors' ears who are affected by the latest cooling measure. Time to release the handbrake and move to a greener pasture?

35-year limit set on home loans

Curbs on long mortgages to prevent buyers from over-extending
By Rachel Chang


IN A move that took the market by surprise, the Government introduced new measures yesterday designed to cool the property market and stop home buyers from over-extending themselves.

From today, the Monetary Authority of Singapore (MAS) will restrict all home loans to a maximum of 35 years.

Home buyers who take a loan that lasts more than 30 years, or extends past their retirement age of 65, will now have to fork out significantly more in cash.

Such long loans can now only be up to 60 per cent of the property's value if this is the buyer's first mortgage. That means that he must pay 40 per cent of the price upfront, in cash.

If this is his second or more property loan, the loan limit shrinks to just 40 per cent of the property's value.

The new loan limits and rules also apply to home owners who refinance their loans.

Analysts said the moves will affect a broad swathe of property buyers and leave only young buyers under the age of 30 untouched.

In a statement last night, MAS explained that it is acting to curb upward pressure on property prices from the current low interest rates worldwide, and the rapid credit growth driven by the US' latest round of quantitative easing (QE3).

"Monetary conditions worldwide are far from normal," said MAS chairman Tharman Shanmugaratnam, who is also deputy prime minister.

But the current climate of easy credit and low rates will eventually change, he cautioned.

MAS said that this is why it is acting now to prevent prices from spiking beyond sustainable levels, so that the eventual correction "which will hurt borrowers and destabilise our financial system" can be softened, if not avoided.

The central bank also revealed the impact of easy credit on home loans over the last three years.

The average tenure for new home loans has risen from 25 to 29 years and currently, more than 45 per cent of new home loans have tenures exceeding 30 years.

In August, a 50-year home loan offered by the United Overseas Bank (UOB) drew the ire of National Development Minister Khaw Boon Wan, who described it as a "gimmick".

Long-tenure loans, said MAS, cause buyers to over-estimate their financial wherewithal.

A rising property market also gives buyers and lenders "false confidence" that the property can always be sold off for a profit if the loan becomes difficult to service.

Analysts interviewed yesterday do not expect property prices to fall drastically in reaction, but they predicted some buyers will exit the market, transaction volumes will cool and price rises will moderate.

In the third quarter of this year, both Housing Board resale prices and private property prices accelerated their climb.

The board's resale price index grew 2 per cent, outstripping the 1.3 per cent growth in the second quarter, while the private property market rose 0.5 per cent, up from 0.4 per cent in the preceding quarter.

The new changes, said observers, would land hardest on older buyers, especially those with more than one property. Young buyers should get away with just paying a shade more every month.

For example, a 40-year-old buyer can now take a loan of only 25 years if he wants to continue to be able to pay the usual 20 per cent down payment.

But if he were to take out the shorter 25-year loan of $800,000 for a $1 million property, this would now mean monthly payments of $3,051, at current interest rates of 1.1 per cent. This is $400 more than if he had a 30-year loan.

But for a buyer like investor Jack Liang, 49, who is on the hunt for his third property, the new rules mean "game over", he said.

If he finds a $1 million property that he wants, he can take only a 16-year loan, up to the retirement age of 65 years old. His monthly repayments will be $4,546, likely more than its rental yield.

Or, he can take a longer loan, but for only 40 per cent of the property's value, as it is not his only housing loan. He must then have $600,000 cash in hand to purchase the property.

"It's time to pull up the handbrake," he lamented.