A pre-war terrace house on Devonshire Road in Somerset faces foreclosure after the home owners failed to pay property tax for two years, amounting to around S$7,000.

The Inland Revenue Authority of Singapore (IRAS) served the owners with a notice of sale in August 2011.

If the home owners fail to pay the amount within three months from the publication of the government gazette, the 1,717 sq ft property will be sold at a public auction in November.

According to Nicholas Mak, Head of Research at SLP International, the freehold property is valued between S$2.2 million and S$2.3 million, based on comparable properties within the vicinity.

Part-time chef Chen Zhen Nan, 53, one of the owners of the freehold property, said that he cannot pay the property tax due to financial problems.

Chen said he had wanted to sell the property earlier to solve his financial problems, but he couldn’t reach an agreement with his siblings.

“We need help to pay our debts,” he said.

IRAS wanted to foreclose on the property but Chen’s eldest brother helped to pay the tax then, preventing it from being sold.

His brother, however, passed away this year.

A property auction was the last option, after all attempts to recover outstanding property taxes failed.

A spokesperson from IRAS said, “Before we auction a property, we would have issued reminders, notices to pay, made phone calls and appointed banks as agents to try to recover the taxes due.”

“We have also communicated with the occupant of the property, one of the children of the deceased owner, about the outstanding property tax.”

“No one has come forward to pay the outstanding property tax.”

Thus, the property will be sold by IRAS (subjected to a reserve price), taking the outstanding amount, less the expenses incurred in selling the property, such as the commission of the property agent.

The remaining amount will be returned to the owners of the property.

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Despite mortgage rates falling to record lows, the demand for home loans in the US continued to fall for the third consecutive week, according to the latest data from the Mortgage Bankers Association (MBA).

The MBA’s seasonally adjusted mortgage applications index, comprising both home purchase and refinancing demand, fell 4.9 percent in the week ending 2 September 2011.

In addition, MBA’s seasonally adjusted refinancing application index also dropped 6.3 percent, while its estimate of loan requests for home acquisitions surged 0.2 percent.

The rates for a 30-year fixed mortgage averaged 4.23 percent, a decrease from 4.32 percent a week ago. It was also the second lowest rate since MBA started its survey almost 22 years ago.

The group also noted that 15-year loan rates averaged 3.41 percent, a decrease from 3.49 percent in the prior week.

“Despite these rates, refinance application volume fell for the third straight week and is more than 35 percent below levels at this time last year,” said Mike Fratantoni, Vice President of Research and Economics at MBA.

“Purchase application volume remains relatively flat at extremely low levels, close to lows last seen in 1996,” he added.

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Singapore property prices will remain stable in the medium term, with key home-buying factors like upgrading and investment still expected to drive up demand, said a My Paper report.

This comes amid the expected slowdown in Singapore’s economic growth, led by the debt crisis in western countries.

As home buyers are likely to be more cautious, prices will not increase or decline by over five percent by end-2012, said property experts. They added that rental yields are also expected to rise by between two and three percent in 2012, in line with historical averages.

“The Asia-Pacific region, including Singapore, remains on track for continued growth and can weather a global slowdown,” said Ong Kah Seng, Senior Manager at Cushman & Wakefield for Asia-Pacific.

He noted that Singapore, like Hong Kong, is in the “high-risk range” when it comes to its vulnerability to the economic crisis in the West.

Ong pointed out that home buyers will likely see a 10 to 15 percent capital appreciation on their properties over the next five years.

“If you are looking at the nearer term, property prices here will generally remain fairly flat in the next year, with the potential for some downward adjustment,” he said.

“But there is always underlying demand stemming from individuals looking at upgrading or for investment, and opportunistic buyers may be quick to react to the lower housing prices, thereby pushing the market up again.”

Meanwhile, Mark Teo, Senior Group-Division Director at ERA Realty Network, said that while external factors affecting Singapore’s economy are important, what affects the property market most are the government’s policies and measures.

He cited how government investment in the development of the Marina South area has led to prices of several properties in the area skyrocketing.

“The development became a global product that commands international pricing,” he said. “Government policy in Singapore is very, very powerful, so make sure to track this especially if you are looking at properties for investment purposes.”

For young couples seeking to acquire properties for the first time, Teo recommended Build-To-Order (BTO) flats, as they are usually cheaper and have “higher capital appreciation value”.

Catherine Tan, Senior Executive Estates Officer with the HDB, also said that buyers need to “refer to transacted resale prices of comparable flats and not on cash-over- valuation in your negotiation so that they will not overpay.”

“The transacted flat prices can be found on the HDB info-web,” she added.

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National Development Minister Khaw Boon Wan has clearly stated that he cannot abolish the cash premiums that HDB resale flat buyers must pay to sellers.

His announcement came as a reply to comments posted on his Facebook page on National Day. He explained that the Cash-Over-Valuation (COV) premiums are set by buyers and sellers themselves and thus, cannot be removed.

He added that removing the COV and having a professional valuer determine the price of resale flats was tried “years ago”. As a result, the “COV then went underground as ‘under counter cash payment’,” he wrote.

The debate over this policy started when Mr. Khaw posted his National Day message, after which comments trickled in, suggesting that the COV be removed as it is an “inflationary” factor.

He explained that the COV is the difference between the valuation of the flat provided by a professional valuer and the price agreed on between the seller and the buyer.

In July, the HDB announced that the nationwide overall median COV figure will no longer be included in its quarterly releases. Furthermore, it has also ceased publication of the overall median COV numbers for various flat types and housing estates. He noted that the data could be misinterpreted as there are other variables involved.

With regards to rising resale flat prices, he said the government has taken notice but the problem will be resolved in three to five years time, when Build-to-Order (BTO) flats are ready.

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Median rents for Good Class Bungalows (GCBs), an exclusive category of bungalows with stringent planning guidelines, have been stable over the past few decades, according to The Business Times.

Based on built-up area, the average rents for GCBs reached S$3.41 psf per month as of the second quarter of 2011. However, the average annual compounded rate of increase hit six percent between 2005 and Q2 2011, when the number of permanent residents (PRs) and foreigners increased significantly.

There are 2,300 completed GCBs across the country, located in 39 GCB areas in Districts 10, 11, 21 and 23. This represents slightly more than three percent of landed properties and 22 percent of all detached houses across the country. A bungalow that falls within a GCB area is subject to a minimum land area of 15,070 sq ft (1,400 sq m) and a building height of two storeys.

According to the report, the provision of greater built-up space is a recent trend in the GCB market. This could moderate median rents on a psf basis for a few quarters, as more bungalow-type properties are completed and leased out.

Since 2002, prices of GCBs have not declined, even at the peak of the 2008 global financial crisis. The annual compounded rate of capital values was 8.8 percent since 2000 but reached a whopping 20.6 percent, if one measures capital growth rates from 2005.

“GCBs should expect to see strong leasing demand and rentals are expected to increase due to limited supply. The GCB leasing market should remain tight because demand from top executives with the budget for these properties will meet limited supply. Vacancy levels are therefore likely to stay low,” said the report.

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Global economic uncertainties have affected Singapore and Singaporeans need to “save for a rainy day”, said National Development Minister Khaw Boon Wan.

Delivering his message yesterday on the sidelines of a national day observance ceremony in Sembawang, the minister called on Singaporeans to be more prudent and reminded them that spending more than one earns is unwise.

He noted that the US and Europe are in debt because they did not save and worse, have overspent.

“You earn S$1,000 but you spend S$1,200, where does the S$200 come from? These are common-sense values but sometimes, people forget,” he said.

In comparison, he said the Japanese are much better in managing debt but their lack of political leadership is their greatest problem.

“For 20 years, no (Japanese) political leader came forward to say the right thing. Everyone tried to be popular, be populist, and say what people like to hear. But what people like to hear, sometimes, may not be the right thing,” he said.

He stressed that political leaders have the responsibility to lead a country but sometimes “get punished by voters for saying the right thing.”

“So, Singaporeans have to decide — do you always want to hear pleasant things even though they are dishonest?”
“Sometimes you get fine weather, sometimes rainy. But if you have always saved for the rainy day, you’ll be pretty steady and safe,” he noted.

His comments followed Deputy Prime Minister Tharman Shanmugaratnam’s warning that it will be tough for the country in the next three to four years, as advanced economies experience slow growth and possible bouts of recession.

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The US mortgage market, which has been supported by the government, could be affected by the country’s recent credit downgrade, with the possibility of a hike in borrowing costs for consumers.

Karen Shaw Petrou, Managing Partner of Federal Financial Analytics, said that the “sufficiently perilous” status of the US mortgage market and the downgrade “can do nothing but harm the market”.

Standard & Poor’s cautioned in July that a downgrade of the credit rating will trigger a downgrade of major mortgage-finance players Fannie Mae and Freddie Mac — the firms that were nationalised three years ago and have maintained their triple-A rating since the government guaranteed their debt.

Currently, no one knows the extent of the impact of the downgrade on the mortgage market, even if the market is primarily intertwined with the federal government.

As a direct result of the government’s rating, the securities issued by the government-owned corporation Government National Mortgage Association, or Ginnie Mae, have been given a triple-A rating.

Approximately 90 percent of new mortgages are backed by Freddie, Fannie or Ginnie.

If the company’s ratings are to be downgraded, borrowing costs will increase, which will translate to an increase in mortgage rates or losses to the firms.

The US$4 trillion in mortgage-back securities guaranteed by Fannie and Freddie and held by investors are not rated and traded as safe investments, as they are government assured.

The combination of the downgrade, Euro-zone debt crisis and roller-coaster nature of the US economy could lead to greater volatility in the mortgage market.

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The Urban Redevelopment Authority (URA) announced that it has strong support for the proposed amendments to the Housing Developers (Control & Licensing) Act (HDCLA) and Housing Developers Rules (HDR).

In a statement published yesterday, the URA said it received feedback from more than 100 respondents, including property developers, agents, solicitors, property consultants and other members of the public.

The URA noted that most of the respondents are “generally in favour of URA’s proposed requirements on developers to provide accurate information in the showflats and to provide more information on the housing units to prospective home-buyers to help them make better informed decisions.”

One of the key proposals that received overwhelming support is the release of “more mandatory information on housing projects” to homebuyers prior to the issue of the Option-to-Purchase, to enable them to make informed decisions.

Additionally, some of the respondents provided suggestions on how to further enhance the URA’s market transparency and better protect home buyers’ interests.

These included mandating developers to give a further breakdown of the strata floor area by room, as well as providing a list of developers with suspended sales licences on URA’s website.

The URA said that it has carefully considered the suggestions and will finalise the proposed amendments to the HDR and the HDCLA, with the new rules and regulations to be implemented in due course.

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Sales of private homes in June dropped 25 percent month-on-month to 1,182 units, excluding Executive Condominiums (EC).

This means a total of 4,562 units were transacted in Q2 2011, about 27 percent more than the 3,595 new homes sold in the previous quarter.

“It is not surprising to see the decline in private housing transactions in June, due to the June school holidays, when many families may be abroad for holidays,” said Adam Tan, Communications Manager of PropNex Corporate.

“In addition, the decline in private housing transactions can also be attributed to the HDB announcing that they will be building 25,000 new flats in 2011, so some potential first-time buyers in the middle income bracket may switch to the public housing market instead.”

“Furthermore, with more than 10,000 new private homes expected to enter the market in the second half of 2011, consumers may be waiting for more choices in other locations across the island,” he added.

Meanwhile, the robust transactions in the April-June period were primarily achieved by suburban leasehold projects. Among the major projects that sold well during the second quarter are Eight Courtyards (488 units sold), Hedges Park (309 units sold) and Terrasse (229 units sold).

“High-end projects located in the Core Central Region (CCR) maintained a steady level of interest throughout the quarter, averaging at around 30 units per month and sold at median prices of S$2,500 psf and above. Nevertheless, buying is still very selective among both local and foreign HNWIs,” noted Joseph Tan, Executive Director for Residential at CB Richard Ellis (CBRE).

“In June, the highest floor rate of S$4,362 psf was achieved for a unit in Le Nouvel Ardmore. In May, a unit in The Marq On Paterson Hill was sold at a record price of S$5,842 psf and in April, a unit in The Orchard Residences was sold at S$4,799 psf.”

He added that residential prices in Q2 increased 1.9 percent quarter-on-quarter, according to the URA’s preliminary forecasts.

Moving forward, Joseph Tan believes “developers will continue to launch new suburban leasehold projects. However, we expect the take-up in Q3 2011 to be lower than Q2 2011’s volume.”

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Minister for National Development Khaw Boon Wan revealed in his latest blog entry that ramping up the launches of build-to-order (BTO) flats will increase applicants’ chances of getting a unit, as it reduces the application rate.

Data gathered by the Housing and Development Board (HDB) on winning applicants during BTO exercises held from January to March 2011 revealed that the probability of being able to select a BTO flat was higher when there were lesser applicants for them.

The minister wrote, “For January BTO, practically all first-timers got to select a flat.  Even second-timers got an 84 percent chance to select. However, as application rate increased to five or eight, the chances fell significantly, especially for second-timers. That is why we are ramping up BTO launches to reduce application rate, and hence raise the chances for our applicants.”

He also stressed in his blog that the HDB “’loads’ the ballot in favour of first-timers”.

He stated that for the February BTO exercise, first-timers were “three to five times more likely to be selected than second-timers” in choosing their flats.

He added that more loads have been given to first-timers who had not been successful in previous BTO launches.

Mr. Khaw noted that his ministry is dealing with the issue by offering applicants more choices.

“We are trying to offer larger BTO launches. This way, we hope to provide more choices and reduce the odds of repeated disappointment.”

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