PROPERTY INSIGHTS

A suggestion to let young homebuyers borrow more

Leslie Yee

Published Fri, Sep 13, 2024 · 12:39 PM

As interest rates soften, the pace of property investment sales could pick up, writes BT senior correspondent Leslie Yee. BT SCREENSHOT

This week in Property

Lending to young Singaporean first-time home buyers
More investment property deals loom as interest rates soften
The thorny issue of finding land for property development

More generous lending

Buying my first home when I got married years back was part of adulting. While much has changed in Singapore over the decades, buying one’s first home remains an important milestone for many young couples today.

Scrambling to find savings for the down payment and securing a home loan is key to making the homeownership dream a reality.

As we live and work longer, perhaps it is sensible for young people today to borrow more over a longer period to fulfil their housing aspirations. I suggest in The Level Ground allowing Singaporeans under the age of 35 to take on home loans with loan-to-value of 80 per cent and a maximum tenure of 35 years.

Sure, tightening home loan conditions can contribute to curtailing housing demand and moderating home prices. Still, the ability to borrow to buy a home matters for young persons who cannot tap on parental help. And a young borrower’s ability to service a multi-year home loan could improve over the duration of the loan as income rises on the back of career progression.

Ultimately, I think there is room to relax lending to young homebuyers while ensuring prudent borrowing. Also, home prices will grow reasonably if supply is adequate.

Flash estimates from SRX and 99.co released last week showed overall Housing and Development Board (HDB) resale flat prices posted a 0.5 per cent month-on-month increase in August. Resale prices rose 1.2 per cent in non-mature estates but fell 0.2 per cent in mature estates.

The number of million-dollar HDB flat sales made up 4 per cent of the total resale volume in August, with 104 units sold. This was down from the 120 million-dollar flats transacted in July. Sales volume of HDB resale flats fell in August as the Chinese Hungry Ghost month kept buyers at bay.

With the Hungry Ghost month behind us, developers are busy lining up various new condo launches.

Bukit Sembawang Estates has started previews for its Upper Bukit Timah project 8@BT, with prices starting from S$2,530 per square foot. About half of the 158-unit condo project’s homes comprise one-bedroom and two-bedroom units.

Singapore retail deals

My colleague Kalpana Rashiwala reports that the Singapore retail strata market is buzzing. Recent deals include the S$64 million sale of Sceneca Square mall being built next to Tanah Merah MRT station, and the S$8.7 million sale of a retail unit at The 101 in Beach Road owned by money launderer Su Haijin.

The single-storey Sceneca Square is being bought by 8M Real Estate, which is a major owner of conservation shophouses in Singapore.

As interest rates soften, the pace of property investment sales could pick up. Investors in real estate investment trusts may need to be prepared to cough up more money to participate in equity fundraisings by trusts to finance acquisitions or see their proportionate interest in said trusts diluted.

My colleague Ben Paul opines how CapitaLand Integrated Commercial Trust’s proposed mega acquisition of 50 per cent of prime retail property Ion Orchard and its related equity fundraising are signs of what will come as interest rates soften.

Certainly, any property sale or leasing deal entails risks for the counterparties. Distrii Singapore, which once operated one of Singapore’s largest co-working spaces, is suing its former chief executive officer for failing to act in good faith and breaching her fiduciary duties, reports my colleague Jessie Lim.

Court documents say that Distrii, which failed to pay City Developments Ltd over S$2 million in rent (as at February 2024) for its 62,000 square feet of commercial space in Republic Plaza, vacated the premises in March.

The built environment has a key role to play in Singapore’s decarbonisation efforts. My colleague Ry-Anne Lim reports that Singapore is exploring more workable solutions and technologies to improve commercial buildings’ energy efficiency in its drive to accelerate decarbonisation in the built environment.

The aim is to help best-in-class green buildings make an 80 per cent improvement in energy efficiency over 2005 levels – one of the key goals in the Singapore Green Building Masterplan 2030.

Thorny development issues

Barratt Developments entered into a joint venture with Lloyds Banking Group and Homes England to deliver thousands of UK homes. The partnership will act as a master developer for multiple large-scale, residential-led developments from 1,000 to more than 10,000 homes, along with community facilities and employment uses.

Might the efforts of Barratt and its partners go some way towards helping to alleviate the chronic housing shortage in the UK?

Many major cities need more homes to be built. Yet, there will be obstacles to the building of new homes as this may come at the expense of other beloved amenities of a community.

In the US, there are plans to build a 123-unit affordable housing project for seniors on a plot of land in New York City’s Little Italy that is currently occupied by Elizabeth Street Garden. This plan has met with protests from thousands, including celebrities Robert De Niro and Martin Scorsese, who want the garden preserved.

On the other hand, excessive development can be an issue at popular tourist destinations. Indonesia’s tourist resort island of Bali has proposed a ban lasting a year or two on the construction of hotels, villas and nightclubs in some areas as it grapples with the problem of overdevelopment of land. The island is hoping to boost tourism quality and jobs while preserving the indigenous culture.

Many people have a lust for travel. What tourist destinations will need to get right is to reap the economic benefits of tourism while balancing the needs of local residents with those of visitors.

Are existing rules on home loans too tough? Let me know your thoughts at lyee@sph.com.sg