No more freebies for home-buyers
The New Paper
Thursday, Sep 27, 2012
Does the purchase price of a home include the legal fees,
valuations and fire insurance?
Some banks here say yes, and have calculated them as part of
the purchase price. When a loan is given out, it then covers the three items.
But that's wrong, reminded the Monetary Authority of
Singapore (MAS) in a letter sent to banks about two weeks ago. They pointed to
Notice 632 which spells out the items banks can no longer include as part of
the purchase price.
Among them - stamp duty.
On monday, some home buyers hunting for bank loans were told
legal fees, valuations and fire insurance will no longer be absorbed. The New
Paper understands banks are going to make an announcement on this on tuesday.
The end of subsidies were part of a series of cooling
measures, introduced by MAS that came into effect in January last year.
Depending on the value of the property, these legal fees can
range from S$2,400 for an HDB flat to a few thousand dollars for a landed
property.
Valuation for private property can range between S$200 and
S$500, while for HDB it is S$180, property agents told TNP.
A senior bank executive said: "Individually, the sum
may be small per customer. But in total, they can be quite a hefty sum. It is a
saving for the bank.
"It's not that banks were not complying with Notice
632. We have compliance officers to ensure we do.
"But it was a question of how to interpret purchase
prices."
Last January, MAS told banks to grant loans on the price of
the property contingent on the borrower declaring any "discount, rebate or
any other benefit from the bank or any other party (including the payment of
legal or stamp fees for the purchase) which has the effect of reducing the true
purchase price".
Another senior bank executive said the subsidies were only
introduced recently to attract customers.
So what would be the impact of banks announcing an end to
such subsidies?
A spokesman for mortgage broker Advance Partner said:
"The outcome is that customers might switch to another bank which still
offers these freebies, even though this other bank is charging a higher
interest rate (on its housing loan).
"At the moment not all banks have done away with the
freebies and we're looking at a transition period in which customers could be
motivated to take up a loan with a bank which still has these offers." .
Low profit margin
While the interest rate of these other banks "might be
higher, it is not that significantly higher", she added.
Mortgage Supermart Singapore's Keff Hui, said interest rates
are projected to remain low until 2015. Property loans would yield "low
profit margin" for banks and cutting freebies could give them an
"opportunity to review and streamline their costs", he said.
Property experts say removing these freebies would have
minimal impact on the hot property market. OrangeTee head of research and
consultancy Tan Kok Keong said: "The cost is not a big proportion of the
purchase price, hence it will have minimal impact.
"In the past, when some developers were offering cars
to home buyers, the cost of freebies were deducted from the actual cost when
you took a housing loan. This measure may just be about tying up the loose
ends."
PropNex's associate branch director Ron Lim agreed:
"Initially, it will affect the buyers. But people will get used to it
after a while and adjust accordingly."
According to a Colliers International report released on
monday, the property market is set to heat up even more.
One major factor which may come into play is the US move to
print more money, a measure also known as Quantitative Easing 3 (QE3).
The report said the US government's move could drive up
property prices here.The weak US economy might drive investors to put their
money here.
But Chesterton Suntec International's director of research
and consultancy Colin Tan told TNP that he does not think the additional
capital flowing into the property market here will have minimal impact because
there is "enough supply to dampen pressure on price increases".
Martin
Koh | 86666 944 | R020968Z
Sherry Tang |
9844 4400 | R020241C
Senior Sales
Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham
Tie Leung (SEA) Pte Ltd (L3006301G)
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