PROPERTY experts will tell you that one of the most important considerations when buying a piece of property is - location, location, location.
If that property you are eyeing happens to be in a red-light area, this cannot be more true.
And for good reason: You may well be unable to get a bank loan for it.
First-time home buyer Lim Chuan Jer and his family learnt this lesson the hard way - and are now $22,000 poorer.
Mr Lim, 30, his younger brother and their widowed father had intended to buy one unit each at the Atrium Residences condominium in Geylang Lorong 28 earlier this month.
To secure the three freehold units, they put down $91,000 collectively - or 5 per cent of the units' total selling price - as booking fees.
But Mr Lim started hitting brick walls when he approached banks for financing. He needed a 30-year loan of $400,000 on his unit but was turned down by no fewer than seven banks, including DBS Bank and Standard Chartered.
Only finance companies Hong Leong Finance and Sing Investments and Finance said yes.
This, despite Mr Lim earning more than $50,000 a year as a product manager with a publishing company and having a clean credit history, he said.
'I had no problem getting a car loan previously, so I didn't think that it would be a problem getting a housing loan from the banks. It never occurred to me that the location was the problem.'
He added that the condominium was located in the residential zone of Geylang, under the Urban Redevelopment Authority's Master Plan 2003.
The family had chosen Geylang because it is in the east - near to where they live in a terrace house at Siglap currently - and yet close to the city centre. Prices of private apartments there, which average $500 per square foot, are also about 10 to 15 per cent cheaper than those in nearby areas such as Katong.
Because of Mr Lim's experience with the banks, his brother, 27, and businessman-father, 60, decided not to go ahead with their purchases as well. This meant that the three of them ended up forfeiting a quarter of their booking fees amounting to $22,000.
The family's fear was that they would find it hard to sell their units in future, should financing also prove to be a problem for their potential buyers.
Banks contacted stopped short of admitting that they discriminate against any one location, saying only that the location of the property is among several factors they consider when reviewing mortgage loan applications.
The Monetary Authority of Singapore said it does not intervene in banks' commercial decisions on lending, which are based on their own range of internal credit evaluation criteria.
But industry experts note that banks may also have concerns about selling off such properties in the event of customers defaulting on the loan, resulting in repossession by the bank.
Said DBS Bank: 'We do not offer financing for properties that are of potentially higher credit risks to us as the current and future value of the properties are subject to several other factors like the condition, type of business and location of the property and its surroundings.' Six other banks including local players OCBC Bank and United Overseas Bank and foreign banks Citibank Singapore and Maybank Singapore, said the borrower's ability to repay the loan is a key factor.
OCBC Bank's head of consumer secured lending, Mr Gregory Chan, added that the bank will consider financing properties in Geylang 'as long as they are used for a lawful purpose' and the application meets its credit evaluation and guidelines.
Generally, banks do not finance properties located in the even-numbered lorongs between Geylang Lorong 2 and 28, which is known as the red-light district, said lawyer Lie Chin Chin of Lie Kee Pong Partnership and Ms Angeline Lim, senior marketing director of realtor ERA.
In these cases, home buyers would go to finance companies or pay cash, said Ms Lim, who has sold several properties in Geylang.
But it is prudent for home buyers to do their homework before they sign on the dotted line, said Mr Dennis Ng, spokesman for www.housingloansg.com, a portal that provides analysis of housing loans. 'Before you commit any cash to buying a property, make sure you get the bank's approval for the loan first, regardless of the location of the property,' he said.
ngsls@sph.com.sg
'I had no problem getting a car loan previously, so I didn't think that it would be a problem getting a housing loan from the banks. It never occurred to me that the location was the problem.'
- MR LIM CHUAN JER who was rejected by no fewer than seven banks when he approached them to finance his purchase of a Geylang condominium unit.
