Redbrick’s Eugene Huang: Reflections of a mortgage broker

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/ EdgeProp Singapore
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March 19, 2021 7:00 AM SGT
SINGAPORE (EDGEPROP) - The spike in HDB resale transactions and to a certain extent, private residential property transactions, has been “a knee-jerk reaction”, says Eugene Huang, founder and director of Redbrick Mortgage Advisory. He likens it to his purchase of a Brompton bike last November.
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Huang: People who didn’t lose their jobs are feeling quite rich — they have nowhere to spend their money because they couldn’t go on holidays. They are working from home, and that has spurred the need to upgrade (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Had he purchased it from a Brompton dealer in Singapore last November, he would have paid $2,580, but would only take delivery of his bike this October — a good 11 months later. “So I just went on Carousell and offered $4,000 because I couldn’t wait,” says Huang.
He reckons it is this same restlessness due to the Covid pandemic that has fuelled the housing market this past year. “People who didn’t lose their jobs are feeling quite rich — they have nowhere to spend their money because they couldn’t go on holidays. They are working from home, and that has spurred the need to upgrade,” says Huang. “Once taxes and mortgage payments resume, and life returns to normal, that emphasis on upgrading could lessen.”
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Refinancing, purchases

Last year was a record year for Redbrick’s mortgage advisory firm. “We transacted $6 billion mortgage loans,” says Huang. Of that amount, 90% were for residential property, with an even split between private homes and HDB flats. Most of Redbrick’s enquiries came from its website, and they doubled during the “circuit breaker” period from April 7 to June 18. A lot of the enquiries were about refinancing.
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Redbrick brokered $6 billion in mortgage loan transactions last year. Of that amount, 90% were for residential property, with an even split between private homes and HDB flats (Photo: Samuel Isaac Chua/EdgeProp Singapore)
The trigger was the emergency decision by the US Federal Open Market Committee (FOMC) on March 2, 2020, to cut its key interest rate, the federal funds rate, by half a percentage point to 1-1.25%. In line with the interest rate cut, the Singapore Interbank Offered Rate (Sibor) fell, along with the mortgage rates pegged to Sibor. “Overnight, mortgage rates fell from 2.5% to 1.5%,” relates Huang. “So everyone was rushing to refinance, as there was a lot of money to be saved.”
For the first half of 2020 therefore, 70% of the mortgage transactions handled by Redbrick advisers were for refinancing deals, with the balance 30% from residential property purchases. In the second half of the year, however, as “everyone rushed in to buy”, 70% of the mortgages were linked to purchases, notes Huang.
New private home sales totalled 9,982 units for the whole of 2020, up 0.7% from 2019’s volume of 9,912 units. In the private resale market, 10,729 units changed hands last year, up 19.9% y-o-y from 8,929 units in 2019. HDB resale transactions, on the other hand, hit an eight-year high in 2020 at 24,748 units, up 4.4% y-o-y from 23,714 units in 2019. Based on the URA price index, private residential property prices were up 2.2% y-o-y last year, while HDB resale prices jumped 4.8%.
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A total of 25,530 HDB flats will be reaching MOP this year, 5.7% more than in 2020, according to OrangeTee & Tie (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Market will correct itself’

This year, there will be more flats reaching Minimum Occupation Period (MOP). According to the latest data released by data.gov.sg in January 2021, 25,530 HDB flats will be reaching MOP this year, 5.7% more than in 2020, according to Christine Sun, head of research at OrangeTee & Tie.
Hence, with the increase in supply of HDB flats, the market will correct itself, reckons Redbrick’s Huang.
He therefore does not expect new property cooling measures to be imposed just yet. The blanket moratorium on mortgages ceased at the end of last year, he points out. With relief programmes rolled back, and taxes resumed, the auction houses will start to get busy as more mortgagee sales are likely to surface, he adds.
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Until last year, banks were offering mortgages of up to 90% for commercial and industrial properties, says Huang. “The borrowers have no rental, no cash flow, and there are hardly any transactions, so they can’t offload their properties,” he continues. “The loan-to-value at 90% is high; these borrowers are stuck with a 4% to 5% mortgage rate and are unable to refinance.”
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Huang bought a shop unit at The Plaza on Beach Road back in 2011, which had been leased for eight years to a beauty salon until February 2020 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
As a property investor himself, he understands their plight. After all, Huang owns a shop unit at The Plaza on Beach Road, which he purchased in 2011.
Huang was betting on its location when he bought it — a small shop sitting within the larger mixed-use complex, with an office tower, residences and a retail podium, together with the Parkroyal hotel and serviced suites. Built in 1979, The Plaza is part of UOL Group’s portfolio. “It’s an old building sitting on land with underutilised plot ratio,” relates Huang. “It’s benefitting from the revitalisation of the Kampong Glam area. When I bought it, Duo was under construction.”
His shop unit has been vacant since the previous tenant moved out in February last year. The shop was previously tenanted to a beauty salon that had been there for eight years.
Those commercial and industrial property owners caught in a Catch-22 situation today are similar to HDB shophouse owners back in 2014, says Huang. It was after the total debt servicing ratio (TDSR) loan framework for private property kicked in late June 2013, and the mortgage servicing ratio (MSR) for HDB property in December 2013. “Following TDSR, those who own HDB shophouses couldn’t refinance their mortgages,” he recalls.
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Redbrick started in 2014: by helping property owners refinance and structure their property portfolios post-TDSR and post-MSR (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Asset swapping’

And that was how Redbrick started in 2014: by helping property owners refinance and structure their property portfolios post-TDSR and post-MSR. “We help structure portfolios of people who want to pass their property to their children, or husbands and wives, as well as siblings swapping properties,” he says.
Such “asset swapping” is very efficient, notes Huang. Assume a parent wants to buy a new $5 million private home. He can transfer his existing residential property, which is worth $3 million, for example, to his wife or child. This would help in terms of savings in additional buyer’s stamp duty (ABSD) for the parent’s new property purchase, explains Huang.
In instances where a couple jointly own a property, and the husband is a Singapore citizen while the wife is a foreigner, Huang advises that the wife should buy the husband’s share. “This will free up the husband’s name to purchase a second property in the future,” he adds.
One of Redbrick’s clients is a family of four siblings who collectively own 12 residential properties and several commercial properties. “Every time one of them buys a property, it will start another round of asset-swapping among the siblings, their spouses, parents and children,” says Huang.
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More foreign high-net-worth individuals are also purchasing property in Singapore, as they view the city as a “safe haven”, says Huang (Photo: Albert Chua/EdgeProp Singapore)

More foreign talent, ‘those with haversacks’

Redbrick’s mortgage advisory service is open to locals, permanent residents and foreigners, and extends across a wide spectrum of the market — from HDB units to Good Class Bungalows (GCBs). The single largest loan quantum brokered by the firm was $20 million, for the purchase of a GCB.
More foreign high-net-worth individuals are also purchasing property in Singapore, as they view the city as a “safe haven”, notes Huang.
Last November, the Economic Development Board announced the launch of Tech.Pass, a programme targeted to attract founders, leaders and technical experts with experience in established or fast-growing tech companies to contribute to the development of Singapore’s tech ecosystem. The Tech.Pass kicked in from January this year.
“I see a lot of tech people who are here on the Tech.Pass,” he adds. “They are not just the founders, but also the shareholders, of the firm. And they are moving here and buying property.” The opening up of Singapore’s digital full banks will also bring in more FinTech talent to the city, notes Huang.
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Huang first purchased a three-bedroom unit at Sanctuary Green in 2007 for $1.239 million and sold it for $1.3 million in 2011. He purchased another three-bedroom unit on a lower floor of the same block in 2017 and lives there now (Photo: Samuel Isaac Chua/EdgeProp Singapore)
“I stay in Sanctuary Green in Tanjong Rhu,” he adds. “The condo seems to be popular with a lot of the foreign talent, predominantly those in the tech sector — you can tell from their haversacks.”
Huang’s first investment property, purchased in 2007, was also in Sanctuary Green. He had paid $1.239 million ($1,100 psf) for the 1,119 sq ft, three-bedroom apartment in the 99-year leasehold condo built in 2003. At that time, he was the head of the mortgage sales department at Standard Chartered Bank.
During the global financial crisis in 2009, a similar-sized unit at Sanctuary Green changed hands for $740,000 ($661 psf). That deal scared Huang, and he eventually sold his investment property for $1.3 million ($1,161 psf) in 2011.
When the market had softened in 2017, Huang saw the opportunity to purchase a 1,036 sq ft unit at Sanctuary Green — on the second floor of the same stack that he had purchased a decade ago. “I wanted to pick up from where I stumbled,” he says.
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February’s low new home sales volume, is therefore not indicative of slowing demand from home buyers. This is evidenced by a fairly buoyant resale market, which saw 1,039 transactions, according to URA data (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Private home sales to pick up

In February this year, developers sold 645 private homes, a 60.5% drop from the 1,632 units sold in January. “Developers held back from launching new projects due to the Lunar New Year festivities,” comments Ong Teck Hui, JLL senior director of research and consultancy.
Ong is also of the view that developers are in no hurry to launch “as the market is on their side with prices trending upwards”.
February’s low new home sales volume, is therefore not indicative of slowing demand from home buyers. This is evidenced by a fairly buoyant resale market, which saw 1,039 transactions, according to URA data. “Therefore, we expect launch activities to resume and new private home sales momentum to pick up in the coming months,” says Ong.
With more property transactions anticipated, mortgage loan transactions are likewise expected to increase, notes Redbrick’s Huang. “When interest rates are low, people tend to borrow more,” he says. “There’s a lot of property upgrading and switching of assets going on.”
Refinancing activity is also likely to accelerate, especially those whose “lock-in period” for their existing mortgages expires, and they want to take advantage of the current low interest rates, adds Huang.
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Redbrick Mortgage Advisory’s core team (clockwise, from bottom left): Jo’An Tan, Thomas Chew, Clive Chng, Eugene Huang, Colin Lim, Landy Lan, Andrew Adriaan and Alvin Lock (Photo: Samuel Isaac Chua/EdgeProp Singapore)

50% y-o-y growth

As such, Huang is forecasting a 50% y-o-y growth in terms of mortgage transactions, and is looking to grow his headcount of advisers at Redbrick by another 30 to 50. “We have been quite aggressive with our hiring and training,” he adds.
The firm started seven years ago with just four people, including Huang and his wife, Landy Lan. Today, it is the largest mortgage advisory firm in Singapore, if not in Southeast Asia.
Huang is not keen to sell the business outright as that would mean “losing our identity”, he says. His preference is to list Redbrick in an IPO.
“If we ever get listed, it’s about legacy planning and rewarding people who have been with us from the start,” says Huang. “They can continue working in the company and see it grow, and still retain control of the business. There are eight of us including me, and we are all aligned to the same dream.”