Sheng Siong buys five wet markets for 26mil

Source : Straits Times – 12 Sep 2009

LOCAL supermarket chain Sheng Siong is on an expansion drive with its recent purchase of five wet markets for $25.55 million. It bought them from mainboard-listed Heeton, a boutique property developer.

The wet markets are at Choa Chu Kang Street 62, Choa Chu Kang Avenue 1, Serangoon Avenue 3, Bukit Batok West Avenue 8 and Fajar Road.

The deal looks set to mark another expansion phase for Sheng Siong, a homegrown chain which has been growing in leaps and bounds. It
is not clear what changes, if any, will be made. A Sheng Siong spokesman told The Straits Times: ‘Our company has not made a formal announcement to staff on its plans for the wet markets yet.’ Plans will be announced soon, when the deal is completed, she added.

Sheng Siong has seen phenomenal growth since it started with one outlet in Ang Mo Kio Avenue 3 in 1985. It now owns and operates 22 supermarket outlets, clocking a turnover of $667 million last year. It is opening its 23rd outlet in Punggol soon. Sheng Siong recently announced that it would build a customised distribution centre to better serve the needs of the outlets.

For Heeton, the wet market business has brought in steady rental yields and good cashflow. However, its wet market revenue as a proportion of total revenue is small as it expanded aggressively in the property development business over the years. It has developed the exclusive The Lumos condo at Leonie Hill. With the sale of the wet markets, the business will be focused on boutique property development.

Heeton said the funds will allow it to beef up its land bank and to develop more projects.

Forum upbeat on Asian growth

Source : Business Times – 12th Sep 2009

WHAT a difference a year makes. Last year, the mood at the annual CapitaLand International Forum on the property sector was bleak as speakers surveyed a gloomy global economy. Yesterday, a year on, speakers at the same event held at the Raffles Hotel were pointing cautiously to a revival of growth and brighter prospects in areas such as real estate investment trusts (Reits) and in Asia, particularly China.

Ms Gail Fosler, president of United States-based business research organisation The Conference Board, who also spoke at last year’s event, said future global economic growth rates will be much lower than in recent times – but not unusually low.

The projection is 3.2 per cent for 2006 to 2016, compared with more than 5 per cent on average for 2004 to 2007 and some 4 per cent on average from 1996 to 2006. Virtually all global growth will be in emerging markets, she said. The notion of US consumption denting Asian growth is miscast, she said. ‘China is much more a factor in Asian growth than the US.’

Indeed, China, as an economic locomotive, is pulling up Asia and increasingly the rest of the world, said Professor Tan Kong Yam of Nanyang Technological University’s division of economics.

One factor was that China’s dependence on exports is less than 10 per cent – instead of the headline exports-to-GDP ratio of more than 30 per cent – as its exports contain a lot of imported components. ‘China is becoming like the sun. More countries are revolving around it,’ said Prof Tan.

Ms Fosler said the world is now in search of ’stores’ of value and increasingly bidding up commodities and real estate. It is thus ‘extremely important’ for Asia to be watchful on asset and price accumulation, as the risk of an Asian asset bubble and instability is greater than the risk to growth, she said.

Mr Anthony Ryan, head of real estate investment banking, Asia, at JP Morgan, said a bubble could emerge in the Asian residential property market, as he has seen ’some fairly quick rises in prices’, particularly in China and India. Still, the Asian Reits outlook is positive and new products will emerge. Singapore could look forward to two to five Reit listings in the next two years, and more mergers and acquisitions, he said.

Separately, Reuters reported that Mapletree Investments will launch a Reit when market conditions are more favourable. The proposed Mapletree Commercial Trust will have assets worth as much as $4 billion, with properties such as the VivoCity mall and PSA Building.

Global meltdown: What got fixed, what needs watching

Source : Straits Times – 12 Sep 2009

The US housing market: Still a house of cards THE storm started here around 2002, in the suburban and regional houses that the United States government encouraged Americans to buy with super cheap loans.

With the stock market booming and interest rates low, everyone piled into the property market, building a housing bubble that was seemingly unbreakable.

Everyone thought home prices would just keep rising. Even sub- prime borrowers with terrible credit histories could get loans. Banks fell over one another to lend them money, knowing that the risk of these loans could be ’swapped out’ by passing them on to investors in financial markets.

But when the bubble did burst towards the end of 2006, everything tumbled down with it, triggering the sub-prime mortgage crisis and leading large banks to write down billions of dollars in losses. Just as the US housing market triggered the crisis, experts are also looking to it to underpin a recovery for the global economy.

To achieve that, prices of houses must stop falling and foreclosures must stop rising. Economists say until that happens, it will be difficult for banks to clean up their balance sheets and resume normal activity.

Where are we now?

After falling by about 30 per cent from their 2006 peak in places like Miami, Las Vegas and Phoenix, home prices rose 2.9 per cent in the second quarter from the first, according to Standard & Poor’s Case-Shiller home price index.Government stimulus efforts, such as the tax credit for first-time buyers, are boosting sales, with sales of new homes jumping 10 per cent and construction of new homes rising 1.7 per cent in July.

But foreclosures keep rising, up 18 per cent last month over the same month last year. Worryingly, the defaults on mortgages involve not just sub-prime loans, but also prime borrowers.

Economists warn that there is still a glut of unsold new and existing homes. While most agree the market has bottomed out, few are expecting a meaningful upturn in prices. With a weak economy, low borrowing rates, tax incentives and refinancing will continue to be vital, but a longer-term concern is whether there will be enough political will to remove these subsidies once a recovery is reached.

Or is the US housing market setting itself up for another collapse?

STATUS: Improving, but still shaky.

Within a family’s reach

Source : Straits Times – 12 Sep 2009

I THANK Mr Ng Kok Lim (’Do the criteria reflect reality?’), Mr Hoon Tze Ming (’Home affordability fails to factor in opportunity costs’) and Mr Chew Kim Cheer (’Solve key concern – soaring resale prices’) for their letters last Saturday.

As the public housing authority, HDB has two key responsibilities: to help Singaporean families set up their first home; and to ensure flat values for the 80 per cent of Singaporeans who are home owners are sustained over the long term.

To do this, HDB adopts a two-pronged approach. First, ensuring affordability for first-time home owners; second, calibrating new flat supply to meet demand.

Affordability

THE Government provides generous housing subsidies. HDB flats are thus affordable by any measure. On average, first-time home buyers use only 17 to 29 per cent of household income for their loans, below the international benchmark of 30 per cent.

A first-time couple earning $4,000 a month buying a resale four-room flat at $300,000 will need only 25 per cent of their monthly income. Their Central Provident Fund (CPF) contributions ($920) will cover almost all of the instalment, with only $81 paid in cash. New flats are equally affordable.

Mr Ng cited some house price-to-income ratios to conclude that Singapore has one of the priciest property markets in the world. Both Mr Ng and Mr Hoon felt that HDB should use other indices besides debt-servicing ratio (DSR).

The figures quoted by Mr Ng do not reflect the situation in Singapore. They include both private and public housing. In our case, the house price-to-income ratio for first-time HDB flat buyers is only about five years, much less than that in any of the 20 cities Mr Ng listed.

DSR is the proportion of mortgage instalment to monthly household income. It is objective, simple and well- accepted. Banks and many countries use it as an accurate measure of affordability.

Flat supply

HDB determines flat supply based on population growth, including immigrants and new marriages, as well as resale flats released into the market. In response to rising demand, HDB has been increasing new flat supply. HDB will increase the build-to-order (BTO) flat supply this year to 8,000, compared to 2,400 in 2006. Most first-time applicants have a chance to select a BTO flat within two tries.

Mr Ng feels there are no willing buyers or sellers because there are insufficient new flats where and when people like. Mr Chew asked for comparisons between mature and non-mature estates.

It is not possible to build new flats ‘where and when people like’, especially in mature estates. There is not enough land to do so. However, there are ample resale flats in mature estates, which are affordable. Based on recent transactions, the average DSR for mature estates was about 27 to 28 per cent.

We understand the aspirations of flat buyers to buy a flat of their choice. But as with all purchases, flat buyers need to decide on their trade-offs, such as price and location.

HDB will continue to watch the market closely to ensure affordability, and will consider appropriate measures if the situation warrants.

Yap Chin Beng
Deputy Chief Executive Officer (Estates & Corporate)
Housing & Development Board

Rising property prices to get airing in the House

Source : Straits Times – 12 Sep 2009

THE red-hot property market in Singapore will come under scrutiny on Monday when Parliament sits.At least two MPs – Madam Ho Geok Choo (West Coast GRC) and Ms Jessica Tan (East Coast GRC) – have put in questions on the impact of rising property prices.

Madam Ho is worried that the buying frenzy could result in a property bubble. She told The Straits Times yesterday: ‘If you look at what is happening in Singapore today, everybody is happily going shopping for property. Nobody seems to have concerns that there might be a risk in just going forward like that. It’s very much like what happened in the United States before the sub-prime crisis.’

Ms Tan is concerned about how the price spike may affect affordability.

With HDB prices also rising, many have asked if the income ceiling for government housing grants could be raised. Now, any household earning more than $8,000 a month does not qualify for a grant when buying a resale flat.

Ms Tan is bringing up the issue in Parliament, asking when the income ceiling was last reviewed. The property boom, coming amid a global economic crisis, has caught the eye of many, including those in the Government.

National Development Minister Mah Bow Tan had said in July that signs of speculation were reappearing. He stressed that the Government would monitor the situation closely.

Property aside, a wide range of domestic issues will also be discussed in the House, from the Formula One race in the last weekend of this month to hotels that provide rooms at hourly rates.

Nominated MP Calvin Cheng wants to know if the period the roads are closed for the race could be shortened. In Monaco, roads are closed for only a few hours before each session, he added.

Mr Christopher de Souza (Holland-Bukit Timah GRC) wants to know if the Government would consider tightening the rules for hourly rated hotels. He sees a worrying trend of such hotels – which typically attract activities such as prostitution – creeping out of the red- light districts.

He told The Straits Times: ‘I have been getting feedback from constituents who are seeing an increase in vice activities beyond the conventional boundaries of Geylang. One way to address this is to clamp down on hourly rated hotels.’ He is raising it as ‘a possible solution and would like to see what the Government has to say’.

On Monday, three Bills tabled during the last sitting will also be debated – the Private Education Bill, the Copyright (Amendment) Bill and the Casino Control (Amendment) Bill.

The Private Education Bill seeks to tighten controls on private educational institutions. Several have closed, leaving thousands of students stranded, with many unable to recover their fees.

The casino Bill will impose stiffer penalties on those giving incorrect tax returns on gaming revenue, while the copyright Bill will widen the scope of the Copyright Tribunal for resolving rows between owners and users of copyrighted material.

Property index and saga of the three-hump camel

Source : Straits Times – 12 Sep 2009

SINGAPORE’S Private Property Market Index looks like a mutant three-hump camel, registering a 45 per cent bust from the second quarter of 1996, a 40 per cent boom from the fourth quarter of 1998, a 20 per cent bust from the second quarter of 2000 and a 58 per cent rise from the first quarter of 2004, with the latest figures in the second quarter of this year dropping back to below the second hump.

Yet National Development Minister Mah Bow Tan said on Sept 2 that ‘as far as (private home) prices are concerned, we want to make sure… there is no excessive speculation’.

With a three-hump camel of boom-busts in 13 years, at what point is speculation deemed ‘excessive’? When a slew of sub-sale advertisements appear on soft launch and when kettles are owned for more than five years, yet property ownership of less than five years may not be ‘property trading’, it makes a mockery of tax laws.

Currently in land-scarce Singapore, we have 4.84 million residents (6,814 people per sq km), with a 6.5 million target population in 40 years. As Central Provident Fund savings are largely locked in home ownership, residential real estate goes beyond Mr Market’s wheeling and dealing. To draw a parallel, it is equivalent to rice harvests in Vietnam as an agro-economy – except we are in perpetual drought.

Mr Mah urges Three Thinks – ‘think carefully, think long term, think about the unexpected’ – before we buy property.

I did Three Thinks before buying a condominium unit. Now I cannot do even One Thing when my neighbours sell the roof over my head.

Property is all about location and timing. Retirement wealth is at stake. Can Mr Mah follow South Korean laws and do One Thing for Singaporeans: ‘Sell one, return one’ instead of ‘Double the price or half the size’ in collective property sales?

Tan Meng Lee (Ms)

It’s a kind of magic

Source Business Times – 12 Sep 2009

TURNING a mere 67 square metres of real estate into the height of luxury sounds a little like a tall order, but one that interior designer Cameron Woo accomplishes with ease.

Back in 2006, the Singapore-based Australian transformed a barely-there showflat that was the equivalent of the size of a 3-room HDB flat into the hottest seller at The Metropolitan, a 382-unit, high-rise condominium in the Bukit Merah area, a project that he counts as one of his biggest successes.

The two-bedroom space, dressed to the nines with glamorous mirrored walls and overhead displays, was presented by developer CapitaLand as a new-generation solution for nuclear families who could purchase adjacent units for their loved ones.

Says Woo: ‘We took what was probably their biggest liability (their smallest apartments) and turned them into one of their biggest assets: we communicated that an 800 sq ft space can feel large and actually work.’

The project, which won his firm, Cameron Woo Design, the CNBC Arabia Best Residential Interior Design Category for Asia-Pacific back in April this year, will represent the region in the international awards held in November.

But his four-year-old Singapore firm remains in the spotlight this month, as they are featured in the just released Andrew Martin Interior Design Review book, an annual compilation of the world’s best works by the New York- and London- based industry leader whose design awards have been dubbed as the ‘Oscars for the interior design world’.

The only company from Singapore to be selected, Cameron Woo Design made 2009’s compilation (volume 13) with two condominium showflat projects: Seafront on Meyer and Scotts HighPark. Scotts HighPark, the luxury address at the former Melia at Scotts hotel site on Scotts Road, stands out with a duplex apartment in the now fashionable ‘bungalow in the sky’ concept.

With the large double-storey windows that throw open the view to its generous stretch of veranda, one could get lost in the generous 200 sq m three-bedroom units, but Woo has turned the space into a storyboard for each inhabitant’s private oasis.

He takes the modern classic approach: facelifting simple furnishings through the classical ideas of layout, balance, proportion and scale. The entry to the
master bedroom is what he calls a serene sanctuary: a grooming area in the home which leads to the bathroom from one side and the bedroom on the other – ‘it’s still one space, because you can see right through the other areas’.

Upholstery plays a key role in creating Woo’s signature style: custom designed rugs, bed linen and other tactile elements give each space its own personality, and there’s an extra-high bed and night-light stands for the princess touch.

A more recent condominium project is Trilight, which pushes boundaries with what Woo calls an ‘urbanista’ concept. It’s created for a ‘Singaporean Carrie Bradshaw, a Sex in the City girl about town’.

Here, the space restrictions have taken the designer outdoors for inspiration: motifs in the tactile space are taken from the willow tree or animal skin patterns, and the dining area lifted from outdoor bistros, with a sofa that doubles as a dining settee. There’s a wall of photographs of female icons, an airy bathroom that maximises the lush view, and a friendly layout that allows one to watch the children’s bedroom from the study.

‘What I feel I am doing is that I am an editor of the client’s personal style and aspiration. We’re fine-tuning what the interior space is about,’ explains Woo.

‘We’re always trying to make things look glamorous. How can I make things look extraordinary, and not ordinary. How can I feel elevated, spiritually and physically. We want them to feel special, it’s just for them.’

It ties in with his personal advice for homeowners trying to create their private sanctuaries. ‘Invest in what makes you most happy. If you love cooking, invest in your kitchen. If you love music, create a room that makes it absolutely perfect for you. You need to prioritise. If something makes you peaceful and gives you that balance, create a room that helps do that for you.’

Concepts like Trilight, and envelope-pushing environments like Scotts HighPark are some of the reasons why he set up a branch in Singapore in 2005, two years after starting his firm in Sydney and after doing up legacy houses for Sydney and Melbourne’s high society.

‘Singapore is a great place to do it. We work in a space that is fast, and we have to be innovative. There’s so much competition. If you’re not innovative, you die,’ he jokes. ‘In Asia, there are also fantastic condominium concepts that you don’t see anywhere else – roof gardens, mid-sky gardens and other communal areas, and sky bungalows with pools even for individual units. It’s the natural thing in Singapore with the density here. But we want to do it in a more eco-conscious, sympathetic and people-friendly way, we don’t want to end up like a concrete jungle.’

His combined staff strength of 12 in both the Singapore and Sydney offices go beyond design concepts but embrace the marketing of the property as well, a service that makes his firm stand out. ‘A lot of people forget that design is very intellectual,’ shares Woo.

‘They think we’re going to talk about colour, layout and cushions – that may be true, but that’s just one aspect. We see it in a very business way. It’s not just about the interior; it’s about design as a whole. We have to work out the marketing and then a design strategy. We help developers identify their unique selling points and translate that into what that means to their buyers. It’s a collaborative process; we don’t ever just pick up the pencil.

‘Somehow or other, the interior designer has to make everyone happy – we’re the conduit through which everything is pulled together. We have to create magic.’

Asia at risk of asset bubbles:Fosler

Source : Business Times – 12 Sep 2009

THE president of a prominent US research group has joined the growing ranks of economists warning against escalating asset prices in Asia.

The huge fiscal stimulus packages and flush liquidity set ‘the stage for asset bubbles to move out of the United States and into Asia’, said The Conference Board’s Gail Fosler at the CapitaLand International Forum yesterday.

Asia needs to keep a close eye on this risk, she emphasised. ‘Valuations at which acquisitions are made, at which underlying business investments are made, these acquisition prices are going to be almost generically extremely high, and I think this is going to pose a significant business challenge.’

Several economists have cautioned against potential speculation in the region’s equity, real estate and commodity markets after governments turned to fiscal stimulus and looser monetary policy to counter the downturn. Bank of China’s vice-president Zhu Min also said this week that liquidity could be heating up these markets.

Observers are training their attention on China, where property prices have risen rapidly on the back of record lending and growing optimism. Home prices in the country’s 70 biggest cities went up one per cent year-on-year in July, and again by 2 per cent year-on-year last month.

Property prices increased even as business sentiment in the real estate sector stayed weak, Ms Fosler pointed out. ‘There is just a huge amount of money floating around in the international marketplace seeking a home.’

The Chinese government – which pushed out four trillion yuan (S$832 billion) in stimulus measures and aggressively extended credit – is unlikely to tighten policies soon, said Nanyang Technological University economics professor Tan Kong Yam.

Technocrats in the People’s Bank of China and China Banking Regulatory Commission may be inclined to do so to avoid resource misallocation and more non-performing loans, he said. But he believes that they will be overruled by politicians who are more concerned about creating jobs and maintaining stability.

Policy tightening in China is likely to be ’slightly behind the curve’, Prof Tan said, projecting an increase in the reserve requirement ratio in Q4 this year and a hike in interest rates only in early 2010.

China’s economic performance will have wide-reaching impact. Prof Tan noted that Hong Kong, Taiwan, Australia and Korea are regions with the highest level of dependence on the Chinese growth engine. The Conference Board’s Ms Fosler even commented that China influences Asia’s growth more than the US.

Globally, economic growth rates will fall to a more ‘reasonable’ level after the crisis, Ms Fosler said. While they will be much lower than the rates achieved during the booming period of 2004-07, they will not be too far below those seen over a longer period of 1996-2006, she explained. ‘The new normal is in some sense the old normal.’

She also believes that US consumers will become more frugal and save more as their income expectations fall. But a contrary view came from another speaker at the forum, DePaul University professor James Shilling, who expects savings to fall should governments raise taxes

Experts say room for 2-5 more REITs in S’pore in next 2 years

Source : Channel NewsAsia – 11 Sep 2009

Experts have said there is room for another two to five real estate investment trusts (REITs) in Singapore in the next two years.

These are likely to be large cap domestic REITs similar to listed ones like CapitaMall Trust and A-Reit.

While not giving any specifics, experts attending the annual CapitaLand International Forum also said there may also be more obstacles in creating these REITs.

Anthony Ryan, managing director, head of real estate, Investment Banking Asia, J.P.Morgan, said: “It would need to start very big…it would need to start with a manager with a good track record and experience. That is a lot harder than when the market first started.”

Observers also note that while the sector may grow, there may also be consolidation among existing REITs in Singapore.

They also said that REITs may not be a defensive financial instrument as they used to be, but they could become value-added players now that prices have been significantly depressed.

On the regional front, industry watchers said REITs are expected to put out more products in the next few years.

This will give developers a way to tap the capital markets.

URA’s Serangoon Ave site likely to draw strong bids

Source : Business Times – 10th Sep 2009


URBAN Redevelopment Authority yesterday launched the tender for a 99-year condo plot at Serangoon Ave 3. Market watchers expect top bids to be towards the upper band of the range of prices they predicted two weeks ago when URA first revealed it had received a successful application for the site, which was in the reserve list.

The revision follows the strong showing at Tuesday’s state tender for a condo plot at Dakota Crescent, which drew 13 bids. URA said yesterday it has awarded the land parcel to UOL Development (Novena) Pte Ltd, which placed the highest bid of about $329 million or $508 per square foot per plot ratio (psf ppr).

URA also announced an Oct 7 closing date for the tender of the latest plot at Serangoon Ave 3, next to Lorong Chuan MRT Station and near Australian International School.

A fortnight ago, property consultants polled by BT generally predicted top bids for the plum site to be in the $350-450 psf ppr range, with resulting breakeven costs of about $700-850 psf and target selling prices of $800-1,100 psf on average.

Yesterday, DTZ executive director (consulting) Ong Choon Fah predicted the highest offer for the land parcel will probably be towards the $450 psf ppr mark.

Colliers International executive director (investment sales) Ho Eng Joo too is betting that the winning bid will be around the $400 psf ppr level, or the higher end of the $350-$400 psf ppr price band he predicted earlier.

However, most consultants said they are not expecting run-away prices for this site. Knight Frank chairman Tan Tiong Cheng points to greater competition from nearby existing private housing stock for a new condo on the Serangoon Ave 3 site compared with a new project on the Dakota site.

Also, a condo project in the Serangoon area will appeal more to families and therefore have a bigger proportion of larger units. This will also put a cap on the per square foot pricing that its developer will be able to charge buyers.

This is unlike UOL’s strategy for the Dakota plot, where at least half of the units will be smaller two-bedroom units, which will allow it to push for a higher psf selling price.

Next Thursday (Sept 17), URA will close the tender for another plot – a commercial and residential plot at the corner of Yio Chu Kang and Seletar roads. ‘Those who missed on the last couple of tenders will become sharper in their pricing for the next few land tenders,’ says Knight Frank’s Mr Tan.

Since July 20, the government has announced the successful trigger of four sites in the reserve list. The first, a condo plot at Chestnut Ave, was bought by Hong Leong Group for $280 psf ppr.

Market watchers expect developers to make successful applications for the release of further sites on the government’s reserve list for the current half.

‘The mass-market is where the confidence is right now; there are many developers who have not secured sites in this segment,’ says Credo Real Estate managing director Karamjit Singh.

Despite the government last week raising the ‘definite possibility’ that it will restart confirmed list land sales from first-half next year, property consultants believe some developers will still press on with making applications to release more sites from the H2 2009 reserve list.

‘If they like something on the current reserve list, why wait? After all, they don’t know what sites will be in the H1 2010 confirmed list,’ said DTZ’s SE Asia research head Chua Chor Hoon.

Confirmed list sites are launched according to scheduled dates; reserve list sites are released only upon successful application by a developer with an undertaking to offer a minimum acceptable price.

Some market watchers expect that when government restarts the confirmed list, it will be ‘very calibrated’.BT understands that developers continue to urge the government not to revive the confirmed list, arguing that the reserve list is working well. However, analysts point out that it takes a longer time for a reserve list site to make it to the market as someone first has to make a successful application. ‘If no one triggers a site, it can sit on the backburner,’ says DTZ’s Mrs Ong.

‘The confirmed list is pretty much in your face. There is greater certainty.
It’s a faster time to market,’ she adds. ‘The psychological message that the government sends out by restarting the confirmed list – of ensuring there will be sufficient supply of land for private housing development – can also be quite powerful.

Commercial mortgage defaults to rise

Source : Business Times – 10 Sep 2009

The default rate on commercial mortgages held by US banks will rise to 5.4 per cent in 2011, the highest since at least 1992, as banks anticipate more losses amid falling rents, according to Real Estate Econometrics LLC.

The property research firm increased its projected default rates for 2009 to 2011 amid declining occupancies and incomes at hotels, shopping malls and office buildings.

Defaults will rise to 4.2 per cent this year and 5.3 per cent next year before peaking at 5.4 per cent in 2011, the New York-based firm said.

Previously, it estimated rates of 4.1 per cent this year, 5.2 per cent next year and 5.3 per cent in 2011.

‘The higher default rate reflects a larger number of loans moving from delinquency to non-accrual status,’ said Sam Chandan, president and chief economist of Real Estate Econometrics, in a statement. Loans moved to non-accrual status signify that the bank does not expect to be paid back in full.

The default rate more than doubled in the second quarter. Loans that were 90 days or more past due climbed to 2.88 per cent of outstanding balances from 1.18 per cent a year earlier, according to the firm.

Commercial mortgages labelled as ‘non-accrual’ more than doubled last quarter to US$27.76 billion, according to Real Estate Econometrics. Balances for delinquent loans, those that were 30 to 89 days past due, fell.

‘This shift corresponds with banks working to identify and mitigate losses associated with problem loans earlier in the delinquency period, and an increase in the share of delinquent loans that will require modification or foreclosure,’ Mr Chandan said.

Defaults in residential loans also rose in the second quarter, according to Real Estate Econometrics.

Defaults for bank-held home loans, excluding apartments, climbed to 5.52 per cent last quarter, the highest since the firm began tracking the data in 1992, an increase from 3.85 per cent at the end of 2008, according to the firm’s analysis of Federal Deposit Insurance Corp data.

Overdue commercial property loans reached 4.6 per cent in 1992 during the savings and loan crisis, when the US created the Resolution Trust Corp to sell off real estate and non-performing mortgages held by insolvent lenders.

Bank holdings of commercial property loans rose to US$1.087 trillion in the second quarter from US$1.077 trillion in the previous three months. That is almost 15 per cent of all loans and leases held by banks, Real Estate Econometrics said. Defaults are rising both for lenders that hold commercial mortgages and for bondholders in the US$700 billion US market for securities backed by commercial mortgages.

No prizes for guessing the easiest place to do business

Source : Business Times – 10 Sep 2009

S’pore tops the list for fourth year running with slew of fresh reforms

The Republic has topped the list for ease of doing business for the fourth year running.

Coming in ahead of New Zealand and Hong Kong, in second and third place respectively, Singapore made three notable business regulation reforms between June 2008 and May this year – the duration covered by the International Finance Corporation-World Bank Doing Business 2010 report.

Within that period, Singapore made setting up businesses easier by making it possible to incorporate a company and register for taxes using the same form and allowing the online submission of documents for construction permits in low-risk industries.

Property registration was also simplified with the improvement of various electronic systems.

Dubbed a ‘consistent reformer’ by the project’s programme manager, Sylvia Solf, Singapore ranked among the top five countries for most of the 10 categories.

In coming up with the rankings, metrics such as the number of days taken, cost and number of procedures involved in completing a business process were assessed.

For example, in the ease of trading across borders category, Singapore scored top marks, with five days taken to export goods and four documents involved in the process.

Singapore also clinched second place for the ease of obtaining construction permits, protecting investors and closing a business categories.

Singapore’s ranking in the ease of registering property, however, was not as stellar, despite taking a turnaround time of five days and three steps to register a property. It took 16th place, behind Saudi Arabia and Georgia, which were in first and second place respectively.

‘This was more a result of other countries making relatively more reforms.

Norway, for example, needs only one step to register property,’ said Ms Solf.

Within the region, Indonesia had the distinction of being the most active reformer, moving from 129 to 122 in this year’s study.

The East Asia and Pacific region had an average rank of 83. Globally, Rwanda made the largest strides in regulatory reforms.

Overall, the study’s findings were heartening, with the number of reforms worldwide hitting a record 131 out of the 183 economies surveyed, since the study’s first report for 2004.

The outcome of the study might also have larger implications, according to Ms Solf.

‘We have seen an overall ranking correlation between a higher ranking and a more consistent growth rate and employment,’ she said.

How well the study predicts a country’s performance in such turbulent times remains to be seen, however.

‘It will be interesting to see what impact better regulation rankings will have on a country’s ability to cope with recovering from the recession,’ said Ms Solf.

Don’t overlook mortgage insurance

Source : Business Times – 10th Sep 2009

RECENTLY, my client Mr Wong called me for mortgage insurance advice. He had just bought a semi-detached house for close to $2 million. He took a loan of $1.2 million over 15 years, and was looking for a mortgage reducing term insurance that will pay off his mortgage in case of his death or total and permanent disability (TPD) while the loan is not fully paid.

Mr Wong told me that he will never forget the time that he and his younger siblings lost their family home when his father died of a heart attack
some 30 years ago, leaving his mother struggling to raise the four of them.

Certainly, he does not want this to happen to his homemaker wife and three children. ‘When I pass away, the last thing that I would want to put my family through is to also lose the roof over their heads,’ he said.

In Singapore, mortgage insurance is not made compulsory for private
property owners and those who are not using CPF to pay their monthly HDB
housing loan repayments. However, the Home Protection Scheme, or HPS, is
mandatory for HDB/HUDC flat owners who service their mortgage loans with CPF funds.

Many private property owners baulk at mortgage insurance either
because of inertia or misconception that it’s an unnecessary cost. Without
mortgage insurance coverage, however, life could be a lot harder financially
for the family if things go wrong.

Over the past years, there have been newspaper reports on households having to surrender their private properties because the sole breadwinner passed away without mortgage insurance coverage. As such, I always advise my clients who own private properties to have mortgage insurance to protect their homes and families.

As the name implies, mortgage insurance safeguards your home and family against the unexpected, so that they will not be burdened with mortgage repayments or face the possibility of losing their home. It is available on a single or joint-life basis. If you and your spouse jointly own the home, you may want to consider a joint-life mortgage policy which pays out on the ‘first death’.

You can decide how long you want the policy to cover you, but most people have it to run concurrent with their mortgage.

The premium will increase with the mortgage size and the length of your term. In addition, age, gender and whether you smoke are big factors in determining how much you pay. Smokers pay a lot more than non-smokers, simply because they are more likely to make a claim. For example, based on the quotation from a local insurer, Mr Wong will need to pay around 40 per cent more if he were a smoker.

Most of the mortgage insurance plans are reducing coverage whereby the sum assured decreases annually and the rate of reduction depends on the mortgage interest rate and the policy term.

Some of the common benefits and features:

Total and permanent disability (TPD) coverage up to age
70. The policyholder will receive the sum assured in instalments or a lump sum up to $2 million upon diagnosis of TPD;

Single or joint-life coverage is available for joint homeowners;

Premium payment term
usually stops a few years before the end of policy term, while you continue to enjoy the coverage;

Option to add waiver of premium rider so all future premiums will be waived upon diagnosis of one of the 30 critical illnesses;

Mortgage insurance does not normally cover critical
illness, which means that in the event of a critical illness such as cancer,
you will still need to pay the monthly mortgage repayments. Therefore, you may need to buy a separate policy for critical illness cover;

Most plans will not cover any disability caused by riot, civil commotion and terrorist activities.

Buying a home will likely be the largest undertaking you make in your lifetime, so protecting it should be a key part of your overall financial plan. Mortgage insurance will ensure that your dependants will not have the financial worry of trying to find the mortgage repayments or having to sell the property or downsizing in the event of your untimely death.

If you are looking for a mortgage insurance policy, do shop around as premium rates and features offered can vary greatly from insurer to insurer.

The writer is a Certified Financial Planner practitioner.
The views expressed are his own

Hotel in Little India up for auction

Source : Business Times – 10th Sep 2009

TEKKA Hotel, comprising nine adjoining two-and-a-half-storey shophouses off Serangoon Road, will be put up for auction at an indicative price of $17 million to $19 million.

The refurbished pre-war property in Belilios Lane is on nine titles and has a 99-year leasehold tenure from March 8, 1995. It is in the Little India conservation area under the 2008 Master Plan and is zoned for commercial use. The hotel has 50 guest rooms and six retail and restaurant spots, spread over a gross floor area of 20,397 sq ft. An assumed price of $18 million would translate to about $160,000 per room. The shops on the ground floor are tenanted and fetch combined rent of $54,900 a month. The last tenancy expires on Sept 30, 2012.

Colliers International is auctioning the hotel on Sept 23. Its deputy managing director of agency and business services Grace Ng said that in line with Singapore’s aim to attract 17 million visitors a year by 2015, demand for hotel accommodation could spill over to city-fringe areas. Tekka Hotel is strategically located in a vibrant area with a rich cultural heritage, she said. And with more budget-conscious tourists from countries such as China, India and Vietnam, ‘budget hotels will be a popular choice’.

More shophouses are also up for sale. Colliers will also auction a four-storey freehold conservation shophouse in Geylang Road. The property has a gross floor area of 21,779 sq ft and there is potential to add another floor to the building.

DTZ, meanwhile, is auctioning two shophouses on Sept 22. One is a freehold two-storey conservation shophouse at Lorong Geylang, with an indicative price of around $2.4 million. The other is a three-storeyconservation shophouse in Mohamed Sultan Road, with an indicative price of around $5 million. Some freehold landed residential properties will also feature in Colliers’s auction. There is a 4,355 sq ft three-storey detached house and a 3,145 sq ft three-storey corner terrace house, both off Upper Bukit Timah Road.

There are also two semi-detached houses off Yio Chu Kang Road – a 3,960 sq ft two-storey five-bedroom unit, and a 3,850 sq ft two-storey four-bedroom unit.

Land potential a big IF: Experts

Source : New Paper – 9 Sep 2009

Some see red over investment companies’ unlikely push to develop UK’s greenbelt

IF YOU are a football fan, you have probably seen the television commercials exhorting you to invest in land in the UK.

Thousands of investors in several countries, including Singapore, did, hoping to make a huge profit.

After all, the Singapore-based company is called Profitable Group.

But the big question remains: Will the piece of land, now in a ‘greenbelt’ zone in Hounslow, near London, ever be developed?

The Profitable Group said in its brochures that the 48ha site, which it called Concorde Village, would be suitable for 1,000 houses, estimating that planning approval would come in 2012.

However, the Hounslow Council told The New Paper that the land is unlikely to be re-zoned for development in the near future.

Its spokesman said: ‘There have been informal proposals to alter the site’s greenbelt status, but they haven’t been successful.

‘We would have ‘in principle’ objections to that at local, regional and national level.

‘Any formal application to change that (greenbelt) status would have to go through the Secretary of State and there’s not a great chance of success for anyone looking to do that.’

The Profitable Group had claimed investors could get 250 per cent returns if the land is approved for development.

The company, whose commercial director is former Liverpool midfielder Steve McMahon, helped to organise the football club’s friendly match here in July.

It also gained media attention when it expressed interest in buying Newcastle football club, though nothing has materialised so far.

Last October, Malaysian authorities raided the Kuala Lumpur offices of Profitable Group and Canadian-based Edgeworth Properties after getting complaints that they were offering illegal investment schemes for UK and Canadian land. Both companies were cleared in June this year after it was found that they had issued genuine title deeds to investors.

Warnings from UK experts

The Profitable Group had bought the Hounslow land for £3.15 million ($7.4m) in 2006, The Hounslow Chronicle reported on 20 Aug.

It then subdivided and resold the land to investors at £8,000 for an individual plot of 576 sq ft.

Mr Henry Wu, 50, is a Singaporean who paid about $18,000 for a plot, hoping for a windfall.

He said: ‘There are risks in every investment and the returns could be bigger than investing in property in Singapore.

‘But as it’s a long-term commitment. I agreed only when I felt I could tie up the funds for several years.’

UK property specialists warn consumers to be wary of companies selling plots of greenbelt land that they claim will soar in value if reclassified for housing.

‘Be incredibly wary,’ says Mr Justin Gaze, an analyst with property consultancy Knight Frank’s London office. ‘I’ve never known one of these greenbelt plots to be redesignated. In fact, splitting sites into tiny plots only makes the land unattractive to developers because all the owners must agree to the sale.’

Mr Gaze explained that greenbelt land is unlikely to be re-zoned as it separates urban areas from rural areas and stops the urban sprawl.

Wealth management firm Providend’s chief investment strategist, Mr Daryl Liew, said it does not recommend land banking to its clients.

He said: ‘The first rule is always to know what you’re investing in. Assess the potential of the land and if possible, personally inspect the plot.’

The Royal Institution of Chartered Surveyors in the UK told The New Paper that protection against development on greenbelt land is so strong that redesignation for housing is unlikely.

Its spokesman said: ‘It’s possible that development will be allowed in the future but, unless and until planning permission has been granted by the government, it’s not assured.’

Not within company’s control

When we related the UK experts’ misgivings to the Profitable Group’s group operations director, Mr John Nordmann, he got his planning agents to tell us that the time frame for the land to be re-zoned was beyond the company’s control.

In an e-mail response, the planners claimed: ‘Concorde Village is in a ward with a high level of social deprivation and there is a shortage of open space which could be addressed by development. A strong case (for re-zoning) therefore exists at the appropriate time.’

As to how developers would view subdivided land, Mr Nordmann agreed that having multiple owners could lead to problems of getting all of them to agree to sell the land.

To overcome this problem, Mr Nordmann said the company has an ‘option agreement’ which obliges all plot owners to sell the land upon planning permission being granted.

He said the company has kept 20 per cent of the site for itself.

He said: ‘We retain a good proportion of the land we’re offering for ourselves. Our return is exactly the same as our clients would make. This shows the company has a vested interest in achieving planning in the shortest possible time.’
_____

Feedback sought for development

LAST September, Profitable Group’s planning agents in the UK, DLP Planning, held a public exhibition in Hounslow to inform residents in the area of its plans to develop Concorde Village. Residents from 5,500 households within 800m of the entrance to Concorde Village were invited and their feedback sought.

DLP went ahead with the consultation despite the Hounslow Council saying it would not allow the greenbelt land to be developed, reported the Hounslow Chronicle on 20 Aug.

DLP outlined three concepts for the proposed development, each proposing to develop varying segments of Concorde Village into housing and facilities like playgrounds and open-air theatres.

Residents have expressed concern with rezoning greenbelt land and taking that feedback into account, DLP tweaked its plans to include new trees and a green corridor to provide wildlife refuge.

Dakota Crescent site in high demand

Source : Straits Times – 9th Sep 2009

IN A further sign of relentless demand for residential properties, a land parcel at Dakota Crescent has drawn 13 bids and a higher-than-expected top bid of $329 million. The highest bid for the 99-year leasehold site next to the planned Dakota MRT station came from UOL, which offered $508 per sq ft of gross floor area. This was way above the trigger price of $130 million, or $201 psf of gross floor area for the reserve list site. And it exceeds analysts’ expectations of between $350 and $370 psf of gross floor area for the site that fronts the Geylang River.

It approaches levels set around the peak of the market boom in June 2007 when Ho Bee Investment paid $524 psf per plot ratio for its Dakota Residences site. It launched its condo last year at an average price of about $970 psf.

Other developers keen to acquire the Dakota Crescent plot included Guoco-Land, Ho Bee which tied with NTUC Choice Homes, Sim Lian Land, Keppel Land, Allgreen Properties and Teambuild Properties. The lowest bid came from Lippo Estates. It was $160 million, or $247 psf of gross floor area. Reserve list sites are put up for tender only if developers indicate an interest by committing to a minimum acceptable bid.

‘The message is quite clear. The results show that developers are still hungry for land,’ said Colliers International executive director (investment sales) Ho Eng Joo. Restarting the confirmed list sales – with sites tendered out on a fixed schedule, without preconditions such as developer expressions of interest – now looks more likely, he said. Confirmed list sales were halted by the Government last October when the property market was in the doldrums.

Developers largely stopped buying land until recently. The first state plot to be launched for sale in a year – in Bukit Panjang – attracted 13 bids last month, a number that an analyst described as impressive. DTZ’s head of SEA Research Chua Chor Hoon said: ‘The high number of bids and closeness of the top bid to the price of the other Dakota site sold in June 2007 reflect a strong demand among developers for sites. ‘The Government is likely to put on some confirmed list sites, and also expand on the reserve list.’ UOL’sbid will likely translate into a break-even price of about $850 psf to $900 psf for the condominium project to be built on the site, said CBRE Research executive director Li Hiaw Ho.

Based on this estimate, the final selling price could range from $1,000 psf to $1,100 psf, he added. Recent caveats of the next-door Dakota Residences show that deals were concluded at prices ranging from $830 psf to $930 psf. Resale transactions of five-room and executive HDB flats in Dakota Crescent and Pine Close have come in at between $550,000 and $620,000.

‘The optimistic bid reflects developers’ confidence in mid-tier residential projects in the fringe areas with immediate MRT access,’ Mr Li said. The site, he added, is within walking distance of the Dakota MRT station and overlooks the landed housing estate in Katong along Goodman and Wilkinson roads.

NZ house prices recover further: survey

Source : Business Times – 8 Sep 2009

Aug data supports views the economy is emerging from long recession

New Zealand house prices showed further signs of recovery in August after a year of sharp declines, data showed yesterday, supporting views the economy is emerging from its longest recession in more than 30 years.

Quotable Value’s residential house price index fell 2.8 per cent in the year to Aug 31, compared with a 5 per cent decline in the previous month – the fifth month in a row the trend in property values has improved.

The government agency said prices have risen 1.9 per cent since April and the number of houses sold was also above last year’s historical lows.

‘The housing market is strongly driven by confidence, and that appears to be returning to the wider market,’ QV spokeswoman Glenda Whitehead said.

She said a general shortage of properties was leading to increased competition and higher prices, but it was unlikely that another housing boom was in the making.

‘Although there has been an improvement in market sentiment, continuing doubts over job security, a lack of wage growth and tougher lending conditions are likely to limit increases in the medium term,’ Ms Whitehead pointed out.

The housing market, once a major inflationary concern for the Reserve Bank of New Zealand (RBNZ), peaked in late 2007, but fell sharply because of high borrowing costs and prices, while consumers cut their spending amid a deepening recession and rising unemployment.

The central bank has slashed interest rates by 575 basis points since last July to combat the downturn, which is expected to last through much of this year.

A Reuters poll is forecasting the official cash rate will be held at a record low 2.5 per cent when the RBNZ reviews rates on Sept 10. The RBNZ, which previously forecast house prices to fall around 20 per cent by early 2010 from their peak, said in its June statement that house price inflation was close to cyclical lows.

Fixed term lending rates for two years or longer have risen to reflect increased wholesale rates as investors have moved to lock in low rates in the expectation that the RBNZ will start raising rates as soon as early next year.

QV said the average sale price rose 0.7 per cent to NZ$385,426 (S$382,283) on the previous month.

House prices in Auckland, the biggest population and commercial centre, were 1.9 per cent lower in August from a year ago, compared with a 3.5 per cent fall in July, while the capital, Wellington, was down 0.1 per cent after a 4 per cent drop the month before.

Prices in two cities – Hamilton and Dunedin – were now higher than they were a year earlier, although most regions remained up to 9 per cent below their highs, Ms Whitehead said.

The monthly residential price report is based on sale prices of properties over the past three months compared with sales over the corresponding three-month period a year earlier.

The data is not seasonally adjusted.

Motorsports hub: 3 groups unveil plans

Source : Straits Times – 8th Sep 2009

SLEEPY Changi could soon stage motorcycling’s equivalent of Formula One, have a race driving academy whose graduates include top F1 drivers, or be transformed into a family-friendly shopping and entertainment destination.These tantalising features and more were dangled by the three groups bidding to develop the Changi Motorsports Hub, a facility crucial for Singapore to be an international motorsports destination, in separate presentations to the media yesterday.

The hub will be located on a 41ha site near Changi Airport and is expected to cost between $200 million and $300 million. It will be completed in late 2011.

Based on tender specifications, it will have a track that can host any race except F1, grandstands for at least 8,000 spectators, and car industry-related amenities. Singapore Agro Agriculture’s (SAA) trump card is that it has
clinched a deal to stage MotoGP at night – a coup which would see Singapore hosting the top tiers of both motorcycling and motor-racing under the stars. ‘That’s the jewel in our crown,’ said chief operating officer Jason Wong of SAA Holdings, the company behind food-and-retail hub Turf City. Sports Services, backed by public-listed leisure and health-care products company Haw Par Corporation, emphasised its strong financial position.

This is a possible edge given the trouble in securing loans which is preventing another mega project, the $1.87billion Kallang Sports Hub, from getting started. Haw Par executive director Chng Hwee Hong said: ‘We have a strong balance sheet and a reputation to uphold. Financing is not a main concern, what matters is the project’s long-term sustainability.’

Subscription fees from a 3,000-member MotorSports Country Club will help defray the hub’s capital and operating costs. Members will have free use of the 4.2km track – good enough to be an F1-test venue – and the right to rent
bonded garage space. The internationally-renowned and United States-based Jim Russell driving academy – graduates include current F1 championship leader Jenson Button – will be another draw. Track designer Hermann Tilke, who drew up the Marina Bay F1 circuit, also told the Sports Services consortium recently that MotoGP promoters were keen for a tie-up if it won the bid.

SG Changi, fronted by Jurong Kart World, is banking on facilities that will provide entertainment for a wider crowd than just racing enthusiasts. ‘Most race tracks are a men-only venue but we want to sell ourselves as a family and tourist destination,’ said Mr Norman Simon, managing director of norman2, the firm which is marketing the bid. Video arcades, a 120-room three-star hotel, a museum and beach activities are part of its proposal.

Five criteria will be used in evaluating bids: Ability to position the hub as the preferred venue for international motorsports events (40 per cent); contribution towards developing a centre of excellence for motorsports training and education (20 per cent); financial and business sustainability (20 per cent); contribution towards developing the local motorsports ecosystem (10 per cent), and attractiveness of commercial mix and events (10 per cent).

The winner will be announced in the first quarter of next year.

Averting property bubbles: lessons to heed

Source : Business Times – 8th Sep 2009

WHILE it is appropriate for the government to continue monitoring the situation in the property market, the question is whether pre-emptive measures should be taken sooner rather than later to prevent a bubble from forming. It is instructive to consider the actions of the Reserve Bank of Australia (RBA), which has largely managed to keep the
country out of a recession.

Prior to the sub-prime crisis, central banks in several countries (notably the US and the UK) had helped to pump up property bubbles with low interest rates which were accompanied by easy mortgage terms. By contrast, the RBA resisted cutting rates and chose instead to talk down the property market. As far back as 2002, the RBA, feeling that property prices were escalating dangerously, decided to commission housing market reports to show that prices were unsustainable. Looking at affordability, bank lending standards and collating data on home loans as well as errant marketing ploys, the RBA went on the offensive with its then governor Ian Macfarlane saying: ‘I’m using a certain amount of moral suasion to try and get . . . to investors, to make them sit back and think again.’ Interestingly, his comment mirrors that of Singapore’s National Development Minister Mah Bow Tan, who said last week that home buyers ‘need to think carefully, think long term, think about the unexpected’.

Mr Mah’s comment, which buyers would do well to heed, came as he revealed that the government was likely to resume confirmed land sales through the Government Land Sales (GLS) programme, a strategy that can help keep property prices in check. However, there is little consensus on what is spurring property sales, which reached a record high of 2,767 new housing units in July. Stated reasons range from low interest rates and confidence in the economic recovery to speculation and panic buying, to the imminent completion of the integrated resorts (IRs) and a renewed influx of visitors and potential homebuyers. Whatever the reasons, prices have risen significantly, and across the board. A recent Citigroup report noted that, based on caveats lodged, luxury and the mid-segment home prices are now 15-30 per cent above the lows in the first quarter of 2009 while the mass market segment is some 10 per cent higher. However, the latest evidence suggests that buyer interest may be cooling off – although it is too soon to
view this as a trend.

The need for vigilance thus remains. Apart from hastening land sales, the government should stand ready to enact other measures, including reining in liberal housing loan practices. Historically, there has been a tendency to let free market forces run their course and for measures to be taken only when the home-buying reaches frenzied
levels, as in 1996 and 2007. We are fortunately not at that point yet. But one of the lessons of the financial crisis of 2008/09 is that by the time a property market bubble is even identified, it’s too late.

M’sian property market on recovery path

Source : Business Times – 8th Sep 2009

JUDGING by the recent step up in sales at Malaysia’s most expensive real estate development, the property market appears to be trending up again. The Binjai On The Park clinched over RM100 million (S$40.7 million) in sales last month, about RM40 million in the last week, its marketing & sales manager Terri Har told BT. Indeed one well-heeled buyer even acquired six of its standard 3,000-plus sq ft units costing about RM7 million each, and is contemplating another two. Also snapped up were three penthouses of about 5,200 sq ft, each priced at between RM15-16 million. Investors may be more upbeat about the economic recovery, but a price revision has also proved a big incentive. Considered a trophy asset given its freehold residential status right smack in the KLCC (Kuala Lumpur City Centre) development and its views of the KL Twin Towers, developer Layar Intan had initially priced the luxury units at an average RM3,000 psf last August when it began to take bookings. Nearly a third of the total 171 units in the two tower blocks were snapped up within two months. But things quickly soured when the global financial crisis hit. The timing was unfortunate, Ms Har acknowledged, recalling its Singapore road show was rendered a non-event since it was held on the same day that Lehman Brothers collapsed, plunging global markets into a tail-spin. Closer home, more than 20 buyers cancelled their bookings. Because the sales & purchase agreements had not been signed and wanting to keep their goodwill, their deposits were refunded. Developer Layar Intan is a subsidiary of KLCC Holdings, in turn part of the property group of national oil company Petronas.

Deciding it was pointless to fight the bearish sentiments, Layar Intan laid low but in June revised prices to an average RM2,400 psf – still some 30 per cent higher than other developments in the vicinity. It is currently also throwing in a 5 per cent ‘early bird discount’ to Malaysian buyers and has launched its smaller units of 2,000-plus sq ft at a lower average cost of RM1,700 psf which has attracted a number of investors who believe there will be significant capital appreciation over the next few years. Rebates were given to purchasers who had bought units at higher prices. Many of those who cancelled have since come back and purchased larger units, according to Ms Har who described buyers to be a combination of old-money and Malaysian professionals working overseas who have plans to use their residences as a second home or holiday home. About 60 per cent of the buyers have decided against a loan, preferring to pay up in cash. Once about 40 per cent of the units are sold, Layar Intan plans to raise prices, she said. Purchasers will receive vacant possession of their units in December

Laguna Park ‘too expensive’

Source : Today – 8th Sep 2009

Singapore property giant CapitaLand has ruled itself out of bidding for the Laguna Park estate, which was put up for collective sale earlier this week.

CapitaLand’s chief executive Liew Mun Leong said yesterday that the reserve price tag of some $1.2 billion for the estate is “too high to yield affordable homes”. He was speaking on the sidelines of an event to unveil the design of The Interlace, an upcoming CapitaLand project at the site of the former Gillman Heights estate.

Laguna Park, a former HUDC estate at Marine Parade, was launched for tender two years after the idea of an enbloc sale was first mooted. Its marketing agent, Credo Real Estate, said it expects keen competition for the plot, but developer CapitaLand said the asking price is simply too high.

“I’m not very sure that at the end of the day, after paying over $800 per plot ratio, plus construction costs, plus your cost of financing, your break-even cost would be something like $1,500 or $1,600 (per square foot). “Are buyers prepared to pay for it at that location and that price? I am less sanguine than them,” said Mr Liew.

Two years ago, CapitaLand bought Farrer Court in a collective sale for over $1.3 billion.

However, CapitaLand said on a per-square-foot basis, Laguna Park is more expensive.

Farrer Court was sold at between $762 and $783 per square foot per plot ratio (ppr). Laguna Park’s reserve price works out to about $844 ppr. Mr Liew said “that is simply too high a price for it to be a good investment”.

Mr Liew said CapitaLand has enough land in its portfolio and is not looking to buy more. He added that CapitaLand now has enough land to build some 3,000 homes, a third of which will be launched next month for The Interlace project.

Another 50 Trevista units snapped up

NTUC Choice Homes sold another 50 units at its ToaPayoh condo Trevista over the weekend, taking the total number of units soldthere to 460. The remaining units at the 590-unit condo are mainly larger ones – continuing a trend where buyers snap up smaller homes.

Trevista attracted hordes of keen buyers and onlookers at its preview two weekends ago. It sold out 210 units in one afternoon, on the firstpreview day of Aug 28. Most of the unsold units at the 99-year leasehold project are the three- and four-bedroom units.

An NTUC Choice Homes spokesman said there are just ‘a handful’ of two-bedroom units left for sale. The 39-storey condo was previewed at an average price of $898 per sq ft. At that time, the three- and four-bedroom units averaged $1.065 million and $1.43 million respectively, under the normal payment scheme. Now, the remaining three-bedders are priced from $1.008 million. They cost $884 psf to$1,050 psf. The four-bedders are priced from $850 psf to $964 psf, or from $1.448 million.

Elsewhere, sales are still ongoing at current launches. For instance, developer Keppel Land has now sold 37 out of 56 units at Madison Residences in Bukit Timah Road at an average price of $1,700 psf, after selling another unit over the weekend. The project was launched in the middle of last month, after a brief preview.
The market was generally quieter over the past weekend, compared with the previous one. Property agents said one factor might be people going away for the school holidays. Also, they said some price resistance may be setting in, particularly at projects subject to recent price rises.

Next week, The Trizon at Mount Sinai, which has sold at least 110 units, will be launched. The project
was previewed late last month at $1,300 psf to $1,500 psf.

Next month, the 1,040-unit The Interlace in Alexandra Road will be launched. Other possible launches this year include the 119-unit Elliot at The East Coast and a 396-unit condo on the former Hong Leong Gardens site in West Coast.

Source : Straits Times – 8th Sep 2009

Sales quieten down at Trevista, Trizon

BUSINESS visibly quietened down at showflats last week but developers are already revving up for new launches and releases of new phases of existing projects after Hungry Ghosts Month ends on Sept 18.
However, some market watchers reckon developers may be more careful not to price their projects too aggressively following National Development Minister Mah Bow Tan’s second statement in five weeks that the government is monitoring the property market very closely and will take ‘certain actions’ if necessary.

City Developments is expected to preview Hundred Trees condo on the former Hong Leong Gardens site in the West Coast area in the last weekend of September. Earlier market talk was that the 396-unit project will have an average price of about $930-$980 per square foot (psf). However, some quarters suggest the project will be ‘priced competitively’. The 12-storey development has a 956-year-leasehold tenure. The Hundred Trees condo will be decked with Mempat trees, often dubbed the local version of Japan’s sakura or cherry blossoms.

At Keng Chin Road in the Bukit Timah area, Far East Organization is expected to preview in a few weeks a 278-unit freehold condo named Cyan. A stone’s throw away, Keppel Land has sold about 65 per cent of its 56-unit freehold Madison Residences since last month at an average price of about $1,700 psf. This pricing applies to those who opt for the interest absorption scheme (IAS). Buyers who prefer a normal progressive payment scheme pay 2 per cent less. Even more projects are slated for launch in October, including Ho Bee’s Trilight on the former Elmira Heights site on Newton Road, as developers try to catch possibly the last wave of home buying for 2009 before the year-end school holiday season.

NTUC Choice Homes sold 50 units at its Trevista condo in Toa Payoh last week, mostly on Saturday and Sunday. This is significantly below the 410-unit sales achieved from Friday to Sunday of the preceding week when the developer previewed the 99-year-leasehold condo. To date, Choice Homes has released 550 of the condo’s total 590 units.

‘The remaining units in the project are mostly three and four-bedroom apartments. Prices start from $884 psf or $1.008 million for three-bedders and $850 psf or $1.448 million for the four-bedroom apartments,’ a Choice Homes spokeswoman said yesterday. Trevista’s initial average price was $898 psf, but with subsequent releases of units – some with better facing and on higher floors – the average price achieved is understood to be about $920-$930 psf.

BT understands that things were even quieter at the Trizon showflat in the Mount Sinai area. Units in the freehold project cost $1,250 psf to $1,550 psf. Sales are said to have plummeted last week after the slightly more than 100 units sold in the previous weekend’s preview. A property consultant said: ‘When a minister, especially the National Development Minister, comes out to urge buyers to be cautious, it has its effects – at least for the time being.’ ‘When the caution is being urged in the Seventh Month  (when traditionally things are a bit slower in the property market), potential buyers have time to reflect on the message,’ he added.

Following six months of surprisingly strong home sales, developers have upped prices. By some estimates, prices of mass-market homes increased about 10-15 per cent from the lows of January-February 2009 to July-August. In late July, Mr Mah urged home seekers to research the property market thoroughly and seek affordable units. Last week, he advised them to ‘think carefully, think long term, think about the unexpected’ before buying a property. He also said there is a ‘definite possibility’ that the government will re-introduce land sales through its confirmed list system from next year. Such sales have been suspended since October last year.

All eyes are on today’s tender for  a plum 99-year condo plot at Dakota Crescent next to an MRT station and fronting Geylang River.

Source : Business Times – 8th Sep 2009

The Interlace replaces Gillman Heights

A NETWORK of apartments and recreational spaces looks set to replace the vertical blocks that used to be the landmark of Gillman Heights.  Unveiling The Interlace on Friday, CapitaLand and Hotel Properties Limited (HPL) said they are ready to launch the project next month.
Featuring 1,040 apartments on a 99-year leasehold land of 871,884 square feet, The Interlace will have units that range in size between 807 sq ft for two bedroom apartments and 4,306 sq ft for “super penthouses”.
CapitaLand president and chief executive Liew Mun Leong declined to disclose how much the units will cost, but said the firm is trying hard to price them under $1,000 psf. The Interlace sits on the site which used to house 608 units at Gillman Heights. The former HUDC estate was in the news following a $548 million collective sale inked in 2007, and subsequently, a series of legal cases when a minority group of owners challenged the sale. The deal was finally wrapped up in May this year.

The development of The Interlace is led by CapitaLand and two other shareholders, including HPL. The construction cost is expected to be $250 to $270 psf and total investment is estimated at $1.4 billion. The construction contract is  expected to be awarded by year-end and the project will be completed in 2014.
The Interlace is designed by Office for Metropolitan Architecture partner, Mr Ole Scheeren. The German is also known for leading the design and construction of the China Central Television Station (CCTV) headquarters in Beijing.

Instead of the standard design of residential developments in Singapore – in clusters of isolated, vertical towers – The Interlace responds to the issues and challenges of tropical living in an network of recreational and dwelling spaces integrated with the natural environment.

Nestled in a green belt at the Southern Ridges, The Interlace’s design features 31 apartment blocks, each six stories tall, stacked in a hexagonal arrangement to form eight large-scale courtyards. The project also features sky gardens and roof terraces.

“In developing the dramatic external form, we have also focused … on creating comfortable internal spaces,” said CapitaLand Residential Singapore chief executive Patricia Chia.

“The name reinforces the interconnectivity between man and the space, community and natural environment surrounding him.” Tan Hui Leng

Source : Today – 8th Sep 2009

Prices of Goodwood Gardens cross $1,600 psf

Source : The Edge – 7 Sep 2009

The encouraging response to the launch of City Developments’ 85-unit high-end Volari (the former Garden Hotel) at an average price exceeding $2,000 psf and improved sentiment in the property market have lifted prices of condominiums in the Balmoral neighbourhood.

Adjacent to Volari is the 40-unit Sui Generis, jointly developed by Kajima Overseas Asia and United Engineers, and which set a benchmark for the Balmoral area when it was soft-launched in November 2007 at prices averaging $2,500 psf. Early this year, Sui Generis was reportedly fully sold when a property fund purchased the remaining 21 units for $65 million, or an average of $1,260 psf, when the market was still bleak. As recently as August last year, prior to the collapse of Lehman Brothers in September, a 2,121 sq ft unit changed hands for $5.73 million, or a high of $2,704 psf.

At the nearby Goodwood Gardens, a 29-unit boutique condominium located on the quiet, exclusive neighbourhood of Balmoral Crescent just off the busy Balmoral Road, there’s been a spike in transactions in the secondary market since July. It is believed that the units sold are by the same owner — the Asia No 1 Property Fund, jointly set up by Henderson Global Investors and Keppel Land, which made a bulk purchase of 15 units at Goodwood Gardens in August 2004 for a total of $23.7 million, or an average of $1,066 psf, according to caveats lodged with URA Realis. The purchase was made on a deferred payment scheme and with an attractive rental scheme offered by the developer, TID Pte Ltd, a partnership between Singapore property tycoon Kwek Leng Beng’s Hong Leong Holdings and Japan’s Mitsui Fudosan. Thus, the project was fully sold without a launch.

Very few units had changed hands in the secondary market in the five-year-old condominium, with a sole transaction in 2006 at $1,097 psf. According to caveats lodged with URA Realis from July 28 to Aug 11, six units changed hands and the seller appears to be the Asia No 1 Property Fund. Two units were sold at $2.92 million ($1,605 psf) and $3.36 million ($1,585 psf) in July.

From Aug 4 to 11, four other units changed hands for $2.92 million ($1,644 psf) to $3.5 million ($1,565 psf). A 1,776 sq ft apartment that was sold for $2.92 million was purchased for $1.87 million ($1,054 psf) five years ago. Meanwhile, a 2,239 sq ft unit that was sold for $3.5 million was originally purchased by the fund at $2.04 million ($911 psf). The capital gain ranges from 56% to 71.5% for the seller.

Next generation builders shaping family legacies

Source : Business Times – 7 Sep 2009

While building homes will always be just a Lego-brick memory of their childhood for most, some under-40s – hailing from notable families in real estate – have already overseen the building and marketing of gleaming hotels, homes and malls.

In the process, these next-generation builders will have a hand in shaping Singapore’s landscape, and also their families’ legacies.

Some have been active in the hospitality industry. LC Development (LCD) executive director Kelvin Lum, 35, is closely linked to Crowne Plaza Changi Airport, a 320-room hotel which opened its doors in May last year. The company is on the lookout for a second hotel in Singapore.

Mr Lum is the son of David Lum, who is managing director at both Lum Chang Holdings and LCD. LCD began as the former’s listed subsidiary but both firms de-merged in 2005. LCD now eyes the hospitality pie while Lum Chang is largely in the construction and property development businesses.

The younger Lum worked in a bank for several years before joining LCD in 2002. The move was unplanned, he says. ‘The company was looking at expanding its hotel arm, so I was brought in to look at opportunities in the region.’

He has a younger brother in his early 30s, Adrian Lum, who is business development manager in Lum Chang’s property division.

There is also Allen Law, director at Park Hotel Group which his family founded. The group bought Crown Prince Hotel along Orchard Road for $300 million and is revamping the property into the five-star Grand Park Orchard, which will come with luxury retail space. It also built the four-star Park Hotel Clarke Quay.

Other names which come to mind include Ho Bee’s senior manager in business development and marketing Nicholas Chua, son of group chairman and CEO Chua Thian Poh. Nine third-generation members of the Kwek family – which founded Hong Leong Group – are also involved in the group’s businesses.

Contrary to popular belief, not every young scion has nicely done-up properties handed to them on a plate. ‘A lot of them are working through the ranks up,’ observes Knight Frank chairman Tan Tiong Cheng.

LCD’s Mr Kelvin Lum recalls his early days in business development and project management, when he kept reference books at hand as he learnt about the trade. ‘When I first started it was difficult, going from banking into the brick and mortar business,’ he says. ‘You have to be humble, you have to learn, listen and observe.’

Any shortfall in experience is not keeping the younger generation from pushing the envelope. Jack Investment business development director Han Minli has been the face of marketing efforts for the new Iluma. Unlike most other malls, it is gunning for unique brands and houses more entertainment offerings.

Jack Investment owns Iluma and other properties such as Leisure Park Kallang. Ms Han, under 30, is said to be related to the company’s owner Han Chee Juan.

The younger generation tends to be better-educated and would have seen more innovation at work from overseas trips, says Knight Frank’s Mr Tan. This makes them ‘more sensitive to new trends.’

Many young scions are also aware of stereotyped views about them. ‘It’s unavoidable, when you meet external people and they have that preconceived idea that so-and-so is the towkay’s (boss’s) son and they assume certain things,’ LCD’s Mr Lum says.

But because the firm is listed and is run just like any professionally-managed company, these people do change their minds in the course of work, he adds.

The delicate question of succession also arises in companies which house a few family generations. Because of parental instincts, ‘given the choice, I guess fathers would like to pass the baton to their sons, provided they are capable,’ Mr Lam says.

But he underlines that professionals should take over if family is not up to the job. His father ‘will not compromise the company and give it to someone who is incompetent,’ he says. ‘No self-respecting CEO or MD in the right mind would do that.

Next generation builders shaping family legacies

Source : Business Times 7th Sep 2009

SINGAPORE) While building homes will always be just a Lego-brick memory of their childhood for most, some under-40s – hailing from notable families in real estate – have already overseen the building and marketing of gleaming hotels, homes and malls.

In the process, these next-generation builders will have a hand in shaping Singapore’s landscape, and also their families’ legacies.

Some have been active in the hospitality industry. LC Development (LCD) executive director Kelvin Lum, 35, is closely linked to Crowne Plaza Changi Airport, a 320-room hotel which opened its doors in May last year. The company is on the lookout for a second hotel in Singapore.

Mr Lum is the son of David Lum, who is managing director at both Lum Chang Holdings and LCD. LCD began as the former’s listed subsidiary but both firms de-merged in 2005. LCD now eyes the hospitality pie while Lum Chang is largely in the construction and property development businesses.

The younger Lum worked in a bank for several years before joining LCD in 2002. The move was unplanned, he says. ‘The company was looking at expanding its hotel arm, so I was brought in to look at opportunities in the region.’

He has a younger brother in his early 30s, Adrian Lum, who is business development manager in Lum Chang’s property division.

There is also Allen Law, director at Park Hotel Group which his family founded. The group bought Crown Prince Hotel along Orchard Road for $300 million and is revamping the property into the five-star Grand Park Orchard, which will come with luxury retail space. It also built the four-star Park Hotel Clarke Quay.

Other names which come to mind include Ho Bee’s senior manager in business development and marketing Nicholas Chua, son of group chairman and CEO Chua Thian Poh. Nine third-generation members of the Kwek family – which founded Hong Leong Group – are also involved in the group’s businesses.

Contrary to popular belief, not every young scion has nicely done-up properties handed to them on a plate. ‘A lot of them are working through the ranks up,’ observes Knight Frank chairman Tan Tiong Cheng.

LCD’s Mr Kelvin Lum recalls his early days in business development and project management, when he kept reference books at hand as he learnt about the trade. ‘When I first started it was difficult, going from banking into the brick and mortar business,’ he says. ‘You have to be humble, you have to learn, listen and observe.’

Any shortfall in experience is not keeping the younger generation from pushing the envelope. Jack Investment business development director Han Minli has been the face of marketing efforts for the new Iluma. Unlike most other malls, it is gunning for unique brands and houses more entertainment offerings.

Jack Investment owns Iluma and other properties such as Leisure Park Kallang. Ms Han, under 30, is said to be related to the company’s owner Han Chee Juan.

The younger generation tends to be better-educated and would have seen more innovation at work from overseas trips, says Knight Frank’s Mr Tan. This makes them ‘more sensitive to new trends.’

Many young scions are also aware of stereotyped views about them. ‘It’s unavoidable, when you meet external people and they have that preconceived idea that so-and-so is the towkay’s (boss’s) son and they assume certain things,’ LCD’s Mr Lum says.

But because the firm is listed and is run just like any professionally-managed company, these people do change their minds in the course of work, he adds.

The delicate question of succession also arises in companies which house a few family generations. Because of parental instincts, ‘given the choice, I guess fathers would like to pass the baton to their sons, provided they are capable,’ Mr Lam says.

But he underlines that professionals should take over if family is not up to the job. His father ‘will not compromise the company and give it to someone who is incompetent,’ he says. ‘No self-respecting CEO or MD in the right mind would do that.

All is quiet at Shaw Centre

Source : Today 7th Sep 2009

MORE than half of the 86 retail tenants at Shaw Centre have moved out since early this year as the mall appears to be a casualty of the supply glut of retail space downtown. Tenants that Today spoke to say an exodus of retailers has led to a significant drop in foot traffic for Shaw Centre. “It looks eerie in the evenings,” said a shop assistant whose employer is among a dwindling number of businesses still operating in the five-storey retail mall along Scotts Road. For others, it is understood that the landlord Shaw Foundation had wanted to double their rents when their leases came up for renewal.

One former tenant, who had recently relocated, is understood to have been paying around $7 per square foot for her unit before the proposed renewal of her lease. Shaw Centre is owned by the Shaw Foundation and the rental revenue is distributed to charities. Shaw Centre’s management declined to comment when contacted by Today. Some retailers did say that the lack of clarity over whether the mall would be redeveloped soon was also a thorny issue.

They said there had been talk that Shaw Centre would be redeveloped or revamped to keep up with impending competition posed by newer malls, such as ION Orchard across the road, and others like Orchard Central, 313@Somerset and Knightsbridge further down Orchard Road. A retailer who declined to be named said, “I want to remain here because it is easier for my regular customers to return to my shop, and I don’t mind if I have to move out during the revamp. But now, I don’t even know if there is going to be one, and when it would happen. There is a lot of uncertainty. Some tenants are leaving even before their leases are up, citing poor business from the lack of traffic.

Tenants that have left are understood to have relocated to nearby malls like The Heeren, Far East Plaza, Far East Shopping Centre and Orchard Central. Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said landlords have to try to keep occupancy levels at a minimum of 90 per cent in malls. He saidL “When tenants leave, it is important for landlords to quickly find someone to fill the empty unit, or it can snowball if you don’t arrest that.” It is also critical to have the right retail mix or the mall may not be able to attract enough shoppers, he added. Shoppers have no lack of choices when it comes to malls along Orchard Road.

The arrival of three new mega-malls – Ion Orchard, Orchard Central and 313@Somerset – will add about 1.8 million sq ft of new retail space, bringing the total space available on Orchard Road to 8 million sq ft. This does not yet count the retail space that will be offered by the two upcoming integrated resorts. The supply of new retail space comes against the backdrop of a government survey of professional forecasters earlier this month, where 21 economists predicted a bigger 11.7-per-cent contraction in wholesale and retail trade for this year, compared to 11 per cent in the previous survey in the June survey. Mr Tan of Chesterton said while landlords in the Orchard Road area may not be cheering these trends, those that operate malls in the suburban areas, which cater mainly to locals, are seeing demand for space holding up relatively well

10 things to note when shopping for a home loan

Source : Straits Times – 6th Sep 2009

Coming up alongside the current property rally is a fierce competition among banks here, eager to sign up homebuyers with attractive and innovative loan packages.

The loan options being dangled are mind-boggling – such as the perennial choice between fixed or floating rate mortgages.

Some packages even come with a deposit interest matching feature where the interest earned can be offset against the mortgage interest.

Two examples are United Overseas Bank’s (UOB) HomePlus and Standard Chartered Bank’s (Stanchart) MortgageOne Sibor.

For instance, MortgageOne Sibor customers earn the same interest rate on two-thirds of their deposit linked to their mortgage as they pay on the loan. The interest earned can offset the mortgage interest.

Customers pay less interest each month, and are able to pay down their loans faster than is the case with a traditional loan package.

Citibank’s Home Saver deal is an index-linked home loan that offers customers one of the widest selections of index tenures in the market, ranging from one month to three years. Customers have the flexibility of switching from one index tenure to another. The indexes used for reference include the Singapore Inter-bank Offered Rate (Sibor).

If time is money, Stanchart has launched a service which provides in-principle approval for a mortgage loan within one hour – provided certain information like annual income and property valuation is made available.

Some experts even suggest that the conventional wisdom – that the best deal is the package with the lowest interest rate – is not always so.

‘The best loan package is the one that meets the needs of the home owner,’ said Ms Annie Lim, managing director of mortgage consultancy firm Global Creatif Financial.

Besides interest rates, consumers should look into such features as the lock-in period, penalties for partial redemption and legal fee subsidies.

Ms Lim’s own wish-list is a package with no lock-in period and no penalty for partial repayment.

‘I like the flexibility of not having to pay a penalty should I sell my property within the lock-in period, or to restructure my loan as my financial needs do change from time to time.

‘I also want to be able to choose partial repayment as and when I get any bonus or lump sum income,’ she said.

Here are 10 things to consider in a home loan:

1 Fixed or floating rate mortgages

Mr Dennis Khoo, Stanchart’s general manager for retail banking products, said customers who want security and stability should opt for a fixed-rate package as this is a good time to secure the pricing before interest rates rise.

‘With fixed interest rates, the monthly instalments are not open to fluctuations,’ he said.

But some other customers may believe that interest rates will fall or remain low.

For them, variable or floating interest rates are the preferred route, given that the payment amount automatically adjusts as rates go down – or up.

Customers typically link their loans to one of two major benchmark rates: Sibor and the Swap Offer Rate (SOR).

2 Sibor

Mr Dennis Ng, spokesman for mortgage consultancy portal www.HousingLoanSG.com, cautioned against the false notion that the Sibor will stay low at below 1 per cent.

He said it is likely to creep up as the economy recovers and when US interest rates are adjusted upwards.

‘The three-month Sibor is now at a low 0.68 per cent. This rate has been stable for the last six months. But do note that in 2007, Sibor was as high as 3.58 per cent.?

‘Sibor is mainly affected by the US Federal Reserve rate and the liquidity of Singapore’s banking system. The US is likely to keep interest rates low for the next six to 12 months,’ he said.

But two years from now, for instance, interest rates may go up. So do not calculate your ‘affordability’ based on current low housing loan interest rates, he advised.

3 Loans with interest-offset features

Ms Lim said customers with healthy monthly cashflows or initial lump sums parked in their savings accounts may want to check these out.

The deposits can be used to offset their loan account so that they pay only the loan interest on the difference, as in the case of Stanchart’s MortgageOne Optimizer.

Such an offset allows customers to lower their loan term without additional instalment payments, as offsetting minimises the loan payment.

4 Interest-only packages

These are available only for new loans, and on a case-by-case basis when customers decide to refinance.

Customers pay only the home loan interest and not any of the principal for a specified period, usually up to three years. In the fourth year, the loan reverts to a normal interest rate plus principal loan and follows the fourth-year rate of the package.

This option is targeted at the investor who wants to maximise bank financing for his property investments. It is also suitable for customers who may have temporary cashflow problems for a limited period, Ms Lim said.

5 Check out vacancy rates and rental rates

Investors who depend on rental income to pay their housing loan instalments should realise their property might go untenanted for up to six months. It is prudent to have enough cash or Central Provident Fund savings on tap to cover these monthly instalments.

Mr Ng noted that condominium rental rates are still falling. Investors should factor in a possible drop in rental income by 30 per cent to calculate the amount needed to top up any shortfall in rental against the loan instalments.

6 Penalties and fees

Customers should look beyond interest rates and consider other factors such as the lock-in period and penalty fees.

Some loans come with benefits including legal fee, valuation fee and fire insurance fee subsidies which are aimed at defraying part of consumers’ housing loan costs, said a UOB spokesman.

Another potential cost is the loan cancellation fee. An investor who bought a property speculatively and then applied for a loan might be slapped with a loan cancellation fee if the property is sold before the loan is disbursed.

Cancellation fees can range between 0.75 per cent and 1.5 per cent of the loan amount, and can be quite substantial. For example, if the loan amount is $1 million, the cancellation fee works out to $15,000, said Mr Ng.

7 Valuation

Do not assume that when you buy a newly launched property from the developer, you are free from having to check its market valuation.

Mr Ng understands that some new projects have been sold above valuers’ estimates. In such a case, you will have to use your own cash for the amount above what the property is valued at.

Say, a property is sold for $1 million but valuers reckon its market valuation to be $900,000. The $100,000 difference – known as cash-over-valuation (COV) – has to be paid by the buyer in cash.

Indeed, arising from the recent exuberance in the property market, the COV component is becoming more marked in private and public housing sales.

Ms Lim’s advice is to get an independent property valuation before committing to a sale price.

8 Debt servicing ratio requirement

To approve loans, banks typically use the debt servicing ratio – which is the percentage of one’s monthly income used to service long-term liabilities. The recommended healthy debt servicing ratio is about 35 per cent although every bank has different acceptable levels of debt servicing ratio.

Ms Lim recommends that young couples and first-time home owners apply for loans with the maximum quantum – usually 80 per cent of purchase price – and the maximum tenure. The latter is usually based on age 70 less the customer’s present age or 35 years, whichever is lower.

‘We recommend this in our practice to enable easier approvals of loans so that a healthy debt servicing ratio is achieved. Given the right package, the customer can always make future adjustments like doing partial repayments or shortening loan tenure,’ she said.

9 Have a buffer

Homeowners should have a buffer of at least 12 months’ funds to service the loan so that they have sufficient time to rent out or sell the property. This will come in handy if things turn bad, said Mr Bryan Ong, founder of mortgage consultant BC Group.

10 Mortgage insurance

Finally, that dream home may become a nightmare for your family if you fail to protect your investment with some mortgage insurance.

This safeguards your home, and family so that they will not be burdened with mortgage repayments or face the possibility of losing their home or downsizing should you die prematurely or become permanently disabled, said Mr Jason Ong, an adviser with Professional Investment Advisory Services.