District 19 - home of property investors

District 19 - home of property investors
Data shows area has highest number with multiple home loans
By SIOW LI SEN

(SINGAPORE) It may not top Singapore’s wealth charts, but Hougang has plenty of property investors - or speculators. District 19, which includes Serangoon Gardens, Hougang and Punggol, has the highest number of borrowers with multiple property loans, at 3,263.
According to data from Credit Bureau Singapore (CBS), which analysed loans and looked at where borrowers live, investors are defined as people with two home loans and more. They live all over Singapore and are not confined to the rich districts of 10 and 11 or 15.

In fact District 9, which includes Orchard, Cairnhill and River Valley, has only 716 borrowers with at least two home loans. This is much lower than districts 16, 18, 20, 22 and 23, each of which has between 2,000 and 2,700 borrowers with more than one loan.

People with multiple home loans totalled 38,520 in June - a 64 per cent jump from 12 months earlier.

And District 19 took the top prize in this category - at 3,263. CBS general manager Mark Rowley said this could be due to the number of property launches in the area, although the data would include residents who have bought elsewhere.
While the rich residents of districts 15, 9 and 10, which include Katong, Orchard, Ardmore, Bukit Timah and Holland Road, figure prominently in terms of people owing banks more than $1 million on property loans, the data shows people who owe more than a million dollars on homes live all over the island. The number jumped a hefty 26 per cent to 12,884 in June from a year ago.

‘The value of properties has gone up,’ said Mr Rowley who does not consider the jump in big loans a matter of concern, given the low rate of delinquency among borrowers.

District 10, which is made up of Ardmore, Bukit Timah, Holland Road and Tanglin, has the most million-dollar borrowers at 2,033, up 30 per cent from a year ago.

Again District 19 didn’t do too badly. It has 618 such borrowers, a slight gain of 2 per cent from June 2006.

District 24, which comprises Lim Chu Kang and Tengah, has a grand total of 6 people who owe more than $1 million on their home loans, a 100 per cent jump from 12 months ago.

Interestingly, Kranji and Woodgrove in District 25 are the only places where residents who owe more than $1 million showed a drop - 117 versus 119 a year ago. They also seem the most conservative area, with only 20 people having multiple home loans.

And District 25 had a 16 per cent fall in new property loans. This translated to 1,666 people getting a loan, down from 1,984 a year ago.

It was one of five districts that showed a negative in new property loan approvals. The other four were districts 22, 24, 27 and 20.

CBS gets its property loan data from 10 financial institutions, eight banks and two finance companies.

They are ABN Amro Bank, CitiBank, DBS Bank, HSBC, Maybank, OCBC, Standard Chartered Bank, United Overseas Bank, Hong Leong Finance and Sing Investments & Finance.

Source : Business Times - 13 sept 2007

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New rule may result in lumpy property earnings

New rule may result in lumpy property earnings

Proposed change requires developers to book revenue only on completion
By WEE LI-EN

(SINGAPORE) A new accounting interpretation standard being proposed will require property developers to recognise revenue from their projects only on completion and not in phases.
Developers are said to be resisting the proposed change in accounting standard which, they say, will result in greater fluctuations in earnings reported by listed property companies.

The new standard is put forward by the Council on Corporate Disclosure and Governance (CCDG) which adopted it from the UK-based International Accounting Standards Board. The CCDG sets accounting standards in Singapore.

The Institute of Certified Public Accountants of Singapore vice-president Ernest Kan said: ‘This will cause earnings of property companies to be more erratic.’

‘Currently, if I started an 18-month project in January, and I complete two-thirds of the project this year, the 2007 financial statement looks nice because I can recognise two-thirds of the revenue and profit.

‘But under the new standard, there will be nothing to show for it in the 2007 financial statements, but next year when the project is completed there will be a sudden surge of revenue and profit which is recognised.’
The proposed change aims to standardise accounting practices among real estate developers for sales of units such as apartments before construction is complete.

The Real Estate Developers’ Association of Singapore said yesterday that it has given feedback to the CCDG on behalf of developers but declined further comments.

Hiap Hoe executive director Cindy Lim said: ‘Financial accounting should reflect the business and economic value generated by companies.’

‘If we were to recognise revenue only upon the completion of a property, it would not be a fair reflection of a company’s performance. Commercially speaking, revenue would have already been generated once the property is sold - even if it is only half completed.’

And the chief financial officer of a listed property developer said: ‘Most developers would prefer the status quo because we don’t want gyrations in earnings.

‘Besides, home buyers here make progressive payments based on completion, and risks are passed on to them accordingly, so developers should be allowed to recognise revenue.’

Dr Kan said the change could be implemented as soon as the financial year beginning on or after Jan 1 next year.

The CCDG has gathered feedback on the proposed change and will pass it on to the IASB, which is inviting comments until Oct 5.

‘It will be interesting to see if Singapore will adopt this. It generally wants to adopt international standards, and has only resisted doing so in very unique circumstances,’ Dr Kan said.
Source : Business Times - 13 sept 2007

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Boom resonates in home loan numbers

Boom resonates in home loan numbers

Number of people with multiple home loans up 64% in June as applications surge
By SIOW LI SEN
(SINGAPORE) For thousands in Singapore, a single home - or a single loan - is no longer enough.
Riding the property boom, with its promise of huge gains, the number of people with multiple home loans soared to 38,520 in June this year.

This represented a 64 per cent jump from 12 months ago. In June 2006, the number of people with two home loans or more stood at just 23,541, according to the Credit Bureau (Singapore) Pte Ltd (CBS), which released data on property loans for the first time yesterday.

In tandem with rising property prices, new home loan applications surged to 17,323 in May. If the past 30 months are a benchmark, then the average month sees just 10,000 new home loan applications.

Also, over the past two-and-a-half years, an average of 4,000 applications have been approved each month. But in May, a total of 4,856 applications were approved, suggesting that while banks had stepped up the pace of approvals, the applications had flooded in even faster.

Loan approval data lags applications as it refers to disbursements which could be a few months later or even as long as two years down the road for borrowers who bought on deferred payment schemes.

June saw 4,794 approvals against 16,017 applications. The breather that the property market then took was echoed in the number of new loan applications, which fell to 13,870 in August.

Property loan approvals increased 12 per cent in June 2007 to 50,514 from a year ago.

Explaining the relatively low rate of approvals compared to the applications flowing in, Mark Rowley, CBS general manager, ventured that people making ‘multiple applications’ could have something to do with it - as could the credit policy of banks.

And while there has been some anecdotal evidence of banks tightening credit, he said it was too early to say if the low rate of approval was a result of that.

Said Helen Neo, head of consumer banking of Maybank in Singapore: ‘A home loan application may be rejected if the applicant’s repayment ability is in doubt taking into account his overall financial commitments.’

Tan Chia Seng, Citibank Singapore business director, said that in the last 12 months, there had been a noticeable increase in big ticket mortgages and multiple home loan borrowers.

‘At Citibank, we always take a prudent approach towards mortgages,’ said Mr Tan.

‘For multiple home loans, it is particularly important to consider the applicant’s aggregate servicing capability for all his loans, especially his home loans,’ he added.

He ventured that one possible reason for the low approval rate could be that the applicants’ aggregate servicing capability for all his loans has fallen below an acceptable level.

‘If the applicant has a disproportionately high debt-servicing ratio, a prudent bank may not approve his application for a second or third home loan,’ said Mr Tan. ‘In our case we have been declining loans to applicants where the debt-servicing ratio exceeds our comfort level.’

CBS said the data, which have been compiled over the 30 past months and used to develop a property loan index, show a hunger for credit to finance properties under the current property boom.

The index showing credit hunger climbed to a high in May, 71 per cent above the baseline or 17,323 new loan applications. Single-day sellouts at various property launches also repeatedly made the headlines.

Home loan approvals jumped 23 per cent in May to 4,856. In April, the number stood at just 3,967.

The good news is that along with the relentless climb in property prices, the delinquency rate, or the proportion of borrowers behind with their home loan instalments, is falling.

CBS also charted a delinquency index which shows the percentage of people being late in payments has been declining from the average delinquency rate of 2.35 per cent to just 2.04 per cent as of June 2007.

That works out to 5,448 delinquent borrowers out of the total 266,512.

From a credit risk perspective, it is very positive, said CBS’s Mr Rowley.

‘We will always focus on delinquency as the indicator - it’s low at this point,’ he said.

Source : Business Times - 13 sept 2007

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More consumers with two or more property loans now

More consumers with two or more property loans now

Number surges by 64% from a year ago; level of new loans rises by 12%
By Joyce Teo, Property Correspondent
AMID Singapore’s property boom, the number of investors with two or more property loans shot up by 64 per cent in June from a year earlier.
And the number of borrowers owing more than $1 million in property loans was up nearly 26 per cent that month, according to new figures from Credit Bureau (Singapore). New property loans, too, rose 12 per cent from a year earlier to hit 50,514 in June.

All these inaugural figures from the bureau’s latest property market credit analysis show a surge in demand for credit amid Singapore’s property boom.

The trend is captured by the consumer credit bureau’s property loan index unveiled yesterday.

The bureau is an independent body that collates data on borrowing trends in Singapore.

The data is derived from loan data provided by 10 members including ABN Amro Bank, CitiBank, DBS Bank, OCBC Bank, Standard Chartered and United Overseas Bank. It includes loans for private and HDB properties, and other types of properties.

A total of 38,520 consumers were holding multiple property loans in June, the data showed.

The largest number of these consumers was concentrated in District 19 (Serangoon Gardens, Hougang and Punggol) with 3,263 borrowers. Other districts with a relatively large number include District 10 (Ardmore, Bukit Timah, Holland Road), District 15 (Katong, Joo Chiat, Amber Road) and District 23 (Hillview, Dairy Farm, Bukit Panjang).

In June, there were 12,884 consumers owing more than $1 million in property loans. Most of them were from District 10 (2,033) and District 15 (1,218).

Apart from the demand for new loans, the index tracks the approval rate of new loans and the rate of delinquency for such loans.

In June, just over 2 per cent of consumers holding on to about 181,000 loans were delinquent - meaning that they have loans that were more than 30 days overdue. This is healthier than the baseline average of 2.35 per cent.

The bureau’s general manager, Mr Mark Rowley, said it devised the index to provide an early insight into the developing trends in property loans as there is ‘a lot of heat’ in the property market.

‘Delinquency is low at this time, but it is a lead indicator. From a credit risk perspective, if delinquency goes up, that is when we take note of a trend change.’

The data comes amid much talk that banks are tightening the way they lend money to finance home purchases.

‘If banks tighten their lending policy, there would be a widening gap between credit demand and approvals,’ said Mr Rowley.

The demand for new loans, which peaked at 71.77 points on the index in May, slipped in July and last month. But it is still above the average.

Mr Rowley said the loan approval figures for July appear to be tapering off, as there is a time lag in the bureau getting the credit approval figures.

‘They would be around the baseline figure, which shows that the gap is still maintained.’

The bureau will post an updated monthly property loan index on its website. It can be accessed free of charge.

The bureau will also soon issue similar indexes for credit card loans, personal loans and motor vehicle loans.
Source : Straits Times - 13 sept 2007

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Billionaire expects to do well in Marina Bay Sands gambit

Billionaire expects to do well in Marina Bay Sands gambit

By Bryan Lee
WITH just one competitor in town, Las Vegas Sands chairman Sheldon Adelson believes his company has a winning hand in its upcoming Singapore venture.
Even as costs of building the Marina Bay Sands integrated resort look set to swell, the American billionaire is counting on the two- horse race - and a big bet on the convention business - to translate into big bucks.

‘This will be a duopoly and, of course, any place that has a duopoly will be very profitable,’ said Mr Adelson yesterday at the Forbes Global CEO Conference.

Speaking in a public interview after receiving a lifetime achievement award from Forbes magazine president Steve Forbes, Mr Sheldon added that his mega project will have enough space to host the world’s biggest conventions.

Las Vegas Sands pipped three other rivals last year with a $3.85billion bid for a government tender to build Singapore’s first integrated resort.

But rising construction costs amid a building boom and refinements to the project’s design may bump up the amount, which excluded a fixed land price of $1.2 billion, by as much as 40 per cent, The Business Times quoted chief operating officer William Weidner as saying last month.

Malaysia’s Genting International is building Singapore’s second gaming development on Sentosa island.

Las Vegas Sands’ Singapore resort will be the company’s second foray into Asia, after it opened a US$2.4 billion (S$3.6 billion) casino resort in Macau last month.

Mr Adelson said the region has room for 10 more of these mega developments, as gaming becomes increasingly accepted as just another form of entertainment.

‘I see the gaming industry as being in its infancy.

‘Gaming has evolved from gambling dens into Disneylands for adults,’ said Mr Adelson, who reckons that other parts of the world, such as Europe and India, could do with more mini Las Vegas-styled casino resorts.

These developments, he said, are really ‘cities of entertainment’ where gambling is just one of the elements.

Gaming takes up just 1 per cent of the space of the company’s flagship Venetian resort in Las Vegas, and just 5 per cent in its Macau outfit, he added.

——————————————————————————–
‘This will be a duopoly and, of course, any place that has a duopoly will be very profitable.’

MR ADELSON, receiving the Malcolm S. Forbes Lifetime Achievement Award from Mr Forbes (right). He is counting on the two-horse race between his firm and Malaysia’s Genting - and a big bet on conventions - to result in big bucks.
Source : Straits Times - 13 sept 2007

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Plan for property developers to change way of reporting revenue

Plan for property developers to change way of reporting revenue

Call for income to be booked only upon completion of a project, not gradually
By Alvin Foo

MANY real estate developers may soon have to change the way they treat sales revenue in their financial accounts.
Under a proposal submitted by the Council on Corporate Disclosure and Governance, developers will have to recognise revenue only upon completion of their projects - instead of doing so gradually, as the projects are being built.

Mr Ernest Kan, vice-president of the Institute of Certified Public Accountants of Singapore (Icpas), which assisted in preparing the proposal, said yesterday: ‘Most developers now recognise revenue progressively. Under this new interpretation, you can only recognise it as revenue upon a temporary occupation permit, unless you are providing construction services.

‘Most developers here would not fall into that category, as they are only involved in sales, not construction and allowing the buyer to decide what to build.’

Dr Kan said the proposal has been submitted to the industry’s international body. It should make a decision by year-end.

‘The earliest it would have an impact here is during financial year 2008,’ he added.
He said the current interpretation meant revenue flow is more even. Under the proposal, revenue will tend to ‘become more lumped up’. This move aims to standardise the accounting practice among developers.

Currently, developers interpret the global Financial Reporting Standards (FRS) differently and record revenue for the sale of units at different times.

Some record revenue only when they have handed over the completed unit to the buyer, while others book gains earlier, as construction progresses.

This move proposes that revenue should be recorded as construction progresses only if the developer is providing construction services, rather than selling units.

In some countries, the prevailing practice has been to view the FRS as contracts for the sale of goods; in this case. completed real estate units, for which FRS 18 is the applicable accounting standard.

Applying this standard, revenue is recorded only when control - and the risks and rewards of ownership - are transferred to the buyer, typically when the unit is ready for occupancy and handed over to the buyer.

In other countries, the practice is to view the sales agreements as construction contracts, for which FRS 11 is the applicable standard.

Applying this standard, revenue for constructing an asset for a customer is recorded as construction progresses - by reference to the stage of completion of the construction.

The new draft proposes that FRS 11 be used only if the sale agreement is a contract to provide construction services to the buyers’ specifications.

Analysts say the proposed change will result in more volatile earnings. However, it should not affect pricing and cash flow.

Said DBS Vickers property analyst Wallace Chu: ‘The money’s still in the bag. It’s just how you recognise it when it comes in.

‘It will affect those developers who are involved in long projects more. Revenues are likely to fluctuate for those with big projects, especially when there’s a long construction period.’
Source : Straits Times - 13 sept 2007

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