High home prices in Singapore send buyers abroad

High home prices in Singapore send buyers abroad
 
Investors check out posh units in cities like London, where values have fallen

By Fiona Chan, Property Reporter 

As the global credit crunch drags on, home prices are falling all over the world, from Britain and Spain to India and Australia.

But in Singapore, property values are proving stubbornly resilient. Private home prices continued to climb 4.2 per cent in the first quarter of the year despite plunging sales and market pessimism.

From an investor’s point of view, properties outside Singapore might look more attractive now, agents say.

‘The Singapore market has risen substantially over the last two years, and we don’t see it dropping dramatically in the short term,’ said Mr Sean Parker, the sales director of JL Property Group, which sells overseas properties here.

‘But the benefit of that has been that Singaporeans can leverage some of the gains they’ve made on property here and redistribute them to other areas.’

More and more Singaporeans are looking to markets such as London, New York, Dubai and Australia for investment options, he added. The group has sold more than 100 properties since Christmas, most of them in Australia.

‘We think this is going to be one of our biggest years in a long, long time,’ Mr Parker said. ‘We’ve seen a significant jump, not just in sales, but also in Singaporeans seeking information to become better-educated investors.’

In a city such as Melbourne, he said, the highest-end properties go for A$1,000 (S$1,269) per sq ft (psf) - a far cry from the $5,000 psf record in Singapore.

Given the current market uncertainty and turmoil, Ms Doris Tan of DST International Property Services advises investors to consider more established markets such as London and New York.

In London, the new Chelsea Apartments in the fashionable Chelsea district has one-bedroom flats that go for �1 million (S$2.7 million) each. That is about the price of a similar unit at Scotts Square in Scotts Road here.

Over in New York, US$1 million (S$1.4 million), or less than US$1,000 psf, secures a one-bedroom apartment in Manhattan’s posh Upper West Side or its smart TriBeCa district. In Singapore, that budget would get you only into Holland Village.

There is also a growing trend of older, wealthier Singaporeans buying investment properties that double up as luxurious holiday homes, said Mr Ku Swee Yong, the director of business development and marketing at Savills Singapore.

‘They’re not just investing,’ he said. ‘They also want to enjoy the properties they buy, so they’re more willing to look at resorts and villas in Thailand and other areas.’

But despite growing interest in foreign properties, not all Singaporeans are out hunting for investment bargains now, Mr Ku added.

‘Most people are affected by the bad mood now. They just clam up and pay down their home loans rather than invest,’ he said. ‘But once the sentiment improves, it’s likely people will start comparing - if prices here are $3,000 psf, why not buy in Thailand for $600 psf?’

However, he also cautioned that each market holds its own particular risks for investors.

‘In New York or Australia, it might be tax issues, but in Phuket or Bali, it could be procedures Singapore buyers are not familiar with,’ he said.

‘For our customers who buy Thai and Indonesian properties, they almost always can’t get loans and have to pay in cash.’
 

Source : Straits Times   - 20 April 2008

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You can take a cash-out loan from your home -Singapore

You can take a cash-out loan from your home -Singapore

By Bryan Lee, Economics Correspondent 
ILLUSTRATION: MIKE M DIZON
 
As a mortgage war breaks out among Singapore banks, homebuyers have emerged the clear winners as lenders slash interest rates to grab new customers and retain existing ones.

Rates have plummeted to less than 2 per cent. This means borrowers are effectively getting free cash as sky-high inflation means their future repayments are worth a lot less than the initial loan.

That is great, of course, for young couples buying their first home and moneyed investors looking to take advantage of the cooling property market. But they need not be the only ones reaping the spoils of the rate-cut battle.

Those of us who already have a roof over our heads but are not ready to take the plunge on another property can still benefit from the rate slashing that is going on.

If you have a private property that is at least partly paid up, you can consider taking a loan, using the paid-up bit of the house as collateral. Often called a home equity loan or a cash-out loan, this facility is pretty much like a mortgage, with similar rates and terms.

But instead of using the money to pay for a house, you can use the cash any way you like - whether to splurge on a new BMW, pick up some undervalued stocks or finance that one-man business which you run out of your study.

As mortgages are just about the cheapest loans available in town, this slightly off-beat idea could yield some interest savings.

It is also one way to cash in on the recent property boom without selling your house. If you own a house that is now worth more than what you had bought it for, banks will be willing to lend you more money than before as the collateral base has grown.

These property-backed loans are common in developed countries, from the United States to Australia.

But bankers say conservative attitudes towards credit and a certain sanctity Asians ascribe to their homes mean relatively few people, in Singapore and in the region, have taken advantage of this cost-saving option.

So far, equity loans in the local market are used mostly by entrepreneurs as a cheap way to finance anything from business expansions to day-to-day transactions. But with mortgage rates so low - and they may fall further - it might be time to take another look at tradition.

Ignoring absurdly low first-year teaser rates, home loans are now going for between 2 per cent and 3 per cent in interest charges. Add a small premium that is typically charged, and equity loan rates are now around the 3 per cent mark, say bankers.

This is clearly cheaper than unsecured credit lines, where rates go into double digits. It is also cheaper than loans for small businesses, which typically face rates of between 7 per cent and 8 per cent.

What about car loans? At 2.5 per cent, they look cheaper. But interest for these is charged on the full loan amount throughout the tenure of the loan. In contrast, regular loans charge interest based on the outstanding principal as the loan is repaid. The effective rate for a car loan is thus roughly about twice that of the advertised rate.

Standard Chartered Bank general manager for lending, Mr Dennis Khoo, says that for a $40,000 loan stretched over six years, interest savings could come up to about $2,000, if one took up a home equity loan instead of a regular car loan.

Sounds good. So, how does one go about getting an equity loan? How much can one borrow?

The process is largely similar to that for a regular mortgage.

Take, for example, a $1 million house. A bank would typically allow for total borrowings on the house of up to 80 per cent of the property’s value - or $800,000.

If there is an outstanding mortgage of $300,000, the biggest equity loan that can be granted would be $500,000. But if the home owner had also used $200,000 of his Central Provident Fund savings to pay for the house, the maximum would be $300,000. This is because if there is a default and the house is sold off, proceeds will first go towards repaying the mortgage and replenishing the owner’s CPF account, before they can be claimed by the equity loan provider.

Besides home valuations, banks will also look at the borrower’s income to make sure he can service the monthly instalments, given his existing financial commitments.

But before you dash out to the nearest bank branch, remember that while they are cheap, equity loans should not be taken recklessly. To cop a familiar slogan: Low interest does not mean no interest.

In fact, more caution is needed as what is at stake may be the home that you live in. Furthermore, bankers warn that a property market downturn may prompt lenders to pull back on the loan as the value of the collateral falls.

If anything, the ongoing financial crisis is a stark reminder of what happens when credit is abused.

The lure of cheap credit, along with a housing boom, led American households to overspend massively in the past decade. Now that the housing bubble has burst, they are finding themselves a lot shorter on cash, with a great number struggling to keep their homes from being repossessed by their lenders.

The point is that one should not let the promise of ‘a good deal’ override prudence and common sense.

The equity loan is best seen as a way to reduce financing costs that you would have incurred anyway. Taking on an unsustainable financial burden just because it is cheap can turn out to be a costly decision.

So be shrewd with your borrowing, but be wise with your spending as well. Or else, you may find that splashing out on that flashy convertible may leave you all washed up - and without a roof over your head.
 
Source : Straits Times   - 20 April 2008

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Before you refinance your home loan… Singapore

Before you refinance your home loan… 
The current downward trend in home loan rates provides a compelling reason for home owners to review their mortgage packages. Lorna Tan looks at five things to consider when refinancing your home loan
ILLUSTRATION: MIKE M DIZON
 

 
WITH interest rates in Singapore still falling and the property market turning quiet, banks are now gunning for the mortgage refinancing business.

Refinancing means replacing your current mortgage with another that comes with lower interest rates. This can be done with the same bank or by switching to another bank.

Many home owners are now considering this because the Singapore Inter-bank Offered Rate (Sibor) has fallen from over 3 per cent to below 1.3 per cent. Sibor, the rate at which banks lend to one another, is a key component used in setting home loan rates.

Some home owners have taken the bait. At HSBC Singapore, for example, refinancing applications have increased by more than 50 per cent in number over the past three months. Other banks, such as United Overseas Bank, have been circulating new refinancing packages by mail to home owners.

But before you take the plunge, you should be aware that refinancing a mortgage comes at a cost. Penalties could be imposed if you terminate your housing loan early with your existing lender, and you could incur legal fees if you refinance the loan with another bank.
Mr Dennis Ng, the founder of mortgage consultancy portal www.HousingLoanSG.com, reckons that if you are paying 3.5 per cent or higher on your home loan, you should be able to enjoy savings in interest by refinancing the loan.

He has worked out that, based on a 30-year loan tenure, refinancing an outstanding loan amount of $215,000 to a lower interest rate of 2.2 per cent, down from the current 4.5 per cent, would result in interest savings of about $14,730 over three years.
Balance your options
A mortgage with a lower interest rate might seem more attractive, but before you refinance your loan, consider these factors:
Lock-in period

Penalty for early loan redemption

Conversion fee

Legal subsidy

Choice of fixed, variable or interest rate-linked rates

Cash rebates

Flexibility to make partial loan redemption

Free fire insurance

Affordability
Five things to note before you switch
1 When you should consider refinancing
Scenario 1

The savings outweigh the costs of refinancing. In other words, do your sums first.
Scenario 2

You do not plan to sell your property within the next 12 months.

Maybank Singapore’s head of consumer banking, Ms Helen Neo, said it does not make sense to refinance if you plan to sell your home in the short term.

‘Home owners have to pay redemption fees, and even refund legal subsidies or cashbacks to the banks,’ she said.

Mr Dennis Ng, the founder of mortgage consultancy portal www.HousingLoanSG.com, added you typically need to give three months’ notice to your existing bank before switching. If you sell your property within nine months, say, you will enjoy interest savings for only six months. Your savings might not be much higher than the refinancing costs.
2 What refinancing will cost you
With the same bank
Within the lock-in period Check if your package has a lock-in period. During this time, usually two to three years, you have to pay a penalty if you withdraw your loan. It’s usually 1-1.5 per cent of the outstanding loan amount.
Also, there is a conversion fee of $500 to $1,000.
Outside the lock-in period The cost is just the conversion fee.
With another bank

With banks pulling out all the stops to garner a larger slice of the home loans market, it is worth your while to shop around. DBS Bank, for example, has customised packages that subsidise penalty payments, while Standard Chartered Bank (Stanchart) is repricing home loans down for existing customers on selected packages.

OCBC Bank’s head of consumer secured lending, Mr Gregory Chan, encourages customers to talk to their lenders first before leaving for another bank. This is because the actual charges incurred could vary depending on various factors, which could include the time till the lock-in period expires and the customer’s business relationship with the bank.
Within the lock-in period
Besides having to cough up a penalty for early loan redemption, you will have to refund the subsidy on legal costs provided by your current bank.

Capped at $2,000, the subsidy is calculated based on 0.4 per cent of the loan amount, plus the cost of the $500 stamp duty. Most banks will offer a subsidy of up to $2,000, depending on the loan amount.

If your loan amount is, say, $500,000, the bank is likely to have given you a subsidy of $2,000.
Outside the lock-in period
Normally, you don’t need to pay your current bank penalties or administrative fees.

However, you might have to reimburse the bank for freebies you received when you first took out the loan. These could include legal subsidies, free fire insurance on the property and promotional shopping vouchers, said Citibank Singapore’s business director, Mr Tan Chia Seng.

Whether you are inside or outside the lock-in period, refinancing a home loan with another bank means incurring legal fees again.
3 Which home loans benefit you most

There are more than 113 different home loan packages in the market.
Fixed rates
Depending on your ‘risk tolerance’, you can consider locking in your loan at the current low interest rates for the next two to three years. This means going for fixed-rate loan packages in which the rates are fixed for the first two to three years.
Pegged rates
If price transparency is a must and you believe interest rates are likely to remain low in the next 12 months, you can consider packages with rates pegged to the Singapore Inter-bank Offered Rate (Sibor) or other benchmark rates as you will automatically enjoy lower loan rates when interest rates fall further.

Said OCBC’s Mr Chan: ‘If fixed cash flow and protection against interest rate hikes are of utmost importance, our fixed-rate packages would be more appropriate.’
Zero penalty for switching
Those who are thinking of selling their property in the next two to three years should choose a package with a shorter penalty period or one with no penalties attached. For a loan amount of $500,000, you would save $7,500 if you chose a package with no penalties attached over one that imposes a penalty charged at 1.5 per cent of the loan amount, said Mr Ng.
4 Which expenses you have to budget for

Rates don’t stay depressed forever. When refinancing, do not underestimate other expenses in a lower interest rate environment only to find yourself unable to pay your debts and monthly instalments when rates rise later, said Mr Dennis Khoo, the general manager of wealth management at Stanchart.

Borrowers should ensure they are not over-exposed to debt repayments. Set aside enough cash to cover at least six to 12 months of all necessary expenses such as utilities and phone bills, he said.
5 Which packages offer favourable incentives

There are more than rates to consider when refinancing.
Partial loan repayment
Pick a package that does not penalise you for partial repayments. This means you can lower your overall loan balance whenever you wish to redeem part of your loan.
Free loan conversion
If your property is still under construction, ask for a package with a ‘free loan conversion’. This lets you switch to a package with lower rates when you get your temporary occupation permit.
Rebates
If a package offers a cash rebate, check if it is refundable and if there will be any additional penalty charges should you withdraw within the lock-in period.
Free fire insurance
Some lenders throw this in.
Source : Straits Times   - 20 April 2008

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Singapore PAP Forum to delve into issues surrounding national policies

Singapore PAP Forum to delve into issues surrounding national policies

By Dominque Loh, 
SINGAPORE: The third People’s Action Party Policy Forum council wants to dig deeper into issues surrounding national policies. That’s according to the council’s new chairman, Satwant Singh, who was elected on Saturday.

Mr Singh added that while the 12-member PPF team will retain some of the council’s previous successes, it’ll chart new territories as well.

The council acts as the bridge between PAP party members and the government leaders when it comes to discussing national policies. It’s their job to raise issues faced at the ground level and help people understand how policies are shaped.

Mr Singh said: “What we want to improve is focus groups. Bringing them together and then ask those who are passionate about certain things like transport, healthcare, education. (And then) bring all these people together (and) ask them (to) do their homework, get research done (and) come back to the council and have the forums with the ministers.”

Transport Minister Raymond Lim, who is also the Advisor to the PAP Policy Forum council, said: “One of the things we want is to ensure (that) the PPF Forum is representative of the ground, and so having diversity, ages, different life experiences is useful and it adds to discussions they have and adds in terms of helping us make better policies.”

12 new PAP Policy Forum (PPF) council members were picked from a field of 31 from diverse backgrounds, ranging from students, doctors, lawyers and even a new citizen.

There were also four women candidates and five others, seeking re-election.

All four women candidates were voted in and the council expects women issues to be well-represented.

Audrey Cheong, council member of the third PAP Policy Forum Council, said: “Being a young professional, I think it contributes to the increase in divorce rates these days and reduced birth rates. It involves the roles of women in society which contributes to such factors. I could be the voice, to give my two cents worth of why maybe an independent lady is reacting or thinking this way.”

With the government’s open policy on immigration, it seemed timely that new citizens have been included.

In the view of another council member, Ori Sasson, “People do come in and become Singaporeans. I don’t think they face a lot of problems (and) I am not sure if that will be my emphasis. If it arises, I will be more than glad to share my own perspectives and ideas.”

Five previous council members were also re-elected to serve another two-year term. - CNA/vm

Source : Channel NewsAsia   - 20 April 2008

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Many in Singapore expect pain if recession comes

Many in Singapore expect pain if recession comes

Banking sector most downbeat, IT appears resilient: Hudson report
By CHUANG PECK MING

(SINGAPORE) If there is a recession, business here is more likely to be hit than that elsewhere in Asia. And workers here may feel the pain, too.
 
 
Not everyone in Singapore is anticipating a downturn. Only about a quarter (26 per cent) of 733 executives in key business sectors polled recently see a recession coming in the next six months, with those in the healthcare and life sciences business the most downbeat.

But overall, hiring expectations for the second quarter have dipped, with 49 per cent of the executives polled intending to increase headcount, down from 51 per cent in Q1 and 56 per cent a year ago.

Among executives expecting a recession, almost four out of five (79 per cent) expect business to be affected. This is more than in any other Asian country covered in the latest poll by Hudson, a leading recruiting executive recruitment firm in the region.

Analysts are not surprised at this, pointing to the fact that the Singapore economy is more open - and thus more vulnerable than others to a global recession.

In the banking and financial services sector, more than 9 out of 10 of the pessimists share the belief that business would be hit because, Hudson says, banks are likely to be the first to feel the pain of a downturn in the global financial industry.

Executives in the information-technology and telecommunications sector are the most resilient, with just under two-thirds (64 per cent) indicating they think a recession would hit business - the lowest figure among all sectors.

‘Companies expect that major IT projects in the financial and public sectors will provide continuing growth opportunities,’ Hudson says in its report on hiring and human resource trends.

Across all sectors, 58 per cent of the executives polled here said a recession would affect their hiring plans - a figure higher than for in any other Asian country surveyed by Hudson.

‘There is a high degree of consistency between the sectors,’ Hudson says. ‘The banking and financial services sector has the highest number of respondents saying their hiring plans would be affected, at 65 per cent, and the IT&T sector the lowest, at 53 per cent.’

A freeze in headcount is most likely in the event of a recession, with 9 out of 10 of the executives polled saying they would take this measure. Only a low 19 per cent of those polled would reach for the axe to chop workers.

A third of the executives indicated they would resort to a pay freeze if there is a downturn, making this the second most popular measure. Companies in the media, public relations advertising (50 per cent) and IT&T (44 per cent) are the most likely to make this move.

‘These sectors are also the least likely to cut staff,’ Hudson notes. ‘Both industries are still busy and would rather freeze salaries than cut staff, to ensure they have adequate resources for ongoing projects.’

Hudson’s latest poll shows hiring expectations have fallen in every sector except the media, public relations and advertisement.

‘Among the media/ PR/advertising firms, hiring expectations have grown over the past year,’ Hudson says. ‘In Q2 2007, 48 per cent of respondents expected to expand recruitment, compared with 52 per cent this quarter. Much of this demand is driven by the growth of online advertising and digital media.’

Which is perhaps why the media/PR/advertising sector is the least pessimistic about a recession, with only 11 per cent of its executives polled predicting a recession in the next six months.

Source : Business Times   - 18 April 2008

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