MAS flags two risks to property buyers

MAS flags two risks to property buyers

Danger of loss in a weak economy or interest rate burden in a buoyant one

By Gabriel Chen

HOME buyers are being advised to pause a moment before leaping into the purchase of that dream apartment.

The Monetary Authority of Singapore (MAS) yesterday cited two scenarios in which the resurgent private property sector may not stay quite so rosy.

The central bank also flagged possible fresh measures to cool the sector, on top of last week’s government announcement that plenty of mass market condominium sites will be released next year.

The first scenario MAS outlined is that if economic growth proves to be weaker than expected, property buyers - including speculators - could suffer losses as the market corrects and home prices fall.

Second, even if the economic recovery stays on course, property buyers could suffer a hit of a different kind in the longer term, the central bank warned.

In a rebounding economy, it is more likely that interest rates - now at rock bottom levels - will eventually rise, and this will drive up monthly instalments on home loans that are not fixed.

This could have severe implications for buyers who have over-extended themselves with big home loans, believing interest rates will always stay low.

The MAS issued the words of caution in its annual Financial Stability Review released yesterday, even as it acknowledged a strong rebound of the economy.

It said households here have weathered the crisis relatively well, owing to their sound money management. Banks are not weighed down by risky loans.

However, MAS said that with the market expecting interest rates to stay low for some time, more buyers, including speculators, may be drawn to the market, driving up demand and prices.

Given the risks, MAS said prices and sales needed to be monitored closely.

It outlined earlier government market cooling steps, adding: ‘The nature and timing of further measures, if deemed necessary, would have to be balanced against the still-uncertain path of economic recovery.’

According to Urban Redevelopment Authority data, private home prices surged 15.8 per cent in the third quarter - the sharpest quarterly rise in 28 years.

Volume has been strong with 12,969 homes sold in the first nine months of the year. Experts expect full-year sales to exceed the 2007 new home sales record of 14,811 units.

The MAS warning comes as a growing number of Asian nations, such as Hong Kong and South Korea, step up efforts to rein in property buying, for fear of a home prices bubble.

In September, Singapore, for its part, announced a slew of measures to cool the market, including the withdrawal of the interest absorption scheme that allowed home buyers to defer payments.

Details of mass market land sites to be offered to developers in the first half of next year were unveiled last week.

These steps have had some effect already - with the number of home sales falling in the last two months. A key indicator of speculative activity, sub-sales - when uncompleted homes are bought and resold before being built - are also down.

MAS pointed to encouraging signs on banks’ property exposure. More than 70 per cent of housing loans are for owner-occupied residential properties, which suggests a lower risk profile, it said.

One trend MAS noted: the share of total loans where the value of the outstanding loan is above 80 per cent of the property’s value has surged from 8 per cent last December to 17 per cent in September this year. However, dreaded negative equity, where a home loan exceeds the value of the home, remains very low at less than 3 per cent of loans.

In any case, banks’ checks include the person’s debt-servicing ability. Said Standard Chartered Singapore’s general manager for retail banking products, Mr Dennis Khoo: ‘You should not have more than $1 for every $2 that you earn going into overall debt servicing.’

Source : Straits Times - 10 November 2009

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HLF stirs waters, cuts HDB home loan rates

HLF stirs waters, cuts HDB home loan rates

DBS says it, too, is offering revised low rates; OCBC says it remains competitive

By SIOW LI SEN

(SINGAPORE) Hong Leong Finance (HLF) has slashed its HDB home loan rates in a bid to undercut the competition amid a low interest rate environment, but it seems some banks might have been even quicker on the draw.

‘The revision in rates is to ensure that our package is one of the lowest in the market.’

- HLF spokeswoman

Yesterday, HLF said its latest HDB home loan rates are 0.50 per cent lower than its last promotional rates.

It now offers variable rates at 1.33 per cent, 2.13 per cent and 2.83 per cent for the first, second year and third year respectively. The variable rates are based on a board rate which currently stands at 4.25 per cent. Its new two-year fixed-rate package charges 1.63 per cent and 2.63 per cent in the first and second year respectively, totalling 4.26 per cent.

But rival DBS said it too has new lower home loan packages applicable to both HDB and private properties. A DBS spokeswoman said the bank ‘just’ revised its home loan rates.

DBS’s variable package charges the same 1.675 per cent based on three-month Sibor plus one per cent for every year of the loan. The three-month Sibor or Singapore interbank offered rate is 0.675 per cent. Borrowers can also opt for a two-year fixed rate at 1.88 per cent for both years which amounts to 3.76 per cent.

At OCBC, the variable rate for three years is the same 1.66 per cent each year and based on its board rate of 4.5 per cent. Those who want a two-year fixed can pay 1.99 per cent per year.

‘OCBC Bank’s home loan packages will remain competitive to respond to market conditions,’ said Phang Lah Hwa, head of consumer secured lending, OCBC Bank.

HLF, Singapore’s largest finance company, said the new rates apply until the end of the year and are for up to 80 per cent financing.

‘The revision in rates is to ensure that our package is one of the lowest in the market,’ said an HLF spokeswoman.

‘We hope that with the new rates, our customers will continue to support us and allow us to capture a bigger slice of the HDB market which is presently very active and healthy,’ she said.

HLF said customers who sign on with a minimum loan of $200,000 will also get a choice of KrisFlyer air miles or dining vouchers with five hotels in Singapore.

‘There has been an increasing demand for HDB flats and we pride ourselves with moving with the market and the changing needs of our customers,’ said Ian Macdonald, HLF president.

‘Response to Hong Leong Finance’s earlier home loan promotion has been very encouraging and we are confident that the new rates will perform just as well,’ he added.

Source : Business Times - 10 November 2009

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More action may be needed if recent property measures inadequate: MAS

More action may be needed if recent property measures inadequate: MAS

Risk of speculation escalating as market expects low interest rates to persist

By CONRAD TAN

(SINGAPORE) Further action to cool the Singapore property market may be needed if recent measures to dampen speculation prove insufficient, the Monetary Authority of Singapore said yesterday.

Related link:

MAS Financial Stability Review November 2009

Looking ahead, ‘price levels and transaction activity bear close monitoring’, MAS said in its yearly Financial Stability Review, published yesterday.

‘As Singapore emerges from recession and with the market expecting low interest rates to persist for some time, the risk of a renewed escalation of speculative momentum cannot be discounted.’

Despite lingering uncertainties in the economic outlook for Singapore and the rest of the world, ‘the domestic property market activity has taken on its own dynamic’, MAS said in a special section in the report highlighting what it sees as the key risks to Singapore’s financial system.

Other downside risks centre on the sustainability of the global economic recovery after governments start to withdraw their fiscal stimulus and tighten monetary policy, MAS said.

‘Should growth turn out weaker than expected, property buyers and speculators could face capital losses as the market corrects. Conversely, if the recovery stays on course, interest rates will eventually rise and drive up financing costs with severe implications for those who have overextended themselves,’ it said elsewhere in the report, commenting on the recent sharp rise in private home prices.

‘While the market rebound may appear to be aligned with improved prospects for the domestic economy, the current low interest rate environment has also played a part by reducing the cost of property financing,’ MAS said.

‘If unchecked, this could lead to a rising spiral of demand and prices as more and more property buyers and speculators are drawn into the market, and expose the property market to the continuing risks in the global economy.’

The steep increase in property prices here in recent months has already prompted the government to act to discourage speculation.

In September, the government banned interest-only housing loans and the interest absorption scheme that allows developers to absorb interest payments for apartments that are still being built.

It also restarted the confirmed list of the Government Land Sales programme in the first half of next year to meet the strong demand for private homes.

Unlike sites listed on the reserve list, confirmed-list land sites are put up for sale at a pre-determined date, without the need for the sale to be triggered by an application from developers.

Last Friday, the National Development Ministry said that it would place eight residential sites on the confirmed list for the first six months of next year.

That definite increase in residential land for sale is expected to have a dampening effect on overall home prices.

‘We would view the comments made by the MAS as more of a pre-emptive signal for now,’ said Donald Chua, an equity analyst at CIMB here in a note to clients.

‘A low interest rate environment coupled with strong property demand has led to fears of rising speculative activity.’

However, since the recent measures to discourage speculation were announced, ‘the euphoria on property has clearly cooled down in recent months, which should lead to more normalised property demand’, he added.

If the latest measures aren’t effective in curbing home price increases quickly enough, the government’s next step could be to reduce the limit on how much of a property’s price may be financed with a bank loan, from 80-90 per cent now, Mr Chua said.

Banks’ loan exposures to the property sector remain in line with historical trends, MAS said.

Its most recent aggregate bank lending data show that half of all Singapore-dollar bank loans at the end of September were to the broad property sector, with business loans to the building and construction sector making up 17.8 per cent of total bank lending, and consumer housing loans contributing another 31.6 per cent.

Source : Business Times - 10 November 2009

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Ho Bee, MCL sell 51 units at Parvis

Ho Bee, MCL sell 51 units at Parvis

(SINGAPORE) Ho Bee Investment and MCL Land last week sold 51 units at their Parvis condo at Holland Hill at an average price of about $1,480 per square foot (psf).

Unlike the recent trend of smallest units in a project selling out first, what happened at Parvis was quite the reverse, with four-bedroom apartments accounting for the most number of units sold - 19. This was followed by two-bedders (15 units) and three-bedders (14 units).

MCL and Ho Bee even sold three penthouses in response to buyer interest, although these were not part of the initial batch of 85 units they released for the preview.

They are now proceeding to do an official launch of the project at the weekend, when they will release more units in the freehold condo, which has a total of 248 units. The 12-storey project is being built on the former Holland Hill Mansions site.

Ho Bee general manager Chong Hock Chang revealed that ex-owners of Holland Hill Mansions had picked up seven apartments.

Singaporeans bought 39 of the 51 units sold. Permanent residents and foreigners acquired the remaining 12 units; they were mostly Malaysians, with some Indonesians, Mr Chong added.

The three penthouses sold comprise two single-level units of 2,300 square feet each, with three bedrooms and costing about $3.3 million apiece, and a 2,800-sq-ft duplex unit with four bedrooms, priced at about $4.1 million. The duplex was picked up by a foreigner while Singaporeans bought the two single-level penthouses.

Last month, Ho Bee released the freehold Trilight condo on Newton Road. To date, it has sold 61 units in the 30-storey project at an average price of $1,650 psf.

Source : Business Times - 10 November 2009

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nex mall to have roof garden dog run

nex mall to have roof garden dog run

By KALPANA RASHIWALA

(SINGAPORE) nex, the mall which is being built next to Serangoon MRT Station, will have a dog run - the first in a shopping centre here.

For pet lovers: Dog owners and their pets will have to use designated lifts in the mall or escalators outside. Dogs will not be allowed in other parts of the mall
The 2,000 sq ft run will be on the roof garden at the fourth level. ‘We hope that with the introduction of a designated dog area at nex, perhaps we can attract a new group of regular mall visitors who are pet lovers,’ says Tong Kok Wing, general manager of Guthrie Consultancy Services, which is providing project consultancy and marketing for nex.

The run has been set aside for dogs to exercise and play in an off-leash environment under the supervision of their owners. ‘Under guidelines stipulated by the Agri-Food and Veterinary Authority (AVA), certain breeds of dogs must be muzzled and the same will apply here,’ a Guthrie spokeswoman said.

To visit the dog run, dog owners and their pets will have to use designated lifts in the mall or escalators outside. Dogs will not be allowed in other parts of the mall.

A Pet Safari store will be on the same level as the dog park. The store, operated by Pet Lovers Centre - one of Singapore’s largest pet food retailers - will occupy more than 5,000 sq ft in a double-storey unit. It will offer pet food, accessories, veterinary services and pets for sale.

So far, more than 70 per cent of retail space at nex has been committed. Anchor tenants include Challenger, rivals Fairprice Xtra and Cold Storage, Courts, Isetan, Shaw Cineplex, Food Republic and Food Junction. The mall is being developed at an estimated cost of $1.3 billion and is slated to be completed by end-2010.

Other places in Singapore where there are dog runs include West Coast Park, Bishan Park and Pasir Ris Farmway.

Source : Business Times - 10 November 2009

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Katong Mall sold for $247.6m

Katong Mall sold for $247.6m

New owners will spend $55m to redevelop the property

By UMA SHANKARI

(SINGAPORE) A consortium of investors - including CapitaLand’s former head of retail Pua Seck Guan - has signed a deal to buy Katong Mall from Tuan Sing Holdings for $247.6 million.

New look and feel: Artist’s impression of a revamped Katong Mall, which has already started attracting new tenants
The deal marks one of the largest investment transactions in Singapore’s property market this year.

Katong Mall was acquired by Tuan Sing in June 2008 through a collective sale deal. The property group paid $219 million for the site then.

The consortium of investors - which comprises no more than six parties and includes corporate investors, institutional investors and Mr Pua - is acquiring Katong Mall via Perennial Katong Retail Trust, a private property trust set up for the purpose of buying the mall.

The transaction is expected to be completed by end-January 2010. The sale was brokered by Landmark Property Advisers.

Katong Mall, located at the junction of East Coast Road and Joo Chiat Road, is a four-storey building with three basement levels and with remaining lease of about 70 years. The new owners will spend $55 million to redevelop the property, which is expected to increase the mall’s net lettable area by about 20 per cent, from 172,170 square feet to over 206,000 sq ft.

Works, which are expected to last for 12 to 15 months, will commence sometime next year upon approval from the relevant authorities.

‘Katong Mall has immense potential to become a thriving lifestyle-cum-food and beverage hub in the Katong and Marine Parade precincts,’ said Mr Pua. ‘The mall enjoys an excellent location and is well-supported by large affluent population catchments from the surrounding Marine Parade, Katong and Joo Chiat areas.’

In addition, Katong Mall presents ’significant value creation opportunities’ which can be harnessed through good asset planning, appropriate repositioning and optimal tenancy remixing, he added.

There are already new tenants lined up.

The BreadTalk group has expressed keen interest in taking up leasable space at the revamped Katong Mall to house a series of its brands, such as Food Republic, Din Tai Fung, BreadTalk, Toast Box and Ramen Play.

Mr Pua’s Perennial Real Estate, a Singapore-registered real estate company, also has a majority stake in the company that will manage the mall.

Tuan Sing said that after taking into account the relevant acquisition cost, the book value of Katong Mall came to $194.8 million as at end-September 2009.

The expected gain from the transaction is estimated to be about $42.7 million, or 3.75 cents per ordinary share.

Source : Business Times - 10 November 2009

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Speculative bubble in property market a risk, says MAS

Speculative bubble in property market a risk, says MAS

By Yasmine Yahya/Ryan Huang

SINGAPORE: The rise in risk appetite and sharp rebound in financial markets since the start of the year may have outpaced economic fundamentals, according to the Monetary Authority of Singapore (MAS) in its annual Financial Stability Review on Monday.

The MAS noted that although Asia has bounced back from the financial crisis faster than expected, the global economic outlook remains uncertain.

This is because the nascent recovery in the world’s biggest economies – the United States, Japan and the European Union – has largely been dependent on government stimulus.

There is a risk that once these stimulus policies are withdrawn, their recovery will take a hit, thus affecting Asian economies, especially those that are export-dependent such as Singapore.

If economic recovery stalls, corporate earnings may come under renewed strain and corporate refinancing may become more difficult. MAS added that unemployment could also rise if the economy slows again.

Despite such uncertainties in the global outlook, Singapore’s property market has taken on its own dynamics. Private home prices rose almost 16 per cent in the third quarter – the highest quarterly increase in almost three decades.

This has led MAS to warn that a speculative bubble could form. Speaking with Channel NewsAsia, some analysts said that such a warning is timely.

David Cohen, director of Asian economic forecasting at Action Economics, said: “It’s probably healthy that people are talking about a potential bubble… It’s when people don’t talk about a bubble, (then) things get out of hand…

“The fact that policy makers, including the MAS, are taking notice and are preparing to take some steps to dampen the exuberance, that’s also welcome.”

MAS said although the government has already introduced several measures in September to temper the exuberance in the market and pre-empt a bubble, more measures might be needed.

But the nature and timing of such measures would have to be balanced against the still uncertain path of economic recovery. Professor Annie Koh, SMU’s Associate Dean (Lee Kong Chian School of Business), agreed: “To come up with a tight policy right now, it might kill the goose that kills the golden egg…

“So killing the golden goose means you come in with very pre-emptive measures that may make cost of funds too high, and people start getting back into risk aversion. You might even stop local consumption picking up, you might stop investments picking up, and that will derail all the signs of correction that we are hoping to move back on.”

On a brighter note, MAS said local banks and insurers have remained resilient through the crisis, maintaining high capital and liquidity ratios. It added that local banks’ earnings have dipped but remained above market expectations.

This, together with successful capital-raising efforts during the crisis, should enable the local banks to absorb further credit losses in the coming quarters.

- CNA/so/ir

Source : Channel NewsAsia - 10 November 2009

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HDB launches Westwood Ave site for sale by public tender

HDB launches Westwood Ave site for sale by public tender

By Mok Fei Fei, 938LIVE

SINGAPORE: The Housing and Development Board (HDB) said on Monday it has put up for tender a residential site at Westwood Avenue.

The site was placed on the reserve list and the sale process was triggered after a developer committed to submitting a minimum bid of S$15 million.

The land parcel has a site area of 14,098.8 square metres and is proposed for landed housing development.

Located within Jurong West town, HDB said the site is next to Westville landed housing estate and is easily accessible.

The tender will close at noon on December 8.

- 938LIVE/so

Source : Channel NewsAsia - 10 November 2009

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Katong Mall sold for S$247.55m to Perennial Katong Retail Trust

Katong Mall sold for S$247.55m to Perennial Katong Retail Trust

By Mok Fei Fei, 938LIVE

SINGAPORE: Mainboard-listed property and industrial services firm Tuan Sing said on Monday that it has sold Katong Mall for S$247.55 million.

Its wholly-owned subsidiary, Golden Cape Investments, sold the property to an unrelated third party, Perennial Katong Retail Trust.

Golden Cape secured 100 per cent ownership of Katong Mall through a successful bidding of S$219 million in an en bloc sale in June last year.

Prior to that, Golden Cape already owned 72 per cent of the total strata floor area of the Katong Mall.

Tuan Sing said the expected gain from the transaction, after deducting foreseeable expenses, is about S$42.7 million.

Located along East Coast Road, Katong Mall is a four-storey building with three basement levels. It has a remaining leasehold of about 70 years.

Perennial is headed by Pua Seck Guan, former head of CapitaLand’s retail unit, who put together the consortium to buy the mall.

- 938LIVE/so

Source : Channel NewsAsia - 10 November 2009

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Mapletree Logistics Trust to raise S$78m in private placement

Mapletree Logistics Trust to raise S$78m in private placement

By Irene Chan

SINGAPORE: Mapletree Logistics Trust said Monday it is raising net proceeds of about S$78 million in a private placement.

It is offering 115 million new units at a price of between 69 and 71 Singapore cents per unit.

The net proceeds will be used to finance two proposed acquisitions in Singapore amounting to S$78 million.

One of the acquisitions is a six-storey warehouse facility in the west of Singapore for S$43 million.

The second acquisition is a S$34-million multi-storey warehouse in the east of Singapore.

Both properties will be leased back to their vendors.

The manager of MapletreeLog said the tenants are of high quality and add to the stability of the REIT’s rental income.

The acquisitions will be accretive to MapletreeLog’s distribution per unit.

The manager said financing these acquisitions with equity will create sufficient debt headroom, and the company intends to use that to fund a third acquisition - a S$68-million warehouse facility in Japan.

- CNA/yb

Source : Channel NewsAsia - 10 November 2009

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