Deferred payment scheme: Up to 4,200 homes may be dumped

April 23, 2008

Deferred payment scheme: Up to 4,200 homes may be dumped

No URA figure on units sold but experts say 30% could be offloaded

By Jessica Cheam

THE hugely popular deferred payment scheme (DPS) - scrapped last year - may now be a thing of the past, but what sort of shadow will it cast on the Singapore property market going forward?

This has been the question on market watchers' lips since the Urban Redevelopment Authority (URA) revealed last week that as many as 29,250 homes offered under the DPS, including 5,760 unsold units as at the end of last month, will be completed from this year to 2013.

The concern is that speculators who bought homes under the DPS could dump their units at below-market prices, and this could drastically drag down overall sentiment.

But just how many units are at risk of being sold, and how big will the impact be?

The URA said while it has the number of units approved under DPS, it does not have data on how many units were actually sold under the scheme.

But four property experts The Straits Times spoke to estimated that up to 30 per cent of homes sold under the scheme last year could be held by speculators who may offload homes as the completion date nears. This translates to roughly 4,200 homes, going by a back-of-the-envelope calculation.

That is because out of the 23,490 units approved under the DPS and sold, only about 50 to 60 per cent - or roughly 14,000 - are likely to have been sold under the DPS, say property consultants and agency bosses from Knight Frank, Savills Singapore, HSR Property Group and PropNex.

The remaining 40 to 50 per cent were not bought under the DPS. Either developers did not eventually offer it, or buyers chose to pay via progressive payments, because buying a home with DPS usually means a further 2 to 3 per cent added to the price.

Next, property experts estimated that of the 14,000 or so homes sold under the DPS, about 20 to 30 per cent were probably sold to short-term investors or speculators.

This means that as a group, speculators could be holding on to as many as 4,200 units.

Why are speculators prone to selling their units as they near completion?

The DPS allowed buyers to pay just 10 or 20 per cent of the sale price upon purchase, with the rest due only when the unit received its temporary occupation permit (TOP) on completion.

Speculators would, therefore, typically opt for the DPS and hope to sell their units for a profit before the TOP. Any later and they would have to pay up for their homes by arranging for bank loans or other means of financing.

Industry experts were, however, divided on the impact these 4,200 homes would have on the market.

Some maintained that panic selling is not likely, given Singapore's strong economic outlook, which is backed by upcoming mega projects such as the integrated resorts and the 2010 Youth Olympics.

Mr Eric Cheng, HSR's executive director, noted that homes set to be completed this year and next are less likely to be sold indiscriminately, since their owners are probably sitting on healthy gains.

But those who bought at the peak of last year's buying frenzy, from April till October, are most likely to be at risk. These homes are likely to be completed after 2010.

Mr Ku Swee Yong, Savills' director of business development and marketing, said the sell-off will likely be staggered, because investors have different levels of holding power.

Also, investors have bigger coffers compared to the last property peak in 1996, he added.

But he warned that if too many units in a single large project get dumped at below-

market prices, overall market sentiment may be hit.

Mr Colin Tan, Chesterton International's head (research and consultancy), thinks that the potential risk created by the DPS is relatively high.

He added that data on homes sold under the DPS should be collected and made public, so investors know 'what they're getting themselves into'.

The DPS was scrapped abruptly last October after a decade-long run to remove excessive speculation and ensure financial prudence in the property market.



RUSHING IN: More than 8,000 units were sold at the peak of the property buying frenzy last year. -- PHOTO



jcheam@sph.com.sg



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Stage 3 of Circle Line set for Nov completion

April 23, 2008

Stage 3 of Circle Line set for Nov completion

By Christopher Tan

CONSTRUCTION of Stage 3 of the MRT Circle Line - a 5km, five-stop section linking Bartley and Marymount - will be completed as early as November.

The section, which will open for service in June next year, has entered a 'testing and commissioning' phase. This involves putting the system and infrastructure through tests and dry runs before it is handed over to the operator for trial runs.

Operator SMRT Corp said that it is assisting the Land Transport Authority (LTA) in the testing and commissioning, and 'progress has been good'.

Its spokesman added that the company was already running and maintaining the Kim Chuan Depot, where the Circle Line's driverless trains are parked. The depot is also the site of the line's operations control centre.

About 140 people have so far been hired, specifically for Stage 3 of the line and the Kim Chuan Depot, the spokesman said.

The Straits Times understands that the station nearest completion is Serangoon, an interchange station which joins a North-East Line station of the same name.

This station has the longest travellators in the entire MRT network. At 73m, they are about 20m longer than those in the Dhoby Ghaut interchange and the Changi Airport station, said the LTA.

Although Circle Line Stage 3 has only five stops - Marymount, Bishan, Lorong Chuan, Serangoon and Bartley - it is expected to be a boon to residents in the area.

For instance, those living in Serangoon will take only 25 minutes to get to Yishun if they change trains at Bishan, also an interchange station.

The alternative is to take a 45-minute bus ride or take the North-East Line to Dhoby Ghaut before transferring to the North-South Line.

Residents can also look forward to a new transport hub coming up at the Serangoon station. Like those in Toa Payoh and Ang Mo Kio, the Serangoon station will be connected to a bus interchange, so transfers from bus to train or vice versa can be done in air-conditioned comfort.

Property investment group Pramerica, which is planning a mega mall on 269,180 sq ft of land above the Serangoon station, is building the transport hub.

While things seem to be on track at Stage 3, sources said contractors and the LTA are still working to resolve the budget overruns triggered by the escalating cost of raw materials like concrete and steel.

'Prices are rising practically every month,'' an industry source said.

High-tensile steel, for instance, is now close to $1,400 per tonne, up from $1,235 in January and $753 in January last year.

Already, one contractor, Sweden's NCC International, is embroiled in a legal tussle with the LTA over stalled Circle Line works.

Last year, when NCC stopped work at the Tai Seng and MacPherson stations, the LTA had to appoint local firm Chye Joo Construction to finish the project.

Both parties have opted for arbitration, a closed-door court process, to settle the dispute over costs. It is believed to be the LTA's first arbitration case in over 20 years.

The process has not started because NCC is fighting to have foreign arbiters appointed, sources said.



PEOPLE MOVER: The Serangoon station on the Circle Line has the longest travellators in the MRT network. -- PHOTO: LTA

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JTC scraps plans to list assets in Reit

April 23, 2008

JTC scraps plans to list assets in Reit

Industrial landlord will instead sell 62 properties to a Temasek subsidiary for $1.71 billion

By Fiona Chan

JTC Corporation has scrapped its long-awaited plans to list its industrial assets in a property trust, citing volatile market conditions.

Instead, Singapore's biggest industrial landlord is selling the properties to Mapletree Investments, a subsidiary of Temasek Holdings, for $1.71 billion, JTC and Mapletree said in a joint statement yesterday.

Mapletree also said it might list the properties in a new trust, possibly combining them with some of its own assets.

The move caught market watchers by surprise, as Mapletree was hired in February to manage JTC's proposed billion-dollar real estate investment trust (Reit). The listing was set down for the middle of the year.

'It's definitely a surprise move. It's a complete U-turn from what JTC said earlier,' said Mr Tan Boon Leong, industrial director at property firm Colliers International.

'It may not sit too well with local and foreign investors, who were expecting a new Reit, to just go and sell off the properties like that. It may be seen as very 'Singapore Inc'.'

But Mr Dominic Peters, director of industrial services at Savills Singapore, said this was 'a better move than JTC having to list on its own because it is difficult to raise funds now'.

JTC said it would complete the sale of 62 properties, including 39 flatted factories and three business park buildings, to Mapletree by July 1. It added that this divestment option had been part of Mapletree's proposal to JTC when the former was appointed as manager of the future Reit, although it had not been disclosed then.

Mapletree has its own industrial property trust, Mapletree Logistics Trust, which is worth about $2.5 billion. Its biggest rival, Ascendas Reit, has a $4.2 billion industrial portfolio.

If Mapletree pumps all the JTC properties into its existing Reit, it could become 'the biggest industrial Reit around', said Mr Tan.

But Mapletree also has other unlisted assets in its industrial fund and could combine these with JTC's assets to form a whole new Reit.

Experts said one issue would be whether JTC's properties were a good fit with the Mapletree assets.

'I believe 95 per cent of JTC's assets are older flatted factories in housing estates with rentals of $1 to $2 per sq ft - a different portfolio from Mapletree,' said an industry watcher.

Colliers' Mr Tan said, however, that JTC's properties were all in 'great locations'. The tenants, though, should expect rentals to rise after Mapletree takes over, as it would have to improve asset yields before listing them.



FOR SALE: Among the industrial assets that JTC Corporation is selling to Mapletree Investments are The Synergy at the International Business Park (top) and a flatted factory property in Lower Delta Road (above). -- PHOTOS: ST FILE PHOTO, GAVIN ANDERSON




FOR SALE: Among the industrial assets that JTC Corporation is selling to Mapletree Investments are The Synergy at the International Business Park (top) and a flatted factory property in Lower Delta Road (above). -- PHOTOS: ST FILE PHOTO, GAVIN ANDERSON


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Analysts find GIC's views on recession too gloomy

April 23, 2008

Analysts find GIC's views on recession too gloomy

By Bryan Lee

THESE are turbulent times, but the world economy has seen worse in the past 30 years, according to economists who feel the Government of Singapore Investment Corporation's (GIC's) gloomy outlook is too bearish.

GIC deputy chairman Tony Tan said on Monday that the world could be facing its worst recession in three decades, if policymakers do not act soon to stem a global credit crisis.

He called for swift action to stabilise the United States housing market, which is at the heart of the problem. If left just to market forces, the recovery would be 'considerably more painful and long- drawn', he added.

Asian Development Bank managing director- general Rajat Nag disagrees with this prognosis.

'It's too pessimistic. We have to assume that things will get much worse in the US, Japan and elsewhere for this to happen,' he told reporters at a breakfast meeting. 'We are expecting an upturn in the US in the second half, when fiscal recovery measures kick in.'

UBS economist Paul Donovan said the downturn is certainly serious, as it is happening across the globe, but the recession in the early 1980s was far more severe, with US unemployment hitting a post-war high of 10.8 per cent in December 1982.

'I think 30 years is putting it a bit strongly. 1981 was very bad indeed, and that was synchronised... We are currently not like that,' he said.

Mr Donovan added that for individual economies, the downturns in the 1990s were worse. The US and Britain had tougher times in 1991, Europe in 1995 and Japan in the mid-1990s.

But he added that 'it is fair to say that this is a worse economic downturn than 2001'.

Analysts noted that despite the turmoil in the global banking sector, real economic activity has not been that badly hurt so far.

'The superlatives of 'the worst' and all that are more appropriate for the problems faced by financial markets,' said Action Economics economist David Cohen.

He pointed out that the recent International Monetary Fund forecast for world growth in gross domestic product of 3.7 per cent is about the average rate for the past 25 years.

'It doesn't sound like the worst disaster in three decades.'

As for the need for policy action, Mr Donovan said intervention is warranted, given the failure of several financial markets.

He hopes that the US government, on top of more rate cuts, will move to stabilise the financial sector so that it can 'get on with the process of repairing itself'.

A plan to bail out sub-prime home owners and their lenders, which is now being debated, could be helpful, he said.

Mr Cohen said the US Federal Reserve has already taken an unprecedented action by extending its role as 'lender of last resort' to investment banks.

He said it would be better to hold off more extreme measures until there is evidence that the downturn is getting more serious, given the uncertainty about the impact of financial sector problems on the overall economy.

bryanlee@sph.com.sg

ADDITIONAL REPORTING BY NICHOLAS FANG

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Refinance your home loan now

Refinance your home loan now

Doc Money tells you how

Putting off refinancing your mortgage could be a big mistake.

By Larry Haverkamp (Doc Money)
mail@AskDrMoney.com


22 April 2008

Putting off refinancing your mortgage could be a big mistake.

Last week, Mrs Money and I refinanced ours.

We used to live in an HDB flat and enjoyed HDB's 2.6 per cent interest. It is still the best loan deal in town.

If you have one, don't switch to a bank loan and don't even think about paying it off early.

That's because if you pay using your CPF, you are using money that earns 2.5 to 3.5 per cent interest to pay a loan that costs only 2.6 per cent. It's a bad move.

After 10 years in our beloved HDB flat, we moved to an executive condo. It is in a narrow niche between HDB and private property. Since we no longer qualify for an HDB loan, we now have to deal with the banks.

Ours had been charging us 3.5 per cent interest. Last month, the one-year lock-in ended and the bank sent a letter saying they were increasing our home loan rate to 3.75 per cent.

Whoa. I told Mrs Money: 'Something's not right here. Falling interest rates mean banks lower our fixed deposit rate. But they raise our home loan rate!'

INTEREST RATE FOR SUCKERS

I later found out 3.75 per cent is a 'sucker's' interest rate. It is for people who are told to pay more, so they do. They don't argue. They don't fight back. They don't refinance.

I called all the banks and got another surprise. They charge a lot less than the 3.75 per cent our bank was charging us.

The best deals are 'pegged rates'. They peg the interest to a benchmark like the Singapore inter-bank offer rate (Sibor) or the swap-offer rate (Sor). These rates are low and published daily in Business Times.

A typical pegged rate is the three-month Sor plus 1 per cent. Sor is now 1.35 per cent so you would pay 1.35 + 1 = 2.35 per cent per year.

I informed our bank that we would be moving our home loan to a bank charging us only 2.35 per cent.

Our bank suddenly became very friendly and offered us the same good deal.

Like magic, our home loan rate was cut almost by half, from 3.75 per cent to 2.35 per cent. Without my asking, the bank also waived its $500 loan conversion fee.

As we were leaving, I asked a throw away question: 'By the way, is that your lowest rate?'

The banker hesitated, then said: 'Actually, our lowest rate is not the 2.35 per cent you are paying. It is 2 per cent (Sor + 0.65 per cent). But it only applies to new customers. Sorry.'

I explained that I could go to another bank where I would be considered a new customer and entitled to their special rate. Our bank executive said: 'Oh... well... that's not necessary.' Then he gave us the lower home loan rate of 2 per cent.

TWO LESSONS

For me, a big lesson learnt has been that banks deal with thousands of customers. Customers, however, talk to just a few banks. It is no contest.

The banks have developed tactics that we cannot begin to match.

On the other hand, consumers are not powerless. It helps to know that other banks are hungry for our business. Competition makes the contest a bit fairer.

The second lesson is that life is unfair. It favours the rich. The lowest rates - 2 per cent - are reserved for private home loans.

For HDB flats, bank borrowers pay more. Variable rate loans start at 3.5 per cent.

Shop around and you can negotiate down to 3 per cent. With a two or three year lock-in, you can get an even lower interest rate, but not as low as for private property.


--------------------------------------------------------------------------------

Shop and save

Bank phone numbers

Citibank 6238 8838

DBS 6333 0033

Hong Leong 6416 2777

HSBC 6216 9081

Maybank 1800 629 2265

OCBC 1800 438 3333

Standard Chartered 1800 747 7000

UOB 1800 222 2121

HDB 1800 866 3060



Refinance your home loan now
TNP Illustration: SIMON ANG

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