Nov 22, 2009
YOUR LETTERS
Cost cap on lift upgrading
I refer to the letter by Mr Michael Yeo, 'Upgrade lifts in ineligible blocks too' (Nov 8).
The Government has set a cost cap of $30,000 for each benefiting unit as an eligibility criterion for the Lift Upgrading Programme (LUP).� The purpose of the cost cap is to maximise the use of the LUP budget, to allow as many residents as possible to benefit from the programme.
This cost cap is necessary because the cost of lift upgrading can be very high, and it is not realistic to provide lift upgrading at any cost. In some cases, the cost can even exceed $100,000 per benefiting unit, or a substantial proportion of the value of the flat.
When the LUP was first introduced in 2001, about 1,000 blocks exceeded the LUP cost cap and were not eligible for the programme. Over the years, HDB has introduced innovative and cost-effective lift solutions so that more blocks can be eligible for LUP.
Today, we have reduced the number of ineligible blocks to just over 200. The HDB will continue to actively explore alternative cost-effective solutions so that more blocks can become eligible for LUP.
HDB is mindful of the need to keep the cost of LUP low so that more lifts can qualify for the programme.
We have reduced the extent of finishes at lift lobbies. We have also made use of bulk procurement arrangements to procure lifts and building contracts to reap economies of scale.
Chee Kheng Chye
Deputy director (Upgrading Programmes Management)
Housing & Development Board
Sunday, November 22, 2009
ST : More condos let you walk on air
Nov 22, 2009
More condos let you walk on air
Developers are tempting buyers with skybridges which can house gyms and gardens or host parties
By Terrence Voon
One Shenton, an upcoming condo development, will feature three skybridges connecting two towers. -- PHOTO: CITY DEVELOPMENTS LIMITED
The sky is now a playground for condo residents.
More developers are touting skybridges in new projects, tempting buyers with the promise of greenery, meals and even workouts in mid-air.
These gravity-defying structures, made famous by HDB's Pinnacle@Duxton, will pop up in Lincoln Suites, One Shenton, Sky@eleven and Silversea.
The Quartz near Buangkok MRT station, completed this year, has one too.
One Shenton has three skybridges connecting a 50-storey skyscraper to a smaller 43-storey tower.
Two of the skybridges are part of private residential units, which can be used for dinner parties, while the third, on the 24th floor, features a gym which can be used by all residents.
Said Mr Anthony Chia, deputy general manager of design and projects for City Developments: 'It's an experience akin to the excitement on the Petronas Towers viewing gallery or crossing the Golden Gate Bridge in San Francisco.'
Lincoln Suites, a recently launched offering in Novena, also boasts a gym in the sky. Built using tempered glass and steel, the skybridge on the 24th level has a see-through floor so residents can get a workout with the world literally at their feet.
In the case of Silversea in Marine Parade, the aim was to create a common space on the 11th floor for residents to mingle. 'The design rationale was to link each pair of towers with bridges so that an uncluttered, column-free common space for the residents is created,' said Mr Chng Kiong Huat, executive director of development and planning at Far East Organization.
At Pinnacle@Duxton, 12 skybridges link seven residential blocks on the 50th and 26th floors, forming continuous sky gardens that offer a green sanctuary for residents.
A check with the Urban Redevelopment Authority (URA) and the Building and Construction Authority showed that there are no specific rules that govern the construction of skybridges in high-rise buildings.
Developers are given free rein, as long as they conform to standard building design codes.
But these lofty structures do not come cheap.
Developers estimate that it can cost more than $200,000 to build one, depending on the materials used and design complexity.
Fully covered skybridges are considered part of a condominium's gross floor area, which is pre-determined by the URA.
This means that the floor area occupied by a skybridge could have been used for another apartment unit, giving developers additional income.
At Lincoln Suites, the 32 sq m taken up by the skybridge could have been used for a $700,000 studio apartment. 'It's an extra cost but we wanted something iconic that would be the talk of the town,' said Mr Francis Koh, CEO and group managing director of Koh Brothers, one of four developers involved in the project.
'Buyers today are more sophisticated, so it is important to give them something extra.'
Developers said buyers are swooning over skybridges, and plan to build more.
Even public housing is reaching for the sky.
According to an HDB spokesman, there will be more skybridges soon as part of plans to rejuvenate the heartland. They will likely be seen at the upcoming Dawson estate in Queenstown.
But despite the soaring appeal of such bridges, prospective buyers said they will look at other factors first before signing off on a purchase.
Said corporate trainer Tay Shun Kiat, 42, who is looking for a private apartment for his mother: 'It looks really nice, but location and price are still most important to me.'
More condos let you walk on air
Developers are tempting buyers with skybridges which can house gyms and gardens or host parties
By Terrence Voon
One Shenton, an upcoming condo development, will feature three skybridges connecting two towers. -- PHOTO: CITY DEVELOPMENTS LIMITED
The sky is now a playground for condo residents.
More developers are touting skybridges in new projects, tempting buyers with the promise of greenery, meals and even workouts in mid-air.
These gravity-defying structures, made famous by HDB's Pinnacle@Duxton, will pop up in Lincoln Suites, One Shenton, Sky@eleven and Silversea.
The Quartz near Buangkok MRT station, completed this year, has one too.
One Shenton has three skybridges connecting a 50-storey skyscraper to a smaller 43-storey tower.
Two of the skybridges are part of private residential units, which can be used for dinner parties, while the third, on the 24th floor, features a gym which can be used by all residents.
Said Mr Anthony Chia, deputy general manager of design and projects for City Developments: 'It's an experience akin to the excitement on the Petronas Towers viewing gallery or crossing the Golden Gate Bridge in San Francisco.'
Lincoln Suites, a recently launched offering in Novena, also boasts a gym in the sky. Built using tempered glass and steel, the skybridge on the 24th level has a see-through floor so residents can get a workout with the world literally at their feet.
In the case of Silversea in Marine Parade, the aim was to create a common space on the 11th floor for residents to mingle. 'The design rationale was to link each pair of towers with bridges so that an uncluttered, column-free common space for the residents is created,' said Mr Chng Kiong Huat, executive director of development and planning at Far East Organization.
At Pinnacle@Duxton, 12 skybridges link seven residential blocks on the 50th and 26th floors, forming continuous sky gardens that offer a green sanctuary for residents.
A check with the Urban Redevelopment Authority (URA) and the Building and Construction Authority showed that there are no specific rules that govern the construction of skybridges in high-rise buildings.
Developers are given free rein, as long as they conform to standard building design codes.
But these lofty structures do not come cheap.
Developers estimate that it can cost more than $200,000 to build one, depending on the materials used and design complexity.
Fully covered skybridges are considered part of a condominium's gross floor area, which is pre-determined by the URA.
This means that the floor area occupied by a skybridge could have been used for another apartment unit, giving developers additional income.
At Lincoln Suites, the 32 sq m taken up by the skybridge could have been used for a $700,000 studio apartment. 'It's an extra cost but we wanted something iconic that would be the talk of the town,' said Mr Francis Koh, CEO and group managing director of Koh Brothers, one of four developers involved in the project.
'Buyers today are more sophisticated, so it is important to give them something extra.'
Developers said buyers are swooning over skybridges, and plan to build more.
Even public housing is reaching for the sky.
According to an HDB spokesman, there will be more skybridges soon as part of plans to rejuvenate the heartland. They will likely be seen at the upcoming Dawson estate in Queenstown.
But despite the soaring appeal of such bridges, prospective buyers said they will look at other factors first before signing off on a purchase.
Said corporate trainer Tay Shun Kiat, 42, who is looking for a private apartment for his mother: 'It looks really nice, but location and price are still most important to me.'
ST : Private home buyers go slow
Nov 22, 2009
property
Private home buyers go slow
Year-end lull hits auction deals and new launches as buying sentiment cools
By Joyce Teo
The posh 99-year leasehold Marina Bay Suites is set to hold a private preview on Wednesday. It is likely to be the last major condo launch this year. -- PHOTO: MARINA BAY FINANCIAL CENTRE
The auction market is seeing more sellers eager to beat the year-end lull as sentiment cools.
However, buyers do not seem to be in a hurry to commit.
Knight Frank's auction on Thursday offered 23 residential properties for sale - its longest list this year, said executive director for auctions Mary Sai.
Among them was a rare 999-year leasehold, two-storey house in Pasir Ris Road that sits on 8,007 sq ft of land and faces a seafront park.
Even so, the bids came in below the opening price of $4.5 million, and the property was not sold. The counter offer was $4 million and the closing bid $4.24 million.
Only one residential property was sold at the auction. It was a low-floor, two-bedroom unit in freehold Regent Court which was sold for $700,000.
'The auction attracted a large crowd of observers, but the results were disappointing as buyers remained cautious,' said Ms Sai.
'Of late, potential buyers have been making counter offers that are 10 to 20 per cent below the opening bids.'
Whether the sale goes through depends on whether the seller can accept such prices, she said.
These are not mortgagee sales.
Mr Shaun Poh, DTZ's senior director for investment advisory services and auctions, said the mild slowdown in the auction market recently is partly a reflection of what is happening in the overall market.
Owners want to sell now as the school holidays are coming, and they worry that people might no longer be in the buying mood, said Ms Sai.
She added: 'With all the government announcements, some also think it is better to sell now than later.'
The Government came out in mid-September with measures to calm the property market.
Two months later, Finance Minister Tharman Shanmugaratnam warned that the Government would not hesitate to use every tool at its disposal in a calibrated fashion to prevent another boom.
Said Ms Sai: 'People are still keen to buy, but they have become more cautious since there has been a strong word from the Government that there is no need to panic as there is enough supply.'
At Colliers International, deputy managing director of agency and business services Grace Ng said it had received fewer inquiries about properties put up for auction since the government announcements.
The number of auction deals has also fallen since prices have risen, she said.
'At the beginning of the year, sellers were asking for prices above valuation, and buyers couldn't get bank support,' she said. 'Now, they are asking for prices at valuation level, but values have since gone up, so there is some resistance.'
With the slowdown in the market, buying activities might pick up only next year, industry observers said.
The new launch market is fairly quiet too, with the exception of the posh Marina Bay Suites, which will hold a private preview on Wednesday.
The launch of the 99-year leasehold project - by a consortium made up of Keppel Land, Cheung Kong Holdings and Hongkong Land - has been delayed for nearly two years because of the global crisis. It has 221 large units (three- and four-bedders). The developers have not disclosed the prices.
CBRE's executive director for residential properties, Mr Joseph Tan, said Marina Bay Suites is likely to be the last major condo launch this year.
property
Private home buyers go slow
Year-end lull hits auction deals and new launches as buying sentiment cools
By Joyce Teo
The posh 99-year leasehold Marina Bay Suites is set to hold a private preview on Wednesday. It is likely to be the last major condo launch this year. -- PHOTO: MARINA BAY FINANCIAL CENTRE
The auction market is seeing more sellers eager to beat the year-end lull as sentiment cools.
However, buyers do not seem to be in a hurry to commit.
Knight Frank's auction on Thursday offered 23 residential properties for sale - its longest list this year, said executive director for auctions Mary Sai.
Among them was a rare 999-year leasehold, two-storey house in Pasir Ris Road that sits on 8,007 sq ft of land and faces a seafront park.
Even so, the bids came in below the opening price of $4.5 million, and the property was not sold. The counter offer was $4 million and the closing bid $4.24 million.
Only one residential property was sold at the auction. It was a low-floor, two-bedroom unit in freehold Regent Court which was sold for $700,000.
'The auction attracted a large crowd of observers, but the results were disappointing as buyers remained cautious,' said Ms Sai.
'Of late, potential buyers have been making counter offers that are 10 to 20 per cent below the opening bids.'
Whether the sale goes through depends on whether the seller can accept such prices, she said.
These are not mortgagee sales.
Mr Shaun Poh, DTZ's senior director for investment advisory services and auctions, said the mild slowdown in the auction market recently is partly a reflection of what is happening in the overall market.
Owners want to sell now as the school holidays are coming, and they worry that people might no longer be in the buying mood, said Ms Sai.
She added: 'With all the government announcements, some also think it is better to sell now than later.'
The Government came out in mid-September with measures to calm the property market.
Two months later, Finance Minister Tharman Shanmugaratnam warned that the Government would not hesitate to use every tool at its disposal in a calibrated fashion to prevent another boom.
Said Ms Sai: 'People are still keen to buy, but they have become more cautious since there has been a strong word from the Government that there is no need to panic as there is enough supply.'
At Colliers International, deputy managing director of agency and business services Grace Ng said it had received fewer inquiries about properties put up for auction since the government announcements.
The number of auction deals has also fallen since prices have risen, she said.
'At the beginning of the year, sellers were asking for prices above valuation, and buyers couldn't get bank support,' she said. 'Now, they are asking for prices at valuation level, but values have since gone up, so there is some resistance.'
With the slowdown in the market, buying activities might pick up only next year, industry observers said.
The new launch market is fairly quiet too, with the exception of the posh Marina Bay Suites, which will hold a private preview on Wednesday.
The launch of the 99-year leasehold project - by a consortium made up of Keppel Land, Cheung Kong Holdings and Hongkong Land - has been delayed for nearly two years because of the global crisis. It has 221 large units (three- and four-bedders). The developers have not disclosed the prices.
CBRE's executive director for residential properties, Mr Joseph Tan, said Marina Bay Suites is likely to be the last major condo launch this year.
ST : Sports Hub: Vivian asks for patience
Nov 22, 2009
Sports Hub: Vivian asks for patience
Minister says delay is deliberate, so as to get best deal for construction of project
By Wang Meng Meng
Present at the unveiling of Youth Olympic Games mascots Lyo (in orange) and Merly at Suntec City yesterday were (from left) Senior Parliamentary Secretary of MCYS Teo Ser Luck , Dr Vivian Balakrishnan (with his son), YOG organising committee chairman Ng Ser Miang and deputy chairman Niam Chiang Meng. -- ST PHOTO: DESMOND FOO
Please be patient and Singapore will get a Sports Hub everyone can be proud of.
That was Dr Vivian Balakrish-nan's response to queries on the Singapore Sports Hub Consor-tium's (SSHC) recent decision to launch a financing competition to raise money for the delayed project.
The completion of the Sports Hub, to be built on the site of the National Stadium in Kallang, has been pushed back tentatively to late 2013 or early 2014.
The Minister for Community Development, Youth and Sports, who was speaking on the sidelines at the unveiling of the Youth Olympic Games (YOG) mascots, appealed for understanding.
'I understand Singaporeans' impatience to get this iconic project off the ground. I also want to see a wonderful new Sports Hub for all Singaporeans.
'But I also ask for your understanding to let me do this properly, carefully and get value for money. Then, in due time, this is something which we can all be proud of,' he said.
Due to the recession, the $1.87 billion project has encountered funding problems.
Construction is expected to cost $1.2 billion, with the money raised from the private sector. It is understood that the consortium has yet to raise the money necessary for construction to begin.
Dr Balakrishnan said: 'The delay is unfortunate. It's not something we wanted to happen. It was caused by, first, inflation in construction costs. Secondly, the fact there is a global financial crisis, credit became a problem. I decided and deliberately delayed it in order to get the best deal possible for Singapore.
'Yes, this has been a deliberate decision but now the signs are positive again. This is now exactly the right time to proceed and the first step is to conduct this competition for financing. I'm sure we will get good offers placed on the table and I'm sure we can then proceed.'
The SSHC had hoped to pull down the National Stadium by the first quarter of next year, but this is dependent on the final contract being signed first.
Demolition will take about three months. Construction can then begin and will take about three years.
Since the announcement of the project in 2005, the completion date has been pushed back repeatedly from next year to 2011, 2012, and then 2013.
Singapore's hosting of the South-east Asia Games in 2013 is now uncertain, as the biennial event was supposed to showcase the Hub.
Yesterday, the two YOG official mascots were unveiled at Suntec City. Named 'Lyo' after the lion and 'Merly' after the Merlion, the duo will promote the Olympic va-lues of excellence, friendship and respect through their acts and stories.
They will also be promoting the inaugural YOG - to be hosted at various venues around Singapore next August - by visiting five countries on five continents. The destinations have yet to be confirmed.
Both mascots have been given background stories.
Lyo, whose mane resembles the Olympic flame, stands for 'Lion of the Youth Olympics'. He is a basketball enthusiast and a guitarist and loves dishes like chilli crabs and chicken rice.
Merly got her name from 'mer' (meaning the sea) while 'l' and 'y' stand for 'liveliness' and 'youthfulness' respectively. She dreams of becoming an environmental scientist, and the vegetarian's favourite dessert is ice kacang.
Sports Hub: Vivian asks for patience
Minister says delay is deliberate, so as to get best deal for construction of project
By Wang Meng Meng
Present at the unveiling of Youth Olympic Games mascots Lyo (in orange) and Merly at Suntec City yesterday were (from left) Senior Parliamentary Secretary of MCYS Teo Ser Luck , Dr Vivian Balakrishnan (with his son), YOG organising committee chairman Ng Ser Miang and deputy chairman Niam Chiang Meng. -- ST PHOTO: DESMOND FOO
Please be patient and Singapore will get a Sports Hub everyone can be proud of.
That was Dr Vivian Balakrish-nan's response to queries on the Singapore Sports Hub Consor-tium's (SSHC) recent decision to launch a financing competition to raise money for the delayed project.
The completion of the Sports Hub, to be built on the site of the National Stadium in Kallang, has been pushed back tentatively to late 2013 or early 2014.
The Minister for Community Development, Youth and Sports, who was speaking on the sidelines at the unveiling of the Youth Olympic Games (YOG) mascots, appealed for understanding.
'I understand Singaporeans' impatience to get this iconic project off the ground. I also want to see a wonderful new Sports Hub for all Singaporeans.
'But I also ask for your understanding to let me do this properly, carefully and get value for money. Then, in due time, this is something which we can all be proud of,' he said.
Due to the recession, the $1.87 billion project has encountered funding problems.
Construction is expected to cost $1.2 billion, with the money raised from the private sector. It is understood that the consortium has yet to raise the money necessary for construction to begin.
Dr Balakrishnan said: 'The delay is unfortunate. It's not something we wanted to happen. It was caused by, first, inflation in construction costs. Secondly, the fact there is a global financial crisis, credit became a problem. I decided and deliberately delayed it in order to get the best deal possible for Singapore.
'Yes, this has been a deliberate decision but now the signs are positive again. This is now exactly the right time to proceed and the first step is to conduct this competition for financing. I'm sure we will get good offers placed on the table and I'm sure we can then proceed.'
The SSHC had hoped to pull down the National Stadium by the first quarter of next year, but this is dependent on the final contract being signed first.
Demolition will take about three months. Construction can then begin and will take about three years.
Since the announcement of the project in 2005, the completion date has been pushed back repeatedly from next year to 2011, 2012, and then 2013.
Singapore's hosting of the South-east Asia Games in 2013 is now uncertain, as the biennial event was supposed to showcase the Hub.
Yesterday, the two YOG official mascots were unveiled at Suntec City. Named 'Lyo' after the lion and 'Merly' after the Merlion, the duo will promote the Olympic va-lues of excellence, friendship and respect through their acts and stories.
They will also be promoting the inaugural YOG - to be hosted at various venues around Singapore next August - by visiting five countries on five continents. The destinations have yet to be confirmed.
Both mascots have been given background stories.
Lyo, whose mane resembles the Olympic flame, stands for 'Lion of the Youth Olympics'. He is a basketball enthusiast and a guitarist and loves dishes like chilli crabs and chicken rice.
Merly got her name from 'mer' (meaning the sea) while 'l' and 'y' stand for 'liveliness' and 'youthfulness' respectively. She dreams of becoming an environmental scientist, and the vegetarian's favourite dessert is ice kacang.
ST : The dollars and sense of home loans
Nov 22, 2009
The dollars and sense of home loans
Get a package that matches your income profile and appetite for risk
By Lorna Tan, Senior Correspondent
Home buyers were recently advised not to throw caution to the wind in their anticipation of fulfilling the Singapore dream of snapping up a private unit.
The Monetary Authority of Singapore (MAS) earlier this month flagged two scenarios in which the private property sector could falter. Lately, it has levelled off somewhat, after a strong rebound.
MAS warned that property buyers could not assume that interest rates on home loans will stay at their current rock bottom levels indefinitely.
If the economy rebounds, interest rates are more likely to rise over the longer term, MAS cautioned.
This, in turn, would drive up monthly instalments on home loans that are not fixed.
If that happens, any home borrower who over-extended himself with a big loan could face serious problems.
The second scenario that MAS laid out: Home buyers could suffer losses from falling home prices as a result of a possible market correction if economic growth proves weaker than expected.
The Sunday Times takes a closer look at key factors to weigh up when taking out a home loan.
Affordability issues
In order to ensure prudent financial planning, Mr Dennis Ng, spokesman for www.HousingLoanSG.com - a mortgage consultancy portal - suggests that home buyers track their total monthly debt repayment obligations.
These repayments should not exceed 35 per cent of their household income.
For example, suppose your car loan instalment is $800, other monthly bills are $1,200 and your housing loan instalment is $3,000. That adds up to a total monthly debt repayment of $5,000.
Assume a monthly household income of $10,000.
That means half your income is going into debts. In the language of financial experts, that is called a debt-servicing ratio of 50 per cent.
That is not advisable as it is well above the maximum recommended debt-servicing ratio of 35 per cent.
Mortgage consultancy firm Global Creatif Financial helps its clients work out the maximum amount they can borrow. Firstly, it takes into account its
clients' individual and/or combined income (with spouse) derived from employment, trade, property or other income.
This amount would then be used to deduct monthly commitments including mortgage loans, car loans, bank loans, overdraft and credit card bills, said its managing director Annie Lim.
From there, Global Creatif calculates how much cash the client has left after fulfilling his monthly obligations. Using a desired loan term and an applied interest rate, it calculates the lump sum that the client can potentially borrow.
Another tip from Mr Ng is that prospective home buyers should not assess the affordability of a home they are eyeing by using current low interest rates.
Before the downturn in 2007, home loan interest rates were hovering at a higher rate of about 4 per cent.
So to be prudent, home buyers should calculate their instalments based on a higher interest rate of, say, 4 per cent instead. This would give them a better sense of whether they could afford the instalments if rates change.
Home buyers should set aside sufficient funds to meet future instalments should interest rates move up.
One's long-term repayment ability should take into account the stability of your source of income and the available Central Provident Fund (CPF) savings for the down payment and monthly loan servicing, said a spokesman for United Overseas Bank (UOB).
Consider a 25-year housing loan of $500,000 at a current rate of 2 per cent.
If indeed rates rise to 4 per cent, then monthly mortgage instalments will jump 24.5 per cent or about $520.
Using the same rate revision, if the loan is a higher $800,000, the hike in monthly instalments is about $830.
If the property is meant for investment and you are using the rental earned to fund your monthly loan instalments, you might want to factor in a possible drop in rental rates, added Mr Ng.
This is because rental rates fluctuate and it is only prudent to be prepared for the possibility of lower rental income to ensure you can still afford the instalments if rental rates fall.
Mr Ng advised home buyers to factor in a possible 10 to 20 per cent drop in rental.
Let's assume that the property is rented out at $3,000 a month. Rental falls of 10 and 20 per cent translate to lower rentals of $2,700 and $2,400, respectively.
Whether you are buying a house to live in or as an investment, it is prudent to have sufficient cash or CPF savings on standby to pay for at least six months of housing loan instalments in the event of unforeseen circumstances.
This means that if your loan instalment is $3,000, you should have $18,000 in cash and/or CPF monies set aside to cover six months of instalments.
Interest rates movement
Financial experts generally believe that home loan rates will stay low for the next six to 12 months.
Singapore home loan interest rates are very much affected by the Singapore Inter-bank Offered Rate (Sibor), pointed out Mr Ng. 'Sibor is in turn affected by two factors, United States Federal Reserve interest rates and the liquidity in the Singapore banking system. And the US has indicated it is likely to keep interest rates low for the time being,' he said.
Sibor is the interest rate at which banks lend to one another and is partly influenced by the supply of and demand for funds.
UOB said it expects Sibor rates to remain steady at the current level of 0.7 per cent for the next six months.
However, in the event that the US economy recovers, the US Federal Reserve might increase interest rates. If that happens in, say, about a year's time, interest rates here would likely rise as well.
Mr Ng recalled that Sibor was 3.58 per cent in 2007 and above 2 per cent last year. It dropped below 1 per cent only this year when the US cut interest rates to a historic low of 0.25 per cent. For the last 10 months, it has been about 0.7 per cent. As a result, some consumers may have the misconception that Sibor is always below 1 per cent.
'Consumers need to be mentally prepared for Sibor to go up to 2 per cent in more than one year's time,' he cautioned.
Another indication that home loan rates are likely to remain low, at least in the coming months, is the introduction of low one-year fixed rate packages by the financial institutions, said Ms Lim.
'The general sentiment in the market is that rates will remain low for the next 12 months,' she said.
Whether rates will indeed start creeping upwards a year from now depends on how long it takes for the global economy to right itself, but Ms Lim is certain that rates will move upwards more than three years from now.
Fixed or variable home loan packages
Naturally, the benefit of a fixed package is certainty: You know how much your instalments are for a set period.
The key difference between most fixed rate and variable packages is that the former comes with a lock-in period where you are penalised for any premature exit from the package.
Variable packages usually do not impose a lock-in period. Therefore they are recommended for clients who are not sure if they would be holding on to their properties. A no-lock-in package is deemed to be more suitable as the home buyer is not slapped with a penalty payment if he sells his property and redeems his loan. Also, variable packages tend to feature lower interest rates than most fixed rate packages, noted Ms Lim.
'These variable packages are also suitable for clients who feel that they are comfortable with any short-term fluctuations and/or feel that rates will generally remain low in the short term,' she added.
However, a variable rate, as the name implies, means that the bank can change the interest rate any time. For example, a three-month rate would re-set every three months. At the end of each three-month period, it could be higher or lower and you would pay more or less accordingly.
Fixed rate packages are suitable for clients who want certainty and peace of mind, and are not comfortable with rate fluctuations.
If you are unlikely to sell your house in the next three years, Mr Ng suggested that now might be a good time to lock in the low interest rates. You might want to consider fixing interest rates for the next two to three years.
Looking at present circumstances, both Mr Ng and Ms Lim would go for variable packages with no lock-in, as the sentiment is that rates would remain low at least for the next one year.
'Since Sibor is unlikely to go up in the next six to 12 months, one might be better off opting for a one-month or three-month Sibor package. In the event that the Sibor starts rising, one can opt to switch to a 12-month Sibor package,' said Mr Ng.
One-month Sibor is currently at 0.4375 per cent, three-month Sibor is 0.68 per cent while 12-month Sibor is 0.9 per cent. So if you choose the latter, you might end up paying more interest while interest rates are still low.
lorna@sph.com.sg
The dollars and sense of home loans
Get a package that matches your income profile and appetite for risk
By Lorna Tan, Senior Correspondent
Home buyers were recently advised not to throw caution to the wind in their anticipation of fulfilling the Singapore dream of snapping up a private unit.
The Monetary Authority of Singapore (MAS) earlier this month flagged two scenarios in which the private property sector could falter. Lately, it has levelled off somewhat, after a strong rebound.
MAS warned that property buyers could not assume that interest rates on home loans will stay at their current rock bottom levels indefinitely.
If the economy rebounds, interest rates are more likely to rise over the longer term, MAS cautioned.
This, in turn, would drive up monthly instalments on home loans that are not fixed.
If that happens, any home borrower who over-extended himself with a big loan could face serious problems.
The second scenario that MAS laid out: Home buyers could suffer losses from falling home prices as a result of a possible market correction if economic growth proves weaker than expected.
The Sunday Times takes a closer look at key factors to weigh up when taking out a home loan.
Affordability issues
In order to ensure prudent financial planning, Mr Dennis Ng, spokesman for www.HousingLoanSG.com - a mortgage consultancy portal - suggests that home buyers track their total monthly debt repayment obligations.
These repayments should not exceed 35 per cent of their household income.
For example, suppose your car loan instalment is $800, other monthly bills are $1,200 and your housing loan instalment is $3,000. That adds up to a total monthly debt repayment of $5,000.
Assume a monthly household income of $10,000.
That means half your income is going into debts. In the language of financial experts, that is called a debt-servicing ratio of 50 per cent.
That is not advisable as it is well above the maximum recommended debt-servicing ratio of 35 per cent.
Mortgage consultancy firm Global Creatif Financial helps its clients work out the maximum amount they can borrow. Firstly, it takes into account its
clients' individual and/or combined income (with spouse) derived from employment, trade, property or other income.
This amount would then be used to deduct monthly commitments including mortgage loans, car loans, bank loans, overdraft and credit card bills, said its managing director Annie Lim.
From there, Global Creatif calculates how much cash the client has left after fulfilling his monthly obligations. Using a desired loan term and an applied interest rate, it calculates the lump sum that the client can potentially borrow.
Another tip from Mr Ng is that prospective home buyers should not assess the affordability of a home they are eyeing by using current low interest rates.
Before the downturn in 2007, home loan interest rates were hovering at a higher rate of about 4 per cent.
So to be prudent, home buyers should calculate their instalments based on a higher interest rate of, say, 4 per cent instead. This would give them a better sense of whether they could afford the instalments if rates change.
Home buyers should set aside sufficient funds to meet future instalments should interest rates move up.
One's long-term repayment ability should take into account the stability of your source of income and the available Central Provident Fund (CPF) savings for the down payment and monthly loan servicing, said a spokesman for United Overseas Bank (UOB).
Consider a 25-year housing loan of $500,000 at a current rate of 2 per cent.
If indeed rates rise to 4 per cent, then monthly mortgage instalments will jump 24.5 per cent or about $520.
Using the same rate revision, if the loan is a higher $800,000, the hike in monthly instalments is about $830.
If the property is meant for investment and you are using the rental earned to fund your monthly loan instalments, you might want to factor in a possible drop in rental rates, added Mr Ng.
This is because rental rates fluctuate and it is only prudent to be prepared for the possibility of lower rental income to ensure you can still afford the instalments if rental rates fall.
Mr Ng advised home buyers to factor in a possible 10 to 20 per cent drop in rental.
Let's assume that the property is rented out at $3,000 a month. Rental falls of 10 and 20 per cent translate to lower rentals of $2,700 and $2,400, respectively.
Whether you are buying a house to live in or as an investment, it is prudent to have sufficient cash or CPF savings on standby to pay for at least six months of housing loan instalments in the event of unforeseen circumstances.
This means that if your loan instalment is $3,000, you should have $18,000 in cash and/or CPF monies set aside to cover six months of instalments.
Interest rates movement
Financial experts generally believe that home loan rates will stay low for the next six to 12 months.
Singapore home loan interest rates are very much affected by the Singapore Inter-bank Offered Rate (Sibor), pointed out Mr Ng. 'Sibor is in turn affected by two factors, United States Federal Reserve interest rates and the liquidity in the Singapore banking system. And the US has indicated it is likely to keep interest rates low for the time being,' he said.
Sibor is the interest rate at which banks lend to one another and is partly influenced by the supply of and demand for funds.
UOB said it expects Sibor rates to remain steady at the current level of 0.7 per cent for the next six months.
However, in the event that the US economy recovers, the US Federal Reserve might increase interest rates. If that happens in, say, about a year's time, interest rates here would likely rise as well.
Mr Ng recalled that Sibor was 3.58 per cent in 2007 and above 2 per cent last year. It dropped below 1 per cent only this year when the US cut interest rates to a historic low of 0.25 per cent. For the last 10 months, it has been about 0.7 per cent. As a result, some consumers may have the misconception that Sibor is always below 1 per cent.
'Consumers need to be mentally prepared for Sibor to go up to 2 per cent in more than one year's time,' he cautioned.
Another indication that home loan rates are likely to remain low, at least in the coming months, is the introduction of low one-year fixed rate packages by the financial institutions, said Ms Lim.
'The general sentiment in the market is that rates will remain low for the next 12 months,' she said.
Whether rates will indeed start creeping upwards a year from now depends on how long it takes for the global economy to right itself, but Ms Lim is certain that rates will move upwards more than three years from now.
Fixed or variable home loan packages
Naturally, the benefit of a fixed package is certainty: You know how much your instalments are for a set period.
The key difference between most fixed rate and variable packages is that the former comes with a lock-in period where you are penalised for any premature exit from the package.
Variable packages usually do not impose a lock-in period. Therefore they are recommended for clients who are not sure if they would be holding on to their properties. A no-lock-in package is deemed to be more suitable as the home buyer is not slapped with a penalty payment if he sells his property and redeems his loan. Also, variable packages tend to feature lower interest rates than most fixed rate packages, noted Ms Lim.
'These variable packages are also suitable for clients who feel that they are comfortable with any short-term fluctuations and/or feel that rates will generally remain low in the short term,' she added.
However, a variable rate, as the name implies, means that the bank can change the interest rate any time. For example, a three-month rate would re-set every three months. At the end of each three-month period, it could be higher or lower and you would pay more or less accordingly.
Fixed rate packages are suitable for clients who want certainty and peace of mind, and are not comfortable with rate fluctuations.
If you are unlikely to sell your house in the next three years, Mr Ng suggested that now might be a good time to lock in the low interest rates. You might want to consider fixing interest rates for the next two to three years.
Looking at present circumstances, both Mr Ng and Ms Lim would go for variable packages with no lock-in, as the sentiment is that rates would remain low at least for the next one year.
'Since Sibor is unlikely to go up in the next six to 12 months, one might be better off opting for a one-month or three-month Sibor package. In the event that the Sibor starts rising, one can opt to switch to a 12-month Sibor package,' said Mr Ng.
One-month Sibor is currently at 0.4375 per cent, three-month Sibor is 0.68 per cent while 12-month Sibor is 0.9 per cent. So if you choose the latter, you might end up paying more interest while interest rates are still low.
lorna@sph.com.sg
Subscribe to:
Posts (Atom)
Posts
