S'pore vs HK: A high-flying rivalry
Hong Kong may still be the dominant regional banking centre but Singapore is an ever more favoured location
05:55 AM Apr 28, 2010
by Kevin Brown and Sundeep Tucker
When Thomas McMahon and his Indian backers were deciding where to locate an Asian commodities exchange, they turned initially to Hong Kong - attracted by its proximity to China and the mainland's booming, commodity-hungry economy.
Three years later, the exchange, a subsidiary of India's Financial Technologies group, is about to open - not in Hong Kong but nearly four hours' flying time to the south in Singapore.
"We looked at Hong Kong with a view to being able to serve the China market, but we decided that we couldn't run a viable independent commodities exchange from there - the business environment just wasn't right," said Mr McMahon, a former director of Nymex Asia.
"Inversely, Singapore was very welcoming. The authorities were completely happy with the concept of an independent foreign-owned exchange competing with the existing exchange and the view seemed to be there should be a totally competitive environment, which is just what we wanted."
The city state's enthusiasm for what will be called the Singapore Mercantile Exchange, and its willingness to countenance potential collateral damage to the locally-listed incumbent, the Singapore Exchange, neatly illustrates the business-friendly approach that is helping the island to emerge as a strong competitor to Hong Kong in the battle to be Asia's 21st-century international business capital.
Others put it more graphically. "You walk into Changi Airport and they practically give you a hedge fund start-up kit," Mr James de Castro, one of the founders of Hong Kong-based Asia Alternative Asset Management, told a recent conference on the island's financial centre.
The prize is huge.
Rapid economic growth around Asia is creating all sorts of opportunities, dragging in large numbers of bankers, traders, lawyers and other professionals. More big companies in Europe, North America and India are deciding they need a regional headquarters - and the demand for English and reliable communications means the choice is usually between Hong Kong and Singapore.
Japan remains the world's second-largest economy and Tokyo the second-biggest stock market. But it is not really in the game as it is almost entirely domestically focused. For example, as a consequence of regulatory and language barriers, the Tokyo Stock Exchange has attracted fewer than 10 overseas listings since 2004, compared with hundreds bagged by Hong Kong and Singapore.
JOURNEY TO THE EAST
Nor is anyone writing off Hong Kong, an indispensable entrepot for China and the regional home for most global investment and commercial banks, private equity funds, large investment institutions and international legal and accountancy firms.
The self-governing Chinese territory is a big player in the capital markets, hosting a succession of blockbuster initial public offerings of Chinese companies and preparing this summer to co-host (with Shanghai) the IPO of Agricultural Bank of China, which at up to US$29 billion ($40 billion) is expected to be the world's biggest listing.
Underlining its importance, Mr Michael Geoghegan, HSBC chief executive, recently relocated from London to Hong Kong and JPMorgan moved the head of its international private banking unit there from New York to focus on regional opportunities.
Mr Anthony Bolton, star stock picker at United Kingdom-based Fidelity International, has scrapped his retirement and decamped to Hong Kong to launch a China equities fund.
The latest ranking of global financial centres, published last month by the City of London Corporation, shows Hong Kong has narrowed the gap with London and New York to its smallest since the study was introduced five years ago, with fast-improving Singapore just behind in fourth place.
The advance of both cities is clearly worrying Western competitors. "We cannot afford to be complacent in the face of growing competition across the world, not just in the United States but also increasingly Asia," said Mr Stuart Fraser, City of London policy chairman. "There is a danger that new regulation could accelerate this shift in the financial centre of gravity towards fast-developing markets."
At the same time, though, Hong Kong has developed serious problems. Official pollution readings last month soared to record levels - five times the usual high - forcing schools to ban outdoor activity. Air quality reached "dangerous" levels on one day in eight last year.
"There are air quality issues in Hong Kong, which affect companies' ability to attract staff, and international business groups have made representations on this issue to the relevant authorities," said Ms Deborah Biber, head of the Australian Chamber of Commerce in Hong Kong.
Those willing to breathe the air must pay property prices that are up to three times higher than Singapore.
A 1,600 sq ft apartment typically costs upwards of US$10,000 a month to rent.
In leafy Singapore, a house and garden several times the size can be had for less than US$4,000.
Potentially most damaging, Hong Kong appears increasingly inward-looking, with its politics and business focus becoming ever more fixated on China just as the rest of the region becomes more globalised.
While Singapore plots how to dominate Asian commodity trading or take a chunk of the Islamic finance market from Malaysia, Hong Kongers contemplate how to handle political interference from Beijing.
Singapore, sitting near the equator at the centre of Asia's trade lanes, suddenly looks both more central and more cosmopolitan.
As a result, Singapore is emerging as not only a leading Asian centre for the commodities industry, trading both physical goods and futures, but also as a regional headquarters location for non-financial businesses, especially in information technology, pharmaceuticals, electronics and manufacturing. Other big companies use it as a base for their operations in the sub-region of South-east Asia, itself an area with nearly 600 million people and an economy bigger than India's.
In finance, many institutions run divisions from Singapore, including Standard Chartered, Deutsche Bank and Barclays.
In a sign of the times, Britain's Prudential announced on Friday that it was adding a secondary listing in Singapore to its proposed dual primary Hong Kong listing as part of a US$21-billion capital raising linked to its plan to acquire the Asian assets of America's AIG.
The decision to add Singapore, said Mr Magnus Bocker, chief executive of the Singapore Exchange, reflects the city state's greater strength in fund management - its US$1,250 billion of assets under management are about twice Hong Kong's. "There is an attractiveness for them in reaching out to the Singapore-based institutional market," said Mr Bocker.
'SINGAPORE THE CLEANEST CITY IN INDIA'
Importantly, the island state is also better placed than Hong Kong to benefit from India's rise, which is prompting businesses in the subcontinent to find ways of expanding abroad. Wipro and Tata Consultancy Services, the information technology and outsourcing businesses, both have their headquarters for Asia in Singapore, and as many as 2,500 other Indian companies also have bases there, according to the India Business Forum.
"We could have had our HQ in India, Sydney, Hong Kong or Singapore," said Mr Girija Pande, head of Asia-Pacific for Tata Consultancy Services.
"(We came to Singapore because) we have a reasonable business in Singapore, which is larger than in Hong Kong, (and because) Singapore has very strong air links and connections to India, far more than Hong Kong. A lot of technology companies with whom we work ... are headquartered here as well, so this is a kind of tech hub."
Many Indian expatriates say they feel more at home in Singapore than elsewhere in Asia outside their own country, in part because Singapore has a prominent Indian community of its own - the finance and law ministers are both Singaporean Indians, for example.
The Republic is India's second-largest foreign investor and attracted more Indian foreign direct investment than anywhere else in Asia in 2008-2009.
"Every large Indian company is seriously looking at Singapore" as a potential international Asian hub, said Mr Pande.
"Indians are in a lot of places here - industry, government, technology, banks; Indians are very comfortable here. We call it sometimes the cleanest city in India."
The close relationship is not an accident.
"There are a few (Indian) companies in Hong Kong, but since 1991 (when New Delhi began liberalising its economy) this has been one of the main countries that Singapore has concentrated on (winning investment from)," said Dr K N Raghavan, first secretary at the Indian High Commission in Singapore.
MORE OPEN, MORE COSMOPOLITAN
Underlying these strategic developments, Singapore is also undergoing a gentle social transformation designed to alter its international image from sanitised nanny state to cutting-edge icon by injecting a dash of the edginess for which Hong Kong is famous throughout Asia, in sharp contrast to Singapore.
The most dramatic example is the construction of two casino resorts, together costing about US$10 billion.
The second, built by Las Vegas Sands, opened its doors yesterday, giving the state that once banned (the sale of) chewing gum two of Asia's biggest gambling operations.
The Government has also found other ways to make the city a more relaxed place, for example by reducing artistic censorship - cuts to films and plays are now largely restricted to contentious religious issues - and introducing a "don't ask, don't tell" approach to homosexual relationships, which remain illegal but are increasingly tolerated.
It has built facilities such as a world-class concert hall and taken initiatives such as the annual Formula 1 Grand Prix.
Some things have not changed, however. In contrast to Hong Kong's robust and vibrant free press, Singapore's media is partly State-owned and entirely State-supervised.
The country has regular elections, but the Government is always formed by the same People's Action Party.
That will almost certainly remain true after a poll due by next year, although provision is being made for more defeated opposition candidates to sit in Parliament under a "best losers" scheme.
None of that cuts much ice with international business, which is more interested in political stability and the rule of law than in opportunities for opposition politics.
Hong Kong is not a full democracy either. But the gradual social liberalisation that is occurring in Singapore does reinforce its business proposition by making it a more interesting, more open and more cosmopolitan place for people of many different backgrounds to live.
Mr Ronald Arculli, chairman of Hong Kong Exchanges and Clearing, said the city is confident it will maintain its edge as the region's leading financial centre and has taken steps to broaden its focus away from just China. It is attracting increasing numbers of listings from global companies.
Rusal, an aluminium producer, in January became the first Russian company to list in Hong Kong. L'Occitane, the beauty products retailer, is this month scheduled to become the first French company to list in Hong Kong, as part of plans to boost sales across Asia. "We are more than just a gateway to China," said Mr Arculli. "Trading volumes are far higher than before and we have launched new products also."
In Singapore, though, the authorities remain confident that the momentum in this battle is with them.
"I think Hong Kong wants to be open, but it is becoming a more Chinese city in composition, in instincts and in governance," said a senior Singapore official. "That's not a bad future for Hong Kong, because southern China has a great future.
"But we're thinking about Asia and the world - there's Shanghai, there's Bangalore, there's Hyderabad, there are key Western cities that are not going to stay still. That's the way we think of our world. Hong Kong is not in the middle of the radar screen at all." The Financial Times
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
Wednesday, April 28, 2010
TODAY ONLINE : Govt measures were not intended to stop price rise, says minister
Govt measures were not intended to stop price rise, says minister
05:55 AM Apr 28, 2010
by Esther Ng
When the Government introduced measures to cool the property market in February, the steps were not intended to stop prices from rising.
Instead, they were calibrated to temper exuberance in the market and pre-empt a property bubble from forming, Minister for National Development Mah Bow Tan told Parliament yesterday.
Overall, property prices increased 5.6 per cent in the first quarter this year compared to 7.4 per cent in the fourth quarter of last year.
Recent data for public housing show signs of moderation. Resale prices registered slower quarter-on-quarter increase and the median cash over valuation has also stabilised, said Mr Mah.
MP for West Coast GRC Ho Geok Choo had asked what other measures MND intend to introduce as public and property prices continue to rise despite recent cooling measures.
Mr Mah informed the house that the government would "inject an even larger supply" of private housing through the Government Land Sales programme in the second half of the year if demand continues to be strong. Details of this will be announced in June.
Since January, the Housing and Development Board has launched 5,100 flats.
Another 7,400 units will be launched between May and September.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
05:55 AM Apr 28, 2010
by Esther Ng
When the Government introduced measures to cool the property market in February, the steps were not intended to stop prices from rising.
Instead, they were calibrated to temper exuberance in the market and pre-empt a property bubble from forming, Minister for National Development Mah Bow Tan told Parliament yesterday.
Overall, property prices increased 5.6 per cent in the first quarter this year compared to 7.4 per cent in the fourth quarter of last year.
Recent data for public housing show signs of moderation. Resale prices registered slower quarter-on-quarter increase and the median cash over valuation has also stabilised, said Mr Mah.
MP for West Coast GRC Ho Geok Choo had asked what other measures MND intend to introduce as public and property prices continue to rise despite recent cooling measures.
Mr Mah informed the house that the government would "inject an even larger supply" of private housing through the Government Land Sales programme in the second half of the year if demand continues to be strong. Details of this will be announced in June.
Since January, the Housing and Development Board has launched 5,100 flats.
Another 7,400 units will be launched between May and September.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
TODAY ONLINE : We'll look into loan loophole: Mah
We'll look into loan loophole: Mah
05:55 AM Apr 28, 2010
by Esther Ng
SINGAPORE - Housing and Development Board flats are not meant to be used as collateral for loans, legal or illegal. But credit companies and real estate agents, targeting flat owners in financial difficulties, are exploiting a loophole.
Besides lending money to these owners at exorbitant interest rates, they get a lawyer to file a caveat against the property with HDB. The property then cannot be transferred until the debt is settled.
All this is legal, but once the flat is sold, credit companies get first charge to the proceeds and the flat seller usually has little or nothing left, said MP for Jurong GRC Halimah Yacob in Parliament yesterday.
Minister for National Development Mah Bow Tan acknowledged this "loophole" and announced that these malpractices are being looked into, even before regulations to professionalise real estate agents are finalised. He is treating it "as a matter of urgency because there have been abuses and people have been exploited".
While most real estate agents are professional, there is a need to raise the standard of the industry as a whole.
"We're looking into whether we should have a formal form of registration for real estate agents, what are the mediation avenues available. If not, what are the dispute resolution mechanisms available, if not, what punishments can be meted to those who flout the rules," said Mr Mah.
A mandatory examination is one component under consideration.
Currently, real estate agencies are licensed by the Inland Revenue Authority of Singapore (Iras). It has received a total of 154 complaints against real estate agents in the past three years. In 2007, it received 47 complaints, followed by 63 in 2008 and 44 last year.
Mr Mah was responding to Mdm Halimah's enquiry on the number of complaints MND had received against property agents in the last three years.
The current licensing regime does not empower Iras to investigate agent misconduct. It usually refers the complaints it receives to the Singapore Accredited Estate Agencies (SAEA) for investigation and resolution, if the agent is from an SAEA-accredited agency. Otherwise, Iras will refer the complaints to the estate agencies directly, said Mr Mah.
Where there are serious allegations, for instance, of cheating or falsification of documents, Iras will advise the complainant to make a police report. Consumers have also lodged complaints with the Consumer Association of Singapore. There were 1,055 complaints in 2007, followed by 1,100 in 2008 and 1,079 last year.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
05:55 AM Apr 28, 2010
by Esther Ng
SINGAPORE - Housing and Development Board flats are not meant to be used as collateral for loans, legal or illegal. But credit companies and real estate agents, targeting flat owners in financial difficulties, are exploiting a loophole.
Besides lending money to these owners at exorbitant interest rates, they get a lawyer to file a caveat against the property with HDB. The property then cannot be transferred until the debt is settled.
All this is legal, but once the flat is sold, credit companies get first charge to the proceeds and the flat seller usually has little or nothing left, said MP for Jurong GRC Halimah Yacob in Parliament yesterday.
Minister for National Development Mah Bow Tan acknowledged this "loophole" and announced that these malpractices are being looked into, even before regulations to professionalise real estate agents are finalised. He is treating it "as a matter of urgency because there have been abuses and people have been exploited".
While most real estate agents are professional, there is a need to raise the standard of the industry as a whole.
"We're looking into whether we should have a formal form of registration for real estate agents, what are the mediation avenues available. If not, what are the dispute resolution mechanisms available, if not, what punishments can be meted to those who flout the rules," said Mr Mah.
A mandatory examination is one component under consideration.
Currently, real estate agencies are licensed by the Inland Revenue Authority of Singapore (Iras). It has received a total of 154 complaints against real estate agents in the past three years. In 2007, it received 47 complaints, followed by 63 in 2008 and 44 last year.
Mr Mah was responding to Mdm Halimah's enquiry on the number of complaints MND had received against property agents in the last three years.
The current licensing regime does not empower Iras to investigate agent misconduct. It usually refers the complaints it receives to the Singapore Accredited Estate Agencies (SAEA) for investigation and resolution, if the agent is from an SAEA-accredited agency. Otherwise, Iras will refer the complaints to the estate agencies directly, said Mr Mah.
Where there are serious allegations, for instance, of cheating or falsification of documents, Iras will advise the complainant to make a police report. Consumers have also lodged complaints with the Consumer Association of Singapore. There were 1,055 complaints in 2007, followed by 1,100 in 2008 and 1,079 last year.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
CNA : More en bloc sale activity expected as developers cater to mid-market segment
More en bloc sale activity expected as developers cater to mid-market segment
By Chris Howells | Posted: 27 April 2010 2207 hrs
SINGAPORE: Analysts expect more en bloc sales activity from the city fringes and East Coast areas as developers cater to a growing mid-market segment.
They were responding to proposals tabled in Parliament on Monday to smooth out the collective sales process.
The new rules also seek to address the role of the Strata Titles Board and balance the interest of property owners.
Collective sales have bounced back this year after a poor showing last year when only one deal was done.
So far, four developments have been sold with another deal at Margate Road expected to be completed this week.
These five sales combined are worth S$275 million versus the lone S$101 million deal done for the whole of 2009.
Going forward, market watchers expect between 20 and 40 en bloc deals to take place this year.
Donald Han, managing director, Cushman & Wakefield, said: “I think what we're seeing now is more on the fringe of the central areas is looking more promising right now. Those we call the rest of the central core area. The East Coast area is looking interesting right now.
“Mainly there is a combination of investors, developers who are eager to come in and develop the mid-end segment of the market."
Observers said such developments will likely attract small-to-mid sized developers that are currently being priced out of the government land sales programme where land prices rose up to 20 per cent last year.
Observers said they're currently seeing appetite for en bloc sales worth under S$100 million on average and land sizes of around 15,000-50,000 square feet.
Karamjit Singh, managing director, Credo Real Estate, said: "There's also a vacuum to satisfy larger developers demand for land in mid and prime sectors of the market because government land sale programme basically satisfies developers' demand in mass market locations."
Market watchers expect overall land prices to rise around five to 15 per cent this year.
They said good conditions and demand for property will drive developers into the collective market. - CNA/vm
By Chris Howells | Posted: 27 April 2010 2207 hrs
SINGAPORE: Analysts expect more en bloc sales activity from the city fringes and East Coast areas as developers cater to a growing mid-market segment.
They were responding to proposals tabled in Parliament on Monday to smooth out the collective sales process.
The new rules also seek to address the role of the Strata Titles Board and balance the interest of property owners.
Collective sales have bounced back this year after a poor showing last year when only one deal was done.
So far, four developments have been sold with another deal at Margate Road expected to be completed this week.
These five sales combined are worth S$275 million versus the lone S$101 million deal done for the whole of 2009.
Going forward, market watchers expect between 20 and 40 en bloc deals to take place this year.
Donald Han, managing director, Cushman & Wakefield, said: “I think what we're seeing now is more on the fringe of the central areas is looking more promising right now. Those we call the rest of the central core area. The East Coast area is looking interesting right now.
“Mainly there is a combination of investors, developers who are eager to come in and develop the mid-end segment of the market."
Observers said such developments will likely attract small-to-mid sized developers that are currently being priced out of the government land sales programme where land prices rose up to 20 per cent last year.
Observers said they're currently seeing appetite for en bloc sales worth under S$100 million on average and land sizes of around 15,000-50,000 square feet.
Karamjit Singh, managing director, Credo Real Estate, said: "There's also a vacuum to satisfy larger developers demand for land in mid and prime sectors of the market because government land sale programme basically satisfies developers' demand in mass market locations."
Market watchers expect overall land prices to rise around five to 15 per cent this year.
They said good conditions and demand for property will drive developers into the collective market. - CNA/vm
CNA : Leveraged developers a risk factor for China real estate
Leveraged developers a risk factor for China real estate
By Desmond Wong | Posted: 27 April 2010 2040 hrs
SINGAPORE: Leveraged developers, rather than end buyers, are the most likely source of risk for real estate in China.
And Citi says China's efforts to rein in its property price bubble are unlikely to affect other sectors, thanks to the government's effective control over policy.
Momentum in China real estate continues to build.
Citi says while the signs of a bubble are clear, the greatest risk within the market might not lie with the end buyers and high prices.
It says investors should watch the developers instead.
Thomas Flexner, global head of real estate, institutional clients group, Citi, says: "I think you do have to be sensitive which ones might have too much leverage, might have near term maturities, and might have a problem given the increasingly restrictive policies that China is beginning to apply to the residential sector."
China recently raised down payment for second home buyers from 40 per cent to 50 per cent, while increasing mortgage rates as well.
About one third of end-buyers in China pay entirely in cash, while the rest fund around 50 per cent of their property buys with debt.
Citi adds that China's tightening of the real estate sector is unlikely to hurt the rest of the economy for now, given the close control it has over policy making which allows it to introduce targeted changes as needed.
The lender says it remains confident about the long term growth of China's emerging real estate market, given the strong demand in areas outside the first tier cities.
Mr Flexner says: "In some of the top tier cities, like Beijing and Shanghai, there's been much more speculative investment... The other lesser cities that haven't attracted speculators tend to be much more driven by real home buyers."
But Citi stresses that while the long term fundamentals for real estate in emerging Asia are strong, investors should be prepared to accept a certain degree of volatility against a backdrop of fast, but uneven growth."
- CNA/jy
By Desmond Wong | Posted: 27 April 2010 2040 hrs
SINGAPORE: Leveraged developers, rather than end buyers, are the most likely source of risk for real estate in China.
And Citi says China's efforts to rein in its property price bubble are unlikely to affect other sectors, thanks to the government's effective control over policy.
Momentum in China real estate continues to build.
Citi says while the signs of a bubble are clear, the greatest risk within the market might not lie with the end buyers and high prices.
It says investors should watch the developers instead.
Thomas Flexner, global head of real estate, institutional clients group, Citi, says: "I think you do have to be sensitive which ones might have too much leverage, might have near term maturities, and might have a problem given the increasingly restrictive policies that China is beginning to apply to the residential sector."
China recently raised down payment for second home buyers from 40 per cent to 50 per cent, while increasing mortgage rates as well.
About one third of end-buyers in China pay entirely in cash, while the rest fund around 50 per cent of their property buys with debt.
Citi adds that China's tightening of the real estate sector is unlikely to hurt the rest of the economy for now, given the close control it has over policy making which allows it to introduce targeted changes as needed.
The lender says it remains confident about the long term growth of China's emerging real estate market, given the strong demand in areas outside the first tier cities.
Mr Flexner says: "In some of the top tier cities, like Beijing and Shanghai, there's been much more speculative investment... The other lesser cities that haven't attracted speculators tend to be much more driven by real home buyers."
But Citi stresses that while the long term fundamentals for real estate in emerging Asia are strong, investors should be prepared to accept a certain degree of volatility against a backdrop of fast, but uneven growth."
- CNA/jy
ST : Look out, moneylenders who target HDB flat sellers
Apr 28, 2010
Look out, moneylenders who target HDB flat sellers
Govt drafting measures to curb exploitation of cash-strapped owners
By Rachel Lin
THE Ministry of National Development (MND) has sent a clear message to moneylenders who exploit cash-strapped HDB sellers: The game is up.
It is drafting measures to crack down on these unscrupulous credit companies, which lend money to home owners on the condition that they repay the loan from the sale of their flats.
The moneylenders usually collude with real estate agents who, in return for a referral fee, link them up with home owners.
In addition, a legal loophole allows moneylenders to file a caveat on the flat, which ensures that they get first bite of the proceeds when the flat is sold.
'HDB flats are not meant for short-term profit,' MND Minister Mah Bow Tan said in Parliament yesterday. 'They are not meant to be used as collateral for loans, whether to legal or illegal moneylenders.
'My ministry is currently working with the relevant authorities on appropriate measures to curb such abuses.'
Existing measures have not been sufficient to deal with the problem, Mr Mah added.
The credit companies in question advertise openly in the newspapers, with lines such as 'legal loan for HDB sellers' or 'for HDB seller only'.
Some advertisements also state 'property agent referral welcomed'. Loans of up to $100,000 are offered, at interest rates like 1.5 per cent per month.
The matter had been flagged by Madam Halimah Yacob (Jurong GRC), who told The Straits Times later that she had received many complaints from the public.
The problem was becoming rampant, she said. Credit companies have even sent out text messages touting their loans to home owners.
These loans eat into the amount that HDB sellers eventually get from their flats, once the repayments and other fees are accounted for. 'They're expecting $70,000, but in the end, they get only $10,000. Sometimes, they get almost nothing,' Madam Halimah said.
Mr Mah told the House that his ministry is treating the problem 'as a matter of urgency'.
Both the errant credit companies and the estate agents who collude with them will come under scrutiny, he said.
Tougher rules for moneylenders will be introduced before the MND's larger move to regulate real estate agents more tightly.
Currently, complaints against real estate agents go to the Inland Revenue Authority of Singapore (Iras) or the Consumers Association of Singapore (Case).
However, Iras is not empowered to investigate rogue agents. If the agent is a member of an agency accredited by the Singapore Accredited Estate Agencies (SAEA), Iras refers him or her to the SAEA.
If not, the case is handed directly over to the relevant estate agency.
This present system contains one major loophole, Madam Halimah pointed out to the House: 'If you are the real estate agency, I think there will be less reason for you to find fault with your own agents, because that will affect your name.'
Mr Mah agreed that such a loophole existed. The MND is thus looking into a formal registration process for estate agents, compulsory exams, avenues for mediation and dispute resolution and disciplinary measures for errant agents.
'If the whole industry is not regulated, and in the current climate especially, there are a lot of temptations for estate agents to take short cuts and indulge in questionable practices,' he said.
Last year, Iras received 44 complaints against real estate agents, down from 63 in 2008 and 47 in 2006, Mr Mah told the House.
Case received 1,079 complaints last year, compared to 1,100 in 2008 and 1,055 in 2007.
lyuexin@sph.com.sg
--------------------------------------------------------------------------------
NOT COLLATERAL
'HDB flats are not meant for short-term profit. They are not meant to be used as collateral for loans, whether to legal or illegal moneylenders.'
MND Minister Mah Bow Tan
Look out, moneylenders who target HDB flat sellers
Govt drafting measures to curb exploitation of cash-strapped owners
By Rachel Lin
THE Ministry of National Development (MND) has sent a clear message to moneylenders who exploit cash-strapped HDB sellers: The game is up.
It is drafting measures to crack down on these unscrupulous credit companies, which lend money to home owners on the condition that they repay the loan from the sale of their flats.
The moneylenders usually collude with real estate agents who, in return for a referral fee, link them up with home owners.
In addition, a legal loophole allows moneylenders to file a caveat on the flat, which ensures that they get first bite of the proceeds when the flat is sold.
'HDB flats are not meant for short-term profit,' MND Minister Mah Bow Tan said in Parliament yesterday. 'They are not meant to be used as collateral for loans, whether to legal or illegal moneylenders.
'My ministry is currently working with the relevant authorities on appropriate measures to curb such abuses.'
Existing measures have not been sufficient to deal with the problem, Mr Mah added.
The credit companies in question advertise openly in the newspapers, with lines such as 'legal loan for HDB sellers' or 'for HDB seller only'.
Some advertisements also state 'property agent referral welcomed'. Loans of up to $100,000 are offered, at interest rates like 1.5 per cent per month.
The matter had been flagged by Madam Halimah Yacob (Jurong GRC), who told The Straits Times later that she had received many complaints from the public.
The problem was becoming rampant, she said. Credit companies have even sent out text messages touting their loans to home owners.
These loans eat into the amount that HDB sellers eventually get from their flats, once the repayments and other fees are accounted for. 'They're expecting $70,000, but in the end, they get only $10,000. Sometimes, they get almost nothing,' Madam Halimah said.
Mr Mah told the House that his ministry is treating the problem 'as a matter of urgency'.
Both the errant credit companies and the estate agents who collude with them will come under scrutiny, he said.
Tougher rules for moneylenders will be introduced before the MND's larger move to regulate real estate agents more tightly.
Currently, complaints against real estate agents go to the Inland Revenue Authority of Singapore (Iras) or the Consumers Association of Singapore (Case).
However, Iras is not empowered to investigate rogue agents. If the agent is a member of an agency accredited by the Singapore Accredited Estate Agencies (SAEA), Iras refers him or her to the SAEA.
If not, the case is handed directly over to the relevant estate agency.
This present system contains one major loophole, Madam Halimah pointed out to the House: 'If you are the real estate agency, I think there will be less reason for you to find fault with your own agents, because that will affect your name.'
Mr Mah agreed that such a loophole existed. The MND is thus looking into a formal registration process for estate agents, compulsory exams, avenues for mediation and dispute resolution and disciplinary measures for errant agents.
'If the whole industry is not regulated, and in the current climate especially, there are a lot of temptations for estate agents to take short cuts and indulge in questionable practices,' he said.
Last year, Iras received 44 complaints against real estate agents, down from 63 in 2008 and 47 in 2006, Mr Mah told the House.
Case received 1,079 complaints last year, compared to 1,100 in 2008 and 1,055 in 2007.
lyuexin@sph.com.sg
--------------------------------------------------------------------------------
NOT COLLATERAL
'HDB flats are not meant for short-term profit. They are not meant to be used as collateral for loans, whether to legal or illegal moneylenders.'
MND Minister Mah Bow Tan
ST : Stimulus withdrawal a worry for property sector
Apr 28, 2010
Stimulus withdrawal a worry for property sector
By Esther Teo
THE way governments wind back stimulus measures poses a key risk to the region's real estate markets, according to a Citibank executive yesterday.
Mr Aamir Rahim, chief executive of Citi Private Bank Asia Pacific, told a briefing: 'The impact of such liquidity withdrawal on interest rates and the speed of private sector capital deployment to pick up the slack produced by such withdrawal measures obviously are the overriding risks to the property outlook.'
Mr Rahim also flagged inflationary pressures as 'liquidity continues to chase assets' and the tightening of monetary policies as key risks to track.
The Chinese government, for example, has introduced yet more measures to cool the property market, ordering developers not to take deposits for sales of uncompleted flats without proper approval.
It has also imposed curbs on loans for purchases of third homes and increased the downpayment requirements and mortgage rates.
However, Citi's global head of real estate, Mr Thomas Flexner, said the steps are unlikely to overshoot and restrict growth in the other parts of the economy.
Mr Flexner, who was speaking at the briefing in conjunction with Citi's two-day Asia Pacific Property Conference at the Four Seasons Hotel this week, said that while the bubble in the Chinese residential market was 'very real', it is most pronounced at the higher-end and more speculative sectors of the first-tier cities.
In these centres, about 70 per cent of buyers are speculators.
'We call them speculators, they call themselves investors... There is real vulnerability there but I don't think it is systemic,' he added.
'There is certainly the prospect of potential losses by investors in that sector and on the part of developers who own land banks and who are leveraged.'
However, he said that, unlike a debt implosion or a credit bubble, which had contagion effects, China's bubble would not affect first-time home owners and would not have a 'significant larger impact on the Chinese economy and its ability to grow over time'.
Real estate is an increasingly popular asset class, with Asian clients of Citi Private Bank having close to 50 per cent of their portfolios in property.
This compares with 33 per cent globally.
(From left) Citi Private Bank Asia Pacific CEO Aamir Rahim, Citi real estate global head Thomas Flexner and Citi Private Bank Global Real Estate Group co-head Quek Kwang Meng. -- PHOTO: CITI ASIA PACIFIC
Stimulus withdrawal a worry for property sector
By Esther Teo
THE way governments wind back stimulus measures poses a key risk to the region's real estate markets, according to a Citibank executive yesterday.
Mr Aamir Rahim, chief executive of Citi Private Bank Asia Pacific, told a briefing: 'The impact of such liquidity withdrawal on interest rates and the speed of private sector capital deployment to pick up the slack produced by such withdrawal measures obviously are the overriding risks to the property outlook.'
Mr Rahim also flagged inflationary pressures as 'liquidity continues to chase assets' and the tightening of monetary policies as key risks to track.
The Chinese government, for example, has introduced yet more measures to cool the property market, ordering developers not to take deposits for sales of uncompleted flats without proper approval.
It has also imposed curbs on loans for purchases of third homes and increased the downpayment requirements and mortgage rates.
However, Citi's global head of real estate, Mr Thomas Flexner, said the steps are unlikely to overshoot and restrict growth in the other parts of the economy.
Mr Flexner, who was speaking at the briefing in conjunction with Citi's two-day Asia Pacific Property Conference at the Four Seasons Hotel this week, said that while the bubble in the Chinese residential market was 'very real', it is most pronounced at the higher-end and more speculative sectors of the first-tier cities.
In these centres, about 70 per cent of buyers are speculators.
'We call them speculators, they call themselves investors... There is real vulnerability there but I don't think it is systemic,' he added.
'There is certainly the prospect of potential losses by investors in that sector and on the part of developers who own land banks and who are leveraged.'
However, he said that, unlike a debt implosion or a credit bubble, which had contagion effects, China's bubble would not affect first-time home owners and would not have a 'significant larger impact on the Chinese economy and its ability to grow over time'.
Real estate is an increasingly popular asset class, with Asian clients of Citi Private Bank having close to 50 per cent of their portfolios in property.
This compares with 33 per cent globally.
(From left) Citi Private Bank Asia Pacific CEO Aamir Rahim, Citi real estate global head Thomas Flexner and Citi Private Bank Global Real Estate Group co-head Quek Kwang Meng. -- PHOTO: CITI ASIA PACIFIC
ST Forum : Worry over 'stretch' valuations
Apr 28, 2010
Worry over 'stretch' valuations
I TRIED to buy an apartment recently and was surprised when the bank loans officer advised me that his valuer could value property at whatever price I needed to secure a larger loan.
The property was valued at $510,000 in November last year and after checking with several banks, the present indicative value was between $530,000 and $540,0000.
So just last week, the property agent, together with her banker and the banker's valuer, assured me that the property's indicative valuation of $600,000 could be matched without any problem.
When I questioned the fact that the value had jumped so much and whether it would be a risk, I was advised by the loans officer that loans of under $1 million were rarely scrutinised and with an uptrending market, such 'stretch' valuations would easily be approved.
In fact, the agent's response was that the valuation was not important; it was purely the buyer's willingness to match the seller's price and that it was better to buy now before prices rose even higher.
Shouldn't the valuation of a property be an independent function to ensure that property prices are supportable? And if the banks and valuers are feeding a buying frenzy, where is the control mechanism to prevent a property bubble from developing?
Kang Wey-Ming
Worry over 'stretch' valuations
I TRIED to buy an apartment recently and was surprised when the bank loans officer advised me that his valuer could value property at whatever price I needed to secure a larger loan.
The property was valued at $510,000 in November last year and after checking with several banks, the present indicative value was between $530,000 and $540,0000.
So just last week, the property agent, together with her banker and the banker's valuer, assured me that the property's indicative valuation of $600,000 could be matched without any problem.
When I questioned the fact that the value had jumped so much and whether it would be a risk, I was advised by the loans officer that loans of under $1 million were rarely scrutinised and with an uptrending market, such 'stretch' valuations would easily be approved.
In fact, the agent's response was that the valuation was not important; it was purely the buyer's willingness to match the seller's price and that it was better to buy now before prices rose even higher.
Shouldn't the valuation of a property be an independent function to ensure that property prices are supportable? And if the banks and valuers are feeding a buying frenzy, where is the control mechanism to prevent a property bubble from developing?
Kang Wey-Ming
ST : Temporary tax credits lift US home prices
Apr 28, 2010
Temporary tax credits lift US home prices
MIAMI: United States home prices in February posted their first annual increase since the end of 2006, pumped up by temporary tax credits for home buyers. Another report showed that consumers in the US turned more optimistic this month as the growing economy raised hopes that jobs will become available.
However, although the Standard & Poor's/Case-Shiller home price index released yesterday eked out a 0.6 per cent gain, it was half the increase analysts had expected.
The data underscored the mixed and fragile nature of the housing recovery. Nationally, home prices are up more than 3 per cent from the bottom in May last year, but are still 30 per cent below the May 2006 peak.
And there is a 'risk that home prices could decline further before experiencing any sustained gains', cautioned Mr David Blitzer, chairman of the S&P index committee.
'It is too early to say that the housing market is recovering.'
Prices are getting a lift from temporary tax credits that expire at the end of this month. First-time buyers can claim up to US$8,000 (S$11,000) and home owners who buy and relocate can get up to US$6,500.
The Case-Shiller index measures home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices have increased 50 per cent since the beginning of the index.
A rebound in prices is considered necessary to boost consumer optimism and help revive the economy. A home is the largest and most important financial asset for most Americans. So, as values climb, home owners feel wealthier and more comfortable spending.
For home owners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.
Americans' confidence in the economy rose this month to the highest level since September 2008, just as the financial crisis escalated, private research group The Conference Board reported yesterday.
The Conference Board's confidence index rose to 57.9, exceeding all forecasts of economists surveyed by Bloomberg News and was the highest level since Lehman Brothers collapsed in September 2008.
The upbeat reading, combined with bullish earnings reports this week from companies ranging from Whirlpool Corp to UPS offered more hope that the economic recovery is gathering steam.
But unlike US businesses, which whittled down inventories during the recession, the housing market is suffering from a backlog of foreclosures. And as banks unload these properties en masse, it could overwhelm demand and push prices down again.
'The bottom line is that we're still fighting an uphill battle against a shadow inventory of foreclosures,' said Mr Daniel Alpert, managing director of Westwood Capital.
Still, it is 'highly unlikely' that price declines will approach the slide suffered in late 2008 and early 2009, wrote Mr Joshua Shapiro, chief US economist for MFR.
ASSOCIATED PRESS, BLOOMBERG
Temporary tax credits lift US home prices
MIAMI: United States home prices in February posted their first annual increase since the end of 2006, pumped up by temporary tax credits for home buyers. Another report showed that consumers in the US turned more optimistic this month as the growing economy raised hopes that jobs will become available.
However, although the Standard & Poor's/Case-Shiller home price index released yesterday eked out a 0.6 per cent gain, it was half the increase analysts had expected.
The data underscored the mixed and fragile nature of the housing recovery. Nationally, home prices are up more than 3 per cent from the bottom in May last year, but are still 30 per cent below the May 2006 peak.
And there is a 'risk that home prices could decline further before experiencing any sustained gains', cautioned Mr David Blitzer, chairman of the S&P index committee.
'It is too early to say that the housing market is recovering.'
Prices are getting a lift from temporary tax credits that expire at the end of this month. First-time buyers can claim up to US$8,000 (S$11,000) and home owners who buy and relocate can get up to US$6,500.
The Case-Shiller index measures home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices have increased 50 per cent since the beginning of the index.
A rebound in prices is considered necessary to boost consumer optimism and help revive the economy. A home is the largest and most important financial asset for most Americans. So, as values climb, home owners feel wealthier and more comfortable spending.
For home owners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.
Americans' confidence in the economy rose this month to the highest level since September 2008, just as the financial crisis escalated, private research group The Conference Board reported yesterday.
The Conference Board's confidence index rose to 57.9, exceeding all forecasts of economists surveyed by Bloomberg News and was the highest level since Lehman Brothers collapsed in September 2008.
The upbeat reading, combined with bullish earnings reports this week from companies ranging from Whirlpool Corp to UPS offered more hope that the economic recovery is gathering steam.
But unlike US businesses, which whittled down inventories during the recession, the housing market is suffering from a backlog of foreclosures. And as banks unload these properties en masse, it could overwhelm demand and push prices down again.
'The bottom line is that we're still fighting an uphill battle against a shadow inventory of foreclosures,' said Mr Daniel Alpert, managing director of Westwood Capital.
Still, it is 'highly unlikely' that price declines will approach the slide suffered in late 2008 and early 2009, wrote Mr Joshua Shapiro, chief US economist for MFR.
ASSOCIATED PRESS, BLOOMBERG
ST : Top bid of $148m for site near Changi Prison
Apr 28, 2010
Top bid of $148m for site near Changi Prison
By Esther Teo
A RESIDENTIAL site a stone's throw from Changi Prison has received a top bid of $148.3 million as developers look to replenish depleting land banks after months of sizzling home sales.
Tripartite Developers - part of Hong Leong Holdings - made the offer for the 3.1ha site at the corner of Upper Changi Road North and Flora Drive. There were five other bidders. Tripartite tendered $321 per sq ft (psf) on potential gross floor area (GFA) for the site, which had a maximum permissible GFA of 42,951 sq m. The land parcel can potentially yield 390 units.
The second highest bid was by Nam Hee Contractor and OPH Marymount, which came in at $143.2 million. The lowest was lodged by BBR-Tagore, whose holding company is Singapore Piling and Civil Engineering. It offered $91 million, the Urban Redevelopment Authority (URA) said yesterday.
Ho Bee Developments, Frasers Centrepoint and Sim Lian Land also bid.
The 99-year leasehold site, which is on the Government's reserve list, was launched for public tender on March 29 after a developer committed to bid at least $82 million. The tender closed yesterday.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak said the top bid was fairly decent. 'The breakeven price is between $640 and $670 psf and nearby developments have been selling within that range,' he said.
A decision on the award of the tender will be made at a later date, URA said.
If Tripartite wins the tender, it will cement Hong Leong's presence in the area, which is already home to several large condominiums developed by the group, such as The Gale and Ferraria Park.
Meanwhile, the HDB said it will make available a site at the junction of Pasir Ris Drive 3 and Pasir Ris Drive 4 for application under the reserve list of the Government Land Sales (GLS) programme. Reserve list sites are offered on top of those on the confirmed list and are triggered for tender if at least one developer lodges an initial bid that meets a minimum threshold.
The 99-year leasehold site has a land area of 20,000 sq m and a gross plot ratio of 2.1. Its proposed development is for condominium housing and it has the potential to yield 380 units, the HDB said.
The Government has released all eight sites on the confirmed list of the first half of the GLS programme this year for sale.
Four sites have been sold while the tender for the other four will close in the next two months. Together they have a combined potential yield of 2,925 units.
Eighteen sites yielding 7,625 units were placed on the reserve list, bringing total potential supply quantum to 10,550 from the first half of the GLS programme - the highest since it started in 2001.
Top bid of $148m for site near Changi Prison
By Esther Teo
A RESIDENTIAL site a stone's throw from Changi Prison has received a top bid of $148.3 million as developers look to replenish depleting land banks after months of sizzling home sales.
Tripartite Developers - part of Hong Leong Holdings - made the offer for the 3.1ha site at the corner of Upper Changi Road North and Flora Drive. There were five other bidders. Tripartite tendered $321 per sq ft (psf) on potential gross floor area (GFA) for the site, which had a maximum permissible GFA of 42,951 sq m. The land parcel can potentially yield 390 units.
The second highest bid was by Nam Hee Contractor and OPH Marymount, which came in at $143.2 million. The lowest was lodged by BBR-Tagore, whose holding company is Singapore Piling and Civil Engineering. It offered $91 million, the Urban Redevelopment Authority (URA) said yesterday.
Ho Bee Developments, Frasers Centrepoint and Sim Lian Land also bid.
The 99-year leasehold site, which is on the Government's reserve list, was launched for public tender on March 29 after a developer committed to bid at least $82 million. The tender closed yesterday.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak said the top bid was fairly decent. 'The breakeven price is between $640 and $670 psf and nearby developments have been selling within that range,' he said.
A decision on the award of the tender will be made at a later date, URA said.
If Tripartite wins the tender, it will cement Hong Leong's presence in the area, which is already home to several large condominiums developed by the group, such as The Gale and Ferraria Park.
Meanwhile, the HDB said it will make available a site at the junction of Pasir Ris Drive 3 and Pasir Ris Drive 4 for application under the reserve list of the Government Land Sales (GLS) programme. Reserve list sites are offered on top of those on the confirmed list and are triggered for tender if at least one developer lodges an initial bid that meets a minimum threshold.
The 99-year leasehold site has a land area of 20,000 sq m and a gross plot ratio of 2.1. Its proposed development is for condominium housing and it has the potential to yield 380 units, the HDB said.
The Government has released all eight sites on the confirmed list of the first half of the GLS programme this year for sale.
Four sites have been sold while the tender for the other four will close in the next two months. Together they have a combined potential yield of 2,925 units.
Eighteen sites yielding 7,625 units were placed on the reserve list, bringing total potential supply quantum to 10,550 from the first half of the GLS programme - the highest since it started in 2001.
BT : Changi site draws top bids at lower end of estimates
Business Times - 28 Apr 2010
Changi site draws top bids at lower end of estimates
By EMILYN YAP
THE tender for a 99-year leasehold residential site at Upper Changi Road North/Flora Drive closed yesterday on a more subdued note than other recent tenders.
The 3.07 hectare site, which can yield up to 390 apartments, drew bids from six developers. Hong Leong Group unit Tripartite Developers made the top offer of $148.3 million or $321 per sq ft per plot ratio (psf ppr).
A tie-up between units of Far East Organization and Orchard Parade Holdings followed close behind, with a bid of $143.2 million or $310 psf ppr.
Frasers Centrepoint was in third place with a bid of $140 million or $303 psf ppr. Sim Lian, Ho Bee and BBR-Tagore also took part in the tender.
The top bids were towards the lower end of consultants' projections at $300-$400 psf ppr. The site's distance from an MRT station could be a factor in this.
DTZ South-east Asia research head Chua Chor Hoon suggested the large supply of state land may also have dampened competition. With the release of more government land sale sites recently, developers have more choice and could be 'slightly more comfortable', she said.
Last month, the tender for a residential site at Tampines Avenue 1/Ave- nue 10 closed with eight bidders in the fray. Sim Lian made the highest offer of $302 million or $421 psf ppr.
In the latest tender for the Upper Changi Road North site, Hong Leong's top bid is likely to translate to a breakeven cost of $650-$700 psf, said Colliers International investment sales executive director Ho Eng Joo. The selling price could range from $750-$800 psf.
Mr Ho said Hong Leong is familiar with the Pasir Ris area. It is behind seven other projects in the vicinity with names from A to G, such as Edelweiss Park, Ferraria Park and The Gale.
At The Gale - which is a freehold development - units have been sold for $743-$833 psf this month, going by caveats lodged.
Developers hoping for a project in Pasir Ris can turn to another site on the reserve list. The Housing & Development Board has made a 99-year residential plot at the junction of Pasir Ris Drive 3 and Pasir Ris Drive 4 available for application from today.
The site, which is on the reserve list, is about two hectares and can yield an estimated 380 units. It is near Pasir Ris Park and Downtown East, and is surrounded by other parcels of state residential land.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Changi site draws top bids at lower end of estimates
By EMILYN YAP
THE tender for a 99-year leasehold residential site at Upper Changi Road North/Flora Drive closed yesterday on a more subdued note than other recent tenders.
The 3.07 hectare site, which can yield up to 390 apartments, drew bids from six developers. Hong Leong Group unit Tripartite Developers made the top offer of $148.3 million or $321 per sq ft per plot ratio (psf ppr).
A tie-up between units of Far East Organization and Orchard Parade Holdings followed close behind, with a bid of $143.2 million or $310 psf ppr.
Frasers Centrepoint was in third place with a bid of $140 million or $303 psf ppr. Sim Lian, Ho Bee and BBR-Tagore also took part in the tender.
The top bids were towards the lower end of consultants' projections at $300-$400 psf ppr. The site's distance from an MRT station could be a factor in this.
DTZ South-east Asia research head Chua Chor Hoon suggested the large supply of state land may also have dampened competition. With the release of more government land sale sites recently, developers have more choice and could be 'slightly more comfortable', she said.
Last month, the tender for a residential site at Tampines Avenue 1/Ave- nue 10 closed with eight bidders in the fray. Sim Lian made the highest offer of $302 million or $421 psf ppr.
In the latest tender for the Upper Changi Road North site, Hong Leong's top bid is likely to translate to a breakeven cost of $650-$700 psf, said Colliers International investment sales executive director Ho Eng Joo. The selling price could range from $750-$800 psf.
Mr Ho said Hong Leong is familiar with the Pasir Ris area. It is behind seven other projects in the vicinity with names from A to G, such as Edelweiss Park, Ferraria Park and The Gale.
At The Gale - which is a freehold development - units have been sold for $743-$833 psf this month, going by caveats lodged.
Developers hoping for a project in Pasir Ris can turn to another site on the reserve list. The Housing & Development Board has made a 99-year residential plot at the junction of Pasir Ris Drive 3 and Pasir Ris Drive 4 available for application from today.
The site, which is on the reserve list, is about two hectares and can yield an estimated 380 units. It is near Pasir Ris Park and Downtown East, and is surrounded by other parcels of state residential land.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
BT : Borrowers told to act as Sibor hits all-time low
Business Times - 28 Apr 2010
Borrowers told to act as Sibor hits all-time low
Individuals and corporates asked to hedge their interest rate exposures now
By SIOW LI SEN
(SINGAPORE) Singapore's key interest rate has crashed to all-time lows and banks have been quick to capitalise on it.
The key three-month Sibor or Singapore interbank offered rate plunged to 0.546 per cent yesterday, crashing through the previous historical low of 0.56 per cent in June 2003.
DBS, the nation's biggest mortgage player, is launching today a five-year fixed-rate home loan package which charges 2.25 per cent a year.
The bank's popular three-year fixed-rate package remains unchanged at 1.99 per cent a year.
Jeremy Soo, DBS Bank managing director and head, consumer banking group, Singapore, said customers should understand how interest rates will impact their repayment.
'Based on the last 10 years' trend, three-month interbank rate peaked at 3.56 per cent in January 2006, and has shown to be volatile although it has stayed low for the last 1-2 years,' he said.
'This is one of the reasons why our three-year fixed-rate continues to be very popular with our customers, especially since our three and five-year fixed- rates are at a historical low,' said Mr Soo.
DBS is offering two five- year fixed-rate packages. The cheaper package at 2.25 per cent is sold bundled with mortgage insurance called My Protector Mortgage. The standalone package charges 2.5 per cent a year. DBS has offered five-year fixed-rate packages before on requests.
Many bankers said the three-month Sibor is near the bottom and that it is a good time for corporates to hedge their interest rate exposure.
Said Wee Wei Min, OCBC Bank head of treasury advisory: 'As long-term interest rates are close to historical lows, we are advising customers who have floating-rate loans to hedge their exposures. They can choose to hedge part or all of these exposures.'
Although this seems to be an obvious choice, some customers may choose to remain unhedged.
'This is because the short end rates are even lower and they will incur immediate high negative carry (difference between the three or six-months rates and the long end rates) when they lock in long-term fixed rates.'
Ms Wee said there are other hedging solutions like buying interest rate caps - akin to paying premiums to buy insurance to protect themselves from rising interest rates.
'When rates remain low, the customer enjoys low interest rates; and when rates go up, the customer will have protection,' she said.
'It's close to the bottom, it can't go to zero. We're still an emerging market where there's a premium,' said Jimmy Koh, United Overseas Bank economist.
US interest rates are at zero, but that's not possible for markets like Singapore despite their strong fundamentals. Usually, US interest rates are higher than Singapore interest rates by about 300 basis points.
'We've told corporates to hedge their interest rate exposures now,' said Mr Koh. The continued appreciation of the Singapore dollar is attracting inflows, which in turn pressures the local interest rate.
Investors also buy the Singapore dollar as a proxy for the yuan, which is expected to be revalued although no one knows when. But the yuan cannot be freely traded, unlike the local unit.
'If you like the yuan, you use the Sing dollar as proxy,' Mr Koh said.
The question is: how long before interest rates turn? Most say by year- end, as they expect the US to hike its rates then.
Gerard Feng, treasurer at Citibank Singapore, projects that three-month Sibor will rise to 0.8 per cent by year-end.
Selena Ling, OCBC Bank head of treasury and research unit, is looking at three-month Sibor rising gradually to reach one per cent by end-2010, 'on the assumption that liquidity management will likely take on an even more prominent function to drain excess liquidity conditions from further fuelling any potential asset bubbles in the making'.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Borrowers told to act as Sibor hits all-time low
Individuals and corporates asked to hedge their interest rate exposures now
By SIOW LI SEN
(SINGAPORE) Singapore's key interest rate has crashed to all-time lows and banks have been quick to capitalise on it.
The key three-month Sibor or Singapore interbank offered rate plunged to 0.546 per cent yesterday, crashing through the previous historical low of 0.56 per cent in June 2003.
DBS, the nation's biggest mortgage player, is launching today a five-year fixed-rate home loan package which charges 2.25 per cent a year.
The bank's popular three-year fixed-rate package remains unchanged at 1.99 per cent a year.
Jeremy Soo, DBS Bank managing director and head, consumer banking group, Singapore, said customers should understand how interest rates will impact their repayment.
'Based on the last 10 years' trend, three-month interbank rate peaked at 3.56 per cent in January 2006, and has shown to be volatile although it has stayed low for the last 1-2 years,' he said.
'This is one of the reasons why our three-year fixed-rate continues to be very popular with our customers, especially since our three and five-year fixed- rates are at a historical low,' said Mr Soo.
DBS is offering two five- year fixed-rate packages. The cheaper package at 2.25 per cent is sold bundled with mortgage insurance called My Protector Mortgage. The standalone package charges 2.5 per cent a year. DBS has offered five-year fixed-rate packages before on requests.
Many bankers said the three-month Sibor is near the bottom and that it is a good time for corporates to hedge their interest rate exposure.
Said Wee Wei Min, OCBC Bank head of treasury advisory: 'As long-term interest rates are close to historical lows, we are advising customers who have floating-rate loans to hedge their exposures. They can choose to hedge part or all of these exposures.'
Although this seems to be an obvious choice, some customers may choose to remain unhedged.
'This is because the short end rates are even lower and they will incur immediate high negative carry (difference between the three or six-months rates and the long end rates) when they lock in long-term fixed rates.'
Ms Wee said there are other hedging solutions like buying interest rate caps - akin to paying premiums to buy insurance to protect themselves from rising interest rates.
'When rates remain low, the customer enjoys low interest rates; and when rates go up, the customer will have protection,' she said.
'It's close to the bottom, it can't go to zero. We're still an emerging market where there's a premium,' said Jimmy Koh, United Overseas Bank economist.
US interest rates are at zero, but that's not possible for markets like Singapore despite their strong fundamentals. Usually, US interest rates are higher than Singapore interest rates by about 300 basis points.
'We've told corporates to hedge their interest rate exposures now,' said Mr Koh. The continued appreciation of the Singapore dollar is attracting inflows, which in turn pressures the local interest rate.
Investors also buy the Singapore dollar as a proxy for the yuan, which is expected to be revalued although no one knows when. But the yuan cannot be freely traded, unlike the local unit.
'If you like the yuan, you use the Sing dollar as proxy,' Mr Koh said.
The question is: how long before interest rates turn? Most say by year- end, as they expect the US to hike its rates then.
Gerard Feng, treasurer at Citibank Singapore, projects that three-month Sibor will rise to 0.8 per cent by year-end.
Selena Ling, OCBC Bank head of treasury and research unit, is looking at three-month Sibor rising gradually to reach one per cent by end-2010, 'on the assumption that liquidity management will likely take on an even more prominent function to drain excess liquidity conditions from further fuelling any potential asset bubbles in the making'.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Subscribe to:
Posts (Atom)
Posts
