Don’t be chained to loan woes

It must be tempting to splash out a bit now that the worst of the recession – and the belt-tightening that it forced on us – is over.
After all, some firms have started restoring pay cuts to employees and year-end bonuses have been paid.
With the mood improving, the urge to snap up that big-ticket item with cash or a loan is getting stronger.
Using cash is one thing, but excessive borrowing can lead to financial trouble.
‘Loans can help us to purchase high-value items or essentials that we do not have the savings or the full amount for at the moment – but it should be something we can afford in the long run,’ said GE Money Singapore’s president and chief executive, Mr Rahul Gupta.
And the same principle should apply, whether for a home loan, a car loan, a home renovation loan, one for education, or even one for a holiday.
‘Consumers need to ensure that loans taken are well within their means,’ said Mr Gupta.
Here are eight things to consider when taking out a loan:
1 A need or a want?
Before taking a loan, ask yourself if the item or service is meant to satisfy a need or a want.
Ms Tan Huey Min, assistant director at Credit Counselling Singapore, suggests that if it is a ‘want’ – not necessary and just for consumption – perhaps it would be better to save for it rather than to pay a ‘premium’ price (that is, the interest cost of borrowing). For instance, don’t borrow to pay for a vacation or a new kitchen appliance.
Take time to consider if there is an alternative to borrowing now or borrow a smaller amount instead. Better still, don’t buy it at all if it is unnecessary.
However, if the purchase is for investment purposes, then perhaps it is okay to get a loan. This could be for renovations that add value to your home, or enhancing your future income earning ability via training and education.
2 Interest cost of borrowing
Consumers should be aware of the type of interest rate that is stated in the loan agreement or marketing material.
And when considering loan options, compare like with like, said Mr Gupta.
Some loans use the annual percentage rate (APR), which reflects the actual interest cost of borrowing, while others refer to the simple interest rate. Shop around for the lowest APR.
The simple interest rate is calculated by applying a flat rate on the original principal amount for the entire loan tenure.
The APR is interest calculated based on the declining principal balance over the tenure of the loan.
As the borrower makes monthly repayments, the principal is reduced every month, so the interest payable on the principal also reduces each month.
Sometimes a loan comes with a zero per cent interest cost if it’s paid via a credit card. Make sure you pay off the debt before the interest starts to build up. If you miss a payment, you may be automatically bumped up to the highest annual interest rate of 24 per cent.
3 Current debt service ratio
Before taking the loan, calculate your debt service ratio. It is the percentage of your monthly income needed to service long-term liabilities.
It provides a useful guide to how much of your take-home pay – that is gross pay less 20 per cent employee CPF contribution and personal income taxes – is used to pay debts.
Debt payments are monthly expenses like mortgage, car loans, personal loans or even credit card debts. A healthy debt servicing ratio – debt divided by income – should be 35 per cent or less.
To put it another way, out of every $1,000 of after-tax and CPF income, you should spend $350 or less on debt repayments.
Ms Tan cautions that if the consumer already has a high amount of outstanding debt to service, it is best to pay down existing debt first before incurring more.
And even if your debt service ratio is less than 35 per cent, it is prudent to consider if you have surplus funds to take on another loan repayment after paying monthly living expenses.
Make sure you know your cash inflow and outflow before taking on another loan.
4 Loan tenure
It is worth considering the optimal loan tenure as it affects monthly repayments and interest paid.
Generally a longer loan tenure means smaller monthly repayments but a shorter loan tenure may lead to lower interest paid, says GE Money.
For example, Mr Mark Tan takes a $10,000 loan for a period of five years at an APR of 18per cent per annum (pa).
His monthly repayment is $254 so the total interest he will pay over the five-year loan tenure is $5,236, over and above the $10,000 loan amount.
If he takes a loan period of three years at an APR of 18 per cent pa, his monthly repayment will be $362 but the total interest paid over three years will be $3,015.
So to minimise the interest payable, a shorter loan tenure may be an option, but the repayments will be higher.
Some financial experts suggest you make the highest repayments you can manage so that you clear the debt in the shortest possible time.
When deciding on a loan tenure, consider your monthly commitments and take the appropriate loan tenure based on your monthly cash flow.
5 Early payment options
Not all loans allow customers to settle early, so read and understand the terms and conditions of the loan before signing up.
An early settlement fee is usually imposed if a loan is paid off early.
For example, if you redeem your GE Money personal loan before the full term expires, an early redemption fee of 3 per cent to 5 per cent of the outstanding amount at the time will apply.
Home loan customers are urged to look beyond interest rates and consider factors such as the lock-in period and penalty fees.
Another potential cost is the loan cancellation fee. An investor who buys a property on speculation and then applies for a loan might be hit with a cancellation fee if the property is sold before the loan is disbursed.
Cancellation fees can range between 0.75per cent and 1.5per cent of the loan amount, and can be quite substantial. For example, if the loan amount is $1million, the cancellation fee works out to $15,000.
6 Late payment fees
Most loans stipulate late payment fees. These are over and above the interest charged for late payment, so go through the terms and conditions of loan agreements thoroughly to ensure you understand them clearly.
Pay special attention to fees incurred for late payment.
For instance, credit cards typically charge a one-time administrative fee of $50 to $80 for late payment. This is besides the 24per cent interest charged on the sum that is rolled over.
So keep track of the payment dates and remember to pay before the due date. Try to have fewer loans or credit facilities and avoid having multiple sources of credit. In order not to incur interest and penalty fees, pay your outstanding credit in full.
7 Payment flexibility
Avoid defaulting on loan repayments as it will hurt your credit history. However, a typical loan tenure is for at least a year, and sometimes it is hard to predict what will happen so far into the future.
You might hit cash flow difficulties at some point, so it is worth looking for loans that offer some payment flexibility and provide rewards for prompt payment.
For example, Mr Gupta says that GE Money’s James personal loan, which caters to people earning $30,000 and above, offers several flexible payment options. They include allowing customers to defer two payments a year, paying only the interest component or paying higher or lower instalments at the start, or end of their loans.
Such features offer flexibility in managing your cash flow, particularly during unforeseen circumstances. GE Money customers are also rewarded for prompt payment by having part of their interest component, or their last instalment amount of the loan, waived.
For those who can’t meet their monthly payments, experts suggest that they approach their lender first for assistance to restructure a loan. Financial institutions will usually review such requests on a case by case basis. A responsible lender will work with its customers to provide a solution.
8 Other loan terms and conditions
Make sure you understand the key fees and charges stipulated by a loan agreement. This makes you aware of what to expect when a loan is taken and reduces any surprises after it has commenced.
If you are acting as a guarantor for a loan, be clear about the terms and conditions of the agreement, especially those related to your obligations as a guarantor.
Ms Tan says: ‘In the eyes of the creditor, the guarantor is the ’same’ as the borrower, meaning, both the borrower and the guarantor are jointly and severely liable for the loan.’
This means that even if you are willing to act as a guarantor, you should also consider your own ability to make repayments in case the principal borrower fails to repay.
She recalled a case in which a person (let’s call him John) became a guarantor for a stranger (Jim), who wanted to buy a car, in return for a fee.
When Jim defaulted on his car loan, the car financier pursued legal action against both people.
Jim could not repay and became a bankrupt. In the end, John assumed the balance of the loan, which was $30,000, after the car was sold and makes regular payment to avoid being made a bankrupt by the car financier.

Source : Sunday Times – 28 Feb 2010

‘Residences’ expert@work in naming a condo

What’s the name of your condo?
If you bought a unit in the 1980s, you probably live in a project with words like ‘palm’, ‘garden’ or ‘park’ in the name.
In more recent times, it became fashionable to incorporate auspicious numbers, like Scotts 28 and 8@Woodleigh.
Now, many developers have plumped for Residences.
Examples include Residences Botanique in Serangoon, Kovan Residences in Upper Serangoon, The Shore Residences in Katong, Vista Residences in Balestier, Holland Residences in the Holland Road area and Tembeling Residence in the East Coast area.
A spokesman for the Street and Building Names Board said that of the 25 to 30 condominium names it approved in 2008 and last year, names with terms like ‘residences’, ’suites’ and ‘@’ were most popular.
New property player Ferrell Asset Management opted for Ferrell Residences for its first condo in Bukit Timah, saying thatthe word ‘residences’ evokes ‘a very personal and intimate feeling towards the development’.
Ho Bee’s general manager of marketing and business development, Mr Chong Hock Chang, shares a similar view. ‘The word conjures a very homely image,’ he said. The firm’s projects include Orange Grove Residences and Dakota Residences.
For developer TG Group, there is a more mundane reason for naming its 102-unit development in the East Coast, St Patrick’s Residences.
It conforms to the residential zoning of the area, and differentiates itself from industrial or commercial zones, said its head of corporate affairs, Mr Lowell Loh.
Frasers Centrepoint Homes, which is launching Residences Botanique this weekend, also drew attention to the word Botanique.
It reflects the wide array of plants and landscaping of the resort-style condo, said a spokesman.
Far East Organization said it tries to express what makes a development unique via the condo’s name.
Its The Shore Residences is so named because its ‘large waterscape with mini beaches and coconut trees’ aims to recapture the old Katong ambience with a long shoreline.
But do names really matter with buyers? Apparently not, it seems. Mrs Debora Neo, 44, who lives in Rivervale Crest condo in Sengkang, said price and location matter more.
Proximity to schools is also crucial, said the mother of two teenage children.
As for the use of ‘residences’, she said it reminded her not of a home or condominium, but of serviced apartments for foreigners here for a short stay.

Source : Sunday Times – 28 Feb 2010

Copthorne Orchid to go ahead with condo plans

Tenants had heard it before: The Copthorne Orchid Hotel would be torn down for a condominium.
So there was a sense of deja vu when they learnt from reading The Straits Times last Monday that the 440-room hotel in Dunearn Road would go.
In 2005, City Developments Ltd (CDL) had said it planned to turn the hotel’s site into a condominium. But that did not happen.
CDL owns hotelier Millennium & Copthorne (M&C), which operates the Copthorne Orchid Hotel.
But its latest announcement seems to be for real. A CDL spokesman told The Sunday Times it wants to launch the condominium project as early as this July.
The property developer has not decided on a firm date to put the 150 units of the project on sale as it ‘had just obtained provisional permission to redevelop’.
Depending on how well the condominium sells and existing tenancy obligations, the building may be torn down only next year or later.
M&C held back its plans in 2005 ‘as there was a projected shortage of hotel rooms’, its spokesman said.
But its recent announcement was not good news to its tenants – one of which has been leasing space in the hotel for 35 years.
Madam Anne Lee, 52, owner of Anne Salon, was upset that the hotel withheld such important information as she renewed her lease just three months ago.
‘They must tell us so we can start looking for another landlord,’ said Madam Lee, who has been running her salon there since 1975.
Nice Express, which operates its Singapore-Kuala Lumpur express bus service from the hotel, was also not informed about the plans.
Mr Charles Lawrence, 56, operations and sales supervisor at Nice’s Singapore office, said: ‘I do not know whether to move or stay.’
This comes at a bad time for Nice as it spent $100,000 last year to renovate its office at the hotel.
When asked why tenants were not informed, an M&C spokesman said: ‘We have not sent out any notices as there is no firm date yet.
‘The terms of the tenancy agreement contain a three-month notice clause. We have sufficient time on hand to serve proper and timely notice to all our tenants.’

Source : Sunday Times – 28 Feb 2010

HDB may tweak rules to curb property speculators

Frustrated buyers have pointed their fingers at permanent residents and private property speculators for pushing up HDB resale flat prices to record levels.
They claim the speculators snap up resale flats and then rent them out illegally or sell them quickly but legally after the stipulated one-year period.
A week ago, National Development Minister Mah Bow Tan said the Government is looking into ’something’ regarding measures for the HDB market.
Property experts reckoned the Government could extend the minimum occupation period for those who bought their flats with bank loans as well as make checks to ensure owners are not flouting the rules.
Under HDB rules, those who buy resale flats without housing grants can sell their flats after 21/2 years if they take a loan from HDB, or one year if they take a bank loan.
They can rent out the entire flat only if they have lived in it for at least three years.
Buyers who take up housing grants for their purchases can sell only after a minimum occupation period of five years.
‘Speculation is not an issue right now. But it may become an issue if buyers are sure that prices will continue to rise for the next year,’ said the managing director of C&H Realty, Mr Albert Lu.
ERA Asia-Pacific associate director Eugene Lim said the Government has already started to rein in the sizzling HDB resale market with the lowering of the loan-to-value limit (LTV) for housing loans taken from banks.
This means buyers can borrow less than before – at up to 80 per cent of the property’s valuation instead of 90 per cent previously.
This will likely affect deals for the high-value resale flats involving cash-over-valuation (COV) of anywhere from $50,000 to $90,000, as buyers will now have to fork out more down payment, in addition to the cash, said Mr Lim.
COV is the amount over and above the flat’s valuation that is payable only in cash.
There are not many other things the Government can look at, as it will not want to affect genuine demand, property experts said.
While the lower LTV limit will have an impact, it won’t be big, said Mr Chris Koh, director of Dennis Wee Properties.
‘It is the 5 per cent cash down payment and the COV that the buyers find challenging to come up with,’ he said.
An industry observer suggested that the Government may raise the first-time applicant’s housing grant to buy resale flats.
The Government can also extend the minimum occupation period for those who bought resale flats with bank loans to as long as 21/2 years, though this may not go down well with the banks as this may increase their risk exposure, property pundits said.
‘The banks may not agree to extending the period, but this area needs to be looked into so that people will not look at flats as a quick one-year turnaround investment,’ said Mr Koh.
Mr Lu suggested that the Government ban private property owners from buying resale flats if their sole intention is to rent them out.
HDB flats are in demand as the well-located ones can easily command a rental yield of 7 per cent to 8 per cent.
HDB, he said, can conduct regular checks to see that the private property owners are living in their flats instead of renting them out during the minimum three-year occupation period.
‘This, however, does not solve the problem of private property owners renting out their HDB flats legally after the minimum three-year occupation period,’ Mr Lu said.
HDB owners can buy private property but they must continue to live in their flats.
However, those who have obtained prior approval from HDB to sublet their flats can live in the private property.
Some property experts suggest going back to the days when flats could not be easily rented out.
‘One possible measure is to revert to the old system of allowing HDB flats to be rented out only if the owner has valid reasons such as being posted overseas to work,’ said Mr Lu.
Mr Koh added that HDB flats should not be seen as a short-term investment as this changes the whole concept of government housing.

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SUGGESTED CHANGES ~ Extend minimum occupation period for those who buy HDB flats with a bank loan
~ Check to ensure that owners are not flouting occupation rules
~ Raise first-time applicant’s housing grant to buy resale flats
~ Ban private property owners from buying resale flats to use as rental property
~ Revert to old system where HDB flats may be rented out only for valid reasons

Source : Sunday Times – 28 Feb 2010

Anatomy of a good home buy

I am no expert when it comes to investing in property, but as I have invested in numerous properties over the last decade, I have gained some valuable experience.
I made money from some and lost money from others. Some say you need luck to make money in real estate, but I believe there are some fundamentals that one can use as a guide to make as infallible a decision as possible.
1 Good location
In property selection, particularly for investment purposes, the key is location. For owner-occupied properties, location may be less significant as individuals have different preferences. Some like
quieter locations away from commercial activities while others choose to be close to specific amenities.
Proximity and accessibility to schools, transport lines, shopping centres, factories and specific suburbs are some important factors to consider.
Even for an owner-occupied property, it is important to consider how other people would view the location should you decide to sell it one day. In short, try to be as objective as possible when it comes to location.
2 Good site
Is the property in a good site? Is it next to an MRT station, bus stop, monsoon drain or power cables? Or is it at a T-junction? There is nothing technically wrong with T-junctions, but some people believe it obstructs the flow of good luck in one’s life.
Is the site prone to flash floods and so on? Many people like to live near MRT stations, but some foreigners prefer to avoid the constant noise of the trains. They may prefer quieter areas.
When choosing the site of the property, consider the points that will appeal to your potential buyers in the future.
3 Good layout
Do you like the layout of the apartment or house? Many people prefer their living rooms to feel spacious. Are there many angles and nooks in the house? Some people may consider them bad fengshui.
A more practical consideration is whether the living room and bedrooms are irregularly shaped, with lots of unusable space. A good, clean layout will save you the time, effort and money that you otherwise would have to spend on redesigning around oddly shaped and oddly positioned living areas.
4 Good address
Securing a good address without paying a premium for it is like a windfall. It may not matter much to you now but a good address, such as a nice sounding road name or an auspicious sounding unit number like #08-08, may attract more interest and demand in the property and also a higher price when it is time to sell.
5 Good history
Many potential buyers like to know the background of the property they are buying. Who are the current owners? Why are they selling? Who built the property and how old is it? Is the property owner-occupied or rented out? These things matter in the making of personal and economic decisions.
If the property is for investment, then the purchaser should look into two other areas:
6 Good rental yield
What is the expected rental yield for the property? Is this an acceptable level for you? What is the median rent for properties in that area?
7 Good potential for capital appreciation
What is the median price for property prices in that area? What is the highest and lowest price for properties in that area over the last three, five and 10 years?
The writer is managing director of mortgage consultant Global Creatif Financial. The views expressed are her own.

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Lucky numbers
Securing a good address without paying a premium for it is like a windfall…A good address, such as an auspicious unit number, may attract more interest and a higher price when it is time to sell.
Source : Sunday Times – 28 Feb 2010

Fresh curbs not stopping property buyers

They came, they saw, they bought.
As of yesterday, more than 300 of about 350 units in The Estuary condominium that were released for sale have been snapped up.
The MCL Land project in Yishun is the first major property launch since measures were announced by the Government last week to curb speculation.
These were: stamp duty to be paid if the buyer sells the property within a year, and lending institutions allowed to lend only up to 80 per cent of the property’s value, not 90 per cent.
Yesterday, more than 80 pairs of shoes were seen outside The Estuary’s showflat when The Sunday Times visited at 1.30pm.
The number increased steadily to more than 100 pairs by 2pm as people came to check out the 99-year leasehold condo.
Most were families with young children or young couples, lured by the condo’s proximity to Lower Seletar Reservoir and attractive prices of about $750 per sq ft.
Inside, all the 15 tables set aside for prospective buyers were filled most of the afternoon.
Sales of the 350 released units began last week. The project has 608 units – comprising one-, two-, three- and four-bedroom types.
‘It’s been encouraging so far despite the measures,’ said an MCL Land staff member, noting that demand was evenly distributed across the various apartment types.
‘At first, there was more interest in the one-bedroom units but when the measures were announced, this died off a little.’
One- and two-bedroom units have usually been popular among speculators at launches over the past year. They make up nearly 40 per cent of units in The Estuary, which is near Khatib MRT station.
Small apartments have been targets for speculators because the lump-sum outlay is relatively more affordable.
The Government’s measures to curb excesses have come at the right time, said Madam Angie Ng who bought a three-bedroom unit at The Estuary for about $930,000 yesterday.
‘I’m relieved actually. We were waiting for this launch and then the measures came. That’ll help curb speculators and prices won’t be jacked up,’ she said.
Madam Ng, 36, who works in the banking industry, is married with two children and lives in a five-room flat in Yishun.
Property agents said The Estuary’s relatively distant location from the city also meant it might not be as attractive for speculators.
The prices were the key lure for the buyers, about 70 per cent of whom live nearby in Woodlands and Marsiling.
‘For upcoming projects in Singapore, the prices are at least $900 psf,’ said ERA agent Shayne Lim, 34, noting that prices have even reached $1,200 psf in Ang Mo Kio.
‘And there hasn’t been a new condo in the Yishun area for over 10 years,’ she said of the good buying response.
People in the real estate sector will also be monitoring sales at another condo – Vision@West Coast – which is set to be launched soon.
Located on West Coast Highway, the 99-year leasehold development has 281 apartments and 14 strata houses. Sizes start at about 800 sq ft for a two-bedroom unit and rise to 5,000 sq ft for the strata houses.
‘Demand should be strong as the location also boasts sea views,’ predicted property agent Jimmy Tan.
The asking price for the project, he added, could be around $1,100 psf.
Source : Sunday Times – 28 Feb 2010

URA releases Hougang site for tender

A 99-year leasehold site at Hougang Ave 2 is now open for application from interested developers, according to the Urban Redevelopment Authority (URA).

Six new residential sites had been introduced by URA to the reserve list under the government’s land sales programme in the first half of 2010. This 3.02-ha plot at Hougang is the first to be released.

The site can accommodate a landed housing development or a low density condominium. The maximum gross floor area for condo units or flats is 455,152 sq ft.

According to Nicholas Mak, a property lecturer from Ngee Ann Polytechnic, the site could yield around 140 to 150 houses in a landed development, or 380 to 400 units in a non-landed project.

The site is close to Hougang HDB town and located within a private residential estate. Kovan and Hougang MRT stations are also located nearby.

Real estate consultants expect developers to show keen interest in the parcel of land. Ong Choon Fah, executive director of DTZ, observed that the site is located within an established landed housing estate, and residents in the area could attract a pool of potential buyers.

Mr. Mak believes that the tender could most likely be won by a developer who plans for a non-landed project on the site, as these projects can be sold for a higher price under psf basis, and has the capacity to bid more aggressively.

He expects the site to receive around four to eight bids, if it is triggered for sale. The bids could range from $159 million to $193 million, which works out to $350 psf ppr to $425 psf ppr.

URA will make the remaining five new residential sites on the reserve list available soon. It will release one at Hougang Avenue 7 and another at Stirling Road next month. One site in April and another two in May will also be released.

In addition, the government will release another four sites on the confirmed list - two in March and two in April.

Overall, the sites on the confirmed and reserve lists can supply 10,550 units - the highest number in history for the government's land sales programme.

Source : Property Guru

Property tax boon may be short-lived

I refer to the revision of the property tax rate on owner occupied properties which has the effect of reducing by $240 the property tax currently paid by the majority of homeowners, based on exemption of tax on the first $6,000 of annual value (AV) which at present attracts tax at 4 per cent.

The benefit of the rate change, alas, may not last long if the IRAS starts revaluing the AV on the grounds that the property market has been unusually strong of late and likewise for rentals. If AV increases by $6,000, there goes the $240.

In revising AV, it should be borne in mind that to the owner occupant, even a doubling of notional rental makes no difference in terms of income.

Denis Distant

Source : Business Times – 26 Feb 2010

Allgreen 2009 profit more than doubles

ALLGREEN Properties posted a more than doubling in full-year net profit, helped by firmer sales and a higher provision write-back.

The property developer said net profit for the year ended Dec 31, 2009 stood at $163 million, up from 2008’s $67.4 million. This translates to earnings of 10.23 cents per share, against 2008’s 4.24 cents.

It has also proposed a first and final dividend of four cents per share.

Revenue – which came mainly from the sales of development and investment properties – surged 75.5 per cent to $621 million.

Sales from the company’s development properties segment more than doubled to $468 million in 2009 from $186 million the preceding year. This was after recognising income from projects such as The Cascadia at Bukit Timah Road, Cairnhill Residences at Cairnhill Circle and Blossoms@Woodleigh.

Revenue growth from its investment properties was nearly flat, falling 0.44 per cent to $111 million, impacted by reduced room rates and lower occupancy at Traders Hotel. This was offset by higher occupancies and rental rates at Tanglin Mall and Great World City’s retail space. Allgreen registered a 62.2 per cent decrease in ‘other operating expenses’ to $17.4 million. It said there was no need to make provisions for a ‘diminution in value of development properties’.

It had made about $24.6 million in provisions for a lowered value for development properties a year ago. The year 2009 also saw a $66.3 million write-back of provision for diminution in value of development properties. As the write-back is a non-taxable income, it resulted in a lower effective tax rate for 2009.

The developer posted a fair value loss of about $6.09 million, reversing from a gain of $8.35 million a year ago, due to lower valuation of Great World City’s office space. Updating on its recent launch, the developer said thus far it has sold 74 units of its 83-unit Holland Residences, which was launched on Jan 25.

‘Brisk sales at good prices in these early days of 2010 suggest the market remains buoyant against the backdrop of improving economies locally and internationally,’ the firm said in its financial statement.

Allgreen shares closed flat at $1.12 yesterday.

Source : Business Times – 26 Feb 2010

SC Global gets boost from AVJ consolidation

SC Global Developments saw a near eight-fold jump in fourth-quarter net profit to $33.2 million – from just $4.2 million a year ago – as it consolidated the results of new subsidiary AV Jennings Ltd (AVJ).

Group revenue for the quarter ended Dec 31, 2009, rose almost ten-fold to $274.5 million from $28 million in Q4 2008.

In December 2008, SC Global increased its stake in AVJ to 50.03 per cent and, as a result, AVJ became a subsidiary. The inclusion of revenue from AVJ pushed up the developer’s topline for Q4.

Turnover also included progressive revenue recognition of the group’s Singapore development projects – including The Marq on Paterson Hill, Hilltops and Martin No. 38 – based on progress of construction. In addition, revenue was also recognised from its development project in China, Kairong International Gardens in Shenyang.

Earnings per share for Q4 2009 rose to 8.36 cents from 1.07 cents a year ago.

For the full 2009 financial year, SC Global’s net profit rose by 28 per cent to $56.9 million from $44.5 million in 2008. This was mainly due to higher profit recognition from the group’s Singapore development projects and the return to profitability for AVJ.

Revenue for 2009 hit a record $804.7 million, a significant 524 per cent increase from $129.1 million in 2008. The group’s net debt to equity ratio fell to 2.18 times at end-2009 from 2.84 times at end-2008. It proposed a final dividend of 1.5 cents per ordinary share.

‘Despite the challenging conditions in 2009 brought by the global financial crisis, the group posted its highest year of revenue and net profit since its inception as a real estate developer in 2000,’ said chief executive Simon Cheong.

SC Global will continue to sell units in projects it has already launched over the year, Mr Cheong said. ‘We are very positive about the high-end market in Singapore given the forecasted growth of 4.5-6.5 per cent in the economy.’ SC Global, which holds a land bank of over 1.1 million square feet of developable gross floor area in the prime areas of Orchard Road and Sentosa Cove in Singapore, is well-positioned as the market continues to improve, Mr Cheong added.

Source : Business Times – 26 Feb 2010

Bountiful year for two local developers

Local developers SC Global Developments and Allgreen Properties have both posted impressive full-year profits on the back of the rebounding real estate market.

SC Global’s net profit last year improved by 28 per cent to $56.9 million – a record for the group since its inception as a developer in 2000.

It said higher profit recognition from its local development projects and the return to profitability of its subsidiary AVJ contributed to its strong performance.

Revenue hit $804.7 million for the 12 months to Dec 31, an impressive 524 per cent increase from $129.1 million the year before.

Full-year earnings per share was 14.39 cents, up from 11.27 cents a year earlier, while net asset value per share rose to $1.21 cents as of Dec 31, from 88 cents.

The group, which develops high-end luxury residences, is recommending a dividend of 1.5 cents a share. There was no dividend in 2008.

SC Global’s shares fell three cents yesterday to $1.73.

Chairman and chief executive Simon Cheong is optimistic about prospects.

‘The group holds a valuable landbank of over 1.1 million sq ft of developable gross floor area in the prime areas of Orchard Road and Sentosa Cove, which positions the group well as the market continues to improve,’ he said.

Allgreen also shone with a 141 per cent increase in full-year profit from $67.4 million in 2008 to $162.7 million last year.

Revenue for the 12 months to Dec 31 increased 75 per cent to $620.8 million, due mainly to higher sales at projects such as One Devonshire in June last year.

Higher occupancies and rental rates in its investment properties like Tanglin Mall also boosted its performance although they were offset by the weaker hotel and serviced apartment sector because of lower occupancy and room rates.

Earnings per share for the year was 10.23 cents, up from 4.24 cents a year earlier, while net asset value per share rose to $1.48 as of Dec 31, from $1.41.

The group is recommending a dividend of four cents a share, from two cents the previous year.

Allgreen’s shares remained unchanged yesterday at $1.12.

Source : Straits Times – 26 Feb 2010

Hougang reserve list site open for application

Property developers looking to boost their residential landbanks can get their cheques ready for a new piece of state land.

The Urban Redevelopment Authority (URA) said yesterday that a 99-year leasehold site at Hougang Ave 2 is open for applications from interested developers.

URA had introduced six new residential sites to the reserve list under the H1 2010 government land sales programme. This 3.02 ha plot at Hougang is the first of them to be released.

The site can house a low density condominium or landed housing development. For condominium units or flats, the maximum gross floor area is 455,152 sq ft.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that the site could yield 380-400 units in a non-landed project, or 140-150 houses in a landed development.

The plot is located within a private residential estate and is near Hougang HDB town. It is also near the Hougang and Kovan MRT stations.

Property consultants expect developers to show keen interest in the land parcel. DTZ executive director Ong Choon Fah observed that it sits within an established landed housing estate, and residents there could form a pool of potential buyers.

For instance, young people may be interested in condominium units there so that they can live near their parents, she said.

Mr Mak believes that a developer who plans for a non-landed project on the site could have a higher chance of winning the tender. This is because non-landed projects can be sold for a higher price on a per sq ft (psf) basis, and the developer would be able to bid more aggressively.

He expects the site to attract some four to eight bids if it is triggered for sale, and the higher bids could range from $159-$193 million, which works out to $350-$425 psf per plot ratio.

Nearby, two units at Kovan Residences were sold at $754-$890 psf last month, going by caveats lodged.

URA will make the remaining five new residential sites on the reserve list available soon. It will release one at Stirling Road and another at Hougang Avenue 7 next month. One site in April and two in May will also be available.

In addition, the government will be releasing another four sites on the confirmed list – two in March and two in April.

Together, sites on the reserve and confirmed lists can supply 10,550 units – the highest number in the history of the government land sales programme.

Source : Business Times – 26 Feb 2010

Property measures: Keep them guessing

If there was a party in the property market going on after the Chinese New Year, the Government would have been the party pooper. Barely a week into the new year, it introduced measures to cool the febrile-prone property market. A new seller’s stamp duty was introduced, together with a reduction in the loan-to-value limit for home loans, from 90 per cent to 80 per cent. The measures came just five months after the Government implemented moves to kill innovative interest absorption home loan schemes.

For property prices to go up is patently reasonable. After all, the property market is now seeing ample liquidity, low interest rates and growing consumer confidence buoyed by a recovering economy. That said, however, the speed at which the market is heating up is puzzling. In January, property developers sold 1,476 units – a figure treble that of the preceding month. Prices have increased at a faster rate compared to rebounds from the troughs of previous property cycles. Mortgage lending has also increased steadily by about 12 per cent year-on-year through the whole of last year. Market watchers can only surmise that the strong demand could be coming from either pent-up demand or buyers flush with cash from collective sales.

Typically, official measures to cool the market are inevitably late, given that they occur after the fact. But thankfully, they do not come so late as to fail to pre-empt any speculative bubble. In essence, the Government is doing what it has been adept at doing – precision targeting to put a brake on speculative demand before it spirals out of control. The stamp duty will hit short-term speculators, while the bank loan limit will affect buyers at the margins.

The most powerful weapon in the Government market-cooling arsenal, however, is not the series of measures already announced, but those yet to be. This is one of the oldest tricks in the book, be it in fields as diverse as nuclear strategy, politics or an endeavour as earthy as property: to receive pain in one big dose is bad; to get the same pain in small but discrete instalments is worse, but to have no certainty as to when the dose will come is the worst. As one industry watcher noted, if the Government can enact the measures so fast and without warning, it can do something ‘faster and more painful’ if prices continue to head north. Here, in essence, is the nub of the Government’s pre-emptive strategy that will keep property developers and speculators awake at night: keep them guessing.

Source : Straits Times – 26 Feb 2010

CDL plans to start $2.5b mega project next year

CITY Developments (CDL) is aiming to start building its landmark $2.5 billion South Beach project in Beach Road next year, said its boss Kwek Leng Beng yesterday.

Mr Kwek gave an update on the project – shelved in late 2008, owing to high construction costs, then slated for a start this year – as he unveiled a far- better-than-expected 77 per cent surge in fourth quarter net profits for CDL.

He brushed aside financial worries over the mega project, which is set to boast offices, luxury hotels, retail space and residences when completed in 2016.

CDL bought the site in 2007 jointly with Dubai World and El-Ad Group, which have since been hit by debt woes.

Mr Kwek, the executive chairman, said: ‘We cannot presume that the two partners have no money. If the two partners have no money, then their share will be diluted,’ he said, of the Dubai partners.

Hong Kong’s Nan Fung group emerged as a new investor in the project last June under a refinancing exercise.

‘The verbal understanding with Nan Fung is that both of us will put in more money if so required,’ Mr Kwek said.

CDL’s net profit for the three months ended Dec 31 shot up 77 per cent to $176.7 million, as the group booked profits in projects such as Cliveden at Grange, The Arte and One Shenton.

That beat the average estimate of six analysts polled by Dow Jones Newswires of $129 million. Fourth quarter revenue rose 28.6 per cent to $922.4 million.

‘The global economic recovery is better than expected,’ he said, adding that prospects were good for the residential, hospitality and commercial sectors.

Full-year earnings rose 2.1 per cent to $593.4 million, on the back of better income from strong property prices.

Last year also marked the group’s highest ever revenue of $3.27 billion, up 11.1 per cent, and second highest profit since its inception in 1963. It expects to stay profitable over the next 12 months.

Mr Kwek said that the firm will continue to focus on the local market, capitalising on its land bank and experience – but said China is promising.

‘That is not to say that we will never go abroad… But why would we want to go in a big way at the moment when I still believe that we can make a lot of money in Singapore. We know Singapore best, can read the trends better and are here most of the time,’ he said.

CDL expects sentiment among genuine buyers to remain strong despite recent government measures to cool speculation in the property market.

Full-year earnings per share were 63.8 cents, up from 62.5 cents a year earlier. Net asset value per share rose to $6.57 as at Dec 31, from $5.97.

The group is recommending a dividend of eight cents a share, up from 7.5 cents the previous year. CDL shares rose two cents yesterday to close at $10.34.

OCBC Investment Research analyst Foo Sze Ming said he expects CDL to deliver strong earnings this year, underpinned by its sold residential projects last year – The Gale, Volari and Hundred Trees – that have yet to book in profits.

Developers ‘limited by land bank’

Property developers say they are eager to bring forward project launches to ride the buoyant market but are being held back by their limited land bank.

They were caught by surprise at the rapid market recovery, they say.

‘Many of us are now caught with a depleting land bank,’ the Real Estate Developers’ Association of Singapore (Redas) president Simon Cheong said.

‘We believe the long-term solution to a sustainable and stable market is still adequate supply,’ he added.

Credo Real Estate’s deputy managing director Tan Hong Boon summed up the mood: ‘You never know what will happen. While the going is still good, developers will want to launch quickly. This is particularly so for mass market projects.

The Government recently stepped up the supply of development sites after a lull, and believes supply is adequate.

Yesterday, a 3.02ha site at Hougang Avenue 2 was offered to developers. If interest is adequate, a tender will proceed.

Another reserve list site will be offered by May, on top of confirmed list sites, which are tendered without precondition.

The comments by Mr Cheong and Mr Tan at the Redas Chinese New Year lunch at Capella Singapore yesterday came a week after market cooling measures.

The Government imposed a duty sellers must pay if they sell within a year of purchase. It also capped bank loans at 80 per cent of a sale price, from 90 per cent.

Mr Cheong said developers want land supply fast-tracked to satisfy buyer demand to minimise speculation to ease the pressure for more anti-speculative steps.

‘Given the unexpected return of an active property market, developers over the next few months would also be actively bidding for more land,’ he said.

Redas members look forward to more confirmed list sites to replenish land banks, he said. They are looking to Government land, given limited sources of private land. A developer who declined to be named said private land owners were asking for the sky ’so we can’t buy’.

Mr Cheong said developers would rather have this problem than the bleak effects of last year’s meltdown in the banking system. ‘Managing upside is always easier than managing downside.’

The anti-speculative steps were a timely reminder, said Frasers Centrepoint chief executive Lim Ee Seng at the lunch. ‘Exceptional jumps in prices are not good for us.’ Still, he said: ‘No matter how high it gets, it will still obey the law of gravity.’

An anonymous developer said the measures had hurt sentiment a little. ‘If there are 100 buyers, maybe 10 will change their minds. I expect volume to moderate a bit.’

Still, so far the measures appear to have had little or no impact on recent sales. ‘The market is still hot,’ said an industry observer. The 608-unit The Estuary in Yishun, whose preview opened on Wednesday, has sold over 200 units.

The average price for the 99-year leasehold condo is $750 per sq ft, with units facing the Lower Seletar reservoir costing around $800 psf on average.

Separately, City Developments boss Kwek Leng Beng said at a results briefing for CDL yesterday that sentiment would remain strong among genuine buyers, despite the government measures.

Mr Cheong addressed guest of honour Finance Minister Tharman Shanmugaratnam, saying developers were disappointed at being left out of the Budget.

But they were happy at the productivity push given the long-term gains. Redas called this ‘a deferred payment hongbao’.

Looming launches include the 151-unit Seascape in Sentosa Cove and Cheung Kong Holdings’ 295-unit The Vision. Far East Organization and Frasers Centrepoint plan to release Waterfront Gold in Bedok Reservoir soon. Allgreen may launch RV Residences in River Valley and unsold units at Cascadia in Bukit Timah.

Source : Straits Times – 26 Feb 2010

Developers put home launches on fast track

Developers will be bringing forward their property launches over the next few months to satisfy strong demand from homebuyers, said Real Estate Developers’ Association of Singapore (Redas) president Simon Cheong yesterday.

But Mr Cheong, who was speaking at Redas’ spring festival lunch, warned that many developers are now facing depleting land banks following brisk home sales in recent months. Developers, he said, were surprised at the speed of the recovery in the property market.

Property groups including Allgreen Properties, CapitaLand, City Developments, Frasers Centrepoint, MCL Land and UOL Group are all looking to launch projects over the next few months.

‘Redas’ members are committed to fast track supply to satisfy demand to minimise excessive speculation in the property market,’ said Mr Cheong. ‘Hopefully when demand is satisfied, there will be less pressure for future anti-speculative measures.’

Property groups here appear to have shrugged off the measures introduced by the government last Friday to cool the market.

The government said that a seller’s stamp duty will be levied on those who buy a residential property and sell it within a year. Currently, stamp duty is levied only for the purchase of a property and not its sale. Also, the loan-to-value limit on housing loans will be lowered from 90 per cent to 80 per cent.

Developers said that while volumes might contract in the short term, demand for private homes is expected to hold up well this year. Sales of new private homes by developers rose to 1,476 units in January – three times as high as the previous month and the highest level since August last year.

‘Sentiment will initially see a knee-jerk reaction and be affected, but over time, people will realise … that the interest rate environment is still very low,’ said City Developments executive chairman Kwek Leng Beng at the group’s results briefing earlier in the day. ‘If you don’t buy today, by the time you want to buy, the prices could have gone up a lot more.’

City Developments group will roll out five projects with around 1,600 units this year – The Residences at W Singapore Sentosa Cove and one residential project each at Chestnut Avenue, Thomson Road, Pasir Ris and in the Dunearn Road area.

Other market players shared similar sentiments. Frasers Centrepoint CEO Lim Ee Seng believes that the most recent anti-speculation rules are unlikely to disturb the property market much.

Frasers Centrepoint will officially launch its 81-unit Residences Botanique along Sirat Road tomorrow. It also has two launches planned for Q2 – a 393-unit project on the former Flamingo Valley Site along Siglap Road and phase three of its Waterfront Collection along Bedok Reservoir.

The buzz in private home sales continued this week – even after the newest anti-speculation measures were announced.

At MCL Land’s preview of its Yishun condo The Estuary yesterday, most of the 200 units launched were snapped up at an average price of $750 per square foot. MCL Land will roll out another 120-150 units in the project over the coming weekend – with selective price increases – said chief executive Koh Teck Chuan.

‘So far, the impact (of the government measures) is not noticeable,’ said Mr Koh. But units and projects that are more popular with investors could see a drop-off in demand, he added. MCL Land will also preview its 65-unit D’Mira at Boon Teck Road in mid-March.

UOL Group also intends to launch two projects in April or May – a 616-unit development at Dakota Crescent and a 172-unit project on the former Rainbow Gardens site at Toh Tuck Road.

But depleting land banks were a concern, Mr Cheong said. Redas ‘is now looking forward to more sites in the confirmed list for developers to replenish their land banks’, he said.

‘We believe the long-term solution to a sustainable and stable market is still adequate supply,’ Mr Cheong noted.

One developer told BT that it is important for his counterparts and himself to have enough in their land banks. But ‘at the same time, we don’t want the government to flood the market and over-supply,’ he said.

He added: ‘The best thing for the government to do – which is something very difficult and I don’t envy them – is to try to sell just enough so that the market will not catch fire, and not sell too much so that the market will go under.’

Source : Business Times – 26 Feb 2010

Govt to increase development charge rate for residential homes in S’pore

The government has increased the development charge rate for both non-landed and landed residential homes. Analysts said this is in line with the strong rebound in home sales and prices over the last six months.

The rise in non-landed residential DC rates, in particular, is expected to add on to developers’ land banking cost.

Private homes were hot property in 2009. Some 6,300 units have been sold in the last six months.

And market watchers said the upward revision in development charge for residential homes is widely expected.

A development charge is the tax payable by the developer when a property site is developed into more valuable project.

This allows the government to have a share of the gains from the enhanced value.

The DC Rate for non-landed home will go up by eight per cent on average with prime areas like Orchard Road, Sentosa and Cantonment seeing double-digit increase.

The DC rates for suburban locations like Paya Lebar, Eunos, Bedok North and Tampines also went up .

Some observers said the upward revision could have a marginal impact on developers’ land banking plans.

Dr Chua Yang Liang, head of Research, Southeast Asia, Jones Lang LaSalle, said: “The DC rate revision will have some bearing on potential developers looking at en bloc deal especially those which have an increase in plot ratio, it might have some effect.”

DC rates for landed residential homes will also go up by an average 12 per cent.

The largest increase of 17 per cent will apply to developments in Sentosa, Tanglin and Holland and even Hougang, Toa Payoh and Ang Mo Kio.

In contrast, the levy for commercial sites will fall by two per cent on average.

Sites in Raffles Quay and Shenton way will see a 13 per cent reduction.

Sentosa is the only sector in the Commercial category to see an uptick in DC rate by 12.5 per cent.

Mr Chua believes the opening of the Integrated Resort and its retail spaces has put an upward pressure to close the gap between sectors like Sentosa and World Trade Center where Vivocity is located.

With this revision, the gap has narrowed from S$1,750 to S$1,400.

Some said this reduction could have an unintended effect.

Dr Chua added: “If you look at DC rate between residential and commercial, residential continues to rise in the downtown areas, whereas the office market, office use, continue to contract.

This means there will be a wider gap between these two land use groups suggesting redevelopment into office use rather then conversion into residential.”

The change in DC rate will take effect from March 1 and will last for six months.

Source : Channel NewsAsia – 26 Feb 2010