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Archive for August 24th, 2008

Finding the best way to pay off a home loan

Posted by luxuryasiahome on August 24, 2008

When the going gets tough, the tough go shopping. And that is what home owners have been doing – shopping for suitable and the lowest home loan rates.

The cheap cost of borrowing, a result of interest rates heading south, has led to more home owners opting to refinance their mortgages to enjoy savings.

Fuelling this trend are financial institutions which are jumping on the bandwagon to launch attractive and creative loan packages to capture a bigger slice of the lucrative mortgage market.

Refinancing your home loans

Let’s take a look at the refinancing trend so far this year. Mortgage consultancy portal www.HousingLoanSG.com has seen a surge of at least 50 per cent in refinancing activities.

At HSBC, the volume of refinancing applications has grown more than 50 per cent in the last three months.

‘The reason for this trend is the big drop in the Singapore Interbank Offered Rate (Sibor) in the last 18 months from as high as 3.5 per cent to about 1.2 per cent currently,’ said Mr Dennis Ng, spokesman for www.HousingLoanSG.com.

Sibor is the benchmark rate used by banks to determine mortgage rates for home loans. It is the cost at which banks borrow funds from one another.

The drop in Sibor means that those who took up a housing loan one to two years ago are likely to enjoy significant interest savings if they refinance now.

Mr Ng worked out that refinancing an outstanding loan amount of $480,000 to a lower interest rate of 1.95 per cent, down from the current rate of 3.5 per cent, will result in interest savings of $21,710 over three years. This assumes a 25-year loan tenure.

Even those who are subject to lock-in and clawback penalties may save money by refinancing, said Ms Annie Lim, managing director of mortgage consultancy Global Creatif Financial.

Furthermore, financial institutions which are eager for your business may offer to pay your legal fees of up to $2,000 for you to switch banks.

Refinancing has represented 75 per cent of all mortgages at Global Creatif Financial so far this year.

Still, Ms Helen Neo, Maybank Singapore’s head of consumer banking, cautions that refinancing should be considered only when there are no plans to sell the property in the short term so as to avoid paperwork and potential costs.

Pegged rates versus fixed rates

With Sibor falling steadily, it is not surprising that many customers are opting for new Sibor-linked packages or refinancing from a fixed-rate package to a Sibor one.

Still, some customers are confused when faced with a choice of a three-month or a 12-month Sibor-pegged home loan package.

Mr Ng noted that if one chooses the latter, it is as good as fixing the interest rate for a year.

This means the customer enjoys greater certainty or lower volatility with a 12-month Sibor package than a three-month package.

However, as the 12-month Sibor rate is typically 0.5 per cent higher than the three-month Sibor, he will end up paying a higher interest.

Ms Lim believes that the three-month Sibor will appeal to those who are comfortable with the current interest-rate environment and who expect rates to stay depressed.

Looking ahead, Mr Bryan Ong of mortgage consultancy bcgroup.com.sg thinks that rates will remain flat for the next 18 months. That is why he feels that the three-month Sibor is ‘the way to go’.

New home loan packages

With depressed interest rates and an influx of new and creative home loan packages, home owners are spoilt for choice.

However, opting for the cheapest rates may not always be the best for every home owner, as different people have different needs.

MortgageOne Sibor

For instance, Standard Chartered Bank’s (Stanchart) newly launched MortgageOne Sibor will appeal to those with excess cash.This is because it comes with an offset feature so that customers can  use the interest earned on their deposits to reduce the interest payable on their home loans.

MortgageOne Sibor loans are priced at 0.8 per cent per annum above the three-month Sibor for the first three years.

Customers can enjoy the same interest rate as their mortgage loan on two-thirds of the deposits linked to their loans, subject to a maximum of their outstanding loan amount. The remaining deposits will enjoy an annual rate of 0.5 per cent.

At the same time, they have the flexibility to withdraw their deposits at any time.

‘This is good for home owners who have surplus cash. They could be waiting for investment opportunities and want to remain liquid. In the meantime, they can use their cash to reduce their loans,’ said Mr Ong.

Interest-only loans

Some mortgage packages like the DBS Bank’s new interest-only mortgage product launched early this month appear attractive, but experts cautioned that they are not suitable for everyone.

The product allows customers to pay only the interest for the entire duration of their home loan.

The principal amount is payable in one lump sum only at the end of the loan tenure.

This means that the money that would otherwise have formed the principal component of the loan instalments would be available to the customer for investing.

Ms Lim worked out that based on a rate of 3 per cent, a $1 million loan with a 25-year tenure would have a monthly instalment of $4,486.

Of this, $2,083 is paid towards the principal and would thus be available to the customer to meet other needs if he opts for interest-only servicing.

But here’s the potential pitfall. If the customer invests wrongly or, worse still, has no discipline to save and invest, the amount would be frittered away and he still has a loan to pay.

Ms Lim said that she would go for an interest-only loan only under the following situations:

~ If she has an intention to buy multiple properties and would like to pay only the loan interest and keep every cent possible;
~ If she has other alternatives to invest at higher returns; or
~ If her cashflow is very tight.Like her, most experts said that they would prefer the conventional packages where both principal and interest are paid up regularly and doing so helps them pay their home loans in a disciplined manner.

Said Mr Ng: ‘The customer might end up in financial trouble in the event that property prices correct by say over 20 per cent and plunge him into negative equity.

‘In such a situation, he might not be able to sell his property at a price where he can pay up the loan.’

He cautioned home owners who opt for such a product that they would end up paying more interest in the long run compared to conventional loan packages where both the interest and principal components are paid up regularly.

However, Mr Ng added that he might consider such a loan package if he is buying an investment property.

DBS’ interest-only mortgage charges 1.5 per cent on top of either the three-month or 12-month Sibor.

Other banks like Stanchart allow customers to pay only interest on a mortgage for up to three years and such products are offered on a case-by-case basis.

To ensure that customers are not overstretched, DBS imposes certain restrictions such as allowing home owners to borrow only up to 70 per cent of the property purchase price.

Finally, Stanchart’s general manager of lending, Mr Dennis Khoo, advises home owners to consider the following when choosing a mortgage package:

~ Is the property for your own stay or for investment?
~ What are your long-term financial goals?
~ Do you prefer security and protection or transparency with some volatility?
~ Do you have any spare cash that you can use to reduce your interest payments and shorten your loan tenure?

A word of caution

‘The customer might end up in financial trouble in the event that property prices correct by say over 20 per cent and plunge him into negative equity. In such a situation, he might not be able to sell his property at a price where he can pay up the loan.’ – MR DENNIS NG, spokesman for www.HousingLoanSG.com, on the dangers of taking up an interest-only loan

Source : Sunday Times – 24 Aug 2008

Email lushhome@gmail.com to speak to professional loan consultants.

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Geylang King’s Midas touch

Posted by luxuryasiahome on August 24, 2008

His Fragrance chain of budget hotels is a familiar sight in Geylang. But Mr James Koh Wee Meng, who last week made headlines with his debut 24th placing on Forbes magazine’s list of the 40 richest Singaporeans, is less forthcoming about his personal life.

The 45-year-old, who has a net worth of $230 million and is chief of the public-listed Fragrance Group, repeatedly declined interview requests from The Sunday Times.

He even ruled out the possibility of an interview in the next few months.

Fragrance is a family-run property and hotel developer which was listed on the Singapore Stock Exchange in 2005.

It has built more than 50 properties, from budget hotels to terrace houses.

While little is known about the man, it is obvious that business acumen runs in the Koh family.

They are the same people behind the Lee Hwa jewellery business, which listed as Aspial Corp in 2006.

Mr Koh’s younger brother, Mr Koh Wee Seng, is chief executive of Aspial Corp, the only public-listed jewellery company in Singapore.

The younger Mr Koh also declined to be interviewed.

It was in the family’s Lee Hwa operations that the elder Mr Koh got his business training. In a 2001 interview with The Straits Times, the former Serangoon Secondary School student revealed that he was never interested in studies.

From the age of 14, he would help out at his father’s jewellery shop on Circuit Road – then called Lee Hwa Goldsmiths and Jewellery – after school.

He worked his way up. By age 21, he had set up a factory above his father’s shop to make gold ornaments for the shop, as well as for wholesale. Soon, he was running the family’s jewellery stores and factory. But building houses, not jewellery, was his passion.

‘I used to walk past construction sites and just stare at them. To construct a tall building from an empty plot of land is very satisfying,’ he told The Straits Times in 2001.

In 1991, he got his first big break in property. He bought a 5,000 sq ft plot of land for $700,000 in Kembangan to build a bungalow and sold it for $1.8 million. He developed more landed properties and later moved on to apartment blocks.

In the 1990s, he saw the potential for budget hotels in Singapore to serve backpackers and young travellers.

In 1996, he built the first Fragrance Hotel in Geylang Lorong 20 and named it Ruby, a nod to the many years spent helping out with his family’s jewellery business. Fragrance’s next four hotels in Geylang were named Crystal, Emerald, Pearl and Sapphire.

Mr Koh was soon crowned Geylang King by the media for building 11 small-scale residential projects in the area between 1994 and 2004.

In 2005, the business went public on the Singapore Stock Exchange.

In February this year, Fragrance Group reported that for the 2007 financial year, its net profit had more than doubled from $14.8 million to $30.4 million. Its hotel sector contributed $23.63 million to the group’s total consolidated turnover of $136.12 million.

Over the years, Mr Koh has been consistently upping his stake in the company. His direct interest in Fragrance now stands at 72.75 per cent.

His wife, Madam Lim Wan Looi, also holds a substantial stake in the company. They have a 17-year-old daughter.

If he has one indulgence, it has to be his love for vintage cars. In 2004, it was reported that he had two 1970-model Volkswagen Beetles, which he drove on Sundays, and a Bentley which ferried him around daily.

Source : Sunday Times – 24 Aug 2008

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HDB resale market going strong

Posted by luxuryasiahome on August 24, 2008

Deals of more than $700K are still being done, with demand fuelled by PRs and new families

While sentiment in the private homes market remains gloomy, the market for Housing Board resale flats offers another story.

Deals of $700,000 and above are still being done this year, after ‘record deals’ of more than $700,000 first surfaced during last year’s boom, though these are few and far between.

The good news for sellers is that prices continue to rise, pushing up valuations.

Volume is seen remaining healthy as home seekers continue to check out resale flats, largely oblivious to the credit crisis consuming the world, market watchers said.

Demand for HDB resale flats comes mostly from newly formed families and new permanent residents (PRs), they said.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, thinks that HDB prices are still rising because there is not enough supply to meet demand.

‘For example, last year, there were about 78,000 new citizens and PRs. So they may be buying HDB flats which they may not have been eligible to buy previously,’ he said.

HDB flat seekers also include those who are priced out of the private market given that mass market prices there remain relatively strong.

But there is a limit to the gains for an HDB seller. Already, HDB prices are considered high, said Mr Leong.

Also, agents say that buyers are showing more resistance to sizeable cash-over-valuation (COV) amounts. The COV is the cash sum that is paid over and above the valuation of a flat.

It cannot be paid from a home loan or with Central Provident Fund monies.

Generally, once you cross the barrier of $600,000, there will be strong resistance, said the assistant vice-president of ERA Asia Pacific, Mr Eugene Lim.

High-priced transactions have been registered in a few estates such as Marine Parade, Queenstown and Bukit Merah. For instance, a $750,000 deal for a 10-year-old, high-floor 124 sq m unit in Holland Close in Oueenstown was recorded in June.

Once a high-priced deal is done, sellers in the area will raise their asking prices. But these may not be realistic, said Mr Lim.

Increasingly, potential buyers are feeling the pinch of rising costs and negotiating harder for a smaller COV amount, particularly for non-prime flats, he said.

‘People are more cost-conscious now.’

For suburban locations, asking levels for COV amounts have come down, said HSR Property Group’s executive director, Mr Eric Cheng.

‘I would say that $15,000 to $25,000 is common for non-prime districts. Previously, people were asking for $30,000 to $40,000,’ he said.

‘The resale index rose because of higher valuations.’

Valuations are made based on historical data.

Going forward, HDB resale prices look set to rise, but likely by a smaller margin.

In its second-quarter data release in end-July, HDB said that it planned to offer about 3,900 new flats under the Build-to-Order (BTO) system over the next six months. These will be in towns such as Punggol, Sengkang and Bukit Panjang.

For the whole of this year, HDB has a planned supply of 8,400 new BTO flats, up from the 6,000 flats offered last year and just 2,400 BTO flats in 2006. These BTO flats are the main supply of new flats.

With more new flats coming on the market, some demand will be taken away from the resale market, said Mr Lim.

He expects an overall price rise of 10 to 15 per cent, including an 8.2 per cent rise in resale prices in the first half of this year.

Mr Cheng believes the rise in the next 12 months will not be more than 5 per cent.

Last year, HDB resale prices rose by 17.5 per cent.

HDB prices will support the private mass market sector, but selectively. A lot still depends on the general economic outlook, said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

When the economic outlook is less buoyant, HDB upgraders are likely to stay put rather than move to another estate to upgrade, he said.

Typically, demand for a private suburban launch comes primarily from the same housing estate. Unless the market is generally buoyant, sales will start to slow once this pool of buyers runs out, he added.

Big money

Despite the slowing economy, the HDB resale market still saw high-priced transactions in the last few months.

Marine Parade
3-room: $382,000 (July)
4-room: $425,000 (July)
5-room: $700,000 (May)

Queenstown
3-room: $365,000 (June)
4-room: $606,000 (July)
5-room: $750,000 (June)

Bukit Merah
3-room: $395,000 (Aug)
4-room: $590,000 (Aug)
5-room: $690,000 (June)

Source : Sunday Times – 24 Aug 2008

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Visit to study HK’s rental flat system

Posted by luxuryasiahome on August 24, 2008

Singapore officials will go to Hong Kong next month to study the territory’s rental flat system.

Senior Minister of State (National Development and Education) Grace Fu will lead the delegation, accompanied by MPs on the Government Parliamentary Committee for National Development.

The visit comes amid a review of the eligibility criteria for HDB rental flats.

The Hong Kong Housing Authority handles 670,000 rental flats for two million people, about one-third of its population.

National Development Minister Mah Bow Tan told reporters yesterday that some who rent flats here own cars, have maids and money to install air conditioning.

Another group is those eyeing a flat, blaming their children for kicking them out. But when contacted, the children will deny it, saying: ‘My mother doesn’t want to stay with me. She wants her own place. She wants more freedom.’

Source : Sunday Times – 24 Aug 2008

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Needy will move to head of queue for HDB rental flats

Posted by luxuryasiahome on August 24, 2008

Singaporeans in desperate need of a home will, from today, be moved to the front of the queue for HDB rental flats.

National Development Minister Mah Bow Tan announced this move yesterday and also gave a peek into new rules being studied to stop abuse of the rental scheme.

One of them is that the HDB will scrutinise the assets, including private property, of siblings and children of applicants to ensure they rely first on family, not on rental flats.

Another will require flat sellers to deposit part of their sales proceeds into their Central Provident Fund (CPF) accounts.

These likely changes are part of a government move to address the sharp rise in demand for rental flats, with many people joining the queue even when they have other housing options.

It is a worrying trend highlighted by Prime Minister Lee Hsien Loong in his National Day Rally speech last Sunday.

Yesterday, Mr Mah told reporters at a community event in Tampines: ‘Our housing policy is premised on home ownership. Rental flats are there because we recognise that there is a small group of people who cannot afford to own flats.’

These are the destitute with no family and who cannot work.

He also pledged that ‘if you are staying on the beach, on the void deck, and you are a divorcee with five kids, we’ll find a way’.

They will go to the front of the 4,400-strong queue.

He also said the supply of rental flats will be raised by 20 per cent to 50,000 flats, in three years.

They are leased for two years at what he called ‘ridiculously cheap’ rent which has stayed the same for 30 years. It can be as little as $26 a month. This fuelled the trend he noted: an increasing number of old folk who want ‘to cash out of their flats and ask us for rental flats’.

Hence, he is hurrying the HDB to complete the review of the eligibility criteria as early as year’s end or at the latest, next March.

He identified three rules that may get the green light:

~ When owners sell, they will have to put into their CPF account the subsidy they had enjoyed when they bought their flat from the HDB. The amount could be about $30,000 to $40,000.Now, they can pocket the entire sales proceeds and the fear is they may spend it all, be in dire straits and join the rental queue.However, Mr Mah did not say if the rule was only for people applying for rental flats or for all sellers.

This rule has a precedent. Currently, those who receive a government grant of $30,000 to $40,000 when they buy an HDB flat in the resale market will have to put that grant back into their CPF accounts when they sell their flats.

~ Scrapping the current rule that allows a person to apply for a rental flat only if he has not sold a property in the past 30 months.This rule, Mr Mah said, keeps those in dire need waiting, while giving the not-really-needy the impression that if they wait for 30 months, they are sure to get a flat.

~ The main measure of neediness now is a monthly household income of no more than $1,500. Soon, the HDB will also look into the applicant’s children’s ownership of private property and if the person’s siblings and children have the means to support him.

APPLICANTS

Supply
~ Today: 42,800
~ 2011: 49,860

Demand
~ Each month, 131 tenants give up their flats while 382 people join the queue.
~ In June, 4,387 were on the waiting list. They wait, on average, 11/2 years for a one-room flat and nine months for a two-room flat.

Who applies?
~ About 12,000 applied last year, but only 4,671 were eligible. Their household income was at most $1,500 a month.
~ Of those eligible, four in 10 were former flat owners who had no mortgage arrears or who were not divorced, suggesting some might not have been as needy as others.

Source : Sunday Times – 24 Aug 2008

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Sheares Bridge Run sees participants run across Marina Barrage

Posted by luxuryasiahome on August 24, 2008

Back for the 17th time, the Sheares Bridge Run, which began at Esplanade Drive, attracted 70,000 runners on Sunday morning.

For the participants, the highlight of the event was running across the Marina Barrage – the newest development at the Marina Bay area. Guest-of-Honour, Defence Minister Teo Chee Hean, also joined the runners in the new scenic route.

The event ended with a carnival at the Padang and various performances in celebration of the closing of the Beijing Olympic Games.

Mr Teo said: “The barrage, in a sense, represents a new source of life for Singapore because it is a source of water, but also a source of recreation in the future for all Singaporeans.

“With this new route, it has also excited the interest of runners because they are also looking for something novel.”

Source : Channel NewsAsia – 24 Aug 2008

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S$1.8m integrated sports hub opens in Bishan North

Posted by luxuryasiahome on August 24, 2008

A S$1.8 million sports hub, called Bishan Active, opened in the heart of the Bishan North neighbourhood on Sunday. It is the largest public outdoor sporting facility in Singapore’s housing estates.

Mayor for Central Singapore District, Zainudin Nordin, said beach volleyball is featured at Bishan Active because it is hip and popular with the young. He said the Town Council will also look into further improvements, such as adding shower facilities there.

At over 22,000 square metres, the sports hub in Bishan sits on a plot of land that was initially meant for a school. But plans to build the school were deferred and the sports hub was constructed there on a seven-year lease.

Other features at the sports facility include a basketball court, a football pitch and a roller blade track. There is also a multi-purpose sheltered pavilion, which will provide some cost savings to nearby residents.

“(Putting up a) tentage for a weekend event can cost up to S$11,000 to S$12,000, so you are now able to exploit and take benefit from such a facility,” said Mr Zainudin.

It is also hoped that the new facility can kick-start the sporting dreams of young Singaporeans. In fact, the Singapore women’s national football team has adopted the pitch at Bishan Active and will be holding training sessions there. Residents will also be able to interact with the players and watch their development.

Bishan Active will be an ideal platform to rally the residents and garner support leading up to the 2010 Youth Olympic Games in Singapore.

Source : Channel NewsAsia – 24 Aug 2008

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Come to Joo Chiat for the art

Posted by luxuryasiahome on August 24, 2008

Mention Joo Chiat, and bars, budget hotels, massage parlours, pubs and great food joints come to mind.

With time, the enclave may also be known for something less down to earth: its art galleries.

In the past year, four have sprung up.

They include Artoholic Gallery in Joo Chiat Road, which opened last October on the ground floor of a two-storey conservation shophouse, and which includes a cafe. On display are digital prints by Foon Foono, a Malaysian graphic artist.

General manager Gerlene Tan, 32, says she was drawn by the area’s cultural heritage and bohemian feel, which she found ideal for an art gallery. She set up the gallery despite the area’s sleazy reputation. In fact, friends questioned the choice of location.

Still, the gallery is nearer the Marine Parade end of the road, away from the bars and budget hotels.

She says she is encouraged by the new condominiums popping up in the area and reckons her gallery will be the place for home owners to go to for interior decoration.

Chinese ink painter Lin Lu Zai, 45, who set up his art gallery Miao Zai Xuan at Joo Chiat Place last July, is another who likes the old-world ambience. He says: ‘I like the area for its old houses and rich culture.’

Lin, who paints mostly flowers, birds and scenery, has been living in the nearby Eunos area for the past 10 years and adds: ‘I feel very comfortable and familiar here and somehow that helps me paint better.’

Rent is also affordable, compared to having an art gallery in town. He pays $3,000 monthly for a 1,000-sq ft space that would cost at least $6,000 in the city.

Apart from selling his paintings which can cost ‘more than $10,000′, he also conducts art lessons for adults.

It is not just locals who stop by. His gallery is also popular with expats living nearby.

The gallery is also ‘within walking distance’ of pubs in Joo Chiat Road. He says: ‘I often see the women in their sexy outfits walking by – they add to the uniqueness of the place.’

The latest art space that has set up in Joo Chiat is the Black Earth Art Museum, owned by a businessman who is also an art collector, and who wishes to remain anonymous.

The museum, which opened on Aug 3, is in a three-storey conservation building. A separate one-storey terrace house at the back is also part of the museum.

On show now are works by three local artists, showcasing Chinese ink, watercolour and oil paintings. Museum chairman Chieu Shuey Fook, 74, himself an artist, says it was set up so ‘local artists have a place to show their works’. Interested artists send their requests to a committee that decides what will go on show.

He says the museum has exhibitions lined up till next August. Artists pay $3,000 for a 10-day period. ‘The sum helps to cover the electricity bill,’ he says. The museum, a former foreign-workers’ dormitory, has attracted crowds. He says visitors stroll in after dinner to look at the works.

Artist Goh Chiew Lye, 56, is exhibiting Chinese ink paintings there. He has been painting for 35 years and says the art museum will help bring an ‘artistic feel’ to the area.

Slightly away from Joo Chiat Road is Muse House, an art gallery set up by installation artist Teo Eng Seng, 69, within his double-storey Peranakan house.

The Cultural Medallion recipient says the area, with its mix of conservation and new buildings, is ideal for art. ‘Hopefully this can be like London’s Cork Street,’ he says. Cork Street is known for its numerous art galleries.

The arrival of art galleries has been given the thumbs-up from the Save Joo Chiat workgroup, formed in 2004 by residents wanting to promote its Peranakan heritage.

Spokesman Colin Chee, 58, says the art galleries are a good sign that Joo Chiat can be a ‘creative hub’.

Indeed, Joo Chiat resident Wong Mei Ling, 39, notes: ‘They add a different sort of vibrancy to the place.’

Source : Sunday Times – 24 Aug 2008

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