Property Buyer Articles

Property Buyer Announcements - July 2010

Sun, 25 Jul 2010 04:08:30 +0000

Dear readers,

Thank you for you support all these years. We have reached the point where we now need to upgrade our web hosting and server.

This means that there may be momentary disruption to the websites from now till Mid August 2010.

We seek your understanding as we upgrade.

Meanwhile, there are also many new developments coming up and Property Buyer will be revamping the website to incorporate many new features to serve your better.

Our home loans and mortgage consultancy operates as usual at: -

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email: loans@propertyBUYER.com.sg

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Check Valuation of Property in Singapore

Role of a Conveyance Lawyer in Singapore

Wed, 23 Jun 2010 03:01:57 +0000

Role of a Conveyance Lawyer in Singapore

The lawyer’s role in property buying includes but not limited to the following: -

1. The lawyer’s role is to review the contracts and terms of purchase. Such as reviewing an Offer to purchase, Option to purchase or a sales and purchase agreement. (Many times, this important process is skipped as people go straight to the show room and sign contracts blindly after listening to property agents without adequate legal advice.)

By Property Buyer Singapore Mortgage Consultants and Broker

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

2. Conduct title searches on the property which you are buying to make sure that the titles are unencumbered or unchallenged and can be delivered to you upon completion of the purchase of the property.

3. Check against government policies or regulations which may adversely affect the value of the property that you are buying. Such enquiries may include checks with URA, BCA, SLA, LTA or more.

4. Once all checks are complete, a caveat on the property title is lodged. This Caveat is then published and made available to the public. This serves to inform the public that you have a vested interest or claim in the property which has the corresponding property title. During this period, if there are other claims or counter claims on the property title, they must be raised at that time. Lodging a caveat increases the protection to the buyer from future legal challenges on the legality of the sale process.

5. Given that properties are large commitments. Most people will use a bank loan to finance a property buying. During this stage, (you would have already completed exercising option to purchase and already signed a bank’s letter of offer for a Singapore bank loan.) your lawyer will liaise with your bank’s lawyer to ensure smooth disbursement of the agreed home loan mortgage on your property. Sometimes, the bank’s lawyer is also your lawyer. This lawyer will assist in coordinating to disburse your loan. The bank’s lawyer will check against terms in the bank’s letter of offer and compliance to matters of material facts and report such matters accordingly to the banks prior to funds disbursement.

6. Liaising with CPF Board (or Lawyers on CPF board). If you intend to utilize Central provident fund (CPF) – A Singapore’s version of pension fund, your lawyer will check and ensure that the CPF funds are ready for drawdown in order to complete the property purchase within the completion time-lines. Sometimes, your lawyer may also be a lawyer on CPF panel of lawyers, that makes things potentially easier and faster (but CPF has internal processes for disbursing funds, these things still takes time).

7. Your lawyer will be responsible for liaising with the Bank and the CPF Board (or their lawyers) to ensure that your Housing Loan and your CPF Funds are in place and ready for drawdown to order to complete the purchase within the agreed completion period.

8. Prior to Completion, your lawyer will calculate any sums of monies due to the property seller from their over payment of Management Committee Strata Titles (MCST) fees (commonly known as maintenance fees) and annual property tax. Based on the property completion date, your lawyer will calculate your pro-rata share from the MCST and Annual Property tax that has been paid by the property seller and you will have to settle this fee in cash by paying your lawyer and your lawyer will pay to the seller.

9. Completion of sale. This is a legal term which refers to all the payment of the agreed and contracted property sale price where you have fully paid all monies to the seller. The seller hands over to you the signed conveyance of title called the “Instrument of transfer” which effectively transfers the ownership of the titles from the seller to the buyer and hence the ownership of the property from sellers to buyers. At this stage, your Singapore bank loan is fully disbursed. Or in the case of a building under construction, whatever monies which should be paid during this stage of construction is disbursed.

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We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or Singapore Mortgage refinance home loans, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed or fear based buying approach, we emphasize that you need to check your finances and property home loan affordability. Check out the mortgage calculators or call us so as to do your sums right.

Not Simply Cheap, but what Fits. We Research, You Save!

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All articles are the intellectual property of www.PropertyBuyer.com.sg. You are welcome to reproduce our articles provided that you include an active and working link back to http://www.propertyBuyer.com.sg

Option to purchase: Dishonest Singapore property agents can still play

Mon, 21 Jun 2010 01:03:32 +0000

Dishonest Singapore property agents Option to purchase in Singapore

We shall not go into the details on how an Option to purchase works and what it is. An option to purchase is basically a legal document which gives the Property Buyer the option to buy a property at an agreed price within a time period, typically 14 days.

Malpractice in Property transactions regarding Option to purchase in Singapore

We consider any act that puts the property buyer and seller at risks is unethical and bad practices.

Some Bad Singapore Property agents want the seller to sign an Option to Purchase document leaving out the date and the price unfilled. This puts the seller at risks of selling involuntarily and gives a potential dishonest property agent a chance of a quick sale which could costs the Owner hundreds of thousands of dollars.

By Property Buyer Singapore Mortgage Consultants and Broker

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

On property buying , the dishonest property agents lure the property buyers into making an offer, and leading them into believing that the price is agreed by seller.

Case study 1 , Dishonest agent dupes buying into believing that the deal is sealed at $1.23m, this price is acceptable by the seller.

So the Property buyer makes an offer and pays a deposit for the option to purchase of $12,300 for the property. The Dishonest property agent then deposit this cheque into the seller's account . He/she forces or sweet talk the Seller into agreeing to the deal.

During this time, you will be chasing the property agent. At this time, they may have asked the seller to return the money, but as cash to them. You may have a hard time to see this money again.

This causes the property buyer much anxiety . When they are most anxious , the dishonest property agent will offer a solution to help negotiate with the seller.

Be cautious, during this time, the crooked property agent may ask for some fee for "doing you a favour" from the trouble they created in the first place. Talk about being thick skin.

In case this crooked agent cannot get a cut from trying to recover your money, they may instead really try to sell the property at the true asking prices of $1.31m instead of $1.23m. And since your Option to purchase money is stuck and the Dishonest property agent has no intention of returning you the money easily (even if it is not them who kept the money), some buyers may be tricked into paying more for their property. BINGO, the deal is done! The deal is closed!!! Commission is paid out to dishonest Singapore property agent. It's all in a day's work.

Our unfamiliarity with Property Buying is dishonest singapore agent's gain

Remember many agents in Singapore look really decent and innocent. Behind that innocent face are lies, tricks and unethical behaviour. Many of them look really kind and friendly, if you do follow them secretly for a day, you will discover all their dirty tricks. Even many property agents secretly acknowledged that 9 out of 10 of them are crooked and it's because of the system, they have no choice.

IS OFFER TO PURCHASE A BAD CHOICE?

The offer to purchase document is a new and bad development in our opinion. This practice stems from a botched deals where smart property buyers discovered last minute that something is not quite right and cancelled the cheque.

Since these buyers actually can protect their own interest, this runs counter to the benefit of dishonest agents and dishonest agencies , something needs to be done to protect the interests of the Property agencies and property agents.

So they came up with a document called OFFER TO PURCHASE. We are not quite sure how much an OFFER TO PURCHASE holds in legal weight. But it is nonetheless a legal document whereby the Property agent asks the Property Buyers to sign on offering a price.

Do check through on the terms and make sure that they are reasonable for an Offer to purchase and that you have the right to rescind the offer should it not be accepted within 3 days. If possible, post date your cheque. And that you must also specify and include your rights such as "the offer is valid upon a reasonable and satisfactory terms stated within the Option to purchase" or words to that effect.

What if a Buyer offers to purchase and it is accepted and the subsequent Option to purchase comes, but with terms that are UNFAIR and not acceptable? Does that mean that the Property Buyer has also accepted the terms and conditions of the Option to Purchase?

Most Singapore property agents will only tell you what you need to know, not more. So will they show you the Option to purchase?

If you don't believe, try asking them to provide you a copy of the Option to purchase, 9 out of 10 will be most reluctant to show you. Since the agencies drafted the Option to purchase documents, it usually favours the agencies and the agents and sometimes to the disadvantage of the Property seller and buyers. Those rare agent who may be willing to show you may be new to the trade.

So if a Singapore Property agent asks you to offer a cheque and sign an OFFER to purchase, ask them to send you both documents for your review first. And have the terms and conditions of an Option to purchase included in the offer to purchase. Otherwise you may be signing a blank cheque.

Should the Property Buyer sign the Option to Purchase?

Only the rightful seller needs to sign the option to purchase. The property buyer(s) do not need to sign the option to purchase. The property buyer only needs to have the original signed copy of the option to purchase in their possession. Never never never ever leave your Original copy of the Option to purchase with your agent.

Beware of letting your agent handle your original option to purchase document. They can easily sub-sale your property without you knowing about it, simply by filling in the name of the buyers if it is not filled in.

During the hot property market , we have heard that some agents who held copies of the original option to purchase managed to flip the properties for higher price making the difference. When the original buyers wanted to exercise option, they did not want to HAND OVER the ORIGINAL option to purchase. The buyers have no recourse as they do not have the original OTP and cannot exercise the option.

This leads to the Original buyers being unable to exercise option even if they have paid and book the property. Under normal circumstances, the buyer would have the right to buy the property at the agreed price. In this case, the Property Buyer loses out on his/her property and any potential gains.

Some crooked Singapore Property agents may even take your original option to purchase , make copies and then submit it to many banks to try and secure property loans from their favourite bankers and lawyers from which they have an under-table deal. These rogued lawyers then over-charge you and pay the dishonest agent the difference , which is illegal.

Is your property agent too eager to recommend a bank, a banker to you? RUN for your life.

Is your property agent too eager to recommend a lawyer or law firm? RUN for your life.

Anything outside of Property buying and selling, be really careful.

Singaporeans and people who buy in singapore do not buy properties too often in their lives, so naturally you can consider an advisor such as Property Buyer Singapore Mortgage Consultant who's also experienced not just in Home loans, but also property Buying to guide you.

About Property Buyer Contact Property Buyer

www.PropertyBUYER.com.sg

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

HOME LOAN SINGAPORE: Will Low Sibor - SOR Interest rates cause property prices to go up?

Sat, 05 Jun 2010 02:31:30 +0000

HOME LOANS SINGAPORE: Will LOW SIBOR - SOR INTEREST RATES CAUSE PROPERTY PRICES TO GO UP?

“Analysts say the Sibor drop may complicate recent government efforts to rein in rising asset prices, in particular a surging real estate market.” (David Roman and Gaurav Raghuvanshi, Dow Jones Newswires, http://online.wsj.com/article/BT-CO-20100519-718371.html

,19th May 2010)

"Property is the most interest-rate sensitive sector of the economy," said David Carbon, an economist with DBS. "The economy is growing very fast, rates are very low: You can draw your own conclusions." (David Roman and Gaurav Raghuvanshi, Dow Jones Newswires, http://online.wsj.com/article/BT-CO-20100519-718371.html

By Property Buyer Singapore Mortgage Consultants and Broker

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Some financial news reports or articles have been saying that Sibor at an all time low is making the situation more complex as low interest rates cause asset bubbles especially in the property market.

Though the statement looks correct universally and is more or less so, but if you bother to drill down, a lot of so called Universal truth is not so Universal afterall.

WHAT WILL LOW PROPERTY INTEREST RATES CAUSE?

The general hypothesis is that when Interest rates are low, people can afford the properties, therefore bidding up the prices. We are usually very mindful about generic motherhood statements such as these.

While in the extreme, that statement "Property is the most interest-rate sensitive sector of the economy" is usually true, but the degree of sensitivity of property to that is suspect.

Because if you look at 2007 to 2008, during the property boom, the run up in prices as well as interest rates are almost in tandem. It took quite a lot of interest rates hike (from about 2% home loans singapore rates to almost 5%) to slow down the property market. So there is a substantial lag effect.

And even so, it was not entirely Interest rates that did the job of slowing the property market, it was the FINANCIAL CRISIS.

We always like to do some investigation and research. As our tagline goes, WE RESEARCH, YOU SAVE. And when we say Research, we mean it.

POINTS FOR AND AGAINST " Low Interest rates complicate recent government efforts to rein in rising asset prices"

A lot of our clients who first come to see us to get property loans in Singapore have not yet a clue how much the repayment schedule will be. Therefore it would seem that it is not the low interest rates that draw them in the first place.

As far as the cases we have seen and our clients with whom we spoke to.

Property Buyers who are getting home loans in Singapore do so for the following reasons: -

Need a place to stay
Don’t want to rent anymore
Property available in their locality
Property meeting their budget
Property meeting their lifestyle
Investment reasons – Income (very few)
Investment reasons – Capital appreciation (Quite a lot)
Interest rates are very low (Very low amount of people that buy a property actually quote this point. Based on our Non-scientific sample size of > 50 people, which can to some extent be representative of Singapore's population.

We have a sample size of 50 clients over the past many months, population of 5 million people, 90% of people did not state interest rates being low as buying criteria (only 10% stated low mortgage interest rates as property buying criteria).

Based on a statistical tool at http://www.surveysystem.com/sscalc.htm, we have arrived at a figure of 90% +/- 8.32% using a 95% confidence level.

PROPERTY BUYERS ARE NOT BUYING DUE TO LOW MORTGAGE LOANS RATES!!! (We are 95% certain) – Based on our 30min rough estimation

Even though people that bother to read our research material are typically skewed towards private properties, their range do vary a lot, from property purchase between $1m to $10m. And as these people are not related, we can therefore assume that they are fairly homogeneous and representative of Singapore’s Private property buyers.

We can say with a 95% confidence level that between 81.68% to 98.32% of people buying properties in Singapore, they are NOT buying due to low Singapore property loans rates. Of course there are between 1.68% to 18.32% @ 95% confidence level are buying due to low interest rate reasons.

So low interest rates is one of the many factors that cause property asset prices to rise, but only a small reason.

Second factor that somewhat disprove the Low interest rates causes property prices to rise

Singapore Banks practice a safety threshold for property mortgage loans interest rates. Therefore only those who have a healthy income (cash flow) minus off their liabilities meeting a certain debt servicing ratio (typically 50%) are granted a loan.

Singapore banks generally set a property loans interest threshold at between 3.5% to 5%. Even if the prevailing interest rates are 1% or less on your home loans, you will be tested for your servicing ability at between 3.5% to 5% home loans rates. If you fail this test, you will be granted a smaller loan size or NO loan at all.

So if you cannot pass the affordability test, you cannot buy a property using bank's financing, so how will you add to the demand to force property prices to rise?

Therefore your affordability do NOT increase with lowering interest rates in Singapore. It's either the bank will lend to you, or NOT (if you fail the cash flow criteria).

POINT THREE - IF PROPERTY INTEREST RATES ARE HIGH AND YOU NEED A PLACE, WITHIN THE ELASTICITY RANGE OF INTEREST RATES YOU WILL STILL BUY (If you can afford it)

Say you need a place to stay, you will still buy a place even if interest rates increases. So interest rates increases beyond a elasticity level (will cause the bank to raise their safety threshold interest rates even higher) and eventually cause people to shun away from buying a property.

But Low interest rates alone do not do the opposite. It may not cause people to want to buy a property. When the rates are low, it could be more of a need based demand.

As there is a safety threshold, however low the interest rates go, the bank's safety Sibor interest rate threshold typically do not fall further. (But it is the bank's decision).

IF YOU WANT TO BE A SINGAPORE PROPERTY INVESTOR - YOU CANNOT TAKE GENERIC STATEMENTS AT FACE VALUE

We are not practicing economists, we are mindful and wary of generic motherhood statements. Because this is how most news work. They report something that is easy to read and digest.

Even though they do try to get their facts right (at least their intentions are noble, but may otherwise appear a little lacking in subject matter expertise), and gather some sound bites from seasoned professionals, and then they churn out the news. The news are not research quality news and therefore of limited value in many instances and sometimes downright misleading (though never intentionally)

So, Interest rates must raise significantly (say several percentage points say 2 to 3%) before before dampen their buying sentiment that allows it to stop the rising property market.

However, when interest rates fall below a certain percentage, the bank's safety interest rate threshold will limit the effectiveness of low interest rates in increasing demand.

So Low interest rate is not a key driver of demand of housing, but rather the shortage of housing is the driver of demand.

About Property Buyer Contact Property Buyer

www.PropertyBUYER.com.sg

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Mortgage Insurance in Singapore

Thu, 27 May 2010 00:13:04 +0000

Do you have to buy mortgage insurance in Singapore when you buy a property

By Property Buyer Singapore Mortgage Consultants and Broker

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Elsewhere in the world, Insurance Industry is over-saturated, insurance companies are getting too innovative in creating products. Some are borderline betting houses in our opinion , such as buying insurance to insure against the person having the cash flow to continue to service the home loan.

There are other mortgages that can even insure against the price of the property staying above a certain valuation. These are part of the reason how AIG got into trouble previously. The world needs a stronger governing body to have the over-sight of Insurance companies so that none will become too big to fail and none will be allowed to take BETS. Mind you, their role is insurance, not that of Betting house .

Luckily in Singapore, it is simpler . Some Singapore banks may give you some cheaper Singapore SIBOR-SOR-fixed bank loan rates, but try to cross sell their insurance package to you.

Mortgage Reducing Term Assurance (MRTA)

Mortgage insurance is an insurance to insure against the death of a co-owner in which the beneficiary is the other person (usually someone who is an owner under the joint-tenancy ownership structure in which the assets as well as liabilities are transferred to the other person).

For example , if the loan is $1,000,000 in which each person shares half the repayment burden. In this case, each person buys $500,000 of insurance. So that when a partner dies, the other partner gets $500,000 towards payment of the house. There is also what is called Mortgage Reducing Term Assurance (MRTA) .

As the home loan is being paid down while at the same time, the owners are getting older. Hence the Mortgage insurance premium may decrease only a little.

Bank's actuary department will be happy with this arrangement as this risk is now hedged via mortgage insurance . This reduces the Singapore bank's exposure to this housing loan against possible default.

If you already have many insurance policies, buying such an insurance may mean you are over-insured.

Why do Banks sometimes force you to insure with their partner insurance company?

Banks are progressively cross selling products , so this helps to attain their profits targets.

Housing Assurance : Home valuables Insurance

Home content insurance pays you if your contents are lost, stolen or destroyed. There may be additional premium to pay for additional cover which covers many different conditions leading to the loss or damage.

Home Insurance : Property Insurance

Banks see no value in owning a collateral which may come in the form of shares of a strata titled land in case a building is destroyed by whatever reasons. The bank cannot easily buy or sell such stake and hence their collateral is illiquid .

For example your condominium is $1,000,000. If the evaluated construction cost is $400,000, this implies that $600,000 is attributed to land and $400,000 is the building cost .

Just to side-track, you can use read your own Insurance insured amount to estimate fairly accurately the Building cost of your condominium . (We use this method at PropertyBUYER.com.sg as a proxy for estimating building cost)

About Property Buyer Contact Property Buyer

www.PropertyBUYER.com.sg

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Singapore Property housing loans using 2 borrowers and 3 mortgagors

Mon, 10 May 2010 15:18:28 +0000

Singapore Property Housing loans using two borrower and three mortgagors.

By Property Buyer Singapore Mortgage Consultants and Broker

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

The economic climate has recovered. The recession seems a distant memory (even though it’s only 1 year ago in June 2009). Sibor and SOR rates are still at close to historic low despite the pick-up in economic activity sweetening deals for property buyers.

Several banks have relaxed credit now (May 2010), including banks such as DBS, OCBC, Maybank and recently HSBC, Bank of China. Based on our observation and experience working with the banks, the easing of credit from the bank is rather across the board.

Recently up until June 2009, credit was very tight. Very high credit barriers were set up to qualify whether to lend out money. Property buyers or investors have a tough time to get any housing or property loans approved if they are sharing a property with multiple non-related parties. Even if they are buying an investment property, many banks would require them to put up 30% down-payment. This means a 70% loan of the property valuation.

Any complicated Singapore property deals is almost impossible with extensive processing time and uncertain end-result.

Refinancing mortgages in Singapore is equally hard as property values plummeted with loans outstanding exceeding 80% of the valuation of the Singapore property.

Investing and Sharing a property investment in Singapore

Many family members and friends tend to get together to buy a second or third property. This phenomenon is getting more common as far as our mortgage consultancy – broker has experienced.

Usually all will share in putting up the cash for the down-payment and all will become borrowers.

Lately, Property buyers have found an innovative way to borrow for their Singapore property loans and mortgages.

Many of the so called “Property Gurus or experts” with property buying or investing systems or those,“How I manage to own a multi-million dollar portfolio earning $2500 a month” are also mainly using similar ways. We will delve into the risks in the later paragraphs, remember, there are no free-lunch. Many are dishing out standard generic advice, masquerading as divine investment and view of the future.

Let us now explain how such Housing loans in Singapore work.

One would avail cash for down-payment while the others will make their cash flow available so as to borrow large sums of funds.

For example, taking Singapore home loans amongst three people (real example, fictitious people), Oliver, Soon Huat and Kim Seng.

Do you want to know how Oliver and Soon Huat can buy a property without having CASH down-payment?

Do you want to know how Oliver and Soon Huat can buy a property without the cash down-payment?

• Oliver earns $2000 a month
• Soon Huat earns $5000 a month
• Kim Seng is a retired cousin, who has lots of cash, but no cash flow. Cash in excess of $400,000.

PROPERTY LOANS BORROWERS

• Oliver and Soon Huat are borrowers.

Using a very relaxed criteria and barrier, they may be able to borrow up to $800,000 to $940,000 if they have no other financial commitment and are eligible to borrow over 30 years. (Maximum loan quantum is very risky, you have to assess your risks. The amount illustrated are estimates, banks have final say in actual amount of lending offered)

Based on the cash flow (salary) of Oliver and Soon Huat, they would be able to afford to buy a property in the range of $1m to $1.175m.

WHAT IS THE SINGAPORE Property LOANS CASH DOWN-PAYMENT?

The cash down-payment required would be $200,000 to $235,000.

Since Oliver and Soon Huat did not have cash, Kim Seng who is retired and seeking an investment would pay the $200,000 to $235,000 cash plus stamp duty for it.

How does the Property Buyer Investment system work?

PROPERTY LOAN BORROWERS

• Oliver and Soon Huat would make available the cash flow (salary) so that they can borrow money to buy an expensive property.
• Kim Seng would pay the cash down-payment.

PROPERTY OWNERS – MORTGAGORS

• Oliver, Soon Huat and Kim Seng are all co-owners and home loan mortgagors.
• The apportionment of the asset share is agreed by the property investors in private. They can do so under the tenancy-in-common structure.

Oliver, Soon Huat maxed out their Property borrowing capacity.

The Singapore property loan was based on Oliver and Soon Huat’s credit standing and cash flow.

Since Kim Seng is the Mortgagor (owner) and not the borrower, his credit assessment is not being looked at. (Not all banks allow this)

What are the risks for Borrowers and owners of such Property Investments structures?

What if Oliver and or Soon Huat lose their jobs, they will be unable to repay their installment if they have no savings.

The Singapore property loans – mortgage will be in default.

Soon the bank will likely serve notice to pay up to borrowers or mortgagors (owners).

Hence, the end result is, all people are liable for the loan, not simply the borrowers.

The bank will re-possess the property and put it up in the market for sale. If the sale comes short of the outstanding loan amount, all mortgagors and owners are likely to be liable. The bank may sue all three and recover whatever monies it can.

What is the RISK for Kim Seng the Financing the home loan for the property?

If Kim Seng finances the property deal and is himself involved in several such previous deals, he may be able to pass the cash flow requirement (because his credit and liability may not be checked).

In case Kim Seng has many such properties, if One property falls through by default of payment or installment, Kim Seng will be exposed.

In addition to that,

Kim seng may be forced to pay up for any short-fall. Because if one or multiple properties default may cause a cascade of properties to fall.

These type of Singapore property buyers or investors typically rely on rental income. If rental income is not forthcoming, trouble will come very quickly.

The above way is very risky, it could very well be the waterloo of your entire property portfolio. So do take note and do your sums right.

About Property Buyer Contact Property Buyer

www.PropertyBUYER.com.sg

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

Email: loans@propertyBUYER.com.sg

Singapore Property Buyers: Do you prefer Sibor or SOR rates

Sun, 25 Apr 2010 21:36:30 +0000

Property Buyers: Do you prefer Sibor or SOR rates

by: Property Buyer Singapore Mortgage Consultants

SMS: 9782 8606

We very frequently received questions such as, which is safer SIBOR rates or SOR rates from novice as well as experienced property buyers and investors. Some out there may feel shy to ask this question, but in fact, it is common not to know the answer, there is nothing to be ashamed about not knowing.

When does a Country Change or set their interest rates?

In the USA, the country is made up of many states coming together. There is a federal government and the state government. As the Federal government may not have the mandate and wide reaching powers and know-how to micro-manage the policies as every state’s economic condition is different. As a result, the USA mostly depends on a more granular mechanism such as using interest rates to control inflation and regulate growth.

In Singapore, the country is rather small and therefore homogeneous. The Singapore government can manage the country to a very fine detail. When the economy heats up and inflation grows, instead of raising interest rates to control inflation, Singapore could raise it’s currency value against a trade weighted basket of currencies. This reduces the prices of imports as the Singapore dollar strengthens. This has the effect of lowering inflation for Singapore citizens. However this also impacts certain industries which relies on exports.

SO DOES SINGAPORE GOVERNMENT SET AN INTEREST RATE TARGET?

Singapore’s interest rates are consistently set at a low level. Though we are not sure “SET” is the right word, because there are many factors including the liquidity of banks in Singapore which helps “SET” the interest rate environment. Banks that are flushed with cash from depositor’s funds who do not need all these funds will then release it into the Inter-bank market available to as funds to be borrowed by other financial institutions. The rate is called, the Singapore Inter-bank offered Rate (SIBOR). This is the rate at which the banks lend to each other and Sibor is traded and published in the Association of banks of Singapore (ABS).

Singapore’s interest rates are consistently lower than that of the US and that of Australia. This ensures that Gross Fixed capital investment is maintained at a higher level of which a significant portion goes into investment of plant, machinery, software, etc. All of which could significantly enhance the long term productivity and efficiency of the Country.

Why does the Singapore Economy not over-heat?

Singapore’s Economy can over-heat just like any other. And Inflation can soar. However due to the various policies tools at the disposal of the Singapore government, it can selectively target industries that are over-heating by imposing levies, taxes or restrictions while leaving the other industries which are not over-heating to continue to grow.

Thus Singapore’s finely tuned micro-managed economy can maintain higher growth rates due to long term lower interest rates and a longer term lower unemployment rate.

When I looked at US and Australia’s high bank Interest rates I Freaked out

Will Singapore’s interest rates reach the levels seen in Australia and US? It is hard to say whether Singapore will ever reach those rates seen in Australia or the USA, but on a comparative basis, Singapore’s interest rates tend to be lower than those in Australia and the USA.

When will Singapore’s Sibor or SOR rates rise? And why?

In most modern economies, credit is well developed. What this means is, when there are investments or economic activities, funds are being used up. For example, a project that costs $600 million may need financing of at least 60% of that fund. That means the company who invests in that project only comes out with capital of $240 million while borrowing $360 million. Even the company’s investment of $240 million may also come from issuing shares or bonds of the company, leaving the actual capital of the investment lesser than $240 million.

In other words, investments suck up excess capital and gradually deplete the funds of banks available for lending into the inter-bank market. This leads to an investment activity based and economic expansion based rise of rates.

The other instance is when there are major economic shocks where we do not know how much are the banks exposed to these shocks. In such a scenario, each bank will view the other one with suspicion as they do not know whether they will get back their money if they leave lend it out. In such a scenario, the SIBOR or SOR rates move up very quickly. In such scenario, it is expected that the Singapore Government would intervene to provide the liquidity of the last resort, thereby stabilizing the market.

So it is safe to say, when investment grows, funds are sucked up because most investments are still credit driven in a developed economy like Singapore.

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Yet another Singapore bank withdraws SOR SIBOR Promo rates

Fri, 16 Apr 2010 08:20:02 +0000

YET ANOTHER SINGAPORE BANK WITHDRAWS SOR SIBOR PROMO RATES

In the last issue, 1st week of April we spoke of 2 Singapore banks withdrawing promotional rates. See last article (http://www.propertybuyer.com.sg/articles/compare-singapore-home-loans-/singapore-banks-raise-sibor-margins-on-housing-loan-rates/)

By today 16 April 2010, 1 more Singapore bank has removed their promotional rates. The choices of promotional rates SIBOR or SOR packages are shrinking, at least in April, 2010, until better rates comes about in May or if some banks choose to break ranks with the others.

Shortly after the last article which we posted, the tradionally media published a report saying that banks are lowering rates and competing to acquire home loans. And more are about to follow.

This lead some of our customers to come and ask us, "Why are you saying Sibor Sor margins are rising when the traditional media has just mentioned that the banks are reducing rates to compete?"

We found that article and we read it. It was factually correct and in that article it did mention that banks are revising rates in April 2010. However the headline title said banks are reducing rates to compete. The article was probably written early march and only approved for posting in 1st Week of April, 2010.

So we concluded and explained to our customers that the tradional media is at least 2 to 3 weeks behind the internet media.

For Singapore property buyers wanting to buy completed or Building-under-construction (BUC) properties, the cost is potentially getting higher.

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Singapore banks raise SIBOR Margins on housing loan rates

Sun, 04 Apr 2010 02:45:21 +0000

Singapore banks raise SIBOR Margins on housing loan rates

The market has begun to awake. The world economy has also been showing signs of recovery. The US household income has grown several by between 0.1 to 0.3% over the past several months. The household income number’s absolute growth are in the single digit billions, which is a drop in the ocean. But this signify that the world’s locomotive of consumption has gradually recovered.

Singapore has also shown signs of recovery. Unemployment rate fell in Singapore. Singapore’s domestic activity is also waking up, with property prices shooting up. The market is no longer fearful.

Several measures to curb speculators are not showing much results as demand outstrip supply in HDB sector. HDB prices rising is pushing up mass market private properties. Although there is still ~60,000 units of supply in the pipeline for private properties, these units are still building under-construction (BUC) and do not add to supply immediately.

All in all, Singapore economic activity is rising. The demand of funds for financing all sorts of activities will be high. Even though that the Sibor or SOR rates have kept relatively stable up until now March 2010.

Singapore banks are raising their lending margin. For example, banks usually charge SIBOR + margin%, this margin is being raised.

We should now expect more and more banks to follow suit with more expensive home and housing loans from 05 April 2010.

Stay tuned while we wait for latest updates from banks. Meanwhile, some older housing loan rates in Singapore from March 2010 will be only valid until 9th April 2010 and all documents must be in.

You may wish to quickly compare singapore home loans and then to decide one within days.

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Buying property is a serious affair, we do NOT advocate a Greed or fear based buying approach, we emphasize that you need to check your property home loan affordability. Check out the mortgage calculators or call us so as to do your sums right.

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HISTORY OF STRATA TITLED LANDED CLUSTERED HOUSING FOR SINGAPORE PROPERTY INVESTOR

Wed, 24 Mar 2010 02:53:15 +0000

HISTORY OF STRATA TITLED LANDED CLUSTERED HOUSING IN SINGAPORE

Singapore’s strata titled cluster housing is a new form of housing type created in 1993 by Urban redevelopment authority (URA). The first ever development of this housing type is North Shore Bungalow in Punggol.

Compared to landed property which has many development controls in place which limits how the building can be enhanced or re-built, strata titled cluster landed housing has more freedom. In an earlier edition of Skyline, Nov/Dec 2001. Development controls were removed.

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“What controls are lifted

Five controls have been lifted in order to give architects and developers more

flexibility (see below). However, other controls like site coverage and the

provision of communal open space remain in place to protect the quality of

the environment in strata landed developments.

1. Building-to-building spacing control

2. Setback of units from strata boundaries

3. Maximum number of units for each development

Note: This control still applies to developments in Good Class Bungalow Areas, so

as to preserve the ambience and low-density, green environment of such areas.

4. Minimum plot width and plot frontage

5. Maximum footprint of individual strata detached house

Note: To ensure that strata landed developments do not become flats but

remain landed, at least 50 square metres of the building footprint must still

have contact with the ground.

On an estate level, architects will have more room to come up with interesting

layouts as they are no longer constrained by the need to ensure a minimum

distance between rows of landed housing.

With the lifting of the minimum plot width and plot frontage, individual

landed housing units can take on new shapes and designs instead of the

standard rectangular plots.” (Source: URA, Skyline, Nov/Dec 2001)

So essentially you can say that the Singapore Strata titled landed housing is more densely built-up due to removal of the: -

Building-to-building spacing control.
Control of setback of units from strata boundaries.
Maximum number of units for each development.
Minimum plat width and plot frontage.

By freeing up Strata titled landed housing developmental controls, the benefits are: -

More unique and differentiated designs
May come in smaller and affordable sizes compared to landed property.

Downside of freeing up Strata titled landed housing development controls are: -

Too congested to live in.
Can become very untidy and hard to blend into the landscape of surrounding landed properties.
Traffic congestion to roads leading to the development.

However as more and more developments were built over the years.

The diversity caused much discomfort to Singapore’s landed property residents

as well as to people who are concerned with esthetics.

As a result, the roads leading to such Strata titled landed developments becomes clogged with traffic. It was sometimes considered an eye-sore as such developments were too densely built. It was not because the buildings were ugly, it was rather that these development were incompatible with the surrounding architecture and landscape of landed properties.

As more and more of Strata titled clustered Housing were built, it was only a matter of time before the anger and disagreement spill over.

At one time, there was a fear that Urban redevelopment authority (URA) won’t listen to public feedback.

Kudos to Singapore’s Urban Redevelopment Authority (URA) is a world leading city planner and statutory board. URA is very forward looking and receptive to public opinion.

“In 2007, URA carried out a Focus Group consultation exercise on

landed housing. The consultation process involved landed housing

residents as well as developers, architects, academics and other

property professionals. The feedback from the Focus Group

participants was that strata landed housing developments have

become very dense and congested. As a result, the quality of the living

environment and those of the surrounding area deteriorated as houses

within the strata landed development are packed very close together to

maximise the number of units. Such dense strata landed housing

developments have affected the overall character and living

environment of the landed housing estates where they are located.”

(Source: URA, 3 Nov 2008, Circular URA/PB/2008/20-DCD)

After concluding that strata titled clustered landed housing is getting a bit out of control, URA brought up the issue of congestion to the attention of Singapore Land authority (SLA) and Real estate Developers Association of Singapore (REDAS) who acknowledge the issue.

Effective from 3rd Feb 2009, Strata titled clustered landed housing in Singapore will be subject to re-imposition of development controls so as to reduce the number of housing allowed.

How to determine the maximum number of housing for Strata titled clustered housing?

For strata landed housing developments comprising only 1 type of housing form, the maximum number of units allowed will be determined by the following formula:

Number of allowable units ≤ (Total Site Area of Development / Y)

Where Y = housing types

For terraces = 150 sq meters (~ 1,614sq feet)
Semi-detaches = 200 sq meters (~ 2,152sq feet)
Bungalow = 400 sq meters (~ 4,304sq feet)

In order to retain the characteristics of landed housing, all Strata clustered landed housing must maintain a footprint of 50 sq meters (~ 538sq feet) in contact with the ground.

This brings the Strata titled clustered housing closer to the proportions and size to that of landed housing in Singapore. With this new rule, future strata titled clustered housing in Singapore from 3rd Feb 2009 onwards will blend in better into landed housing in Singapore.

Example: Shamrock Villa which is believed to be built under the old ruling before 3rd Feb 2009.

For example, using Shamrock Villa in Singapore as an example, where the total size was a mere 23,008 sq feet (Approximate), it was able to build 11 bungalows ranging from 5,974 sq feet to 6,523 sq feet.

House number 41 Namly place = 6,103 sq feet
House number 43 Namly place = 6,168 sq feet
House number 45 Namly place = 6,243 sq feet
House number 47 Namly place = 5,974 sq feet
House number 49 Namly place = 6,189 sq feet
House number 51 Namly place = 6, 189 sq feet
House number 53 Namly place = 6,383 sq feet
House number 53A Namly place = 6,523 sq feet
House number 53B Namly place = 6,351 sq feet
House number 53C Namly place = 6,351 sq feet
House number 53D Namly place = 6,114 sq feet

Total of 68,588 sq feet of saleable space.

Total land area of development = 23,008 sq feet (estimate)

In terms of plot ratio, 68,588 divided by 23008 would be 3 to 1. This is actually quite a high ratio for low rise residential housing. The number of units of 11 bungalows is also rather high.

Using the new URA ruling after 3rd Feb 2009, Shamrock villa Singapore would only be able to build: -

23,008 sq feet / 4,304 sq feet = 5 units of bungalow

23,008 sq feet / 2,152 sq feet = 10 units of semi-detaches

23,008 sq feet / 1,614 sq feet = 14 terraces

While the size of the units such as Bungalows, semi-detaches or terraces units will depend on the total size of development area’s plot ratio.

Conclusion on Strata Titled clustered landed housing in Singapore

Strata titled landed clustered housing built and approved to build before the 3rd Feb 2009 are more densely built together. This means that the developer would have maximized the size of each unit they build. Depending on how much the government charges for development charge for the change of use of land and/or change of plot ratio as well as prevailing construction costs and other factors, such developments could be quite profitable for some property developers.

In the case of Shamrock Villa Singapore, assuming that the asking price is $5m a unit. 11 bungalows 0f $5m each = $55m.

As a hypothesis, the property developer could build only 5 units of bungalow under the new ruling. And assuming that a plot ratio of 3:1 is maintained. Each bungalow would then become: -

23,008 sq feet (land area of development) x 3 (plot ratio of 3:1) / 5 (units of bungalow) = 13,805 sq feet.
Each bungalow would then have to be sold for $11m in order to achieve the same revenues of $55m.

It is doubtful whether the property developer could fetch that kind of prices given that the higher the price quantum, the lesser number of people could afford it.

With more limited building options, perhaps property developers may choose to build less of such strata titled landed clustered housing in the future or they could simply switch to building large strata titled clustered terraces instead. But terraces do not hold the same type of prestige as Bungalows.

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