Complete Property Market Updates of Singapore

July 24, 2008

No more cheap mortgages as banks raise rates

Filed under: Financing,General — Propertymarketupdates @ 2:51 am

Hike of up to 1 percentage point for some fixed rate packages to 3.98%

THE days when you could lock in cheap mortgage rates or the first year or two seem to be over, now that banks have quietly jacked up rates for new fixed-rate loans.

Just five months ago, banks were dangling teaser rates on the first year of their fixed-rate home loan packages. Maybank had a package that offered 1.68 per cent, while United Overseas Bank’s (UOB’s) FirstZero product carried zero per cent.

But now, homebuyers would be hard-pressed to find rates fixed on the first year of a mortgage at below 2.68 per cent, as some banks had already raised the rates of certain packages by up to 1 percentage point in recent weeks to as high as 3.98 per cent.

UOB and OCBC Bank have raised rates for their three-year, fixed-rate mortgages to 3.68 per cent from 2.98 per cent. Standard Chartered Bank has raised its rate for its two-year, fixed-rate package to 3.78 per cent a year from about 2.68 per cent.

This means new home buyers will have to grapple with much higher costs of borrowing, if they want the certainty of locking in their interest rates for the next few years.

A new customer will fork out about $3,500 more in interest for the first year on a loan of about $500,000, if the rate has been raised by 0.7 percentage point.

Banks may have turned cautious and are raising mortgage rates amid a slowing property market and an uncertain economic outlook.

They are facing ‘increased credit risks on housing loans’, suggested Mr Dennis Ng of mortgage consultancy portal

The higher fixed rates may prompt more buyers of new homes to take up loans linked to transparent rates that they can easily monitor. These include the Singapore Interbank Offered Rate (Sibor) – the rate at which banks lend to each other – and the swap offered rate (SOR), which is Sibor plus a bank’s lending costs.

Existing holders of home loans, whose fixed or variable rates are up for renewal in the coming months, may also find floating rates more attractive, as the difference between fixed rates and those linked to Sibor or SOR widens.

Customers with loans linked to the 12-month Sibor, which is hovering at about 1.7375 per cent, are still enjoying rates as low as 2.4 per cent that is fixed for a year – a difference of 1.3 of a percentage point compared to some newly-hiked, fixed-rate packages.

Some banks, however, have also started to raise rates linked to Sibor and the three-month SOR, currently at 1.4307 per cent. Some banks have raised their SOR-linked packages by 0.1 of a percentage point, or more, to as much as SOR plus 1 per cent.

DBS Bank has not changed its rates – yet. Market sources say the bank is preparing to introduce new – and higher – rates for both its fixed-rate and Sibor-linked packages in a few weeks.

Still, the banks’ rate increases may raise eyebrows since the Sibor and United States Federal Reserve rates appear unlikely to climb sharply in the coming months.

Market talk that the Fed might soon raise interest rates to curb inflation was quashed last week, with an unexpectedly sharp surge in the US unemployment rate to 5.5 per cent last month.

One banker, who declined to be named, said the Singapore banking industry’s motives for raising fixed rates this time, however, might ‘have less to do with current Fed rates than expectations that Sibor is close to bottoming out’. Thus, market players may now be raising rates to squeeze higher margins from new loans.

A banking analyst said banks had enjoyed a roaring mortgage business in the past year, and some had already hit most of their 2008 targets.

‘So, they may now be focusing on credit quality and growing their margins for any new loans,’ he said.

The question on the minds of home owners is whether this fixed-rate mortgage hike is an ominous signal of an eventual rate hike for all other packages. This may cool the already lukewarm property market further.

Bankers, however, kept mum about their pricing strategy, pointing out instead that the current mortgage rates were still at historical lows.


Banks are raising mortgage rates amid a slowing property market and an uncertain economic outlook. They are facing ‘increased credit risks on housing loans’, suggests Mr Dennis Ng of mortgage consultancy

Source : Straits Times – 10 Jun 2008


July 8, 2008

The only way is up?

Filed under: Financing,General — Propertymarketupdates @ 5:10 am

Some economists say short-term rate has bottomed out, but they expect increases to be tiny

THE period of rock-bottom interest rates may be over, with some experts tipping that levels in Singapore are set to head north – but at a gentle pace.

The three-month Singapore Interbank Offered Rate (Sibor) – the level at which banks lend to each other – is at 1.3 per cent. That is still a remarkably modest rate, but it is up from the 12-month low of 1.25 per cent a few days ago.

It is also dramatically lower than the 3.1875 per cent in March last year, before rates began plunging.

Economists expect rate rises to be tiny, but home owners might think it smart to refinance mortgages before rates creep up.

The rates pressure is coming from the United States. The Sibor tends to track US rates, which are tipped to rise by 50 basis points by year end.

Dr Chua Hak Bin, Asian strategist at Deutsche Bank Private Wealth Management, said: ‘I believe the short- term interest rate has bottomed out. Our rates track the US rates quite closely, and there is a sense that the Fed, after a 325 basis point cut, is due to raise rates soon.’

He expects rates to rise to 1.4 per cent in 12 months and to go back to above 2 per cent in three years.

OCBC Bank economist Selena Ling said: ‘We would expect the short-term interest rate to rise to 1.5 per cent by year end. It won’t rise sharply because the Monetary Authority of Singapore (MAS) is still on a tight monetary policy to combat inflation.’

But HSBC economist Robert Prior-Wandesforde sees things differently: ‘We are not expecting a Fed hike before the end of this year, and I’m still looking for the three-month Sibor to fall to 1 per cent over the next few months. With the MAS thought to keep the Singapore dollar strong, this is encouraging foreign inflows, which in turn is depressing interest rates.’

One indicator of where short-term rates might be headed lies in the bond market, where long-term interest rates seem to have spiked.

The 10-year Singapore Government Securities bond yield was 2.73 per cent in the middle of last month, but has now risen to 3.6 per cent.

United Overseas Bank’s treasury research head, Mr Jimmy Koh, said: ‘We have inflation climbing in the region, making long-term rates move up. Over time, this could drag up short- term rates.’

He also noted that central banks in Indonesia and the Philippines have already started raising short-term interest rates.

Deutsche Bank’s Dr Chua said: ‘Long-term interest rates are determined by long-term views on growth and inflation. As risk appetite returns, these might move up faster than the short-term rates because of inflation risks, and the Fed may not be able to move as fast as we hope.’

Whatever the cause, rising interest rates affect everyone, from bank savers to homebuyers and retirees looking for a good return on their cash.

If the Sibor rises, so might bank deposit rates in time to come. A DBS Bank spokesman said: ‘Our rates will move in tandem with market forces.’

Home owners might also think it prudent to switch to a fixed-term mortgage now as rates are linked to the Sibor.

Mr Prior-Wandesforde said ‘it is worth thinking seriously about shifting to a fixed rate’.

He added: ‘Although fixed-term mortgage rates haven’t come down that much during the recent decline in short-term market rates, they also didn’t rise as much as one would have expected during the period of rising short-term rates from 2005 to 2006.’

‘We would expect the short-term interest rate to rise to 1.5 per cent by year end. It won’t rise sharply because MAS is still on a tight monetary policy to combat inflation.’ -OCBC BANK ECONOMIST SELENA LING

CPF rates could rise

LONG-TERM interest rates are up, which means that Central Provident Fund (CPF) rates, which track the 10-year Singapore Government Securities (SGS) bond rate, could also rise.

The link was made on Jan 1 this year when the CPF rate was set at the SGS rate plus 1 per cent.

This extra interest is paid on the first $60,000 in a member’s combined CPF accounts, with up to $20,000 from the Ordinary Account (OA). That means the Government has guaranteed a 3.5 per cent annual return for the first $20,000 in the OA, and 5 per cent a year for the $40,000 in the Special, Medisave and Retirement Accounts (SMRA) for this year and the next.

The floor rate for the SMRA will be kept at 4 per cent for the first two years, beginning this year. After that, the 2.5 per cent rate will apply to all accounts.

But with the SGS bond rate now at 3.6 per cent, this means CPF’s rate should actually be 4.6 per cent, said Dr Chua Hak Bin, the Asian strategist at Deutsche Private Wealth Management.

He added that the CPF would have to revise its rate upwards to match this figure, if it holds, when the two years are up.

‘This is good news because we haven’t seen this level of yield since September

Source : Straits Times – 6 Jun 2008

June 27, 2008

Directors’ Trades: Ho Bee

Filed under: Developer News,Financing,General — Propertymarketupdates @ 3:08 am


MR DESMOND Woon Choon Leng, executive director at Ho Bee Investment, has been snapping up shares in the property developer this week.

On Tuesday, he bought 150,000 shares on the open market at 95.8 cents apiece.

Then on Wednesday, he bought another 250,000 shares on the open market at 93.7 cents apiece.

Ho Bee’s share price fell nine cents, or more than 9 per cent, during five straight days of losses that ended on Wednesday. The counter rose one cent to close at 93 cents yesterday.

These two transactions raised Mr Woon’s direct stake to 1.55 million shares, or 0.21 per cent, of the firm’s issued share capital.

In March, Ho Bee chairman and chief executive Chua Thian Poh bought 300,000 shares at 89.5 cents apiece through Ho Bee Holdings, further raising his deemed stake to 476.4 million shares, or 64.61 per cent, of issued share capital.

Ho Bee’s first-quarter results, announced earlier this month, were hurt by a drop in home sales. It reported a 62 per cent plunge in its net earnings to $26.1 million for the quarter ended March 31.

Revenue also fell 62 per cent to $94.2 million, mainly due to the lower recognition of revenue from its property development project, The Coast at Sentosa Cove.

While it warned that the property market is expected to remain soft in the near term, it expects earnings to be supported by recognition of income from the sale of its residential projects, which include Vertis at Amber Gardens and Quinterra in Holland Road, in the next few years.

Source : Straits Times – 30 May 2008

UBS chief says worst of crisis is over

Filed under: Financing,General,USA — Propertymarketupdates @ 3:06 am

The head of embattled Swiss bank UBS said yesterday that the worst was behind it after it was recently forced to write down about US$37 billion (S$50.7 billion) of assets hit by the United States sub-prime crisis.

‘I definitely think that the worst is behind us,’ UBS chief executive Marcel Rohner told Swiss newspaper Le Temps. ‘There will certainly be plenty of things for banks to clear up over the next two years, but as far as systemic risks are concerned, we’ve got over the hardest part.’

He added that UBS’ investment banking arm had ‘developed some questionable economic activities’ in the run-up to the sub-prime crisis. ‘We made the mistake of adopting an imitation strategy to try and catch up with our competitors in fixed income operations.’

Earlier this month, it posted first-quarter losses of 11.5 billion Swiss francs (S$15.1 billion). The bank faces fresh problems after a former member of its private banking team was detained in the US as part of a tax evasion probe.

The bank decided to shut down its cross-border private banking business for US customers in November last year, but recently, Bradley Birkenfeld, a former senior banker, was indicted for helping wealthy Americans to evade paying income tax on their investments.

Source : Straits Times – 30 May 2008

Stamford Land FY08 net profit up 28.7%

Filed under: Developer News,Financing,General — Propertymarketupdates @ 2:58 am

Stamford Land Corporation on Thursday unveiled a 28.7 per cent rise in its net profit for the year ended March 31, 2008.

Revenue, however, fell 7.3 per cent to $276.11 million (US$202.52 million) as it has a low inventory of completed residential properties for sale compared with last year.

The hotel segment saw higher revenue due to improved occupancy and room rates. The company also benefited from currency gains.

Its property development & investment segment recorded decrease in revenue in line with fewer units of Stamford Marque remaining for sale (22 units) in the current reporting year.

The company is proposing a final dividend of 1.5 cents a share and a special dividend of 1 cent a share. These are in addition to the interim dividend of 1.5 cents a share paid on March 12, 2008.

A year ago, it paid a first and final dividend of two cents a share and a special dividend of one cent a share.

Source : Business Times – 29 May 2008

June 24, 2008

Directors’ Trades: CapitaMall Trust

Filed under: Financing,General,Regulators — Propertymarketupdates @ 3:41 am


CAPITALAND chief executive Liew Mun Leong has raised his direct stake in CapitaLand-managed CapitaMall Trust (CMT).

Mr Liew bought 148,000 units in CMT on Monday at an average price of $3.3736 each. He purchased 94,000 at $3.37 apiece and 54,000 at $3.38 each.

The transaction gave him a direct stake in CMT of 0.0089 per cent of its issued share capital.

He also has a deemed stake of 418,000 units, or 0.0251 per cent of the trust.

Last Thursday, CMT announced it was buying The Atrium@Orchard on Orchard Road for $839.8 million from the Singapore Land Authority.

The following day, CMT made its sharpest drop in almost four months, falling to as low as $3.30, after Moody’s Investors Service lowered its outlook for the trust from ’stable’ to ‘negative’.

Moody’s cited tighter conditions for borrowing as being one of the challenges faced by Singapore’s real estate investment trusts.

Credit Suisse last week reiterated its ‘outperform’ call on CMT in view of the company’s proposed Orchard Road acquisition. It described the acquisition as strategic in geographic terms, as CMT already owned the adjacent Plaza Singapura.

JPMorgan has also kept its ‘overweight’ call on CMT.

CMT units closed unchanged at $3.27 yesterday. They are down 5.49 per cent this year, compared with a 9.6 per cent decline in the benchmark Straits Times Index.

Source : Straits Times – 29 May 2008

Picking the best home loan package

Filed under: Financing,General — Propertymarketupdates @ 3:11 am

Be aware of your financial needs and risk appetite while weighing home loan packages, writes HELEN NEO

WHILE owning a home is high on the must-have list for Singaporeans, the fact is buying a property usually means signing on for a mortgage. As banks compete for a larger share of the home loan market, borrowers are sometimes overwhelmed by the multitude of home loan packages, with differing features that cater to the different needs of homebuyers.

Not all homebuyers are savvy about all these features. Thus, it has become challenging for homebuyers to decide which loan best suits their needs. Here we show what is available in the market and discuss the advantages and disadvantages of each type of loan package.

Interbank-pegged vs home loan board rate (variable)

Features of interbank-pegged home loan

Pegged to Singapore Interbank Offered Rate (Sibor) or Swap Offered Rate (SOR) plus margin.

The Sibor or SOR can be easily obtained from the newspapers.

Sibor or SOR will be fixed for a period depending on interest period used and will change at rollover/maturity date.


Transparent: Your home loan interest rate moves in line with the market interest rate.


Volatile: Although interbank rates move daily, interest rates will only be repriced according to the interest period used, eg, for a three-month Sibor repricing is done once every quarter.

Pre-payment and redemption inflexibility: Prepayment or redemption for interbank-pegged packages are usually permitted only on rollover/maturity dates. Otherwise, a break fund cost may be imposed. This applies even if you had taken up a package with no lock-in period.

Administrative hassle: For those using the Central Provident Fund to service their monthly instalments, there are administrative issues to consider. As interbank rates are subject to frequent rate adjustments, this results in frequent changes to monthly instalments. For each change, customers would have to instruct the CPF Board to revise the monthly CPF amount released for servicing the loan. This results in inconvenience to customers, particularly if CPF funds are used in full for the payment of monthly instalments. Customers may need to update the board as often as once every three months.

Features of home loan board rate (variable)

Not pegged directly to any interbank rates.

Derived from overall bank funding costs (including business costs) from different sources. Maybank’s home loan board rate is benchmarked against interbank rates, market conditions, as well as business costs. This may differ for other banks. How often it is revised depends on each individual bank’s review of its portfolio against its benchmarked/reference market rates and business costs.


Not as volatile as interbank-pegged home loan packages.


Not as transparent as interbank-pegged rates. Each bank has its own way of computing its board rate(s).

Multiple board rates: Different board rates may be introduced at different times.

Home loan board rate (variable) vs fixed rates

Features of home loan board rate (variable)

With or without lock-in, there is a margin charged on top of the respective banks’ board rate.

Favoured by rate sensitive customers who also prefer more certainty in rates.

Favoured by investors mostly on no lock-in variable packages so that they can get out of the loan anytime without any penalty.

Features of fixed rates

Banks generally offer a choice of fixed rates for one to three years.

Interest rate certainty during the fixed period.

Favoured by risk-averse customers and those too busy to monitor their loan.

Not all customers will choose the lowest home loan interest rate package since much will depend on the needs and risk profile of the customers. For example, a young couple with no children and few financial commitments may consider taking on more risks compared to another with more financial commitments.

As for the choice between board rates and interbank pegged rates, this is very subjective. Some borrowers do not like the interbank pegged rates due to their volatility, but some like it because it is transparent.

Board rates usually lag behind in adjustment compared to interbank pegged rates because the bank will adjust them only after serious consideration of all factors (including interbank rate movements).

Looking at risk appetite, a person who cannot tolerate risk is likely to select a fixed rate package where they are able to determine with certainty the total monthly instalments they have to pay. Those likely to fall into this category are:

Young couples starting a family with a relatively high level of gearing to manage.

Older borrowers who do not like uncertainty in their financial commitments.

On the other hand, a person is likely to select an interbank-pegged interest rate if he has a higher risk appetite. The interbank rates are currently low and hence attractive; but it is also subject to market forces.

This uncertainty is translated to a different monthly instalment every few months. The effect is a fluctuating financial commitment during the loan tenure. Over time, the averaging effect may neutralise the low interest rates currently enjoyed.

The key is the option to exit the home loan when interest rates are on the uptrend. However, this option is not always available due to considerations such as a lock-in period, claw back period, income stability, and loan quantum.

Our take is that every loan package is designed to meet the needs of a particular customer segment. As a home loan buyer, you are making a decision for a long-term loan of say, 20 to 30 years. Be aware of your own financial needs before committing to a loan. Banks are generally more than willing to explain the differences between various loan packages and to analyse which is more suitable for your needs.

Helen Neo is head, consumer banking, Maybank Singapore.

Source : Business Times – 28 May 2008

Local banks slow down loan activity

Filed under: Financing,General — Propertymarketupdates @ 3:07 am

Foreign banks step in to fill the gap as their local counterparts become more circumspect in extending loans due to industry limits, writes SIOW LI SEN

A CURIOUS thing is happening among lenders in Singapore. The local banks are slowing down their loans activity while foreign banks have taken up the slack and are increasing their market share.

Latest data from the Monetary Authority of Singapore shows that industry loans at the end of the first quarter grew 6.9 per cent from the previous quarter and 23.9 per cent from a year ago.

Ng Wee Siang, BNP Paribas analyst, has projected that 2008 will see a robust 18 per cent in loans growth, led by building and construction loans.

Loans growth for March was fuelled by broad-based business loans driven by building and construction, up 54 per cent from a year ago and financial institution loans, up 23.3 per cent. Consumer loan growth, however, seems to have peaked.

DBS Group Holdings was the only bank which kept up with the buoyant system growth with loans up 8.5 per cent in Q1 from the previous quarter. ‘This means foreign banks are winning share,’ said Matthew Wilson, an analyst with Morgan Stanley.

Even DBS is expected to see its loans growth moderate for the rest of the year and is unlikely to repeat its 25.2 per cent increase in 2007, said Mr Ng.

‘While the loan pipeline remains healthy, (DBS) management has guided that loan growth is set to moderate,’ said Mr Ng. ‘Management indicated that a 10-20 per cent loan growth is within reach,’ he added.

United Overseas Bank said its first quarter 2008 loan growth was only 1.8 per cent. Its management said that the bank has reached its internal limits for some exposures, and risk management guidelines are curtailing loan growth.

OCBC Bank reported quarter-on-quarter loan growth of 4 per cent and 19 per cent year-on-year. Its chief executive David Conner noted that the industry loans growth – which has been in the above 20 per cent range – is expected to come down. ‘It is bound to taper off,’ he said, adding: ‘It will come down to a low double-digit range.’

It is not surprising that the local banks would become more measured in selling loans given the economic uncertainties.

But this wasn’t supposed to happen. Late last year, some observers thought that 2008 would be the year of the local banks as they would gobble up loans and other banking business at the expense of the foreign banks which had been nipping at their heels.

The thinking was that foreign banks – nursing massive losses at home, and facing diminished capital bases at the group level – would have to pull back on their activities.

Local banks did have some exposure to the US sub-prime loans and collateralised debt obligations but their losses were very small and did not impact their capital.

Local bankers had another reason why they were looking forward to strengthening their position this year in spite of sliding interest rates as central banks eased. Foreign banks are typically able to sell more customer loans in Singapore when interest rates fall as they can borrow cheaply on the interbank.

This time round, local banks thought they would face less competitive pressure from the foreign banks which may be constricted by their smaller capital bases.

But not all foreign banks have been hurt by the sub-prime losses. Even those which have taken hits cannot afford to pull back in Asia which is showing strong growth.

Maybank, Malaysia’s largest bank, which recently released its nine months’ results, said loans growth at its Singapore operations grew 19.2 per cent. And Standard Chartered Bank said its Singapore operations will be expanding by nearly 11 per cent in 2008. Some 500 people will be hired in Singapore across the consumer and wholesale banking and support functions, mainly in sales and risk management positions. The bank employs some 4,700 people here.

In Singapore, liquidity is plentiful and local banks take in more deposits than they can lend out, but they have become more circumspect in extending loans as they are facing industry limits.

Section 35 of the Banking Act restricts property exposure to 35 per cent. Banks also have their own internal exposure limits. The local banks in the past couple of years have increased their loan books mainly by lending to the real estate sector.

Singapore continues to have some mega construction projects over the next few years but it looks like the foreign banks may get a bigger share in financing them.

Two local banks and 13 foreign banks participated in last month’s loan syndication of $4 billion credit facilities for the Sentosa integrated resort development, one of the largest loans ever undertaken in Singapore.

‘The bulls point to the very buoyant Singapore loans growth but only DBS is keeping up with system growth. Foreign banks are increasingly participating, as Asia has never been more important and the local banks are approaching their exposure limits,’ summed up Mr Wilson.

Source : Business Times – 28 May 2008

CapitaLand issues hold firm despite souring property views

Filed under: Developer News,Financing,General — Propertymarketupdates @ 3:05 am

BEARISH reports put out recently by analysts on the Singapore property market have failed to dampen traders’ appetite for covered warrants issued on property counters by foreign banks.

Yesterday, a call warrant issued by Deutsche Bank (DB) on CapitaLand rose two cents to 21 cents on a hefty volume of 10.7 million shares. In contrast, the mother share stayed flat at $6.30, with 5.25 million shares traded.

Traders were attracted by the warrant’s relatively long shelf life of five months and a strike price of $6.9289 which works out to a small premium over current market prices. ‘Well, I guess it boils down to how traders view the property market going forward,’ said a dealer.

Investors could be betting on the residential property market making a comeback in the second half, he said.

However, not all analysts are quite so confident. Barclays Capital and Credit Suisse recently forecasted that rents and prices might drop by up to 40 per cent in the next two years.

But UOB Kay Hian sniffed fresh investment opportunities in property stocks, arguing that they had already corrected 45 per cent from their mid-2007 peaks. Property counters, as a group, had also underperformed the Straits Times Index by 20 per cent in the past year, it added. As such, it has argued that the market had already ‘over-discounted’ the negative prospects of the property sector and advised investors to load up on them instead.

But there are others who are urging caution. Tracking the trading patterns of top property giant executives will shed insight on how these insiders view the market.

They noted that on May 16, CapitaLand chief executive Liew Mun Leong sold 500,000 shares at $6.87 apiece and another 300,000 shares at $6.88 each.

Even though Mr Liew has made a regular practice of cashing in on his stock options and selling the resulting shares, it still stirred a debate among traders. ‘If there is upside, surely, even Mr Liew will want to wait to get a better price,’ one dealer said.

Source : Straits Times – 28 May 2008

June 21, 2008

HK home owners brace for interest rate hikes

Filed under: Financing,General,Hong Kong — Propertymarketupdates @ 6:17 pm

HONG KONG home owners are expecting interest rate hikes as banks in the city attempt to bolster earnings, ending a long run of cheap mortgage costs. But some market factors may militate against such a move.

Banks have been sounding the alarm bells as their margins feel the squeeze amid a succession of interest rate cuts. Last month, lenders failed to match a Hong Kong Monetary Authority (HKMA) interest rate cut, the first time since September that banks did not follow the de facto central bank.

Last week, senior bankers warned that an interest rate rise could be imminent. With competition for home financing fierce, no lender has yet to take the lead and raise interest rates.

Raymond Or, chief executive of Hang Seng Bank, spoke of the pressure facing lenders regarding raising interest rates.

Other bankers have cited an unfeasibly low interest rate for bankers to turn a profit, with home owners being loaned cash at between 2.5 and 2.8 per cent with cash rebates often thrown in. The Hong Kong interbank offered rate is, meanwhile, 1.7 per cent.

Meanwhile, record-high oil prices are unlikely to lead to a further cut in Federal Reserve key rates, from which the HKMA takes its cue as Hong Kong’s currency remains pegged to the greenback.

Banks have also not seen a huge uptake in mortgage financing as external factors bite into potential home owners’ appetites.

Despite low interest rates, property sales in the mass market have remained sluggish. This is partly because of a wait-and-see attitude buyers are taking amid global economic uncertainty.

According to the latest Land Registry figures, the total number of sale and purchase agreements in April was down 0.4 per cent from the previous month to 10,945. The total consideration for these deals was down 23.9 per cent from March, to HK$33.5 billion (S$5.8 billion).

Chief economist at Bank of East Asia Paul Tang, however, remains optimistic that home owners will not face a massive uptick in their financing costs in the next 12 months.

‘I think it really depends on the United States interest rate movements – and that’s a big uncertainty,’ he said.

‘There’s still a lot of room for it (interest rates) to go up and right now it’s at a very low level. The US economy will take one to two years before it recovers to a more healthy stage. Interest rates (in Hong Kong) should remain low despite inflationary pressure,’ he explained.

Developers likewise sounded a more bullish note, perhaps unsurprisingly as jitters about mortgage rate increases took a toll on their stocks last week.

On Thursday, shares in the main developers took a tumble as speculation that Hong Kong lenders would no longer slash interest rates began to spread.

Shares in Sun Hung Kai Properties, Cheung Kong (Holdings) and Hang Lung Properties all fell slightly on the rumours.

Tycoon Li Ka-shing, chairman of Cheung Kong (Holdings), said last week he expects the property market to remain steady amid low interest rates and relatively tight supply in the market.

Source  : Business Times – 26 May 2008

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