New homes set to raise level of city centre buzz

With office units in short supply, condos make a good option for investors: Analysts

Singapore’s city centre is set to get bigger and bolder in the next decade, with the injection of around 23,000 homes that promise to take the buzz to another level.

And if Singapore’s urban planners have their way, more office buildings will sprout at Marina Bay, along with mixed-use developments in the Beach Road and Ophir-Rochor areas – bringing people closer to their jobs.

All this will come to pass while hotels and lifestyle hot spots in Little India and the Singapore River surroundings ensure that the city teems with activity.

And even if you need a quick getaway from the city’s frenzy, green open spaces such as the upcoming Gardens by the Bay and Esplanade Park are all within walking distance.

This vision for Singapore’s 1,650ha central area was unveiled by the Urban Redevelopment Authority (URA) last week as part of its latest masterplan, which outlines Singapore’s land use over the medium term.

With all these grand plans and more, is it time for investors to hunt within the city for a good buy?

Property experts say this depends on the location of the property, the timing and how quickly URA’s blueprint materialises in the next few years.

Let us start with the Central Business District (CBD).

Office space investments are limited, although there are some strata-titled commercial units available, such as those at The Arcade in Raffles Place and International Plaza in Tanjong Pagar.

However, there is only a small pool to shop from, and units in good locations could be beyond the reach of the average investor. Units at The Arcade, for example, changed hands at around $5,000 per sq ft (psf) at the end of last year.

Knight Frank director of research and consultancy Nicholas Mak said there are ‘very few good strata-titled office spaces in the city’. A more obvious choice would be to shop for homes.

With the government’s latest strategy to repopulate the city centre and bring people closer to their jobs, investors can rest assured that this pool will only get bigger.

Some projects that have already been launched include The Sail at Marina Bay and Marina Bay Residences. Further inland, One Shenton and Scotts Square also offer units in the heart of the city.

The latest URA data shows Marina Bay properties transacting at around $2,100 psf. This is a slight dip from the peak prices seen in the property boom last year.

At Scotts Square in Scotts Road, units are being sold at an average price of $3,700 psf this year, down about 8 per cent from $4,000 psf in last year’s fourth quarter.

At One Shenton, the latest sale went at $2,069 psf in January.

Prices might be falling at some condos now, but as these homes were launched at just below or around the $1,000 psf level, the question remains whether the upside is limited if one buys now, say some market watchers.

It is possible that prices might drop further, given the current cooling of the market, but Mr Mak added that owners are unlikely to let go of units if they would incur a loss.

Savills Singapore’s director of business development and marketing, Mr Ku Swee Yong, said that sellers are more likely to negotiate now given the current market sentiment.

For investors holding out for drastic price drops, he said it is unlikely that home prices in the city will drop as much as 30 per cent, as recent bank reports have predicted.

‘Current market conditions do not support that. At the most, we will see a 5 to 10 per cent decrease for top-end luxury homes.’

Mr Ku said that even at the $2,000 psf level, city homes can command rental yields of about 4 per cent as they are attractive properties to rent, catering to the international expatriate community.

At DTZ Debenham Tie Leung, senior director of research Chua Chor Hoon agreed.

‘City centre homes fetch pretty good rentals and therefore give good yields…URA’s data shows that rentals for condos such as Icon were in the range of $6.50 to $7.50 psf a month,’ she said.

Mr Ku added that investors who are in for the long haul might find that their investments will pay off in the next five to 10 years, especially after the Marina Bay integrated resort opens and the city gets busier.

Other homes to consider include those at Robertson Quay and Tanjong Pagar.

The condos include Robertson Blue, RiverGate and Watermark at Robertson Quay; at Tanjong Pagar, there are the Pinnacle @ Duxton and Icon. Units at these projects have changed hands for $1,400 to $1,600 psf in the last three months.

The other option for investors is to wait for further government land sales, for more new homes to be developed, said Mr Mak. These developments would probably be in the Marina Bay area, he added, unless URA allows city properties to be converted into mixed-use projects.

Around Beach Road and the Ophir-Rochor area – touted as the northern gateway to the city – investment opportunities are more diverse.

There is a good mix of shophouses and strata-titled commercial and residential units on the market for the average investor.

The 101, Premier Centre and The Plaza, for example, are all strata-titled properties with a mix of commercial and residential units. At The Plaza, transacted apartment prices have gone up 28 per cent, rising from $600 psf in June last year to $900 psf currently.

Commercial units in this area have generally stayed at the $1,500 psf price level this year, though transaction volumes have fallen since last year, said Mr Ku.

Over at Tanjong Pagar, shophouses are also a staple of the district. These properties are usually more affordable, added Mr Mak, although he warned that they are more sensitive to market downturns.

If plans for a revamped Kallang Riverside and Paya Lebar Central go ahead, the city centre will also benefit from the buzz added by these new, nearby commercial hubs.

How soon investors will see price movements in city investments will depend on the pace of development. Market watchers agree it is still too early to see the price effects from URA’s masterplan.

‘Prices are peakish now, so one should consider the investment time horizon and yield before making a purchase,’ said Ms Chua.

Promising outlook

For property investors who are in for the long haul, they might find that their investments will pay off in the next five to 10 years, especially after the Marina Bay integrated resort opens and the city gets busier, says Mr Ku Swee Yong, Savills’ director of business development and marketing.

LOCATION AND TIMING CRUCIAL

Market watchers point out that while prices of many city centre residential properties have come down since last year’s peak, the upside may be limited as many of these homes were launched at much lower prices.

On the other hand, apartments at The Plaza, a development in the Beach Road and Ophir-Rochor area with a mix of commercial and residential units, have actually enjoyed price increases since last year.

Source : Sunday Times – 1 Jun 2008

Middle East investors ‘looking to S-E Asia’

MIDDLE Eastern investors are increasingly looking to Singapore and other South-east Asian nations for deals as financial ties grow between the two regions.

So says Standard Chartered (Stanchart) Bank’s group head for origination and client coverage, Mr V. Shankar.

Stanchart is well-positioned to become a leading player in this area. In the past year, it has advised on more than 40 per cent of the deal flow from Middle East to this region, which totalled US$8 billion (S$10.9 billion).

The figure was up from the US$987 million in the 12 months preceding, and Mr Shankar believes it will continue to rise in the years ahead.

‘The financial ties between the Middle East and Asia are strengthening by the day and we are seeing more East-East relationships being formed,’ he said in a recent interview.

‘Oil and natural gas from the Middle East are vital for China, Japan and all the fast-growing markets in the Asia-Pacific region, which are fast ramping up their infrastructure.

‘And the oil-generated capital and liquidity in the Middle East are fuelling a search for investments with high returns.’

Mr Shankar added that a recent report by McKinsey estimated that Gulf countries would have US$9 trillion to invest by 2020.

Stanchart began boosting its presence in the Middle East three years ago and now has a team of 50 corporate advisers there.

Mr Shankar, who is also a member of Stanchart’s group management committee, said this put the bank in an enviable position as Singapore’s business with the Gulf looks set to soar.

‘Between 2004 and 2006, total trade between Singapore and the Middle East shot up from US$20.9 billion to US$30.8 billion, an increase of 47 per cent.

‘Currently, Singapore companies are working on more than $6 billion worth of projects in the Middle East.’

Stanchart is no stranger to deals between the Republic and Gulf countries. It recently advised the Al-Futtaim group in its successful bid for Singapore’s oldest retailer, Robinson & Co.

Looking ahead, Mr Shankar said the bank would leverage on its experience and capabilities in the region to shore up its position as a major player.

‘Stanchart is well-placed to seize future opportunities, thanks to our growing geographical reach and the scale and breadth of our products and capabilities.

‘We have an established history in Singapore, having been in the market for 150 years, and we have been operating in the Middle East for more than 50 years. We feel we can act as a strong local bank in all the different markets for our clients.’

Source : Straits Times – 5 May 2008

A good plan to retire on

THE Government-initiated insurance plan for retirees, released yesterday, has been retooled to gain broad acceptance. Two aspects of the original formulation which drew the loudest objections – capital sums to lapse upon a CPF member’s death and the late access age for payouts – have been confirmed amended in the report of the Lim Pin committee. First, the amounts remaining will revert to members’ heirs. It should have been proposed at the start to avoid muddying the waters, as annuities are not a concept readily understood here. Second, a range of starting ages is offered for members to choose from, as to when they wish to begin receiving the money. This concession does not invalidate the statistical profile of Singaporeans’ lengthening life span, but it does satisfy a primal urge in people.

That the plan will be managed by the CPF Board, another recommendation, was never in question. There was little chance of the proposal carrying if a private company were to run it. Members will insist on a state guarantee for the investing and management of their savings, more so in an age of bolder and riskier investments by global finance houses. It has nothing to do with the CPF’s better interest yield compared with a commercial provider designing annuities on the assumption of lower rates of investment returns.

All told, this is a plan that ought to sell itself. Retirement planning for a non-welfare state, with its trademark absence of taxation-funded old-age pension, does not come more carefully thought out than this. The Straits Times recommends it thoroughly. The public education which the committee proposes the CPF Board carry out to acquaint members with the scheme should address issues arising, not the hard-cast features. One such is ironically the need to sign on because of creeping inflation which will erode monetary purchasing power at a faster clip henceforth. The first members, now aged 50, will draw on their annuities in 15 years’ time if they choose the age-65 access plan. (The access range goes up at five-year intervals to a rather ambitious 90.) These monies are not inflation-indexed.

How much a notional monthly payout of $600 at today’s prices can buy 15 years from now will make for lively speculation. Premiums and payouts and their underlying investments will be reviewed periodically in accordance with actuarial change and economic cycles. This is the minimum assurance against monetary inflation. One trusts the Board to be fair to members. One other educating job is getting those outside the plan’s actuarial scope – those older than 50 this year – to join up by opting in. These individuals should be making their own calculations. They will see the merits readily.

Source : Straits Times – 13 Feb 2008

Flexible Annuities Scheme to start in 2013

WORKERS aged 50 and below are set to get a steady retirement income for life under a new annuities scheme to be run by the Central Provident Fund Board.

They will have 12 types of annuity plans to choose from, and can decide whether to start their payouts as early as age 65 or as late as age 90.

They can also opt to give their families a refund of their annuity premiums if they die early, before they get it all back in monthly payouts.

The new scheme is the result of a redesign of the old compulsory annuities plan proposed some six months ago to much public criticism.

A committee with members drawn from the unions, the civil service, companies, and academia was then set up to recommend an alternative better suited to Singaporeans’ needs.

They unveiled their new scheme, which the Government has accepted, yesterday.

To be called CPF Life, the scheme will roll out in 2013.

The first batch of workers to come under it are those who turn 50 this year. There are about 35,000 of them.

Depending on how much they have in their Minimum Sum cash balances at age 55, they can expect a lifelong income of between $350 and $1,100 a month.

That is, if they opt for the standard CPF Life plan that starts their annuity payouts at age 80. The majority of them – 60 per cent – can expect monthly payouts of $600 or more for life.

Another 15 per cent will get between $350 and $600.

The remaining 25 per cent will be exempted from the scheme as they will have less than $40,000 in the CPF Minimum Sum cash balances at age 55 – not enough for payouts to last a lifetime.

The committee has called on the Government to offer ‘one-off assistance measures’ to those with insufficient CPF retirement funds to help them take part in the scheme.

Manpower Minister Ng Eng Hen is expected to make an announcement on that issue today, when he responds to the committee’s report.

Exemptions also apply to those who are seriously ill and those on pension or approved private annuity plans.

The CPF Life scheme is a key piece in a comprehensive plan to tackle the problem of an ageing population, with people’s retirement savings not keeping pace with longer life spans.

The Government is also putting in place measures to help Singaporeans work longer, enhance the returns on CPF savings and make these savings last a lifetime.

In a letter thanking the 18-member committee, Dr Ng hailed its proposal as ‘a landmark report that will significantly strengthen our CPF system’.

The committee had collected feedback from some 600 members of the public before drawing up its 55-page report.

Yesterday, with his work done, a smiling Professor Lim Pin, the committee’s chairman, said: ‘We’ve designed a product which we think reflects the diverse needs of Singaporeans. We’re confident it will go down well with the public.’

The scheme is not cast in stone, he added, and will be reviewed periodically, in line with new data and feedback.

Financial experts and Members of Parliament said it was an improvement on the old annuities plan as it tackled the main concerns of Singaporeans over lack of flexibility and refunds.

But critics pointed to the needy folk who would not be covered by the scheme.

Source : Straits Times – 13 Feb 2008

Scheme gets thumbs-up from Experts and MPs

Most S’poreans feel all the important feedback has been taken into account

THE new annuities scheme has received the thumbs-up from financial experts, MPs and Singaporeans.

Most interviewed said the plan, to be called CPF Life, addressed the concerns of Singaporeans and is a vast improvement on the original idea.

As MP Denise Phua, a member of the Government Parliamentary Committee (GPC) for Manpower, put it: ‘Major feedback on making the premiums affordable, allowing for choices and flexibility in payout ages, and refunds of premiums on earlier demise have all been taken into account.”

The compulsory scheme was first suggested by the Government last year to help Singaporeans, who are living longer, have a more secure retirement.

The initial idea was for CPF members to use part of the Minimum Sum in their Central Provident Fund (CPF) account to fund the annuity. It would give them monthly payouts when they turn 85.

But it upset many Singaporeans. Some were sceptical they would live to 85 while others baulked at losing their money should they die early.

A committee was then set up and it consulted widely before designing the scheme which the Government has now accepted.

Manager Koh Lee Peng particularly welcomed the decision to allow for the refund of unused premiums.

Said the 40-year-old: ‘Even if you pass away early, your money can go to family members. The scheme looks more attractive now.’

She said she would opt for the payout to start when she hits 65 – the earliest possible – as she hopes to retire then.

When CPF Life is introduced in five years’ time, people can choose to start getting their payout from one of six ages – 65, 70, 75, 80, 85 and 90.

Mr Andrew Linfoot, an actuary at the local office of Scottish Annuity & Life Insurance Company, singled out the flexible payout age as a key sweetener.

‘Offering a range of options is a good way to meet the differing retirement needs of different parts of the community,’ he said.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, noted that CPF Life offers a better interest rate – around 5 per cent – than the projected 4 per cent or less of private sector annuity plans.

But Mr Leong, like Dr Lim Wee Kiak, member of the GPC for Manpower, feels the man-in-the-street needs help to figure out which annuity plan among the dozen offered is best for him.

Said Dr Lim: ‘The CPF Board has a huge task ahead just to communicate the scheme to the public. But the old scheme cannot compete with this one, which guarantees lifelong income.’

Currently, the payout from the CPF Minimum Sum is for 20 years, after which many have few sources of their own funds.

However, Ms Koh, like some others, worries the payouts may not keep pace with inflation.

‘Twenty years on, medical bills are going to be more expensive. How to survive on $600 a month?’ she said, referring to the estimated monthly payout.

Ms Phua pointed out that the annuities scheme was not meant to provide for all the retirement needs of Singaporeans.

‘CPF members should know how much they would need on retirement to maintain their desired standard of living. CPF Life is only one possible stream of income.’

They could consider healthcare insurance and renting out part of their homes, she added.

But critics like Mr Joseph Chong, chief executive officer of financial advisory firm New Independent, said it may not cater to its target group: those who outlive their resources.

‘Are we spending a lot on something which is a small improvement to the present scheme?’ he asked.

Mr Chong feels the payout makes little difference for many well-off Singaporeans, but not for those outside the CPF system or with few funds. ‘They may just fall through the cracks. The Government should top up such people’s CPF accounts.”

MORE ATTRACTIVE

‘Even if you pass away early, your money can go to family members. The scheme looks more attractive now.’ – MANAGER KOH LEE PENG, 40, who welcomed the decision to allow for the refund of unused premiums

JUST ONE OPTION

‘CPF members should know how much they would need on retirement to maintain their desired standard of living. CPF Life is only one possible stream of income.’ – MS DENISE PHUA, a member of the Government Parliamentary Committee for Manpower

Source : Straits Times – 13 Feb 2008

10 things you need to know about CPF Life

Workers aged 50 and younger who pay CPF will come under the new annuities scheme that starts in five years’ time in the year 2013

1 How much do I pay? How much do I get?

You will pay for your CPF Life premium with your CPF Minimum Sum. You will not have to pay more out of your own pocket.

CPF Life is the new name for the annuities scheme.

How much premium you pay depends on the annuity you choose. How much income you get monthly depends on how much you have in your Retirement Account at age 55, and on your annuity option.

2 What choices do I have?

You will have 12 options to choose from.

 
You can choose the age at which you want to start receiving payouts from your CPF Life.

You can ask for your payouts to start at age 65, 70, 75, 80, 85 or 90.

For each of these six options, you have a further choice of whether you want your family to receive a refund of the CPF Life premium, should you die early.

Once you have made your choice, you cannot change your mind.

So if you want your payouts to start at age 65, you can either choose option Refund 65 or option No Refund 65.

The default option is Refund 80.

The earlier you want your payouts to start, the larger the premium you will have to pay. But you will also receive a bigger payout every month.

Let’s take an example of someone with a CPF Minimum Sum of $67,000 when he turns 55.

If he chooses Refund 65, 100 per cent of his CPF Minimum Sum will go into paying the CPF Life premium. He will receive a monthly payout of $650 from age 65 until he dies.

But if he chooses option Refund 90, only 6 per cent of his Minimum Sum in the Retirement Account will be used to pay for the CPF Life premium.

He, too, will receive a monthly payout from age 65 until he dies, but it will be $560. This payout is from the remaining amount in the Retirement Account.

The payout from the annuity will start from age 90.

If he opts not to have a refund, his payout will be higher.

The payouts for women will be lower because they are expected to live longer than men.

3 If I die early, does my family get a refund?

Yes, if you choose any one of the six options that gives a refund. The refund amount will be equal to the CPF Life premium minus the CPF Life payouts you would have received.

4 Am I covered by the new scheme?

The CPF Life scheme starts in 2013, five years from now.

You are covered by CPF Life if you are aged 50 and younger, working and contributing to your CPF account.

You are exempted if you have less than $40,000 in your Retirement Account at age 55, but you can still opt into the scheme.

The Government is expected to announce today incentives to help people in this group take part. Those over 50 can also opt in.

You are also exempted if you are on a pension or have bought a private annuity that pays you an equivalent benefit; have a terminal illness; are of unsound mind; have a mental or physical condition that leaves you unable to work; or a medical condition that severely impairs your life expectancy

5 Is it compulsory?

Yes, it is compulsory unless you are exempted.

Allowing people to opt out would have an adverse impact on this national scheme, and make it less viable.

6 What happens to my CPF money when I turn 55?

When you turn 55, the money in your CPF Ordinary and Special Accounts is moved to your Retirement Account.

You are required to leave a Minimum Sum in your Retirement Account for your old age.

The sum you must leave in your account, called the Full Minimum Sum, is currently $99,600.

It will be raised gradually to $120,000 (in 2003 dollars) by 2013, the year the CPF Life scheme starts. The CPF Board estimates that after adjusting for inflation, the Full Minimum Sum in 2013 will be $134,000.

If you have more than the Full Minimum Sum, you can withdraw the excess.

At age 55, you will also be asked to choose one of the 12 CPF Life options.

The sum you have in your Retirement Account is then split into two, according to the option you choose.

One part goes to pay for the CPF Life premium. This portion is pooled together with the premiums of other CPF Life members.

The other part remains in your Retirement Account and earns interest from the CPF Board.

You start to receive an income from the sum in your Retirement Account when you turn 65.

You start to receive an income from CPF Life at the age you have opted for. For most people, that age should be 80.

7 How is CPF Life different from the current Minimum Sum scheme?

The current Minimum Sum Scheme gives you a monthly payout for 20 years from age 65.

CPF Life also gives you a monthly payout from age 65, but for the rest of your life.

The payout amount will remain roughly the same.

For example, under the current Minimum Sum scheme, if you have $67,000 in your Retirement Account at the age of 55, you get a monthly payout of $600 from age 65 to 85.

But under the new CPF Life scheme, if you choose the standard Refund 80 option, you get a payout of $570 to $610 for life.

The range in the size of payouts is to take into account interest rate fluctuations.

The standard option refers to the plan you are automatically put on if you do not make a choice at age 55.

8 Will my CPF Life payouts be indexed to inflation?

No. Otherwise, the payouts need to get bigger over time. That means the initial payouts need to be much smaller. It also means bigger CPF Life premiums and fewer members being able to afford the scheme.

9 Who will run the new scheme?

The CPF Board will.

The board offers better interest rates than most commercial annuity providers. Members of the public cited this as the main reason for preferring the CPF board over private providers. Having one operator also reduces costs through efficiencies gained from having a larger scale of operations. The public trusts the CPF Board, as it has helped manage their retirement funds since 1955.

10 What happened to my feedback?

The scheme was changed in response to feedback.

As a result, the new scheme provides for refunds and for a choice on the age people want to receive the payouts.

Source : Straits Times – 13 Feb 2008

CPF annuities scheme will offer members 12 options

ONCE they turn 55, Singaporeans can choose from one of 12 annuity plans available to them under a new scheme unveiled yesterday.

But they will be unable to change their decision thereafter, even if their circumstances change.

Explaining why, National Longevity Insurance Committee chairman Lim Pin said:

‘Once you opt, then it (the premiums) will go into a pool, and that pool has to be fixed because the pooling is very important for the whole scheme.

‘If you come in one day and go out another, the pool becomes variable, you cannot calculate how much money to pay out. It’s a danger. It’s an administrative problem. It’s a kind of contract, a kind of insurance policy contract.’

It is the one immovable point in the scheme, of which flexibility is a hallmark.

Indeed, Singaporeans can choose to start receiving their annuity payouts from as early as age 65 or as late as age 90.

They can also decide whether or not to have the premiums refunded to their families should they die early.

In all, there will be 12 annuity options to choose from, to meet public calls for a flexible scheme.

‘The committee recognises that different members have different retirement and bequest needs,’ the committee noted.

Its report, released yesterday, detailed how the scheme – which kicks off in 2013 – will work.

That is when the first group of Central Provident Fund (CPF) members – about 35,000 who turn 50 this year – will come under the annuities scheme.

By that year, the Minimum Sum amount that this group is supposed to have is $134,000. This can be either fully in cash, or partly in cash and partly in the form of a property pledge.

Under the annuities scheme, the Minimum Sum cash balance will be divided into two parts: a portion that remains in the Retirement Account; and a Refundable Premiums (RP) portion.

The sum in the Retirement Account is used for monthly payouts to the member, starting at age 65, until the age at which he opts to start receiving payouts from the annuities scheme.

The RP portion, on the other hand, is used to pay the premium of the scheme.

At 55, the member will have to choose at which age he wishes to start receiving payouts from the scheme.

This can start at any one of six ages – 65, 70, 75, 80, 85 or 90 – and the payouts will continue for the rest of his life.

The earlier the starting payout age, the higher the premiums will be.

This means there will be less money left in his Retirement Account – and thus less money for his beneficiaries, as he loses out on the interest otherwise accrued on the amount in that account.

He does not get the interest from his RP, as it is pooled to fund the scheme.

For each of the six ages that the payouts can start at, a member can also specify if he wants a refund of the capital sum – which is paid out in premiums – if he dies before reaping them back.

These six options are named Refund 65, Refund 70, Refund 75, Refund 80, Refund 85 and Refund 90.

If he opts instead for the non-refundable plan, he will then pay relatively low premiums and get relatively higher payouts.

These plans are known as No Refund 65, No Refund 70, No Refund 75, No Refund 80, No Refund 85 and No Refund 90.

Take a hypothetical case of a male CPF member at age 55 who has half the required Minimum Sum, or about $67,000 in cash.

The costliest plan will be if he wants his payouts to start at the earliest age possible – 65 – and also wants the refundable option.

His premiums will cost 100 per cent of his Minimum Sum. In return, he will receive $650 a month in annuity payouts for as long as he lives. But if he opts for the No Refund scheme, then he will receive $690 a month.

If, on the other hand, he chooses to delay his payout age to age 90, his premiums will cost just 6 per cent of his Minimum Sum. In return, he will get annuity payouts of $560 a month.

The corresponding payout range for women is lower – $540 to $590 – as they generally live longer.

These figures are indicative, as they may vary. And the factors are: the balance that an individual has in his Minimum Sum; changing mortality rates, and the CPF Board’s investment returns on the pooled premiums.

But committee chairman, Professor Lim Pin, noted that no matter what, the payouts will be calculated based on a minimum guaranteed interest rate of 3.5 per cent, which is what the Government offers to CPF members.

Source : Straits Times – 13 Feb 2008

Several MRT station ‘hot spots’ likely in the future

Interest in these areas rises as Govt readies review of land use masterplan

A MAJOR review of the town plan governing the development of land across Singapore is due this year – and keen interest centres on the use of land near MRT stations.

Property analysts have identified several MRT station ‘hot spots’, but they are playing down the possibility that the Government may allow more intensive development in these areas for now.

The five-yearly review of Singapore’s Master Plan, due around the middle of this year, will examine plot ratios – the level of intensity of development on a given site.

MRT stations hold interest for planners and industry watchers for the obvious reason that vast numbers of people use them every day. A new Jones Lang LaSalle report on higher plot ratios near Circle Line stations picked Paya Lebar, Buona Vista, Telok Blangah and Harbourfront as new hot spots.

The Master Plan shows the permissible land use and density for every parcel of land in Singapore. Property analysts say over time, plot ratios will have to increase in selected areas to cater to a growing population. What is uncertain is the timing.

For the purpose of planning land use and transportation in the next 40 to 50 years, the Government is using a projected population of 6.5 million, as opposed to the current population of 4.5 million.

Maximising the use of land around MRT stations is an obvious choice.

‘You can then minimise car usage, and the masses get the best accessibility,’ said Dr Chua Yang Liang, the head of research for South-east Asia at Jones Lang LaSalle. ‘From the planning perspective, it is about maximising your investment dollars and social benefits.’

‘Yes, the plot ratios may rise, but people should not count too much on that,’ said Knight Frank director of research and consultancy Nicholas Mak. ‘I don’t think the Government will be creating a lot of windfalls for private property owners, as there is no compelling reason to do so.’

Besides, some of the areas along the Circle line are fairly built-up, he said.

National Development Minister Mah Bow Tan said in June there was no need for an across-the-board change in plot ratios, as the land available today would be sufficient to meet needs over the next 10 to 15 years.

That, however, has not deterred some property owners from dreaming of a windfall.

Some recalled that certain sites above or near key MRT stations had their plot ratios raised after plans for the North-

East Line (NEL) were finalised more than 10 years ago. A prime example was the land around the Dhoby Ghaut MRT station, when it was also made the NEL interchange.

There is no need for significant increases in plot ratios along the Circle Line in the upcoming Master Plan because the line will not be ready until 2012, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore.

Generally, the areas likely to see a significant revision in development density will be vacant state land around the Circle Line stations. Paya Lebar certainly has some. It is slated to be a regional commercial centre, so it is possible that the Government will allow a higher land density around the station, said Mr Ku.

It may happen at the Buona Vista stations, he said, as the area is a biotech hub.

Places such as Bishan and Dhoby Ghaut have been ruled out because there is little empty state land there. Also, plot ratios in Dhoby Ghaut are already very high, said Dr Chua.

‘So you can’t raise them further. Otherwise, you will upset the urban streetscape.’

Source : Straits Times – 7 Jan 2008

She bought her first house with casino tips

From the age of 16, fitness firm CEO realised real estate was where the money was, and has stuck with it since

AT THE age of 30, Shanghai-born Annie Sun was already the owner of a string of properties in Melbourne, where she had been a student.

BORN IN SHANGHAI, EDUCATED IN MELBOURNE, the jetsetting Ms Sun still recalls the heady times she spent as a spa manager at the Crown Casino, where high rollers and big tips were the order of the day.

Her belief that real estate investments offered good returns over time sprang from her observation as a student that many rich people had made their money from property.

The lesson stuck. Now, the chief executive (CEO) of fitness and wellness firm Dynaforce – which distributes high-end gym equipment – has 80 per cent of her investments in property.

In a recent interview with The Sunday Times, Ms Sun, 38, recalled how, even at 16, she had wanted to own property.

‘Even then, I decided I needed to be smart and invest well, instead of relying on a monthly salary. I figured I could make more money from investing and collecting properties,’ she said.

Armed with a degree in hospitality and health sciences, Ms Sun hobnobbed with international celebrities and high rollers during her stint at Melbourne’s Crown Casino complex, where she managed the spa and fitness club. She worked in Hong Kong and Shanghai before coming to Singapore.

She never imagined that she would be a high-flying CEO herself one day, but the opportunity presented itself when there was a mass resignation at the Dynaforce Singapore office two years ago.

As a result of the 2006 crisis, the company’s chairman promoted her and put her in charge. She had become a design and spa consultant at one of Dynaforce’s units in 2004.

This year, the company generated a turnover of $15 million for the period to Oct 31. It manages 11 gyms in Singapore and has helped conceptualise the gyms in St Regis Residences and at various hotels including the Ritz-Carlton, Mandarin Oriental, Fullerton, Shangri-La and Hyatt.

Ms Sun, who is single, works out in the office gym three times a week and practises power yoga once a week.

Q What are your money habits?

A I save two-thirds of what I earn. Although I enjoy the finer things in life, I have learnt to moderate my needs these days, so I spend much less than when I was younger. I don’t carry much cash around, maybe $300 at a time, so I rely on credit cards. Since I eat out most days, I think hotel cards are a great invention.

During my Crown Casino days, money came easily. The high rollers gave generous tips when they came to the spa. I quickly saved up enough money to buy my first house by the sea in Melbourne.

Those were heady days. There was no financial planning. It was almost a given that if I showed up for work, there would be big tips and money coming in.

Q What financial planning have you done?

A I’m not a risk taker. Currently, about 80 per cent of my investments are in property and the balance is in a stock portfolio managed out of Melbourne. It is invested mainly in the Australian stock market and includes telecoms shares. I seldom monitor it.

I know I need to be more proactive in my financial planning, but I have been too busy to think about it. My bankers have been hounding me and I think next year will be a good time to sit down with them to work out a better plan. That will be my New Year resolution.

Q What about insurance planning?

A I have an investment-linked plan with AMP back in Australia. I’m insured for about $1 million. Apart from that, I have medical and travel insurance. My annual premiums top A$5,000 (S$6,340).

Q What are your property investments?

A At present, I have four properties, three in Melbourne and one in Singapore. One of my Melbourne properties is being rented out. This is a one-bedroom apartment in the prestigious St Kilda residential area. I bought it for A$380,000 in the late 1990s, for tax planning purposes.

Q Moneywise, what were your growing-up years like?

A I was never short of money. I always got what I wanted as I was the only child. My father’s family owned a textile factory in Shanghai. My mother came from a wealthy family. When money is handed to you easily, you don’t see its value.

My perception of money changed when I was alone in Australia before my family migrated there. I learnt how to live independently and had to take financial responsibility for myself. I learnt to budget and worked as a part-time waitress.

The experience taught me to believe in hard work. It is through making my own money that I enjoy real financial freedom.

Q What has been a bad investment?

A At Crown Casino, I saved up so much money that I was itching to try something new. The entrepreneur in me kept trying to emerge. The opportunity came when a relative in Shanghai asked me to join him in setting up a wine bar and fusion restaurant along the Shanghai Bund.

It was 1999 and Shanghai was starting to boom big time, so I thought the timing was perfect. I packed my bags and sold my beach house in Melbourne and moved to Shanghai. I bought that two-storey beach house in 1994 for A$300,000 and sold it for almost A$800,000.

After six months of fighting red tape and being cheated by my main contractor, who was also a distant relative, I threw in the towel and returned to Melbourne – A$400,000 poorer but much wiser. I learnt not to trust people easily and to read the circumstances and the business environment much better.

Q Your best investment to date?

A My best investment came when I was invited to become a shareholder in Dynaforce. It is an investment that I can take active control of to produce results for my team and myself. I have a 30 per cent shareholding currently and there are plans to list Dynaforce at a later stage.

Another good investment was my first apartment in Singapore, at 8 @ Mount Sophia, which I bought for $800,000 in 2004 and sold for $1.5 million this year. It is 1,100 sq ft in size.

Q What retirement plans do you have?

A I want to retire within 10 years, with $50 million in hand, so I can do more charity work and learn other things that I did not have the time or the opportunity to do before. I would be interested in charities that involve children and might even set up one if I can’t find a suitable one to contribute my resources to.

I plan to spend time in Melbourne, Singapore, Thailand, Bali and Shanghai.

Q And your home now is… ?

A I invested the profits from the sale of my apartment this year into a 1,400 sq ft, 99-year leasehold apartment, also around Mt Sophia. It cost $1 million.

Q And your car is… ?

A A dark-grey Porsche Boxster.

More value for money

‘I decided I needed to be smart and invest well, instead of relying on a monthly salary. I figured I could make more money from investing and collecting properties.’

MS SUN, on how she decided back in her student days to build her fortune

High returns secured

‘A good investment was my first apartment in Singapore, at 8 @ Mount Sophia, which I bought for $800,000 in 2004 and sold for $1.5 million this year. It is 1,100 sq ft in size.’

MS SUN, listing just one of the properties she has made big bucks on

Source : Sunday Times – 30 Dec 2007

Guide to getting a home loan

Let’s take a walk through the top seven questions that you should consider when shopping for a mortgage. Bryan Lee

It’s easy to get carried away by swish showflats and glossy brochures but when it comes to the nitty-gritty of financing that dream home or money-spinning condo, it’s best to keep your feet on the ground. Let’s take a walk through the top seven questions that you should consider when shopping for a mortgage.

1. How much can I borrow?

This is the first question you need to ask before you sign the purchase contract for that ideal flat with the pool view and auspicious unit number.

There are essentially two factors that banks consider when determining how big a loan they can grant you.

First, they are allowed to lend you no more than 90 per cent of the property’s purchase price or valuation – whichever is lower.

So if the valuation is less than the purchase price, be prepared to cough up more cash to meet the difference.

Take note also that interest rates are usually higher, between 0.5 and 1 percentage point, for loans larger than 80 per cent of the property’s value.

Next, banks will also want to make sure you can afford the monthly instalments of the mortgage.

The rule of thumb is that all your monthly financial commitments, such as car loans, should not exceed half your monthly income.

Online loan calculators found on bank websites can help you estimate the monthly repayments of the potential mortgage you are considering.

Alternatively, just walk into your favourite bank branch and get advice from the officers there.

Some banks, such as Standard Chartered Bank (Stanchart), do offer “in-principle approvals” for existing customers. While a final go-ahead is still needed, it does give an indication of how much you can borrow.

2. Where should I start shopping?

The most obvious way to find out about interest rates and loan packages is to visit the various banks.

The Internet and the phone may help with some initial inquiries, but a face-to-face consultation is often still needed to get details and the latest information.

If DIY is not your thing, you can seek advice from mortgage brokers who will do all the legwork for you – for free.

“What we offer is a “one-stop shop” where we hope to help clients weigh up the various packages objectively,” says Mr Geoffrey Ying, mortgage division head of financial advisory New Independent.

Beyond finding out the rates and terms of various loan packages on the market, they can sometimes even offer you special packages with lower rates.

3. How long should I stretch the mortgage?

A longer tenure will mean smaller monthly instalments. So to minimise the immediate pain, most borrowers tend to stretch their loans for as long as possible.

Most banks typically assume borrowers will be able to keep up with monthly repayments up to age 70. Hence, a 35-year-old can get a 35-year loan.

But a protracted loan may not always be a good idea, as you will end up paying a lot more interest.

Take, for example, a $500,000 mortgage with an average annual interest rate of 4 per cent.

A 30-year loan translates into monthly repayments of $2,387 and accumulated interest of $359,288.

If you can stump up $642 more each month, you can finish paying up the loan 10 years earlier and save $132,162 in interest charges.

4. How do I want my interest rates determined?

Standard mortgages are charged according to reference rates set by banks, which they may change over the tenure of the loan.

While based loosely on benchmark interbank rates, each bank’s reference rate is different and may be affected by a bank’s business and its funding costs.

Recently, loans with rates pegged directly to benchmark rates such as the Singapore interbank offered rate, or Sibor, have hit the market for borrowers who want greater transparency about how their interest rates are determined.

These mortgages tend to be slightly more expensive than plain-vanilla variable rate loans and will usually expose borrowers to market fluctuations fully.

For transparency with stability, POSB’s Ideal Home package may appeal to many as its rates are pegged to the Central Provident Fund Ordinary Account rate, which has not changed in the past eight years.

5. Should I opt for fixed rates?

For peace of mind, rates can be fixed, usually for the first one to three years.

Mr Bryan Ong, a senior associate manager at real estate firm PropNex, recommends fixed rates to busy people who could well do with one less thing in life to monitor.

Moreover, locking in a low interest rate may well be financially prudent if rates are expected to go up.

Stanchart mortgages head Elaine Heng says borrowers who chose fixed rate loans in 2005 have been enjoying big savings. Rates were as low as 1 per cent two years back but have since risen, going above 3 per cent in June.

But hindsight is always 20/20.

Also, fixed-rate loans are charged at a small premium over flexible rate loans. This means any potential savings is likely to kick in only after the first three to six months, says OCBC Bank consumer secured lending head Gregory Chan.

“Fixing rates for one year doesn’t make sense unless you think rates are going to spike up.”

He added that keen competition is keeping rates low anyway.

For those who want to hedge their bets, most banks offer “combo” or “hybrid” loans where a part of the mortgage has its rate fixed, while the remainder is kept variable.

6. What about lock-in periods, early repayment penalties?

Banks typically stipulate that borrowers cannot accelerate their loan repayments in the first one to three years.

Any early redemption often carries penalties equivalent to between 1 per cent and 1.5 per cent of the principal.

Each bank has its own rules and, even then, these differ between products, and special promotional exemptions are available from time to time.

In general, fixed-rate loans usually come with a lock-in period because the lender would have already incurred hedging costs.

Flexibility can, however, be bought by paying 0.5 per cent to 0.75 per cent more interest, says DBS home loans head Koh Kar Siong.

But what is almost unavoidable when redeeming a loan early is the return of legal and insurance subsidies that the bank may have given initially.

Mr Koh says this question is more pertinent for speculators who hope to flip their properties for a quick buck.

Still, longer-term buyers may want more flexibility to refinance their homes to take advantage of better mortgage deals that may come up.

And then, there’s always the possibility – however remote – of striking lottery.

7. What else is in the market?

There are a few innovations in the mortgage market that may benefit those with some extra cash in their hands.

Products such as Stanchart’s MortgageOne and HSBC’s SmartMortgage pay borrowers the same interest rate on some of their deposits as their loans.

This effectively means that the higher interest earned from deposits can help offset some of the borrower’s mortgage costs.

Another product that tries to help borrowers pay off their loans more quickly is OCBC’s QuickOwn mortgage.

Instead of giving a special rate for deposits, borrowers need to set aside regular savings over 12 years that will go into an endowment policy.

Payouts from the savings plan will go towards paying off the mortgage, reducing the loan’s tenure.

Source : Sunday Times – 18 Nov 2007