Resort? No, It’s HDB Life By The River

Source : The New Paper, 21 Aug 2007















Ching: PM struck the right chord when he talked about our homes.

For us Singaporeans, the home is ultra important. A roof over our heads. Our nest egg. Our security.

PM said the Government will give you help to buy a flat, increase its value and even unlock its value for you if you need money for your old age. Choo, you already own a flat, right?

Choo: Yes! All my own. Five years ago it cost me $200K.

Now, every day agents are shoving paper under my door offering me more than $400K.
But have you seen the pictures PM showed of the new-look HDB heartlands? Like a resort!

Wonder if I can buy a timeshare there.

Ching: It was something amazing. PM showed an artist’s impression of Anchorvale Community Centre.

He was right when he said it should be called ‘Anchorvale Country Club’.

When these plans are in place, the whole HDB landscape is going to be transformed.

No other city in the world has public housing that is so cool - like private housing.

For new homes like Punggol 21, there are those with river views, a town centre by the water front and water activities. It will be the new face of Singapore.






















When the PM was showing them last night, all those listening to him went ‘wahhhh!’ and clapped.

The older homes in Queenstown will also get a facelift.

I saw the slides which PM showed last night.

Alexandra Canal has a wooden deck built over it, with a park on top.

Quite amazing.

So, everyone can benefit from the property boom, like you, Choo.

Choo: Ah, but I’m not selling. My home is my nest egg, and from what’s been said, the egg is starting to look like a golden one, the only thing missing now is more elderly-friendly features.

Ching: Well, there is the lift-upgrading programme, which is very popular.

Putting in these kinds of facilities will help to increase the value of the flats.

Owning a flat is like ‘buying shares in Singapore’ as PM says, and when Singapore does well, it will seep into the value of the flat.

You said your flat was a ‘nest egg’.

Well, there’s a new plan for those with smaller flats, the three and two-room flats, and with elderly owners.

The Government will ‘buy back’ the tail-end of your lease.

Choo: What? You mean Government can ‘buy back’ your own flat while you continue staying in it? You don’t have to sell and downgrade?

Ching: The Government will buy back some of the lease, leaving it with 30 years. The Government will give you some of the money in a lump sum, the other bit in an annuity - something that will pay you a sum of money for as long as you live.

Choo: Wah, sounds like touch Toto big time.

Do You Have A SAFE ANNUITY?

Source : The New Paper, 21 Aug 2007

In his National Day rally speech yesterday, Prime Minister Lee Hsien Loong announced that annuities will eventually be made compulsory. It applies to persons who are now 50 years of age and below.

Doctor Money answers common questions about this important topic.

What is an annuity? Should I or my parents buy one?

It is a lifetime income. You pay a lump sum, like $100,000 now. In return you receive an income of, say, $600 a month for the rest of your life.

As you know, life insurance pays nothing while you live and makes a lump-sum payment to your beneficiaries if you die.

An annuity is the opposite. You make a lump-sum payment to receive a constant income for as long as you live.

It is insurance to protect you from out-living your money.

Is an annuity fair? If I die early, will I lose most of my money?

Yes, many people think this way. But it applies only to one type of annuity, which I call a ‘risky’ annuity.

It makes high monthly payments which stop when you die. If you purchased the annuity for, say, $100,000 and die after $10,000 has been paid out, your beneficiaries do not receive the remaining $90,000.

A second type is much more common here. I call it a ’safe’ annuity. The monthly payments are lower. But if you die early, the remainder goes to your beneficiaries. In our example, the $90,000 balance would be returned to your beneficiaries.

A third choice is to receive payments over a fixed number of years. In our example, the $100,000 annuity would be paid over 20 years. Again, if you die early, the unpaid balance is returned to your beneficiaries. The CPF retirement account works this way.

How do annuities work?

You buy annuities from life insurance companies. To buy the risky annuity, you must use cash.

Most annuities are purchased with CPF money and CPF rules permit only the safe annuity. It pays less than the risky annuity but your beneficiaries get the unpaid balance when you die.

Annuities have not been popular. Only about 5 per cent of CPF members purchase them. The other 95 per cent take the default option of monthly payments from the CPF Board for 20 years.

At present, it works like this: If you had the minimum sum of $99,600 in your CPF account at age 55, you could withdraw $790 per month over 20 years from age 62 to 82.

The alternative is a lifetime annuity. The best deal comes from NTUC Income. Using the same numbers, it will pay a monthly income of $633 for men and $593 for women and these amounts increase yearly.

If one dies before the $99,600 has been paid out, CPF rules require that the balance be returned to the beneficiaries.

Between the two, which is the better?

All else being equal, the NTUC Income annuity is better because it is an annuity. It provides insurance against out-living your money.

All else, however, is not equal as the rates of return are different.

The CPF Board’s $790 per month for 20 years translates to a fixed return of 4 per cent per year.

NTUC Income guarantees lower monthly payments but they continue for life. The return comes to 5.25 per cent per year of which only 2.5 per cent is guaranteed.

It boils down to a trade off between a fixed return of 4 per cent for 20 years (CPF) compared to a return of 5.25 per cent for life, of which only half is guaranteed (NTUC Income).

Cautious investors would probably go for the CPF Board’s 4 per cent for 20 years as it is more certain.

Those willing to take a slight risk would want to consider NTUC Income’s higher but less certain returns.

Homemade ‘annuity’

PAYOUTS from your retirement account now begin at age 62. The starting age is to be raised gradually to age 65 and eventually to 67.

But why wait? You can raise it yourself and it will work to your benefit. It is like creating a homemade annuity.

For every one year that you defer receiving your 20-year payout, it adds two years to the total payments you receive.

For example, if you elect to receive your payouts from age 63 instead of 62, you will receive monthly payments until age 84 instead of age 82.

The longer you delay receiving your money, the more the payouts grow.

If you defer your payouts by three years to age 65, you might expect to receive two additional years for each year you defer. It seems you would get 3 x 2 = 6 added years.

In fact, you will do even better. Because of interest earned on interest, you get seven more years and your payouts continue until age 89 (82 + 7).

This is not a special incentive scheme but simply the effect of compounding your money at 4 per cent per year.

More ‘Teeth’ Needed To Rein In Errant Property Agents

Source : The Straits Times, 21 Aug 2007

YET another unpleasant experience with property agents was highlighted in Ms Laura Thornton-Olivry’s letter, ‘Signed and sealed with a handshake, yet no deal’ (ST, Aug 18).

There have been many complaints against unethical agents recently, and the only assurance given by the authorities is that there are accreditation schemes in place.

I expressed my concerns in the letter, ‘Time to regulate property agents’ (ST, July 11), calling for control of property agents. Since then, many readers have offered their views in this Forum.

My letter elicited a joint reply from the HDB and the Inland Revenue Authority of Singapore on July 31, and a separate one from the Singapore Accredited Estate Agencies on the same day.

At best, the responses highlighted the existence of agencies to which a property agent can accredit himself or herself with, and the qualifications needed.

But they do not address the issue of the need to have more ‘teeth’ to rein in errant agents, including perhaps licensing them through legislation.

Accreditation is merely associating oneself with an agency and the person can choose not to abide by the rules.

There is no punitive action against an agent if he were to flout the rules, except being struck off from the register of the association. This is really a non-event.
We should not allow a few black sheep to tarnish the image of the real-estate industry.

It is a ‘jungle’ out there and the professional agents - I am sure there are many - and potential buyers and sellers need to be protected from the unscrupulous ones.

Teo Cheng Peow

MTI Sees Growth At Upper End Of 4-6%

Source : The Business Times, 21 Aug 2007

The economy should be able to grow at the upper end of the newly revised 4-6 per cent trend potential over the next five years if external conditions remain good, says the Ministry of Trade and Industry (MTI).

Thanks to diversification and reforms, the economy now has the potential to grow 4-6 per cent over the next 5-10 years, MTI says, elaborating on what Prime Minister Lee Hsien Loong said towards the end of his National Day Rally speech on Sunday.

Mr Lee revealed that after a review, MTI had raised its estimate of Singapore’s underlying growth from the previous 3-5 per cent range.

But the new estimate is still well below the private sector’s assessment. As BT reported last month, most economists believe Singapore’s trend growth potential has risen to 6-8 per cent, fuelled by an influx of skills and investments.

Economic growth has averaged 7.8 per cent a year in the past three years and 6.1 per cent a year in the past five years, which MTI attributes to economic reforms.

In 2003, the Economic Review Committee projected that labour force growth of 1-2 per cent and productivity increases of 2-3 per cent would drive annual economic growth of 3-5 per cent over the medium term.

But MTI now sees higher increases. It believes the labour force can grow 1.5-2.5 per cent a year, with more women, older workers and expatriate talent in the workforce.

Productivity growth is also projected at a higher 2.5-3.5 per cent because the economy has diversified into higher value-added sectors and attracted new capital investments.

‘Economic restructuring in an increasingly competitive environment has also helped enhance efficiency,’ MTI says. ‘New high-growth sectors like biomedical manufacturing and wealth management and rejuvenated traditional sectors like marine engineering and tourism have also made the economy more resilient and less vulnerable to sector-specific shocks.’

According to MTI, the external environment is likely to be favourable over the next five years, ‘increasing the likelihood that Singapore’s growth potential is realised’.

Apart from the key sources of demand in the United States, the European Union and Japan, the rise of China and India and the revitalised South-east Asian countries will boost growth.

From the late 1980s to the early 1990s, Singapore’s medium-term sustainable growth was seen at 5-7 per cent. This was later pared, officially, to 4-6 per cent as the economy ‘matured’ and subsequently to 3-5 per cent.

Private sector estimates were usually several percentage points higher.

DC Rates Seen Rising By Up To 60%

Source : The Business Times, 21 Aug 2007

Sept 1 adjustment will be on top of the recent 40% increase across the board

Picture : Collier's Director Ms Tay Heuy Ying

AVERAGE development charge (DC) rates could go up 18-60 per cent for non-landed residential use, 10-25 per cent for commercial use and 10-40 per cent for hotel use come Sept 1, property consultants said.

The forecast increases - due to rising land values - would be on top of last month’s effective 40 per cent across-the-board increase in DC rates under a change in the formula for calculating them.

According to Jones Lang LaSalle regional director and head of investments Lui Seng Fatt: ‘The Chief Valuer is most unlikely to let the earlier 40 per cent hike, which was more a policy realignment by the state to get a larger share of the appreciation in land value, influence his decision on the quantums of revision for the Sept 1 DC table, since the rates are meant to reflect the market conditions.’

















Agreeing, Colliers International director for research and consultancy Tay Huey Ying said: ‘We expect the government to maintain the aggressiveness in the upward adjustment of DC rates as seen in the last (March 1) revision. It is unlikely to be deterred by the resulting large hike in DC rates that this dual exercise will cause.’
A surprise change in the DC formula on July 18 creams off 70 per cent of the enhancement in land value arising from higher use or plot ratio, up from 50 per cent. But while this effectively raised DC rates 40 per cent across the board, the July review was based on land values in the March 1 DC table.

In other words, the July 18 move was independent of the regular six-monthly DC rates reviews on March 1 and Sept 1 each year, which are based on market value.

DC, which may be payable when a site’s use is enhanced or when it is built on more intensively, is specified according to use - such as non-landed residential, landed residential, commercial and hotel, and listed by 118 geographical sectors or locations across Singapore.

Hot spot: Deals such as The Ardmore have been transacted at 80 per cent above land values

With recent transacted land values significantly above imputed values based on current DC rates for many locations and use groups, there is room for the Chief Valuer to impose steep increases in the Sept 1 revision, market watchers reckon.

They say some developers have been waiting for this before they finalise decisions on acquiring collective sale sites that have a significant DC component.

But according to CB Richard Ellis executive director Li Hiaw Ho: ‘Even without any revision in the DC rates, developers are likely to take a step back from acquiring sites through collective sales because of the high prices set by owners.

‘In addition, the possibility of losing deals because of strong opposition by minority owners is a dampener for developers. Therefore, the rate of collective sales may slow in the coming months.’

Citing other factors, Colliers’s Ms Tay said: ‘Developers are taking a cautious stance not only due to the impending DC rate revision but also because of the volatility of the stock market and possible credit tightening.’

According to her, higher DC rates by themselves would not necessarily lead to a slower collective sales market or put a stop to land price escalation. Rather, this depends more on whether developers are confident they can pass on higher costs to buyers, she said.

Jones Lang LaSalle expects DC rates for non-landed residential use to escalate 45-60 per cent islandwide on the back of collective sale transactions. Mr Lui predicts a 45-50 per cent rise in DC rates for District 9 locations, where deals such as The Ardmore and Char Yong Gardens have been done at 80 per cent and 92 per cent above land values implied by the current July 2007 DC rates.

The East Coast and Telok Blangah areas are likely to see higher non-landed residential DC rates to the tune of about 35-45 per cent and 25-30 per cent respectively, Mr Lui said.

Colliers’s Ms Tay expects the average non-landed residential DC rate to rise 18-25 per cent but reckons bigger jumps of 40-50 per cent are likely in Sinaran Drive, Telok Blangah, Bedok/St Patrick’s Road and Upper Paya Lebar/Geylang.

This is because transactions in these fringe areas since March have been done at prices that were 143-195 per cent above the land values implied by the current July 2007 DC rates.

As for landed residential use, JLL expects an average islandwide increase of 20-30 per cent, with the East Coast posting about 25-30 per cent, District 11 about 40-50 per cent and Sentosa some 20-30 per cent.

For commercial use, JLL expects DC rates to go up 20-25 per cent islandwide, while Colliers predicts the increase will average 10-15 per cent.

‘We expect DC rates for the Collyer Quay/Marina Bay locations to see the biggest adjustments to the tune of 40 to 50 per cent,’ said Ms Tay. ‘This is because the $1,540 psf per plot ratio transacted price achieved for the 60-year leasehold Collyer Quay commercial site in October 2006, in the previous review period, still reflects a 220 per cent premium on the land value inferred from the current DC rate for commercial use in this location.’

CBRE’s Mr Li expects the biggest jump in commercial use DC rates - about 40 per cent or more - to be for the Shenton Way and Tanjong Pagar micro-markets, where sites and many buildings were transacted in the past two quarters.

‘The recent award of Tampines P15 site at the Tampines Regional Centre for $622 per square foot per plot ratio in May could also result in an upward revision of the commercial DC rate for this location,’ he said. ‘The implied land value based on the DC rate for this sector is about $334 psf ppr.’

Colliers expects DC rates for industrial use to remain unchanged for all locations as there has been no clear increase in land prices, while DC rates for hotel use could rise 10-15 per cent on average.

JLL forecasts hotel DC rates will rise by an average of 35-40 per cent, given the recent sale of two hotel sites by the state in Tanjong Pagar at prices exceeding their DC rate-implied land values by about 80 per cent.

CBRE’s Mr Li said that a rise in hotel DC rates come Sept 1 can be expected because the booming tourism market has boosted interest in hotel investment.