Monday, November 19, 2007

S'pore Needs To Slow Growth: Economists

Source : The Business Times, November 19, 2007

Economy will be fully stretched if it maintains 7-8% growth

While Singapore's underlying growth potential has risen in recent years, the economy will be fully stretched at the seams if it continues to grow between 7 and 8 per cent, as it has on average between 2004 and 2007, economists say. They now see a need to bring GDP growth down to around 6 per cent.

Against a backdrop of slower global economic growth next year, economists say Singapore's GDP expansion has to be moderated before overheating pressures - now nascent - build up further. Apart from moves underway to ease the pace - such as the delay of some S$2 billion worth of public building projects - it also means 'not taking active measures to improve growth if they are going to cause overheating', says Chetan Ahya, chief economist for South-east Asia and India at Morgan Stanley Asia.

Concerns about overheating risks - in the form of both consumer and asset price inflation - dominated discussions at a recent economic roundtable organised by the Institute of Policy Studies and BT. Speaking about the Singapore property market at the forum, Mr Ahya and his colleague Deyi Tan said they see in the ongoing real estate boom speculative excesses in the private residential segment, but genuine demand - and possibly further upside - in the commercial office market. Beyond the property market, resources are also being stretched. Does the growth trend need to take a breather, they ask.

'My personal view is that we probably need to slow the overall demand in the system right now... demand is so strong... The supply response function in all pockets of the economy does not catch up to the shift in demand,' Mr Ahya said.

He pointed out that the average annual growth between 2001 and 2003 was only 1.6 per cent - well below its underlying potential. There was therefore quite some excess capacity. In the four years since, the economy has ramped up sharply, growing almost 7.8 per cent on average, assuming GDP growth this year amounts to 7.7 per cent, which is Morgan Stanley's forecast. The official forecast is 'between 7 and 8 per cent'.

Growth of near-8 per cent for four years is 'clearly above the underlying potential', Mr Ahya said, even if the trend growth has risen in recent years. The government now estimates the economy's medium-term trend growth at 4-6 per cent, while most private sector economists put it higher at 5-7 per cent, some going as high as 8 per cent.

In the first few years from 2004, the economy could sustain the robust expansion without signs of strain because there was all that excess capacity from the recent lean years. But now 'there is stretch in the system', Mr Ahya says. 'We now have to go back to 6 per cent.'

He believes that Singapore can easily grow 6-7 per cent a year in the next two years if there were no overheating pressures in the last two years. 'Everything that can be done to ensure that we moderate growth down should be done,' he told BT. 'The Singapore government is actively boosting the economy by measures such as the integrated resorts but it (the economy) does not have the capacity to absorb the necessary labour or provide the infrastructure that allows for that growth without causing overheating.'

At the roundtable, Khor Hoe Ee, assistant managing director (economics) of the Monetary Authority of Singapore, said: 'I would say there has been a tightening of financial conditions this year. We are growing at a pace greater than what the resources are capable of accommodating. That is something that monetary policy can't deal with very easily, whether through interest rates or exchange rates.

'We are going to have to manage some of these pressures over the next two years until the supply comes onstream. In the meantime, the appreciation of the exchange rate does help to lower tradable prices and help to keep prices down.'

While there has been concern about the jump in inflation in recent months, Dr Khor pointed out that, apart from the effect of July's 2-point hike in the Goods and Services Tax, the increase in the underlying inflation here is still within the norm.

Lippo-Mapletree Trust Falls 3.1% In Market Debut

Source : The Business Times, November 19, 2007

Shares of property trust Lippo-Mapletree Indonesia Retail Trust started trade on Monday at $0.775 in their Singapore stock market debut, down 3.1 per cent against the issue price of $0.80 a unit.

Indonesia's Lippo Group and Singapore's Mapletree Investments, sold 645.47 million shares at $0.80, raising $516 million (US$356 million) in their initial public offer for a joint property trust.

The Lippo-Mapletree Indonesia Retail Trust is based on around $1 billion worth of properties that comprise seven Indonesian shopping malls, and seven retail spaces found in other malls, the prospectus said.

The listing of Indonesian trust comes after Saizen Real Estate Investment Trust (Reit), which is based on residential buildings in Japan, tumbled 14 per cent in its Singapore market debut on more than a week ago.

Saizen's sharp fall prompted Japan's Asia Pacific Land to delay a US$350 million IPO in Singapore.

Mapletree, which is owned by Singapore state investor Temasek Holdings, has a 40 per cent stake in the joint venture that will manage the Indonesian trust. The Lippo conglomerate, controlled by Indonesia's Riady family, owns the remaining 60 per cent. -- REUTERS

Far East Organization To Spend S$26m To Revamp Ginza Plaza

Source : Channel NewsAsia, 19 November 2007

Developer Far East Organization is pumping in S$26 million to refurbish the 16-year-old Ginza Plaza.

The shopping mall will also be renamed West Coast Plaza to reflect its changing focus away from just the Japanese expatriate community.

Vivienne Tan, president of Far East Retail Consultancy, said: "The demographics changed quite substantially over the last few years. And with the new influx of foreign talents, especially in the knowledge industry, we have found ourselves now the happy recipients of a big international community of people working here as well as our own local people, who have been loyal West Coast people for many years."

The 160,000 sq ft mall, which is expected to take 18 months to complete, will be marketed by Knight Frank.

Rental rates are expected to range between S$8 and S$25 per sq ft. - CNA/so

Singapore Ranked Tops In Asia For Ease Of Tax Payment

Source : Channel NewsAsia, 19 November 2007

Singapore has come up tops overall in Asia for ease of tax payment, according to a poll by the World Bank, IFC and PricewaterhouseCoopers.

It is ranked number two in the world, after the Maldives and ahead of Hong Kong.

Singapore performed favourably in the indicators measured, which are the total tax rate, the number of tax payments, and the amount of time it takes to pay.

Companies here take only 49 hours per year to comply with their tax obligations, compared to 58 hours in Luxembourg, 62 hours in Oman and as many as 2,600 hours in Brazil.

Singapore is also in the Top 10 in terms of the fewest number of tax payments.

There are only five tax payments for companies here, compared with eight in the United Kingdom and Spain, and as many as 118 in Uzbekistan and 124 in Belarus.

Only the Maldives, Sweden, Hong Kong and Norway have fewer number of tax payments than Singapore.

The report said companies and countries in general will benefit if governments simplify tax systems, ease compliance cost on business and reduce tax rates.

Other economies that have easy tax filing processes include the Maldives, Hong Kong, the United Arab Emirates and Oman.

On the other end of the scale, Belarus was ranked the most difficult place in the world to pay taxes.

The survey covered 178 countries. - CNA/so

Singapore's Retail Rents Not Rising As Fast As Other Cities : C&W

Source : Channel NewsAsia, 19 November 2007

Singapore's retail rents are going up but not as fast as other cities, according to global real estate agency Cushman and Wakefield.

This has made Singapore more competitive, maintaining its attractiveness as a preferred retail destination in this region.

Singapore's Orchard Road, with rental rates at about US$325 per square foot, is now ranked 14th in the world's most expensive shopping location, down from 13th last year.

The firm said this was mainly due to an appreciation of the Euro dollar over the Singapore dollar. The Euro dollar has appreciated five per cent over the last 12 months.

But with the upcoming S$40 million renovation of Orchard Road, tourist draws such as the integrated resorts, the Formula One race, the Gardens by the Bay and the new sports hub, and the nation's relatively low rental rates, Singapore’s ranking may go up in years to come.

For now, New York's Fifth Avenue retained its position as the world's most expensive shopping location, while Hong Kong's Causeway Bay took second place and Paris' Avenue des Champs Elysees came in third. - CNA/ac

MAS Has No Plans To Change Monetary Policy Before April

Source : Channel NewsAsia, 19 November 2007

The Monetary Authority of Singapore (MAS) said Monday it does not plan to change its monetary policy before its next review in April.

The MAS said its assessment is that the current policy stance is appropriate.

"As to whether we need an inter-meeting review that is not on the cards, obviously it is something that is not out of the question. But it's certainly not something that's planned for," said MAS deputy managing director Ong Chong Tee.

The MAS reviews its policy half-yearly, and at its last review last month, it allowed the Singapore dollar to appreciate at a slightly faster pace. - CNA/ac

Singapore, Malaysia Return To ICJ To Rebut Statements Made

Source : Channel NewsAsia, 19 November 2007

THE HAGUE, Netherlands : Singapore and Malaysia have presented their arguments at the International Court of Justice (ICJ) in support of their claims over the sovereignty of a disputed island and its two outcrops.

Pedra Branca

Both countries were given four days each to make their presentations to a panel of 16 judges at The Hague.

Singapore refers to the disputed island as Pedra Branca, while Malaysia calls it Pulau Batu Puteh. The two outcrops are the Middle Rocks and South Ledge.

The disputed island lies at the eastern entrance to the Strait of Singapore.

About 900 ships pass through the Strait daily, making it one of the busiest in the world.

The dispute arose when Malaysia published a new map in 1979 of its territories, which included the island.

Singapore objected to it, claiming sovereignty over Pedra Branca.

The disagreement was eventually submitted to the ICJ about four years ago.

The hearing at the ICJ now comes after three rounds of written pleadings.

On Monday, both countries will return to the court to rebut each other's statements.

Singapore will start off with two days of rebuttal from Monday, while Malaysia will get the next two days from Wednesday.

Singapore's Ambassador-at-Large Tommy Koh told the Singapore media that "the team is working very hard over the weekend as you can imagine. We are in good shape. We have all done our first draft of our second round statements. The team is energised, ready to go."

On Malaysia's presentation so far, Professor Koh said the "Malaysian team was extremely eloquent and they succeeded because of their eloquence in putting forward a much better case than the intrinsic case of Malaysia."

After both parties wrap up their rebuttals, the judges, from countries like the US and China, will deliberate the case.

The judgment is expected in about six to nine months, between June and September next year.

This is Singapore's first case before the ICJ, while it is Malaysia's second - having first appeared over a territorial dispute with Indonesia concerning the islands of Ligitan and Sipadan.

Malaysia won that case in 2002.

Here's a summary of Singapore's and Malaysia's key arguments as they approach their final week at the ICJ.

Singapore says it owns Pedra Branca and its outcrops since 1847, when the British built the Horsburgh Lighthouse on it, and Singapore is still managing the lighthouse today.

According to Singapore, Pedra Branca was terra nullius, or a no man's land, before the British took possession of the island.

The British did not seek permission and did not have to seek permission to build the Horsburgh Lighthouse.

Singapore says when she succeeded the island from the British, it exercised sovereignty by conducting numerous activities and building many structures on Pedra Branca.

Some activities included naval patrols of the island, granting permission to Malaysians and third parties to visit Pedra Branca, having reclamation plans, building military communications equipment and rader reflectors there.

Singapore said it would not have carried out all these works if the island had belonged to someone else.

These State activities were also done openly and consistently, demonstrating the confirmation of its title of the island.

Singapore substantiated her case with several key points, including a 1953 letter from the Johor government then stating it did not own Pedra Branca.

Singapore's Deputy Prime Minister and Law Minister S. Jayakumar had said before the court that "What can be clearer than these ten words: "The Johore Government does not claim ownership of Pedra Branca."

Singapore also has Malaysian maps to prove it attributed Pedra Branca to Singapore - one as late as 1975.

Singapore maintains that in the last 130 years, Malaysia never once protested to Singapore's activities on the island.

Malaysia also never performed any activities there throughout these years, and has not provided any evidence to prove it owns Pedra Branca.

Professor Jayakumar said earlier that "Malaysia's sudden publication of the map in 1979 in an attempt to claim Pedra Branca was extraordinary, to say the least."

However, the "map could not alter the fact that Singapore has sovereignty over Pedra Branca, Middle Rocks and South Ledge."

In its ownership arguments, Malaysia claims it has the original titles to the island, and it was the Johor rulers who gave the British permission to build the Horsburgh Lighthouse then.

Malaysia also did not protest Singapore's activities because it felt Singapore was exercising her duties as a lighthouse administrator.

In fact, Malaysia said whatever Singapore has done on the island is that expected of just a lighthouse operator.

Malaysia asserts that Singapore cannot view its activities and works as that of exercising sovereignty over Pedra Branca.

Malaysia's Ambassador-at-Large Abdul Kadir Mohamad said on the first day of its oral argument that "Singapore is endeavouring to create for itself a maritime domain which is a far cry from the basis of its presence on Pulau Batu Puteh as lighthouse administrator."

It adds if Singapore had ownership over the island, she should have formally and publicly acknowledged it before 1980, a few months after Malaysia published its map, citing Pedra Branca as one of her territories.

But Malaysia claims Singapore never did that.

Malaysia adds that it too has maps to show the island falls within the territory of the Johor Sultanate.

Mr Abdul Kadir also accused Singapore of "seeking to subvert the arrangements reached between Johor and Great Britain over 150 years ago and maintained throughout the whole period of British rule."

It has been some 27 years since Singapore formally protested to Malaysia's claim of the disputed island.

Now the decision over this dispute lies in the hands of the 16 judges at the ICJ.

The judgment will be final and cannot be appealed.

Both countries have said they will respect and accept the judges' decision. - CNA/de

Singapore's Q3 GDP Growth Falls Short Of Market Expectations

Source : Channel NewsAsia, 19 November 2007

Singapore's economy grew at a slower pace in the third quarter than earlier forecast, with GDP growth coming in at 8.9 percent when compared to the same period a year ago.

But the Trade and Industry Ministry said economic growth for the whole year should come in at 7.5 to 8 percent – at the higher end of its earlier target.

For 2008, the forecast has also been raised upwards by half a point to 4.5-6.5 percent.

Singapore's third quarter GDP growth may have missed earlier forecasts, but it is still a touch higher than the 8.6 percent clip in the previous three months.

Trade and Industry Ministry officials said the short-to-medium-term prognosis for the economy is good.

Ravi Menon, Second Permanent Secretary of the Ministry of Trade and Industry, said: "The biggest risks remain external factors beyond our control – chiefly the state of the US economy, oil prices, and global financial market conditions. Barring negative shocks from these three fronts, economy should grow at a slower but more sustainable rate in 2008."

Growth next year is now forecast at 4.5 to 6.5 percent.

Private sector economists share the same downside concerns, but some noted that forces behind oil prices have changed.

Jimmy Koh, Head of Economics-Treasury Research at UOB, said: "I think the main difference about oil price right now is that oil price is demand driven. And that means it has a self-correcting mechanism. If global demand were to slow, oil price will correct on its own. It all depends on how the sub-prime episode will pan out. It's going to be choppier for the first six months next year."

Still, some analysts said the anticipated slowdown in the US economy may actually work out in Singapore's favour in some areas, for example, in helping to cool inflation.

Alvin Liew, Global Research Economist, Standard Chartered, said: "We are seeing a lot of domestic inflation coming on in the form of wages and office rentals. This would unlikely be addressed by the singdollar policy because it's domestic issues. We do expect the easing of the US market and slower growth itself to moderate our pace of growth next year. This will help cool markets and slow down prices a bit."

Mr Menon added: "Inflation has been on a slightly rising trend this year. This is reflected in a combination of one-off technical factors and underlying cost pressures. It's important to distinguish between the two to get a better sense of inflation risks to the economy.

"One-off technical factors include the GST increase in July this year and the revision in annual values by IRAS last week. Neither represents a sustained rise in inflationary pressures. The effects of both will wear off in the second half of 2008."

Inflation is expected to hover around 2 percent this year, and hit 3.5 to 4.5 percent in 2008. - CNA/so

Plans Unveiled For Punggol Waterfront Park

Source : The Business Times, 19 November 2007

4.9-km promenade, lotus pond, horse riding centre, among amenities in pipeline

THE waterfront promenade coming up at Punggol Point will be a new sea sports and recreation centre with rustic seaside dining venues.

The Urban Redevelopment Authority (URA) yesterday unveiled the design proposals for the waterfront and park, which will add to the leisure amenities in the north-eastern part of Singapore.

Defence Minister Teo Chee Hean gave residents of Pasir Ris-Punggol GRC a snapshot of the development plans for the Punggol Waterfront Promenade at the constituency's Family Day festivities yesterday.

A 4.9-kilometre promenade will be built to connect two proposed sports and recreation clusters at Punggol Point and along Sungei Serangoon. It will also be linked to new park connectors planned by the National Parks Board (NParks) along Sungei Punggol and Sungei Serangoon.

Residents will be able to walk the entire stretch of the Punggol coastline from Sengkang Park to Punggol Park. The 4.9-km walk will comprise three thematic zones - Punggol Point Walk, Nature Walk and Riverside Walk.

Construction, estimated to cost $13 million, will begin in the middle of next year and is expected to be completed by 2010. It will be funded by URA and the project will be handed over to NParks for maintenance. URA said that it does not intend to close off the area from public use during construction.

Punggol Point was identified as one of the coastal areas with rustic charm in the URA's Parks and Waterbodies and Identity Plans that were drawn up in 2002. The Punggol coastline is currently interrupted by several drainage outlets with no continuous pathway for public access to the waterfront.

Punggol Point is currently a popular venue for activities like fishing and camping. Among new amenities coming up will be a lotus pond and a 0.6-hectare park. There will also be a horse-riding centre and food and beverage hub at Punggol Point. The site for the horse-riding centre has been awarded recently while the site for the dining development has been put on the Reserve List in the Government Land Sales Programme, up for bids by interested developers.

'More attractions will be built when the remaining land parcels are successfully tendered out,' Mr Teo, who is an MP for Pasir Ris-Punggol GRC and adviser to the town council, said yesterday.

URA invites feedback from the public on the Punggol Waterfront Promenade before construction begins.

Banyan Tree To Sell Hotel Suites

Source: The Business Times, 17 November 2007

SINGAPORE is expected to show strong demand when Banyan Tree Residences holds a launch here this weekend for its branded hotel residences.

Banyan Tree Residences - one of the business segments of mainboard-listed Banyan Tree Holdings - offers the sale of hotel villas or suites to investors under a leaseback scheme.

Investors can choose to receive a fixed return of 6 per cent of the purchase price for six years or one-third of the net room revenue for the same period of time. After six years, investors have the option to renew their decision.

Owners will also be entitled to 60 days of use of their residence a year as well as discounts and privileges at Banyan Tree, Angsana and Colours of Angsana resorts.

Depending on which returns option the investor picks, the 60 days may be subject to black-out periods.

Banyan Tree currently has residences in Phuket, Bangkok, the Seychelles, Lijiang and Bintan.

While Banyan Tree has been selling residences since 2002, the concept and brand of Banyan Tree Residences was only launched this year.

The Banyan Tree Phuket residences - which has seen the strongest demand - start at US$1.5 million, while Banyan Tree Bintan begins at a more affordable US$440,000.

The Banyan Tree Phuket currently has 16 of the 43 residences still available. Twenty have been sold, while seven have been reserved.

The majority of the customers for Banyan Tree Lijiang were mainland Chinese, said Richard Skene, assistant vice-president (property) for Banyan Tree Residences.

The recent launch in Hong Kong saw a lot of people reserving units. This would mean putting down a reservation deposit but investors still have a month to decide.

Hong Kong was the major market for Phuket, and as Singapore has similar characteristics and a thriving property market, he reckons that the response here will be good.

‘The feedback so far leads us to believe it will be successful. Singapore should be a close second to Hong Kong, and maybe one day take over,’ he said.

He also pointed out that demand is not likely to be drastically affected by changes in the property market as their target customers would probably be less sensitive to normal market circumstances. ‘We’re not selling mass market properties,’ he added.

For the third quarter of this year, Banyan Tree Residences contributed about $3.6 million to revenues, down from $9.1 million in the corresponding quarter last year.

Revenues for Banyan Tree Holdings for Q307 overall was $82.5 million.

However, the group said the drop in revenue for residences in Q307 was due to revenues that could not be recognised for units sold, as construction had yet to begin.

The launch for Banyan Tree Residences is being held today and tomorrow at The Fullerton Hotel.

Interest-Only Loans: The Pros And Cons

Source : The Business Times, 14 Nov 2007

They make sense to short-term investors and individuals who are high income earners and in high tax brackets, says BEN FOK

CONSUMERS are constantly bombarded with offers of loans, overdrafts, credit cards and instalment plans that promise instant gratification.

We cannot avoid debt entirely, especially when it comes to acquiring the big ticket items, and not all debt is bad. But those who borrow must be prudent and know that they can make the repayments.

Even high net worth individuals (HNWI) go to financial institutions for loans, which might seem strange since they are presumably cash-rich. But there are situations where it is worthwhile for the HNWI to borrow instead of paying with their own cash.

Some financial institutions offer interest-only loans targeted at the HNWIs. With such loans, you only repay the interest, not the principal, so the loan balance remains unchanged. Most interest-only loans offered by financial institutions are associated with the purchase of property.

Interest-only loans make sense to individuals who are high income earners and in high tax brackets. The benefit comes from being able to save on tax on rental income. That's because the interest portion of loan instalments for rental properties is tax deductible.

This package also works well for short-term investors. By repaying only the interest, investors fork out less cash each month, until they sell the property. As a result, they may be able to invest in two properties instead of one.

But interest-only loans are not for the long term, because at the end of the loan period, the payment is raised to the fully amortising level. If you're still in your home at the end of the interest-only period, you'll have to start paying off the principal. The payments will be considerably larger because they'll be amortised over a shorter period. For example, if your interest-only option lasts for five years and you have a 30-year loan, your principal payments will be calculated on a 25-year term.

Drawbacks of interest-only mortgages:

You could experience payment shock. As mentioned earlier, your monthly payment will go up - sometimes by 30 per cent or more - when you start paying off the principal. And if the end of your interest-only period coincides with an upward adjustment in your mortgage rate, you could face an even sharper hike in monthly payments.

You're more vulnerable if your home value declines. Many borrowers with interest-only loans assume home price appreciation will help them build equity in their homes. In recent years, that's been a good bet. But rising interest rates could deflate real estate values in some high-cost areas.

It's best to get a reputable financial institution to run the numbers for you and spell out the worst-case scenarios.

Equity provides a cushion against falling home values. Without it, you could find yourself owing more on your mortgage than your home is worth. If you sell, the proceeds won't cover your loan balance, which means you'll have to come up with money from another source. One way to avoid this problem is to make a good-sized downpayment on your mortgage.

Advantages of interest-only mortgages:

You have more flexibility. Some interest-only borrowers can afford a larger mortgage payment but their priority is to beef up their retirement nestegg or build up their emergency funds. Once they've accomplished those goals, they often decide to increase their mortgage payments.

Increasing your monthly payments will build equity and lessen payment shock when you're required to start paying off the principal. If you're interested in this option, make sure your loan doesn't contain pre-payment penalties.

Interest-only mortgages are complicated, so make sure you understand the pitfalls before you sign anything.

And don't rely on the financial institutions to figure out how much you can afford to borrow. A lender may not take into account all of your future expenses, such as child's university fees or support of an elderly parent.

What worries me is Singaporeans taking two or more mortgages in a rising market. As property prices rise, the dollar amount also rises in line with higher selling prices. Affordability becomes an issue. You're in the best position to know what your financial obligations are, so get a mortgage you can afford. How much should one borrow? There are two ratios that financial advisers commonly use:

Debt to asset ratio which is total debt/total assets. This ratio should be 50 per cent or less;

Debt servicing ratio which is total monthly loan repayment/monthly take-home pay. This ratio should be 35 per cent or less.

After all, wealth equals assets less debt. It is built up over the years by accumulating assets and paying down debt, especially mortgage debt. When you pay down the balance of your mortgage, you are increasing your wealth by reducing debt. But an interest-only mortgage does not increase wealth in that way.

Of course, you may be increasing your wealth by accumulating assets instead. If that's your plan and you have determined that it is more effective in building wealth during the interest-only period than paying down mortgage debt, fine. But paying down mortgage debt is the most effective way to build wealth, especially in today's financial environment. Four dangers related to borrowing too much:

# It can become a habit;
# It takes away money from other important needs;
# Your credit rating will be damaged if you don't pay the bills;
# It can lead to high interest payments that are harder to make.

Three situations where it's better to avoid borrowing:
# Paying your everyday expenses;
# Covering optional spending;
# Borrowing when you know you can't afford the payments

It's not a good idea to borrow a lot thinking that you will just pay the minimum back each month. It may take a long time to get out of debt and you'll end up paying a lot of interest. Also, if you have one late payment, your credit rating may suffer and you'll be charged penalties.
At the end of the day, paying down a loan is the best option, because once it's paid it remains paid.

Ben Fok is CEO, Grandtag Financial Consultancy (Singapore) Pte Lt.

Essential Homework Before Taking Loan

Source : The Business Times, 14 November 2007

KEVIN LAM discusses five key areas that your home loan banker would be looking very closely at

THIS has been a special year for the property market. Not since the early 1990s has there been such euphoria about the property market - long queues at property launches, stories of someone we know making fast money by 'flipping' new property purchases in a matter of weeks, even days. Many people who have yet to join the party have been wondering if they should also jump on to the property bandwagon.

With the latest government measures to discontinue the deferred payment scheme, some measure of stability should return to the market such that even as prices continue to go up given our transformation into a global city, it would rise in a more measured manner.

For those who need to think very carefully about the finer details of taking out a loan with a bank to finance what would be one of the biggest financial commitments, you may want to consider some finer details as part of your overall decision-making process.

What should I consider about buying a house and financing it?

In Singapore, we have seen two boom-and-bust cycles of property price peaks and troughs in the past 17 years. While many people may think that we are currently in the midst of a boom, many others remain cautious and conservative about making a property financing commitment, and rightly so. The first and most important thing potential home owners should be looking at when they consider buying a house and taking up a mortgage to finance it is this - are you over-stretching yourself? To answer this, you have to look at five key areas that your banker would probably be also looking very closely at:

Quantum of financing: Since July 2005, the Monetary Authority of Singapore (MAS) has liberalised the quantum of financing for housing loans, up to 90 per cent loan-to-value (LTV). This means that as a home buyer, the minimum that one needs to raise is 10 per cent of the value of the property and the cash component can be a minimum 5 per cent with the balance of 5 per cent made up from the Central Provident Fund (CPF).

Typically, because the capital and credit cost associated with granting these higher quantum loans are higher, these loans come with higher interest rates when compared to 80 per cent LTV loans. In this market, a comfortable level for financing for banks would generally be at 80 per cent quantum of financing. This means that home buyers must have a minimum of 5 per cent cash and 15 per cent CPF lump-sum from their CPF Ordinary Account. For a $1 million property, this works out to $50,000 in cash and $150,000 in CPF OA monies, or if one prefers, this amount could be paid in cash.

With more cash upfront, this is generally viewed more favourably by the banker, that is, if you could use more than the minimum 5 per cent cash. For example, if there are two borrowers looking for 90 per cent financing, both of equal standing, the one who can put up the entire 10 per cent in cash downpayment, would be better positioned from a bank's credit standpoint than the other who uses 5 per cent cash and 5 per cent CPF monies. More cash upfront shows more commitment from the potential customer, and this would generally put your financing request in a better light.

Likewise, if a potential customer has the ability to fork out up to 30 per cent or more, cash or CPF down payment, and request only 70 per cent financing, he or she can be more confident of your request for financing.

Employment profile: The potential customer's employment status is also one of the most important considerations to review when taking out a housing loan. He or she should consider the stability of his/her employment, regardless of whether the potential customer is a working employee or self-employed.

Typically two years of qualified income coming from the same employer or same source of business should be a good indication of the borrower's employment profile. On the other hand, if a borrower changes jobs frequently, even with higher income, it may be viewed by banks as being less secure and stable in employment.

Income and your CPF reserve: In home financing, one of the key commitments is to ensure that monthly housing loans instalments remain uninterrupted and consistent.

As a good rule-of-thumb, if housing loan instalments are kept to below 40 per cent of a person's monthly income, the borrower would be better positioned in his/her monthly servicing ability. This is especially so if the borrower's monthly CPF OA contribution is able to fund a good part of the housing loan instalment.

It would also be a prudent measure to have a reserve of at least six to 12 months of monthly instalments in the CPF OA. This provides more cushion should there be a change in a borrower's employment status, and he/she needs time to find another job. This means that when one uses CPF for the initial downpayment, it is important to be conservative and keep a reserve, rather than using up all of one's CPF for downpayment. As one goes through the sums for mortgage financing, one will realise that income, CPF resources, employment profile, and the quantum of financing are all inter-related. Any home buyer should sit down and work out the numbers to ask the question: 'Am I over-stretching myself financially?'

Interest rate, monthly instalment and rental yields: One of the key considerations in taking a housing loan is interest rate. However, borrowers almost always ask the wrong question with regards to interest rate. 'How low is your interest versus other banks?' is the typical question.

Consider this alternative thinking; instead of asking how low a bank's interest rates are, borrowers should seriously consider the exact opposite: 'How high can interest rates be, while I can still afford the housing loan payment? Look at the accompanying table and consider various scenarios, such as a higher interest rate (note that the SGD mortgage interest rate is one of the lowest in the region) and whether a borrower can continue to service the loan, even if interest rate would double. Not possible?

Those of us who can remember the 1990s recall that housing loan rates were once at 8 per cent. These difficult economic periods when interest went up were often accompanied by periods where people found the stability of their income at risk. So, under such circumstances, if you were to lose your job, do you have sufficient reserves to last - and for how long?

This is where the difference of taking a fixed or a floating rate should be reviewed. Floating rates, while lower, do not have the stability of fixed rate loans. So a borrower may want to consider taking a two-in-one loan where a borrower can combine both fixed and floating rate loans in one mortgaged property. For example, the UOB two-in-one loan.

With rising rental yields, many are also thinking of buying a property as an investment which they intend to rent out to cover mortgage payments. Here. the question to ask would be: 'Would I still be all right if rental should fall by half?' Rents go up quickly due to shortage of housing, especially for foreigners with good housing budgets, but they can drop as quickly if there is a downturn.

In the current climate, these may seem faraway possibilities, but whether you are buying for your own stay, or for investment - consider the various scenarios and do your sums carefully.

Your credit performance: One of the other lesser known issues one should consider before taking up a housing loan is credit performance. In Singapore, all your credit performance in terms of number of loans applied for, whether for housing, cars, credit cards or other loans is stored in the Credit Bureau. When you apply for a loan, you would have signed a consent for your bank to obtain a copy of your credit performance.

Some borrowers have been caught in a situation where they committed to a property by paying the option money, only to find that when they apply for a loan, their application is either turned down, or their request for financing reduced. This could be due the credit history, showing a habitual lateness for other loans. These information are transparent across banks, and a borrower would be advised to get a home financing in-principle approval before committing to a property. One of the ways to ensure that one is not 'caught' by credit performance is to ensure that payment is prompt in the borrower's other loan repayments.

Many people think that housing loans are commodity products, but that cannot be further from the truth. In a very competitive market like Singapore where rates are so low, banks have learnt to compete not by price competition, but through value-added features.

All said, it is key for every potential home buyer to do some homework. Ask yourself if you have the resources both now and in the future to service the mortgage for the amount of loan you intend to take to buy that property. As daunting an exercise as this may be, it is one exercise that we must spend time pondering. At the end of the day, there is no free lunch.

Kevin Lam is head, loans division, United Overseas Bank

Punggol's 'Vibrant' Coast

Source : TODAY, Monday, November 19, 2007

$13m waterfront plan to jazz up its rustic charms

ITS idyllic beachfronts and charming nature tracks make Punggol Point one of Singapore's best-kept secrets. While some prefer to keep its quaint surroundings untouched, most residents feel a facelift is long overdue.

Yesterday, Minister for Defence Teo Chee Hean announced that the 4.9km waterfront would go through a two-year, $13-million facelift from the middle of next year.

Speaking at the Pasir Ris-Punggol Kampong Family Day, Mr Teo, who is one of the Group Representation Constituency's Members of Parliament, said the upgrade could turn Punggol into a vibrant seaside town.

"Punggol is growing very rapidly and it's becoming a very vibrant town. But there are a lot of young families here and some are very adventurous, so the redevelopment will provide exciting things for everyone," said Mr Teo.

By 2010, residents can expect a promenade stretching from Punggol Point to Sungei Serangoon, and additional features include sea sport and recreational facilities, a nature trail and a return of its once-popular dining establishments.

These plans, which were drawn up in 2002, are also timely.

Said Mr Teo: "The Housing Development Board has indicated that it is building several thousand new flats over the next few years and a very large proportion of them will be in the Paris Ris-Punggol GRC, specifically in the Punggol and Buangkok areas, so many more residents can be expected."

To those concerned about Punggol Point becoming commercialised, developer Urban Redevelopment Authority (URA) promised that the rustic charms of the area will be left intact.

Mrs Cheong Koon Hean, the URA's chief executive officer, said: "The facilities will improve the accessibility and connectivity of the area … Together with the new leisure attractions, the distinct character of Punggol Point will be enhanced and the area enlivened."

However, some green groups are concerned about any impact on the area's wildlife.

Mr Grant Pereira, head of Green Volunteers Network, said: "Impact studies are important. The URA should gather feedback from environmental groups."

Mr Wilson Ang, of the Environmental Challenge Organisation Singapore, added: "I think it's important that they strike a balance between development and preserving nature, but my bigger concern is how people can get to appreciate the environment, with the littering in open spaces such as Punggol Point."

Walk Along Coast, Golf In Punggol

Source : The Straits Times, Nov 19, 2007

A 4.9km waterfront promenade will feature a host of attractions by 2010

THE vision of Punggol as a vibrant waterfront town was given more flesh yesterday.

A $13 million plan to redevelop a part of its surrounding coastline will put at residents' doorsteps a 4.9km walking trail that opens up access to the Punggol coast.

Activities such as horse riding, golf and fishing will also feature in the area.

These attractions were unveiled by Mr Teo Chee Hean, an MP for Pasir Ris-Punggol GRC.

He noted that adventurous young families had already taken to walking along the coast, which is largely reclaimed land.

Mr Teo, who is also Defence Minister, told reporters that there was a bit of a track there, but not a whole lot of facilities, so the walking trail would 'enhance accessibility'.

The developments are part of the Parks and Waterbodies and Identity plans drawn up by the Urban Redevelopment Authority (URA) in 2002.

The plan singled out five coastal areas - Changi, Pasir Ris, Coney Island, Pulau Ubin and Punggol Point - to develop as recreational destinations.

The waterfront promenade coming to Punggol will have three segments:

Punggol Point Walk: A 1.2km promenade will be added to this popular fishing and camping spot.

Nature Walk: A 2.4km stretch between Punggol Point and Sungei Serangoon will become a nature trail.

Riverside Walk: A 1.3km- long promenade will be built along Sungei Serangoon to make the riverfront more accessible.

The 4.9km promenade will link the proposed sports and recreational clusters in Punggol Point and Sungei Serangoon and the new park connectors along the Punggol and Serangoon rivers.

Construction of the promenade will begin in the middle of next year and will be completed by 2010. The work will not disrupt fishing or other activities there, said the URA.

The public will be invited to give feedback on the proposals, which went on show at a carnival in Punggol yesterday.

Many residents said they were looking forward to it.

Mr Roy Mathiew, 58, said: 'It is a good idea; it brings us closer to nature. I will definitely go there for walks.'

In August, Prime Minister Lee Hsien Loong first unveiled plans for a jazzed-up and vibrant Punggol in his National Day Rally speech.

He described a waterway winding through the town, with parks, water sports and alfresco dining on its banks.

Mr Teo said yesterday that Punggol - with more than 18,000 households now - will grow as more flats, schools, shopping centres and an improved transportation network are added.

However, littering is a problem. The Pasir Ris-Punggol Town Council received more than 1,000 complaints of high-

rise littering last year. This year, there have been already more than 500 complaints by the end of last month.

Next year, the town council will launch a three-pronged campaign to promote graciousness and to rekindle the 'kampung spirit'.

Pasir Ris-Punggol MP Ahmad Magad said that with Punggol's population of young families, 'it was important to... sensitise them to what communal living and kampung living means to the entire community'.

Pedra Branca Trial: S'pore Team Ready For Final Rebuttal

Source : The Sunday Times, Nov 18, 2007

THE HAGUE (Netherlands) - SINGAPORE'S legal team in the Pedra Branca case is 'energised' and all set to launch its final round of oral pleadings before the International Court of Justice on Monday.

The team, led by Deputy Prime Minister S Jayakumar and including Chief Justice Chan Sek Keong, Attorney-General Chao Hick Tin and Ambassador-at-large Tommy Koh, spent the weekend in meetings and crafting their rebuttal speeches.

Professor Koh said: 'We're in good shape. The team is energised and ready to go.'

Singapore has two days to rebut Malaysia's oral arguments, presented over four days last week. Singapore delivered its oral pleadings two weeks ago.

With the final rebuttals, the court will then deliberate and bring to a close a 28-year bilateral dispute over Pedra Branca, an island located some 40km east of Singapore and at the eastern entrance of the Singapore Strait.

South-east Asia's first lighthouse - the Horsburgh Lighthouse - sits atop the football field-size island.

Singapore's case is that Pedra Branca was terra nullius, that is belonged to no one, when the British took lawful possession of it in 1847 and built Horsburgh Lighthouse there.

Since then, Britain and later Singapore, upon receiving the title from the British on independence, have exercised sovereignty over the island, it told the court.

Malaysia has argued that the Johor Sultanate, from as early as the 16th century, extended to all the islands in the Strait of Singapore, including Pedra Branca.

It said the Johor rulers gave the British permission to build and operate HorsburghLighthouse there.