Monday, March 24, 2008

Kuwaiti Firm Still In Talks Over Mega Deal

Source : The Straits Times, Mar 24, 2008

A MAJOR $818.4 million residential property deal that fell through recently could be revived.

The potential buyer, Kuwait Finance House (KFH), said last week it was still in talks to buy the 97 units at GuocoLand’s freehold Goodwood Residence.

KFH said it had a positive view of the outlook for Singapore’s property market.

A fund to be managed by the Islamic investment bank had agreed on the deal last December.

However, KFH did not exercise its purchase options, which lapsed, GuocoLand said on March 10. It also said the parties were in talks ‘with a view to a grant of fresh options for units in the development’.

REVIEWING TERMS: GuocoLand might grant fresh options to Kuwaiti investment bank KFH for 97 units at the freehold Goodwood Residence, as the deal agreed on in December has lapsed.

Last week, KFH said it was still in talks with GuocoLand with respect to the ‘terms of the purchase’, which are being reviewed by both parties. Industry sources had speculated that KFH wanted out as the price was too high.

KFH had done the deal at a median price of $3,200 per sq ft (psf), when nearby projects in the Bukit Timah/Newton Circus area were going for an average price of $2,500 psf or below.

KFH said it was upbeat about Singapore, given the Republic’s status as a financial hub, the integrated resorts and the introduction of events such as Formula One.

‘The current cautious sentiment driven by external factors will abate in due time and, as a global city, Singapore will remain an investment destination for international real estate investors,’ KFH said.

K-Reit Feeling Effects Of Financial Crunch

Source : The Business Times, March 24, 2008

K-REIT Asia is going to find it a bit tough to raise the money it needs. The real estate investment trust (Reit) is looking to raise up to $700 million in a rights issue, in part to repay some of the $942 million bridging loan it took from Keppel Corp when it purchased its one-third stake in One Raffles Quay last year. The trust indicated in a recent circular to shareholders that it intends to price the new units at up to 20 per cent discount to the market price. However, K-Reit is seeking to issue only 420 million new shares. The limit is in place to ensure that at least 10 per cent of the total issued units are held by the public after the rights issue.

Keppel Corp and sponsor Keppel Land, who together own 72.7 per cent of K-Reit, have both given irrevocable undertakings to take up their respective allocations of the rights units. Both companies will also make applications for excess rights units that are not subscribed - essentially underwriting the fund-raising exercise. The 420 million share cap ensures that in the worst-case scenario where no other shareholder subscribes to the rights units, KepCorp and KepLand will still end up with less than 90 per cent - allowing K-Reit to avoid delisting.

While the circular helps to allay some concerns in the market with regard to potential delisting and consolidation by parent KepLand, there is a shortfall between how much the trust is hoping to raise (up to $700 million) and how much it could actually raise from a rights issue of 420 million shares.

In the circular, K-Reit used $1.20 (20 per cent off the market price of $1.50) for illustrative purpose. Assuming a rights issue of three new units for every two existing units, K-Reit will be issuing 372.1 million rights units and raising about $446.5 million in gross proceeds. K-Reit will come close to raising $700 million only in the highly unlikely scenario that it issues 413.5 million rights units on a five-for-three basis at $1.68 apiece, which will give it gross proceeds of $694.6 million.

For this to happen, the prevailing market price will have to be $2.10 - assuming a rights issue price which is at a 20 per cent discount to the market price.

K-Reit’s stock closed at $1.47 last Thursday, the last day of trading before the extended weekend break. Analysts believe that it is unlikely that the stock price will cross the $2.00 mark over the next few months amid a generally sluggish market. K-Reit said in its circular that the entire exercise is expected to be completed no later than mid-May.

Looking at the expected shortfall between what the Reit hopes to raise and what it probably could raise, it wouldn’t be wrong to assume that K-Reit might have to look at additional sources of funding. However, it is unclear what K-Reit plans to do if the rights issue falls short of the amount it needs. K-Reit said in its circular that, given current market conditions, a rights issue is the ‘most appropriate’ method of raising equity.

Raising funds from other sources will undoubtedly be hard in a squeezed credit market. Industry players have pointed out that the two upcoming integrated resorts (IRs) have mopped up much of the credit available in the market, making it much harder for smaller players to get loans and refinance debt. Also interesting is the fact that K-Reit seems to be looking to parent companies KepCorp and KepLand to tide it over the current financial crunch. If minority shareholders choose not to take up their rights units, KepCorp and KepLand are ready to step in, even though this might mean that K-Reit could suffer from poor liquidity and low trading volumes in the future.

Buying up all unwanted units will also raise KepLand’s stake in K-Reit. KepLand has said it intends to go asset light by divesting all its investment properties . By increasing its stake in the Reit, it is doing the opposite. Perhaps then it is time for KepLand to reconsider plans to keep K-Reit listed; going private will probably allow K-Reit to raise funds more easily in a tight credit market.

As for K-Reit, the rights issue will lower its gearing from the present 53.9 per cent (which is approaching the maximum allowable limit of 60 per cent) to 32.7 per cent - assuming the trust issues 372.1 million rights units at $1.20 each. But raising funds for future acquisitions may continue to be a problem if the Reit has to go back to the market once again.

CapitaLand Issues Active After Weak Home Sales Data

Source : The Straits Times, Mar 24, 2008


PROPERTY plays are now on investors' radar screens following the release of new-homes sales figures recently.

Thus, covered warrants on these property counters have also drawn attention, including those of CapitaLand.

The latest data shows that sales of new homes last month in Singapore almost halved from the previous month. Some experts estimate that sales this quarter could hit one of the lowest levels ever seen here.

With Singapore's residential market cooling off, investors are looking at developers with a diversified business portfolio, said Mr Ooi Lid Seng, Societe Generale's (SG's) vice-president of structured products for Asia, excluding Japan.

These include CapitaLand, which has substantial investments and business activity outside Singapore. Mr Ooi said: 'Its diversified portfolio and increasing presence in emerging markets such as India, China and Vietnam can more than compensate for the slowdown in Singapore's property market.'

Last month, South-east Asia's largest developer announced its net profit for last year had grown nearly three times to $2.76 billion from $1 billion the previous year.

Last Thursday, CapitaLand shares closed four cents lower at $5.68.

Mr Ooi said investors who are bullish about the stock can consider a call warrant with a strike price of $6 that matures on July 14.

Last Thursday, that contract was the most active SG CapitaLand warrant, ending two cents down at 15.5 cents with 7.6 million units done.

Another active SG CapitaLand contract was a call warrant expiring on July 7 with an exercise price of $6.22. That warrant closed a cent lower at 12.5 cents with 1.26 million units traded.

Mr Ooi sees a neutral short-term outlook for CapitaLand. Although the stock has bounced off a support level of $5, it could face upward resistance at $6.30.

A call warrant lets an investor buy into a stock or index at a pre-set price over a period of three to nine months. A put warrant allows an investor to sell the stock or index at a pre-set price.

文庆路私人组屋只卖出了65% 剩余单位将让公众直接选购

《联合早报》Mar 24, 2008

位于文庆路的私人组屋City View@Boon Keng在发售时掀起抢购热潮。不过,相信由于售价偏高,因此发展商至今只卖出65%的组屋,剩余的单位须在来临的星期六开放让公众直接选购(walk-in selection)。

由海峡双威(Hoi Hup Sunway)设计、兴建和销售的City View于两个月前在一片争议声中发售。尽管不少人和国会议员都认为其售价订得很高,但是发售第一天(1月5日)仍吸引了8000人涌往参观,近三分之一的申请者在第一天便上网登记申购。


City View共有714个单位,总共收到约3500份申请,平均每个单位有5个人申购。经过两轮的抽签选购,将近65%的单位已有了主人,包括顶楼6间售价72万7000元的五房式阁楼组屋。





City View的三房式售价介于34万9000元和39万4000元、四房式介于52万3000元和59万7000元,五房式介于53万6000元和72万7000元。

City View是继森联集团的The Premiere@Tampines后的第二个私人组屋项目。与The Premiere相比,City View的售价昂贵得多,申购人数少了一半,抽签选购也只卖出六成多。不过,City View楼高达40层,而且非常靠近市中心,是The Premiere无法相比的。

位于淡滨尼6道的The Premiere有616个单位,吸引了约5700人申购。森联集团在第一轮抽中1200人选购,结果卖出了80%的单位或496间组屋。发展商让其余的4500个申请者以先到先得的方式直接选购剩下的120个单位。


除了淡滨尼和文庆路,建屋局也在宏茂桥和碧山推出地段供发展商设计、兴建和销售组屋。Greatearth Developments私人有限公司在去年12月标得宏茂桥52街地段,青岛建设集团公司新加坡分公司在上个月标得碧山24街地段。这4个地段共占地7公顷,可建造2300间组屋。


组屋市场趋稳 走势不再旺热

《联合早报》Mar 24, 2008












不过,Dennis Wee房地产经纪行董事许家荣说,目前的组屋市场依旧活跃,组屋价格应该和去年第四季相差不远。



也有经纪认为 全年价格走势还是会上扬





虽然组屋转售市场的走势放缓,国人对新组屋的需求依旧强劲。建屋局在本月推出的“Jade Spring @Yishun Phase 2”预购组屋,至今已有1766人申购576个单位。

HDB Unveils Resale Checklist For Housing Agents

Source : Channel NewsAsia, 24 March 2008

HDB announced on Monday that it is introducing mandatory Resale Checklists for housing agents handling resale HDB flat transactions.

The checklists cover a list of key policies and procedures that agents will need to advise resale flat buyers and sellers before they commit to a transaction.

This is part of HDB's ongoing efforts to ensure that buyers and sellers are aware of relevant HDB purchase and financing policies concerning such transactions. - CNA/ch

Into The Economic Abyss: How Deep Will It Go?

Source : The Straits Times, Mar 24, 2008

NEW YORK - FOR months, Americans have been subjected to a sort of economic water torture - a maddening drip of bad news about jobs, gas prices, sagging home values, creeping inflation, the slouching dollar and a stock market in bumpy descent.

Then came Bear Stearns. One of the five largest US investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry US$2 (S$2.75) per share.

To the drumbeat of signs that seemed to foretell a traditional recession, this added a nightmarish specter - an old-style run on the bank, customers clamoring to pull their cash, a stately Wall Street firm brought to its knees.

The combination has forced the economy to the forefront of the national conversation in a way it has not been since the go-go 1990s, and for entirely opposite reasons.

As economists and Wall Street types grope for historical perspective - which is another way of saying a road map out of this mess - Americans are nervously wondering about retirement savings, interest rates, jobs that had seemed safe.

They are surveying the economic landscape and asking: Just how bad is it? They are peering over the edge and asking: How far down? And the scariest part of all? No one can say for sure.

Economy acting as slowly tightening vice

Even before the crippling of Bear Stearns, the US economy was acting as a slowly tightening vice - an interconnected web of factors combining to squeeze Americans from all sides.

Take Ms Jaci Rae of Salinas, California. She runs a company, Luco Sport, that sells golf bags and accessories. The merchandise is made with foam, which is based on petroleum, so record oil prices have taken a heavy toll.

On the other end, her clients are feeling the pinch, too, and cutting back. Sales to retail clients are an eighth of what they were a year ago. So Ms Rae had to cut five of her 20 employees loose.

Now the company isn't buying products as far in advance. With gas prices running high, she waits for shipping companies to pick up products from her headquarters instead of having an employee drop them off.

She is nickel-and-diming expenses at home, too. She eats in every night, has stopped going on road trips to visit her family, dropped her satellite dish and canceled her monthly Blockbuster movie rental.

'I want to make sure I have enough money to feed my family,' Ms Rae says.

Signs of pinch showing up everywhere

Signs of the pinch are showing up everywhere: -By the end of 2007, 36 per cent of consumers' disposable income went to food, energy and medical care, a bigger chunk of income than at any time since records were first kept in 1960, according to Merrill Lynch.

-People are treating themselves less often. The National Restaurant Association says 54 per cent of restaurants reported declining traffic in January, and the government says eating at home increased last year for the first time since 2001.

-Financial planners say that more than ever, parents are calling for advice on how to deal with grown children who have moved back in with Mom and Dad after losing a job or just to save money.

-Less trash is being set on the curbs of Mesa, Arizona, where surging home foreclosures are leaving more houses empty. That means fewer homeowners paying the city US$22.60 a month for pickup.

And Mr William Black, the city's solid-waste management director, says people are not throwing out as many appliances and bulk items, like furniture. They're sticking with what they have.

On top of an economy that was already groaning under the weight of a downturn, Bear Stearns came down like an anvil.

Housing crash, credit crunch

It tied together so much of what's wrong with today's economy - the housing crash, the credit crunch and a loss of confidence among investors and consumers alike.

Understanding how things got so bad means rewinding to the start of the housing boom. Wall Street and the banks made it far easier for people with shaky credit to get a mortgage - known as a subprime loan.

Investors wanted a piece of the fast-growing mortgage pie, so there was plenty of money sloshing around the market to pay for the loans.

Financial firms sliced up the mortgages and sold them as complex investments, finding eager buyers among pension funds, hedge funds and more who were chasing higher returns and willing to overlook risks.

As long as housing prices went up, the strategy worked. When they began to crumble, so did financial stability.

The same people who made a financial stretch to buy their homes are now defaulting on the loans at alarming rates. Many are 'upside down' on their loans, meaning they owe more on their mortgages than their homes are worth.

Nearly 9 million households now have upside-down mortgages, and for the first time ever, aggregate mortgage debt is bigger than the total value of homeowner equity - bigger by US$836 billion, according to research by Merrill Lynch.

Domino effect

The housing problem set off the dominoes: Surging defaults meant the mortgage-backed securities plunged in value. That dried up the money to fund new home loans, and lenders everywhere became tighter with credit.

Bear Stearns found itself in the cross hairs. Market rumors began to swirl about the size of its exposure to mortgage securities, whether it had ample reserves to cover potential losses. Clients and investors began to demand their money back.

'This problem begins with the fact that we underwrote mortgages sloppily, which means no one really knows what those assets are worth,' said Lyle Gramley, a former Federal Reserve governor and now an analyst with Stanford Financial Group. 'That makes bankers very leery, and has resulted in a significant contraction in the availability of credit.'

The credit crunch means corporations can't borrow as easily, so they are delaying big projects, which cuts into the job market. And many of the same companies were already smarting from the downturn in housing, which has made many Americans uneasy about their household wealth and caused them to scrimp on spending.

The last time the US economy tilted into recession was 2001. And it was an entirely different animal.

Investors bore the brunt of that downturn as the stock market shook off the excesses of the late-'90s technology boom. Encouraged by their government - and fortified with tax rebates in their pockets - Americans kept spending.

Perhaps most importantly, there was no reason for anyone to doubt the stability of the financial system. There was no credit crisis to speak of, and the housing boom had yet to begin.

Recession not declared yet

This time around, no one has declared a recession just yet: By the generally accepted rule, that takes two consecutive quarters of shrinking economic activity. The economy came close to stalling late last year but eked out small growth.

But the lack of an official declaration makes the pain no less real.

'I think the current financial crisis looks to me like the worst one since we got into the Depression,' says Mr Richard Sylla, who teaches the history of financial institutions at New York University's Stern School of Business.

Which is not to say this time will be anywhere near as bad - partly because, economists note, Federal Reserve Chairman Ben Bernanke is a student of the Depression and appears to be steering the Fed toward avoiding the mistakes of back then.

That may be why the Fed moved quickly to back up JPMorgan Chase & Co.'s lifeline loan to Bear Stearns when it neared collapse.

The Fed dusted off other Depression-era tools, too. It allowed securities dealers to borrow directly from the Fed, a privilege once restricted to commercial banks. And it announced it would lend up to US$200 billion to investment banks in exchange for the banks' beaten-up mortgage-backed securities.

The idea is to maintain confidence in the American banking system. If that fails - if more Bear Stearns episodes emerge - it could gum up the entire economy, historians note.

'No one would trust anybody else, no one would be willing to do business,' said Prof Charles Jones, a finance professor at Columbia Business School. 'And if that happens, the economy would feel that right away. So the Fed is doing what it can.'

US just a piece of a complex global economy

Another key difference: Today, the United States is just one piece of a complex global economy. A century ago, an American financial crisis was America's problem. Today, emerging economies provide an extra layer of insulation.

'People are still going to eat in China and India. They're going to be buying clothes and cars and airplanes,' says Prof Robert A. Howell, a distinguished visiting professor of business administration at Dartmouth. 'So I think it's a whole different ballgame.'

A better comparison might be the economic downturn that gripped the United States in the early 1970s, a time now widely remembered for long lines at the pump. Today gas is plentiful, but summer drivers face the scary prospect of paying US$4 a gallon.

And as Mr David Rosenberg, chief North American economist for Merrill Lynch, pointed out in an analysis this week, the parallels to the 1970s go much deeper than just the shock of record oil prices, which tripled during the 1973-1975 recession and have seen a similar rise in recent years.

Then as now, food prices rose along with energy. Then as now, declining home prices gave homeowners ulcers over equity. And the dollar, which held up fine in the 2001 recession, is falling now even more than it did in the early '70s - 9 per cent then on a trade-weighted basis, 14 per cent in the last year, according to the Federal Reserve.

The 1970s

One other interesting difference: In the downturns between the '70s and today, the baby boomers used their massive buying power to help spend the nation out of the slump. In the 1970s, they were too young. Today, they are focusing on retirement.

'The mid-1970s is the best template,' Mr Rosenberg wrote, 'if there is any.'

If the 1970s truly are a guide, there's a lot farther to fall.

Back then, the Standard & Poor's 500 index fell 36 per cent from its peak to its trough. Right now, the S&P 500 has only lost 15 per cent from its record highs of October 2007.

Finding shelter from this downturn is not as easy as you might think. So-called private label products - no-name cereal or crackers usually far cheaper than brand names - are less of a deal because of soaring commodity prices.

Nearly 90 per cent of chief financial officers of global public companies do not see an economic recovery coming until 2009, according to a new survey by Duke University/CFO Magazine.

And that is more than just crystal-ball gazing: If companies see a sluggish recovery, they will not be taking any steps to build their payrolls soon and will remain cautious in how they allocate capital.

So what's the way out? Former Fed chair Alan Greenspan wrote in the Financial Times last week that the financial crisis - which he said would likely be the 'most wrenching' in the United States since World War II - would end only when housing prices stabilise.

Interest rates slashed

Already, the Fed has slashed interest rates. It has cut the closely watched federal funds rate, the overnight lending rate for banks, six times since September, from 5.25 per cent to 2.25 per cent - two-thirds of the cut coming in the last two months alone.

But the Fed can't work alone. Upcoming tax rebates for millions of people and tax breaks for businesses may give a little relief, but economists think that something will have to be done soon to slow down the number of foreclosures, a cornerstone of the economy's woes.

'We can't have financial institutions not providing credit to the economy,' said Prof Eugene White, a professor of economics at Rutgers University. 'We have to stop that if we want to avoid a deep recession.'

Economists and market historians seem to agree that this is more than a typical, cyclical slump. And the X-factor that sets it apart - determining how deep the wounds from the mortgage mess really are - also makes it impossible to map the path of the downturn.

'Financial crises happen, but they always do blow over,' Mr Sylla says. 'It's a question of how long.' So in the meantime, Americans like Ms Monica Nakamine are planning for a long road ahead.

The 37-year-old took a higher-paying job at a Los Angeles architectural firm, but has been putting the difference in her earnings right into savings. These days she's dyeing her own hair, picking through sales racks when she shops and washing her dog herself, rather than getting him groomed.

And she's considering some drastic actions in case things get worse - like moving to a cheaper city such as Austin, Texas, and getting rid of her gas-guzzling SUV for a hybrid sedan.

'Certainly I don't want it to get any worse,' Ms Nakamine said, 'but I know it can.' -- AP

Mandatory HDB Resale Checklists For Housing Agents From May

Source : The Straits Times, Mar 24, 2008

THE Housing Board will introduce mandatory resale checklists for housing agents handling resale HDB flat transactions from May 1.

The checklists cover a list of key policies and procedures that housing agents will need to advise resale flat buyers and sellers before they commit to a resale flat deal.

'This is part of HDB's ongoing efforts to ensure that buyers and sellers ae aware of the relevant HDB purchse and financing policies when buying or selling an HDB flat," said the Board in a statement on Monday.

Under the new measure, housing agents will have to submit the completed checklists to HDB together with the resale application.

Applications that do not meet this new requirement will be rejected, said HDB, warning that there will be 'serious penalties for false declarations.'

Singapore Interest Rates Likely To Fall Further

Source : The Straits Times, Mar 24, 2008

Fed cut and robust Sing$ could push interbank lending rate below 1%

SINGAPOREANS can expect cheaper mortgages but lower savings and fixed deposit rates in the months to come.

This is after a move by the United States Federal Reserve to slash a key US interest rate last week.

The Fed had cut three-quarters of a point off its federal funds rate, bringing it to 2.25 per cent, to fight a mushrooming credit crisis and a slowing US economy.

Economists in Singapore said the lowering of the Fed funds rate will have a knock- on effect in the Republic.

The Singapore Interbank Offered Rate (Sibor), or the rate at which banks lend to one another, tends to track the Fed rate.

Citigroup economist Kit Wei Zheng said: 'For Singapore rates, the trend is downwards. We expect the Fed to cut its rate to 1 per cent and Singapore should follow with a lag.'

He lowered his forecast for the Sibor, estimating it would fall to as low as 0.75 per cent by the end of the third quarter, down from an earlier estimate of 1 per cent.

A recent report by DBS Group Research also forecast the Sibor would fall, to 0.83 per cent in the second quarter, and remain at that rate through the second half before rising next year.

The three-month Sibor fell to a 12-month low of 1.25 per cent last Monday, before recovering to 1.425 per cent on Thursday, ahead of the Good Friday public holiday.

Mr Kit said Singapore rates were also affected by the Singapore dollar's appreciation against the US currency. He said the Singdollar is most probably at the top end of the secret trade-weighted band within which the Monetary Authority of Singapore (MAS) guides the currency.

'With the Singdollar expected to continue appreciating, MAS will aim to moderate it by flooding the market with liquidity, which will in turn pressure interest rates downwards,' he said.

OCBC economist Selena Ling said another consequence of the strong Singdollar would be a high inflow of foreign capital into the Republic. 'This can also contribute to lower interest rates.'

For consumers, the net result is both good and bad.

Banks recently embarked on a mortgage loan war, with Maybank firing the first salvo last month with an aggressive three-year, fixed-rate package offered at 1.68 per cent for the first year.

DBS Bank and United Overseas Bank (UOB) have also unveiled attractive packages. UOB has one that offers a zero rate in the first year.

And with Sibor-linked home loan package rates likely to head south too, it could be a good time to refinance mortgage loans, experts said.

A DBS spokesman said: 'DBS offers transparent mortgage rates pegged to the Sibor and the CPF Ordinary Account rate, so our rates will move in tandem with market forces.'

But there is also the possibility that savings and fixed deposit rates could slump as interest rates go down.

OCBC's vice-president for group wealth management, Mr Fabian Lum, said the bank would review its deposit rates to keep them in line with prevailing market conditions.

And while the bank has not changed its savings rate recently, it lowered its 12-month fixed deposit rate for amounts between $50,000 and $1 million to 1.2 per cent a year from 1.4 per cent earlier this month.

DBS said that its savings deposit rates had not been adjusted since 2005, but added that its fixed deposit rates are always pegged to the interbank rate and would thus be adjusted accordingly.

CIMB-GK economist Song Seng Wun said that the low interest rates did not reflect a lack of liquidity on the part of banks. 'The loans-deposit ratio is still very strong, so banks definitely have the money to lend,' he said.

'But I think there is greater caution now, after what has happened in the US with the sub-prime crisis, and people are much more cautious nowadays when it comes to borrowing and lending money.'

A Sub-Primer For Dummies

Source : The Business Times, March 20, 2008

RAISE your hand if you don't quite understand this whole financial crisis.

It has been going on for seven months now, and many people probably feel as if they should understand it. But they don't, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn't afford, and now they are falling behind on their mortgages.

But the overwhelming majority of homeowners are still doing just fine. So how is it that a mess concentrated in one part of the mortgage business - sub-prime loans - has frozen up the credit markets, sent stock markets gyrating, caused the collapse of Bear Sterns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression?

I'm here to urge you not to feel sheepish. This may not be entirely comforting, but your confusion is shared by many people who are in the middle of the crisis.

'We're exposing parts of the capital markets that most of us had never heard of,' Ethan Harris, a top Lehman Brothers economist, said last week. Robert Rubin, the former treasury secretary and current Citigroup executive, has said that he hadn't heard of 'liquidity puts', an obscure financial contract, until they started causing big problems for Citigroup.

I spent a good part of the last few days calling people on Wall Street and in the government to ask one question, 'Can you try to explain this to me?' When they finished, I often had a highly sophisticated follow-up question, 'Can you try again?' I emerged from it thinking that all the uncertainty has created a panic that is partly irrational.

That said, the crisis isn't close to ending. Ben Bernanke, the Fed chairman, won't be able to wave a magic wand and make everything better, no matter how many more times he cuts rates and cheers Wall Street. As Mr Bernanke himself has suggested, the only thing that will end the crisis is the end of the housing bust.

Back to the beginning

So let's go back to the beginning of the boom. It really began in 1998, when large numbers of people decided that real estate, which still hadn't recovered from the early 1990s slump, had become a bargain.

At the same time, Wall Street was making it easier for buyers to get loans. It was transforming the mortgage business from a local one, centred around banks, to a global one, in which investors from almost anywhere could pool money to lend.

The new competition brought down mortgage fees and spurred innovation, much of which was undeniably good. Why, after all, should someone who knows that they're going to move after just a few years have no choice but to take out a 30-year, fixed-rate mortgage? As is often the case with innovations, though, there was soon too much of a good thing. Those same global investors, flush with cash from Asia's boom or rising oil prices, demanded good returns. Wall Street had an answer: sub-prime mortgages.

Because these loans go to people stretching to afford a house, they come with higher interest rates - even if they're disguised by low initial rates - and higher returns. These mortgages were then sliced into pieces and bundled into investments, often known as collateralised debt obligations, or CDOs. Once bundled, different types of mortgages could be sold to different groups of investors.

Investors then goosed their returns further through leverage, the oldest strategy around. They made US$100 million bets with only US$1 million of their own money and US$99 million in debt. If the value of the investment rose to just US$101 million, the investors would end up doubling their money.

Homebuyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody's The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years.

All these investments, of course, were highly risky. Higher returns almost always come with greater risk. But people - by 'people,' I'm referring here to Mr Greenspan, Mr Bernanke, the top executives of almost every Wall Street firm and a majority of American homeowners - decided that the usual rules didn't apply because home prices nationwide had never fallen before. Based on that idea, prices rose ever higher, so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy.

And it largely explains why the mortgage mess has had such ripple effects. The American home seemed like such a sure bet that a huge portion of the global financial system ended up owning a piece of it.

Last summer, many policymakers were hoping that the crisis wouldn't spread to traditional banks, like Citibank, because they had sold off the underlying mortgages to investors. But it turned out that many banks had also sold complex insurance policies on the mortgage debt. That left them on the hook when homeowners who had taken out a wishful-thinking mortgage could no longer get out of it by flipping their house for a profit.

Many of these bets were not huge. But they were often so highly leveraged that any loss became magnified. If that same US$100 million investment I described above were to lose just US$1 million of its value, the investor who put up only US$1 million would lose everything. That's why a hedge fund associated with the prestigious Carlyle Group collapsed last week.

'If anything goes awry, these dominos fall very fast,' said Charles R Morris, a former banker who tells the story of the crisis in a new book, The Trillion Dollar Meltdown. This toxic combination - the ubiquity of the bad investments and their potential to mushroom - has shocked Wall Street into a state of deep conservatism.

The soundness of any investment firm rests in large part on the confidence of other firms that it has real assets standing behind its bets. So firms are now hoarding cash instead of lending it, until they understand how bad the housing crash will become and how exposed to it they are. Any institution that seems to have a high-risk portfolio, regardless of whether it has enough assets to support the portfolio, faces the double whammy of investors demanding their money back and lenders shutting the door in their face. Goodbye, Bear Stearns.

The conservatism has gone so far that it's affecting many solid, would-be borrowers, which, in turn, is hurting the broader economy and aggravating Wall Street's fears. A recession could cause automobile loans, credit card loans and commercial mortgages to start going bad.

Many economists now argue the only solution is for the federal government to step in and buy some of the unwanted debt, as the Fed began doing last weekend. This is called a bailout, and there is no doubt that giving a handout to Wall Street lenders or foolish homebuyers - as opposed to, say, laid-off factory workers - is deeply distasteful. At this point, though, the alternative may, in fact, be worse.

Bubbles lead to busts. Busts lead to panics. And panics can lead to long, deep economic downturns, which is why the Fed has been taking unprecedented actions to restore confidence. 'You say, my goodness, how could sub-prime mortgage loans take out the whole global financial system?' Mr Zandi said. 'That's how.' - NYT

Stress Test For Builders As Steel Price Soars

Source : The Business Times, March 20, 2008

The price of steel has almost doubled since January 2007 and this could come in the way of the construction industry's quest to reduce its dependence on concrete.

In Singapore, industry players report that the price of both steel reinforcement bars (rebars) and structural steel has gone up by around 80-100 per cent over the past 15 months. This comes on the back of higher global demand and hikes in the costs of the raw materials used to make the metal.

The development is a setback for the construction industry, which was veering towards using more steel to reduce dependence on concrete, which is more prone to supply-side shocks.

'In the last 15 months, steel prices (steel rebars and structural steel) have gone up by about 80 per cent,' said Jackson Yap, chief executive of United Engineers.

Brandon Lye, assistant vice-president for Sembawang Engineers and Constructors, similarly said that steel prices have doubled over the past 18 months.

Data provided by industry regulator Building and Construction Authority (BCA) shows that the price of 20mm-high tensile steel was $752.50 a tonne in January 2007.

But by January 2008, the price had climbed to $1,235.46 a tonne - a rise of some 64 per cent. The price continued to climb in February and March, industry players said.

On the back of this, the proportion of steel cost against total construction cost has gone up from about 10 per cent to 15 per cent over the same period, Mr Yap said.

One reason for the steel price hike is increasing global demand, said Bernard Chung, second vice-president of the Singapore Structural Steel Society.

Macquarie Research's data shows that global steel consumption rose from 1.24 billion tonnes in 2006 to 1.33 billion tonnes in 2007. Demand is expected to continue growing in 2008 - Macquarie Research forecasts global steel demand of 1.43 billion tonnes for this year.

Mr Chung said the demand is being driven by developing economies such as Brazil, Russia, India and China. He said that these four countries alone accounted for about three-quarters of demand growth between 1997 and 2006.

Similarly, Macquarie Research said that China accounted for 62 per cent of world demand growth from 2000 to 2007.

Steel prices have also been pushed up by large rises in the costs of raw materials, industry players said.

'The cost of components used to make steel - iron ore, scrap, coking coal, coke, freight and electricity - have also gone up,' Mr Chung said.

Macquarie Research said that steel mills are expected to pass through large rises in raw material costs in 2008, which could add around US$150 per tonne to steel costs. Add this to price increases brought on by surging demand, and the overall price of steel could climb even more this year, analysts said.

In Singapore, increases in the price of steel could impact the industry's move towards using more steel for building.

BCA, for example, has been encouraging more extensive use of steel for construction since Indonesia banned the export of concreting sand in January 2007. Land sand is used to make concrete.

'Rising steel prices will slow down the drive towards the use of more steel for sustainable construction,' said United Engineers' Mr Yap.

BCA, however, pointed out that the prices for both ready-mixed concrete and steel have increased by about 60 per cent, which means that the situation has not changed that much in terms of cost competitiveness.

'However, steel is more readily available from many sources as compared to sand and granite,' a BCA spokeswoman said.

And where faster 'time-to-market' is required, developers will still continue to use steel, Mr Yap said.

UK Property Sellers Need 'Reality Check'

Source : The Straits Times, Mar 24, 2008

LONDON, ENGLAND - SELLERS need a 'reality check' when pricing their homes for sale, as unsold stock reaches record proportions, Britain's largest property portal said on Monday.

The Web site - which advertises 90 per cent of all homes for sale via estate agents across the UK, measuring an average 35,000 properties coming to the market per week - said Britain's property market was in danger of stagnating, as house price growth nears zero per cent.

The average asking price in March rose just 0.8 per cent to 239,655 pounds (S$658,739) on the previous month, down from 3.2 per cent in February, its index shows. That took annual house price growth to 5 per cent from 5.8 per cent.

Buyers' choice continued to grow as unsold stock reached a peak for this time of year: an average of 67 homes remained unsold per estate agent branch, up from 56 a year ago and 64 last month.

Rightmove said 'smart pricing' was needed to take account of growing competition, an average 10 per cent drop in selling prices from the peak of the housing market boom and buyers' affordability constraints.

Commercial director Miles Shipside said: 'Most sellers coming to the market seem to be ignoring the increased competition from other unsold properties and the challenge buyers now face in obtaining a mortgage.

'As many of these sellers are likely to be buyers themselves, they seem to be trying to bank a higher figure for their home but want a bargain when they buy.'

'The best price sellers can achieve has fallen - though they won't lose out if they are then planning on buying as well.'

Mortgage lenders have tightened their lending criteria, as the fall-out from the credit crunch continues, and Rightmove warned that some properties could become unsaleable if sellers do not drop asking prices and the government does not act to strengthen funding markets.

'If sellers were to price more realistically at the same time as lenders were able to normalise lending criteria, we could see a speedier harmonisation of seller expectations and buyer affordability,' said Mr Shipside.

'Until then, there will be a lot of sellers who can't sell and a lot of buyers who can't buy, and everyone sitting on their hands.' -- REUTERS

Creative Sells And Leases Back HQ For $250m

Source : The Straits Times, Mar 24, 2008

SINGAPORE'S Creative Technology Ltd, which makes digital music players, said on Monday it had agreed to sell and lease back its headquarters in the city-state for $250 million.

Creative said in a statement it was expected to reap a gain of $200 million from the deal. The gain would be treated as a deferred gain that would be amortised and recognised in its income statement over the lease term of five years.

The deal was likely to be completed by the end of June, Creative said. The buyer of the building was not named. -- REUTERS

Agents Ofering Illegal CPF Cash Rebates Resurface

Source : The Straits Times, Mar 21, 2008

Ads which claim falsely to share commissions with investors make comeback - in a different guise.

BEFORE you commit your Central Provident Fund (CPF) savings to agents promising ‘maximum returns’ and ‘the best deal in town’, consider this: You might be falling foul of regulations.

To entice you to sign up, some agents are offering cash rebates, ranging from 1 to 1.5 per cent of your investment capital, which they say is taken from their own commission.

What this really means: When you use your CPF savings to invest, charges such as agent commissions are deducted from your CPF accounts.

So the cash rebate you are receiving from this deal essentially amounts to an early withdrawal and possible erosion of your CPF savings.

There is another problem as well. Receiving direct cash rebates from your CPF investments is forbidden under CPF Board regulations.

Instead, all gifts and rebates under the CPF Investment Scheme (CPFIS) should be converted to cash or bonus units and refunded to your Ordinary and Special accounts.

Such advertisements have appeared in the past, but agents are now relying on subtle shifts in language to fly under the radar.

When they first appeared several years ago, the ads screamed ‘instant cash’. This led to warnings against the agents.

Now, similar ads have resurfaced, this time using tags such as ‘best returns’ and ‘maximum potential’.

In response to queries, the CPF Board said that product providers under CPFIS are well aware of the rule.

Said a spokesman: ‘Agents who violate this rule would risk facing disciplinary action, from being issued with warning letters from the product providers to being suspended or even having their services terminated.’

Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, advised consumers to be cautious of the ‘generic nature’ of these ads - they often make vague claims, offer only mobile phone numbers and do not include company names.

Checks with several agents revealed how the scheme works. The minimum sum required for investment ranges from $2,000 to $10,000, and all the agents push investments in unit trusts.

When asked about the ‘high returns’, the agents said that by sharing their commissions with investors, they can give cash rebates of between 1 and 1.5 per cent of the investment capital.

When asked which companies they worked for, the agents replied that they were ‘middlemen’, ‘introducers’ or ‘brokers’ for companies such as Aviva, Prudential and AIA.

All refused to give their full names.

Mr Leong Sze Hian of the Society of Financial Service Professionals said the ads target those who are cash-strapped.

He said such people ‘must realise that when the focus is on getting cash rebates every month, their CPF savings may be eroded over time’.

Factory worker Mary (not her real name), 32, is one of those who succumbed to the lure of instant cash.

Needing money to pay for her parents’ nursing- home fees last November, she jumped at the chance of getting some extra cash. She signed documents that transferred $39,000 of her CPF savings into unit trust investments and got $200 cash in return.

Mary said she was unaware of the CPF Board regulation prohibiting rebates.

In any case, she said, she really needed the cash.

‘My thinking was, the CPF money was just being left there anyway and I’m not sure if I will live until I’m 60.’

Realising The Marina Bay Vision

Source : The Business Times, March 22, 2008

CHING TUAN YEE and BENJAMIN NG reflect on the planning of Singapore's most ambitious urban project and highlight the exciting developments in store for Singaporeans and visitors alike

THE vision for Marina Bay is that of a high-quality, 24/7 live-work-play environment, one that encapsulates the essence of the global city Singapore is envisaged to be.

Something for everyone: Set by the water's edge and with the city skyline as a backdrop, Marina Bay is envisioned to be a Garden City by the Bay, a 24/7 destination that presents an array of opportunities for people to explore new lifestyle options, exchange new ideas and information for business, and be entertained by rich leisure and cultural experiences

Waterfront business districts such as Canary Wharf in London and Pudong in Shanghai have come, in recent years, to signify urban progress and prosperity. They have raised the international profile of their respective cities while spurring growth and investment.

The Singapore example is in Marina Bay. A seamless extension of Singapore's flourishing central business district spanning 360 hectares of prime land for development, Marina Bay is our city's most exciting and ambitious urban project that will support our continuing growth as a major business and financial hub in Asia.

Set by the water's edge and with our signature city skyline as a backdrop, Marina Bay is envisioned to be a Garden City by the Bay, a 24/7 destination presenting an exciting array of opportunities for people to explore new living and lifestyle options, exchange new ideas and information for business, and be entertained by rich leisure and cultural experiences in a distinctive environment.

The groundwork for the expansion of the existing CBD (Central Business District) and its transformation into a waterfront business district focused around Marina Bay had been laid as early as the late 1960s. Land adjacent to the CBD was reclaimed in phases between 1969 and 1992.

The Master Plan for Marina Bay focuses on encouraging a mix of uses (commercial, residential, hotel and entertainment) to ensure that the area remains vibrant around the clock.

The concept of 'white' site zoning also gives developers more flexibility to decide on the mix of uses for each site, including housing, offices, shops, hotels, recreational facilities and public spaces.

To cater for good connectivity and seamless extension, the development parcels at Marina Bay were planned based on a grid urban pattern which extends from the existing road network within the CBD. This grid creates a flexible framework with a series of land parcels that can be amalgamated or sub-divided to meet different requirements as well as changing demands and allow the phasing of developments.

Creating signature districts

In the planning of Marina Bay, specific attention was paid to creating value. The land parcels are located within a series of distinctive districts, each focusing around attractive public open spaces and tree-lined boulevards which will provide signature address locations for developments.

Along the waterfront and fronting key open spaces, building heights are kept low. This maximises views to and from individual developments further away from the waterfront, enhancing their attractiveness and creating a dynamic 'stepped-up' skyline profile as well as more pedestrian scaled areas.

The successful development of Marina Bay is supported by state-of-the-art infrastructure. To date, the government has pumped in more than $4.5 billion to facilitate development of the area.

A Common Services Tunnel housing electrical and telecommunication cables and other utility services underground is being built, making repeated road diggings a thing of the past. An extensive road and rail network has also been planned, with three MRT stations to be built in the area as part of the new Downtown rail line.

Chain event: A 280m pedestrian bridge - the longest in Singapore - will, together with a new waterfront promenade, create a continuous walking loop connecting all the attractions and open spaces around the Bay

A new vehicular and pedestrian bridge will link Bayfront to Marina Centre. The 280m pedestrian linkway - the longest in Singapore - will sport a dynamic double helix structure. Together with a new waterfront promenade, this will create a continuous walking loop connecting up the necklace of attractions and open spaces around the Bay.

Another key infrastructural project is the Marina Barrage. When officially opened in 2009, it will turn the existing water body into Singapore's first reservoir in the city. This will serve as a new source of fresh water for Singapore and a new lifestyle attraction allowing for a variety of water-based activities and events to take place. It will also house Singapore's tallest fountain project.

The softer touch

Having provided for much of the 'hardware' for the new business district, it became clear that URA had to go beyond its traditional roles of urban planning and land sales management. To this end, the Marina Bay Development Agency was set up within URA to focus on the 'software' for developing the area. Since then, URA has embarked on a full spectrum of marketing, promotion and place management activities to showcase the uniqueness of this new destination.

To generate more buzz, a calendar of events and activities for public spaces and water bodies has been put in place in partnership with various agencies and the private sector. Signature events, like the Marina Bay Singapore New Year's Eve Countdown, have become a new urban tradition. Marina Bay has also become the definitive venue for a host of sporting events like the F1 Powerboat Race, the Oakley City Duathlon and the Great Eastern Women's 10km run.

The shape of things to come

While it will take more than a decade for the entire area at Marina Bay to be fully developed, a host of projects that will offer people from all walks of life exciting and attractive options to live, work and play are already taking shape. These upcoming developments have contributed significantly towards enhancing the area's reputation as a location that offers something for everyone: a tropical living environment among lush greenery; a bustling global business hub and a lifestyle locale presenting a kaleidoscope of entertainment and leisure choices.

LIVE - by the Bay. Marina Bay has fast become one of the city's most popular and prestigious residential addresses, with a number of outstanding projects already under construction.

The Sail @ Marina Bay will be the tallest residential development in Singapore at 245 metres when it is completed in 2009. It boasts two towers - one at 70 storeys and the other at 63 storeys. Meanwhile, the Marina Bay Financial Centre incorporates the 55-storey Marina Bay Residences, comprising 428 luxury apartments, and the Marina Bay Suites, a 66-storey development offering 221 exclusive bayside units.

WORK - by the Bay. With its prime location in the heart of Singapore's future downtown, Marina Bay continues to be a magnet to global investors and tenants seeking premium office space in a prime location.

The development of Marina Bay will help to further position Singapore as one of Asia's leading financial centres, doubling the size of the existing financial district. The new growth area set aside for the seamless extension of the existing financial district is more than twice the size of London's Canary Wharf and will provide some 2.82 million square metres of office space, equivalent to the office space within Hong Kong's main business district, Central.

Already, a nucleus of office developments is forming with the development of One Raffles Quay, the soon-to-be-completed Marina Bay Financial Centre, and the two recently sold sites at Marina View. Several global banks and multinational corporations, including UBS, Deutsche Bank, DBS and Standard Chartered, are already located or will be locating in these developments.

PLAY - by the Bay. The 'fun' factor at Marina Bay is expected to be raised to a new high when the Marina Bay Sands Integrated Resort opens its doors in 2009. With its impressive design featuring a sky park and three soaring 50-storey hotel blocks with landscaped balconies, the area's most anticipated project will add a new dimension to our city skyline.

The Marina Bay Sands Integrated Resort will house, among other things, a casino, 110,000 sq metres of meeting and convention facilities, and an ArtScience Museum (above)

The integrated resort is poised to be a world-class development that will house a casino, two theatres, 110,000 sq metres of meeting and convention facilities, as well as about 2,500 hotel rooms. Other attractions at the integrated resort include restaurants in the form of two floating crystal pavilions and an ArtScience Museum, the rooftop of which becomes an amphitheatre with tiered seating.

Coming attractions: Building on Singapore's green legacy, three world-class waterfront gardens (above) of about 100 hectares are planned for the area.

Building on Singapore's green legacy, three world-class waterfront gardens of about 100 hectares have been planned for the area. With the first phase of the project slated for completion in 2010, the Gardens at Marina Bay will be another unique destination attraction for those visiting Singapore and a green sanctuary for people living and working in the city.

Each garden will feature a distinctive design and character. All three gardens will also be interconnected via a series of pedestrian bridges to form a larger loop along the whole waterfront and linked to surrounding developments, open public spaces, transport nodes and attractions.

Focal point for the community

Marina Bay is a prime example of a visionary masterplan that is not only well on its way to becoming a new focal point for the local community, but it has also drawn worldwide attention and interest. Testament to this is its achievement in attracting close to $16.5 billion worth of private investments to date from international investors and developers from the US, Hong Kong, Australia, Europe as well as the Middle East.

Moving forward, Marina Bay will continue to be the centrepiece of Singapore's urban transformation, providing the city with the opportunity to attract new investments, visitors and talents.

The URA, as the Development Agency for Marina Bay, is committed to our long-term and strategic plans to meet the area's future development needs. We will continue to adopt a holistic and integrated approach in designing the area with people in mind, work with partners and communities to implement key infrastructure, and carry out active promotion and place management activities. We will also engage investors to garner more interesting business concepts and ideas. This will take us closer to our vision of making Marina Bay a choice destination for all, one that promises Singaporeans and visitors alike a brand-new, live-work-play experience.

Ching Tuan Yee is Executive Architect, Urban Planning Section, Urban Redevelopment Authority, while Benjamin Ng is Place Manager, Marina Bay Development Agency, Urban Redevelopment Authority

Muted Market Gives Buyers More Bargaining Power

Source : The Sunday Times, Mar 23, 2008

Prices aren’t tumbling but it’s a good time to get a unit at a reasonable price, say experts.

IT IS no secret that the residential property market is in a lacklustre mood.

With many buyers and sellers having scurried to the sidelines as the United States sub-prime woes brought about an uncertain stock market, new home sales slipped to a nine-month low last month.

UNUSUAL PRODUCTS SUCH AS THE FREEHOLD 39-UNIT AMBROSIA IN TELOK KURAU, which offers units with swimming pools - not common in small projects - have attracted fairly strong interest. About 30 per cent of the five-storey development has been sold at an average price of $950 per sq ft. -- PHOTO: KNIGHT FRANK

For those looking to buy a home, the question is whether to buy now or later.

As fire sales have yet to hit the market and prices largely appear to be holding steady, it may not yet be a time when bargains abound everywhere.

But property experts say this may be the best time to bargain for a reasonable deal if you have something in mind.

It is a time when sellers - be it developers selling their new developments or individuals selling their properties in the resale market - are more flexible and buyers have more bargaining power, they say.

Generally, developers are still loath to lower their prices. So a good bet now is likely to be the resale market, where sellers can be more flexible, depending on their reasons for wishing to sell their property .

Completed properties also have the advantage of generating an immediate rental yield, or allowing buyers to move in any time they like, consultants say.

‘Right now, bargain-hunting may take place in the secondary market,’ says Mr Donald Han, Cushman & Wakefield’s managing director.

Some sellers may be looking to get out of the property market because they either cannot or do not wish to hold on to the asset on hand, he adds.

There are certainly desperate sellers out there, but it is not as though they are all ready to sell at a major discount or take a significant loss, says a property investor who declined to be named.

Last month, only 185 new homes were sold, down from 328 in January.

If the current standstill in the market continues, some small developers may start to lower their prices, say property consultants.

And if this happens, it will affect the entire market.

Home prices could fall, but by then, other buyers may beat potential buyers to the properties that they like.

This is why some property consultants say it is really an individual’s reading of the market on when to buy.

This is particularly so for those with a specific unit or a small project in mind, or those seeking unusual products such as suburban condominium units with pools.

The freehold 39-unit Ambrosia in Telok Kurau, for example, offers units with swimming pools, which is not common in small projects.

Its nine penthouses and two ground-floor units come with private pools and these have attracted fairly strong interest.

About 30 per cent of the five-storey development has been sold at an average price of $950 per sq ft (psf), says property consultancy Knight Frank, which is marketing the project.

‘Last year, valuation was trying to keep up with transacted prices,’ says Mr Han. ‘Now, transacted prices are keeping up with valuations.’

Mr Eric Cheng, executive director of HSR property group, says: ‘In today’s market, you can find cheap buys.’

But not all units are cheap, even if the sellers are willing to offload their homes without any profit, he adds.

For instance, some sellers at the 99-year leasehold The Rochester in Buona Vista may be keen to sell at around $1,200 psf, which could be the price they bought at last year.

But the project was launched at 2007 prices, at a time when the market was booming, he said, so they are not a real bargain.

Your best bet

Generally, developers are still loath to lower their prices. So a good bet now is likely to be the resale market, where sellers can be more flexible, depending on their reasons for wishing to sell their property .

Will I Be Forced To Sell Home Upon Divorce?

Source : The Sunday Times, Mar 23, 2008

Q MY husband and I have been separated for nine months. He has moved out of our home, but my children and I are still living in the condominium, which is under both his name and mine.

When we divorce, what will happen to the condo? Will I be forced to sell it and split the money 50:50? What are our options if my children and I want to continue living in the condo? My husband is currently paying half of the mortgage loan.

A THE fate of your matrimonial home can be affected in two scenarios - if there is a default in the mortgage repayments and upon divorce.

If there is a default in the mortgage payments, the mortgagee bank would be entitled to recover possession of the property and sell it off.

In the event of a divorce, the division of the matrimonial home will be adjudged by the court if the parties are unable to reach an amicable settlement. When it falls to the court to decide, there are various factors that it takes into account.

The starting point is the parties’ respective direct financial contributions to the initial payments and the monthly mortgage. Payments for these through Central Provident Fund (CPF) monies are also taken into account. The court then takes into account indirect financial contributions such as renovations, payment for furniture, fittings and furnishings, monthly maintenance charges, utilities bills and other outgoings on the home.

Finally, the court takes into account indirect non-financial contributions such as looking after the children and the welfare of the family, cooking, housekeeping, looking after an aged or disabled member of the family.

In raising your children and looking after them, you would have earned an additional equity or share in the matrimonial home that would be added to your share due to your financial contributions.

The court also takes into account that if you have the care and control of your children, you would continue contributing towards their upbringing and welfare. If there was an agreement, its terms (for instance in a separation deed) would also be a factor to be considered.

However, the court does not embark on a detailed calculation of mathematical precision. Instead, it adopts a ‘broad brush’ approach and understandably so, as no one keeps such neat and precise accounts as in a business.

The court is also not compelled to order an equal division as the law requires the division to be just and equitable, although in some cases, an equal division may be the most just and equitable one.

In short, the court will be fair to both parties. Having arrived at your share or equity in the home, the next issue is to decide how to satisfy that equity, for instance whether you have the financial means and capability to buy out your husband’s share.

Depending on your age and the amount of funds available in your CPF account, you may be able to use some of those funds to buy out your husband’s share. You may also be able to find a bank willing to enter into a fresh loan agreement with you for the apartment.

If your husband is agreeable, you may also be able to postpone the sale until, say, when the youngest child reaches 21 years of age or completes his or her education, whichever occurs later.

The apartment may have to be sold as a last resort, and after deducting the outstanding loan, the refund to your respective CPF accounts and expenses of the sale, the rest of the money will then be distributed according to you and your husband’s shares as determined by the court.

While it is true that it is possible to maintain the standard of living that both parties have been used to during marriage, it is also true that upon a divorce, there will almost always be a lowering of the standard. You may have to find alternative affordable accommodation for yourself and your children and look to your husband to contribute towards the expenses as part of his monthly maintenance obligations.

With the recent amendments to the CPF Act, you may be able to persuade the courts to transfer the apartment to you without having to refund your husband’s CPF account first, but it may not be reasonable for you to insist on living in a private condo when there is ample affordable public housing available.

Amolat Singh
Lawyer, Amolat & Partners

Advice provided in this column is not meant as a substitute for comprehensive professional advice.

Anatomy Of A Crisis

Source : The Sunday Times, Mar 23, 2008

Confused by the current financial turmoil? You are not alone. Why are some central banks cutting interest rates even as others raise theirs? And what’s the difference between cutting the main Fed funds rate and the discount rate? Bryan Lee says the key to understanding the crisis is to see it as a three-headed monster: a credit problem in the banking sector, a US-led economic slowdown worldwide, and sky-high inflation the world hasn’t seen in a while.


Dodgy investments in sub-prime mortgages mean billions in losses that the market cannot even calculate. The result is near paralysis in lending markets and a paranoia which has led to runs on banks like the storied US investment bank Bear Stearns and Britain’s Northern Rock.

What caused this?

THE current woes faced by the United States financial sector have their roots in a housing bubble that formed between 2001 and 2005, when the Federal Reserve kept interest rates low to help the US economy recover after the bubble burst.

When the housing market started to falter in late 2005, homebuyers who had borrowed beyond their means began to default on their loans. And they were unable to refinance their mortgages as planned when times were better.

By early last year, specialist lenders who gave loans to these risky or ’sub-prime’ borrowers started to collapse as defaults accelerated.

A few months later, the debacle caught up with regular banks and hedge funds around the world, which had indirectly funded the sub-prime loans by buying into complex financial instruments such as ‘CDOs’ (collateralised debt obligations).

Although these investments comprised more than just sub-prime debt, and often were packaged with good loans, entire tranches of these investments have become almost worthless as mortgage defaults mount.

The complexity of the securities makes it impossible for investors to separate the grain from the chaff and give a market value to them.

How is this a threat?

MANY banks bought into sub-prime debt and the market has been left guessing exactly how much losses each financial institution might sustain.

Banks have therefore become more reluctant to lend to one another, even for regular trading activities, as they fear that commitments once assumed vault-safe may not be honoured.

If paranoia sets in and the reluctance to extend credit becomes indiscriminate, the whole financial system could seize up and become paralysed.

Even though banks have collectively written down about US$150 billion (S$207 billion) in sub-prime related losses, there remains much nervousness that more losses may be unveiled.

Aggressive players which fund their activities primarily by borrowing money from other banks are especially at risk of failure, as was the case with the No.5 US investment bank Bear Stearns.

But the heavy reliance on credit by the financial sector in general means that no bank is safe from a run.

Bear Stearns has been rescued with help from the US Federal Reserve. But had it gone under, it would have had serious knock-on effects on the rest of the industry as banks today are intricately linked with one another.

The fall of Bear Stearns has exacerbated the crisis of confidence and adds to fears that no bank is too big to fall.

So far, the credit crunch has been felt most acutely in the US, although there are fears that the malaise is spreading to Europe and Asia, where several banks have already taken big hits on their sub-prime investments.

Indeed, British bank Northern Rock suffered a run last September when it fell foul to tightening credit conditions that emerged soon after the US sub-prime fiasco erupted.

If the US housing market continues to tank, the risk of a global melt-down will rise.

That’s because higher quality mortgage instruments, which European and Asian banks have invested money in bigger quantities, will also be in jeopardy.

What’s being done?

TO ENCOURAGE banks to lend to one another, the US Federal Reserve has been pumping cash, or liquidity, into the banking sector.

It has done this by making available hundreds of billions of dollars in emergency loans since last December.

Last Sunday, it extended the facility to non-deposit-taking banks to 20 primary dealers including investment banks and securities firms. This was the first time it has done so since the Great Depression.

The Fed has also made these emergency funds cheaper. Since last August, it has been slashing what is known as the ‘discount rate’, reducing the interest it charges for these emergency loans from 6.25 per cent to 2.75 per cent.

The Fed also played a key role in keeping Bear Stearns afloat, putting up a US$30 billion guarantee for buyer JPMorgan Chase on Bear Stearn’s most illiquid assets.

It argued that if Bear Stearns had collapsed, it would have led to a larger crisis of confidence that might have taken other banks down with it.

Elsewhere, other central banks have similarly been pumping cash into their financial sectors. A number, such as the Bank of England, have had to bail out failed banks in their jurisdictions.

What’s next?

MORE sub-prime losses seem to be on the cards, with the International Monetary Fund predicting that total write-downs in the global financial world could swell to US$800 billion eventually, from about US$150 billion already reported.

Experts say that there is ample liquidity to go around, but paranoia is still high, preventing the money from circulating within financial markets.

The Fed’s actions have so far had limited effect in preventing confidence from worsening, and economists say the crisis will continue until the US housing market bottoms out.

Only then will the market be able to assess the full extent of losses sustained by mortgage-related investments.

The market can then price these securities and accurately evaluate how much this has hit banks’ bottom lines.

Only then, they say, will the paralysing fear that has kept many investors on the sidelines abate.

Experts say there is ample liquidity to go around, but paranoia is still high, preventing the money from circulating within financial markets.


The housing slump and the credit crisis in the US has eroded consumer confidence and is plunging the US into a recession. If the recession is deep, economic growth in the rest of the world will also slow down given the US economy’s size and influence in the world order.

What caused this?

AGAIN, it is the housing slump that is at the root of the US downturn, which many now believe has deteriorated into a recession.

Consumer spending, which constitutes about 70 per cent of the US gross domestic product (GDP), is starting to slow as household wealth is falling - for the first time in five years - with declines in home values.

During the recent boom years, many US consumers had depended on the buoyant property market to feed their spending appetites. They re-mortgaged their homes to buy second homes or cars, and banks were willing to lend them the money because house prices were on the rise.

But now that the market has gone south, US consumers are starting to curb their expenditures, especially those who had taken up mortgages beyond their means and are now forced to abandon their new homes.

Households and businesses are being further hit by the credit crisis in what the US Federal Reserve has called a ‘negative feedback loop’.

As banks grow increasingly cautious, their reluctance to provide credit will crimp household consumption and business investment, worsening the slowdown.

How is this a threat?

US GROSS domestic product growth has slowed to a crawl since the final quarter of last year.

The slowdown has hit both the manufacturing and services sectors. Unemployment, which many consider to be the ultimate barometer of economic health, is on the rise.

A slowdown in the US economy will invariably have a significant impact on the world, especially export-dependent countries.

Investment bank Goldman Sachs, for instance, has projected that a 1 percentage point decline in US consumption could hit Singapore’s economic growth by close to 0.6 percentage point. That said, many economists also agree that the emergence of China and other economic fast-growers in the developing world will provide some buffer to a US slowdown.

Also, economies with robust domestic sectors should weather the weaker external environment better.

Experts also note that since the current US slowdown is not focused on the technology sector, unlike the 2001 downturn, electronics-heavy Asia may have a slightly easier time weathering the current slowdown.

What’s being done?

THE Fed has been cutting its funds rate since last September, bringing down the benchmark interbank rate from 5.25 per cent to 2.5 per cent. This interest rate, which is different from the discount rate, is the primary monetary pool that the Fed employs to address economic growth and inflation issues.

It works by directly lowering short-term borrowing costs faced by households and companies. Lower rates spur economic activity by making it cheaper for individuals and companies to borrow money for consumption and investments.

But experts note that the Fed’s rate cuts this time round have had little impact. That’s because long-term rates, which are more relevant to homebuyers and businesses, are still high as banks rein in lending as part of the ongoing credit crisis.

Beyond interest rates and other monetary policy efforts, the US government is also employing fiscal measures to boost the economy.

A US$152 billion (S$210 billion) package comprising tax rebates and business incentives has been planned. There is talk of a second stimulus package as recession risks increase.

What’s next?

THE US recession means that global growth this year will undoubtedly be slower than last year. Much will depend on the severity of the credit crisis and the speed of its recovery.

In the US, economists will be watching for signs of a housing turnaround, which is key for normalcy to return to the financial sector.

The European Union and Japan - the other two economic heavyweights - are expected to suffer slower growth. A weakening US dollar has made the euro and yen strong, and is hurting European and Japanese exporters.

The euro zone’s central bank could lower rates to boost the region’s economies, but appears right now to be more committed to keeping rates high to fight inflation.

The Bank of Japan has fewer options since interest rates are already near zero in the country. Furthermore, the central bank faces a vacuum of leadership as politicians are stuck in a stalemate over who should fill the bank’s top job.

The silver lining is that economists are most optimistic about developing countries in Latin America and Asia.

Strong domestic growth could keep emerging economies in both regions on the boil, they say.

And this would support theories that the developing world is ‘decoupling’ from the fortunes of the wealthy nations.


Red-hot growth in economies like China and India are combining with supply disruptions and speculative fervour to send oil and food prices through the roof. Inflation raises the cost of living and doing business and poses political problems for governments worldwide.

What caused this?

THE world economy has been booming in the past few years, led by the United States, which bounced back from the debacle on the back of cheap credit provided by the Fed.

At the same time, nationalistic trade barriers were reduced and the resulting soaring of world trade has helped spread the good times to emerging economies, which tapped on cheap land and labour resources to become key beneficiaries of the global manufacturing outsourcing phenomenon.

The extended period of growth has caused aggregate demand for goods and services to catch up with - and in some cases exceed - supply capacities, putting pressure on prices to rise.

In particular, the growing economies of China and India have been sucking up much of the world’s commodities, such as steel, as both countries race to build up infrastructure with their new-found wealth.

The rapid development of the two economies has given rise to the emergence of a significant middle class that is further accelerating consumption growth, from food to luxury goods.

Inflation is also on the rise because of several supply shocks to key commodities such as oil and food.

Ongoing tensions in the Middle East and production disruptions elsewhere have added to price pressures.

Crop failures caused by bad weather, such as the recent devastating winter storms in China, and farmers switching the use of their farmland to the growth of biofuel crops, instead of crops for consumption, have also exacerbated food inflation.

Experts add that the record-breaking commodity prices of late are also partly due to speculative trading by investors who are betting on the price rises to accelerate.

More recently, the US Federal Reserve’s rate cuts and liquidity injections have devalued the US dollar significantly. As commodity prices are denominated in the greenback, the falling dollar means higher prices.

How is this a threat?

INFLATION around the world is sending the cost of living and doing business into an upward spiral.

Energy costs have surged on record oil prices, while food inflation is fast becoming a social and political hot potato for many governments.

Crude oil has gone past the US$100 (S$139) a barrel level, while wheat prices are 2.5 times higher than a year ago.

The problem seems acute in China, which saw inflation hit a 12-year high of 8.7 per cent in February. And since the mainland has become one of the key manufacturing locations for the world, there are fears that inflation there will eventually be passed on to other countries.

Concerns are growing that persistently high inflation could trigger a ‘wage-price spiral’.

As workers become convinced that prices will keep rising, they demand higher wages to protect their purchasing power.

But this in turn would fuel inflation further in a vicious circle that will be hard to break.

While some amount of price increase is inevitable in a growing economy, high inflation rates ultimately hurt as they create uncertainty over how much money earned today will buy tomorrow.

As a result, consumers may hold back on long-term commitments like home purchases, while businesses hold back on investments as they are unsure about their bottom line.

Economists also say that in times of runaway prices, companies and individuals may end up spending more time and resources avoiding inflation, instead of productive activities.

What’s being done?

THE typical way policymakers deal with inflation is to cool economic activity by tightening credit conditions.

But coming at a time when economic growth is slowing and credit is tight because of paranoia in the markets, central bankers are finding it tricky to employ tried and tested means to solve the problem.

The dilemma they have is how to strike a balance between stimulating growth and curbing inflation.

Most of the world’s central banks have decided that inflation is the bigger threat. Many (like in Australia) have therefore raised interest rates, while others (like in China) have reined in lending by requiring banks to keep more cash on hand.

The clear exception is the Fed, which has been doing just the opposite, cutting rates aggressively.

As the US is the epicentre of the financial crisis and the economic slowdown, the Fed has little choice in this.

Still, it has sought to affirm its commitment to the inflation-busting part of its mandate by flagging price rise concerns in its public statements.

Some say that inflation concerns are already causing it to hold back on even bigger rate cuts.

What’s next?

INFLATION pressures are likely to persist at least until the middle of the year, when slowing economic growth could take some pressure off prices.

Indeed, commodity prices had eased last week as investor concerns over the US financial sector and the weakening dollar rose.

Central banks outside of the US, especially those in Asia, will likely continue to prioritise inflation in their policy actions.

For Asia’s export-heavy economies, keeping costs low for manufacturers will be key at a time when their most important customers are suffering.