Source : The Straits Times, Nov 16, 2008
Check if bank can meet unit's valuation to avoid overpaying for the property
A couple of telling anecdotes illustrate the unexpected glitches that home buyers can face as property prices start to fall.
A Spring Grove condominium unit owner was denied the chance to take advantage of lower interest rates by refinancing his devalued property without coughing up more hard-earned cash.
The owner had to make up the shortfall because the reduced value of the Grange Road unit meant the bank could not extend a large enough loan.
Another buyer had to cancel his purchase recently after he learnt that banks' valuation of the property was less than what he was supposed to pay.
The banks could not offer him the loan he needed as the collateral was inadequate.
This is the brave new world of home loans as property values fall amid the global financial crisis and banks tighten lending.
Banks are still dishing out home loans but are much more selective these days, mortgage consultants said.
Banks can grant only up to 90 per cent of the purchase price or valuation, whichever is lower. So if the sale price of a property exceeds the valuation - which is determined by an independent professional - the buyer will have to make up the shortfall.
Amid poor demand and falling prices, banks are sticking to lower property valuations in anticipation of further price falls.
'OCBC Bank engages independent, third-party valuers to determine the open market value of properties and there has been evidence of a fairly strong downward trend in property valuation,' said its head of consumer secured lending Gregory Chan.
The buyer who cancelled his property deal realised that the yet-to-be-completed 1,000 sq ft condo unit was worth less than the $2 million he was going to pay.
'No bank can match the property's valuation as there was a recent sub-sale deal done at 15 per cent below the developers' price of $2,000 per sq ft,' said Mr Dennis Ng, spokesman for mortgage consultancy portal www.HousingLoanSG.com
Buyers can avoid overpaying for a property by checking to see if the banks can match the valuation to the property's purchase price, he said.
In today's market, those still keen on taking out a loan for a home they intend to live in should also know that most banks now prefer to offer up to only 80 per cent financing, said Ms Ally Yang, a chief mortgage consultant at www.homeloan.com.sg
OCBC Bank said it continues to offer housing loan packages for 80 per cent financing. It also offers 90 per cent financing on a case-by-case basis if the applicant meets its credit assessment criteria.
HSBC Singapore's head of personal financial services, Mr Sebastian Arcuri, said: 'Customers can still obtain home loans of up to 90 per cent valuation or purchase price if their financial profile can support it and their application meets the bank's criteria.'
But there are signs that banks are starting to be more stringent in their credit criteria and they are very selective in granting a 90 per cent loan, said Mr Ng.
'A 90 per cent home loan is now more selectively granted to consumers with very good profile who are buying a property as their first home.'
Investors will find it tougher to get a bigger loan these days. Banks used to offer more than 85 per cent financing for investment properties but all of them, except DBS Bank, no longer do so, said Ms Yang.
This means buyers have to be prepared to cough up more cash for investment property buys.
Those looking at refinancing may be in for a surprise if they bought their properties in last year's booming market.
The Spring Grove unit in question was bought by a South Korean expatriate for $2.58 million or $1,442 per sq ft on a floating rate package.
He now pays 3.5 per cent interest on his 80 per cent loan and was looking to halve his interest payments by switching to a package pegged to the three- month Singapore Interbank Offered Rate, said Ms Yang.
But a check with two banks found that the valuation for his property was $2 million or $2.22 million. If he wants to refinance at these valuations, he would need to pay up to $180,000 to top up his loan, currently at $1.78 million.
Consumers seeking a loan for their property purchase should get prior approval or have more cash on hand. 'They should approach a mortgage specialist for a joint assessment if they are unsure whether they can afford the home purchase,' said OCBC's Mr Chan.
'Things are quite fluid these days so buyers should re-check their loan eligibility after one month,' said Mr Ng.
Monday, November 17, 2008
Wheelock Takes $85m Impairment Loss On SC Global
Source : The Straits Times, Nov 15, 2008
WHEELOCK Properties' losing bet on niche high-end developer SC Global Developments has left the firm with an impairment loss of $85 million.
It bought a 10 per cent stake in SC Global in June last year at $6 per share or $112.1 million then, and purchased more on the open market this year. The share price of SC Global, which has since done a two-for-one stock split, closed one cent down at 57 cents yesterday.
Wheelock's share of SC Global is now 16.05 per cent. Its chief executive, Mr David Lawrence, had in April apologised to shareholders for buying it at the top of the market last year.
For the third quarter ended Sept 30, Wheelock reported a net profit of $133 million, down 39 per cent from the three-month period ended Dec 31.
The comparison is such because the group changed its financial year end from March 31 to Dec 31.
Revenue rose 21 per cent to $229.53 million, as the firm commenced recognition of the sold units in Scotts Square. It was partially offset by lower revenue recognition from its earlier projects such as The Sea View and lower dividend income from Hotel Properties and SC Global.
The firm said its investment property, Wheelock Place, was revalued from $700 million to $790 million based on increased rental reversion.
Looking ahead, the group aims to launch the 30-unit Orchard View for sale next year.
It said that it is in a strong financial position to take advantage of opportunities which may arise as it already has $800 million cash in hand.
Earnings per share reached 11.09 cents, down from 18.18 cents at the end of last year. Net asset value per share was at $1.83, as at Sept 30, up from $1.82 at the end of last year.
Shares of Wheelock climbed two cents to close at 91.5 cents yesterday.
WHEELOCK Properties' losing bet on niche high-end developer SC Global Developments has left the firm with an impairment loss of $85 million.
It bought a 10 per cent stake in SC Global in June last year at $6 per share or $112.1 million then, and purchased more on the open market this year. The share price of SC Global, which has since done a two-for-one stock split, closed one cent down at 57 cents yesterday.Wheelock's share of SC Global is now 16.05 per cent. Its chief executive, Mr David Lawrence, had in April apologised to shareholders for buying it at the top of the market last year.
For the third quarter ended Sept 30, Wheelock reported a net profit of $133 million, down 39 per cent from the three-month period ended Dec 31.
The comparison is such because the group changed its financial year end from March 31 to Dec 31.
Revenue rose 21 per cent to $229.53 million, as the firm commenced recognition of the sold units in Scotts Square. It was partially offset by lower revenue recognition from its earlier projects such as The Sea View and lower dividend income from Hotel Properties and SC Global.
The firm said its investment property, Wheelock Place, was revalued from $700 million to $790 million based on increased rental reversion.
Looking ahead, the group aims to launch the 30-unit Orchard View for sale next year.
It said that it is in a strong financial position to take advantage of opportunities which may arise as it already has $800 million cash in hand.
Earnings per share reached 11.09 cents, down from 18.18 cents at the end of last year. Net asset value per share was at $1.83, as at Sept 30, up from $1.82 at the end of last year.
Shares of Wheelock climbed two cents to close at 91.5 cents yesterday.
Japan Is In Recession
Source : The Straits Times, Nov 17, 2008
TOKYO - JAPAN'S economy, the second largest in the world, has entered its first recession in seven years as the global financial crisis batters exports and business investment, official data showed on Monday.
The contraction confirmed that the global financial crisis has sabotaged growth in yet another major economy. -- PHOTO: ASSOCIATED PRESS
Japan joins Germany and Italy on the list of major economies that are officially in recession, despite emergency steps by world powers to try to shield the global economy from months of turmoil on financial markets.
The Japanese economy unexpectedly contracted by 0.1 per cent in the three months to September, after shrinking 0.9 per cent in the second quarter of the year, according to figures from the Cabinet Office.
The data 'showed that the economy is in a recession phase. There are risks it may worsen further', said Economic and Fiscal Policy Minister Kaoru Yosano.
It is the first time since the third quarter of 2001 that Japan has entered a recession, which is usually defined as two or more consecutive quarters of negative economic growth.
Gross domestic product (GDP) contracted at an annualised rate of 0.4 per cent.
Analyst forecasts, on average, had been for modest growth of 0.1 per cent quarter-on-quarter. Tokyo's Nikkei stock index fell 1.3 per cent in early trade.
Business investment slumped 1.7 per cent in the third quarter while exports were worse than expected, as the financial crisis triggered by a US housing slump squeezed other major economies.
'Japan was dragged down by the weakness in the global economy,' said Mr Kyohei Morita, chief Japan economist at Barclays Capital, who expects the recession to last for four quarters in total.
Although Japan has not suffered financial turmoil on the same scale as the United States or Europe, its trade-dependent economy remains highly vulnerable to global downturns.
'Japan is as export-driven as ever. So as long as exports are slowing due the weakness of the global economy, we cannot escape,' said Mr Morita.
After suffering a series of on-off recessions in the 1990s, Japan had been slowly recovering on the back of brisk exports and business investment.
Corporate profits, however, are now sliding as exports suffer from the global slowdown, prompting companies to slash investment in new equipment and factories, which had been a key driver of economic growth.
Consumer spending rose 0.3 per cent in the third quarter helped by a hot summer and demand for televisions ahead of the Beijing Olympics.
But analysts said Japanese consumers are likely to tighten the purse strings as the economy worsens and companies shed workers.
'We are already seeing the start of a vicious cycle in which a worsening labour market leads to slack consumption,' said Mr Naoki Murakami, chief economist at the Monex brokerage firm.
Analysts see little prospect of a recovery any time soon. The Japanese economy is expected to contract 0.1 per cent in 2009, according to the Paris-based Organisation for Economic Cooperation and Development. -- AFP
TOKYO - JAPAN'S economy, the second largest in the world, has entered its first recession in seven years as the global financial crisis batters exports and business investment, official data showed on Monday.
The contraction confirmed that the global financial crisis has sabotaged growth in yet another major economy. -- PHOTO: ASSOCIATED PRESSJapan joins Germany and Italy on the list of major economies that are officially in recession, despite emergency steps by world powers to try to shield the global economy from months of turmoil on financial markets.
The Japanese economy unexpectedly contracted by 0.1 per cent in the three months to September, after shrinking 0.9 per cent in the second quarter of the year, according to figures from the Cabinet Office.
The data 'showed that the economy is in a recession phase. There are risks it may worsen further', said Economic and Fiscal Policy Minister Kaoru Yosano.
It is the first time since the third quarter of 2001 that Japan has entered a recession, which is usually defined as two or more consecutive quarters of negative economic growth.
Gross domestic product (GDP) contracted at an annualised rate of 0.4 per cent.
Analyst forecasts, on average, had been for modest growth of 0.1 per cent quarter-on-quarter. Tokyo's Nikkei stock index fell 1.3 per cent in early trade.
Business investment slumped 1.7 per cent in the third quarter while exports were worse than expected, as the financial crisis triggered by a US housing slump squeezed other major economies.
'Japan was dragged down by the weakness in the global economy,' said Mr Kyohei Morita, chief Japan economist at Barclays Capital, who expects the recession to last for four quarters in total.
Although Japan has not suffered financial turmoil on the same scale as the United States or Europe, its trade-dependent economy remains highly vulnerable to global downturns.
'Japan is as export-driven as ever. So as long as exports are slowing due the weakness of the global economy, we cannot escape,' said Mr Morita.
After suffering a series of on-off recessions in the 1990s, Japan had been slowly recovering on the back of brisk exports and business investment.
Corporate profits, however, are now sliding as exports suffer from the global slowdown, prompting companies to slash investment in new equipment and factories, which had been a key driver of economic growth.
Consumer spending rose 0.3 per cent in the third quarter helped by a hot summer and demand for televisions ahead of the Beijing Olympics.
But analysts said Japanese consumers are likely to tighten the purse strings as the economy worsens and companies shed workers.
'We are already seeing the start of a vicious cycle in which a worsening labour market leads to slack consumption,' said Mr Naoki Murakami, chief economist at the Monex brokerage firm.
Analysts see little prospect of a recovery any time soon. The Japanese economy is expected to contract 0.1 per cent in 2009, according to the Paris-based Organisation for Economic Cooperation and Development. -- AFP
Saturday, November 15, 2008
HK Slides Into Recession
Source : The Business Times, November 15, 2008
(Hong Kong) HONG Kong slipped into recession in the third quarter as exports were hit by weakening global demand and consumption was hurt by a drop in asset prices and concern about the economic outlook.
Third-quarter gross domestic product (GDP) shrank 0.5 per cent, seasonally adjusted, from the previous quarter.
Compared with a year earlier, GDP grew 1.7 per cent, well below an expected 2.6 per cent increase, and the government slashed its full-year growth forecast to between 3 and 3.5 per cent from a range of 4 per cent to 5 per cent.
The economy's performance in July-September was the weakest since the Sars outbreak hammered consumer and business confidence in the spring of 2003 and highlights Asia's vulnerability to a global economic downturn.
'As expected, Hong Kong is in a technical recession and this may last until early next year. The economic outlook is not that good,' said Daniel Chan, senior investment strategist at DBS Bank.
'China may help, but Hong Kong's overall exports will continue to slow down because our major trading partners, such as Europe and the US, are also in a recession,' he noted.
The International Monetary Fund forecasts 2 per cent growth for Hong Kong in 2009, but a number of local economists say it will be hard-pressed to achieve one per cent growth.
Expected job losses in the trade, retail and property sectors in particular will push the unemployment rate up from 3.4 per cent at present, curbing wage growth and deterring consumption, analysts say.
Consumer confidence fell in the second half of this year to the lowest level in four years, the Nielsen Company said, and retail sales grew by the least in 17 months in September.
The 51 per cent slump in the Hang Seng Index of stocks this year has damped spending. So, too, has weakness in real estate. The number of home sales posted the biggest drop in almost nine years in October.
Private consumption expenditure, which excludes spending by tourists, rose only 0.3 per cent in the third quarter from the previous quarter, as locals were hit by a 50 per cent plunge in the stock market this year and as property prices have started to decline.
Investment spending rose 3 per cent from a year earlier while net services exports still managed solid growth of 5.3 per cent.
Consumption had been buoyant. It was the main driver of economic growth, which averaged 7.3 per cent annually in the past four years, as the territory benefited from China's booming economy.
China will still provide some cushion for Hong Kong as mainland companies require financial services in the city and mainland Chinese are still flocking in to shop here. -- Reuters, Bloomberg
(Hong Kong) HONG Kong slipped into recession in the third quarter as exports were hit by weakening global demand and consumption was hurt by a drop in asset prices and concern about the economic outlook.
Third-quarter gross domestic product (GDP) shrank 0.5 per cent, seasonally adjusted, from the previous quarter.
Compared with a year earlier, GDP grew 1.7 per cent, well below an expected 2.6 per cent increase, and the government slashed its full-year growth forecast to between 3 and 3.5 per cent from a range of 4 per cent to 5 per cent.
The economy's performance in July-September was the weakest since the Sars outbreak hammered consumer and business confidence in the spring of 2003 and highlights Asia's vulnerability to a global economic downturn.
'As expected, Hong Kong is in a technical recession and this may last until early next year. The economic outlook is not that good,' said Daniel Chan, senior investment strategist at DBS Bank.
'China may help, but Hong Kong's overall exports will continue to slow down because our major trading partners, such as Europe and the US, are also in a recession,' he noted.
The International Monetary Fund forecasts 2 per cent growth for Hong Kong in 2009, but a number of local economists say it will be hard-pressed to achieve one per cent growth.
Expected job losses in the trade, retail and property sectors in particular will push the unemployment rate up from 3.4 per cent at present, curbing wage growth and deterring consumption, analysts say.
Consumer confidence fell in the second half of this year to the lowest level in four years, the Nielsen Company said, and retail sales grew by the least in 17 months in September.
The 51 per cent slump in the Hang Seng Index of stocks this year has damped spending. So, too, has weakness in real estate. The number of home sales posted the biggest drop in almost nine years in October.
Private consumption expenditure, which excludes spending by tourists, rose only 0.3 per cent in the third quarter from the previous quarter, as locals were hit by a 50 per cent plunge in the stock market this year and as property prices have started to decline.
Investment spending rose 3 per cent from a year earlier while net services exports still managed solid growth of 5.3 per cent.
Consumption had been buoyant. It was the main driver of economic growth, which averaged 7.3 per cent annually in the past four years, as the territory benefited from China's booming economy.
China will still provide some cushion for Hong Kong as mainland companies require financial services in the city and mainland Chinese are still flocking in to shop here. -- Reuters, Bloomberg
F&N Profit Jumps 23% In Q4 To $120m
Source : The Business Times, November 15, 2008
Property business remains a key contributor to profit; APB reports 7% slide in full-year net
LOCAL conglomerate Fraser and Neave (F&N) yesterday reported net profit of $120.3 million for the fourth quarter ended Sept 30, up 23 per cent from the corresponding period last year.
CHEERS! F&N's food & beverage business has proved resilient in earlier downturns
Fourth-quarter revenue rose 4.4 per cent to $1.29 billion.
The Q4 results brought F&N's full-year net profit after fair value gains and exceptionals to $435.8 million - 15 per cent higher than in the year-ago period. This translates to earnings per share of 31.4 cents, against 28.7 cents a year ago.
Before fair value gains and exceptionals items, however, net profit notched up just 0.3 per cent to $379.0 million.
Group revenue for the financial year increased 5 per cent to $4.95 billion.
Shareholders can expect a final dividend of 8.5 cents per share, bringing the full-year dividend to 13.5 cents per share.
'The group's diversified portfolio of businesses has helped to provide stability in earnings,' said F&N's chairman Lee Hsien Yang. 'The food & beverage (F&B) and commercial property businesses, in particular, have proven resilient in previous economic downturns, and have remained strong pillars for the group, delivering continued profit growth.'
The property business remained the key contributor to profits, accounting for 59 per cent of profit before interest and taxation (PBIT) for the full year.
Within the segment, however, PBIT from development properties dipped 7 per cent from a year ago, while PBIT from investment property and real estate investment trusts (Reits) jumped 22 per cent.
Residential property sales have been affected in today's climate, said CEO of Frasers Centrepoint Lim Ee Seng, and 'next year is going to be pretty challenging'.
But he pointed out some positives. The business continues to recognise profit from residential properties sold; construction costs are easing; and the land bank comprises mostly plots bought at relatively low cost for the mass- and mid-markets. There will still be launches going forward of projects for which construction has started, he told BT.
Commercial properties put up a stronger showing as Reits, malls, offices, business parks and serviced apartments enjoyed almost full occupancies and improved rentals.
Frasers Centrepoint bought a 17.7 per cent interest in Allco Commercial Reit in July. The Reit has since been renamed Frasers Commercial Trust.
Asked about further plans for the Reit, CEO of Frasers Centrepoint Commercial Christopher Tang said that refinancing and recapitalisation plans 'are in the pipeline'.
The F&B business contributed to 37 per cent of group PBIT for the full year. The publishing and printing arm made up the remaining 4 per cent. 'One of the key directions we have set is stimulating faster growth of our non-property development businesses,' said Mr Lee.
F&N unit Asia Pacific Breweries reported a 7 per cent slide in full-year net profit to $123.7 million. This was despite a 12 per cent increase in revenue to $1.998 billion.
APB shares rose 50 cents yesterday to close at $10.60, while the F&N counter shed 11 cents to $3.14.
Property business remains a key contributor to profit; APB reports 7% slide in full-year net
LOCAL conglomerate Fraser and Neave (F&N) yesterday reported net profit of $120.3 million for the fourth quarter ended Sept 30, up 23 per cent from the corresponding period last year.
CHEERS! F&N's food & beverage business has proved resilient in earlier downturnsFourth-quarter revenue rose 4.4 per cent to $1.29 billion.
The Q4 results brought F&N's full-year net profit after fair value gains and exceptionals to $435.8 million - 15 per cent higher than in the year-ago period. This translates to earnings per share of 31.4 cents, against 28.7 cents a year ago.
Before fair value gains and exceptionals items, however, net profit notched up just 0.3 per cent to $379.0 million.
Group revenue for the financial year increased 5 per cent to $4.95 billion.
Shareholders can expect a final dividend of 8.5 cents per share, bringing the full-year dividend to 13.5 cents per share.
'The group's diversified portfolio of businesses has helped to provide stability in earnings,' said F&N's chairman Lee Hsien Yang. 'The food & beverage (F&B) and commercial property businesses, in particular, have proven resilient in previous economic downturns, and have remained strong pillars for the group, delivering continued profit growth.'
The property business remained the key contributor to profits, accounting for 59 per cent of profit before interest and taxation (PBIT) for the full year.
Within the segment, however, PBIT from development properties dipped 7 per cent from a year ago, while PBIT from investment property and real estate investment trusts (Reits) jumped 22 per cent.
Residential property sales have been affected in today's climate, said CEO of Frasers Centrepoint Lim Ee Seng, and 'next year is going to be pretty challenging'.
But he pointed out some positives. The business continues to recognise profit from residential properties sold; construction costs are easing; and the land bank comprises mostly plots bought at relatively low cost for the mass- and mid-markets. There will still be launches going forward of projects for which construction has started, he told BT.
Commercial properties put up a stronger showing as Reits, malls, offices, business parks and serviced apartments enjoyed almost full occupancies and improved rentals.
Frasers Centrepoint bought a 17.7 per cent interest in Allco Commercial Reit in July. The Reit has since been renamed Frasers Commercial Trust.
Asked about further plans for the Reit, CEO of Frasers Centrepoint Commercial Christopher Tang said that refinancing and recapitalisation plans 'are in the pipeline'.
The F&B business contributed to 37 per cent of group PBIT for the full year. The publishing and printing arm made up the remaining 4 per cent. 'One of the key directions we have set is stimulating faster growth of our non-property development businesses,' said Mr Lee.
F&N unit Asia Pacific Breweries reported a 7 per cent slide in full-year net profit to $123.7 million. This was despite a 12 per cent increase in revenue to $1.998 billion.
APB shares rose 50 cents yesterday to close at $10.60, while the F&N counter shed 11 cents to $3.14.
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