CPF floating rate is 3.75%

CPF floating rate is 3.75%

 

Tuesday • March 11, 2008

 

foR The first time, the Central Provident Fund (CPF) board has announced the floating interest rate for Special, Medisave and Retirement Accounts (SMRA), and it is 3.75 per cent — below the floor rate of 4 per cent.

 

But because the Government has said it will maintain this minimum rate for two years, so as to help CPF members adjust to the floating rate, Singaporeans will still enjoy the 4 per cent interest on their savings from April 1 to June 30 — as announced by the board last month. The HDB mortgage rate will also remain unchanged for this period.

 

After two years, a 2.5 per cent floor rate will apply for all CPF accounts.

 

Effective from Jan 1, the interest rate for the SMRA has been pegged to the 12-month average yield of the 10-year Singapore Government Security (10YSGS) plus 1 per cent, as announced by Manpower Minister Ng Eng Hen last year.

 

The move to a floating, market-based rate is aimed at improving returns on CPF savings so that Singaporeans will be on a better financial footing when they retire, the board said.

 

The average yield of the 10YSGS from March 1 last year to Feb 29 this year, plus 1 per cent, worked out to be 3.75 per cent, according to the board — lower than the 4 per cent average yield when the announcement of the changes was first made in September.

 

But as was also announced then, an additional 1 per cent interest will also be paid on the first $60,000 of a member’s combined balances, with up to $20,000 from the Ordinary Account. This will go towards the member’s Special or Retirement account.

 

It would mean that even were the 4 per cent floor rate to be removed today, the bulk of CPF members, whose balances are less than $60,000, would enjoy a 4.75 per cent interest on their SMRA.

 

In addressing concerns about the floating rate last year, Mr Ng had pointed out that such interest paid would still be better than under the old system, and that “even if the SMRA rate was to fall, for a short period, the gains previously made are already locked in”.

 

The CPF rate will continue to be reviewed quarterly.

 

Source: TodayOnline

A ‘booming hiring climate’

A ‘booming hiring climate’

 

Tuesday • March 11, 2008

 

LIN YANQIN

yanqin@…

 

DESPITE the threat of recession in the United States, Singapore will experience a “booming hiring climate” in the next quarter, an employment survey predicts.

 

The expansion of sectors like biological science and information technology, and a shortage of manpower in banking and finance will contribute to the increase in employment, said Manpower Staffing Services (Singapore).

 

According to its report, 65 per cent of the 650 employers surveyed in Singapore — an even mix of multi-nationals and small and medium enterprises — are looking to hire more in the second quarter of this year.

 

But, even as companies seek to employ more, bosses will continue to be concerned with wage costs, especially when the market is short of talent, said Manpower spokesperson C K Goh.

 

The tight labour market could also result in companies looking outside Singapore to fill vacancies.

 

“Companies come to us requesting both locals and foreigners because they want to draw from all available sources of talent,” said Ms Goh, adding that Manpower has seen increasing demand for foreign talent in the last six months.

 

Last year, the number of jobs taken up by foreigners here hit a record high of 144,500, which comprised 61 per cent of the 236,000 jobs created.

 

Ms Goh added that while hiring for the next quarter is predicted to grow, a slowdown was expected overall for the year — a point also highlighted by the Singapore Human Resource Institute (SHRI) last week.

 

The SHRI’s survey of 183 employers stated that fewer companies were expected to hire — 73 per cent compared to 81 per cent last year — and the number taken on per company would also be lower.

 

One factor that could possibly slow employment down was spiralling wages, said Mr Ryan Escher, senior manager at recruitment consultancy Robert Half International. “The wages might just get too much and lead to a wage freeze, or employers will start thinking about how to manage with fewer people, and stop hiring,” he said.

 

SHRI had said in its report that wages were expected to grow by 5 per cent, an increase from 4.5 per cent the previous year, with the high demand for labour resulting in employers having to raise salaries.

 

With rising wages and falling productivity, companies are looking at non-monetary methods to motivate staff, said Mr Escher. “Increasing wages will not help productivity. Each company will have to look at how to promote increased job satisfaction, and how to prevent people from being burnt out,” he said.

 

Source: TodayOnline

URA to market Ophir-Rochor site at global property fair

URA to market Ophir-Rochor site at global property fair

 

By Jessica Cheam

 

SINGAPORE‘S urban planner is going international to market the Ophir-Rochor district – touted as the nation’s next development hot spot.

 

The Urban Redevelopment Authority (URA) said yesterday that it will market a major site in this ‘new growth area’ at a renowned annual global property event in Cannes, from today till Friday. The 2.74ha site for office, hotel and other uses could fetch up to $1.4 billion, a property analyst estimates.

 

A URA-led team of local agencies and companies such as the Housing Board, Singapore Tourism Board and property developer City Developments (CDL) will exhibit and showcase property investment opportunities at the fair – the Marche International des Professionnels de L’Immobilier.

 

The Government last year unveiled plans to rejuvenate the hotchpotch Ophir-Rochor area with its mix of commercial buildings and old shophouses.

 

This is part of a masterplan to double the size of Singapore‘s financial district to that of Hong Kong at about 2.82 million sq m of office space, National Development Minister Mah Bow Tan said in Parliament last month.

 

The Ophir-Rochor corridor will complement the financial district at Marina Bay and Raffles Place, surrounded by a vibrant arts and entertainment scene, said the URA.

 

The site, between Rochor and Ophir roads and surrounding Parkview Square, will go on sale in June, and is expected to yield 495 hotel rooms and 139,740 sq m of commercial space.

 

The URA said the site will have a minimum requirement for office and hotel use, and is the second to be released in the district.

 

Last September, a CDL-led consortium that included Middle East investors won the tender for a 3.5ha site at $1.689 billion to build an eco-friendly mixed-use project – South Beach – designed by world- renowned British architect Norman Foster and his partners.

 

Property analysts say the upcoming site is likely to garner international interest.

 

Savills Singapore‘s director, Mr Ku Swee Yong, said the site is the ‘best piece this year’ – likely to get at least five bids. He estimates the land cost, based on certain assumptions, to be up to $1.4 billion, or $700 to $800 per sq ft per plot ratio.

 

Chesterton International head of research and consultancy Colin Tan said the property fair will keep Singapore‘s property scene on the global radar, but he expressed concerns about big projects adding to the current strain on resources.

 

The URA has been participating in the French fair since 2002. It is one of the world’s largest real estate exhibitions, attracting about 26,000 delegates from 74 countries each year.

 

Source: Straits Times  

MPs seek steps to prevent ‘magic dollars’ flat scam

MPs seek steps to prevent ‘magic dollars’ flat scam

 

Greater flexibility in HDB loan rules for downgraders may help, say some

 

By Jessica Cheam

 

THE emergence of a new scam by HDB flat sellers has prompted calls by some MPs for a review of loan rules for flat downgrading.

 

Housing agents say sellers who resort to the so-called ‘magic dollars’ scam often face financial difficulties and may be having a hard time in downgrading to cheaper flats.

 

Some MPs noted that greater flexibility in downgrading rules could help these people.

 

Property agents have recently seen an increase in deals where the seller and buyer collude to under-declare the sale price to the Housing Board.

 

The buyer pays the difference between this and the real price to the seller in cash, often in return for a discount.

 

These sellers are likely to have bought their homes at the previous market peak, leaving the flat in negative equity, where the mortgage is more than the property’s value.

 

This means that any sales proceeds will go towards repaying the seller’s loan and the money taken from the Central Provident Fund (CPF).

 

This would leave him with no cash in hand.

 

The scam provides vital extra cash – indirectly from the seller’s CPF monies – in a buoyant HDB market with high resale prices.

 

Some families struggle to fork out the cash-over-valuation amount for a new flat.

 

Several MPs told The Straits Times that help could be given to such sellers so they do not flout the law.

 

Those caught in the scam could face jail and/or fines.

 

One agent said he has spoken to sellers seeking such deals. They are desperate for cash and stuck with a large flat they can no longer afford.

 

C&H Realty’s managing director Albert Lu added that sellers are unlikely to put themselves at risk of a jail term unless they have a strong motivation to do so, such as a need to avoid financial trouble.

 

A recent HDB market recovery – with prices up 17.5 per cent last year – has prompted sellers to offload properties.

 

But many who wish to downgrade are unable to get HDB loans which are less risky and have lower interest rates than bank loans. HDB does not give loans for downgrading.

 

Some MPs raised the issue in Parliament two weeks ago.

 

Mr Teo Ser Luck (Pasir-Ris Punggol GRC) said some families do not qualify for bank loans and are not eligible for rental flats.

 

‘If these families genuinely need help, could we then consider making the policy for downgrading more flexible?’ he asked.

 

Mr Charles Chong (Pasir Ris-Punggol GRC), chairman of the Government Parliamentary Committee for National Development, also supported a policy review.

 

Mr Masagos Zulkifli (Tampines GRC), however, said he felt the Government should not bail out those who had made mistakes. ‘That’s not the right thing to do,’ he said.

 

Ms Indranee Rajah (Tanjong Pagar GRC) said there is a need to distinguish between those who resort to the scam for extra cash and those driven to it by real need.

 

Ms Irene Ng (Tampines GRC) said one possible solution is to allow downgraders to take out HDB loans, especially if they have previously had only one housing subsidy.

 

The current policy is a ‘disincentive’ for families to downgrade, she said.

 

National Development Minister Mah Bow Tan had explained in Parliament that the HDB does not offer concessionary loans to downgraders as most would have benefited from selling their flats.

 

Mr Mah added, however, that ‘those who downgrade because of genuine financial difficulties do get special consideration from HDB. For such cases…HDB will continue to be flexible’.

 

Mr Teo said many families who approach him are in a dilemma. ‘Perhaps it’s desperation that makes them resort to such scams,’ he said.

 

‘The question is: Is it the strictness of our policy that has caused them to do that?’

 

Still, he noted that current policies are made for the majority’s benefit and ‘we have to work out the genuine cases and not let the exception become the rule’.

 

Source: Straits Times  

Kuwait fund pulls out of bulk purchase of high-end homes

Kuwait fund pulls out of bulk purchase of high-end homes

 

It allows options for 97 condo units at Goodwood Residence to lapse

 

By Joyce Teo

 

A KUWAIT bank fund that agreed in December to buy 97 units at posh Goodwood Residence for $818.4 million has let the purchase option lapse.

 

Kuwait Finance House has given no reason for the move, which could result in the firm having to pay developer GuocoLand multimillion-dollar penalties.

 

It could also be the first time a foreign institutional investor in Singapore has pulled out of such a deal, raising concerns that the property market, already hit by weaker sentiment, may be heading into a downturn.

 

‘While the current market is cautiously optimistic, news of such a pullout might cause it to turn more cautious,’ said Cushman and Wakefield managing director Donald Han.

 

GuocoLand did not provide a direct reason for the lapse but said in a statement yesterday that the private residential market in Singapore appears cautious.

 

The developer also said it is in talks with Kuwait Finance House, an Islamic investment bank, with ‘a view to a grant of fresh options for units in the development’.

 

The firm declined to comment further, citing ongoing talks. Kuwait Finance House also declined comment for the same reason.

 

Kuwait Finance House’s huge deal was for 97 four-bedders ranging from 2,500 sq ft to 3,900 sq ft at the former Casa Rosita site in Bukit Timah Road, near Newton Circus.

 

The condo has 210 freehold units on a large 24,845 sq m site fronting Goodwood Hill. The Kuwait fund’s purchase would have been the single-largest purchase of residential units under construction in Singapore.

 

Kuwait Finance House had agreed to buy the units at a median price of $3,200 per sq ft (psf), which would have set price benchmarks for the area. Industry sources said the price was way too high, considering that bulk purchases typically come with a discount.

 

‘If it were to have bought at an average of, say, $2,700 psf last December, it would still be a record for the Newton Circus area,’ said an industry source who declined to be named.

 

‘If it had held on for 15 to 20 years and leased the units for up to a 5 per cent yield, it may have been able to justify the deal. But if it had wanted to buy and sell, why didn’t it bargain for a rock-bottom price as the property had not been launched?’

 

It is believed that Kuwait Finance House was keen on flipping the units as they were marketed in Dubai recently, but the sale campaign was unsuccessful.

 

Another industry source, who declined to be named, said: ‘The pullout may be due to the terms of the deal. The buyer could have realised that it had bought at a higher-than-expected price, had problems flipping the units and wanted to cut its losses.

 

‘It could also reflect the current market and the possibility that the property market may stagnate in the next two to three years.’

 

The stale market appeared to have led GuocoLand to put off the launch of Goodwood Residence, scheduled initially for the first quarter.

 

Many developers are following suit, delaying launches until keen interest returns to the sector, which is in the doldrums with buyers and sellers staying on the sidelines.

 

A GuocoLand spokesman said: ‘We would be tapping selected overseas markets when we decide to launch Goodwood Residence at a later date.’

 

It added in its statement that the expiry of the options will not have any material financial effect on its net tangible assets per share or earnings per share for the financial year ending June 30.

 

Source: Straits Times  

Property investors set sights on market trough in US, Europe

Property investors set sights on market trough in US, Europe

 

HONG KONG – OPPORTUNISTIC investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe.

 

Hedge funds have stopped dabbling in property in the region, fund managers say.

 

Although private equity firms will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

 

In the wake of the economic crisis from 1997- 1998, Asia, in particular Japan and South Korea, drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as the Carlyle Group.

 

Many have made fat profits on a revival by Asian property markets, which are now mostly strong.

 

Researchers at Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump last year, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

 

Better opportunities, however, now lie elsewhere for investors who think they can spot a market trough.

 

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their peak last year.

 

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through next year.

 

‘I think a lot of investors will return to home markets,’ said Mr Bart Coenraads, head of real estate at Fortis Investments.

 

‘Some will try to buy distressed core and refinance it. They could make good returns.’

 

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion (S$167.8 billion) – a sixth of the global total – with about half invested in Japan, which has been popular for its rock-bottom interest rates.

 

However, Japanese banks are getting cold feet on property, only giving loans worth 60 per cent to 70 per cent of a building’s value, compared to 80 per cent to 90 per cent years earlier.

 

But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia.

 

‘Funds have been raised and platforms are set up, and they don’t want to unwind them overnight,’ said Mr Tim Bellman, global head of strategy for ING Real Estate.

 

‘But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.’

 

Source: Straits Times  

Hedge funds in worst crisis in a decade

Hedge funds in worst crisis in a decade

 

Funds facing margin calls as more banks worry that they may not get their money back

 

LONDON – THE hedge fund industry is reeling from its worst crisis in a decade, as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States government.

 

Since Feb 15, at least six hedge funds, totaling more than US$5.4 billion (S$7.49 billion), have been forced to liquidate or sell holdings.

 

This is because their lenders – staggered by almost US$190 billion of write-downs and credit losses caused by the collapse of the sub-prime mortgage market – raised borrowing rates by as much as tenfold with new claims for extra collateral.

 

While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world’s safest securities, because of the price fluctuations in the bond market.

 

‘If you have leverage, you’re stuffed,’ said Mr Alex Allen, the chief investment officer of Eddington Capital Management, which has US$195 million invested in hedge funds for its clients.

 

He likens the crisis to a bank panic turned upside down, with bankers – not depositors – concerned they will not get their money back.

 

The lending crackdown is the worst to hit the US$1.9 trillion hedge fund industry since Russia‘s debt default in 1998 roiled global credit markets.

 

Today, hedge funds are being forced to sell assets to meet banks’ margin calls, resulting in the dissolution of the funds.

 

Yesterday, Carlyle Group’s mortgage-bond fund said creditors might liquidate as much as US$16 billion of securities unless the two sides could reach an agreement on debt repayments.

 

Carlyle Capital is meeting lenders to discuss more than US$400 million of margin calls and is ‘evaluating all options’.

 

Carlyle’s fund used loans to buy about US$22 billion of AAA-rated mortgage debt issued by Fannie Mae and Freddie Mac, which the firm said had an ‘implied guarantee’ from the US government. Even those bonds have slumped following the collapse of the sub-prime mortgage market.

 

‘There has to be more in the next few weeks,’ Mr Allen said. ‘There are people who have been hanging on by their fingernails who can’t hold on much, much longer.’

 

BLOOMBERG NEWS

 

Source: Straits Times  

New form of deferred payment – but with a catch

New form of deferred payment – but with a catch

 

Property developers and banks revive old scheme that involves interest absorption

 

By Fiona Chan

 

IN A bid to tempt home buyers back into the cooling property market, banks are teaming up with developers to bring back deferred payment – or something like it.

 

They are resurrecting an older scheme known as interest absorption, which also allows buyers to postpone the bulk of their payments on new homes.

 

This decade-old plan had been phased out over the last few years in favour of the more popular deferred payment. But it is now making a comeback after the Government pulled the plug on deferred payment plans last October, saying they encouraged speculation in the then red-hot property market.

 

Though interest absorption may sound like deferred payment, here’s the catch: The home buyer has to take up a bank loan at the point of purchase, with a specific bank that has tied up with the developer to offer the scheme.

 

In contrast, the deferred payment scheme did not require a buyer to take a loan until the home was fully built. This was thought to encourage speculation, as one could buy and resell many unbuilt homes without taking a single loan.

 

Interest absorption plans offer two extra deal sweeteners. First, the developer absorbs interest payments on the loan until completion. Depending on the loan amount and tenure, this could work out to a few tens of thousands of dollars.

 

Another perk: Most units sold under interest absorption schemes do not cost more than those under normal payment plans. Developers used to charge slightly more for units sold with deferred payment.

 

Industry experts say interest absorption plans were introduced in the late 1990s to spur home-buying in the downturn. Then, not all plans had a deferred payment component – in some, developers just absorbed interest until completion.

 

Only United Overseas Bank (UOB) and OCBC Bank offer interest absorption plans with a deferred payment feature. They have tied up mainly with smaller developers and projects. One is Cosmo in Guillemard Crescent, which is almost fully sold. While final figures are not in yet, developer Fission Development expects about half to opt for interest absorption. ‘It’s a good arrangement for everyone as the bank does a credit assessment of the buyer…so that takes a lot of the risk out of the equation for the developer,’ said Fission managing director Melvin Poh.

 

UOB is believed to have provided interest absorption with deferred payment for at least five projects launched in the last three months. A bank spokesman said the response ‘has always been positive…even before the abolishment of deferred payment’.

 

OCBC is offering the plan at a few other developments, but declined to comment, citing competitive reasons.

 

On the whole, interest absorption schemes shift the risk of buyer default from the developer to the bank, said director of marketing and business development Ku Swee Yong, at Savills Singapore.

 

‘I would expect the bank’s interest rate to be marked up slightly to account for the extra risk,’ he said, adding such plans would help genuine home buyers who may have needed the deferred payment scheme to buy a new home.

 

Meanwhile, boutique developer Roxy Homes will absorb stamp duty for buyers who pick up a unit at its Ambrosia project in East Coast Road this weekend.

 

Source: Straits Times