LICENSED moneylenders are changing tack, targeting HDB sellers in need of immediate cash.

Rather than advertise the availability of personal loans to all and sundry, some specify that only those intending to sell their homes need apply.

The reason: HDB owners will have cash after the sale of their flats, so repayment is almost guaranteed.

Mr David Poh, president of the Moneylenders’ Association of Singapore, explained: ‘If they take a personal loan which is based on their income, they may lose their job at any time, so it’s not so secure for us.’

There were 187 licensed money lenders in Singapore as of July last year.

The moneylenders who spoke to The Straits Times said these HDB sellers are usually in need of quick cash, to pay credit card bills, medical bills, gambling debts, or renovation bills.

And even though they can liquidate their homes for cash, a sale can take up to five months.

Within this time, a seller will collect only up to $5,000 from the buyer, according to HDB rules, so some turn to money lenders referred through housing agents, or who advertise in the newspapers.

Some recent advertisements have been targeted at ‘HDB Sellers Only’, and promise cash of up to $100,000 at monthly interest rates that start from 1.5 per cent.

Usually, agents are also involved in the process. They introduce desperate sellers to money lenders, and may get a fee for the referral, usually about $500 a customer.

Mr Mohamad Ismail, chief executive of Propnex, said he is aware that this has been happening since late last year, and has warned agents in his company against the practice.

‘Agents should not bring sellers to licensed money lenders for a referral fee. This is not within the ambit of their job,’ he said.

But with HDB prices rising by 3.8 per cent in the last quarter and hitting new highs, moneylenders say they are more willing to lend large amounts of up to 80 per cent of the profits of the sale of each flat.

Mr James Lee, founder of James Lee Credit said his company now has about 25 HDB sellers asking for loans each month. This is about a fifth more than this time last year.

Moneylenders are willing to lend as sellers are likely to have ‘positive sales proceeds’ even after repaying their CPF, he added.

This does not always mean the loan will be repaid, however. Out of 10 loans, Mr Lee said one or two will not be honoured.

Moneylenders, however, have found ways to ensure that loans are repaid with interest of up to 10 per cent a month, depending on the borrower’s income, guarantor, and loan amount.

For high-risk cases, moneylenders will usually lodge a caveat on the HDB flat. The seller’s lawyer will then have to contact them about releasing the caveat so that the sale can continue.

Moneylenders can then lay claim to what they are owed, and make sure lawyers direct the money to them when the sale is completed.

Mr Lee said: ‘It’s a legal process that’s all in black and white.’

But lawyer Derrick Wong said this is possible only if there is no prior mortgagee or if the prior mortgagee does not object.

Ms Tan Huey Min, assistant director of Credit Counselling Singapore, a non-profit group that advises people on debt repayment, warned HDB sellers to do their sums before borrowing.

‘If there is a valid reason like an operation, then it may be okay,’ she said.

‘But if it’s not urgent, they should not do it because the interest rates are high, and there is a high chance they may be digging a bigger hole and get into bigger debt.’

Source: Straits Times, 11 Jan 2010

Public bookings for Resorts World Sentosa hotels opened on Monday and more than 3,300 enquiries poured in.

Some 300 reservations were made on the first day of bookings as people took advantage of discounted opening rates.

The hotels are set to open to the public on January 20.

To help ensure smooth visitor arrivals at the integrated resort, taxi drivers were given a drive-through tour of the three main drop-off spots.

“This is a new place for us… so the orientation benefitted us,” said a taxi driver. “Passengers want to come to this hotel. Like Hard Rock Hotel and Festive Hotel. So (now) we know where it is.”

There are three taxi drop-off points at the integrated resort, which are near to attractions such as the Universal Studios Singapore theme park and the casino.

Apart from cars and taxis, visitors can also hop onboard buses and trains to reach the integrated resort.

Robin Goh, spokesperson for Resorts World Sentosa, said: “The most cost-effective and convenient (way to travel) would be public transport so visitors can choose either taking a bus – the Sentosa bus – to Sentosa… or they could actually hop on the Sentosa Express and get off at the first station called the Waterfront Station.”

The station will open on January 20, providing the integrated resort with an integrated transport solution.

Source: Channel News Asia, 11 Jan 2010

AFTER a leisurely lunch on his patio, Mr Zulkifli Mansor can walk out to a putting green and practise a few strokes of golf – and he doesn’t even have to leave his home.

From his balcony, Mr Tio Hong Tjoen sometimes casts a reel into the stream winding around his home. The Singapore permanent resident has caught fish weighing up to 3kg.

Mr Zulkifli, a 47-year-old civil servant, and Mr Tio, 53, who is in the furniture business, are among an increasing number of Singaporeans and permanent residents buying high-end homes across the Causeway, mainly as weekend residences.

From his doorstep, Mr Zulkifli can point out eight other properties belonging to Singaporeans in a neighbourhood of about 170 homes.

‘In fact, the first group to welcome us to the neighbourhood was Singaporean,’ he told The Straits Times. He bought his home about three months ago as a holiday retreat for his wife and son. His mother-in-law and sister-in-law live there permanently.

His two-storey house is in a gated estate fronted by burly security guards – a far cry from the days when Singaporean-owned homes in Johor Baru made headlines as prime targets for burglaries.

And with relatively few restrictions on home ownership in Malaysia – the houses have to be at least two-storeys high and until recently had to cost a minimum of just RM250,000 (S$103,000)- Singaporeans are finding it a breeze across the border. The minimum cost has just doubled to RM500,000.

Mr Zulkifli’s roomy 2,140 sq ft house sits in a lush garden and cost him RM298,000 – much less than what he would have had to fork out for a three-room HDB flat here.

‘Every month I pay a $630 instalment on the house which is less than the $800 I pay for my car – and I can’t live in my car!’ he quips.

Mr Zulkifli’s house is on an estate known as Nusa Idaman, one of at least four sprawling housing estates within South Johor’s Iskandar Malaysia project, which is being touted as a high-class resort area.

The Iskandar Regional Development Authority, which oversees the development of the 2,217 sq km area, says Singaporeans occupy about four in 10 homes there. Another three in 10 are occupied by other foreigners, mainly expatriates working in Singapore, with the remainder owned by Malaysians.

Iskandar Malaysia was designated as a special economic zone in Johor in 2006. Besides upmarket housing, plans are in the pipeline to build universities, top-notch medical facilities and theme parks.

The residential estates are none too shabby either, and home owners say the construction quality is good.

Homes in the luxurious Horizon Hills are set against a private golf course. Residents in the nearby Leisure Farm Resort have horse-riding facilities, and at Nusa Idaman, there is a kindergarten on the estate.

The fear of being a target of burglars has by and large been put paid to as well, with developers cottoning on to the concerns and touting high-levels security features to reel Singaporeans in.

Back in 2006, 37 Singaporeans launched a petition to the Malaysian High Commission for Singapore, asking for help following a spate of burglaries in a condominium in Bandar Seri Alam in Johor. Their units were completely ransacked and stripped of electrical wiring and light fixtures.

Mr Tio, who bought a weekend home in Leisure Farm Resort, says: ‘It’s very safe. Security is one of the reasons I bought a unit here.’

The neighbourhoods are fenced in and have several levels of security, such as CCTV monitoring and former Nepalese army guards on 24-hour patrol.

Developers Mulpha International even paid for a manned police station to be built just outside the main entrance of the the Leisure Farm estate.

‘We have had a few attempted break-ins in the past 12 years but with no harm, casualties or monetary loss. We are trying our level best to keep our record low and as close to zero as possble,’ a spokesman added.

With the promise of better security and property prices soaring at home in the last few years, Singaporeans have been looking northwards, charmed by the prospect of open space and quiet.

Developers say that interest has grown stronger in the past two to three years with the ‘aggressive promotion of Iskandar Malaysia’.

There are advertisements in local newspapers, roadshows in hotels and even charter buses to take interested Singaporeans to South Johor – a 15 minute drive from the Second Link – to view the developments.

Mr Zulkifli makes the hour-long drive from his home – a flat in Jurong East – whenever he is on leave and his son is on vacation from school.

Sometimes he goes to the nearby kampung, a 15 minute drive away, for a walk to unwind.

Mr Tio, an Indonesian who is now a Singapore permanent resident, said: ‘I come here with friends to eat and drink. In Singapore, where can you unwind?’ He lives in a bungalow in the MacPherson area with his two daughters.

But there are drawbacks to living life far from the bustling city. The nearest supermarket is a 10 minute drive away. Many Singaporeans say that they prefer to live and work in Singapore,and have a weekend home to escape to.

Mr Zulkifli’s wife, part-time wedding caterer Madam Amidah Ahmad, 47, said: ‘Back in Singapore, I step out of my house and there is an NTUC there already.’

And home repairs are not always undertaken speedily.

Said 68-year-old remiser Tan Hui Nam: ‘ ‘The system here is different, the work ethic and culture are different. You have to learn to be more patient.’

Also, while the estates are not far from the Second Link, the cost of driving back and forth can add up, with the tolls on both sides of the Causeway. A round trip can cost almost $20.

‘I cannot live here on a full time basis because it’s just too expensive to be driving in and out of Malaysia every day!’ added Mr Tan.

Singaporean Arif Tan, 62, is shopping around for contractors to have a bungalow built to his specifications in Johor.

The owner of a transport company has made trips up to various showflats in the region and says he hopes to make the move with his wife and three grown children within three to five years.

It is part of his retirement plan, he says, adding: ‘The cost of living in Singapore is just too high.’

Property experts say that buyers of property in the Iskandar Malaysia project should see their purchases as long-term investments, as the area is still in its developmental stages and not expected to realise its potential within the next five to 10 years. These properties are better off as holiday homes, they add.

Said PropNex chief executive Mohamed Ismail: ‘There will be a continuous supply of more land and property, so new buyers will have a choice between resale homes and new properties. It will take some time for the development to attain maturity and for the resale market to become buoyant.’

Source: Straits Times, 11 Jan 2010

LICENSED moneylenders are changing tack, targeting HDB sellers in need of immediate cash.

Rather than advertise the availability of personal loans to all and sundry, some specify that only those intending to sell their homes need apply.

The reason: HDB owners will have cash after the sale of their flats, so repayment is almost guaranteed.

Mr David Poh, president of the Moneylenders’ Association of Singapore, explained: ‘If they take a personal loan which is based on their income, they may lose their job at any time, so it’s not so secure for us.’

There were 187 licensed money lenders in Singapore as of July last year.

The moneylenders who spoke to The Straits Times said these HDB sellers are usually in need of quick cash, to pay credit card bills, medical bills, gambling debts, or renovation bills.

And even though they can liquidate their homes for cash, a sale can take up to five months.

Within this time, a seller will collect only up to $5,000 from the buyer, according to HDB rules, so some turn to money lenders referred through housing agents, or who advertise in the newspapers.

Some recent advertisements have been targeted at ‘HDB Sellers Only’, and promise cash of up to $100,000 at monthly interest rates that start from 1.5 per cent.

Usually, agents are also involved in the process. They introduce desperate sellers to money lenders, and may get a fee for the referral, usually about $500 a customer.

Mr Mohamad Ismail, chief executive of Propnex, said he is aware that this has been happening since late last year, and has warned agents in his company against the practice.

‘Agents should not bring sellers to licensed money lenders for a referral fee. This is not within the ambit of their job,’ he said.

But with HDB prices rising by 3.8 per cent in the last quarter and hitting new highs, moneylenders say they are more willing to lend large amounts of up to 80 per cent of the profits of the sale of each flat.

Mr James Lee, founder of James Lee Credit said his company now has about 25 HDB sellers asking for loans each month. This is about a fifth more than this time last year.

Moneylenders are willing to lend as sellers are likely to have ‘positive sales proceeds’ even after repaying their CPF, he added.

This does not always mean the loan will be repaid, however. Out of 10 loans, Mr Lee said one or two will not be honoured.

Moneylenders, however, have found ways to ensure that loans are repaid with interest of up to 10 per cent a month, depending on the borrower’s income, guarantor, and loan amount.

For high-risk cases, moneylenders will usually lodge a caveat on the HDB flat. The seller’s lawyer will then have to contact them about releasing the caveat so that the sale can continue.

Moneylenders can then lay claim to what they are owed, and make sure lawyers direct the money to them when the sale is completed.

Mr Lee said: ‘It’s a legal process that’s all in black and white.’

But lawyer Derrick Wong said this is possible only if there is no prior mortgagee or if the prior mortgagee does not object.

Ms Tan Huey Min, assistant director of Credit Counselling Singapore, a non-profit group that advises people on debt repayment, warned HDB sellers to do their sums before borrowing.

‘If there is a valid reason like an operation, then it may be okay,’ she said.

‘But if it’s not urgent, they should not do it because the interest rates are high, and there is a high chance they may be digging a bigger hole and get into bigger debt.’

Source: Straits Times, 11 Jan 2010

THE property bug is starting to bite and Singaporeans are itching to renew their love affair with real estate. For those who purchased any type of residential property a year ago, congratulations. From all accounts, private property prices in popular areas rose by 20 per cent or more in 2009 alone. Of course, only those who actually sold their property in the latter part of last year may have realised the short-term capital gains.

The situation today is much different from that in January 2009. Many investors in Singapore are in the process of deciding whether to take the plunge as the economic recovery story unfolds in 2010. If we exclude those who are in the market for public housing or others who are contemplating trading up their primary residence, we are left with serious investors and speculators. But before you traipse along to the next property launch, consider some alternative forms of exposure to property.

Direct shares

A good place to start is to share in the fortunes of a listed property company. Singapore and Hong Kong stock markets are anchored by successful blue-chip property players. Some are plain developers of residential and commercial real estate. Other listed companies own and manage real estate in Singapore and internationally. To illustrate how listed companies differ in their strategies, let’s examine two of the leading property groups based in Singapore. (These are not stock recommendations)

CapitaLand, which owes its heritage to DBS Land and Pidemco Land, is a favourite with institutional and retail investors. With the financial backing of Temasek, CapitaLand represents exposure to a variety of businesses including owning shopping malls and office buildings, especially in China. The much-publicised initial public offering of CapitaMalls Asia in 2009 allows investors to have a stake in a more focused aspect of property investing in China’s flourishing retail and office buildings.

Contrast CapitaLand with City Development, a respected property developer with significant ownership by the Kwek family. CityDev owns or manages hotels mainly in Europe, UK, New Zealand and Singapore under the Millennium & Copthorne brand, in addition to being a leading developer of residential properties in Singapore. As a component of the Straits Times Index like CapitaLand, CityDev has demonstrated steady earnings over the years without being too aggressive in its business strategy. Hypothetically, an investor in direct shares would be able to identify a few solid firms that collectively offer diversification and coverage of the various market sectors such as retail, office, residential, industrial and hotel operations both in the region and around the world. Exposure to property via direct shares does bring with it the added thrills and spills of investing in the stock market whereas direct ownership of bricks and mortar is an experience that is unique to a particular location or city.

Reits

Real estate investment trusts (Reits) have come a long way in Singapore since the 2002 IPO of CapitaMall Trust. In general, Reits minimise corporate level tax as long as they distribute substantially all of their taxable income to unit-holders in the form of dividends. This makes Reits a high-dividend yield play relative to other asset classes.

Investors who are seeking regular income as an investment objective should consider these securitised real estate vehicles. Currently, Reits may be adversely affected by the lack of capital access and investor perception of financial markets rather than operating fundamentals. Nevertheless, low yields in broader debt markets may be an indicator of higher real estate valuation in the future. Reits presently trading at a premium to net asset value may be reflecting the improved earnings potential of the underlying properties.

Property unit trusts

For investors who are seeking long-term capital gain and regular income distribution from quoted securities of property companies, unit trusts investing in the real estate sector are the third option. These unit trusts may also invest in Reits, physical real estate and in debt securities of real estate companies. In the local retail market, these products are global property funds with little concentration in Asia. Local investors will need to combine globally diversified property unit trusts with shares and Reits listed in Singapore to achieve the outcome of country bias as part of the individual’s liquid investment portfolio. Global property funds have returned about 40 per cent in 2009 but the two-year average cumulative return was around -19 per cent as measured by the UBS Global Investors Index in USD. (For context, the STI was -20 per cent, CapitaLand -30 per cent and CityDev -20 per cent over the last two years). The sub-prime mess and the ensuing credit crisis resulted in the poor near-term performance of global property funds. If the global economic recovery is sustainable in the near term, one possible conclusion is that beaten down properties in the developed economies are likely to appreciate in value in tandem with equities. For a moderate-risk long-term investor, about 10-15 per cent of the total liquid investment portfolio must surely include property unit trusts, Reits and direct shares.

Singapore residential property

Bricks and mortar investing includes local and overseas residential, commercial and retail properties. For local readers, the fourth way of investing in property will focus on owning private residential property in Singapore. When people talk about property investing, this is the default option. The fact that resale HDB apartments today are changing hands at prices above 1996 is definitely a red flag for potential buyers of private residential properties across the island. No doubt the government imposed cooling measures in 2009 but the demand for new low and mid-priced private property this year will further attract the attention of policymakers if the trend continues.

So why do Singaporeans chase after private property when the market is hot? Ego, overconfidence and sheer greed are the usual suspects. There is little regard for reasonable pricing when citizens and foreigners participate in a feeding frenzy in a compact market. If the aim is to make a tidy sum in a matter of months, this is a dangerous game to play. Holding power must be assured for at least five years in the event the market tanks by 20 per cent or more in a scenario of bland economic recovery in the months ahead.

The accompanying chart is a subjective assessment of each method of property investing based on five criteria. The aim is to decide intuitively if there is a case for bricks and mortar real estate to be in the top two preferred approaches. Unless you have a million dollars in the bank, the typical property buyer will have to carry a mortgage. Debt is a horrible thing when the leveraged asset’s value takes a dive. Also, if interest rates creep up, the rental income may not be adequate to service the debt repayment. Finally, there is the small matter of finding tenants in a limited market and managing the property as landlord. Here is a tip to set a benchmark for you on whether the planned investment in bricks and mortar will be worth the risk and trouble. If you are confident that you can earn two or three times your combined annual income from the capital gain (on a cash-flow basis, not the difference between buying and selling prices) within five years of owning the investment property, then you have done well. If the idea is to acquire an asset as a hedge against inflation with a passive income stream, then don’t expect double-digit total returns (capital gain and net rental income) in the long term. Most investors underestimate the risk and overstate the returns from real estate. In conclusion, we can agree that real estate is an essential ingredient to a portfolio’s asset allocation.

The historical low correlation of property with equities and bonds will come in handy as part of risk management. Investing in bricks and mortar requires excellent timing and sensible valuation both to buy and sell. The lack of liquidity is a serious handicap for investors who may need to raise cash. There is no denying that the realisation of a windfall from the appreciation of bricks and mortar gives owners an emotional high. For peace of mind, however, do consider the merits of alternate exposure to property over and above the home you live in.

The writer is Foundation Adviser at ipac Singapore. The opinions expressed are personal and do not represent the corporate policy or opinion of ipac financial planning Singapore private limited. Before making an investment decision, you should speak to a financial adviser to consider whether this information is appropriate to your needs, objectives and circumstances

Source: Business Times, 11 Jan 2010