singapore property weekly issue 208

8/9/2019 Singapore Property Weekly Issue 208

1/17

Issue 208Copyright © 2011-2014 www.Propwise.sg. All Rights Reserved.

http://www.propwise.sg/http://www.propwise.sg/


2/17

ContributeDo you have articles and insights and articles that you’d like to share

with thousands of readers interested in the Singapore property

market? Send them to us at [email protected] , and if they’re good

enough, we’ll publish them here, on our blog and even on Yahoo!

News.

AdvertiseWant to get your brand, product, service or property listing out to

thousands of Singapore property investors at a very reasonable

cost? Head over to www.propwise.sg/advertise/ to find out more.

CONTENTS

p2 9 Key Factors that Impact Mortgage

Interest Rates

p10 Singapore Property News This Week

p16 Resale Property Transactions

(April 29 – May 5 )

Welcome to the 208th edition of the

Singapore Property Weekly .

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

mailto:[email protected]://www.propwise.sg/advertise/http://www.propwise.sg/advertise/mailto:[email protected]


3/17

SINGAPORE PROPERTY WEEKLY Issue 208

Page | 2Back to Contents

By Paul Ho (guest contributor)

The interest rate a bank charges you is the

reward for taking a risk with their capital on

you as a borrower. The interest rate is often

referred to as the “cost of funds” or hurdlerate.

What are the key factors that affect mortgage

interest rates? In this article, we will examine

many of the factors that affect this critical

rate, especially in view of the potential

Federal Reserve tapering that could push upinterest rates as early as later this year.

9 Key Factors that Impact Mortgage Interest Rates


4/17



1. Risk to Capital

If the lender perceives a higher default risk on

its capital lent out, it will demand a higher

interest rate. This can come from shocks tothe financial system from within the country or

beyond. As the world’s financial systems are

increasingly interlinked, any credit event far

away can increase potential default risk.

2. Demand for funds

The increased demand for funds, when it

outstrips the supply, will also cause interest

rates to rise. The genuine demand of funds

comes from the industry’s need for

investment. The industry will borrow money

for investments if they think their investmentreturns can better the interest rate. This type

of capital demand can help a country

increase its productive capacity.

The other types of demand for funds are for

household consumption such as housing

mortgages, car loans, renovation loans or

personal consumption.

3. Supply of funds

The supply of funds varies in each country.

The supply of funds can come in local

currency or foreign currency. The supply of

funds generally comes from banks. The

banks in turn receive their funds from equityand depositor’s funds. These funds are then

lent out to borrowers, lessing off capital

reserves requirement such as BASEL III to

maintain the stability of the banks via a capital

adequacy ratio.

Financial institutions having excess capital

may then lend these funds to other financial

institutions on an overnight basis,


5/17



1 month, 3 months, 6 months and so on. This

is referred to as the interbank rate or

benchmark interest rate. In Singapore it is

referred to as the Sibor rate; in London, it is

referred to as the Libor rate; in the USA it is

referred to as the Federal Funds Rate

(overnight rate).

The supply of funds in a country depends on

the money supply and the amount of

depositor’s funds within a financial system. And in recent decades, the availability of

credit (debt) also increases the supply of

funds and is further complicating the issue of

funds availability. The effect of credit (debt) on

the supply of funds is not fully understood.

4. Government Intervention

A regulator or central bank usually intervenes

in the overnight funds market. The effects of

intervention then filter through to the rest of

the tenures of the interbank lending rate.

5. Core Inflation and headline inflation

Core inflation measures inflation over a

longer period of time for a constant basket of goods. Headline inflation measures the

current inflation rate and can be impacted by

short-term supply and demand imbalances,

causing temporary spikes and troughs in

pricing. Every country varies in the way they

measure inflation.

When Core Inflation is on an uptrend, it can

start to erode purchasing power and may lead

to intervention via increasing interest rates.

Core inflation can rise when a nation is

approaching full employment. Two mainfactors that contribute to the increase in

disposable income are: 1. Higher total

employment 2. Higher wages due to labour

crunch.


6/17



More disposable income can push up prices

of goods and materials. “Full employment”

seems to be around 4% for the US economy.

Interest rates may have to rise to cool down

the economy.

Ch ar t: USA & UK Un em p lo y m en t Rat e 1990 to 2015, (So u r c e: Tr ad in g

E c o n o m i c s )

6. GDP growth

When a country’s total gross domestic

production grows too quickly, it can cause

Core Inflation to rise. For example, if a

country’s GDP grows by 5% and inflation

grows by 6%, this means that the country has

negative real growth. When an economy

grows at a fast rate, it is usually accompanied

by a higher inflation rate as industry clamours

for limited supplies of raw materials andpushes production toward or beyond capacity.

If income does not keep pace with inflation,

this can cause social unrest. A regulator may

hence pull the brakes on the economy by

increasing interest rates to cool the economy.

Generally interest rates should somewhattrack inflation, i.e. high inflation leads to high

interest rates. However, interest rates can be

kept at a certain level for an extended

duration of time through intervention.


7/17



7. Cross-border Interest Rates

As the world’s major economies are

increasingly interlinked, policies and

regulations in other countries may affect

another country. If interest rates are rising

globally, then all connected economies will be

affected. Funds may then move away to seek

higher returns via higher interest rates (all

factors being equal).

C h ar t : U S A O v e r n i g h t F e d f u n d s r a te V s

Si bor overni ght rate (Source: i Econom i cs)

By observation of the chart of the US

overnight fed funds rate versus the Sibor

overnight rate, we can see that these two

economies have correlated interest rates

movements.

8. Funds Flows and Exchange Rates

The movement of capital across the globe

has implications on each country’s economy.

Some developing countries have a higher

percentage of corporate and household debtdenominated in foreign currency and,

therefore, are at a greater risk from sudden

funds withdrawal from their markets. Money

supply in local currency may also suffer from

withdrawals of deposits and repatriation of

profits to foreign markets.

The exchange rate plays an important role for

investors parking their funds in any country. If

the investment currency is expected

SINGAPORE PROPERTY WEEKLY I 208


8/17



to weaken significantly against the investor’s

base currency, investors may then decide to

withdraw their funds from the invested

currency.

Interest rates may have to rise when funds

become scarce. Alternatively, some country’s

regulator or banks may have mechanisms to

react preemptively to raise interest rates to

cushion against a weakened currency by

increasing interest rates.Many countries regulate the economy by

varying the interest rates to regulate the

speed of the economy. These monetary

policy levers are effective for countries with a

large domestic economy relative to trade,

such as the USA where trade accounts for 13.5% of the GDP in 2013 (World Bank)

9. Shocks to the Financial System

Shocks to the financial system (systemic

risks) may cause bankruptcies and defaults.

There are many possible shocks to the

financial system - just to name a few:

i. Exchange Rate Volatility via Quantitative

Easing

Quantitative Easing (printing money) leads to

currency devaluation. A currency which is

devaluing may need to raise interest rates to

slow down its devaluation as compensation to

investors for holding the currency. Financial

institutions and fund houses with un-hedged

cross currency borrowings may end up

bankrupt leading to a cascade of possible

defaults. A case in point was the recent

unexpected de-pegging of the Swiss franc to

the Euro, which caught many by surprise).

SINGAPORE PROPERTY WEEKLY I 208


9/17



C h a r t : E u r o s p e r 1 C H F 2 0 1 0 t o M a y 2 0 1 5

(Sourc e: XE)

ii. Sovereign Debt Defaults

Slow economic growth and high sovereign

debt especially in European nations are risky.

Budget deficits could cause potential defaults. Any possible risk of default or downgrade of

the economy could cause interest rates to

swing upwards further escalating risks.

Sovereign bonds could become worthless

causing a cascade of asset losses and

bankruptcies for investors.

iii. Other Troubled Assets and Toxic

Assets

Banks typically hold very little equity and are

over-leveraged. Hence asset depreciation or

write-downs (in the form of loss of asset

value) could make the banks insolvent.

Hence, the Basel Accord was formed to

mandate minimum reserve liquidity in theworld’s banking systems. The increase in the

minimum capital adequacy ratio (CAR)

means that the banks will have less capital to

lend out and hence banks may demand

higher interest rates.

Summary

The above are some of the key factors that

affect interest rate movements. It is hard to

decipher and predict the time frame of



10/17



interest rate movements. Many credit events

and unexpected shocks could happen which

would severely impact interest rates.

Hence borrowers should not expect interest

rates to remain at their current low rates

forever, and should be cautious of over-

leveraging themselves.

By Paul Ho, holder of an MBA from a

reputable university and editor of

www.iCompareLoan.com, Singapore’s first Cloud-based Home Loan reporting platform

used by Property agents, financial advisors

as well as Mortgage brokers.


http://www.icompareloan.com/http://propertymarketinsights.com/http://www.icompareloan.com/http://www.icompareloan.com/http://www.icompareloan.com/http://www.icompareloan.com/http://www.icompareloan.com/


11/17


Singapore Property This Week


Residential

April’s r e s a l e p r i c e s o f c o n d o s f a l l b y 0 . 7

p e r c e n t m o n t h - o n -m o n t h

According to flash estimates by SRX

Property, resale prices of condominium units

have fallen by 0.7 percent in April from the

previous month. Nonetheless, about 440

private non-landed homes changed hands in

April. This was 2.7 percent lower than in

March, where 452 units changed hands.

Eugene Lim from ERA Realty said that the fall

in resale volumes was due to an increase in

new launches. Particularly in April, there were

two new launches in Yishun and Bartley. Lim

believes that as prices stabilise, demand for

resale units will increase. According to theBusiness Times, in April, resale prices of

condominium units in the core central region

and outside central region fell by 0.1 percent

and 1.5 percent respectively. However, resale

prices of condominium units in the rest of

central region increased by 0.4 percent during

the same period. Wong Xian Yang from

OrangeTee said that despite the price falls,

transaction volumes have not picked up

because buyers hesitate to return to the

resale market. Not only so, given the stable

economy, sellers have been able to hold on to

their properties.

(Source: Business Times)



12/17



HD B r en ts i n A p r il f al ls b y 0.7 p er c en t

f r o m M a r c h

In April, HDB rents have fallen by 0.7 percent

month-on-month according to flash estimates

by SRX. Also, during the same period, HDB

rental volumes have fallen by 13.2 percent to

1,705 units in April from 1,964 units in March.

Four-room, five-room and executive flats saw

a 0.9 percent, 1.3 percent and 0.4 percent dip

in rents respectively. However, three-room

flats saw an increase in rents by 0.4 percent.

On the other hand, private residential rents

have remained flat in April compared to

March. Rental volumes for private homes

have also fallen by 11.9 percent month-on-

month in April. Private residential rents in theprime city area have increased by 0.7

percent, while rents in the city fringe and the

suburbs have fallen by 0.1 percent and 0.7

percent respectively. According to Ong Kah

Seng from R’ST Research, the low rental

volumes show that tenants are still finding

rental prices high. Lastly, Ong predicts that

condo rents will fall by up to 7 percent this

year.


E C i n J u r o n g l a u n c h e d a t i n d i c a t i v e p r i c e

of $800 psf

Westwood Residences, an executive condo

in Jurong, has been launched. The project,

which consists of 480 units, has been priced

at $800 psf according to the Business Times.

The project boasts of its bike-themed features

such as a two-tier bike garage for 500

bicycles. Not only so, the development will

contain a bike maintenance area that will

consist of repair tools and bike stands. Also,

the residential estate will feature a “BMX

adventure” park that is child-friendly.



13/17



There will also be an indoor gym, a pool and

other facilities. According to the Business

Times, the project has a 99-year lease. It

comprises of 28 two-bedders, 62 three-

bedders, 98 four-bedders and 28 five-bedders. The project will be the second

executive condominium in 18 years to be

developed in Jurong.


March’s l u x u r y h o m e p r i c e s f a l l b y 1 2 .6 %

A study by Knight Frank shows that prices of

luxury homes in Singapore have taken the

hardest hit among the 35 cities in the study.

According to the Prime Global Cities Index,

luxury home prices in Singapore have fallen

by 12.6 percent year-on-year by the end of

March this year. On the other hand, Geneva

and Zurich came in next with a 5 percent fall

in prices of luxury home. In general, the index

increased by 3.9 percent year-on-year to

March 2015. San Francisco saw the largest

increase in luxury home prices as prices

surged by 14.3 percent year-on-year till

March. Alice Tan from Knight Frank said thatthe cooling measures that were implemented

by the government had curbed demands in

the luxury home market in Singapore.


April’s i n c r e as e i n d e v e l o p er s a l es h i g h e s t in 11 mont hs

In April, the increase in developer sales for

private homes, excluding executive

condominiums has hit a new high in 11

months as 1,124 units were sold in April.

However, due to a lack of major launches in

the coming months, market experts believe

that this trend will not be sustained in the

coming month.



14/17



According to market experts, the 83.4 percent

increase in developer sales in April from the

613 units sold in March, was due to the

launch of two major projects in Yishun and

Bartley. Ong Teck Hui from JLL said that it isstill too early to say if the market has

recovered. Chia Siew Chuin from Colliers

added that buyers have flocked to the two

major launches due to the prime location of

the projects and their reasonable pricing.

Eugene Lim from ERA Realty said thatcooling measures such as the total debt

servicing ratio framework and the additional

buyer’s stamp duty have curbed buyers’

interest. As such, he believes that buyers are

still price sensitive. As the number of

launches slows down in the coming months,

Chia believes that sales volumes in May will

be around 400 to 700 units.


Commercial

Hig h-s peed r ai l t er m in us t o r ep lac e

J u r o n g C o u n t r y C l u b

The Jurong Country Club will be torn downand developed into a terminal for a high-

speed rail link to Malaysia. According to Tan

Boon Khai, the chief executive of Singapore

Land Authority, the Jurong Country Club will

not be offered a replacement site following its

acquisition, which was made under the Land Acquisition Act. The 67-ha site will be handed

over in November 2016. According to the

Business Times, part of the site will be

redeveloped into a mixed-use precinct

comprising offices, retail outlets, hotels and

homes. Chew Men Leong from the LandTransport Authority said that most of the

infrastructure for the high-speed rail will be

built underground.



15/17



Slated to be completed in 2025, the Jurong

Region Line and the Cross Island Line which

is to be completed in 2030, will be located

near the high-speed rail terminal, said Chew.



http://www.moneymatters.sg/


16/17

S G O O ssue 08


Non-Landed Residential Resale Property Transactions for the Week of Apr 29 – May 5

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 PEOPLE'S PARK CENTRE 1,701 1,205,000 709 99

2 THE BEACON 969 1,330,000 1,373 99

3 QUEENS 1,410 1,825,000 1,294 99

4 CARIBBEAN AT KEPPEL BAY 840 1,468,888 1,750 99

4 CARIBBEAN AT KEPPEL BAY 2,691 4,398,000 1,634 99

4 CARIBBEAN AT KEPPEL BAY 1,206 1,850,000 1,535 99

4 HARBOUR VIEW TOWERS 1,615 1,500,000 929 99

5 THE ROCHESTER 1,206 1,670,000 1,385 99

9 ESPADA 560 1,160,000 2,072 FH

9 111 EMERALD HILL 2,497 5,118,850 2,050 FH9 VIDA 850 1,660,000 1,952 FH

9 SCOTTS HIGHPARK 1,141 2,180,000 1,911 FH

9 WATERMARK ROBERTSON QUAY 904 1,700,000 1,880 FH

9 THE IMPERIAL 1,410 2,590,000 1,837 FH

9 THE EDGE ON CAIRNHILL 2,142 3,828,000 1,787 FH

9 THE PATERSON 1,421 2,500,000 1,760 FH

9 MIRAGE TOWER 1,744 2,800,000 1,606 FH

10 ONE TREE HILL RESIDENCE 1,227 2,294,490 1,870 FH

10 PARVIS 1,701 3,100,000 1,823 FH10 ONE CHATSWORTH 3,305 6,000,000 1,816 FH

10 ZENITH 560 990,000 1,769 999

10 NATHAN PLACE 1,130 1,850,000 1,637 FH

10 PROXIMO 1,119 1,750,000 1,563 FH

10 BOTANIC GARDENS MANSION 1,399 2,150,000 1,536 FH

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

10 ALLSWORTH PARK 1,033 1,520,000 1,471 999

11 SUITES @ SHREWSBURY 344 640,000 1,858 FH

11 SOLEIL @ SINARAN 958 1,668,000 1,741 99

11 THE LINCOLN RESIDENCES 1,841 2,828,888 1,537 FH

11 LION TOWERS 1,862 2,700,000 1,450 FH

11 MEDGE 861 1,150,000 1,335 FH

11 WATTEN HILL 2,626 2,750,000 1,047 FH

11 TREASURE LOFT 1,539 1,360,000 884 FH

12 TRELLIS TOWERS 1,647 2,050,000 1,245 FH

12 D'LOTUS 807 950,000 1,177 FH14 DAKOTA RESIDENCES 1,894 2,530,000 1,335 99

14 EVERGREEN VIEW 1,281 1,240,000 968 FH

14 EUNOS MANSION 1,453 1,090,000 750 FH

15 WATER PLACE 1,227 1,570,000 1,279 99

15 RIVEREDGE 1,335 1,635,000 1,225 99

15 EAST VIEW 883 1,078,000 1,221 FH

15 ST PATRICK'S GREEN 1,087 1,290,000 1,187 FH

15 MANDARIN GARDEN CONDOMINIUM 1,001 1,080,000 1,079 99

15 KATONG PARK TOWERS 1,475 1,238,000 840 9916 THE SUMMIT 1,249 1,320,000 1,057 FH

16 TANAH MERAH MANSION 1,044 970,000 929 FH

16 AQUARIUS BY THE PARK 1,206 1,030,000 854 99

17 THE GALE 1,152 1,080,000 938 FH

17 AZALEA PARK CONDOMINIUM 1,507 1,150,000 763 999



17/17


NOTE: This data only covers non-landed residential resale propertytransactions with caveats lodged with the Singapore Land Authority.Typically, caveats are lodged at least 2-3 weeks after a purchasersigns an OTP, hence the lagged nature of the data.

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

18 SAVANNAH CONDOPARK 1,453 1,235,000 850 99

19 TANGERINE GROVE 1,281 1,500,000 1,171 FH

19 A TREASURE TROVE 775 880,000 1,135 99

19 HILLSIDE MANSIONS 1,195 1,020,000 854 FH

19 CHILTERN PARK 1,302 1,075,000 825 99

19 RIO VISTA 1,378 1,090,000 791 99

20 THOMSON V TWO 452 690,000 1,526 FH

20 FABER GARDEN CONDOMINIUM 2,120 2,250,000 1,061 FH

20 GRANDEUR 8 1,249 1,200,000 961 99

20 FAR HORIZON GARDENS 1,292 920,000 712 99

21 FLORIDIAN 872 1,350,000 1,548 FH

21 THE NEXUS 1,378 1,980,000 1,437 FH

21 ASTOR GREEN 1,528 1,500,000 981 99

21 SIGNATURE PARK 1,389 1,290,000 929 FH

21 MAYFAIR GARDENS 1,765 1,400,000 793 99

21 PINE GROVE 1,744 1,365,000 783 99

22 THE MAYFAIR 1,389 1,180,000 850 99

22 LAKEPOINT CONDOMINIUM 2,217 1,130,000 510 99

23 HILLINGTON GREEN 1,755 1,720,000 980 999

23 MERA WOODS 1,830 1,540,000 842 999

23 HILLVIEW REGENCY 969 800,000 826 99

25 PARC ROSEWOOD 431 560,000 1,301 99

28 NIM GARDENS 1,830 1,582,000 865 FH

28 SUNRISE GARDENS 2,067 1,399,000 677 99

28 SELETAR SPRINGS CONDOMINIUM 2,067 1,230,000 595 99

singapore property weekly issue 208

Documents