Don’t buy, don’t sell
Source : Straits Times - 6 Dec 2008
Sit tight and wait for recession dust to settle, say financial and real estate experts in a survey
PROPERTY investors here might feel like cutting and running but the best advice is to sit tight and hold on, according to a PricewaterhouseCoopers (PwC) report.
The report, now in its third year, asked about 180 experts from across the region - in fields from real estate to banking and property development - for their strategies on whether to hold their investments, buy more or sell.
Mr Stephen Blank, senior resident fellow of finance at the research firm Urban Land Institute, a co-publisher of the report, described the mood: ‘Interviewees say that we are in a wait-and-see mode, and everyone’s sitting on the sidelines waiting for the dust to settle.’
About 65 per cent of those polled urged investors in Singapore real estate to hold on to their investments in the hotel sector and in rental apartments.
‘Visitor numbers have been slipping, and in 2009, the hotel sector might not perform as well as 2008,’ said Mr Nicholas Mak, director of consultancy and research at Knight Frank.
‘Nevertheless, the mid-term outlook is still positive due to the many new offerings in the tourism and Meetings, Incentives, Conventions and Exhibitions (Mice) market, which resulted in the relatively high hold calls.’
Other sectors here, namely office, retail and industrial/distribution, each attracted hold recommendations from at least 50 per cent of those surveyed.
This was up on last year, when the hold recommendations varied from 29 per cent in the office sector to 48 per cent in the industrial/distribution sector.
The strongest buy recommendations came from the industrial/distribution sector, with 34.8 per cent of respondents urging investors to plough in more cash.
Mr Colin Tan, director of research and consultancy at Chesterton Suntec International, said: ‘The industrial sector is pretty diverse. Pockets of industries are doing well. This will help cushion the decline for the industrial sector.’
But there was a strong recommendation to steer clear of the residential rental sector, with only 11.6 per cent of respondents suggesting that now is the time to buy.
‘There are many owners whose units are completing in the coming 12 months. As supply outstrips demand, there will be intense competition, which will drive rents down,’ Mr Tan said.
The report also stated that the moment of truth has yet to arrive in the Asia-Pacific, indicating more gloom to come.
‘The biggest threat to Singapore, other than the squeeze on credit, is the seemingly generous pipeline of development projects which may be completed during a period of sagging interest from foreign investors,’ said Mr David Sandison, tax partner of PwC.
‘Apart from this, local players in retail and office space are also seeking to cut costs by downsizing and relocating to more affordable parts of the island.
‘Acceleration of government infrastructure projects and other measures aimed at buoying the economy should, however, be sufficient to stabilise the market.’
There was one bright spot in the report: Singapore maintained its second position from last year among 20 Asia-
Pacific cities for investment prospects. Tokyo was first.
Saturday, December 6, 2008
Tuesday, March 11, 2008
New form of deferred payment - but with a catch
Straits Times - March 11, 2008
By Fiona Chan
New form of deferred payment - but with a catch
Property developers and banks revive old scheme that involves interest absorption
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.
By Fiona Chan
New form of deferred payment - but with a catch
Property developers and banks revive old scheme that involves interest absorption
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.
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