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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/
8/9/2019 Singapore Property Weekly Issue 208
2/17
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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]
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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
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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,
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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.
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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.
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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
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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).
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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
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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.
SINGAPORE PROPERTY WEEKLY Issue 208
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/
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Singapore Property This Week
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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)
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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.
(Source: Business Times)
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.
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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.
(Source: Business Times)
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.
(Source: Business Times)
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.
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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.
(Source: Business Times)
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.
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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.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 208
http://www.moneymatters.sg/
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S G O O ssue 08
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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
DistrictProject Name
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
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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
DistrictProject Name
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