Home loans in era of SORA

In perhaps the biggest shake-up for the mortgage landscape, the Monetary Authority of Singapore (MAS) launched the landmark interest rate in 2021 – SORA (Singapore Overnight Rate Average). This shift is considered a massive game-changer, and could have major impacts on existing home-owners and home buyers. So read on to find out what is this SORA is all about and how it may affect your financial decisions if you are looking at taking new home loans, refinancing or repricing of home loans.

SORA

Thus far, the US Federal Reserve has hiked interest rates by a total of 0.75% in 2022. Against the backdrop of record inflation rates in US, the Federal Reserve has also signalled their intention to increase interest rates further in the coming months. Incidentally, the rising interest rates take place at a time when MAS mandates the roll-out of SORA and discontinuation of SIBOR (Singapore Interbank Offered Rates) by 2024.

In the past, the volatility of US interest rates usually led to corresponding volatility in the SIBOR rates. However, with SORA, the situation has changed a fair bit as SORA works quite differently to SIBOR.

Before proceeding to explain what is exactly the difference between SORA and SIBOR, you should take note of the key dates:

31 March 2022 – 6-month SIBOR have ceased

31 Dec 2024 – 1-month and 3-month SIBOR will cease

Those who were on 6-month SIBOR home loans should have been notified by their banks to convert their loans. Anyway, the demands for 6-month SIBOR were typically not high. Thus, the affected borrowers should be quite few. For borrowers on loans that reference 1-month or 3-month SIBOR, details of your loan conversion will be released in due course, given that these benchmarks will only be discontinued after 31 December 2024. In any …

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CPF accrued interest may lead to HDB negative sale?

In Singapore, many people use their CPF Ordinary Account (OA) savings to pay for their property loan instalments. Fundamentally, there is nothing wrong with this approach. I have been doing this since I bought my first property in 2010. Then again, it is important to be mindful of the amount of CPF accrued interest because it may lead to negative sale when you disposed your property.

Due to the HDB lease decay issue, the prospect of facing HDB negative sale is very real for some HDB owners in recent years. This is especially so for those who owned ageing HDB flats. What is HDB negative sale and how does CPF accrued interest play a part in it? In this article, I will explain why it is important to factor in the CPF accrued interest when you buy and sell properties.

CPF accrued interest

CPF accrued interest and its dark side

CPF’s rule is that whatever amount of CPF savings you take out for housing or education purposes, you must refund the amount with compound interest. The rationale is that our CPF savings is primarily meant to fund our retirement needs. This is akin to borrowing money from your own retirement fund and paying back yourself with interest. The accumulated interest is CPF accrued interest.

And what is exactly negative an HDB sale? It means that after you sold your HDB flat, the resale price is sufficient to pay off the outstanding HDB or bank loan but not enough to fully refund the CPF principal amount plus the CPF accrued interest. In this situation, besides having no cash proceeds from the transaction, you may even require to top up the shortfall in cash to your CPF account if your property is sold below market value.

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According to CPF rule, there is also a difference …

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Sengkang Grand Residences a dream or nightmare for buyers?

When CapitaLand and City Development (CDL) teamed up to develop the 3.7 hectares residential site next to BuangKok MRT station in 2018, it promised to be a match made in heaven. Indeed, there was tremendous market hype as the two developers are the big boys in the real estate sector. The last time the two titans combined forces was in 2007 for the Botannia project in West Coast. Thus, it is not surprising that Sengkang Grand Residences became the best-selling integrated project in 2019.

But what raised plenty of eyebrows was the strong response shown during the launch day of Sengkang Grand Residences. 216 of the 280 units had been sold at an average price of $1,700 per square feet (psf). Prices for the integrated project start from $798,000 for a one-bedroom plus study unit, $998,000 for a two-bedroom, $1.498 million for a three-bedroom, and $2.1 million for a four-bedroom premium plus flexi. With such selling prices for Sengkang Grand Residences, one could be forgiven for thinking that it is a seller’s market now. But is it really so?

Sengkang Grand Residences

The selling prices of Sengkang Grand Residences are certainly mind-blowing. After all, the block-buster performance came against the backdrop of a slowing economy in Singapore. With retrenchments so rampant in Singapore, market sentiments had been extremely cautious for the past two years. But what made the launch performance of Sengkang Grand Residences standout was that 93% of the buyers are Singaporeans.

In my view, I suspect the strong buying support from Singapore buyers for Sengkang Grand Residences could come from a group of buyers – the en bloc beneficiaries. The period of 2016 – 2018 saw a slew of en bloc sales taking place in Singapore. Loaded with million-dollar windfalls, these group of people will need to look for replacement …

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Investing in overseas properties

In the aftermath of the 2009’s Great Financial Crisis, interest rates had remained very low, driving Singapore wealth builders to look to overseas properties that generate high returns. In addition, the implementation of Additional Buyer Stamp Duty (ABSD) has also led to many wealthy Singaporeans to invest in overseas properties in United Kingdom, Malaysia and United States. In this article, the risks of investing in overseas properties are discussed.

Before we talk about returns, it is important to think about the risks of owning a foreign property. Context is important because investing in properties in Singapore is very different as compared to investing in overseas properties.

In life, if it is too good to be true, it probably is. Henceforth, I always believe in taking care the downside risks and let the potential upsides do the talking itself. Broadly speaking, the downside risks are geopolitical, regulatory and market supply.

Geopolitical risk

Unlike many countries, Singapore has a very stable government with strong ruling party. This is an important factor because investors do not like uncertainties arising from a change of government or major upheaval in the political environment, which often leads to new policies for property ownership for foreigners.

Brexit is a prime example. Following United Kingdom’s referendum to leave European Union in 2016, many analysts predicted that the home prices would slow in 2018. It is still early days to gauge the impact of Brexit on United Kingdom’s property’s prospect but in the run-up to 2019 [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Freehold or Leasehold Property?

One of the most often raised questions among property investors is whether to purchase a leasehold or freehold property in Singapore. While many would argue that freehold is definitely better than leasehold because of the perceived perpetual ownership, this argument may not hold water in Singapore due to the Land Acquisition Act.

In this article, I would share my views on freehold property in Singapore. Once again, I am putting a disclaimer that this article is not meant to be a form of financial nor legal advice. The content is produced to the best of my knowledge and research. If there are any factual errors, please feel free to let me know. I would be happy to amend my article.

Leasehold property

Generally, 99 years old leasehold property must be returned to the government upon expiry of lease. In March 2017, Minister for National Development, Lawrence Wong, highlighted specifically that all leasehold private and public housing will be returned to the state upon expiry. Due to land scarcity, the government needs to recover land to meet changing social needs.

Effectively, this means that home-owners will [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Read my other articles on property:

  1. Negative HDB sales
  2. Wealth destruction from CPF Accrued Interest
  3. Devastating HDB Loan and CPF Accrued Interest
  4. CPF’s Home Protection Scheme (HPS)
  5. The Dark Side of CPF Housing Withdrawal Limit

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Deferred Resale Levy

According to Minister for National Development, Lawrence Wong, there were 7900 second-timer households who paid the required resale levy when buying second subsidized flat from the Housing and Development Board (HDB) from 2010 to 2015. Notwithstanding the figure, I suspect many people are not aware of the lurking dangers of deferred resale levy rule.

Not knowing the rule can cost you an arm or leg because without the knowledge, you are unable to strategize and do proper asset planning. In this article, I will share with readers how to exploit the deferred resale levy rule with the goal of building wealth with property.

Please note that I am not advocating anything illegal or sleazy. No, nothing of that sort. In fact, this information that you are going to read is something that you are not likely to find in most personal finance blogs. I learnt about this relatively unknown rule in the course of purchasing my third property and hope to share this really useful information with readers. Read on if you are interested.

Deferred Resale Levy

Second timer applicants

Most Singaporeans are aware that they are given two chances to purchase new subsidized flat from HDB. Hence, Singaporean couples can apply twice for Build-to-Order (BTO), Design, Build and Sell Scheme (DBSS) or Executive Condominium. In essence, an eligible Singapore Citizen is allowed to buy these properties twice in total, BUT not twice per type of property.

What this means is that a Singaporean can buy BTO and then DBSS or EC. However, he is not eligible to buy BTO and then BTO. In addition, if you have already bought 2 such properties, you will not be eligible to apply for an EC or be listed as an essential occupier in an application. These information is stated in the HDB website …

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Managing your CPF proceeds from the sale of HDB flat to build your wealth

My wife and I have been house-hunting for the past few years and recently just decided to purchase an Executive Condominium (EC). The desire to upgrade to an EC is because of the new addition to our family. With the arrival of my boy, we need a bigger space. But the key motivation behind this move is basically I want my children to grow up in a better environment. I always feel that people living in HDB three room flats come from “challenging” backgrounds – drug addicts, ex-convicts, etc. I know it is too sweeping to make this sort of statement as I have been living in HDB three-room flat for more than 30 years. But as parents we all want the best for our kids. So in today’s article, I shall note down how to manage CPF proceeds from the sale of HDB flat to build your wealth.

Selling your existing HDB and buying another resale HDB

Firstly, if you are buying EC, you can only apply for bank loans. HDB don’t offer loans to EC owners. Nevertheless, before I touch on the financial aspects for buying EC, I will like to touch on the finances for buying a second resale HDB flat. We toyed with the idea of upgrading to a resale HDB 5-room flat last year but decided not to do so after much consideration. We don’t find it worth-while to pay $500,000 to $600,000 for an HDB resale 5-room flat. For slightly more, an EC with condominium facilities is more value for money. The payments involved are as follows:

  • Standard $1000 for option fee. $4000 for exercising the option fee.
  • If you are buying the flat at prices above the valuation, then you need to pay the Cash-Over-Valuations (COV)
  • Initial payment to HDB which is 10%
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HDB: The thin fine line between “Joint Tenancy” and “Tenancy-in-Common”

In Singapore, more than 80% of the residents live in HDB flats. Yet how many are aware of the various HDB regulations and its implications to themselves and their loved ones? Not knowing the rules can potentially land you in financial troubles, but may also cause family disharmony and destroy relationships. One of the most overlooked clause is the Manner of Holding, specifically, “Joint Tenancy” and “Tenancy-in-Common”. Read on if you are a joint owner of a HDB flat and is curious to find out how it can impact you.

When you are buying a HDB flat with your spouse or other family members, you would need to decide on the manner of holding the flat upon the transfer of flat ownership, either through joint tenancy or tenancy-in-common.

Technically, under joint tenancy, all the flat owners have an equal share in the flat. However, in the event of a demise of any joint owner, the right of survivorship applies and his interest in the flat would automatically be passed on to the remaining co-owners. This is regardless of whether the deceased joint owner has left behind a Will.

According to an example quoted from HDB’s website “Mr A, Mrs A (wife) and Mr C (son) own an HDB flat under joint tenancy. In the event of Mr A’s demise, the ownership of the flat will automatically be passed to Mrs A and Mr C.”

On the other hand, under tenancy-in-common, each co-owner holds [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Release of second half 2015 Government Land Sales (GLS) Programme

On 11 June 2015, the Singapore Government announced the second half 2015 (2H2015) Government Land Sales (GLS) Programme, which comprises 4 Confirmed List sites and 13 Reserve List sites. These sites can yield up to 7,825 private residential units, including 1,340 Executive Condominium (EC) units, and 277,580 sqm gross floor area (GFA) of commercial space.

Among the Confirmed List sites, Alexandra, Clementi and Siglap are expected to generate the most interest since they are located in matured estates. The Siglap site alone will generates about 750 units. Overall, the Confirmed List comprises 4 private residential sites (including 1 EC site) which can yield about 2,130 private residential units (including 520 EC units).

For the Reserve List, the Stirling site is bound to attract competitive bids from developers as it is located at the popular Queenstown area. The site can accomodate more than 1110 units. The Bedok South Avenue 3 site is also expected to generate interests among buyers as it is located near the Tanah Merah MRT and Bedok Town Centre. The Reserve List comprises 8 private residential sites (including 1 EC site), 2 commercial & residential sites, 2 commercial sites and 1 White site. These sites can yield about 5,695 private residential units as well as 275,580 sqm GFA of commercial space, mostly for office use.

The supply of private housing and commercial space from the GLS Programme, together with supply from projects in the pipeline, will be adequate to meet the demand for private housing and commercial space over the next few years.

There is an existing pipeline supply of about 84,000 private residential units (including ECs). So this release of land sales for private residential units might be a litmus test for developers. Given that buying interests among have cooled down under the current investment climate, developers …

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Property: Foreign Investment Opportunities

Below is a guest article contributed by Lamudi, a German properties listing company. Given the current cooling measures, many Singapore investors are turning their eyes on property market in South East Asia countries. Investors should be aware of the risks involved and the regulations in these countries to avoid losing monies in such investments.

2015 is predicted to be the year when many emerging markets in Asia such open up their property ownership to include foreigners. As it stands in many countries, non-citizens are prohibited from buying properties. For example, in Philippines the country’s constitution bans non-Filipinos from owning land and in Sri Lanka non-citizens pay more tax when they own any property.

However, there are signs that this may be about to change. 2015 will see countries in the Association of Southeast Asian Nations (ASEAN) merge to form a single market. The establishment of the ASEAN Economic Community is expected to boost foreign direct investment in the Philippines and also in untapped markets across the region, putting pressure on lawmakers to amend these ownership restrictions. This year, foreign ownership laws will also come into focus elsewhere in Asia, with debate set to continue in Indonesia and Myanmar about opening up the countries’ property sectors to international investors.

This is a sign of relief for real estate agents in some countries like Myanmar, who perceive lack of foreign investments to be one of the top 3 major constraints on the property market. A recent study conducted by leading property website House.com.mm, revealed that 24% of house hunters and real estate agents identified lack of external investments as a factor that prevents the property market from skyrocketing.

As a country, Myanmar has become increasingly attractive to foreign investors. Foreign Direct Investment (FDI) grew from $US 1.9 billion in the 2011-12 financial …

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(Sponsored Article) How to Finance an Overseas Property Investment

The current investment property landscape is rich with opportunities. The big question many have is if they should use financial leverage, and if so what international mortgages are available to them?
 
There are many ripening property investment opportunities around the globe. In many ways markets are experiencing an incredible aligning of the stars which provide the ideal timing for new income property acquisitions. Whether restructuring and optimizing an existing portfolio, or launching into real estate investing for the first time it is an attractive time to seize opportunities, ramp up property holdings, and it is always wise to be diversified.
 
Scaling a portfolio requires capital. Even for those who sometimes feel that they are burdened with too much capital, there are many advantages of using leverage to acquire more investment properties. This is even true today as global interest rates prepare to swing upwards.
So what international mortgages are open to global property investors today?
There are four main strategies for financing overseas investment properties to choose from.
 
Leveraging Existing Home Equity
Accessing home equity from an existing residence in a property investor’s home country may be one of the simplest solutions. This affords investors a straightforward, and easy to navigate process, often with streamlined processing. This is especially true for those with existing local banking relationships. Tapping into equity in a primary residence for investment purposes may not be highly recommended by many financial investment advisors for obvious reasons, and may be best suited to those planning to sell and relocate in the near future, as well as kept within moderation.
 
Lines of Credit
Both secured and unsecured lines of credit can be incredibly advantageous for financing overseas property. Lines of credit offer flexibility, eliminate third party hurdles to increase speed of action, enable investors to retain the benefits
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QE3 and opportunities for investors

Last week, the US Fed announced another round of money printing programme known as QE3. It was reported that US$40 billion of new money will be issued every month until the US jobs situation improves. Does this latest move by US government means opportunities for investors?
Since 2008, the US government had purchased trillions worth of Treasury securities, hoping to revive the economy and stimulate job growth. However, the strategy doesn’t seem to work and US unemployment remains stubbornly high at about 8%.
Opportunities

Muddling through the years
I am not surprised that the US Fed announced this QE3. This stimulus measure comes at a time when the US citizen is voting for a new president. President Obama’s job is on the line, so he has to make a last-ditch attempt to win votes and placate the citizen’s rising unhappiness over the persistenet high unemployment rate.

But whether this third round of money printing will be effective is a big question mark. The previous two round of money printing had flooded world wide markets with “hot money” but ultimately those moves were widey regarded as flops, in terms of job creation for the US citizens.
Yes, its true that QE1 and QE2 had helped US to avert financial disaster in 2008 – 2009 but until now, the US economy still remain in a state of limbo. I think the US economy will continue to languish and muddle through for the next few years until 2017.

Make money through US properties investment
So what opportunities does QE3 represent for Singapore investors? Well firstly, our local banks take the cue from US banks. So until 2015, the interest rates for borrowing will probably remain low. So it might be prudent for houseowners to shop around and refinance their home loans with the most

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