Falling mortgage rates boost homebuilder confidence, but not new construction

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The nation’s homebuilders are feeling better about their business, as falling mortgage rates help more buyers afford homes. They are still not, however, building enough homes to meet demand.
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Credit lines get in trouble but diagnostic tools can help identify weaknesses

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Author: Ravi Philemon

There are many reasons why credit lines get in trouble. The following listing can be used as a diagnostic tool to identify the cause of a credit line problem.

By: Phoenix Lee/

credit lines get

Image credit: Hloom via Flickr

Solutions can be developed once problems have been identified. The listing can also be used as a prevention tool to identify potential weaknesses before they become a problem.

Failure to supervise the loan
Failure to supervise the loan by either the lender or the borrower is a common cause of credit problems. The loan should be monitored on a regular basis to insure that it will be properly repaid. Loan supervision is not the responsibility of just the lender but is also in the best interest of the borrower.

Lack of communication
Successful loan repayment is often based on open discussion between lender and borrower. Lack of communication and trust by either party often results in a breakdown of the business relationship.

A major reason why credit lines get in trouble.

Inefficient business
To generate sufficient income for debt repayment, the business must be well managed and achieve production efficiencies. To avoid repayment problems, the lender may want to monitor business and production efficiency.

Business too small
Credit lines get in trouble because the business may be too small to generate sufficient income for family living needs. The shortfall is often covered by short-term borrowing. However, the accrued debt makes the income deficiency even greater.

Failure to analyse the business
Debt repayment capacity is based on the ability of the business to generate income and cash flow. Failure to accurately analyze the income, expenses, and cash flow of the business may lead to errors in projecting debt repayment capacity.

Unrealistic prices and production levels
Unrealistic assumptions may lead to errors in analysing the repayment capacity of a loan. Typical errors pertain to estimates of selling prices and production or sales levels. However, poor assumptions about efficiency factors are also common.

Credit lines get in trouble because the borrower may intentionally use unrealistic assumptions in order to obtain or keep a line of credit. However, the use of unrealistic assumptions can also be unintentional. The borrower may not have sufficient business records or outlook information to realistically describe the business.

Lack of partial budgeting
Partial budgeting involves projecting the added costs and added returns from a capital investment. Unless partial budgeting or a similar procedure is used to estimate the additional income generated from the loan funds, the repayment capacity may fall short, and credit lines get in trouble. Just because a business decision involves new technology or is common among other farmers does not mean that it is profitable or financially feasible.

Uncontrolled living expenditures
Many small business owners are negligent about monitoring and controlling family living expenditures. Monitoring expenditures involves keeping records of the money spent for family living. Keeping the business and family financial transactions in separate checking accounts will often be helpful. Successful control of family living expenditures often involves developing and monitoring budgets of expected family living needs.

Lack of business direction
The planning horizon for many small business owners is often one production period. So, the business lacks any long-term goals or direction. This lack of long-range business planning is often accompanied by a lack of progress on long-term debt repayment.

Failure to structure repayment
If possible, the repayment terms of the loan should be tied directly to the additional income generated from the loan. Unless the loan repayment is structured and the additional income designated for loan repayment, the income will be spent elsewhere and the debt carried over from year to year.

Repaying debt too rapidly
Reducing debt as quickly as possible is often a good objective. However, trying to repay debt too rapidly may unnecessarily cause a shortage of cash for operations and credit lines get in trouble. The length of debt repayment should be tied to a conservative estimate of the life of the assets the borrowed funds were used to purchase.

Purchasing capital assets with cash
Using cash reserves to purchase capital assets may result in cash shortages in the future. Sufficient cash should be maintained to cover intermediate and long-term debt payments, income taxes, family living expenditures, and other items.

Buying non-productive assets
Using borrowed funds to purchase non-productive assets requires the repayment to come from other sources. The alternative repayment sources should be carefully identified in advance.

Carryover debt
Short-term loans that cannot be repaid are often carried over from one production period to the next. Unless properly monitored, carryover debt may grow until it jeopardizes the health of the business. Carryover debt is often too large to be repaid during one production period. It may need to be paid over a period of years. Progress should be made each year in retiring carryover debt.

Poor risk management
A cash buffer should exist between the projected repayment ability of the business and the business debt repayment schedule. For example, if the debt repayment schedule is based on the repayment ability in an average year, a shortfall will occur in low income years. This shortfall is often covered by borrowing additional money. Due to this additional debt, the total debt load cannot now be serviced in average years, and credit lines get in trouble.

Poor use of profit windfalls
An abnormally profitable year often provides additional income. However, the additional money is often consumed or used to purchase non-productive assets rather than repaying debts. As a result, when below average years occur in the future, there is no reserve for debt payments.

Using multiple credit sources
Small business owners often obtain credit from a variety of sources. Usually the larger the number of credit sources the more difficult it becomes to monitor overall debt repayment. Consolidating credit and reducing the number of sources may improve the ability to successfully project and monitor debt repayment.

Ignoring tax consequences
Although interest payments are tax deductible, principal payments are not. Debts must be repaid with after-tax income. This calculation needs to be included in the debt repayment analysis.

Selling assets to repay debt may also have significant tax consequences. The sale of low basis property may trigger a large tax liability and reduce the amount of funds available for debt repayment.

How to Secure a Business Loan Quickly

If you are searching for a business loan, the loan consultants at iCompareLoan can set you up on a path that can get you a it in a quick and seamless manner. Our loan consultants have close links with the best lenders in town and can help you compare various loans and settle for a package that best suits your needs. Find out money saving tips here.

Our Affordability Tools help you make better property buying decisions. iCompareLoan Calculators help you ascertain the fair value of a property and find properties below market value in Singapore.

If you are looking for a new home loan or to refinance, our Mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us for your business expansion needs.

Contact us for advice on a new home loan.

Contact us for home loan or refinancing advice.

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Nassim Road GCB bought by OUE Chairman for $95 million

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Author: Ravi Philemon

OUE announced through a regulatory filing on Aug 14 that its executive chairman and controlling shareholder, Dr Stephen Riady, is buying a Nassim Road GCB (good class bungalow) from a subsidiary – OUE Reef Development.

Nassim Road GCB

Dr Stephen Riady (Image credit: OUE)

The Nassim Road GCB is being bought for $95 million and is located at 26A Nassim Road

It has a land area of 3,182.0 square metres, and the tycoon is buying the plot together with the property being built by OUE Reef Development on the land.

OUE Reef Development successfully acquired in the plot on which the Nassim Road GCB sits in 2016, and subsequently development was undertaken. The Group obtained the temporary occupation permit for the property on 6 August 2019.

The Nassim Road GCB is valued on the basis of market value as at 25 June 2019 at $87 million and $85,5million by Cushman & Wakefield VHS Pte Ltd using the comparable sales method and Knight Frank Pte Ltd (collectively with Cushman & Wakefield VHS Pte Ltd, the “Valuers”) using the direct comparison method respectively. Based on the independent valuations of the Property by the Valuers as set out above, the average market value is approximately $86.25 million.

OUE said that the consideration for the sale of the Nassim Road GCB of $95 million is 10.1% higher than the average market value of the Property.

GCBs have been in the spotlight since news broke recently that Sir Dyson had forked out $41 million for a hilltop GCB located along Cluny Road with views of the Botanic Gardens, Singapore’s first and only UNESCO Heritage Site.

List Sotheby’s International Realty (List SIR) which reported on the purchase of Sir Dyson, noted that what makes this GCB deal an even greater surprise is that landed properties in Singapore, including the 2,800 plots located in the 39 GCB areas gazetted by the Urban Redevelopment Authority (URA), are classified as restricted properties and are limited for purchase and ownership by Singapore Citizens only. Besides their rarity, GCBs also come with strict planning conditions stipulated by the URA to preserve their exclusivity and low-rise character.

Even ultra high net worth investors, such as the Dysons, need to get special approval from the government to purchase and own GCBs because they are permanent residents. Criteria include making exceptional economic contributions in Singapore and the buyer can only use the GCB for owner occupation.

According to the Singapore Residential Property Act, foreigners are not allowed to own landed properties, which include bungalows. However, foreigners are allowed to own the bungalows at Sentosa Cove, a planned resort island to attract high-net-worth (HNW) foreign investors. Foreigners are allowed to own apartments in Singapore.

More recently, a GCB plot in the prestigious Nassim Road area was bought by SG Casa Pte Ltd for a record $230 million. The price for the sprawling land of 84,543 sq ft land works out to be S$2,721 psf. The plot of lands comes with a two-storey bungalow, a tennis court and swimming pool. The site has a road frontage that is nearly 100m, and can be redeveloped into four or five bungalows.

List SIR in referring to media report suggested that the party behind SG Casa could be Eduardo Saverin. Mr Saverin became a Singapore citizen in 2012.

Sir Dyson, who is chief executive of Dyson Ltd, had earlier bought the most expensive 99-year-leasehold penthouse situated on a 62nd to 64th floor in Wallich Residence. The three-storey penthouse comes complete with a private infinity pool, jacuzzi, barbecue pit, and private lift lobby.

Besides Dyson and Saverin, another famous name that has been making rounds in Singapore’s media landscape was Jack Ma, who is said to have purchased a 30,000 sq ft site at Victoria Park Close. The Alibaba co-founder is supposedly building a two-storey bungalow with a basement and swimming pool.

The report by List SIR said, ” in light of the geopolitical tensions in Hong Kong and United Kingdom, there could be increased interest from more foreign ultra high net worth investors, the likes of Sir Dyson. Singapore’s solid economic fundamentals, sound financial framework, ease of doing business, quality education and racial harmony continue to make it one of the choice locations for potential foreign investors.”

Mr Paul Ho, chief mortgage consultant at iCompareLoan, said, “with political stability, it is understandable why Singapore looks attractive to ultra high net worth investors. Due to its limited supply and the prestige associated with these large bungalow plots, GCBs are often sought after by well-heeled individuals.”

He added, “Singapore’s business-friendly environment also attracts many ultra high net worth investors to park their assets here. Prices of GCBs have been on a steady increase since 2016 and so it is viewed as a good investment.”

How to Secure a Home Loan Quickly

Are you planning to invest in properties but are ensure of funds availability for purchase? Don’t worry because iCompareLoan mortgage broker can set you up on a path that can get you a home loan in a quick and seamless manner. We are the experts who do the work for you for free, while you lean back, rest and rely on our professionalism at absolutely no cost to you.

Our brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs. Find out money saving tips here.

Whether you are looking for a new home loan or to refinance, the Mortgage broker can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us.

For advice on a new home loan.

For refinancing advice.

The post Nassim Road GCB bought by OUE Chairman for $95 million appeared first on iCompareLoan Resources.

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Private home developers sales rise in July, but risks are not mitigated

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Author: Ravi Philemon

Private home developers launched 911 units for sale and sold 1,178 units in July. The sales numbers by private home developers are 43% higher MoM and 32% lower YoY. Number of units launched-wise is 36% higher MoM and 59% lower YoY.

Developers sold 1,178 new private homes (excluding Executive Condos) last month – up by 43.5% from the 821 units transacted in June. On a year-on-year basis, developers’ sales were about 31.7% lower than the 1,724 units sold in July 2018, where panic buyers rushed to pick up new units before new cooling measures took effect on 6 July 2018.

July’s sales numbers brought overall new home sales (excl. ECs) to 5,366 for the first seven months of 2019 – down 5.4% from 5,671 units transacted over the corresponding period in 2018.

Huttons Asia commenting on the data released by the Urban Redevelopment Authority on Thursday (Aug 15), said July 2019 sale numbers is not directly comparable to July 2018 sales because cooling measures were introduced last year.

“July sales tend to be much higher than June because it is right after the school holidays and before the Lunar Seventh Month. But we believe that the solid sales recorded for One Pearl Bank and Sky Everton is a catalytic factor for the primary sales market in July and the positive sentiments spill over to the rest of the market.”

Private home developers sales in the RCR continued to lead the market, accounting for more than 50% of units sold in July, said Huttons. It added, “rising affluence among households allowed them to trade up to a city fringe private home.”

The leading real estate services company said, “August sales volume tend to be slower as developers hold back on launches in the Lunar Seventh Month and purchasers are likely to hold back as well. But right after the Lunar Seventh Month, we are likely to see several highly anticipated launches such as Parc Clematis, Avenue South Residences, Meyer Mansion, The Antares and Guoco Midtown.”

Huttons pointed out the top five private residential projects for July 2019:private home developers

Colliers International commenting on the July data compiled by URA from its survey of licensed private home developers, said, “demand for units at three former collective sale sites boosted developers’ sales significantly in July. Newly launched One Pearl Bank and two others – previously launched Treasure at Tampines and The Florence Residences – accounted for over a third of the total sales during the month.”

Ms Tricia Song, Head of Research for Singapore at Colliers International, said: “The best-selling private residential projects in July 2019 included: One Pearl Bank which moved 197 units at a median price of SGD2,353 per square foot (psf); Treasure at Tampines shifted 119 units at a median price of SGD1,325 psf; The Florence Residences sold 112 units at a median price of SGD1,449 psf; Parc Botannia transacted 75 units at a median price of SGD1,308 psf; while freehold development Sky Everton sold 67 units at a median price of SGD2,606 psf.”

Top 10 Selling Projects in July 2019 (including EC)

Project Name Street Name Locality Units Sold in the Month Median Price ($psf) in the Month % sold to date (of total)
Piermont Grand (EC) Sumang Walk OCR 378 1,107 46%
One Pearl Bank Pearl Bank RCR 197 2,353 25%
Treasure At Tampines Tampines Lane OCR 119 1,325 26%
The Florence Residences Hougang Avenue 2 OCR 112 1,449 23%
Parc Botannia Fernvale Street OCR 75 1,308 84%
Sky Everton Everton Road RCR 67 2,606 61%
Parc Esta Sims Avenue RCR 55 1,664 48%
Stirling Residences Stirling Road RCR 45 1,859 61%
Riverfront Residences Hougang Avenue 7 OCR 43 1,327 74%
View At Kismis Lorong Kismis RCR 39 1,706 21%

Source: Colliers International, URA

6 new launches in July 2019

Project Name Street Name Locality Total Number of Units in Project Units Launched in the Month Units Sold in the Month Median Price ($psf) in the Month % sold  (of launched)
Dunearn 386 Dunearn Road CCR 35 35 3 2,524 9%
Haus On Handy Handy Road CCR 188 30 25 2,874 83%
Jervois Treasures Jervois Road CCR 36 36 1 2,426 3%
One Pearl Bank Pearl Bank RCR 774 280 197 2,353 70%
Piermont Grand (EC) Sumang Walk OCR 820 820 378 1,107 46%
View At Kismis Lorong Kismis RCR 186 60 39 1,706 65%

Source: Colliers International, URA

Colliers noted that in general, large projects launched earlier saw buying interest pick up in July compared to June. Buyers continue to be value-conscious, with 430 or 37% of units (excl. ECs) sold in July priced at below $1,500 psf.

“July 2019 also saw the launch of a new EC development – a hybrid of private and public housing – Piermont Grand. This has come 15 months after the last EC — 628-unit Rivercove Residences was launched in April 2018 and sold 82% within the first month at a median price of $970 psf.

Despite the keen anticipation, Piermont Grand EC sold 378 units or 46% of its total 820 units, a tad slower than expected. This could be due to its record price point — its median price of $1,107 psf was an all-time high for newly launched ECs in Singapore.”

For the full year, Colliers Research is still expecting takeup of private home developers sale to come in at around 9,000 units (excl. ECs).

How to Secure a Home Loan Quickly

Are you planning to invest in properties but are ensure of funds availability for purchase? Don’t worry because iCompareLoan mortgage broker can set you up on a path that can get you a home loan in a quick and seamless manner. We are the experts who do the work for you for free, while you lean back, rest and rely on our professionalism at absolutely no cost to you.

Our brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs. Find out money saving tips here.

Whether you are looking for a new home loan or to refinance, the Mortgage broker can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us.

For advice on a new home loan.

For refinancing advice.

The post Private home developers sales rise in July, but risks are not mitigated appeared first on iCompareLoan Resources.