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THE government has given the go-ahead for reverse mortgages on Housing and Development Board (HDB) flats. NTUC Income will be the first to offer the scheme, in which elderly people can raise money from the value of their homes.

The CEO of the insurance cooperative, Tan Kin Lian, said NTUC Income already has a promotional interest rate to offer its first clients. Income will offer an effective interest rate at 5 per cent.

Currently, Income offers reverse mortgages to private homeowners at an interest rate of 4.5 or 5.5 per cent, depending on the conditions of the mortgage.

As late as November 2005, talks between HDB and NTUC Income on reverse mortgages were said to have reached deadlock. However, the problems seem to have been overcome and Mr Tan said that he is now able to confirm requirements for the loans.

The loan quantum cannot exceed 70 per cent of the total projected valuation of the HDB flat.

For reverse mortgages on private properties, the upper limit is 80 per cent of valuation.

The loan period will be up to 20 years or when the borrower reaches the age of 90. The HDB flat must have at least a remaining tenure of 50 years at the end of the loan period. Loans will be available to flat owners between the ages of 70 and 90.

The loan ends on the borrower’s death, after which any balance from the sale of the flat will go to the mortgager’s estate.

Source : Business Times - 4 Mar 2006

Rents and take-up should improve but certain segments may find the going tough
SINGAPORE’S industrial property market looks set for slow and steady growth with rising occupancies.

More entrants are expected after the anticipated divestment move of Singapore’s largest industrial landlord, JTC Corp, but rents are unlikely to shoot up significantly.

Consultants said they could rise slightly this year as there is still a property glut while rents of some sites could stay flat or fall, said a report last Friday from consultancy Knight Frank.

Unless the positive economic outlook translates into robust demand that can absorb the projected rise in supply, the rentals and capital values of industrial space not acquired by real estate investment trusts are likely to remain flat or fall further, it said.

An estimated 500,000 sq m of factory space is expected to be completed this year and next year, it pointed out.

More will follow.

Last month, the Government said it would launch five industrial sites totalling 12.9ha on the confirmed list for the first half of this year. This is on indications of demand for more land in certain locations. The confirmed list goes for tender at a pre-determined date, with no need for a minimum trigger price.

There are also five other industrial sites totalling 8.9ha on the reserve list, which means land is put up for tender only if a developer agrees to bid a minimum price.

This year, the industrial market will face the challenge of maintaining the take-up rate, which averaged 570,000 sq m of factory space a year in 2004 and last year, said Knight Frank.

But so far, the impressive performance of the economy and the manufacturing sector has not resulted in rising rents and capital values of industrial space, said its research director, Mr Nicholas Mak.

‘There are some weaknesses in the sector, as the economic drivers such as the biomedical and transport engineering clusters did not necessarily translate to strong demand for industrial space,’ he said.

Average monthly rentals of industrial space in areas such as MacPherson, Kaki Bukit and Admiralty fell by 2 to 5 per cent in the fourth quarter last year, he added.

Last year, average rents for high-tech spaces remained flat at $1.75 per sq ft (psf) per month while rents for ground-level factory space stayed unchanged at $1.20 psf on average per month, according to property consultancy CB Richard Ellis. It said rents may rise slightly this year due to a more open market.

The managing director of property consultancy Colliers International, Mr Dennis Yeo, is also optimistic of a continued rent rise. He said the market’s oversupply is in obsolete facilities, which will one day be torn down, reconfigured or replaced.

‘In 2006, we expect demand and rents to improve by 5 to 10 per cent on the back of the continued recovery in the economy,’ he said.

Source : Straits Times - 2 Jan 2006

How does one go about investing in property? OH BOON PING finds out

YOU’VE probably heard of property speculation and stories of the instant riches it has brought to some people. But what exactly is property speculation? And is it wise for young investors to get involved in it?

‘Property speculation is basically a kind of high-risk, short-term investment that usually occurs in a bull market, when prices are racing ahead of fundamentals,’ says Knight Frank research head Nicholas Mak.

Before anti-speculation curbs were imposed in May 1996, speculators would typically put a downpayment of about 5 per cent on a property, then try to resell it at a higher price before they had to come up with the rest of the finance.

But this is not allowed now. A speculator - like any other home buyer - must complete the purchase of a property and incur costs such as stamp duty and legal fees, which can amount to about 3 per cent and one per cent of the property price respectively, before he or she can resell it.

Some speculators may purchase several units in a popular development at a discount before the official launch, hoping to sell them at a higher price later.

But the risk shouldered by the speculator is great. In a bull run, a speculator may have to offer a higher price and make a higher downpayment to secure a property, which must then be resold at an even higher price to make a profit.

This is a fairly remote prospect when the property cycle is nearing or at its peak. And the problem is, no one - not even a developer - knows when the cycle will peak, thereby making speculation a dangerous game.

Limited capital appreciation

Current conditions are not favourable to those hoping for rapid capital appreciation.

‘Most people recognise that the good old days of strong capital appreciation are now long gone,’ says Colin Tan, head of research and consultancy at Chesterton International. ‘These days, it would seem that our economy is undergoing restructuring and job security remains an issue. In such a scenario, capital appreciation of property would be very limited.’

Mr Mak agrees, saying the property market is just recovering from a down cycle that started with the tech bubble bursting in 2000. Therefore, any capital appreciation is likely to be gradual, he says, citing the one per cent rise in average prices last year.

This year he is hopeful of 3-5 per cent appreciation - but that is a far cry from the 34 per cent year-on-year capital gain in the last bull run in 1999.

Those hoping for a generous return through rental yield may also wish to rethink their plans, as the current net yield from property is only about 2 to 4 per cent per annum.

Starting out

Consultants agree that young investors generally should not engage in property speculation. ‘The market is very much sentiment-driven and timing is a challenge,’ says Mr Tan.

But if you are so inclined, buying a residential property to live in is an attractive option. ‘After all, it provides a roof over your head and the property cycle becomes less of an issue,’ he says.

Mr Mak says that for a start, young investors may wish to look at three-room housing board flats, not just because they are affordable ‘but also because they are a good store of value, with a certain degree of government support’.

Flats that are close to an MRT station and good schools are more likely to yield a capital gain.

Still, young investors should not be too hasty in buying an investment property, especially when their income patterns are likely to change with any job switch, Mr Mak cautions.

Source : Business Times - 2 Jan 2006

Q IF MY husband and I have made a mutual will and either of us dies, is the will still valid or must the surviving party make a fresh will?

If he makes a new will by himself after the mutual will is made, will it make the mutual will invalid?

I have nominated my three children and husband as the beneficiaries of my insurance policy. What will happen if one of my beneficiaries dies?

If I have left my other assets, other than insurance and Central Provident Fund savings, to my children and husband, what will happen if one of them dies after my death?

Is there a difference in writing a will for different insurance policies?

A THE term ‘mutual wills’ is generally used to describe joint or separate wills made as a result of an agreement between, for instance, husband and wife, to create an irrevocable interest for certain beneficiaries.

For example, husband H makes a will bequeathing his property to wife W and after her death to child C.

At the same time, wife W makes a will bequeathing her property to husband H and after his death to child C.

Mutual wills are not simply wills that have been executed in identical terms.

They must indicate an agreement between the parties that each party has executed his or her own will in certain terms because the other party is similarly executing a will in certain terms.

These mutual wills are akin to a contract made between the parties. It is advisable that the terms of this ‘agreement’ be expressly stated in the respective mutual wills. More often than not, mutual wills would also expressly state that both parties agree not to revoke their wills and/or alter the terms of distribution in the mutual wills.

In relation to your first question, once the two mutual wills are made, and one of the parties dies, there is no need for the surviving party to make a fresh will as the mutual will is still in effect and valid.

As regards your second question, strictly speaking when a person makes a new will, he would normally revoke all previous wills made by him and the latest will would be the one that is valid and which takes effect.

In certain situations, the court may still give effect to the terms of the original mutual will.

Although your husband’s latest will would be proved in court, the court, if asked, may still give effect to the terms of the original mutual will and order that your husband’s estate be distributed to the beneficiaries stated in the original mutual will.

This is notwithstanding that your husband has revoked the original mutual will by executing a new will.

Using the example in the first paragraph above, if after your death, husband H makes a new will bequeathing his property to a third party T, the court may order that T hold H’s estate on trust for child C.

If this kind of situation arises, litigation and a consequent court ruling are likely to be necessary.

The factors that the court would take into account include whether your husband made his new will before or after your death, and whether you were aware of his new will and, if so, your reasons for not altering or revoking your mutual will. A key consideration would also be which party died first.

The court would also need to consider whether the terms of the will as well as the surrounding circumstances could show that you and your husband had made an agreement to execute a mutual will, and that both of you had agreed not to revoke the mutual wills and/or alter the beneficiaries.

The mere fact that the mutual wills were made in identical terms is insufficient. Each case would ultimately depend on its own facts.

On your third question, if one of your intended beneficiaries of the proceeds of your insurance policies dies before you do, you should take steps to inform the institution where the insurance was purchased and amend your nominated beneficiaries accordingly.

You will need to liaise with your insurance agent about this, and whether or not this can be done is ultimately dependent on the terms of your policy.

In answer to your fourth question, please note that generally, unless your will provides otherwise, the bequests made by you in your will, to a beneficiary who subsequently dies after your death, would be given to the estate of such deceased beneficiary and distributed in accordance to the terms of such deceased beneficiary’s will or the law of intestate succession, as the case may be.

On your fifth question, you should note that, generally speaking, if you have named specific beneficiaries for your insurance policies, upon your death, under the law, the proceeds payable on such policies will not be distributed in accordance with your will. Instead, such proceeds will be distributed to the beneficiaries named in your policy.

If there are no specific beneficiaries named for your policies or if the beneficiary of the policy is stated to be ‘the estate’, such proceeds would be distributed in accordance with your will.

In the latter case, you may wish to specify in your will, the manner in which you would like the proceeds of each insurance policy to be distributed.

Navin Joseph LoboLegal associateHarry Elias Partnership

Q RECENTLY, my brother and I obtained Singapore citizenship. My parents are Malaysians.

If they want to draft a will to leave us their assets, should it be done in Singapore or Malaysia? If they do not have a will, how will their assets be distributed? Is it according to the Intestate Act of Malaysia or Singapore?

A IF YOUR parents own immovable property, such as land, in Malaysia, Malaysian law will govern the distribution of an intestate estate - that is, where no will was left.

For Malaysian-registered cars and shares listed on the Malaysian stock exchange, Malaysian law also applies.

If a person dies intestate while ordinarily resident in Malaysia, I would assume that Malaysian law will govern the distribution of the estate under the Malaysian intestacy laws.

If your parents have immovable property in Singapore, this part of their property will be governed by Singapore law.

If they ordinarily reside in Malaysia and are likely to stay there until the end of their lives, it makes sense to have a will drafted in Malaysia.

Technically, it makes no difference which country the will is drafted in, as long as it is validly drafted and signed/witnessed, as it is sufficient to inform of your parents’ wishes with regard to their estate.

If they die in Malaysia and are domiciled, that is, usually living, in Malaysia, the Intestate Succession Act of the country will apply.

The Intestate Succession Act of Singapore applies only to one who dies intestate either domiciled in Singapore and having any property - such as land, cash and shares - in Singapore, or one who dies intestate domiciled out of Singapore but having immovable property in Singapore.Lim Choi MingLawyerTM Hoon & CompanyAdvice provided in this column is not meant as a substitute for comprehensive professional advice.

Source : Sunday Times - 1 Jan 2006

Background:  

Singapore was founded as a British trading colony in 1819. It joined the Malaysian Federation in 1963 but separated two years later and became independent. Singapore subsequently became one of the world’s most prosperous countries with strong international trading links (its port is one of the world’s busiest in terms of tonnage handled) and with per capita GDP equal to that of the leading nations of Western Europe. 

Population:   
4,492,150 (July 2006 est.) 

Independence:  
9 August 1965 (from Malaysian Federation) 
 

National holiday:  
National Day, 9 August (1965) 
 

Constitution:  
3 June 1959; amended 1965 (based on preindependence State of Singapore Constitution) 
 

Legal system:  
based on English common law; has not accepted compulsory ICJ jurisdiction 
 

Suffrage:  
21 years of age; universal and compulsory 

Economy - overview:  
Singapore, a highly-developed and successful free-market economy, enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP equal to that of the four largest West European countries. The economy depends heavily on exports, particularly in electronics and manufacturing. It was hard hit in 2001-03 by the global recession, by the slump in the technology sector, and by an outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, which curbed tourism and consumer spending. The government hopes to establish a new growth path that will be less vulnerable to the external business cycle and will continue efforts to establish Singapore as Southeast Asia’s financial and high-tech hub. Fiscal stimulus, low interest rates, a surge in exports, and internal flexibility led to vigorous growth in 2004, with real GDP rising by 8% - by far the economy’s best performance since 2000 - but growth slowed to 5.7% in 2005.   

Source : https://www.cia.gov/cia/publications/factbook/geos/sn.html#Intro