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Clearer picture seen emerging after award of Somerset Central site

The ageing Specialists’ Shopping Centre along Orchard Road could finally make way for a new project under proposals to redevelop the site together with the former Glutton’s Square plot next door, say sources.

BT understands that the proposals are still being discussed between OCBC Bank, which owns Specialists’ Centre and Hotel Phoenix behind it, and Far East Organization, which clinched the former Glutton’s Square site at a state tender in January.

‘One possibility is OCBC could just contribute its Specialists’ site into a joint venture that could develop this site together with Glutton’s Square without having to put any cash for the construction. In exchange, the bank gets to hold a stake in the enlarged redevelopment scheme equivalent to the value of its site,’ said a market observer.

Originally, OCBC had been talking about a need to merely refurbish Specialists’ Centre - which is more than 30 years old - in conjunction with new developments at adjacent plots. Such an approach is favoured by some quarters in the bank who have some sentimental attachment to Specialists’ Centre, BT understands. As well, a redevelopment scheme would at best see retention rather than an enhancement of the building’s existing gross floor area going by current guidelines - which somewhat reduces the incentive to redevelop.

However, sources say that given that Specialists’ Centre is more than 30 years old, its layout and efficiency (ratio of net lettable area to gross floor area) are dated, so it would still make sense to redevelop.

Discussions between Far East and OCBC are likely to be finalised only after the award of another state site, dubbed Somerset Central, on the other side of Specialists’ Centre. Part of this site, which is above Somerset MRT Station, is currently being used as a carpark. The tender for Somerset Central closes on Aug 16.

Far East is widely thought to have triggered the release of the Somerset Central plot, which was in the government’s reserve list. However, it remains to be seen if it succeeds in clinching the 78,700 sq ft site when the state tender closes in about two months.

If it does, then the latest site will be included in a bigger redevelopment. If, however, another party clinches the plot, it remains to be seen how this affects an OCBC-Far East collaboration on their respective existing sites.

It also remains to be seen if OCBC and Far East agree on including Hotel Phoenix, which faces Somerset Road, in a redevelopment involving Specialists’ Centre or if OCBC has to leave Hotel Phoenix standing and refurbish it separately.

Hotel Phoenix is safeguarded for hotel use by the authorities, which means that even if OCBC contributes the property for joint redevelopment with Specialists’ Centre and the Glutton’s Square site, it has to remain a hotel.

Some market watchers have also been speculating lately whether Far East will team up with Frasers Centrepoint to bid for the Somerest Central site given their recent successful partnership in clinching the Waterfront View residential site in Bedok.

OCBC holds an indirect interest of under 10 per cent in Frasers Centrepoint through the latter’s listed parent, Fraser & Neave.

If Far East and Frasers Centrepoint team up again and win the Somerset Central site, it could make for an appropriate partnership involving OCBC, Frasers Centrepoint and Far East for the development of Glutton’s Square, Somerset Central and Specialists’ Centre - with or without Hotel Phoenix.

This will result in a sizeable retail project boasting prime linear frontage on Orchard Road and with an underground mall linked to Centrepoint Shopping Centre across the road.

A redevelopment of all three sites including Hotel Phoenix can yield a new project with a maximum gross floor area of about 1.3 million square feet based on current guidelines.

However, the developers may even be able to win rights for additional gross floor area from the Urban Redevelopment Authority under an incentive scheme to spur redevelopments on Orchard Road, say property analysts.

Retail market watchers say, however, that the completion of a new project may clash with the opening of Marina Bay Sands in 2009 which is expected to feature about one million sq ft of retail space and boast big new names like Saks Fifth Avenue.

Viewing things more positively, a retail market player says: ‘While the jury is out on whether Marina Bay Sands integrated resort will overshadow Orchard Road as Singapore’s prime tourist belt, it makes it all the more urgent for owners of ageing Orchard Road buildings like Specialists’ Centre to wake up and do something - fast.’

Source : Business Times - 5 Jun 2006

Q MY HUSBAND and I share a joint account containing about $70,000.

Only one of our signatures is required if we need to withdraw money from this account - that is, it is a joint-alternate account.

We are also joint owners - that is, joint mortgagors and joint tenants - of a private property worth about $460,000.

Both of our signatures are required if we decide to sell our property. We are servicing a mortgage of about $360,000.

I am the sole person servicing the loan using my CPF money, as my income is higher than my husband’s.

Neither my husband nor I have written a will.

If my husband should die suddenly, what would happen to the money in our joint account? What would happen to our property?

Would the Government freeze all the money in the joint account and seize my property as well?

How much of the money in the joint account rightfully belongs to me, and what percentage of the property value belongs to me?

A EACH bank has its own policies and procedures regarding the treatment of joint accounts when one or both joint-account holders die. While the ‘rule of survivorship’ may allow the bank to ultimately pay to the surviving joint-account holder, frozen account or otherwise, the money in the joint account may be deemed to belong to the estate of the deceased to the extent that he had contributed to the account when he was alive.

If that is the case, the rule of intestacy regarding the money in the account would apply.

That means the money deemed to belong to the deceased will be inherited by family members in proportions spelt out by the law of intestacy.

In addition, the amount deemed to belong to the deceased may be added to the estate for estate duty purpose.

This is important from the children’s standpoint. We also cannot assume that the children (if any) do not want their share (which totals 50 per cent) if it can be proven that the deceased did contribute money to the joint account, and did not withdraw that sum from the account.

If the bank does freeze the account, it will only allow deposits into and withdrawals out of the account by the executor or administrator (in the case of intestacy) of the estate of the deceased person, according to the terms of the Grant of Probate by the court or Grant of Letters of Administration given to the executor or administrator.

If the deceased had contributed a portion to the joint account and had subsequently withdrawn a portion, that sum has to be deducted from the amount due to his estate.

It is not quite straightforward in the case of joint accounts.

But if you, the surviving spouse, are able to withdraw the amount, you still have to declare the withdrawal in the estate duty affidavit of your husband when applying for his Letter of Administration in respect of his estate. This is necessary even though there may not be any estate duty liability.

The bank account and property that are held by you and your husband do not come under the will, as a will deals only with what is under an individual’s control.

As your residential property is held in joint tenancy (as opposed to tenancy-in-common), you as the survivor will automatically become the property’s sole owner.

Irene YeeCertified Financial PlannerLife Planning Associates

Advice provided in this column is not meant as a substitute for comprehensive professional advice. E-mail questions to lorna@sph.com.sg

If your late father did not leave behind any assets, there may be no need for you to apply for Probate.

As neither you nor your brother are guarantors of your late father’s ready credit, you would not be liable for his debts incurred thereunder.

Source : Sunday Times - 4 Jun 2006

Low-rise boutique flats snapped up by many hooked on nostalgia and abundance of good food

LUXURY homes may be hogging the headlines, but in a peaceful corner of the East Coast, several small condominiums are quietly sprouting up and selling out in a matter of months.

Welcome to Joo Chiat and Telok Kurau, a popular residential stretch just a short walk from the heart of District 15.

The area is known for the good food around Joo Chiat Road and has a high concentration of well- regarded schools such as Haig Girls’.

Although the area is still dominated by landed housing, low-rise boutique developments are increasingly appearing on the landscape, each with fewer than 50 units on average.

Many of these sell out rapidly, such as The Eastside on Joo Chiat Road, which sold all 32 units within two months.

Buyers in this area ‘enjoy excellent value’ as property prices tend to be lower than those along East Coast Road and the Marine Parade area, said Savills Residential executive director David Neubronner.

Most of the projects along this stretch are priced well below $600 per sq ft (psf), compared with more than $700 psf for the nearby One Amber and The Esta, both on Amber Road.

The area attracts a wide variety of buyers because the residents are ‘very cosmopolitan, with a higher proportion of Eurasians, Peranakans (Straits-born Chinese), Malays and Indians than in other parts of Singapore’, said Mr Colin Tan, the head of research and consultancy at Chesterton International. ‘Because of the mix of races, you get pretty good food there,’ he added.

The low density of housing in the area makes it more attractive because ‘it is less built-up and has more vegetation, so you can feel the temperature is slightly cooler’, he also said. Property consultants believe that Joo Chiat, in particular, has an old-world charm that draws previous residents back to the area they grew up in.

‘Buyers tend to be people who have a sense of nostalgia and belonging because they’ve lived in the area before,’ said Knight Frank director of research and consultancy Nicholas Mak.

‘They have a certain attachment to the food, and some of them may have gone to schools around there.’

Source : Sunday Times - 4 Jun 2006

Home owners with variable-rate loans may suffer and stock markets may dip even further

RISING interest rates are a feared spectre for many as the recent plunge in the stock market demonstrates, but they are a reason for businessman Christian Chua to smile.

Mr Chua, 39, has just sold his investment condominium unit and some of the cash will go into a fixed deposit account.

It is a nice position to be in as the interest income comes to more than 3.2 per cent a year.

That is a long way up from, say, June 2003, when rates ranged between a teeny-weeny 0.25 per cent a year and 0.9375 per cent, depending on the cash amount and the tenor.

Mr Chua says he sold his investment unit because it had a rental yield of less than 3 per cent a year, which was unattractive.

And he fears that as interest rates rise further, some properties will become unattractive and their prices might fall.

It is not just investors like Mr Chua who are feeling more upbeat about higher interest rates. Retirees, too, are happy because they are the ones who tend to keep most, if not all, of their savings in fixed deposit accounts.

And they tend not to have any debt that would make them worry about rising interest charges.

But for pretty much the rest, the prospect of further interest rate increases spells bad news.

The United States Federal Reserve has raised short-term rates 16 times in the past 22 months and, just when an end to the cycle was widely expected, it signalled otherwise recently.

Interest rates in other parts of the world are also expected to rise further, a prospect that has sent world stock markets plunging in the past three weeks.

Rising rates are bad for stocks for several reasons.

The simple one is that higher rates mean companies have to pay higher borrowing costs. A more complicated one: Higher rates mean that a dollar of a company’s future earnings is worth less today.

Outside stock markets, higher rates are still a pain for many, especially those who have borrowed to the hilt - through overdrafts or car and home loans, for example.

People suffer the most from their home loans because these usually make up their largest debt.

That is, unless they were prudent in their borrowing or took a concessionary loan from the Housing Board, which completely spares them any increase in the interest charge.

The HDB mortgage rate remains at 2.6 per cent a year, a rate that has held now for several years.

By comparison, bank mortgage rates have jumped from an average of 2 per cent three years ago to about 4 per cent today.

Mr Vincent Tey, 39, is glad he set aside a buffer when he bought his condominium home in Yio Chu Kang in 1998.

Though his mortgage rate has jumped, Mr Tey, a director at Providend, a financial advisory firm, says he does not have to fork out cash to cover the extra cost.

The payment can be completely covered by the monthly Central Provident Fund (CPF) contributions he and his wife make.

The rate on his mortgage has risen from 1.68 per cent in September 2004 to 3.75 per cent now.

His outstanding loan in 2004 was only $215,000, against the condominium unit’s purchase price of $605,000.

The monthly repayment has shot up from $858 in 2004 to $1,147 now, but that is no reason for him to tremble.

He says: ‘We’ve not had to sacrifice any part of our lifestyle because of the higher mortgage cost.’

Hedging with fixed-rate schemes

NOT everyone is as fortunate as Mr Tey.

Citibank’s business director of secured assets, Mr Tan Chia Seng, says: ‘We’re starting to see more customers using additional cash to make their monthly interest/principal repayments, as a result of higher interest rates.

‘Typically, they are on variable-rate mortgages, and have not fully budgeted for possible rate rises.’

To hedge against future rises and for more certainty in their future repayments, a number of Citibank customers have converted from variable-rate mortgages to the new Citibank Home Saver Loan, a five-year fixed-rate scheme.

The bank revealed recently that the number of its customers using cash to pay down part of their loans doubled in the first quarter of this year compared with the same period last year.

It said customers would typically plonk down an amount about six times their monthly instalments.

Mr Gregory Chan, the head of consumer secured lending at OCBC Bank, says there has not been a significant rise in the number of customers increasing their monthly home loan repayments with cash top-ups.

Instead, some prefer to make periodic capital repayments with CPF monies or cash, which generates greater saving on the interest they pay.

Do not worry too much about rate hikes, though.

In its latest financial stability review, the Monetary Authority of Singapore (MAS) said on Friday that rising rates have had a minor impact on the ability of households to service their housing loans.

Rates are not likely to rise further by a large margin, says Ms Tay Huey Ying, an associate director of research and consultancy at Colliers International, a real-estate consultant.

People have a cushion against hikes because wages are expected to continue to rise as the economy grows, she says.

What about the impact on property prices?

‘Generally, interest rates do not directly affect the prices of properties,’ she says.

They can affect affordability if a rise in rates is not matched by a corresponding rise in people’s income.

Any price movement in mass-market projects will depend on how fast the oversupply can be absorbed and how tenacious the bull run in the luxury market proves to be, she adds.

In the automotive market, the Singaporean’s love affair with the car has cooled, going by the prices of Certificates of Entitlement (COEs).

Prices now hover at around rock-bottom levels of between $10,100 and $11,800.

If the cost of borrowing continues to rise, logically COE prices may dip further - until perhaps the price fall compensates for the higher interest cost, more or less.

‘As COE and car prices start to fall, consumers may flock back to car showrooms,’ says Associate Professor Benedict Koh of the Singapore Management University (SMU).

Associate Professor Annie Koh, the associate dean of SMU’s Lee Kong Chian School of Business, says that people have become more prudent in their spending.

‘They don’t buy fully on leverage now. We are seeing more astute purchases. It’s not built on credit because people don’t feel rich enough. It’s built more on a balance between credit and wealth,’ she says.

‘It’s an interesting change. People want to be cash-rich. So, rising interest rates affect more on the saving side than on the buying side,’ she adds.

At the same time, she says, banks are now better able to discern the credit-worthiness of loan applicants.

The banks have set up Credit Bureau (Singapore) to track the promptness of repayments and defaults by consumers.

The MAS on Friday also noted that home buyers have become more cautious about large loans - specifically loans of above 80 per cent of the home value.

New mortgages with such high borrowings fell from 19.6 per ent of total new mortgages last October to 15.3 per cent in December, it said.

Dr Lynda Wee, a retail marketing expert and the director of the Centre for Innovation and Enterprise at Republic Polytechnic, says higher interest rates could reflect greater demand for loans by businesses.

It suggests a buoyant economy where there are jobs and rising incomes, and people can thus bear higher interest costs.

Hence, ‘retail spending would be the same, except that people may change the mix of value and premium shopping’, she says. The price-sensitive types will cut out the frills in their purchases.

And those who postpone their purchase of a big-ticket item such as an upgraded home or a car could instead indulge in a smaller luxury item such as a branded watch, she figures.

Source : Sunday Times - 4 Jun 2006

SUBURBAN condominiums will get their turn in the limelight this weekend as two developments are launched in the north-east.

GuocoLand’s The Quartz in Buangkok and the Fortune Homes project Intero at Potong Pasir will offer home buyers a total of almost 700 units when they are officially launched today.

With 625 units, The Quartz is the biggest project to be launched in recent months and is being seen as the first real test of mass-market demand in more than a year.

While high-end homes such as St Regis Residences and The Sail @ Marina Bay have been hot property over the past year, suburban condominiums have been sidelined largely because of muted demand.

These projects are typically 99-year leasehold developments targeted at the mass market, which comprises first-time homebuyers and Housing Board upgraders.

This market segment has seen little movement since Centrepoint Properties launched its 315-unit The Raintree in January.

However, pre-launch sales at The Quartz and Intero have given market watchers reasons for optimism.

The Quartz has already sold 80 units since its preview started more than two weeks ago, according to GuocoLand.

The 99-year leasehold condominium has released about 150 units so far at an average price of $490 per sq ft (psf) or $500,000 for a three-bedroom unit.

‘This is the first major mass-market project launched this year and it is definitely a test of the mass market,’ said Knight Frank director of research and consultancy Nicholas Mak.

‘This project and a few other launches expected later this year could possibly stir the mass market, which so far has been rather flat.’

At Intero, 60 per cent of the 24 units released have been sold, said Savills Singapore, which is marketing the project.

The Leicester Road freehold condo is asking about $620 psf on average for its 48 units. It has 44 three-bedroom units priced from $639,000 and four penthouses starting from $914,000.

Sales have been so encouraging that Savills has brought forward Intero’s launch, said Savills Residential senior manager Phylicia Ang.

Source : Straits Times - 3 Jun 2006