Top Stories Halimah offers to take lead to explain Lease Buyback Malay/Muslim grassroots leaders raise concerns about understanding scheme Source: Straits Times / Top of The News POST-RALLY dialogue yesterday found that many in the Malay/Muslim community are struggling to understand the intricacies of the Lease Buyback Scheme. That has prompted Speaker of Parliament Halimah Yacob to offer to take the lead in efforts to explain the scheme. At last week's National Day Rally, Prime Minister Lee Hsien Loong announced that the scheme would be extended to four-room Housing Board flats - bringing the five-year-old scheme back into the public eye. It emerged as a top concern at yesterday's closed-door dialogue with 150 Malay/Muslim grassroots leaders. Madam Halimah has offered to take on the challenge of explaining the scheme as part of her duties as chairman of the Pioneer Generation Joint Committee. These duties include getting across the Pioneer Generation Package and MediShield Life. "When you look at retirement, these are the core issues: income security once you retire, housing, health care... It's interrelated," she told reporters yesterday. The Lease Buyba ck Scheme allows retirees to sell part of the lease on their flats to the Housing Board in return for monthly payouts. Madam Halimah said some participants at yesterday's dialogue wanted the scheme to be more flexible. Others wondered about their options should they outlive the 30-year lease they would have left on their homes under the scheme. "As we go and talk about the Pioneer Generation (Package) and MediShield Life, we will also talk about these options. To me, this is also related to the pioneer issue: the options available for them to enhance retirement income," Madam Halimah said. "We need to drill down to the specifics, and express their concerns so that it becomes a real option for them to choose from." Having attended four post- Rally dialogues, she said participants have expressed concerns over the lack of clarity in the details of the housing scheme. And such concerns seem stronger in the Malay community, she said, possibly due to the issue of inheritance. "Maybe they're thinking if their child doesn't do so well, perhaps there is this option of them inheriting the lease that has not run out," she said. Yesterday's dialogue was chaired by Minister-in-Charge of Muslim Affairs Yaacob Ibrahim, who is also adviser to the People's Association Malay Activity Executive Committees Council. On concerns about the Lease Buyback Scheme, he said "we will certainly study them together with the HDB", and that people "want to see how to monetise the flat without losing it altogether". He also highlighted participants' concerns about how people without university degrees could gain qualifications while working, with a focus on mature workers who may face difficulties keeping their jobs once they pass 50. This, he said, was a valid concern for the community, which is "starting from a low educational base".
"If they are able to continue to work in the same company and the company offers opportunities for them to upgrade, that will be a wonderful outcome," he said. -By NUR ASYIQIN MOHAMAD SALLEH Committee could explore options for Lease Buyback Scheme Concern over outliving the 30-year lease is a common one, and is an area the Government can provide more clarity on, says Madam Halimah Yacob.Source: Channel News Asia / Singapore SINGAPORE: The Pioneer Generation Joint Committee could look into the Lease Buyback Scheme – extended recently to four-room flats – and possible options for assuaging some concerns that may remain, said Speaker of Parliament Halimah Yacob, who chairs the committee. Under the scheme, participating seniors retain 30 years of their flat’s remaining leases and sell the rest to the Government, with proceeds used to top up their Central Provident Fund Retirement Accounts for annuity payouts. The extension of the scheme – announced by Prime Minister Lee Hsien Loong at the National Day Rally last week – opens up the asset monetisation option to more than half of all flat owners here, although the take-up rate before the extension has been low. Mdm Halimah, who chairs the committee set up by the Islamic Religious Council of Singapore and self-help group Mendaki to honour pioneer Malays, on Sunday (Aug 24) said that the concern over outliving the 30-year lease is a common one, and an area the Government can provide more clarity on. On the other hand, there are also seniors who want to retain shorter leases, she noted. One option, Mdm Halimah said, could be to allow greater flexibility in the duration of the lease retained by homeowners under the Lease Buyback Scheme. She was speaking to reporters after a post-National Day Rally dialogue held with Malay-Muslim community leaders today, involving her and five other People’s Action Party Malay Members of Parliament. The dialogue, involving about 150 Malay-Muslim community leaders, was held at Canberra Community Club in Sembawang, and was chaired by Minister-in-charge of Muslim Affairs Yaacob Ibrahim. Housing and retirement were among the top concerns at the dialogue, Dr Yaacob told reporters after the session. “Top on their minds were the needs of the older generation and how they can retire.” Participants wanted to know how much they could derive from the Lease Buyback Scheme, and what would happen if they outlived the 30-year leases under the scheme, among other details, he said. “Our response to them is, we will certainly study this together with the Housing and Development Board,” Dr Yaacob added. “I think this is a real ground-up concern because the Malay community has high home ownership and therefore they want to see how they can monetise the flat without losing the flat altogether, or a place for them to stay.” -TODAY/cy Panel may examine Lease Buyback Scheme to ease concernsSource: Today Online / Singapore SINGAPORE — The Pioneer Generation Joint Committee could look into the Lease Buyback Scheme — extended recently to four-room flats — and possible options to assuage some concerns that may remain, said Speaker of Parliament Halimah Yacob, who chairs the committee. Under the scheme, participating seniors retain 30 years of their flat’s remaining lease and sell the rest to the Government, with proceeds used to top up their Central Provident Fund Retirement Accounts for annuity payouts. The extension of the scheme — announced by Prime Minister Lee Hsien Loong at the National Day Rally on Aug 17 — opens up the asset monetisation option to more than half of all flat owners here, although the take-up rate before the extension has been low. Yesterday, Madam Halimah, who chairs the committee set up by the Islamic Religious Council of Singapore and self-help group Mendaki to honour pioneer Malays, said the concern over outliving the 30-year lease is a common one and an area the Government can provide more clarity on. On the other hand, there are also seniors who want to retain shorter leases, she noted. One option, Mdm Halimah said, could be to allow greater flexibility in the duration of the lease retained by home owners under the scheme. She was speaking to reporters after a post-National Day Rally dialogue held yesterday with about 150 Malay-Muslim community leaders. Five other Malay-Muslim People’s Action Party Members of Parliament also took part. The dialogue was held at the Canberra Community Club in Sembawang and chaired by Minister-in-charge of Muslim Affairs Yaacob Ibrahim. Housing and retirement were among the top concerns at the dialogue, Dr Yaacob told reporters after the session. “Top on their minds were the needs of the older generation and how they can retire.” Participants wanted to know how much they could get from the Lease Buyback Scheme and what would happen if they outlived the 30-year lease under the scheme, among other details, he said. “Our response to them is, we will certainly study this together with the Housing and Development Board,” Dr Yaacob added. “I think this is a real ground-up concern because the Malay community has high home ownership and therefore want to see how they can monetise their flat without losing it altogether, or a place for them to stay.” -By Neo Chai Chin http://www.channelnewsasia.com/news/singapore/committee-could-explore/1328044.html
http://www.todayonline.com/singapore/panel-may-examine-lease-buyback-scheme-ease-concerns Views, Reviews & Forum How a falling property market could impact the wider economy UBS analysts' hypothetical picture provides food for thought Source: Straits Times / Money SO FAR, the big debate over the slowdown in the public and private housing markets has focused on whether it is time for the Government to roll back some of the cooling measures that have kept a lid on soaring home prices. The pressure on this front is coming from various quarters. For developers, the build-up in unsold property is a matter of concern, as they struggle to move homes amid flagging demand for their new condo projects. On their part, banks are rightly concerned too. Given the huge sums lent to developers and homebuyers to finance their purchases, they are keeping an eagle eye on the impact on their housing loan book as the market softens. DBS Bank's chief executive Piyush Gupta, for instance, was quoted as saying that the lender had done a stress test to assess if it could cope with a 30 per cent drop in property prices. "We see no problem at a 30 per cent fall. If rates rise, there will be marginal borrowers who can't pay, but we don't anticipate a major issue," he said. However, there is a wider, more significant perspective on the outlook for the property market that should be considered. It is arguably more important to examine just how the wider economy would fare if there were ever such a precipitous drop in housing prices. The scenario looks unlikely for now, with house prices slipping only 2.3 per cent between January and June, but it bears scrutiny just the same. Analysts believe housing prices may fall by 10 per cent to 15 per cent down the road. That means a household which had paid $1 million for a condo at the peak of the market would be $100,000 to $150,000 poorer if that scenario plays out. With a worst-case scenario of a 30 per cent drop, the household would be $300,000 poorer. Since residential properties make up about 48 per cent of total Singaporean assets, this would mean that a big chunk of wealth here would be wiped out on paper if there is a big drop in price. It has some economists worrying whether we are too sanguine about the downside risks posed by a falling market - and the impact this has on consumer spending, business confidence and employment. UBS economist Edward Teather and UBS strategist Maxmillian Lin warned in a recent 16-page report that the safety cushion which Singaporeans have built up on their household balance sheets may be a source of economic risk, rather than resilience, because the balance sheets have been bloated by high house prices. They noted that at the start of the property up-cycle, more people take up housing loans to buy properties. This sets off a chain reaction, creating a "wealth effect" which boosts household spending and additional borrowing as people feel richer. But when prices are high, the property market may come under downward pressure as the supply of new homes builds up and housing credit slows down. That may, in turn, spark off a vicious cycle of falling consumer spending and declining employment, which would cause asset prices to fall further and hurt a household's net worth. The UBS analysts observed that one source of solace regarding the slowing property market is that the household net worth here - at around four times Singapore's GDP - is similar to the wealth levels attained in some other developed economies. But that is still lower than the equivalent of five times GDP in household wealth accumulated by Americans in the United States in 2006 - the year before the sub-prime mortgage crisis sank the US economy. Even though Americans had all that wealth on their household balance sheets, this did little to prevent the economic crisis that followed, they noted. Another concern which they flagged is the often repeated estimate that only about 5 to 10 per cent of borrowers here are over-stretched and that this percentage may rise to between 10 and 15 per cent if mortgage rates rise by 3 percentage points. Over-borrowing is seen when a borrower has to spend more than 60 per cent of his monthly income to service his debt payments. The UBS analysts argued that while the percentage of over-stretched borrowers may appear modest even in a worst-case scenario, this should not lull us into a state of complacency. Using data from the US Mortgage Bankers Association, they noted that at the height of the US housing crisis in August 2008, only 9.2 per cent of all US mortgages were estimated to be delinquent, and that this rose to just 14.4 per cent the following year in September 2009. This shows that even when a small segment of mortgages sours, it can have a negative impact on the broader market. They said: "We are not saying Singapore's housing market looks like that of the US in 2007, just that there are pockets of risk which matter." But the UBS analysts concede that the Government has an arsenal of weapons to combat any slowdown caused by a falling property market. Apart from easing up on the cooling measures in the property market, the Government may expand its social safety nets further, while a weaker labour market could prompt an easier currency policy. What they have painted is the hypothetical picture of a falling market. But for those who hope that prices would fall sharply so that they can pick up their dream property, they should be more careful about what they wish for. -By Goh Eng Yeow, Senior Correspondent Global Economy & Global Real Estate Homebuyers Back as Korea Aims to Awaken Market: Mortgages Source: Bloomberg / News After moving six times in 10 years, Choi Youn Ho, a 46-year-old chemical researcher, said he is hopeful easier mortgage rules will finally allow him to buy a home on the outskirts of Seoul for his family of four. “I’m sick and tired of finding a new home, packing and moving every two years, whenever the lease contract expires,” said Choi, who works at a chemical trading firm and had a 24 percent increase in rent in May when he moved into a new three-bedroom apartment. “I can get a bigger loan now; it may be the time to finally buy a home rather than swallowing this crazy rent rise.” South Korea loosened banks’ mortgage restrictions this month as Finance Minister Choi Kyung Hwan, appointed in July, seeks to revive a stagnant property market in Asia’s fourth-largest economy, boost growth and stimulate domestic consumption. A nationwide weekly apartment purchase price index hit a six-year high on Aug. 18, according to Kookmin Bank data. The new polices are “stronger than people had expected and are thawing the market,” said Shim Gyo Un, a real estate department professor at Konkuk University in Seoul. “People who have been burdened by surging rents now are turning to buying as they have easier access to mortgages and they feel bank loans are cheaper than rents.” The government increased the loan limit for homebuyers to 70 percent of a property’s value from as low as 50 percent, starting this month. Borrowers will be allowed to use 60 percent of their income for mortgage payments, up from 50 percent for homes in Seoul, which had the most stringent lending rules. Mortgage loan applications received at Standard Chartered Plc’s Korean unit almost tripled to 927.5 billion won ($910 million) this month through Aug. 22 compared with the total in July, the bank said in an e-mailed statement today. The easing in the loan-to-value and debt-to-income limits as well as the Bank of Korea’s interest rate cut contributed for the rise, the bank said. Falling PricesSouth Korea has avoided the surge in home prices seen in Hong Kong and Singapore in the last five years as the government tackled record household debt levels with measures including capping banks’ lending to households and promoting fixed-rate mortgages. Apartment prices in the capital Seoul fell for four straight years through 2013 after almost tripling in the previous 11 years, according to an index compiled by Kookmin Bank, the country’s largest mortgage lender. Prices for Seoul and the surrounding metropolitan area, where almost half of the country’s 50 million people reside, have been stagnant since they peaked in 2008 after the previous decade of boom elevated household debt. Easing mortgage curbs to boost the property market is at the center of Finance Minister Choi’s policies to stimulate growth -- dubbed Choinomics after Japan’s Abenomics, which refers to reflationary monetary and fiscal policies to revive economic expansion. Gangnam StyleThe Bank of Korea cut the benchmark interest rate for the first time in more than a year on Aug. 14, to 2.25 percent. The average new mortgage loan rate was 3.58 percent in June, the lowest level since the Bank of Korea began tracking the rate in September 2001. The economy expanded at the weakest pace in more than a year last quarter and the central bank last month reduced its growth forecast for this year to 3.8 percent. The nationwide apartment purchase price index was 101.9 in the week of Aug. 18, the highest level since April 2008, according to the data from Kookmin Bank. Prices in Seoul’s affluent Gangnam area -- immortalized in Psy’s hit song Gangnam Style -- rose at the strongest pace in more than five months in the week to Aug. 18, the data show. Same FundamentalsSome are skeptical of the measures’ success. Choi’s determination to “normalize” the housing market and boost sentiment may exacerbate South Korea’s household debt without lifting home prices, said Lim Hyun Mook, head of real estate at Shinhan Bank, the third-largest lender by assets. “Regardless of the mortgage rule changes, the fundamentals of the market haven’t changed,” Lim said. “People don’t buy homes because they aren’t certain about the future price gains and their income flow. It’s not because they can’t borrow enough money. I expect the impact would be short-lived just like the government’s previous measures.” A 10 percent drop in home prices would more than double the interest-payment burden for those whose mortgages exceed 60 percent of the home value, the Korea Development Institute said in a report published in June, based on 2012 data. The household debt, including loans and goods purchased on credit, stood at a record 1,024.8 trillion won at the end of March, including 422 trillion won in mortgages extended by banks and other depository institutions, according to the latest data from the Bank of Korea. Debt Risk“The loosened mortgage rules should be reversed,” said Jun Sung In, an economics professor at Hongik University, adding that debt risk needs to be contained. “Given that an interest rate cut followed the easing of the rules, loans on credit are likely to increase and add to the household debt risk.” The Financial Services Commission in February said that it aims to reduce the country’s household debt-to-disposable-income ratio by 5 percentage points by 2017. South Korea’s 163.8 percent ratio is higher than that of the U.S., Canada and the average of member countries of the Organization for Economic Cooperation and Development, the regulator said. Finance Minister Choi’s measures will boost the housing market in the short term, especially as interest rates fall, said Kim Kyung Soo, an economics professor at Seoul-based Sungkyunkwan University. “Loosened loan controls mean more than just more transactions; it means more business,” Kim said. That comes at the expense of more household debt, he said. Buy, RentPrices for properties sold at auction are rising. The average auction price was about 87 percent of what properties were valued at in July, the highest since at least 2008, according to Real EstateTaein, an online auction information provider. “It’s an upbeat sign that demand from potential homebuyers is rising, and that they are starting to take action,” said Jung Dae Hong, an analyst at Seoul-based Taein, adding that auction market prices are often a leading indicator of the housing market. Choi, the chemical researcher, has his sights set on a three-bedroom apartment of about 84 square meters (904 square feet), overlooking the Han River in Hanam, a satellite city in the southeast of Seoul. The new units, which will start selling in September, cost about 260 million won. His new rent deposit was 210 million won. The apartment purchase price index for the Seoul metropolitan area fell 5.9 percent over the five years through July in contrast to the 48 percent jump in an index for rents, according to Kookmin Bank data. “I used to think owning a home on debt is an absurd idea, especially when I don’t believe home prices will rise,” Choi said. “But look at this rental market, I may have to borrow money anyway to pay for the lease rise. I’d rather be a debtor with a house rather than be a tenant on debt.” -By Seonjin Cha and Cynthia Kim |