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21st September 2014

Real Estate Companies' Brief

Ex-SIP boss no stranger to Sino-S'pore projects

Bai worked in other organisations linked to Suzhou park before taking on CEO role

Source: Straits Times / News

Former Suzhou Industrial Park (SIP) chief executive officer Bai Guizhi, who is being investigated for graft, may have been in his role for less than three months, but he is no stranger to Sino- Singapore bilateral projects.

Chinese media reports said he was previously chairman and general manager of the Suzhou Industrial Park Neighbourhood Centre Development (SIPNC), which runs the Singapore-style community clubs in the bilateral project.

In October 2012, Mr Bai was signatory for the SIPNC to a joint venture with Guangzhou Zhicheng Real Estate Investment to build, develop and manage neighbourhood centres in the Guangzhou Knowledge City, a private sector-led project between Singapore and China.

Mr Bai, 59, was also former deputy chief executive of the Suzhou Ventures Group and concurrently general manager of its subsidiary, the SIP Ease-Rich Assets Management, which was set up in 2007 and specialises in real estate financing.

He reportedly holds an engineering master's degree from Zhengzhou University and a master's in business administration from the University of Texas at Arlington in the United States.

"He is a soft-spoken, friendly, approachable person. We are all shocked when we heard the news of his investigations," said a reliable source who has worked with Mr Bai.

Mr Bai is said to have worked in Suzhou city and elsewhere in Jiangsu province in eastern China.

The 21st Century Business Herald said he could have been implicated in the case of former Nanjing party committee member Feng Yajun, who was placed under investigation two weeks ago. Nanjing is Jiangsu's capital city.

"They have a common briber," an unnamed official was quoted as saying.

Separately, an SIP venture in neighbouring Anhui province - the Suzhou-Chuzhou Modern Industrial Park - has also been hit by scandal.

Its administrative committee's head Xing Gao was investigated for graft in April and sacked subsequently.

-By Kok Kian Beng, China Bureau Chief in Beijing

Views, Reviews & Forum

Sold on revised Lease Buyback Scheme

Source: Straits Times / Think

Like some of my friends, I see no need to bequeath property to my children if they have the means to buy their own homes.

So, what will I do with my house?

When I retire, I intend to sell it and use some of the proceeds to buy a lower-cost property - most likely a resale Housing Board flat.

Ideally, since I will not be handing over the flat to my sons, I will be able to use it only for as long as my wife and I expect to live.

And this is where the revisions to the Lease Buyback Scheme - where HDB flat owners sell back part of the remaining lease to the Government - have caught my attention, for they seem to dovetail nicely with my financial planning for old age.

I think there is merit in opting to retain the lease of a flat for 15, 20 or 35 years and, in the process, get to monetise the asset.

The HDB cites an example where a couple, aged 65, are joint owners of a paid-up four-room flat worth $450,000, and with a 65-year lease remaining.

If they keep 30 years of the lease and sell the other 35 years under the Lease Buyback Scheme, they will get $190,000.

There is a $100,000 cap on the amount that they can receive in cash, with the rest - if both owners have already fulfilled their Minimum Sum requirements - going to their Central Provident Fund Retirement Account, which pays a decent 4 per cent interest rate.

The scheme is now also extended to owners of four-room HDB flats, in addition to those with smaller units.

There is also greater flexibility for the owners to choose the number of years of the lease to keep, from 15 to 35 years.

These changes are in sync with my plans to buy a four-room resale HDB flat - I like the luxury of having some space - perhaps in Punggol with its waterfront living.

But I am more excited about another rule revision.

The Lease Buyback Scheme eligibility is now expanded to applicants with household incomes of up to $10,000 a month, up from $3,000 previously.

This will allow my two sons - they should be working by the time I retire, and if their pay is not too high - to continue living with my wife and me until they get married and move out.

If they moved out and my wife and I worked part time, our combined salaries would unlikely breach the $10,000 limit.

Applications under the revised scheme will be accepted from April 1 next year, but I am already quite sold on it.

Given that one can expect to live 30 years after retirement, I believe others will also find the revamped scheme a viable option in fine-tuning their housing and financial strategy in old age.

There is one other condition to be met - the home owner must have lived in the flat for five years before applying for the scheme.

But what is five years of waiting in return for greater financial security - with more funds freed up - for many years of old age ahead?

While I won't be leaving my sons any property, I would like to use some of that money to help them buy their first homes.

-By Loh Keng Fatt

Global Economy & Global Real Estate

Fed decision unlikely to rock Singapore's boat

Stocks, interest rate here expected to remain steady in the short term as Fed keeps rates low

Source: Straits Times / Invest

It was a nervous week for investors worldwide as they kept a close watch on the United States Federal Reserve's regular meeting on monetary policy.

Punters here also kept their eyes peeled for signs of how their stocks and other investments such as gold would perform.

Much hinged on the Federal Open Market Committee's (FOMC) language, in particular, whether it would stick with its pledge to keep interest rates low for a "considerable time".

The Fed did not disappoint the market in this regard, keeping the key phrase.

But crucially, it indicated that when interest rates do increase, they would probably be raised at a faster rate than what it had forecast in June.

Policymakers forecast that the benchmark borrowing rates at the end of next year would be 1.375 per cent, up from June's estimate of 1.125 per cent.

That is a significant jump from the current levels of between zero per cent and 0.25 per cent.

The Fed also said it will end its third round of quantitative easing (QE3), or stimulus measures, next month if the economy continues to recover, unchanged from its previous stance.

Analysts note that local interest rates, such as the Singapore Interbank Offered Rate (Sibor), are quite strongly linked to US interest rates.

With many economists expecting the Fed to possibly start raising interest rates by the middle of next year, local interest rates and borrowing costs will inevitably rise.

OCBC head of treasury research and strategy Selena Ling said: "For domestic short-term interest rates, the three-month Sibor has remained very well-behaved post-FOMC, suggesting there is no real impact as yet.

"Going into year-end and into 2015, we expect that Singapore dollar short-term interest rates may start to feel the modest gravity pull as the US dollar interest rate cycle turns."

Many home loans are pegged to Sibor, which stands at around 0.4 per cent now, so any upturn in interest rates could mean home buyers having to fork out more.

Mr Kelvin Tay, regional chief investment officer for Southern Asia-Pacific at UBS Wealth Management, expects interest rates to trend upwards, but in a gradual and incremental manner.

"The impact on mortgages is likely to be muted as affordability is unlikely to be a major impediment in the near term for most Singaporean households.

"Over the next 12 months, we believe the supply of apartments and subsequent increase in the vacancy rate is likely to have a bigger impact on the Singapore residential property market than the threat from higher interest rates."

The impact of the Fed decision on stock markets is less clear because of the mixed signals it sent on keeping rates low for a long time, but then likely hiking them at a faster pace when it starts.

QE3 and the era of low interest rates have been a key factor driving the global stock market rally in recent times, including in Singapore.

The Singapore Exchange found that over the roughly two-year period of QE3, the Straits Times Index (STI) generated a total return of 15.3 per cent.

As Singapore shares historically take their lead from Wall Street, the continued setting of all-time highs on the Dow Jones Industrial Average over the past week should bode well for stocks.

"As seen from the recent price actions post the Fed statement, the market has reacted positively to the news," said OCBC Investment Research head Carmen Lee.

UBS' Mr Tay noted that while banks here should benefit from higher interest rates owing to improved net interest margins, the Singapore export sector such as the electronics industry is still hampered by weak growth

"The overall impact from the FOMC statement is likely to be neutral, with the local market likely to take its cue from the US, but unlikely to outperform its regional peers," he said.

Gold, meanwhile, has taken a tumble as it traditionally shares an inverse relationship with the US dollar.

Eventual interest rate hikes mean greater demand for the US dollar as investors seek higher returns. This, in turn, makes gold less attractive as it is a non-interest-bearing asset. It also has diminished appeal as a hedge or safe-haven asset against a weak US dollar.

The yellow metal dropped to its eight-month low, to around US$1,277.80 an ounce.

Phillip Futures investment analyst Howie Lee noted: "After projections of the FOMC showed an increased amount of hawkishness among Fed officials, gold took a quick plunge.

"The direction of the Fed is well and truly evident, and any form of good economic data will be seen as a sign of further hawkishness among Fed officials."

-By Mok Fei Fei

Fancy owning a home in Iskandar?

Here are various developments you can consider, with prices that suit a broad range of budgets

Source: Straits Times / Invest

Singaporeans interested in buying a home across the Causeway in fast-developing Iskandar Malaysia have a wide array of choices.

The latest, Grand Medini Residences, launched here last Friday.

The Sunday Times surveys some options in Iskandar, at various price points, with the help of Mr Ryan Khoo of Alpha Marketing and developers operating there.

Below RM500,000 (S$200,000)

  • Studio and one-bedroom units (474 sq ft to 614 sq ft) at Grand Medini Residences, going for RM380,000 to RM500,000. Expected completion: Second half of 2018.
  • One-room, small office/home office (Soho) units (644 sq ft) at D'Pristine Medini, starting at RM480,000. Expected completion: First half of 2018.

Below RM750,000 (S$300,000)

  • Two-bedroom units (836 sq ft to 902 sq ft) at Country Garden Danga Bay, starting at RM600,000. Expected completion: End 2017.
  • One-bedroom units (538 sq ft) at Tebrau 8 Residences, in the Johor Baru city centre, starting at RM500,000. Expected completion: End 2017.
  • Two-bedroom units (835 sq ft) at Crescent Bay Suites, on the Johor Baru city fringe, starting at RM600,000. Expected completion: End 2016.
  • 1+1 bedroom units (696 sq ft) at Paradiso Nuova condominium in Medini, starting at RM600,000. Expected completion: First half of 2017.

Below RM1 million (S$400,000)

  • Three-bedroom or dual-key units (904 sq ft to 1,119 sq ft) at Grand Medini Residences, starting at RM600,000.
  • Three-bedroom units (1,264 sq ft to 1,558 sq ft) at Country Garden Danga Bay, starting at RM850,000.

RM1 million (S$400,000) and above

  • Terraced, semi-detached or bungalow houses at Horizon Hills in Nusajaya, starting at RM1 million to RM3.3 million. Completed and new launches are available.
  • Terraced, semi-detached or bungalow houses at East Ledang in Nusajaya, starting at RM1.4 million to RM4 million. Completed.
  • Three- to four-bedroom units (1,200 sq ft to 1,500 sq ft) at Fairway Suites in Nusajaya, starting at RM1 million. Completed.

-By Rennie Whang

Oliver Says Canada Won’t Make Major House Finance Changes

Source: Bloomberg / Luxury

Canada won’t make any sudden changes to the country’s system of housing finance, even as the government looks at ways to reduce its role in the market, Finance Minister Joe Oliver said.

Oliver said that while he’s studying proposals, such as the idea of the government passing on more risk to lenders, these are longer-term issues that don’t require immediate action. The government guarantees about C$710 billion ($648 billion) worth of Canadian mortgages through state-run Canada Mortgage & Housing Corp. and private mortgage insurers.

“We’re looking at things, but we’re not going to be doing anything dramatic,” Oliver said in an interview in Cairns, Australia, where he was attending a meeting of finance ministers and central bankers from the Group of 20 countries. “We don’t see the need for it.”

Evan Siddall, chief executive of CMHC, said in a Sept. 19 speech his organization is looking at ways to better manage the government’s exposure to the housing market.

In the speech, Siddall outlined how his organization is “re-examining” its role to ensure the government isn’t distorting the housing market by assuming too much risk.

Possible steps could include risk-sharing with banks, higher capital requirements or smaller regulatory measures to curb over-borrowing by some households, Siddall said.

Nothing Precipitous

“We certainly aren’t going to do anything precipitous,” Oliver said. “You don’t want to cause the very thing you are trying to prevent.”

On the risk-sharing proposal, Oliver said the government hasn’t made any decisions.

“Obviously it’s one of the things one looks at, but I don’t want to signal we’re doing anything,” he said.

Canadian housing has so far defied predictions of a correction with recent data showing an acceleration in resales, starts and prices. Policy makers have downplayed worries the market is at risk of a collapse, forecasting instead a soft landing. Oliver reiterated he doesn’t see a housing bubble.

In his speech, Siddall said that his organization’s research shows that even with some overvaluation, “there are no immediate problematic housing market conditions at the national level.” If prices don’t moderate as predicted though, Siddall said, it will strengthen case for additional measures to cool the market.

Additional Measures

“Our educated opinion is that growth in house prices in Canada will moderate,” Siddall said. “If we are wrong, and price growth remains strong or accelerates, we may need to look to macro-prudential counter-weights to avoid excesses.”

Until now, the agency has been taking smaller measures to remove some of excesses from the market and reduce the amount of insurance it has in force, which is capped at C$600 billion. In June, it announced it would no longer insure financing for condominiums. In February, the agency said it will increase premiums on mortgage insurance by an average of 15 percent. In 2012, the government gave the country’s banking regulator new to oversee CMHC.

CMHC also is planning to increase its capital holdings to protect from insurance losses and has done stress testing that shows it would have survived a U.S.-style downturn in the housing market, Siddall said in the speech.

CMHC insures mortgages against default, and its insurance is fully backed by the federal government. By law, Canadian mortgages with less than a 20 percent downpayment must be insured.

Housing Vulnerability

Bank of Canada Governor Stephen Poloz said yesterday that while housing remains a “vulnerability” for Canada, “we don’t see the housing market as particularly hazardous and we certainly don’t consider it to be a bubble.”

‘We’re not overly concerned but monitoring it very carefully,’’ Poloz told reporters in Cairns. “Over the course of the summer there was no perceptible reduction in household imbalances, while during the first half of the year we had seen a modest constructive trend.”

While no major policy changes are planned, Oliver said there could be similar smaller steps that can be taken if warranted.

“That doesn’t mean we’re not going to take further steps,” Oliver said. “A lot of things as you know that have happened, they call it the sandbox policies, we believe moderated the growth.”

In a conference call with reporters from Sydney today, Oliver reiterated the government wants to gradually reduce its involvement in the mortgage market. “Anything that we might consider would be of a marginal nature, like some of the steps that have been taken,” he said.

Dramatic Exit

There have been calls for a more dramatic exit from the market by the government. In a June report, the Organization for Economic Cooperation and Development said Canada should consider lowering the amount of mortgage insurance CMHC can write, and eventually get out of the business completely to limit taxpayer risk.

“Right now, government takes practically all the risk,” OECD Secretary-General Angel Gurria said in a June 11 interview. “This is a contingent liability of the taxpayers of Canada. There has to be some risk borne by the intermediary institutions and the borrowers themselves.”

Tax Inversions

Oliver also told reporters on the conference call he spoke to U.S. Treasury Secretary Jacob J. Lew at the Cairns meeting about U.S. companies that seek to reduce taxes by relocating abroad, a practice known as inversion.

Lew said yesterday his department is finishing work on measures that would limit inversions.

Oliver said it’s not clear whether the changes will be retroactive, a move that might affect Burger King Worldwide Inc. (BKW)’s takeover of Canadian coffee and doughnut retailer Tim Hortons Inc. (THI) “We don’t know just how far that might go, whether there would be an attempt at retroactivity,” Oliver said.

He said Canada hasn’t been targeting companies for potential inversions. “The reason that we have pursued a low-tax policy on the corporate side is to attract and retain capital, which results in economic growth and employment.”

-By Theophilos Argitis and Andrew Mayeda