Issue 208

Copyright 2011-2014 www.Propwise.sg. All Rights Reserved.

CONTENTS
p2

FROM THE

EDITOR

9 Key Factors that Impact Mortgage

Welcome to the 208th edition of the

Singapore Property Weekly.

Interest Rates

Hope you like it!

p10

Singapore Property News This Week

p16

Resale Property Transactions

Mr. Propwise

(April 29 May 5 )

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SINGAPORE PROPERTY WEEKLY Issue 208

9 Key Factors that Impact Mortgage Interest Rates

By Paul Ho (guest contributor)
The interest rate a bank charges you is the
reward for taking a risk with their capital on
you as a borrower. The interest rate is often
referred to as the cost of funds or hurdle
rate.
What are the key factors that affect mortgage
interest rates? In this article, we will examine
many of the factors that affect this critical
rate, especially in view of the potential
Federal Reserve tapering that could push up
interest rates as early as later this year.

Back to Contents

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SINGAPORE PROPERTY WEEKLY Issue 208

1. Risk to Capital
If the lender perceives a higher default risk on
its capital lent out, it will demand a higher
interest rate. This can come from shocks to
the financial system from within the country or
beyond. As the worlds financial systems are
increasingly interlinked, any credit event far
away can increase potential default risk.

2. Demand for funds

The increased demand for funds, when it
outstrips the supply, will also cause interest
rates to rise. The genuine demand of funds
comes from the industrys need for
investment. The industry will borrow money
for investments if they think their investment
returns can better the interest rate. This type
of capital demand can help a country
increase its productive capacity.

Back to Contents

The other types of demand for funds are for

household consumption such as housing
mortgages, car loans, renovation loans or
personal consumption.
3. Supply of funds
The supply of funds varies in each country.
The supply of funds can come in local
currency or foreign currency. The supply of
funds generally comes from banks. The
banks in turn receive their funds from equity
and depositors funds. These funds are then
lent out to borrowers, lessing off capital
reserves requirement such as BASEL III to
maintain the stability of the banks via a capital
adequacy ratio.
Financial institutions having excess capital
may then lend these funds to other financial
institutions on an overnight basis,

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SINGAPORE PROPERTY WEEKLY Issue 208

1 month, 3 months, 6 months and so on. This
is referred to as the interbank rate or
benchmark interest rate. In Singapore it is
referred to as the Sibor rate; in London, it is
referred to as the Libor rate; in the USA it is
referred to as the Federal Funds Rate
(overnight rate).
The supply of funds in a country depends on
the money supply and the amount of
depositors funds within a financial system.
And in recent decades, the availability of
credit (debt) also increases the supply of
funds and is further complicating the issue of
funds availability. The effect of credit (debt) on
the supply of funds is not fully understood.
4. Government Intervention
A regulator or central bank usually intervenes
in the overnight funds market. The effects of
intervention then filter through to the rest of
Back to Contents

the tenures of the interbank lending rate.

5. Core Inflation and headline inflation
Core inflation measures inflation over a
longer period of time for a constant basket of
goods. Headline inflation measures the
current inflation rate and can be impacted by
short-term supply and demand imbalances,
causing temporary spikes and troughs in
pricing. Every country varies in the way they
measure inflation.
When Core Inflation is on an uptrend, it can
start to erode purchasing power and may lead
to intervention via increasing interest rates.

Core inflation can rise when a nation is

approaching full employment. Two main
factors that contribute to the increase in
disposable income are: 1. Higher total
employment 2. Higher wages due to labour
crunch.
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SINGAPORE PROPERTY WEEKLY Issue 208

More disposable income can push up prices
of goods and materials. Full employment
seems to be around 4% for the US economy.
Interest rates may have to rise to cool down
the economy.

Chart: USA & UK Unemployment Rate

1990
to
2015,
(Source:
Trading
Economics)

Back to Contents

6. GDP growth
When a countrys total gross domestic
production grows too quickly, it can cause
Core Inflation to rise. For example, if a
countrys GDP grows by 5% and inflation
grows by 6%, this means that the country has
negative real growth. When an economy
grows at a fast rate, it is usually accompanied
by a higher inflation rate as industry clamours
for limited supplies of raw materials and
pushes production toward or beyond capacity.
If income does not keep pace with inflation,
this can cause social unrest. A regulator may
hence pull the brakes on the economy by
increasing interest rates to cool the economy.
Generally interest rates should somewhat
track inflation, i.e. high inflation leads to high
interest rates. However, interest rates can be
kept at a certain level for an extended
duration of time through intervention.
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SINGAPORE PROPERTY WEEKLY Issue 208

7. Cross-border Interest Rates
As the worlds major economies are
increasingly
interlinked,
policies
and
regulations in other countries may affect
another country. If interest rates are rising
globally, then all connected economies will be
affected. Funds may then move away to seek
higher returns via higher interest rates (all
factors being equal).

Chart: USA Overnight Fed funds rate Vs

Sibor overnight rate (Source: iEconomics)
Back to Contents

By observation of the chart of the US

overnight fed funds rate versus the Sibor
overnight rate, we can see that these two
economies have correlated interest rates
movements.
8. Funds Flows and Exchange Rates
The movement of capital across the globe
has implications on each countrys economy.
Some developing countries have a higher
percentage of corporate and household debt
denominated in foreign currency and,
therefore, are at a greater risk from sudden
funds withdrawal from their markets. Money
supply in local currency may also suffer from
withdrawals of deposits and repatriation of
profits to foreign markets.
The exchange rate plays an important role for
investors parking their funds in any country. If
the investment currency is expected
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SINGAPORE PROPERTY WEEKLY Issue 208

to weaken significantly against the investors
base currency, investors may then decide to
withdraw their funds from the invested
currency.
Interest rates may have to rise when funds
become scarce. Alternatively, some countrys
regulator or banks may have mechanisms to
react preemptively to raise interest rates to
cushion against a weakened currency by
increasing interest rates.
Many countries regulate the economy by
varying the interest rates to regulate the
speed of the economy. These monetary
policy levers are effective for countries with a
large domestic economy relative to trade,
such as the USA where trade accounts for
13.5% of the GDP in 2013 (World Bank)

Back to Contents

9. Shocks to the Financial System

Shocks to the financial system (systemic
risks) may cause bankruptcies and defaults.
There are many possible shocks to the
financial system - just to name a few:
i. Exchange Rate Volatility via Quantitative
Easing
Quantitative Easing (printing money) leads to
currency devaluation. A currency which is
devaluing may need to raise interest rates to
slow down its devaluation as compensation to
investors for holding the currency. Financial
institutions and fund houses with un-hedged
cross currency borrowings may end up
bankrupt leading to a cascade of possible
defaults. A case in point was the recent
unexpected de-pegging of the Swiss franc to
the Euro, which caught many by surprise).

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SINGAPORE PROPERTY WEEKLY Issue 208

causing a cascade of asset losses and
bankruptcies for investors.
iii. Other Troubled Assets and Toxic
Assets

Chart: Euros per 1 CHF 2010 to May 2015

(Source: XE)
ii. Sovereign Debt Defaults
Slow economic growth and high sovereign
debt especially in European nations are risky.
Budget deficits could cause potential defaults.
Any possible risk of default or downgrade of
the economy could cause interest rates to
swing upwards further escalating risks.
Sovereign bonds could become worthless
Back to Contents

Banks typically hold very little equity and are

over-leveraged. Hence asset depreciation or
write-downs (in the form of loss of asset
value) could make the banks insolvent.
Hence, the Basel Accord was formed to
mandate minimum reserve liquidity in the
worlds banking systems. The increase in the
minimum capital adequacy ratio (CAR)
means that the banks will have less capital to
lend out and hence banks may demand
higher interest rates.
Summary
The above are some of the key factors that
affect interest rate movements. It is hard to
decipher and predict the time frame of
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SINGAPORE PROPERTY WEEKLY Issue 208

interest rate movements. Many credit events
and unexpected shocks could happen which
would severely impact interest rates.
Hence borrowers should not expect interest
rates to remain at their current low rates
forever, and should be cautious of overleveraging themselves.
By Paul Ho, holder of an MBA from a
reputable
university
and
editor
of
www.iCompareLoan.com, Singapores first
Cloud-based Home Loan reporting platform
used by Property agents, financial advisors
as well as Mortgage brokers.

Back to Contents

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SINGAPORE PROPERTY WEEKLY Issue 208

Singapore Property This Week

Residential
Aprils resale prices of condos fall by 0.7
percent month-on-month
According to flash estimates by SRX
Property, resale prices of condominium units
have fallen by 0.7 percent in April from the
previous month. Nonetheless, about 440
private non-landed homes changed hands in
April. This was 2.7 percent lower than in
March, where 452 units changed hands.
Eugene Lim from ERA Realty said that the fall
in resale volumes was due to an increase in
new launches. Particularly in April, there were
two new launches in Yishun and Bartley. Lim
believes that as prices stabilise, demand for
Back to Contents

resale units will increase. According to the

Business Times, in April, resale prices of
condominium units in the core central region
and outside central region fell by 0.1 percent
and 1.5 percent respectively. However, resale
prices of condominium units in the rest of
central region increased by 0.4 percent during
the same period. Wong Xian Yang from
OrangeTee said that despite the price falls,
transaction volumes have not picked up
because buyers hesitate to return to the
resale market. Not only so, given the stable
economy, sellers have been able to hold on to
their properties.
(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 208

HDB rents in April falls by 0.7 percent
from March
In April, HDB rents have fallen by 0.7 percent
month-on-month according to flash estimates
by SRX. Also, during the same period, HDB
rental volumes have fallen by 13.2 percent to
1,705 units in April from 1,964 units in March.
Four-room, five-room and executive flats saw
a 0.9 percent, 1.3 percent and 0.4 percent dip
in rents respectively. However, three-room
flats saw an increase in rents by 0.4 percent.
On the other hand, private residential rents
have remained flat in April compared to
March. Rental volumes for private homes
have also fallen by 11.9 percent month-onmonth in April. Private residential rents in the
prime city area have increased by 0.7
percent, while rents in the city fringe and the
suburbs have fallen by 0.1 percent and 0.7
percent respectively. According to Ong Kah
Back to Contents

Seng from RST Research, the low rental

volumes show that tenants are still finding
rental prices high. Lastly, Ong predicts that
condo rents will fall by up to 7 percent this
year.
(Source: Business Times)
EC in Jurong launched at indicative price
of $800 psf

Westwood Residences, an executive condo

in Jurong, has been launched. The project,
which consists of 480 units, has been priced
at $800 psf according to the Business Times.
The project boasts of its bike-themed features
such as a two-tier bike garage for 500
bicycles. Not only so, the development will
contain a bike maintenance area that will
consist of repair tools and bike stands. Also,
the residential estate will feature a BMX
adventure park that is child-friendly.
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SINGAPORE PROPERTY WEEKLY Issue 208

There will also be an indoor gym, a pool and
other facilities. According to the Business
Times, the project has a 99-year lease. It
comprises of 28 two-bedders, 62 threebedders, 98 four-bedders and 28 fivebedders. The project will be the second
executive condominium in 18 years to be
developed in Jurong.

increased by 3.9 percent year-on-year to

March 2015. San Francisco saw the largest
increase in luxury home prices as prices
surged by 14.3 percent year-on-year till
March. Alice Tan from Knight Frank said that
the cooling measures that were implemented
by the government had curbed demands in
the luxury home market in Singapore.

(Source: Business Times)

(Source: Business Times)

Marchs luxury home prices fall by 12.6%

Aprils increase in developer sales highest

in 11 months

A study by Knight Frank shows that prices of

luxury homes in Singapore have taken the
hardest hit among the 35 cities in the study.
According to the Prime Global Cities Index,
luxury home prices in Singapore have fallen
by 12.6 percent year-on-year by the end of
March this year. On the other hand, Geneva
and Zurich came in next with a 5 percent fall
in prices of luxury home. In general, the index
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In April, the increase in developer sales for

private
homes,
excluding
executive
condominiums has hit a new high in 11
months as 1,124 units were sold in April.
However, due to a lack of major launches in
the coming months, market experts believe
that this trend will not be sustained in the
coming month.
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SINGAPORE PROPERTY WEEKLY Issue 208

According to market experts, the 83.4 percent
increase in developer sales in April from the
613 units sold in March, was due to the
launch of two major projects in Yishun and
Bartley. Ong Teck Hui from JLL said that it is
still too early to say if the market has
recovered. Chia Siew Chuin from Colliers
added that buyers have flocked to the two
major launches due to the prime location of
the projects and their reasonable pricing.
Eugene Lim from ERA Realty said that
cooling measures such as the total debt
servicing ratio framework and the additional
buyers stamp duty have curbed buyers
interest. As such, he believes that buyers are
still price sensitive. As the number of
launches slows down in the coming months,
Chia believes that sales volumes in May will
be around 400 to 700 units.

(Source: Business Times)

Back to Contents

Commercial
High-speed rail terminus
Jurong Country Club

to

replace

The Jurong Country Club will be torn down

and developed into a terminal for a highspeed rail link to Malaysia. According to Tan
Boon Khai, the chief executive of Singapore
Land Authority, the Jurong Country Club will
not be offered a replacement site following its
acquisition, which was made under the Land
Acquisition Act. The 67-ha site will be handed
over in November 2016. According to the
Business Times, part of the site will be
redeveloped into a mixed-use precinct
comprising offices, retail outlets, hotels and
homes. Chew Men Leong from the Land
Transport Authority said that most of the
infrastructure for the high-speed rail will be
built underground.
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SINGAPORE PROPERTY WEEKLY Issue 208

Slated to be completed in 2025, the Jurong
Region Line and the Cross Island Line which
is to be completed in 2030, will be located
near the high-speed rail terminal, said Chew.
(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 208

Non-Landed Residential Resale Property Transactions for the Week of Apr 29 May 5

Postal
District
1
2
3
4
4
4
4
5
9
9
9
9
9
9
9
9
9
10
10
10
10
10
10
10

Project Name
PEOPLE'S PARK CENTRE
THE BEACON
QUEENS
CARIBBEAN AT KEPPEL BAY
CARIBBEAN AT KEPPEL BAY
CARIBBEAN AT KEPPEL BAY
HARBOUR VIEW TOWERS
THE ROCHESTER
ESPADA
111 EMERALD HILL
VIDA
SCOTTS HIGHPARK
WATERMARK ROBERTSON QUAY
THE IMPERIAL
THE EDGE ON CAIRNHILL
THE PATERSON
MIRAGE TOWER
ONE TREE HILL RESIDENCE
PARVIS
ONE CHATSWORTH
ZENITH
NATHAN PLACE
PROXIMO
BOTANIC GARDENS MANSION

Back to Contents

Area
(sqft)
1,701
969
1,410
840
2,691
1,206
1,615
1,206
560
2,497
850
1,141
904
1,410
2,142
1,421
1,744
1,227
1,701
3,305
560
1,130
1,119
1,399

Transacted
Price ($)
1,205,000
1,330,000
1,825,000
1,468,888
4,398,000
1,850,000
1,500,000
1,670,000
1,160,000
5,118,850
1,660,000
2,180,000
1,700,000
2,590,000
3,828,000
2,500,000
2,800,000
2,294,490
3,100,000
6,000,000
990,000
1,850,000
1,750,000
2,150,000

Price
Tenure
($ psf)
709
99
1,373
99
1,294
99
1,750
99
1,634
99
1,535
99
929
99
1,385
99
2,072
FH
2,050
FH
1,952
FH
1,911
FH
1,880
FH
1,837
FH
1,787
FH
1,760
FH
1,606
FH
1,870
FH
1,823
FH
1,816
FH
1,769 999
1,637
FH
1,563
FH
1,536
FH

Postal
District
10
11
11
11
11
11
11
11
12
12
14
14
14
15
15
15
15
15
15
16
16
16
17
17

Project Name
ALLSWORTH PARK
SUITES @ SHREWSBURY
SOLEIL @ SINARAN
THE LINCOLN RESIDENCES
LION TOWERS
MEDGE
WATTEN HILL
TREASURE LOFT
TRELLIS TOWERS
D'LOTUS
DAKOTA RESIDENCES
EVERGREEN VIEW
EUNOS MANSION
WATER PLACE
RIVEREDGE
EAST VIEW
ST PATRICK'S GREEN
MANDARIN GARDEN CONDOMINIUM
KATONG PARK TOWERS
THE SUMMIT
TANAH MERAH MANSION
AQUARIUS BY THE PARK
THE GALE
AZALEA PARK CONDOMINIUM

Area
(sqft)
1,033
344
958
1,841
1,862
861
2,626
1,539
1,647
807
1,894
1,281
1,453
1,227
1,335
883
1,087
1,001
1,475
1,249
1,044
1,206
1,152
1,507

Transacted
Price ($)
1,520,000
640,000
1,668,000
2,828,888
2,700,000
1,150,000
2,750,000
1,360,000
2,050,000
950,000
2,530,000
1,240,000
1,090,000
1,570,000
1,635,000
1,078,000
1,290,000
1,080,000
1,238,000
1,320,000
970,000
1,030,000
1,080,000
1,150,000

Price
Tenure
($ psf)
1,471 999
1,858
FH
1,741
99
1,537
FH
1,450
FH
1,335
FH
1,047
FH
884
FH
1,245
FH
1,177
FH
1,335
99
968
FH
750
FH
1,279
99
1,225
99
1,221
FH
1,187
FH
1,079
99
840
99
1,057
FH
929
FH
854
99
938
FH
763
999

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SINGAPORE PROPERTY WEEKLY Issue 208

Postal
District
18
19
19
19
19
19
20
20
20
20
21
21
21
21
21
21
22
22
23
23
23
25
28
28
28

Project Name
SAVANNAH CONDOPARK
TANGERINE GROVE
A TREASURE TROVE
HILLSIDE MANSIONS
CHILTERN PARK
RIO VISTA
THOMSON V TWO
FABER GARDEN CONDOMINIUM
GRANDEUR 8
FAR HORIZON GARDENS
FLORIDIAN
THE NEXUS
ASTOR GREEN
SIGNATURE PARK
MAYFAIR GARDENS
PINE GROVE
THE MAYFAIR
LAKEPOINT CONDOMINIUM
HILLINGTON GREEN
MERA WOODS
HILLVIEW REGENCY
PARC ROSEWOOD
NIM GARDENS
SUNRISE GARDENS
SELETAR SPRINGS CONDOMINIUM

Area
(sqft)
1,453
1,281
775
1,195
1,302
1,378
452
2,120
1,249
1,292
872
1,378
1,528
1,389
1,765
1,744
1,389
2,217
1,755
1,830
969
431
1,830
2,067
2,067

Transacted
Price ($)
1,235,000
1,500,000
880,000
1,020,000
1,075,000
1,090,000
690,000
2,250,000
1,200,000
920,000
1,350,000
1,980,000
1,500,000
1,290,000
1,400,000
1,365,000
1,180,000
1,130,000
1,720,000
1,540,000
800,000
560,000
1,582,000
1,399,000
1,230,000

Price
Tenure
($ psf)
850
99
1,171
FH
1,135
99
854
FH
825
99
791
99
1,526
FH
1,061
FH
961
99
712
99
1,548
FH
1,437
FH
981
99
929
FH
793
99
783
99
850
99
510
99
980
999
842
999
826
99
1,301
99
865
FH
677
99
595
99

NOTE: This data only covers non-landed residential resale property

transactions with caveats lodged with the Singapore Land Authority.
Typically, caveats are lodged at least 2-3 weeks after a purchaser
signs an OTP, hence the lagged nature of the data.

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