To gamble or not to gamble?

A friend who's also financial service agent tried to convince me on two funds 4 months ago. I didn't commit and hesitated to wait for a 'low' entry point. Here is their performance over the past four months:

The Singapore Growth Fund performs so-so, with the offer-to-bid return ranging from -13.2% to the latest 2.1%.

However, the Regional China Fund performs too good to believe: achieving 41% offer-to-bid return over the past 4 months, though it had ever recorded -9.4% lost in mid Aug.

To gamble or not to gamble, that's a question...

Interest rates

Singapore Interbank Offered Rate (SIBOR) is a reference interest rate at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market. Set by the Association of Banks in Singapore (ABS), SIBOR reflects the true cost of money in the interbank market; it is commonly used in the Asian region.

Prime (lending) rate is a reference interest rate used by banks. It originally indicates the rate at which banks lent to their most favoured customers. Some variable interest rates may be expressed as a percentage above or below prime rate. Movement of the prime rate usually reflects the changes of mortgage cost.

Perhaps in order to decrease transparency, major Singapore banks now use own names for the reference rate of their home loan products, e.g. DBS calls it Value Mortgage Rate (VMR) at 4% now, OCBC names it Value Rate currently at 4.5%, UOB calls it either HomePlus Rate or UOB Mortgage Rate both at 4.5%. Various home loan products are then expressed as a percentage below that rate.

The above chart is derived from Monetary Authority of Singapore data over the past 10 yrs.

In the yellow area or the first 5-6 yrs before 2002, both the prime lending rate and deposit rates are well dependent on the SIBOR, which I think is fair: banks offer competitive deposit rates close to their true cost of money in the interbank market; the 2~3% higher lending rate produces a reasonable profit though the profit margin became larger after the 1999 peak in rates.

Banks have changed the rule since 2002 (refer to the gray area). Despite the SIBOR had significantly risen to 3.5%, banks stick on offering the ridiculously low interest rate to their retail customers. Instead of making money only from their lending business, banks now target the deposit customers to claim profit. This is in line with the practice that banks started to charge on cheque books & low-balance accounts a few years ago.

Banks now do not offer competitive interest rate but create more sophisticated products to attract funds from retail market. Structured deposit has evolved from simple equity/bond-link interest rate to something complex enough to confuse most of their customers, which then can be designed in more favour to the banks. Actively selling investment products (e.g. unit trust) is another way of making more money (and probably commission too!); even the counter staff is eagle to convince customer with high-balance account to buy their more profitable products rather than to proceed with the deposit instruction.

The 'best' interest rate currently offered at various Singapore banks:

• Maybank iSAVvy for 6-m: effective 1.98% if >$25K, or 2.38% if >$50K
• Citibank MaxiSave Sweep: 1.88% (2.08% for >$50K) for 6-m unfixed deposit or 1.28% on withdral amount
• Standard Chartered e$aver: 1.20% p.a. (just dropped from previous 1.5% w.e.f. 1 Nov.) 1.70% for >$50K.
• UOB for 6-m time deposit: 0.6% if <$50K, otherwise 1.70%
• OCBC for 6-m time deposit: 0.575~0.6% if <$50K, otherwise 1.70%
• DBS for 6-m time deposit: 0.575% if <$50K, otherwise 1.70%

DPS scrapped

The government last night scrapped the deferred payment scheme (DPS) that allowed homebuyers to postpone payments on new property. Buyers now have to make progressive payments (PPS) in steps with the construction process and the 20% downpayment upon signing the Sales and Purchase Agreement (SPA) becomes mandatory.

It is a response to the overheating in the market, especially the excessive speculation. As an indicator for speculative activities, subsales -- owners selling uncompleted properties -- accounted for 12.7% of total deals (21.6% in the core central region), as compared to 28% in 1996. Overall prices rose 8.3% in the 3rd quarter that brings the price growth so far this year to 22.9%. I think it's good to cool the market at some extends so that its growth is more healthier and sustainable.

PPS: it calls on buyers to pay progressively at various stages of construction. Here is the typical scheme:

• 5% booking fee upon obtaining the Option to Purchase
• 20% (incl. 5% having been paid) downpayment upon excising the option & signing SPA
• 10% upon completion of the foundation work
• 10% upon completion of the reinforced concrete framework
• 5% upon completion of the brick walls of the unit
• 5% upon completion of the ceiling of the unit
• 5% upon door & window frames in position and completion of electrical wiring & plumbing
• 5% upon car park, roads & drains completed
• 25% on issuing the Temporary Occupation Permit (TOP)
• 15% on legal completion date

DPS: introduced in Oct 1997, it offers the homebuyers to postpone payment other than the initial 20% downpayment till TOP. The downpayment was further reduced to 10% in Nov 2001. It is believed to encourage speculative activities as a flipper only needs to fork out as little as 10% of the purchase price and has typical 2-4 yrs to find a new buyer of his speculating unit.

SQ flies luxury A380

The brand new A380 super-jumbo flew the first flight SQ380 from Singapore to Sydney on 25th. The Singapore Airlines A380 has a seating capacity of 471 in three classes -- SQ Suites, a class beyond first, together with Business and Economy.

399 Economy Class seats are with seat pitch 81.5cm (32") & seat width 48cm (19"), seat recline 115 degrees. They're also equiped with 27cm (10.6") inflight entertainment screen, USB port & AC power supply. According to newspaper, SQ380 is priced marginally more (<10%).

4-rm new flat at $400K

HDB launched Telok Blangah Tower under Oct. Build-To-Order (BTO) exercise today. It will be 400 studio, 3-rm & 4-rm flats located in Telok Blangah St.31 and a few hundreds meters south of Telok Blangah Hill Park. The price of $308,000 - $402,000 for a 4-rm unit surprises the public as that is even slightly higher than the resale market price in the region (HDB used to 'subsidise' first-timers on new flats). But HDB said that it's in demanded location and the unit selling at $400K is at 38th storey with sea / Sentosa views and with full-height windows.

Stronger SGD

Singapore dollar has been stronger vs. US dollar and RMB since Sept. Today S$1 exchanges 5.1356 Yuan, which is the highest in the past 5 years and 3.7% rise since Sept. It must be due to the weakening US dollar: U$1 exchanges S$1.46, which reflects as much as 20% weakened against SGD in the past 5 yrs (it was nearly 1.8 then).

With RMB interest rate at 3.87% (1-yr) and SGD interest rate remains low at merely 0.8%, it may be wise buying in RMB...

Rosewood at Woodlands

SLA puts on sale a piece of state land for developing private condo, which is of 172,223 sq.ft. with plot ratio 1.4, located in Woodlands ave.2 / Rosewood drive. Actually it is just by the side of Casablanca and opposite Singapore Sports School.

It is said on today's newspaper that the land may be used to build 110 units of 5-storey condo. Colliers, the marketing agent, estimate that the break-even price when built up will be around $500psf (incl. $260-300 land cost) so the developer likely prices it more than $600psf.

It expects to attract oversea buyers with children attending the American School and local upgraders in Woodlands & Sembawang towns. Savills said in Sept. that the properties in (far) north region might expect as much as 35% appreciation as the rental market there had risen 25-30% as compared to previous quarter.

Costs of property transaction

Here collects the various costs related to a property transaction incl. solicitor's charge, agent fee and stamp duty etc.

1. Solicitor's charge

A conveyancing lawyer is responsible for doing all the relevant searches on the title deed to ensure that the seller does not owe any debt and to check to see if there is a road reserve on the property which may affect the value of the property. If the buyer is taking out a bank loan or CPF, the lawyer also ensures that the relevant documents are ready. The lawyer's role ends when the title deed is handed over to the buyer. For uncompleted properties, it could take up to 3 yrs. Resale transactions, however, are usually completed within 3 or 4 months.

The Law Society of Singapore recommends the following fee guidelines for the solicitors' remuneration.

For non-CPF conveyancing transactions:

• Purchaser's solicitor: 0.3% of the purchase price subject to min. fee of $1800
• Mortgagor's solicitor: 0.15% of the total loan subject to min. fee of $900
• Mortgagee's solicitor: 0.3% of the total loan subject to min. fee of $1800
• Where the same solicitor acts for purchase, mortgagor & mortgagee: 0.4% of the purchase price subject to min. fee of $2500

For CPF conveyancing transactions (first application to CPF board for withdrawal):

• Up to $750K: chargeable by CPF solicitor $900 and by member's solicitor $450 if the solicitors are from different law firms; otherwise $500.
• Over $750K up to $1.5m: the above are $1250, $625 and $500 respectively.
• No further charge for member's revising the withdrawal sum where CPF moneys have not been released or within 6 months after such release

The solicitor usually charges disbursements that easily accounts 4-digit:

• Various searches (normally mandated by the bank offering the loan), sometimes range from $700 up to $1000
• stamp fee for the deed assignment (for the loan), $500+
• registration fees on transfer & caveat (normally 3 sets @ $64.45 for the bank, CPF and yourself), typically some $350
• photocopying, transport and other incidentals, depending on the individual solicitor, e.g. $100 ?

Note the bank offering mortgage usually subsidies the legal cost at some 0.4% of the loan amount, subject to fulfilling the min. period of loan facility (e.g. 3 yrs).

2. Agent fees

Institute of Estate Agents stipulates the professional fee / commission for agents / agencies based on standard services and upon successful transaction, but it does not interfere with any private arrangements:

• Sale of all types of properties except HDB resale flats: 2% of contracted price for vendor as sales commission and 1% of contracted price as finder's fee (if the agency is the appointed representative).
• Sale of HDB resale flats: 2% and 1% of contracted price for vendor as sales commission and purchaser as service fee
• An agency shall not accept commission from both the Vendor and Purchaser in the same transaction.
• Commission is due immediately upon completion of sale and purchase

It is the market practice that housing agent only charges the vendor 2% commission in case of condo or landed property sales, and charges both vendor and purchaser in case of HDB resale flat but the commission rate is often negotiable within the above guidelines.

Some agencies (e.g. ERA) provide extra services such as 6 months guarantee and bridge loan if both a client both buys and sells through the same agent.

HDB has over the years simplified and streamlined its resale procedures and made resale information more readily available to the public. It is not a requirement that resale HDB flat transactions must be facilitated by agents. However, HDB encourages to engage accredited SAEA members should one decide to use the agent's service: he will get priority over others with non SAEA-member agents when selecting the first appointment date.

3. Stamp duty

Stamp duty is a tax on commercial and legal documents which record and give effect to certain transactions. Since 28/02/1998, it is payable only on documents relating to immovable property, stocks and shares. These include a sale or mortgage or lease of immovable property.

Use the following conveyance formula (w.e.f. 29/02/1996) on purchase price round-up to the next nearest hundred dollars:

• 1% on the first $180,000
• 2% on the next $180,000
• 3% on the balance amount

or for simplicity, 3% of purchase price - $5,400 when it is more than $360K.

4. Property tax

Property tax payable per year is computed based on tax rate of the Annual Value of the property. For owner-occupied residential building, the property tax rate is 4%. For properties other than owner-occupied residential buildings, property tax rate is 10%.

Annual Value is the estimated yearly rent the property can fetch if it were rented out. The Chief Assessor will determine the AV of the property by analysing rents of comparable properties and relevant data. It is determined regardless of whether the property is let, wholly owner-occupied or vacant.

Legal fees

I always feel confused about how a lawsuit may cost and doubt that the legal protection (civil case) is out of reach for ordinary people. "The Sunday Times" today posts an article on the legal fees, which gives some insight.

• sealing a writ of summons for the commencement of an action costs from $100 at magistrate court (claim of up to $60K) to $1000 at supreme court (claim of more than $1m)
• filing a defence costs from $10 to $500 respectively
• For each hearing day after the first day (the 1st day at magistrate & district courts is free) or the first 3 days (the first 3 days at supreme court is free), it can cost from $250 to $9000.
• court of appeal hearing fees are $4000 to $6000.

Unless it drags too long, the above court fees seem still manageable, especially if the claimed amount is not big (e.g. < $250K so being heard at subordinate court).

However, the lawyer's fees are not cheap at all:

• Contested criminal case in the subordinate courts for 1-wk trial: $20K to $25K. (the simple uncontested case in which the client pleads guilty is charged at $2000).
• Contested divorce matter in the subordinate courts: $4000. (half if uncontested)
• one-week trial at high court: $80K

Lawyers in big firms charge by hour: a new lawyer bills up to $250 an hour while a partner asks double for equivalent work. Furthermore lawyers usually charge 'big' for disbursements -- fees for photocopying & filing documents and transportation and even lunches during a trial!

Photocopying costs very often form the bulk of the disbursements: the court had ever ruled in 2003 that lawyers' photocopying charges at a rate of 15 cents per page (the guideline since 1987 stating 30 cents). A lawyer claimed $259K for photocopying charges in the history!

In the recent case of primary school teacher Jonathan Lock against NTUC Income, the legal bill finally presented to him surprised the public: $125K comprising $80K worth of legal work billed by his own lawyer.

Unlike the situation in US where (I heard) more lawyers fight for getting lawsuit case so they may do cases without charge unless winning over, the profession here has a 'monopoly' when it came to pricing its services. This suggests that small players likely lose out to big boys as the latter can drain the energy and money out of the former by putting them through all the legal hoops to make their case.

Although the Law Society will handle civil cases for free under the Criminal Legal Aid Scheme should the household income of the needed one fall below $2600, how many of us eligible for the legal help?

Nokia N80 firmware 5.0719.0.2

There is a new N80's firmware version V5.0719.0.2 available since May. Feedback on this most recent version has been positive at many forum boards. Many think it's a relief of their currently very buggy v4.0707.0.7 firmware and experience far more stable and slightly better performance -- mainly with photo galley. Some even commented that the photo quality & memory management are also improved. Someone posted the following informal change log:

Messaging -

• Correction for SMS receiving problems
• Correction for received SMS timestamps
• General stability improvements for Messaging application
• Fix for Freemail email download

WLAN -

• Correction for using WLAN wizard from Active Standby in encrypted networks. WLAN wizard help localisation corrections
• Correction for VoIP call when in edge of WLAN coverage

Diverses -

• Correction for USSD commands
• Fix for voice activated dialling and contact name playback
• Fixes for forwarding DRM protected content
• Fix for Multimedia key customization

It is still not yet available for my phoneset (model 0543906) at the online Nokia firmware update service; but I managed to upgrade it at the Nokia service centre. I have so far not experienced any problems so I consider that I'm lucky :)

However, I have not discovered any noticeable improvement either, except that the WLAN seems more stable now (WiFi always disconnects gracefully when a user application exits). The photo galley is not noticeably faster, though probably due to that I store large photos on the 1GB memory card instead of the phone memory. It can zoom-in to 50% that is probably enough for usual cases; but anything beyond that will cause insufficient memory alert.

After re-install the default smartphone software such as Quickoffice, Adobe, SettingWizard & Nokia Search to the memory card, I managed to get 38MB free phone memory (out of total 47MB shared with the system). However, I still can't run the web browser or Yahoo!go without its automatically killing off all other background applications even if it is tiny like Screenshot.

Besides, I've some additional minor complains:

• the warning tone is pretty loud
• After the display goes off, the screen remains light up for about 30 sec. before completely dark. This consumes unnecessary battery power.

Pulau Tioman

Tioman is off the east coast of Malaysia on the South China Sea. Having clear blue seas and white sands, it is ideal to spend 3 days there over a long weekend.

Driving from Causeway to Mersing ferry terminal takes no less than 2.5 hrs along highway No.3 heading south-east. Most of the 132Km journey is on a single-lane road so one can't drive fast as often beening blocked by slow-moving vehicles, especially at night. But the good thing is that it's toll-free all the way. When entering Mersing town, make a right turn at a round-about and you can't miss the ferry terminal. Monitored car park is available at only some RM7 per 24-hrs.

We took the Bluewater (Tel: 07-7994811) speed-ferry that is scheduled at 7am, 11am & 3pm in this non-peak season, at RM70 for a return ticket. However, the ferry is not punctural and likely delay due to tide (excuse?) and passenages (the real?). We experienced nearly a hour delay when heading to Tioman and as much as 2.5 hrs when coming back. It is always wise to call & check on the exact schedule & arrival of next ferry prior to going to the jetty.

Once starting off, it takes about 2 hrs to reach Tekek where most tourists stay. It's aircon'ed so the ferry riding is not too bad but one may need to prepare that it's very cold inside the cabin. Berjaya hotel is pretty good: we took the standard room at RM136 (weekday) / RM221 (weekend), excluding breakfast. It owns private beach area and golf, tennis etc. sport sites. Actually it is the only 5-star resort hotel offering chalets & rooms. It even operates a private daily air service between Seletar airport directly to the Berjaya beach, by 48-seater Dash 7 plane at about S$222++.

We purchased a round-island tour by speedboat at RM60 per head. It starts off at 9:30am and returns at 3:30pm, stopping in 6 places for snorkeling & beach activities. This is our main tour among the 3-day getaway (since we have to spend some 17 hrs on the two-way journey incl. waiting times).

What about the packing list? Well, sun block (>SPF100 for ladies) and mosquito repellent are important. Shorts, wet gears & a pair of slippers for the humid weather are necessary. We also pack with sun glasses, tiger balm (my favor :) and basic first aid kit. Toiletries and beach chairs & towels are easily available at the hotel. Oh, you may like to bring along some instant noodles for breakfast (they don't sell it there)...

Be alert when eating outside the hotel restaurant. I got minor food poisoned at Taman village during the day-tour, which had bothered me until we finally got home.

Execute Condominium

There have been 23 EC projects on the market since it was introduced (in 1996?). About half of them are more than 5 years old so their units may be seen in the resale market now.

Eligibility conditions to buy a new EC:

• A citizen with family uncleus comprising at least another SPR or citizen, at least 21 years old (or 35 years old under the Joint Singles Scheme)
• First-timer applicant, or second-timer who has not enjoyed other housing subsidy and has occupied his flat for at least 5 years
• Gross monthly household income not more than $10,000
• All listed occupiers must not own or dispose any other estate or interest within 30 months before the application
• First-timer may request the $30K CPF Housing Grant being used to pay for the remaining 10% downpayment

Eligibility conditions to buy a resale EC (from 6th to 10th year since TOP):

• Citizen or SPR above 21 years old but need NOT form a family uncleus as in the purchase of new EC. E.g. a single person above 21 can buy a resale EC.
• Buyers are NOT eligible for CPF Housing Grant but they need NOT pay the resale levy either if being owner of a flat directly from HDB
• Owners of direct-purchase HDB flats must have met the 5-year MOP

It surprised me that buyers of first-timer can not get the CPF Housing Grant for the resale EC. But it makes sense as the resale EC has to be treated as equivalent to "private housing" -- the remaining time before its 11th year when all restrictions will be lifted is usually less than 5 years to fulfill HDB's Mim. Occupation Period.

Policies for EC owners:

• must dispose any HDB flat within 6 months from TOP
• no longer qualify to buy a flat direct from HDB
• occupiers who are essential in the forming of a family nucleus will not be allowed for 5 years to make a separate applicaiton
• may sell the EC unit in the open market only after meeting the 5-year occupation period.
• It is not allowed to acquire a share in another residential property / HDB flat within the MOP.

Tracking of property index

I did some research that extends an existing residential property index diagram with more recent data. It shows the current index is the second highest following the historical peak 11 years ago.