Sunday, April 30, 2017

What Marine Le Pen And Emmanuel Macron Showdown Means For Us

If Marine Le Pen wins the French elections, it could mean fewer opportunities for Singapore businesses.
Most of the time, the only French thing Singaporeans worry about are their seating reservations at Poulet. These past few months, however, you may have noticed financial and business experts sounding a bit nervous about French Presidential candidate Marine Le Pen. Things heated up further when she and fellow Presidential candidate Emmanuel Macron became the leaders. Here’s why the results of the French elections will matter to Singapore.
A Showdown Between Populism and Globalism
French Presidential candidates Marine Le Pen and Emmanuel Macron are now the front runners and will face off against each other in the final round on 7th May. This is a significant event for two reasons. First, neither of France’s two main political parties, the left-wing Socialists and the right-wing Republicans, managed to lead. Both Le Pen and Macron are “outsiders”. Second, they’re polar opposites. Le Pen’s party, the National Front (FN), is far-right. The Macron’s party, En Marche! is somewhat more leftist. Le Pen has put together “144 commitments”, but chief among them are a promise to renegotiate France’s position in the European Union (EU). This could lead to a Frexit referendum, which sees France pulling out of the EU just as the UK did. On the other hand, Macron has denounced both Brexit and US President Donald Trump (also a populist). Macron is a globalist, and his party is a staunch supporter of free trade. Macron is currently expected to win (he is expected to capture 68 per cent of the vote, whereas Le Pen is estimated to capture 38 per cent), but remember predictions of Hillary Clinton’s win were wrong in the US Presidential elections.
What Do the Results of the French Elections Mean for Singapore?
As an anti-globalist, Le Pen believes in countries closing off free trade. That is, that countries should protect their domestic companies and workers, by restricting the flow of foreign workers and goods. This would make it more difficult for foreign companies to operate in France. Now, this alone is not a huge worry for Singapore. However, Le Pen’s impact on the EU is bound to cause more anxiety. With the UK soon to be out of the picture, France’s departure could spell the end of the EU. Now at present, Singapore is the EU’s biggest trading partner in ASEAN, with over 10,000(!) EU businesses established locally. Around one-third of all trade (goods and services) between the EU and the ASEAN region is from Singapore. While the EU is not as big a trading partner as, say, China, it’s fair to say we would experience lost opportunities and revenue if the EU were not around. It would certainly make it more difficult for our businesses to operate in Europe, if each state had its own tariffs and regulations (at present, the EU combines them all into a single market). In an ideological sense, Le Pen – along with Trump – also embody certain ideas that are opposed to the traditional Singaporean ethos. These leaders come off as anti-immigration, opposed to further integration with Muslim communities, and as opponents of multi-culturalism. There may be some discomfort among Singaporeans, at seeing growing support for ideals that run so contrary to ours.
Singapore Relies on Countries Open to Trade
As a financial hub and a port city, Singapore is reliant on a world open to trade. The more countries trade with each other, the more they need shipyards and airports. Being located along the main trade routes is a big source of revenue for many Singaporean companies. Likewise, the freedom to invest in other countries (such as, say, the freedom of French or American citizens to invest in Singaporean assets) creates capital inflows; it allows money from other countries to flow into our country. Our status as a financial hub stems from this. The significance of the Le Pen and Macron showdown is that it reflects the changing state of the world. If Le Pen wins, along with the recent events of Brexit and the Trump presidency, it will suggest the world is turning against free trade. An isolationist world means fewer opportunities for Singaporean businesses and losing trade and investment that’s vital to our country.'s #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Friday, April 28, 2017

5 Ways Singaporeans Can Secure Mum's Financial Future

This Mother’s Day, consider giving mum the gift of a more secure financial future.
This Mother’s Day, we at encourage you to go beyond having brunch out. There are many ways to show love and gratitude to mum, and this holiday can mean more than a chance to give away a bag or a nice card. If you want to give a gift that’s truly unique, why not do something to secure your mum’s financial future? It might not be as glamorous as new jewellery, but mum will thank you for it later on. Here are some steps to help ensure mum is comfy in her later years.
Top Up Your Mum’s CPF
The Central Provident Fund (CPF) contributions used to be lower in the past. This means that sine older Singaporeans may not have sufficient savings for a comfortable retirement, or are at risk of having their Medisave wiped out from a medical emergency. This is especially true of those who did not earn much until later in life. This Mother’s Day, consider making a pledge to top up your mum’s CPF. It can be a one-off sum, or a regular monthly top-up; even just S$50 a month can make a big difference over several years.
Pledge to Pay a Portion of the Mortgage
Every repayment on the flat eats a little more into your mum’s CPF. The HDB Concessionary Loan, for example, has an interest rate pegged at 0.1 per cent above the prevailing CPF Ordinary Account (OA) rate. Now that still isn’t enough to beat the interest on most CPF accounts (up to 3.5 per cent for the OA), but paying for the flat still chews up a big portion of mum’s retirement funds. Also, don’t forget she probably had to make a hefty down payment when first buying the flat. You can either pay back some of the mortgage by giving it to your mum in cash, topping up her CPF, or – if the financial situation is tight – even consider becoming an official co-borrower to lessen the burden.
Buy Mum an Endowment Plan
Most of the time, parents buy insurance plans for their children. But why not consider doing it the other way around? Consider buying a 10-year endowment plan, which will see mum get a big pay out when it matures. She can use it to boost her retirement savings, or pay off any existing loans. Alternatively, you can look at more short term goals. You may not be able to buy her a trip to Europe or a walk-in wardrobe, but a five-year endowment plan can give mum the budget for such luxuries, once it matures.
Get Mum a Supplementary Card
Want to help mum with the groceries, or the petrol bill? It can be inconvenient to tally up how much she needs every week (also, she’s probably hiding the real number from you, to ease your financial burdens). Consider getting her a supplementary credit card instead. She can use it when she goes shopping, even when you’re not around. You’ll also get cashback and reward points, which is a great way to save. Or you could give the reward points to mum, and let her pick from the gift list. You can find the best credit cards for different lifestyle needs on Try a credit card like the OCBC 365 Card, so you can get 3% cashback on groceries and utility bills.
Help Mum Pay Off Her Debts
Does mum have any outstanding debts besides the mortgage? Ask if she has any credit card debt, personal loans, or credit lines with outstanding amounts. There’s a clever way to help her trim some of these debts. Say you mum has a credit card debt of S$5,000. The interest rate is around 24% per annum. You could take a cheap personal loan, at around 3% interest, to pay off mum’s debt. When you deal with the personal loan, you will be faced with much smaller repayments due to the lower interest. On top of that, this will help to improve you and your mum’s credit score.
A 'Thank You' To Mums
This Mother’s Day, would like to extend a big thanks to mums everywhere for their many sacrifices. We hope you have a meaningful Mother’s Day with the whole family. For those of you who want to treat mum, do follow us on Facebook. We’ll be updating you on the best Mother’s Day dining promos in the country.

Wednesday, April 19, 2017

Why Do HDB Loans Have Higher Interest Rates Than Bank Loans?

Many Singaporeans often get surprised when they compare HDB home loans vs bank loans. Why do HDB loans tend to have higher interest rates?
Money Mysteries is a column by Ryan Ong that explores the odd world of money. Where does it all go when you give it to a bank? Why does a potato sometimes cost S$200, or shipping a sofa sometimes cost S$1.99? Why is art so expensive, and how do people (legally) rip off casinos? Every week we answer these questions and investigate a new Money Mystery. One common question we get involves the difference between HDB home loans vs bank loans. Many Singaporean couples buying their homes often get surprised when they learn that banks charge much lower interest rates than HDB. How can that be, and why? We clear the confusion in this week’s Money Mysteries.
Bank Home Loans versus HDB Loans
When you take a loan to buy your flat, you can use either a bank loan or an HDB loan. The exception is when you are buying an Executive Condominium, in which case only a bank loan can be used. Now one of the main differences between the two is the interest rate. HDB Concessionary Loans have a very simple formula: the interest rate is the prevailing CPF Ordinary Account (OA) interest rate, plus 0.1%. This comes to about 2.6% per annum, a rate that has remained unchanged for a long time. Note that the CPF OA rate is reviewed quarterly, so it can technically go up. However, CPF rates do not change often. For bank loans, things get a bit more complicated. Bank loans can be based on the Singapore Interbank Offered Rate (SIBOR), Swap Offer Rate (SOR), or a bank’s Internal Board Rate (IBR), of which Fixed Deposit Home Loan Rates (FHR) are also a part. Amidst that nightmare of acronyms though, one simple fact remains: since about 2008. most bank interest rates have been at around 1.8% per annum; cheaper than the HDB rate. But why is this?
Historically, bank loans are more expensive. What we’re seeing is a freak incident from the last financial crisis.
If you observe Singapore’s bank home loan rates from the late 1970s to 2008, you will the historical rate is over 3%; in some cases almost 4%. In those days, HDB loans were much cheaper than bank loans. In 2008 however, the Global Financial Crisis hit. This caused the American Federal Reserve (the central bank in America, also called the Fed) to reduce interest rates to zero. They did this to motivate more loans and spending, to kick start their damaged economy. However, the interest rate in America ultimately affects the rates in Singapore as well. Bank home loans, many of which were pegged to SIBOR in 2008, so interest rates fall to historical lows. In some cases, the rates were below 1% per annum. Due to this plunge, private bank loans suddenly became cheaper than HDB loans. Today however, the Fed is gradually raising interest rates again (there are four proposed rate hikes in 2017). This is due to America’s economy having, at least in theory, recovered. Meanwhile, the Fed cannot keep interest rates low forever, as this will cause inflation to rise uncontrollably. It’s quite possible that bank home loans will be at 2% per annum or greater by the end of 2017. This is much closer to HDB rates, albeit still lower. In the long term however (say 15 or 20 years), it’s possible – although not guaranteed – that bank loan rates will again soar higher than HDB rates.
Banks Like to Innovate and Try to Outdo the HDB
Remember that banks want to lend money to credible borrowers; the whole idea of the banking business is to make money via lending and interest. An HDB loan already has certain advantages over a bank loan. For example, HDB can lend you up to 90% of your flat’s value, whereas a bank can only lend you 80%. The down payment is thus bigger when you use a bank loan. If banks want to get a share of the HDB market, they need to innovate and create loan products that will attract borrowers. Some banks feel incentivised to create offers that have interest rates below the HDB loan rate, in order to tap the gigantic HDB market. Remember that over 80% of Singaporeans live in HDB flats, so there’s a lot of money a bank can make here. At any rate, this is a good situation for all of us. Singaporean homeowners have the option to go with a bank and potentially save money, if they really want to*. But if you don’t want to, you can stick to good old fashioned HDB loans.
*You can refinance your HDB loan into a bank loan, but not the other way around. Speak to your local bank for details.'s #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Thursday, April 13, 2017

How Much Of My Savings Should I Invest?

There are many ways to decide how much of your salary goes to investments. At the end, it all comes down to what your financial goals are.
Many Singaporeans want to know how much of their salary should go to investments. There are many approaches to deciding this. In the end, what it comes down to are your individual financial goals. If you want to retire with five houses and a yacht, you will have to invest much more aggressively than someone willing to retire in a rental flat. Here are some ways to work it out:
Method 1: Work Backwards From the Amount You Want
This is the most common method, and many Financial Advisors or wealth managers can do this for you. To decide how much you need to invest, you first work out how much you want to save. You then work backward from this amount. For example, let’s say you want an income of S$2,000 a month when you retire. You want it to stretch from the age of 65 to 80. You would need about $24,000 a year, or about $360,000. If that seems too easy to be true, it is: the real amount you need will be a lot higher, because of the effect of inflation. Let’s assume you are 25 years old right now, and that the rate of inflation will be more or less three per cent throughout the next 40 years (most developed countries have an inflation rate of about two to three per cent). Now over 40 years, S$360,000 will decrease in purchasing power. In fact, by the time you are 65, it will only have as much purchasing power as around S$110,360 today*. That’s not what you want; you want to have the equivalent purchasing power of S$2,000 a month today, at the time you’re retired. So you need to aim a lot higher. You’d need to have, more or less, S$1.174 million by today’s standards**, in order to have the same purchasing power as S$360,000 in 40 years. Now we can start working out how much you need to invest: Let’s say you build a balanced, diversified portfolio that earns returns of five per cent per annum***. If you can set aside $10,000 a year to invest (about S$830 a month), you could potentially reach this goal in about 39.5 years. So that being said, the general idea is to work out the amount you need post-retirement, factoring in inflation. Once you have the required retirement amount, and you know what returns your investment portfolio provides, you can decide how much you need to set aside to invest.
*retirement amount / (1 + inflation rate) ^ number of years
**retirement amount x (1 + inflation rate) ^ number of years
*** Your CPF Special Account can pay out this rate of return, and you can make voluntary contributions to enhance it
Method 2: Invest Everything After the Emergency Fund
This method, while not precise, is simple to understand and follow. Using this approach, you first save 20% of your income per month to build up an emergency fund. This fund should consist of six months of your income. The emergency fund is the savings you will use to deal with emergencies. As your income rises, or you spend from the fund, you will have to top it back up to the six-month limit. Whenever the fund is at six months of your income, the 20% you’d normally save is instead used to invest. This can go into a mutual fund, blue chip stocks, index funds, etc. You will still need to pick the assets intelligently of course, and secure a good rate of return (speak to a financial professional). However, you can be assured that emergencies will not disrupt your investment – if something goes wrong, such as retrenchment, you can tap your emergency fund instead of taking money from your retirement portfolio.
Method 3: Fixed Ratios
This is a traditional approach, in which you fix ratios to save and invest. Typically, this is 20% of your pay for savings, and 15% for investing. This requires very little thought or planning. If you automate the process, such as by GIRO, you won’t feel the pinch of having to set aside the amounts. However, this simplicity comes with limitations. For example, you may not notice that you are saving too little for retirement, as there is no actual planned amount to reach. You may also end up saving much more than is necessary for an emergency fund. Remember that cash savings, such as leaving money in your bank account, ultimately leads to stagnation. The value of the money decreases as it’s not growing, and it won’t keep up with inflation. If you save an unnecessarily large amount, you may ultimately be losing out.'s #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Wednesday, April 12, 2017

The 5 Types Of Investors You'll Encounter In Singapore

Whether you’re a Prophet of Doom or a Kopitiam Investment Guru, the different types of investors in Singapore have useful quirks.
If you’ve been interested in personal finance long enough, you’ll eventually notice that many Singaporean investors fall into five main categories. They all have their own bizarre quirks – some of which are annoying, and some of which are actually helpful. Here are the types of investors you’re bound to encounter in Singapore:

Investor Type #1: The Wall Street Fan
These types have an infinite number of Warren Buffet quotes memorised, and will respond to any situation with one of them. Their entire room is packed with books like A Random Walk Down Wall Street, or The Big Short. They subscribe to email responders from Investopedia (which they actually read), can explain each component of the Capital Asset Pricing Model, will argue for hours about the efficient market hypothesis, and think the discovery of Modern Portfolio Theory is equal in importance to the discovery of, say, fire. One of their main identifiers is constant resort to wall-speak. Any money-related issue they attempt to discuss with you will be re-worded to sound like they’re writing a Forbes article. For example: “I wonder if my mutual fund is worth the fees, I can’t tell because the market was nuts late last year” would be translated to “I can’t identify Alpha due to at least three standard deviation events in Q3 / Q4 2016”. Many of them hero-worship a group of financial experts known as Quants. If you don’t know what Quants are, consider yourself lucky. The average Quant can’t even tell you how much change is in his pocket without using at least seven graphs. Good For: Getting updates on financial news, because most of them read the Business Times. If you take the time to decipher what they’re saying, they can also explain many critical topics, such as the relevance of R-Squared or the difference between physical replication and synthetic Exchange Traded Funds. Bad For: Advice on anything which requires a quick decision. They can’t come to an easy conclusion on anything, and may even consider their constant hesitation a virtue. Just between you and us, we find that many of these types are more interested in theories than actual investing. Many have spent thousands of dollars on books and courses, but haven’t set aside their first S$10 to invest. Their obsession with finding more and more information – much of it contradictory – makes them unsure where to even begin. Many of them have a bad case of information overload.
Investor Type #2: Allergic to Finance
These investors know they’re investing, because they have “a guy” who handles it for them. They don’t know what they’re investing in, they just know they are and don’t want to think about it. These investors loathe having to sit down and talk numbers. Every time they see an equation, they get a splitting migraine. Talking to them about retirement planning or emergency funds is like explaining astrophysics to your cat – there’s no interest and no chance. They hate “dealing with that money stuff”, and most won’t even know how much is in their CPF, or how much they pay for their mortgage. Good For: Selling financial products to, because most don’t know or care about commissions or management fees. Also, they are good for a free lunch – if their wealth manager invests their money into a company, and an Annual General Meeting is held, they will go just to ta-pau the buffet food. They will be in and out with the food in 15 minutes, whereas every other investor will be asking questions for hours. Bad For: Getting any kind of financial advice. Most of them buy financial products because a relative sold it to them, not because they actually know how to check the performance.
Investor Type #3: Taxi Uncle / Security Guard / Kopitiam Investment Guru
These investors come in two flavours. The first is a hard working Singaporean trying to get a big break, often through stock trading. The other is a retiree or financially well-off, who don’t actually care too much about their job (it’s just for something to do), and make a healthy side-income in the markets. These types have a “street” education in finance. They learn things by putting their money in places where they really shouldn’t, and by identifying and imitating success stories. They know key concepts like value investing, or how to read a company’s fundamentals. But they can’t explain it using the actual terminology (e.g. they know what a P/E ratio is and how it works, but may not know that the letters P/E stand for “Price to Earnings”). Most tend to be traders rather than investors, and they often have a higher risk appetite. In extreme cases, they think SGX is just a more socially acceptable casino. Good For: Explaining to you the various indicators and ratios. Even if they don’t know the exact words, they can tell you what the ratios mean in a practical sense. Sometimes, that’s better than having the right (incomprehensible) terminology. Many have real experience in getting burnt, and they understand the emotional and psychological effects in a way that more academic types never will. A lecturer in Banking and Finance can explain risk appetite, but these investors know what it’s like to lose sleep when you just lost S$30,000 in one day.
Investor Type #4: The Avant-Garde Investor
This type of investors love innovation and feel clever from doing things no one else has discovered yet. If finance were music, these are the people who listened to Foster the People before the Pumped Up Kicks song, or liked your favourite band before they were mainstream. Avant-garde investors talk about financial products that make financial professionals frown, and ask, “Since when has this been a thing?” These types were the first to jump on peer-to-peer lending platforms, like MoolahSense, when it first appeared. They’ll talk about group private insurance (a new trend where people band together to form an insurance pool, rather than go to an actual insurer), cryptocurrencies like Bitcoin, or investing in Iberian ham instead of gold. That’s right; they’re the hipsters of the financial world. (The also like to mock banks and traditional mutual funds or insurers, which they see as a bunch of overpaid dinosaurs.) Good For: Finding out new ways to invest, which are at least entertaining even if they’re not useful. Many also love to point out flaws in traditional investment products, so they’re good for an informed (if pessimistic) opinion. Bad for: This group of investors tend to like fads, which do happen in finance; at one point it was Bitcoin, at another it was classic car funds. Most of these investors are interested in products which are different, not necessarily better. They assets they once swore by might be forgotten by next year.
Investor Type #5: The Prophet of Doom
These investors typically dismiss all financial products that are not tangible. If it’s not physical gold, or property, or something they can hold on to, then they don’t trust it. They especially hate fiat currencies (paper money), and believe this to be a giant scam run by governments. These investors are constantly predicting the economy – local or global – is going to crash. Which, since the market does so every few years, is actually a pretty easy prediction. Nonetheless, they will exaggerate the impact of the “coming” crash (All the money will become worthless and civilisation will collapse! We’ll have to eat our own kidneys for nutrition!) Whereas the Avant-Garde investor merely sneers at banks, The Prophets of Doom tend to see banks and financial institutions as manifestations of pure evil. Not all of them, but many. Good For: Detailed explanation on safe-haven assets, such as gold. Many of these investors are also good at pointing out flaws in financial products. Run your endowment plan by them for a second opinion. Bad For: Your morale and long term plans. When they start preaching disaster, remember some have been predicting the end of the financial world for decades now (and it still hasn’t happened).'s #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Sunday, April 2, 2017

Beware The Unexpected Costs Of Being A Landlord In Singapore

Before becoming a landlord in Singapore, consider these 4 ways you could incur additional expenses.
If you have a spare room or two, subletting is a good way generate some additional household income. Rather than letting your unused bedrooms devolve into glorified walk-in closets, rent them out to help subsidise your mortgage. After all, why pay for the entire flat when you’re really using only half of it? However, there are financial risks that come with renting out your spare bedrooms, which often arise from mismatched expectations, miscommunication, or just plain ignorance. Here are some unexpected ways being a landlord can cost you money.
You May Need To Spend On Storage
Before you put up your spare bedroom for rental, you may want to take a look at your storeroom. Go in there and spend some time familiarising yourself with the walls, because you may never see them again. When you sublet your room, you need to consider how much stuff your tenant is allowed to bring with them. Everything seems fine and dandy, until the day they show up at your front door with what seems like the entire inventory of the neighbourhood flea market. Tenants are not tourists – they’re here for the long term, which also means they will have some semblance of a life. With life comes needs and wants. With no universal standard on how much stuff each person should have, you could find yourself dealing with a storage problem. At the very least, this could mean that your storeroom will be filled to the brim with other people’s stuff, leaving you little to no space for your own things. If your unit does not have a storeroom, you may be forced to carve out precious space from your living room to build one. The solution would be to limit the belongings your tenant is allowed to bring. However this might cut down your pool of potential tenants, or make it impossible for you to put up two tenants in one room and charge a higher rental. But, if you neglect to have this discussion before agreeing to rent, you may find yourself having to spend money on renovations or self-service storage solutions later on.
You May Need to Rewire Your Home
Some days, your tenant may have a hankering for toast. Other days, for homemade herbal tea. And perhaps every Sunday morning, a taste for home-brewed soybean milk. Each of which requires a toaster, a soup pot, and some sort of mechanised bean extractor/steamer respectively to prepare. (That last thing is totally a thing, we swear.) Now, we don’t need to tell you how dangerous overloading an electrical socket is. And having snaking lines of power strips running all over the place isn’t any safer either. So it seems like your choices are limited to either electrocution or blunt-force trauma. You could institute a strict no-cooking rule, forcing your tenants to sneakily cook cup noodles in their rooms in the dead of the night. Or, you might allow your tenants to use the kitchen, so they at least don’t foul up their room and attract pests with cooking odours and food waste. No matter which you choose, you may suddenly find yourself tiptoeing around overtaxed power outlets. Hence, if you’re planning on having tenants, it might be worthwhile to put in a few more electrical sockets at sensible locations during your renovations. This will save you money on a second round of electrical works later down the road.
You May Find Yourself Saddled With Nonsense Payments
As the landlord – aka the owner of the property – you are liable for any damage to the common amenities, such as if the central refuse chute gets choked with bulky rubbish. If any illegal dumping or high-rise littering is traced to your unit, guess who the Town Council or HDB will come after. There’s always the chance that your tenant could have antisocial tendencies and willfully cause such problems. If that’s the case, the only way out would be to terminate the rental agreement and get another (hopefully better socialised) tenant. However, most such occurrences happen out of ignorance or miscommunication. It might be worthwhile to cultivate good relationships and open communication with your tenants. That way, they will feel comfortable enough to ask your advice on how to dispose of bulky items or to ask for certain amenities they may otherwise feel embarrassed about. A little communication goes a long way in establishing a pleasant living environment for all. It could also very well save you from paying unnecessary fines.
You May Need to Replace Your Appliances Sooner Than Expected
Some landlords have an irrational fear that their tenants regress into cavemen/women when no one is looking. When it comes to necessities such as the air conditioner, washing machine, dryer, and fridge, they decide to buy the cheapest model available. Their thinking goes that their tenants won’t take care of the appliances, so there’s no point spending money on quality products. That might be a mistake. Cheaper appliances are not only likely to have lower efficiency (which costs you more in electricity and water bills), they might also break down sooner. Contrary to popular belief, this is not because of repeated banging by brutish cavemen fists, but simply because they are of poorer quality. With more people living in the house, your appliances will also see higher usage. This means that appliance breakdowns will happen at a faster rate. When a necessity breaks down, the onus is on you, the landlord, to remedy the problem. Needless to say, your wallet will take a beating, either by way of repairs, or straight-up replacements. Instead, try showing your tenants how to use the appliances you will be sharing. Keeping the instruction manuals nearby will also be helpful. And if you’re still afraid that your new and expensive washing machine will be somehow savaged, make sure you spell out to your tenants that their security deposit (customarily 1 to 2 months’ rent) will be used for any repairs deemed necessary.'s #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

Saturday, April 1, 2017

Don't Assume Old HDB Flats Are Eligible For SERS's #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

What is SERS, and why does it make some Singaporeans want to buy old HDB flats?
Minister for National Development Lawrence Wong has just warned resale flat buyers about their SERS assumptions. If you’re not too familiar with HDB’s practices, you may be wondering what this is, or why Singaporeans would be rushing to buy SERS flats (which are close to being demolished and replaced). Here’s what you need to know about it: 

What is SERS?
HDB flats have a lease of 99-years, after which they get returned to the government. So far, however, we haven’t had flats in which the lease expired, and the occupants got kicked out. One reason is the Selective En-Bloc Redevelopment Scheme (SERS). In theory, SERS is not about “restoring” the 99-year lease of flats that are nearing their end (although that’s one effect). SERS is actually about rejuvenating old housing estates. When HDB determines that a particular estate has become too old and run-down (thus driving up its maintenance costs), it may launch SERS. This allows them to take back the land and demolish the flats before the usual 99-year lease is up. However, SERS has benefits to the residents, to compensate for the loss of their flats. These are known as rehousing benefits.
What are SERS Rehousing Benefits?
The rehousing benefits come down to two main things. The first is compensation for your existing flat. The second is a price subsidy and priority when choosing a new flat, which will also come with a renewed 99-year lease. The compensation for your flat will be determined by a private valuer. In general, it’s based on price transactions in the given area. You can visit the Urban Redevelopment Authority (URA) website to check the flat prices in your neighbourhood. The valuer will also take into account:
    The size and type of your flat
    Storey height
    Any improvements you have made
    The length of the lease remaining
You will also be compensated for any stamp duties and conveyance fees that come from having to purchase a new flat. Lastly, you will get a “removal allowance” of S$10,000. This is to compensate for the price of moving or storing your belongings, or buying any furniture that you can’t or don’t want to move. Next, you can select a replacement home. You can either choose from one of the sites specifically put up for your SERS flat (called the replacement site), or you can choose to live somewhere else altogether. If you choose the replacement site, you can get a subsidy of up to S$30,000* for your new flat. You are guaranteed to get a flat at the replacement site, as SERS affected residents have priority over others who are balloting for homes there. If you choose to live somewhere else, you have one year from the announcement of SERS to pick another place. As long as the new home you pick is part of HDB’s public sales scheme (e.g. it is not a private condo), you can retain the rehousing benefits and subsidy. Around 5% of BTO flats in Singapore are reserved for SERS affected residents, and they have priority over others for these units. (*Subject to terms and conditions, and is affected by your citizenship status. See the HDB website for more details).
Why Would Singaporeans Want to Buy SERS Flats?
They buy it for the reasons given above: they want to get the rehousing benefits from SERS. If someone buys over your SERS flat, they take your rehousing benefits as you are no longer a resident there. Sometimes, a SERS flat buyer is interested in the replacement site. The new site may be closer to their children’s school, or be a rare flat in a mature estate (near malls, eateries, an MRT station, etc.) If they buy a SERS flat, they are guaranteed a spot at the replacement site in a few years. Some risk-takers also like to speculate on SERS. They go out of their way to buy homes in old estates, in the expectation of benefits once SERS comes around. It is less profitable to buy when SERS is already announced, as the residents will price the rehousing benefits into the sale. This is the group that’s being warned by our National Development Minister: it is dangerous to assume that SERS will always take place. So far SERS has always been around to rescue to ageing estates. But in the off chance that you buy an old flat and HDB really allows the lease to expire, you could end up losing a lot of money (the flat will become worthless). Our take on it is simple: if you can’t afford the potential S$350,000 to S$500,000 loss (the typical price of a resale flat), then you shouldn’t be gambling on SERS. No matter how “sure-fire” you think it is.