Property Bubble?

It's quite worrying when almost everyone I know starts buying property for investments. Table 1 shows the pipeline of project due, extracted from URA.

Table 1

We are expecting 2,000 odd units to be completed by end of 2010. Supply will still be low in the region of 6,000 completed units in 2011. However, in 2012 there will almost be a 50% increase to 9,000 odd units, followed by a YOY 100% increase of completed units in 2013.

This is almost a 300% increase as compared to 2011!

In 2014, 15,000 units are expected to complete, which adds to the glut of supply. Should interest rate rise to 3.5% then, the influx of supply will lead to further rental depression due to high cost of funding. Investors will be selling cheap when their rental yield cannot cover the interest rate they are paying to banks.

The average net rental yield is about 3% now. I believe we will be seeing a downtrend of rental yield from 2011 onwards together with a apike in local interest rates.

Perhaps one should buy a HDB now and wait for fire sale in 2015.

I might be wrong though.

Highest Fixed Deposit Rates in Singapore

Just realised that local banks fixed deposit rates are really crazily low. Effective interest rates after all those interest on interest, free vouchers and loyalty bonus gimmicks never breach 1% PA.

But wait, check this out..

Not some Ponzi scheme but fresh rates given by ICIC bank. BUT, they only have one pathetic branch at Raffles Quay. Still not a bad deal for most people!

Their Aussie rates, my favourite currency is as follows:

No link to their websites as this is not an advert.

Stretch you dollars series: Preferred Banking Standard Chartered Bank

Just receive the preferred banking package. The package sent was quite delightful, considering that I only applied for a credit card and current account.

The card comes with 25,000 points upon first transaction.

There is an overdraft facility that is interest free (without processing fees) for the first $3,000 drawn upon. The current account comes with a debit card that comes with 2% cashback on mastercard spending.

Spending gives 1.5x reward points for $1,500 of spending and below; 2.5x reward points for purchases above that.

Different account categories earn points monthly. For example, a current account, time deposit and investment account earn 250 points monthly or 750 points in total. Online payment of credit card also yield 250 points.

The package comes with some 1-1 vouchers.

I have enquired that there is no termination fees AFTER 6 months for preferred banking account. Before that there is a $30 early account closure fee.

Not a bad deal.

Qualifying criteria: Earn more than $6000 monthly or have $50,000 with SCB. If you have a mortgage with more than $600,000 in value, you also qualify.

Mapletree Industrial Reit (MIT)

I was rather pissed off when I was only allocated 3 lots for GLP. MIT seems the next best alternative as the market is still flushed with liquidity. The balloting results of GLP suggest that many retail investors applied up to $2M for GLP. A few others applied with $1M. I salute them, though they earned about $1.2k profit immediately in 3 days. Given the response for GLP, I expect MIT to rise at least 6% on day 1. That said, I playfully applied for a few lots. I think it was about 60 lots. Not expecting to keep it for long, perhaps to earn just a bit of kopi money for Oct.

I got 0 lots allocated this time. Wow, my guess is MIT will rise 10% on debut.

GLP IPO

Just applied IPO for GLP. Applied for 79 lots. Yes, it is overpriced, but at current market I am sure I can strike a winfall even if I am just allocated 4 lots. It will be part of STI index in time to come, similar to Capmalls Asia. Index funds will be mandated to purchase it, from us. :)

Eventually I was only allocated 3 lots, a paltry $600 paper gain on the first day. Oh well, its free money anyway.

SPH 2010 Final Dividends Prediction

Given that Sky Eleven has ceased contribution for 4Q10, I believe management will be cautious in dishing out dividends. Management is unlikely to cut dividends and have a higher tendency to increase dividends to signal growth and support share price. Hence I expect final dividends to be raised from 18 cents in 2009 to 19 cents in 2010.

Print expenses are expected to decrease due to cheaper US$ and lower circulation demand.

Total profits are expected to be much higher than 2009 due to SPH portfolio and advertising revenue recovery.

Final contribution from Sky Eleven will definitely help to propel SPH profits to near record high.

I predict FY 2010 profit to be in the region of $580M, EPS of 32.5 cents.

Of course I am striking a balance to be optimistic and objective, since a large part of my networth is determined by SPH. I do hope that SPH can deliver 21 cents of final dividends. This would likely propel it to breach the $4.60 mark by Dec 10.

Results will be out after 6pm on Oct 12. Let's see how far my prediction is away from actual results.

Post script: SPH delivered 20 cents of final year dividends, EPS 31 cents. Operating profit of $539M, circulation down by 2.4%, printing cost lowered by 29%. Final contribution from Sky@Eleven of $154.2M. Investment income recorded $39M, a turnaround from last year's loss of $6.2M.

Surprisingly, my projection was the closest than all the reports available in the market.

The new American Express Rewards Card

One of my colleagues is deciding to buy a 5 year savings plan that costs $20,000 upfront. At the end of the 5^th year, he will receive $1,000 and at the 10^th year, he will get $25,000. In total, his yield is a miserly 3% (average).

This return is better than our 0.15% banks’ interest rate though.

The good thing about his savings plan is that one can pay using any credit card.

Since the new American express rewards card (ARC) advertisements can be seen anywhere, let me do a simple calculation to see if paying $20,000 using this card actually increases his yield.

ARC gives 100% points on spending for the 1^st 90 days. Thus my friend will get 40,000 points upon paying his premium.

He spends $20,000 on a calendar year, thus entitled to 50% bonus points. This is another 10,000 points.

In total, he gets 50,000 points, which allows him to exchange for $250 of cash.

If he adds that up to his total endowment return, his average return is 3.125%.

My friend has a visa infinite card from StandChart. It gives him 2.5x reward points on spending. Thus spending $20,000 gives him 50,000 points. This again works out to a payout of $250 spending credit, similar to ARC.

Hypothetically, if he gets a card that gives him 10% cash back ($2,000) on his spending, he will get 4% return on his endowment plan. Unfortunately, there is no such plan at the moment.

If he uses the Manhattan Card, he will get a $300 rebate. If he pays the bill through NETS using his X tra saver card spread over 2 months, he gets a $100 rebate, a total of $400. This brings his endowment yield to 3.2%.

I am extremely impressed by ARC marketing. I seem to see if everywhere, on papers, buses and even MRT floors! However, there is really nothing much to shout about, considering the points are merely 1.25% cash back on spending (at most).

I almost applied for the card when I was at Ion Orchard, but a mental calculation made me realize that I am better off holding the current cards I have now.

I firmly believe that cashback credit cards are more superior products than points/miles accruing ones. Thus readers should note that points are merely gimmicks to entice spending.