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Thursday, October 29, 2009

Spring Singapore Initiatives to boost funding for Singapore SMEs

Spring Singapore Initiatives to boost funding for local SMEs


The year 08 and much of the 1st quarter of 09 saw the global economy facing an almost unprecedented worldwide recession. Singapore was not spared the spill over effects by the double whammy of liquidity crunch and falling global demand either.

Faced with the worst recession in Singapore's history, the Government had to devise extraordinary measures to keep our well-oiled economy in good shape. The Finance Ministry Budget for FY '09 unveiled a record $20.5 billion 'resilience package' that required presidential assent to be delivered in full. Among the slew of job saving and economy boosting initiatives, Spring Singapore introduced major enhancements to increase liquidity and boost lending to the sudden risk adverse banks.

The most eye-catching tweaks done to the existing Bridging and Micro loan was to increase government risk sharing from 50% to 80%-90%. This would encourage the now sudden risk adverse banks to lighten up on their lending. The maximum loan quantum was also increased from $500,000 to $5 million. Most banks would not over gear on 1 company. With the increased loan quantum, companies can apply through more than 1 bank for the Bridging Loan programme.

Most local SMEs lauded the above initiative as in an adverse downturn, unsecured loans amounting to cold hard cash was what small businesses need to survive and remain viable. Most companies would not seek to expand with weakening demand, therefore machinery loans & complex trade facilities are not as seeked after as a simple unsecured term loan. This form of financing would provide working capital and transactional buffer and is a vital lifeline for SMEs to ride out the crisis.

The Bridging/Micro Loan programme by Spring S’pore was launched in December 08, with the government body pumping in $2.3 billion to aid funding. There is no certainty as yet whether if Spring would continue the government assisted funding once the $2.3 billion has been fully drawn down. There remains the possibility that the programme might be discontinued when there are visible signs of the economy picking up. The program was introduced in the face of the global economic downturnin the first place. If and when the loan programe is eventually discontinued, small businesses might have to revert back to traditional unsecured bank loans and facilities again.

The biggest difference between commercial unsecured business loans and the Bridging/Micro loans would be the interest rates charged. Spring, being essentially a Government body, aims to lower the cost of credit for businesses as part of the overall package to address the business community's financing needs, inject liquidity and preserve jobs (SMEs hire almost half of Singapore’s workforce)

An alternative to unsecured commercial loans would be to borrow against your homes by refinancing Singapore home loan, but that would be rather risky. You can contact a Singapore mortgage consultant to do so.

Sunday, October 18, 2009

Invest in Singapore Properties: Property investor review Oct 2009

Singapore property investor - buyer review Oct 2009

Singapore property investor

Singapore Q3, 2009 figures showed that "Singapore's economy grew 0.8% in the three months to September from a year ago". (Source: AFP)

Singapore is technically out of recession with two consecutive quarters of positive growth in Q2 and Q3.

"A clear but modest recovery is under way globally, at least for the next three or four quarters," but "One-off factors such as restocking activities and fiscal stimulus measures will continue to support growth in the near term."

"Manufacturing, which accounts for almost a quarter of Singapore's GDP, grew 8.3 percent in third quarter from a year ago and expanded 34.9 percent on a quarterly basis. The services industry shrank 2.4 percent on the year but expanded 9.5 percent on a quarterly basis. The construction sector surged 12.4 percent year-on-year but fell 0.6 percent from the previous three months." (Source: AFP)

These one off inventory restocking factors are what we are afraid were the primary reasons of Q3, 2009 recovery.

Singapore gets out of recession BUT Singapore property market cools.

We think that the Singapore government didn't expect that their positive media spin, easy credit largely kicked started by DBS and short term constriction of property supply (by property developers) has led to an almost 10 to 20% rise in valuation within one quarter. The Singapore government has therefore had to imposed anti-speculative measures recently in September for fear of a property bubble building up.

But the anti-speculative measures were imposed at a time when the market is already showing signs of slower volumes. It is strange, people buy when there are no fundamentals and slow down in buying when economic fundamentals improve.
Singapore economy recovers with Q3 figures up yet again

Q3, 2009 Singapore economic figures have improved, this means that the economy has firmed up a little and on the path to a slow recovery.

There is a likelihood that this is a recovery that is built for the ramp up to Q4 Christmas sales demand and re-stocking of inventories activities.

But the recovery (growth of Gross domestic product GDP) is likely to be a recovery without job growth at least for the short term.

Unemployment rate may still trend upwards while GDP growth resumes. In all likelihood, the recovery will likely be very mild and fraught with uncertainties and risks.

Possible risks to Singapore property market in 2010

1. Run out of stimulus funding in the US and elsewhere may lead to economy dropping back again.

2. China's stimulus funding (for their own domestic economy) is showing signs of fatigue. China's exports have also dropped. There are worries of stimulus funding being wasted on useless projects just to stimulate the economy.

3. Massive inflation. (The US Federal reserve has kept interest rates at 0.25% while it relied massively on foreign governments to lend it money (by buying it's treasury bonds) to fund it's massive deficit of around US$1 Trillion. The global community has started to lose confidence in the US. USD has started to fall relative to other currencies. The US may be forced to raise rates to attract lending. Other countries may not be interested to lend US the money and see the value of their lending fall.

The options are dire for the USA.

The US may continue to offer low rates and print more money without an actual offset through borrowings or it must raise rates.

Raising rates now will kill a still weak economy. Printing more money will infuriate America's lenders and lead to a cascade of USD falling + interest rates hikes.

Any upswing is likely to be moderate as developers have massive Singapore property supply in the years 2011 through 2015.

Possible positive factors to Singapore property market in 2010

Singapore must hold it's election latest by around June 2011. The economy must hold up well for the PAP to win another election.

Apart from the economy recovering (although very slowly), casinos are also ready in 2010. Media spin: The state controlled press' recent reports have always picked up and accentuated the positives (whether rightly or wrongly), despite the generally very weak economy. The press can single-handedly improve consumer sentiments. These can work in your favour or against you.

Improved sentiments may lead to more aggressive lending by banks, leading to the market over-heating. (remember, banks are usually pro-cyclical, they lend when markets are hot and they cut lending when everyone needs money). Singapore home loans rate may rise, but banks may sacrifice their margins to offer attractive rates which could stimulate the housing market. You will then be able to compare Singapore home loans across many banks who are very eager to lend you money.

Invest in Singapore properties now?


Generally we think that anytime is a good time to look for a property. It's a matter of getting the right price. There are good deals and bad deals in all economic cycles.

For Singapore property investors, now is a good time to look at Singapore property investments. The quieter property market means that there is less hype and more rational sellers. There is a much higher likelihood to get a better deal if you are careful and do your research before buying a properly. If you can find a property with consistent good yield at a good price, you may be able to use sentiments to your advantage when the hype builds up again in 2010 nearing election.

Holding power is still very important during this time as the economic fundamentals have not fully recovered and cash is still king.
Should Singapore property investor simply consider economic fundamentals?

As a Singapore property buyer - investor who wants to also profit from not just fundamentals but also sentiments. It is then important to recognise the sentiments in play.

For example, despite the fact that the market is really not as positive than it really is, but due to the SPIN from the media and other factors, that can work in your favour or against you. But also bear in mind that the media is something you have no control over.

For example, Singapore Aspen heights condo was trading at $1000 psf for units over 1300 sq feet in May 2009 and by July and August the prices have moved to around $1200 psf.

If any economic shocks occur, the property prices could fall. If you bought a property at $1200 psf and it drops back to 1000 psf, that would wipe out your 20% downpayment.

SUMMARY OF SINGAPORE PROPERTY MARKET Q3, Q4 2009

Going forward, economic recovery is going to be slow and bumpy. There exists much uncertainty and risks on the downside as well as some potential upside domestic surprises. Overall economy has stabilized with reduced risks of major economic shocks. There could also be a risk of the economy slipping back into the red, but this should be viewed as an opportunity to cheery pick.

Potential property market bubble curbed. Singapore government's land sales with it's more favourable terms and longer time to completion means developers are likely to bid higher.

Higher land prices are likely to translate higher selling prices (if there is holding power). Incomes are not recovering as fast, therefore the most likely outcome is smaller housing units selling at higher prices.

More and more property developers are likely to launch smaller size units to achieve their margins and meet the budget of the Singapore population. This could potentially lead to oversupply risks of smaller sizes units few years down the road.

Again we recommend that investors buy with caution and should have some cash buffer and holding power to limit the potential risks and to make sure to buy at the right price. If valuations drop and banks ask for equity top-up, most people will be caught unprepared.

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