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SIBOR Reform: Potential Implications for Singaporean Consumers

Published

7 years ago

on

by Value Penguin

The Association of Banks in Singapore published a proposal on 4 December to improve the way it calculates SIBOR. SIBOR stands for Singapore Interbank Offered Rate, and is simply an interest rate that banks in Singapore charge to one another. While that may sound like it is completely irrelevant to everyday consumers in SIngapore, it actually could have some significant implications for them. This is because most loans, especially home loans, in Singapore are priced in relation to how high or low SIBOR is. Therefore, consumers can gain from understanding how the SIBOR calculation is going to change and how this change could impact their lives.

SIBOR’s volatility could increase

According to the major media coverages of this topic, one major change that ABS is planning to institute is to incorporate more market transaction data to help price SIBOR more efficiently. For example, SIBOR could reflect all of banks’ funding activities like bonds instead of only reflecting interbank lending. It seems that authorities want SIBOR to adjust more quickly to local transaction data and global market changes.

To understand why this is happening, it’s important to be aware of the historical context around interbank lending. A lot of major banks all over the world have been getting caught red-handed while colluding to fix interbank lending rates for their own benefit. For example, the Monetary Authority of Singapore caught 20 banks rigging key borrowing and currency rates in 2013. Similar cases have been revealed in other major markets like Japan and the UK in recent years as well.

Essentially, banks all over the world have been colluding to keep their funding cost stable. And to prevent these illegal activities from continuing, authorities in Singapore are now integrating live market data in determining what interest rates should be, while reducing the impact of “expert opinion” to prevent market fixing. While this definitely creates a more transparent process, what it could also cause is increase volatility of SIBOR since it’ll expose SIBOR to more unpredictable market forces.

Interest rates are rising globally

While increased volatility of SIBOR in of itself isn’t necessarily harmful or beneficial to everyday consumers, it does have an impact on Singaporeans because market rates are expected to rise. The fact that SIBOR is going to reflect market forces more efficiently and dynamically means that it will adjust more quickly if rates in other major markets rise. We’ve written previously about how the correlation between SIBOR and US interest rates have fallen in the recent years. With this new adjustment, it is likely that this correlation will pick back up.

This means that the cost of borrowing could increase more rapidly for an average Singaporean borrower. Rates have been at historic lows globally, and many consumers have been enjoying higher consumption than they could afford because they could get cheap financing options. As U.S. rates are set to rise for the next few years, a quicker adjustment in SIBOR means that Singaporeans now have more urgent needs to adjust their balance sheets by refinancing or repaying their loans more quickly.

It’s not all bad

However, a more efficient SIBOR calculation isn’t necessarily bad. In fact, it also has its own set of positives. For instance, a SIBOR that adjusts more quickly to global markets means that SGD’s exchange rate could be more stable. It could also mean that savers could potentially earn higher yields on their investments and savings accounts. Regardless, the most important thing is that you are aware of all of the potential consequences of this upcoming reform, so that you can better prepare yourself to face any challenges or opportunities with a plan. When it comes to personal finance, understanding and planning is half the battle.

This was first published at Value Penguin’s website, “SIBOR Reform: Potential Implications for Singaporean Consumers“.

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Property

Flat in Toa Payoh sold for S$1.2M, becomes most expensive 4-room HDB in estate

A four-room HDB flat at Toa Payoh Crest has set a new record, selling for S$1.201 million. The 1,000 sq ft flat, located between the 37th and 39th storeys of Block 130A, has 93 years left on its lease. This September transaction eclipsed the previous high of S$1.2 million for a flat in neighboring Block 131B.

Published

3 weeks ago

on

30 September 2024

By

SINGAPORE: A four-room Housing and Development Board (HDB) flat in Toa Payoh has been sold for a record-breaking S$1.201 million, setting a new high for the area.

The 1,000 sq ft flat, located at Block 130A Lorong 1 Toa Payoh in the Toa Payoh Crest estate, has 93 years left on its lease and sits between the 37th and 39th storeys.

The flat, sold in September for S$1,200,888, surpassed the previous record held by a similar four-room flat at Block 131B, which fetched S$1.2 million in June this year.

Source: HDB

Highly Sought-After Estate

According to property portal 99.Co, Toa Payoh Crest, completed in 2018, has emerged as a popular choice for homebuyers.

The estate comprises four 40-storey blocks with a total of 1,007 units. So far, it has recorded 16 million-dollar-flat transactions this year alone.

The estate’s prime location contributes to its high demand.

Based on Google Maps, Toa Payoh Crest is conveniently located near three MRT stations: Caldecott, Braddell, and Toa Payoh.

In addition, its proximity to Toa Payoh West Market and Food Centre, as well as Toa Payoh Central, makes it highly attractive for potential buyers.

The unblocked view of the city skyline, thanks to the undeveloped plot of land next to the estate, further enhances its appeal.

Price Hikes and Concerns

Although record-setting resale prices continue to make headlines, Minister for National Development Desmond Lee pointed out on August 20 that flats with very high resale prices account for “a very small proportion of all transactions.”

He noted that such sales represent only 0.5 per cent of all four-room or smaller flat transactions in the past two years.

These units tend to be centrally located, well-connected to public transport, and situated on very high floors with good views.

Nevertheless, the rise in million-dollar flats has sparked concerns about the affordability of resale flats in general.

Minister Lee warned that these transactions could lead to unrealistic price expectations among sellers and anxiety among buyers, potentially distorting market dynamics.

He cautioned that if the market moves too far out of sync with economic fundamentals, it could result in a property bubble.

Million-dollar flats currently account for about 2 per cent of all resale transactions over the past 1.5 years.

In August alone, 104 flats were sold for at least S$1 million, down from 120 in July.

In the first seven months of 2024, 539 HDB flats crossed the million-dollar threshold, compared to 470 in 2023 and 369 in 2022.

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Property

Newly MOP-ed projects in Bidadari and Ang Mo Kio fetch S$1.2M and S$1.08M

Two recently MOP-ed projects have achieved impressive resale values: a unit at Alkaff Vista in Bidadari sold for S$1.2 million, marking the highest resale in the area, while a flat at Cheng San Court in Ang Mo Kio fetched S$1.08 million, making it the most expensive 4-room HDB resale not just in Cheng San Court but throughout Ang Mo Kio.

Published

4 weeks ago

on

23 September 2024

By

SINGAPORE: Two recently MOP-ed (Minimum Occupation Period) projects have achieved significant resale values.

As per reported by Singapore’s property portal 99,co, a unit at Alkaff Vista in Bidadari sold for S$1.2 million, while a flat at Cheng San Court in Ang Mo Kio fetched S$1.08 million.

A check on HDB website indicated that the S$1.2 million 5-room unit located at Block 106A, Bidadari Park Drive.

This particular unit, situated between the 7th and 9th floors of the 17-storey building, spans 1,216 square feet.

Launched in 2010 and completed in 2019, Alkaff Vista boasts nearly 95 years remaining on its 99-year lease, contributing to its substantial market value.

When Alkaff Vista’s BTO units were initially launched, 4-room flats began at S$433,000.

Alkaff Vista offers a range of amenities, including a children’s playground, fitness stations, and a roof garden on the 8th storey, appealing to families and individuals alike.

Its location adds further allure, being a mere 5-minute walk from Potong Pasir MRT Station and conveniently close to various shopping hubs and schools, such as Cedar Primary School and St. Andrew’s Junior School.

Interestingly, the S$1.2 million sale stands as the highest resale not only in Alkaff Vista but across Bidadari.

This project is the first in the area to reach MOP, and its current lack of competition may have contributed to the elevated prices.

As more projects in Bidadari reach MOP, it is anticipated that additional million-dollar sales will follow.

This S$1.2 million sale is not an isolated event; in fact, three other transactions from the project were also sold at impressive prices, with two of them exceeding the S$1 million mark.

4-Room unit at Cheng San Court Achieves S$1.08 Million Sale

Meanwhile, a unit at Cheng San Court (Block 590B, Ang Mo Kio Street 51) recently sold for S$1.08 million.

This flat, located between the 28th and 30th floors of a 32-storey block, measures 1,001 square feet and achieved a price of S$1,078 psf.

Cheng San Court, launched in 2019, is one of the youngest resale projects in Ang Mo Kio, with approximately 93 years and 6 months left on its lease.

Original buyers of this Cheng San Court unit also experienced a notable capital gain.

When the project was launched, 4-room flats were priced from S$435,000, making the recent resale price a 59.72% increase, or S$645,000.

Cheng San Court has seen a surge in million-dollar transactions since recording its first such sale in November 2023, marking Ang Mo Kio’s first-ever million-dollar sale for a 4-room flat.

With this latest S$1.08 million transaction, it stands as the most expensive 4-room HDB resale not only within Cheng San Court but throughout Ang Mo Kio.

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