Paul HO (iCompareLoan.com)

In July 2015, 1.6 million Singaporeans will receive a letter to inform them of their eligible GST Vouchers and other Budget benefits. However will you qualify for the GST vouchers?

The GST Vouchers will be given out in 3 components:

• Cash
• Medisave
• U-Save

GST Voucher – CASH

You will get between $150 to $300 dollars as long as you meet the following Criteria: –

Assessable Income for YA2014 up to $26,000

• Annual Value of Home as at 31 Dec 2014 (Up to $13,000) = $300.
• Annual Value of Home as at 31 Dec 2014 ($13,001 to $21,000) = $150.

The assessed annual value of $21,000 of homes would cover almost all the HDB units as well as some lower priced private properties according to Ministry of Finance.

GST Voucher – Senior Bonus

For older folks aged 55 to 64 with assessed income not exceeding $26,000: –

• Annual value of home as at 31 Dec 2014 (Up to $13,000) = $300.
• Annual value of home as at 31 Dec 2014 ($13,001 to $21,000) = $150.

For older folks aged 65 and above with assessed income not exceeding $26,000: –

• Annual value of home as at 31 Dec 2014 (Up to $13,000) = $600.
• Annual value of home as at 31 Dec 2014 ($13,001 to $21,000) = $150.

GST Voucher – Medisave

You must be a Singapore citizen residing in Singapore and be aged 65 and above in 2015. And the annual value of your home must not be above $21,000.

Annual Value of home as at 31 Dec 2014 – up to $13,000

• Age in 2015 – 65 to 74                    = $250
• Age in 2015 – 75 to 84                    = $350
• Age in 2015 – 85 and above          = $450

Annual Value of home as at 31 Dec 2014 – between $13,000 to $21,000

• Age in 2015 – 65 to 74                    = $150
• Age in 2015 – 75 to 84                    = $250
• Age in 2015 – 85 and above          = $350

How can you use these Medisave Topups?

There is almost no possibility for you to withdraw your GST Voucher – Medisave as many people who are eligible for these topups are lower income earners who likely do not meet CPF Minimum sum. Coupled with the complicated CPF withdrawal rules and Medisave Minimum Sum making withdrawal almost impossible.

You must be sick to use your Medisave. And we all know that medical care is exorbitant. A government hospital C-Class ward charges ~ $200 per day before subsidy. With 8 to 10 beds in a small room, you are talking about a $1600 to $2000 per room per night. Easily the price of a 3 to 4 star hotel’s luxury suite. This is how expensive public health care has become.

GST Voucher – U Save

Again, there is no money in this voucher except to offset the Utilies bill. These are given out 4 times a year.

Table 1: Ministry of Finance, GST Voucher – U Save.

When will I receive my GST Vouchers

You will receive your GST Voucher − Cash and/or Medisave in August each year that you qualify. If your household qualifies, you will receive your GST Voucher − U-Save in January, April, July and October each year.

What can you do with your GST Voucher – CASH?

Since we have already established that you will not get much money in the form of Cash. You will have to contend with just $150 to $300 if you meet the criteria and are below 55 years old.

If you are above 55 years old, you have an extra one-time senior bonus of between $150 to $600.

For Age groups – 21 to 30

If you are not yet married and staying with your parents, you will receive $150 to $300 depending on the type of housing.

In any case these are costs to help offset higher cost of living and GST. Many young adults these days are in debt, use this money to pay down your debt or buy a book about self improvement. If you really have to go out, here is what you can do: –

Places to go for 2 people for an entire day: –

You can consider taking a trip for two to the Sungei Buloh Wetland Reserve with your family and friends. Remember to pack your sandwiches and bring a few bottles of water. Take a bus ride there, have a nice walk. Enjoy an afternoon of fun outing that does not burn a hole in the pocket. (Estimated $20-$30 including food, water and bus rides)

Go home for a shower and you can head out to Geylang for some coffeeshop fare and splurge on some nice Durian. Many people love durian. Durian is more abundant this year and cheaper, but that should still set you back by $30 to $50.

If you are still not tired, head out to watch a movie at the Cinema and buy some popcorn. That should set you back by $30.

Total cost $100 to $110.

You can save the rest.

For Age groups – 30 to 54

Let’s just say you have more burden on your shoulders. You could perhaps have children who are going to school that needs money for everything.

Whatever you can save is money earned. You could go to an online comparison site such as www.DiffMarts.com to find the cheapest food in each of the supermarkets the latest offers or promotional prices.

SHOPPING LIST 1: A shopping cart containing products from different marts (Source: www.DiffMarts.com)

With DiffMarts.com you can afford to buy more as you can pick out the cheapest of each item from different supermarkets.

After treating your family to a sumptuous home cooked meal, you could still have money to spare, how about going online to watch a movie on your laptop computer or rent a DVD movie and have your family watch it together. There is no better way than to enjoy it together as a family.

For Age groups – 55 onwards

If you are in this age group, you are not likely to read this article online. Younger family members please share this with your parents. What can you do with your $150 to $300 GST Voucher – Cash and Senior Bonus ranging from $150 to $600 one-time cash.

What can you do with $300 to $900?

Let’s face it, you are probably still working and have a lot of commitment. And you cannot afford to fall sick. Your joints start to creak, your heart weakens, you may have hypertension or high blood pressure, your bones becomes brittle and your eyes start to strain. If you have not started on a healthy lifestyle, its not too late to start eating healthy and exercising and giving yourself the right vitamins now. Buy a book about healthy living, cooking the right food and exercising.

Here is a sample of how much it would cost you: –

You can save up the rest of the money for books, groceries, or buy yourself a pair of jogging shoes and some exercise shirts.

Conclusion

The main aim of the GST Vouchers is to offset against GST cost. It is best that you do not treat this as a windfall and hence use this money sparingly for necessities. I get particularly nervous whenever the government gives us money. If you noticed, whenever we get vouchers or rebates, next comes the price increases. A case in point is the Pioneer package only to be followed by Polyclinic fees increases. In short, for younger people, spend on self-improvement and dating, middle age people spend wisely on groceries and seniors to spend on healthy lifestyle and vitamins.

References: –

1. Ministry of Finance, General Information on GST Voucher scheme, https://www.gstvoucher.gov.sg/Pages/faqs.aspx

What does iCompareLoan.com do?

www.iCompareLoan.com is a Loan Portal and a Mortgage & Loan broker, helping property buyers and home owners to get the best fit home loan and business owners obtain Business loans for business expansion.

Home Loan Report ™ is Singapore’s first Cloud based Home Loan Report ™ platform to be used by Property agents, financial advisors as well as other Mortgage brokers to prepare reports for their customers.

Home Loan Report ™ – Enterprise allows a property agent’s website to immediately add a loan section. Improve your Google Ranking, let’s viewers increase Time-on-site. Property or Finance sites that deployed Home Loan Report ™ – Enterprise loan section sees viewers stay on their site longer by between 30% to 350% after 4 to 8 weeks of installing the Embedded Loan Plugins.

About PAUL HO:

Paul holds an a B.Eng(Hons) Aberdeen University (UK) and a Masters of Business Administration (MBA) from a Macquarie Graduate School of Business (MGSM) Australia. He also serves as current President of Macquarie University Alumni Association of Singapore and Hon. Secretary of British Alumni.

He is founder of www.iCompareLoan.com, his articles have been syndicated/featured on STproperty, iProperty, BTInvest, TheEdgeProperty, Propwise, Propquest, Yahoo and TheOnlineCitizen amongst many other sites. He is passionate about helping people enhance their wealth and in making money work harder for them.

Copyright © – www.iCompareLoan.com

Paul HO (iCompareLoan.com)

This article has also been featured on TheEdgeProperty

Singapore’s owes its industrial transformation and modern day success to Dutch economist Dr. Winsemius who in 1960 led the United Nations team to examine Singapore’s potential in Industrialization. Dr. Winsemius presented a 10-year development plan to transform Singapore from an already successful entrepot into a centre of manufacturing and industrialization. With his help, Singapore also attracted Shell and Esso to establish refineries here and Philips to set up manufacturing. He continued to work as Chief Economic Advisor from 1961 to 1984 working hand-in-hand with Goh Keng Swee, Lee Kuan Yew and Goh Chok Tong to develop Singapore into the economic success it is. (Reference 1: Wikipedia)

Early stages of industrialization wasfocused on labour intensive industries and increasingly move upstream into higher value-added industries and eventually with the advent of electronics, moved into High technology. (Reference 2: EDB)

The early part of the industrialization was located in Jurong. Comparing the 2014 Master plan versus the 2003 master plan, Industrial B2 zonehas spread out into the North East region and also added new zoning in the West region, north of Jurong. This is in line with the aim of Urban planning to bring jobs closer to homes and to reduce commuting time.

 Map 1: Masterplan 2014, (Source: URA)

Map 2: Masterplan 2003, (Source: URA)

 Map 3: Legend of Master plan (Source: URA)

The largestIndustrial Business 2 (B2) zoneis concentrated in Jurong with some scattered in other areas, such as Woodlands and near the airport.Certain businesses (industries) thataredeemed a potential disturbance to residents are subjected to a 50m nuisance barrier and placed under B2 zones.

 Blurring of lines between Industry and Commercial

The restructuring of industries across the world shifts from heavy industries to a focus on light industries such as Information and Telecommunication, knowledge industry andcloud computing. The definition of “industry” is changing. Production no longer simply meant having people sit beside lathe machines milling precision parts. A modern day “Industry” could also mean having teams of people tapping profusely into the laptop doing programming and coding. There is a blurring of lines between these industries and that of other commercial activities, and development to be used for offices.

Commercial zones are defined by URA as “…Area used or intended to be used mainly for commercial development.”

Such as developments to be used for: –

• Offices
• Mixed Uses (e.g. Office/Shopping/Cinema/Hotel/Flat)
• Convention/Exhibition centre, commercial school
• Bank
• Market/Food centre/Restaurant
• Cinema
• Entertainment
• Foreign Trade mission/Chancery
• Recreation club.

IS COMMERCIALAT A PREMIUM COMPARED TO INDUSTRIAL ZONE?

Commercial zones are premium and concentrated in Central Business District (CBD), there are also commercial zones located outside of category 1 where rentals are cheaper.

Table 1: URA, Commercial Offices – category 1 median rentals are ~$107 psm or about ~ $10.09 psf. Q2 2014, Q1 2015. (Category 1 refers to city core), https://www.ura.gov.sg/realEstateIIWeb/comm/rentalOffice/submitSearch.action

Category 2 (refers to properties outside of category 1) median rentals (Appendix 1) are in the range of $47 to $70 psm or about $4.37 to $6.5 psf.

We randomly selected District 3 and 5 for comparison. The Industrial median rentals in the city fringe Queenstown, Tiong Bahru, Clementi New Town comes in at $19.87 to $32.82 (Level 2 or higher) psm or $1.85 to $3.05 psf.

Postal Districts:

03 – Queenstown, Tiong Bahru,
05 – Pasir Panjang, Hong Leong Garden, Clementi New Town,

Table 2: JTC, 2015Q1 Median rentals in city fringe District 3 and District 5 (

http://cwapps.jtc.gov.sg/applications/IndustrialStatistics/Rentalstatistics.aspx

There is no real apple-to-apple comparison. For the purpose of this study, we assume that Category 2 (fringe area) of commercial zoneswould be a rough approximation to Industrial B1 properties in D3, D5, one of whichis in the city fringe.

Commercial properties still command a premium rental of $4.37 to $6.5 psf compared to industrial B1 properties at $1.85 to $3.05.

Chart 1: Commercial offices category 1, 2, and Industrial Fringe (District 3, 5) rental price (per square feet)  (Source: URA, JTC, iCompareLoan.com)

Table 3: Rental table of commercial offices category 1, 2 and Industrial fringe District 3 and 5 prices factored with ancillary use (Source: URA, JTC, iCompareLoan.com)

As industrial properties can only have 40% of the space for ancillary use, hence we computed an implied rental based on only 40% of ancillary usage for Industrial properties.

Between Commercial Cat 2 – Upper versus Industrial Fringe – Upper range

• A comparable $6.5 versus $7.625 psf of rental

Between Commercial Cat 2 – Lower versus Industrial Fringe – Lower range

• A comparable $4.37 versus $4.625 psf of rental

If you compare only the usable ancillary space allocated for office use, the industrial properties are almost on par with commercial offices, in fact industrial property is slightly more expensive if we did not factor the other usable 60% space for industrial use.

However Industrial B1 properties confer the advantage of using the rest of the 60% space for designated industry use. This pretty much lowers the cost of the overall space.

COMMERCIAL ACTIVITIES REDEFINED AS INDUSTRIAL USE

Industrial B1 zones are scattered across Singapore interspersed amongst commercial and residential areas.

In the past, industrial buildings are dreadful looking with dirt, grime and noise.

Newer industrial buildings such as those by Ascendas are well built with many amenities.

Some E-business activities have been regarded as Industrial uses and can be considered as part of the 60%.

Table 4: E-Business Activities regarded as Industrial use (Source: URA, Non-resi-handbook, Reference 3)

As a result of this classification, many banks and insurance company’s call centres, IT centres, Data centres have been moved to Business Parks, Industrial B1 and B2 zones such as those in Kaki Bukit, Changi business parks. Many of these activities were previously considered supporting office functions of Banking and Finance are now considered “Industry”.

With these new definitions, it eases business cost pressures on such commercial activities, but shifted demand into Industrial properties.

DEMAND FROM COMMERCIAL ACTIVITIES DIVERTED TO INDUSTRIAL PROPERTIES

Many newer industrial properties sitting on Business 1 (B1) zones are increasingly sophisticated and looking like Commercial buildings. In fact you might not even tell them apart unless you refer to the URA Zoning Master Plan.

Since industrial B1 zones are better located nearer to housing estates or regional centres and no longer mainly in Jurong, there is substantial advantage to break the zoning rules.

In 2009, retailer Mustafa has been issued with a writ of summons for operating a supermarket in the warehouse in Kallang Pudding road. Due to the rental price differential between retail and warehouse zoning, there is a lot of temptation to break these zoning rules.

In 2012, CEA issued a circular (Reference 4) to property agencies and Key executive officers warning agents against misleading marketing of Industrial properties in which agents purportedly talked up the potential of using the industrial properties.

In fact, many such breaches would never be found, as inspection would be costly and time-consuming. On top of that, the lines are greyed between commercial activities and industrial activities, meaning that it can be debatable whether there is an actual real breach or not. There is huge benefit to arbitrage the difference in rental yields, hence a lot of incentive to breach the zoning rules, softly or blatantly.

And in the URA circular issued to KEOs on CEA Practice (Reference 4), where URA stated, “However, URA recognises that certain non-industrial activities, such as ancillary offices¹, staff canteens and showrooms are needed to support the predominant industrial uses.”

And in this circular, URA clarifies that it allows Showrooms to support predominant industrial uses. Hence giving Industrial B1 properties the legality to become commercial showrooms. The rental prices are even better for commercial showrooms. Allowing for showrooms in Industrial B1 zoned properties will significantly enhance the valuation for such industrial properties, especially those at level 1. Many showrooms tends to have on-the-spot retail functions, which are of course not allowed.

Conclusion

• E-businesses activities are being reclassified as Industry use and allowed in Industrial B1 zone. Many banks and financial institution’s back office, call centres, IT centres, data centres have moved to Industrial B1, B2 and business parks in search of lower rental. In essence this moves some of the commercial demand to industrial.
• There would be no benefit for a business to use only 40% of the space for ancillary use such as an office if they do not have a significant industry component to use up the 60% of the space. For example, there may be some industry where their Industry component may only use up 20 to 30% of the Industry space, while the office is 40%. Therefore there would not be substantial rental savings.
• Businesses such as IT, programming and info-communication would benefit the most as these industries would use up the full 60% for industry and 40% for offices. In fact you would walk into an such a factory/unit and you would not even feel its an “Industry”, rather there would be neat rows of office partitions and people working on their computers, just like another other commercial offices.
• As Industrial B1 zones are spread out across the island and no longer concentrated in Jurong (which is generally regarded as inconvenient location), there is a growing benefit to arbitrage the rental yield whether legally or illegally. The fact that URA sees a need to issue a Circular to all property Key executive offices (KEOs) as well as developers (Reference 3) attests to this growing segment of Commercial looking Industrial properties.
• Allowing for Showrooms within Industrial B1 properties will indirectly compete with Commercial retail zones. This creates a bigger arbitrage opportunity as Commercial retail has even higher rental compared to Commercial Offices.
• Now that Singapore has become the world’s costliest city, perhaps with these rules in place, Singapore could in time become the place where you see the most beautiful industrial buildings. Ascendas REITs, Mapletree logistics and various large scale industrial property owners are likely beneficiary of these policies with rents generally around $3 to $5 per square feet.

URA has an unenviable task of managing Master plan zones as it will not be easy. URA has done a great job in urban planning and zoning and I believe will continue to do so in the future. It just has to gradually tweak the rules to ensure that there is not too great an arbitrage opportunity between commercial zones and industrial zones. Enforcement may be an option, but unlikely to be economical.

References: –

1. Wikipedia, Albert Winsemius (1910-1996),https://en.wikipedia.org/wiki/Albert_Winsemius

2. EDB,

https://www.edb.gov.sg/content/edb/en/about-edb/company-information/our-history.html

3. URA, Non-Resi-handbook, Some aspects of e-businesses considered as industrial,

http://www.ura.gov.sg/circulars/text/non-resi-handbook.htm

4. URA,Circular No: CEA Practice Circular 3/12 URA/PB/2012/08-DCG, Misleading Marketing of Industrial properties

, 20 Jun 2012, http://www.ura.gov.sg/uol/circulars/2012/jun/dc12-08.aspx

Extract: “To ensure that limited industrial land is used mainly for industrial uses, the URA requires at least 60% of the total floor area of an industrial development to be used for core industrial activities. However, URA recognises that certain non-industrial activities, such as ancillary offices¹, staff canteens and showrooms are needed to support the predominant industrial uses. Hence, such supporting non-industrial uses, together with other ancillary areas (e.g. lift lobbies and circulation spaces) are allowed to occupy up to 40% of the total floor area of an industrial development.”

APPENDIX

1. URA, Fringe area, Category 2 Median Rental for Periods Q1, 2013 to Q1, 2015. https://www.ura.gov.sg/realEstateIIWeb/comm/rentalOffice/submitSearch.action

Definition:

Category 1 refers to office space in buildings located in core business areas in Downtown Core and Orchard Planning Area which are relatively modern or recently refurbished, command relatively high rentals and have large floor plate size and gross floor area. Category 2 refers to the remaining office space in Singapore which are not including in Category 1.

2. URA Zoning description

What does iCompareLoan.com do?

www.iCompareLoan.com is a Loan Portal and a Mortgage & Loan broker, helping property buyers and home owners to get the best fit home loan and business owners obtain Business loans for business expansion.

Home Loan Report ™ is Singapore’s first Cloud based Home Loan Report ™ platform to be used by Property agents, financial advisors as well as other Mortgage brokers to prepare reports for their customers.

Home Loan Report ™ – Enterprise allows a property agent’s website to immediately add a loan section. Improve your Google Ranking, let’s viewers increase Time-on-site. Property or Finance sites that deployed Home Loan Report ™ – Enterprise loan section sees viewers stay on their site longer by between 30% to 350% after 4 to 8 weeks of installing the Embedded Loan Plugins.

About PAUL HO:

Paul holds an a B.Eng(Hons) Aberdeen University (UK) and a Masters of Business Administration (MBA) from a Macquarie Graduate School of Business (MGSM) Australia. He also serves as current President of Macquarie University Alumni Association of Singapore and Hon. Secretary of British Alumni.

He is founder of www.iCompareLoan.com, his articles have been syndicated/featured on STproperty, iProperty, BTInvest, TheEdgeProperty, Propwise, Propquest, Yahoo and TheOnlineCitizen amongst many other sites.

He has also given speeches, guest speeches, trainings and/or seminars at NUH Lunch time talk, iProperty, David Poh and Associates, Getty Goh’s Ascendant Asset property, NTU (Guest Lecture on SEO), Panel discussions at GPS Alliance, C&H, Skillup just to name a few.

He is passionate about helping people enhance their wealth and in making money work harder for them.

Copyright © – www.iCompareLoan.com