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168690__1402884765PROPERTY fortunes move in cycles, a fact that real estate investor Zain Fancy knows all too well.

The 40-year-old former high- flying investment banker has already been through more professional ups and downs than most people experience in a lifetime.

After a stellar 10-year career in real estate investment banking at Morgan Stanley, Mr Fancy left to spearhead an ill-fated property investment joint venture that ended in an acrimonious legal wrangle.

Now, the Pakistan-born father of one is finding success again in his latest endeavour: a Singapore-based firm investing in properties across Asia worth between $10 million and $100 million each.

Clifton Real Estate Group prides itself on being very “picky” about its property choices, since it focuses on unlocking value over the long term, Mr Fancy told The Straits Times in a recent interview.

The company has amassed a portfolio worth about $250 million so far, many of which are Singapore shophouses.

“We look for assets that are well-located but have been neglected or require an upgrade or renovation in order to fulfil their true potential,” said Mr Fancy, who became a Singapore citizen in 2009 and lives here with his wife and daughter. “We evaluated over 150 potential shophouses for over a year before we made our first investment.”

After investing in a property, Clifton renovates the asset with a singularly meticulous approach that Mr Fancy described as its competitive edge. Its “extremely hands-on” methods include carefully selecting each piece of material for the renovation process.

“Our goal is to create the nicest looking property on the street,” he said. “We would like to be known for our attention to detail and our quality finishes.”

The renovated properties are usually rented out to new, higher-paying tenants. Clifton is now renovating four shophouses it owns in colourful Pagoda Street in the heart of Chinatown, and expects to double their rental income once works are completed.

“We really believe in the Chinatown area – lots of good foot traffic, near the MRT,” he said.

But sometimes, the company gets an offer too good to refuse.

Last year, Clifton bought a 6,910 sq ft shophouse at 72 Peck Seah Street for $12.2 million and resold it for $16.8 million – all within the space of a few months.

“Most pan-Asian investors complain that Singapore does not offer attractive investment opportunities currently and there is too much capital ‘chasing’ opportunities,” Mr Fancy said.

“While this may be true broadly, in our space we have still been able to find compelling opportunities.”

In fact, Clifton, which now has 12 employees, initially planned to invest across Asia but has yet to venture beyond Singapore due to the “extremely interesting investment opportunities here”.

The Government’s property cooling measures, which have dampened some of the red-hot demand for real estate here recently, have presented buying chances, Mr Fancy said. “We believe in the long-term fundamentals of the Singapore property market.”

He sees particular potential in shophouses, which are limited in supply and have historical charm but are often not well-managed.

The prices of such properties have stayed resilient through economic crises, but their rents remain much lower than that of premium office and shop spaces, resulting in strong leasing demand and significant room for shophouse rents to catch up, he said.

Clifton is also looking into other types of investments here and abroad. “I expect we will start setting up overseas operations in the next 12 to 24 months,” he said.

That would be coming full circle for the former head of Morgan Stanley’s real estate investment unit in Asia.

Mr Fancy was appointed to the post in 2005, following a string of successful property deals he had led in the region.

He was just 31 then and had been at the bank for a decade, working in New York and in Hong Kong. In 2006, Morgan Stanley made him a managing director.

But in 2008, having built a 120-strong real estate team for the bank, Mr Fancy left to form Och-Ziff Asia Real Estate, a joint venture with New York-based fund manager Och-Ziff Capital Management Group.

The timing wasn’t great: his stint at Och-Ziff coincided with the onset of the global financial crisis and ended with a lawsuit. In October 2010, he departed the venture and sued two of the fund manager’s Singapore-based units for millions that he said he was owed.

Och-Ziff’s position was that he had acted in bad faith by not disclosing his involvement in a probe being conducted by United States authorities into one of Mr Fancy’s subordinates, Mr Garth Peterson, at Morgan Stanley.

Mr Fancy told The Straits Times he could not comment on the legal proceedings, which were reportedly settled out of court. Subsequent reports cleared Mr Fancy of any blame for Mr Peterson’s corrupt actions.

By then, Mr Fancy had moved on. In 2011, he started Clifton Real Estate, named after the affluent suburb in Karachi, Pakistan, where he was born.

“Having worked in an institutional environment for over 15 years, and having always had an entrepreneurial interest, I felt I was ready to venture out on my own,” he recalled.

“In a larger managerial role at Morgan Stanley I was starting to spend most of my time in admin and management and much less in actually being hands-on with managing property or with evaluating and negotiating investments.”

Given his keen personal interest in properties, it is no surprise that Mr Fancy’s own investments have mostly turned out well.

His best personal investment was a condo in Hong Kong’s Amoy Gardens right after Sars had stopped spreading in the territory.

Amoy Gardens had been one of the housing estates most severely affected by the outbreak and was therefore seen as “tainted”.

“Some owners were panic selling, which made pricing attractive at the time,” he said.

As for his worst investment, it would be a property in Pakistan, whose value suffered from the country’s currency depreciation.

“Luckily I waited for the market to recover and was able to get the full amount of my capital investment back,” he said.

“That is the beauty of property – if you are able to purchase assets with good layouts in attractive locations, over the long run, the value should appreciate.”

A lesson, surely, that applies to people with strong fundamentals too.

(Source: The Straits Times)

 
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Posted by on June 16, 2014 in Commercial, Investment Tips

 

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Tough going for Thomson V shops

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Empty shop spaces greet shoppers at Thomson V, a mixed development in Upper Thomson.

Only 25 of the strata-titled development’s 78 retail spaces were occupied on Wednesday, even though it opened in the middle of last year, a check by The Straits Times found.

Tenants spoke of dismal trade and poor traffic.

So far, at least seven – including dessert shops My Garden Cafe and The Ice Shop, as well as salon Ez Cut – have shut.

The mall’s developer, Macly Group, declined to comment.

But property agents who rent out units to individual owners said their sizes range from 5 sq m to 104 sq m.

The development now has an average unit size of 35 sq m, according to calculations by The Straits Times.

Market watchers said those buying them were predominantly investors, not retailers themselves.

Some pointed to Thomson V as an example of how speculative snapping up of commercial spaces could lead to empty malls.

Last Tuesday, the Urban Redevelopment Authority (URA) introduced a minimum average size of 50 sq m for retail units in future developments, citing “a need to ensure a good range of retail units of different sizes to meet genuine retailers’ space needs”.

This came after it received more proposals for developments with a substantial portion of small retail units, said a URA spokesman.

Thomson V is believed to be one of the first to open in a string of new suburban developments offering large numbers of small retail units for sale.

Ms Mary Sai, Knight Frank’s head of commercial sales, said retail investors typically hope for a net rental yield of about 4 per cent. “If they can’t lease it out at a good rate, they are likely to keep it vacant so they have the flexibility to resell it easily,” she said.

Mr Ong Kah Seng, director at R’ST Research, said investors snap up shoebox retail units as “each unit is more affordable”, but the demand for small retail units in the suburbs remains fairly untested.

“Retailers must think the location is favourable,” he added. “But such units are not in the city centre and there is no anchor tenant to draw in the crowds.”

Retailers may also be less attracted to strata-titled malls – as opposed to those with a single owner – as there is no control over the mix of tenants.

“Mall developers sell the units to individuals, who rent them out to the highest bidder. There is no overall position for strata-titled malls,” said Ms Sarah Lim, a senior retail lecturer at Singapore Polytechnic.

She pointed out that successful strata-titled malls with small units, such as Far East Plaza and Sim Lim Square, are centrally located and evolved over time, with market forces attracting similar trades.

In the meantime, retailers at Thomson V are struggling.

Miss Eris Seah, 23, who opened gift shop Eris’ Collections in a 27 sq m unit in Basement 1 last December, pays a monthly rent of $3,000.

“So many spaces are empty,” she said. “No one knows the mall is even here. The store serves four customers on a good day.”

Organic skin care outlet Badger Balm’s owner Terence Lim said he bought the 20 sq m unit in 2008 for about $650,000. “Speculators who have no intention of doing business here buy the units, push prices up and try to rent them out, but can’t for whatever reason. They spoiled what could have been a nice mall.”

Such owners are also in a bind.

Mrs Maggie Lee, 50, bought a 24 sq m unit at Thomson V in July last year for $465,000.

Since then, she has been trying in vain to rent it out at $2,500 a month. “It’s a bit wasted. I must really try to rent it out now.”

(Source: The Straits Times)

 
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Posted by on April 17, 2013 in Commercial, Investment Tips

 

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Beware the Waiting Game: Some Points to Ponder While You Wait

Market naysayers claim that cheap financing has resulted in hot money, which has in turn created an unsustainable property bubble. While I constantly remind young, first-time home buyers not to overstretch their budgets by projecting affordability on the basis on today’s abnormally low interest rates, the continued upward march of property prices here was certainly not due to low interest rates alone. In any case, with the various phases of loan-to-value and loan tenure restrictions introduced since February 2010, the capacity for interest rates to create heat in the property investment market has been brought down to a minimum. (After the latest cooling measures in January 2013, the maximum loan-to-value in certain situations is a mere 20%.)

And so, when a property agent friend recently asked me for my opinion on whether she should advise her home-buyer client to “wait for property prices to drop”, I responded with a question in kind, “how long can she wait?” If you ask me for my honest opinion, today’s market is indeed a challenging one for buyers seeking an investment unit in the residential sector, and it takes a sharp eye to spot a gem worth surmounting the ABSD payable (there ARE such gems out there, I can personally vouch for that!). However, for those without a home to their names hoping to eventually get out of the rental cycle, I silently worry when they confide that they are waiting for prices to drop. (I stay silent in such cases, as my policy is never to give unsolicited advice, the opinions shared on this blog are for you to consider only if you choose to.)

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Besides the fact that they are betting the roof over their heads on an event of uncertain magnitude and indefinite time line, very often the turning-point they have in mind may in fact work to their disadvantage if and when it actually occurs. Let me just run through the two situations commonly cited by those hoping to pick up homes during a property crash:-

Interest Rates Rising:

Some home seekers are waiting for rising interest rates to spark a housing market crash. While I certainly agree that interest rates will eventually rise, let’s not forget the reason for them being so low in the first place. The Feds have committed to keeping interest rates low until the US unemployment rates dip to at least 6.0-6.5%, in a bid to boost their flailing economy. What does this mean? That when they do decide to jack up rates, it will be because their economy is back on track and market sentiment has improved. Would an improved global market outlook help with bringing home prices in Singapore down? I doubt it.

Next let’s consider how the recent increase in local mortgage rates affects the housing resale market. The interest rate payable by a home owner here is based on a moving rate (SIBOR is the most commonly used one at present) plus a fixed margin (determined at the onset of taking up the loan). So a home buyer may, for example, take up a loan that charges him a margin of 0.75% per annum above SIBOR for the first 3 years, and 1.25% per annum above SIBOR in each subsequent year. In a bid to improve profitability, several banks have in recent months moved to increase the fixed margin they charge new mortgagors over and above SIBOR. So while we managed to secure a SIBOR + 0.7% loan package in mid-2012, we would probably be offered a package of around SIBOR + 1.15% if we sought to refinance the loan today. While the hike in rates does little to dampen first-time buyers’ demand, it could actually cause existing home owners to reconsider their upgrading plans, since their subsequent replacement home would likely attract mortgage rates at least 25 to 35 basis points higher than what they pay on older loan packages pegged to lower fixed margins. This in turn reduces the stock of resale units available to home seekers – not the best environment for home shopping.

Huge housing supplies scheduled for completion:

Firstly, the pipeline of private housing projects due over the next 4 years is competing with record numbers of public housing and infrastructure projects for both building materials and a tight foreign worker market, housing prices would tend to move in tandem with escalating construction and manpower costs.

Secondly, as I’ve highlighted before, developer companies aim to achieve profitable returns for shareholders. If there are serious signs that home prices must drop, they must and will source for other ways to reduce costs. There’s a reason why projects completed during times of economic crisis tend to have less impressive finishings than those completed during times of strong growth. There’s a wide spectrum of grades for marble floor tiles and wood parquet, a China-made glass window pane may look identical to an Australia-imported, shatter-resistant pane yet cost just a quarter of the price. Do you really want to be buying a new home when developers are at the point of slashing prices?

And finally, thanks to the 7 rounds of extensive cooling measures, there is a huge arsenal of tools available to the Government in the event that the market were to start showing signs of collapse: reduce ABSD, completely scrap ABSD, reduce/remove restrictions placed on loan-to-value and loan tenure. It doesn’t take much imagination to think, if this is how our property market performs under such draconian restrictions, what would happen if such restrictions were to be completely removed.

 
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Posted by on April 9, 2013 in General, Investment Tips

 

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Singapore Budget 2013: More progressive property tax rates for Singaporean households

To make the tax system more progressive, the Government is raising property tax rates for high-end residential properties in Singapore Budget 2013, with the largest increases applying to investment properties that are not occupied by their owners.

The majority of owner-occupied homes will have lower tax rates in Singapore Budget 2013.

“This is fair,” said Minister of Finance Tharman Shanmugaratnam in his Singapore Budget 2013 speech on Monday.

“The property tax is a wealth tax and is applied irrespective of whether lived in, vacant or rented out. Those who live in the most expensive homes should pay more property taxes than others.”

Owner-occupied residential properties
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Source: Ministry of Finance

The new property tax schedule for owner-occupied homes will ensure that most retirees will end up paying lower property taxes, he added.

The number of households that do not have to pay property tax will rise. Currently, only those whose houses have an annual value of $6,000 or less do not have to pay property tax. This will now include those whose properties have an annual value of $8,000 or less, which will enable 950,000 owner-occupied homes to enjoy tax savings.

After this Singapore Budget 2013, all one- and two-room HDB flats will continue to pay no property tax. Homes with annual values of $12,000, such as a five-room flat, will experience tax savings of $80 or 33 per cent of their current property tax bill.

The top 1 per cent of owner-occupied homes, which includes 12,000 homes here, will face increased taxes.

However, the increase will be small, Mr Tharman said, except for those at the very top end. A landed property in the central area with an annual value of $150,000 will have to pay 15 per cent tax in 2014, or an increase of $5,120 per year, up from 10 per cent now.

There will be more significant hikes to the tax rates for high-end investment properties. Currently before Singapore budget 2013, residential properties that are not occupied by their owners have a flat tax rate of 10 per cent. There will be new marginal tax rates of 12 to 20 per cent for these investment properties.

This will mean an increase in property taxes paid for non-owner-occupied homes with annual values of above $30,000. These properties belong to the top one-third of all non-owner-occupied homes.

Non-owner-occupied residential properties
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Source: Ministry of Finance

Again, the increase will only be significant for investment properties at the high end. Most suburban condominiums will see a small increase in property tax of about $100 to $300 a year.

With Singapore Budget 2013, a high-end property, such as a landed home in the central area with an annual value of $150,000, will see an increase in property tax of $9,000 a year.

This revised property tax structure will be phased in over two years, from Jan 1, 2014.

The revised rates will take full effect from Jan 1, 2015.

Property tax rates for non-residential properties remain unchanged at a flat 10 per cent for Singapore Budget 2013.

(Source: The Straits Times)

 
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Posted by on February 28, 2013 in General, Investment Tips

 

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More home owners ‘decoupling’ property to avoid hefty duty

HOME owners are finding ways to reduce the amount they have to pay after hefty stamp duty increases were introduced two weeks ago.

One way is for families – say a husband and wife, or a parent and child – who bought a house together to transfer one partner’s share to the other person.

This creates a sole owner and leaves the other half of the pair free to buy another home without having to pay the additional buyer’s stamp duty (ABSD), as that purchase will be seen as his first.

The saving can be substantial. A Singaporean buying a second home will have to pay a 7 per cent ABSD, while permanent residents (PRs) pay 10 per cent.

KhattarWong managing partner Gurbachan Singh told The Straits Times that he has seen more cases where couples “decouple” their property.

The firm has fielded about 10 queries over the past fortnight, and is already acting in two or three decoupling cases.

“It’s no longer co-ownership or part ownership. They want to transfer everything to one party so that the other party can buy without the burden of the ABSD.

“Although the Government says this is temporary, we don’t know when it’s going to be lifted, therefore given that uncertainty… people are taking pre-emptive action,” he added.

But the transferring of a half share to one of the co-owners is still subject to the standard stamp duty rate of 3 per cent, as it is considered a transaction, Mr Singh noted.

KhattarWong is also taking more appeals to the taxman over the revised ABSD rates.

One aspect has to do with a will that bequeaths a property with apparent instruction for sale, so that the beneficiary receives the sale proceeds of a property rather than the property itself.

This could entail the executor of the will selling the property and distributing the proceeds to those named in the will. No tax is payable on the distribution of sale proceeds to the beneficiary.

If, however, instead of selling the property, the executor transfers the property to the beneficiary, the Inland Revenue Authority of Singapore’s (Iras) position is that stamp duty – and in turn ABSD, if applicable – should be paid, Mr Singh said.

Take a Singaporean who owns a private home, and is then left the proceeds of a property by his deceased parent.

If he opts to keep this property instead of allowing it to be sold as stated in the will, he will have to stump up 10 per cent in stamp duty based on a market valuation. This includes the standard 3 per cent and the additional 7 per cent, as it is a second home.

A PR in the same position has to pay the standard 3 per cent plus the additional 10 per cent.

If the son then sells the inherited apartment within four years, he will also be subject to the seller’s stamp duty (SSD) of up to 16 per cent.

“We don’t think (having ABSD or SSD levied on such inheritances) is correct, we presently have two instructions to object and to appeal against (Iras’) position,” Mr Singh said. “If the response from Iras is not satisfactory, we may take a court ruling for it.”

Lawyers note that if the will had instructed for the physical property be handed down to the son, no stamp duty applies, thus this same rule should be applied even in these alternative cases.

Mr Singh said the new stamp duty laws are the “most radical” since 1973, when the Residential Property Act was introduced, which prevented foreigners from buying landed homes. “If you look at the ABSD, we seem to give regard to your citizenship status, and I suppose the message is that the Government’s interest is to look after Singaporeans first.”

(Source: The Straits Times)

 
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Posted by on February 4, 2013 in Investment Tips

 

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Home in on the suburbs

Looking to invest in real estate next year? We ask property consultants for their recommendations

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Suburban condominiums have generally fared better than those in prime districts this year, and the trend could continue into 2013.

Property analysts told The Sunday Times that their top picks for next year were mostly in the western and northern suburban regions.

Interest could also shift to districts at the city fringes.

Those who do not want city living yet want the convenience of being near the city will look to the city fringe, said DWG senior manager Lee Sze Teck.

Though the spotlight will likely be on suburban and city fringe hot spots next year, investors should not rule out homes in the prime districts despite a fairly lacklustre 2012 as economic conditions improve.

Rich investors from overseas may seek unsold units in premier locations next year to take advantage of low interest rates and excess liquidity, said Colliers International director of research and advisory Chia Siew Chuin.

Ms Chia added that signs of recovery in China and other major economies could bring more foreign buyers back into the prime market.

But regardless of the market segment, buyers should look out for homes near MRT stations and in districts where price movements have been subdued, analysts said.

These could be areas that have seen few exciting new launches but have the potential for future development.

Other factors to consider are accessibility, congestion and the uniqueness of the development, said Savills research head Alan Cheong.

Buyers should take into consideration the traffic conditions in the surroundings once all the units, both private and public, are completed, Mr Cheong said.

The Sunday Times takes a look at the property consultants’ top picks for 2013.

1 Jurong East

There is a buzz in Jurong East, now that it is firmly established as a commercial hub in the western part of Singapore.

The focus is mainly on Jurong Gateway, an area around the Jurong East MRT station, which has been jazzed up by the development of commercial sites such as the Jem and Westgate shopping malls.

The Government is keeping up the rapid pace of development in Jurong East, with the sale of a residential site to MCL Land for $369.4 million, or $705.10 per square foot per plot ratio (psf ppr), in May.

A hotel site was also bought for $238.2 million last month by Resorts World Singapore, a unit of Genting Singapore. This translates to $1,167 psf ppr, a record price for hotel land.

Mr Ku Swee Yong, chief executive of International Property Advisor, said job creation in the area is likely to be strong, which will drive up residential rental demand and capital values.

New malls built in Jurong East will create new jobs, as will hospitals such as the Ng Teng Fong General Hospital, which is under construction. Also, up to 5,000 existing jobs could move to Jurong East as government agencies relocate their premises there, Mr Ku noted.

As a consequence of the large developments there, rental demand is likely to rise as more locals and foreigners move in.

However, the downside of the rapid pace of development in Jurong East is that the area could become more congested in future as it becomes more densely populated, analysts said.

2 Alexandra

Upcoming launches are likely to boost prices in the Alexandra area, which was given a facelift several years ago by the transformation of Alexandra Canal into a waterway and park connector.

Gross rental yields here could climb as high as 5 per cent, said DWG’s Mr Lee.

The most recent condo launch in Alexandra was the 373-unit Ascentia Sky in 2009.

Upcoming launches include 508-unit Echelon along Alexandra Road, which could be launched within the next few months.

Also, two land parcels in Alexandra, at Prince Charles Crescent and Alexandra View, were sold this year.

However, prices may have already started to rise. Resale prices in the Redhill and Alexandra area have climbed 6 per cent in the third quarter of this year compared to the same period in the preceding year, Ms Chia said.

3 Woodlands

Woodlands is also designated as one of Singapore’s regional centres, but prices here have not appreciated as much as those in the other regional centres due to a relative lack of new launches recently.

Since 2011, there have been only two new launches: Woodhaven in June last year and Parc Rosewood in January this year.

But the area’s image as a remote northern outpost could change soon. One factor is the completion of the Thomson MRT line in 2019, which could drive up home prices by as much as 30 per cent, analysts said.

The three stations along the new line – Woodlands, Woodlands North and Woodlands South – will serve the residents of more than 4,300 private homes as well as those living in HDB flats, which dominate the area.

Also, Singaporeans’ growing interest in buying second homes in Johor Baru could increase cross-border activity and add buzz to Woodlands, said Colliers’ Ms Chia.

However, since Woodlands is still quite far from the city centre, not everyone may want to live there, said SLP International research head Nicholas Mak.

4 Geylang

Although it is more known for its red-light district, Geylang has been thrust into the spotlight by a slew of new launches.

At least 40 projects, yielding 2,190 units, will be launched or completed in this area in the next five years or so.

Most developments in Geylang are small. Recently completed condos include the 78-unit Casa Aerata at Lorong 26 and the 62-unit Centra Suites at Lorong 25A.

The stigma of Geylang’s sleaze factor has been holding down prices. Banks are also known to be reluctant to finance home purchases there.

However, that makes it an attractive investment option for cash-rich investors interested in yield accretion, said Colliers’ Ms Chia.

Yields are a tad under 4 per cent, which is slightly higher than the average of 2 per cent to 3 per cent for condos islandwide.

5 Potong Pasir

The Potong Pasir area is near the Central Business District and Orchard Road, and is undergoing rejuvenation.

Projects under construction in the area include Nin Residence and 18 Woodsville, and Sennett Residence and Sant Ritz will be launched next year.

There was healthy demand for a 99-year leasehold mixed-use site at Upper Serangoon near the Potong Pasir MRT station. It was sold in September this year for $793 psf ppr.

Also, the Bidadari Cemetery has been cleared and is zoned for residential use, though the exact details of land parcels have not been released yet.

However, DWG’s Mr Lee noted that Potong Pasir currently lacks retail amenities.

(Source: The Straits Times)

 
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Posted by on December 26, 2012 in Investment Tips, Residential

 

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