Singapore Property Weekly Issue 3

8/6/2019 Singapore Property Weekly Issue 3

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Issue 3 | www.Propwise.sg


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SINGAPORE PROPERTY WEEKLY Issue 3

Copyright 2011 www.Propwise.sg. All Rights Reserved.

Page | 1

Welcome to the third edition of the Singapore

Property Weekly. We hope youve been enjoying it so

far. Well be adding new sections over time. Let usknow what else youd like to see we welcome all

feedback!

To wisdom and beyond,

Mr. Propwise

Contribute

Do you have articles and insights and articles thatyoud like to share with tens of thousands of

readers interested in the Singapore property

market? Send them to us at [email protected]

,

and if theyre good enough, well publish them

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Contents

Singapore Property This Week Pg 2

Whats Wrong with HDB Prices? Pg 9

Ask Mr. Propwise #8 Will the Market

Crash in 2013? Pg14If the Minister is Worried, Should We Be Too? Pg15
http://www.propwise.sg/mailto:[email protected]://www.propwise.sg/advertise/http://www.propwise.sg/advertise/mailto:[email protected]://www.propwise.sg/


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Page | 2

Singapore Property This Week

Residential News

Average holding period for subsales

increased to 2.31 years in Q1 2011Savills study revealed that the average holding

period for subsales in Q1 2011 was 2.31 years, an

increase from the 2.07 to 2.23 years in the

previous quarters of last year and the longest since

Q1 2008. 97.4% of the subsales in Q1 2011 were

profitable, and there was an increase in the

average gain per profitable subsale deal to

$315,043 from $283,498 to $289,004 in the

previous quarters. The most profitable subsale

deal in Q1 2011, which consisted of a ground-floor

unit at Nassim Park Residence, made a profit of

$3.44 million. A deal for an apartment at Orchard

Residences was the biggest subsale loss at

$723,200. Analyzing the URA Realis caveat data,

Savills found that Livia in Pasir Ris (with 24 deals)

and Double Bay Residences in Simei (with 22 deals)were the projects with the most subsale caveat

matches in Q1 2011.

Most profitable subsale deal in Q1 2011

generated $3.44 million returns; exceeded

last years $3.3 millionLast year, a minimum of 20 units were purchased

and flipped within days, generating a profit of

$5,000 to $188,000 (returns of 0.6% to 27.6%).

111 subsales of private apartments and condos in

2010 generated returns that ranged from $5,000

to $2.08 million per transaction. The government

policies in January 2011 has affected property

speculation as no subsale in Q1 2011 involved aunit bought in that period. The units in the 22

subsale deals in Q1 2011,
http://www.propwise.sg/http://www.propwise.sg/


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which earned a profit of more than $1 million

each, were transacted in 2006 to 2009. The 16%

SSD might make it difficult for speculators to

purchase private property and flip it profitably

within a year. The most profitable subsale deal (inabsolute terms) in Q1 2011 made a profit of $3.44

million, a return of 167.4%, and exceeded the $3.3

million achieved by last years most profitable

subsale deal.

Clydesbuilt Groups Eleven@Holland starts

selling from $1,050 psfClydesbuilt Group will launch its cluster-landed

housing project Eleven@Holland soon. Consisting

of only four- and five-bedroom houses between

3,681 sq ft to 4,348 sq ft, the price for the 82

strata-titled semi-detached units will begin from

$1,050 psf. The project, which is marketed by

Knight Frank and will be modeled after a lavishresort villa, is expected to generate higher rental

gains than other landed houses and condos,

because of its spaciousness and the condo-like

facilities such as security. TOP for Eleven@Holland

is expected to be issued at the end of 2014.

Prices for luxury houses increased 0.9%

quarter-on-quarter: CBRE studyAlthough there was an increase of 5.5% in the

capital values of luxury houses in Asia over the

quarter to Q1, prices of luxury houses in

Singapores core central area increased by only

0.9% quarter-on-quarter while sales volume

decreased by 20.4%. CBRE mentioned that rents

remained rather stable but showed signs ofsoftening towards the end of the quarter. As the

number of foreigners and permanent residents

purchasing new properties in prime areas also

decreased in 2009-2010 as compared to 2006-

2007, CBRE said that volume of luxury transactions

will only see a 5% to 10% increase in 2011, or

approximately 150-200 units with prices at anaverage of $3,000 psf for resale and $3,500 psf for

new projects.


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Copyright 2011 www.Propwise.sg. All Rights Reserved. Page | 4

Analysts predict that DBSS site in Sengkang

can have top bid of around $200-230 psf pprHDBs DBSS site in Sengkang has a land area of

approximately 244,405 sq ft and can hold around

790 flats. Analysts are positive about the responsetowards the 99-year leasehold site and estimated

that the top bid will be around $200-$230 psf ppr.

Also, HDB plans to increase the number of DBSS

flats launched from 3,000 units in 2010 to 4,000

this year. The DBSS land parcels in Clementi and

Pasir Ris, which can hold 1,230 units, have been

sold. HDB will launch another DBSS site atBendemeer Road that holds 700 units in the later

part of June.

Olina Lodge at Holland Hill up for collective

sale with stated price of $225 millionThe freehold 84,288 sq ft Olina Lodge at Holland

Hill, which is zoned out for residential purposewith a 1.6 plot ratio, is up for collective sale with

an asking price of $225 million ($1,666 psf ppr).

DTZ mentioned that no DC needs to be paid if the

site does not redevelop beyond the 1.6 plot ratio.

A DC of $8.33 million is payable if the successful

bidder taps the balcony allowance of 10%

additional gross floor area; this will mean a unit

land price of $1,575 psf ppr. If the asking price isachieved, the amount the owners will obtain from

this collective sale will be 65% more than if they

were to sell their units individually; this equates to

$3 million to $9 million per unit.


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Strong demand increased launch prices by

8-35% for new 99-year condos: DTZDTZ revealed that median prices of new 99-year

condos at GLS sites introduced in 2010 and 2011

increased by 8%-35% as compared to nearbydevelopments introduced earlier. For instance, the

$1,219 psf median price for My Manhattan that

was launched by Chip Eng Seng was 42% higher

than the $856 psf ppr median price of the nearby

Double Bay Residences. The reasons behind the

higher prices may be:

i) Higher psf prices due to smaller units developed

by developers as compared to earlier projects;

ii) Buyers are willing to pay higher psf price for

new units under a progressive payment scheme;

and

iii) Higher demand for new projects. Developers

are continuing to bid for 99-year sites due to

strong demand on the buyers part brought about

by good economic growth and low interest rates.

14,195 homes to be supplied under GLS

programme to curb high prices: Minister

KhawA total of 14,195 houses, 2.88 million sq ft

commercial space and 3,750 hotel rooms will be

introduced in the H2 2011 GLS programme,

including sites on confirmed and reserve list. 43

residential, commercial and EC units are to be

released for H2 2011. However, in order to prevent

oversupply, only 19 out of 43 sites will beconfirmed while the remaining will be placed on

the Reserve List. 17 out of the 19 confirmed land

parcels will supply 8,115 new private houses and

EC units. A supply of 6,100 houses is expected if

any of the 13 residential sites on the Reserve List

are sold. Merrill Lynch said that the GLS

programme for H2 2011 will prevent a housingbubble. Prices for private houses increased 2.2% in

Q1 2011 after hitting 17.6% the previous year.


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Property shares dropped 0.9% due to new

supply by MNDThe FTSE ST Real Estate Index, which had dropped

6.4% in the beginning of 2011, dropped 0.9% after

MND announced its decision to increase its sale ofnew lands for private houses and EC units from

13,945 in 2010 to a minimum of 17,510 in 2011.

The 17 residential sites on the Confirmed List for

H2 2011 GLS can generate 8,115 new private

houses and EC units. Citigroup mentioned that the

uncertainty towards the possibility of the rise in

the income ceiling may be one of the reasons forthe decrease in property shares.

Far East Organization paid $103.8 million for

site at Marine Parade RoadFar East Organization paid $103.8 million for a

47,400 sq ft freehold site, which came with a 113-

year-old conservation bungalow, at Marine ParadeRoad. Including an $18.8 million DC, the price per

potential gross floor area is $1,195 psf. The site can

house around 100 units that have 1,000 sq ft on

average, and can be built to a total GFA of 109,494

sq ft (inclusive of bonus GFA for balconies). The

other 5 properties owned by Far East Organization

in the area include condo projects SilverSea, The

Cape and The Shore Residences, Paramount Hotelalong East Coast Road, and the Amber Glades site.


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Commercial News

Industrial site will get a minimum bid of

$23.8 million by an unknown developer in a

tender 2 weeks laterURA will be putting an industrial site between

Pioneer Road North and Soon Lee Street for sale

through a public tender 2 weeks later. The site,

with an area of 1.7 hectares and a maximum

permissible gross plot ratio of 2, was placed on the

reserve list system on 25th Feb. The 30-year lease

site, which has a maximum gross floor area of366,836 sq ft, will be bid by an unknown developer

at a price of at least $23.8 million ($65 psf ppr) at

the tender. However, analysts believed that the

site can obtain a minimum of $80-$100 psf ppr.

Unenthusiastic response for site at

Woodlands highest bid at $151.5 millionA joint venture between Fragrance Group and

Aspial Corporation won the bid for a site at

Woodlands Avenue 2/Rosewood Drive with a bid

of $151.5 million ($367 psf ppr). The tender

received an unenthusiastic response as only 3parties were bidding and only the top bid was

within market expectations. The top bid for the 99-

year leasehold site exceeded the second highest

($149.8 million or $363 psf ppr) by merely 1.2%.

Colliers International believed that such a weak

response might be due to the sites mediocre traits

and competition from ongoing and upcomingprojects in the vicinity. Although the site has a

maximum permissible gross floor area of

approximately 412,600 sq ft and can hold up to

390 units, its development is limited to a 5-storey

height.

A-Reit awarded site at FusionopolisThe business park site at Fusionopolis was officiallyawarded to A-Reit by JTC Corporation,

SINGA O O Y W KLY I 3


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who submitted a top bid of $110 million. The

67,300 sq ft site, which has a 60-year leasehold,

has a maximum gross floor area of 269,200 sq ft.

Although A-Reit is a wholly-owned subsidiary of

JTC, the usual constraints set out for interestedpersons transaction is waived because the site

was awarded through a public tender.

0.78-hectare site at Marina View can fetch

about $1.3-1.5 billionA white site at Marina View is one of the plum

sites that the government will be releasing for itsGLS programme. The 0.78-hectare Marina View

site, which can produce an approximate GFA of

1.09 million sq ft and net lettable area of 920,000

sq ft in a full-office project, can get a price of about

$1.3-$1.5 billion. Savills mentioned that the site

can fetch around $1,200-1,400 psf ppr in full-office

use and the completed building can be traded ataround $2,700-2,800 psf ppr.

SINGAPORE PROPERTY WEEKLY I 3


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What's Wrong with HDB Prices?

So HDB prices are not overly expensive but

everybody blames our Govt for the pitiful state ofthings. Now new couples cannot afford HDB, not to

mention low and middle income families, old folks,

the disadvantaged. If they cannot afford HDB, where

are they going to live? How are they going to

survive?

We shall look at a few issues that might shed somelight onto the disconnect:

1. Then and Now

2. Sour Raisins

3. Policy Blunders

4. Broken Dreams


Copyright 2011 www.Propwise.sg. All Rights Reserved. Page |9


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It's not even sour grapes, it's leftover sour raisins.

And they have to share with their kids while

servicing their 35 year mortgage.

Frankly speaking, it doesn't really matter to them

whether the price to income is 5x or 10x, to them

it's always 35x. They definitely don't benefit if

prices go up, because it's their only home and they

cannot sell. The government seriously needs to do

something here, although they are already lending

a helping hand, just which it's not publicized much.

than going to a loan shark!).

3. Policy BlundersWhile HDB prices are inexpensive, I guess what

really gets on peoples' nerves are various policy

blunders that led to lower quality and poorer

service, like diminishing floor area, supply-demand

issues and the stupid $8,000 rule.

On lower quality, it's no secret that home sizes are

shrinking. An old 4-Room HDB is now as big as a

modern 5-Room. Maybe in another 10 years, a 5-

Room would look like Mickey Mouse's toilet.

Because they counted the floor area of your

balcony which is now bigger than your living room,

the aircon unit, the common corridor and staircase

as well! Why is this allowed to happen? Talk about

major policy blunders!

The quality of finishing also had some hiccups.

Remember the aluminium window frames that fell

off? Or wall tiles that kept cracking? Well,

admittedly, some of these issues have been

resolved.

On poorer service, this is actually tied to the

supply-demand mismatch. Basically new HDB

owners have to wait on average 2 to 3 years before

they get their flat thanks to HDB's "policy" ofbuilding behind the curve and in a roller coaster

fashion.



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Just as an example, they overbuilt in the earlier

part of the decade, flooded the market with tens

of thousands of flats in Boon Lay and Sengkang.

Then they decided not to build anything, which led

to the current situation of newlyweds having to

wait 2 to 3 years between ROM and the customaryceremony. Meanwhile we want higher birth rates!

And now HDB decided to go all out and build

40,000 flats in the next 2 years, staging the market

for the next cycle of boom and bust.

So despite paying up for a more expensive home,

Singaporeans have to wait longer to live in asmaller unit with probably more defects and

subject to illogical rulings like an $8,000 income

limit for a $780,000 flat.

I guess that is the ultimate unforgivable deed.

4. Broken Dreams

So far, all the analyses are being done on HDB.Prices though not as expensive as other Asian

cities, are rising too fast too furious and policies

are crap. Hence there's a lot of dissent on the

ground. The far more important piece of the

puzzle is actually the private condo market. Even

without doing any detailed analysis, most rational

people would come to the conclusion that the

Singapore property market is frothy. Just a quick

glance at two measures: Price to Income is more

than 20x if you use median household income, or13x if you use the 90th percentile.

Rental yield is closing in on 2%, i.e. Froth-on-your-

Tiger-Beer level. Any frothier, it's either going

down the throat or the chute.

But the biggest setback posed by the private homemarket is this: It destroyed the 5Cs dream. THE

Singapore dream. An average condo now costs

more than a million bucks. Actually the average

price is probably like S$1,875,000 (using $1,500 psf

times 1,250 sq ft). This means that 80% of the

population with an annual income of less than

S$100,000 cannot afford to upgrade to a condo, nomatter how hard they try. Because it will take them

close to 20 year just to earn that face value,

assuming they spend nothing.


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15/19



Ask Mr. Propwise #8 Will the Market Crash in 2013?Dear Mr. Propwise,

I am concerned about the recent remarks byMinister Khaw on a potential property market

crash. Will it really happen just because of the

oversupply of homes? Or will the market just

stagnate? Will prices go back to the low of 1998?

This really stresses me so much because I bought a

property in the beginning of the year beforehearing this news. And I am also subject to the four

year lock in period so I cant sell now. I am very

worried.

My property is currently rented out and its in

District 11. I can hold on to the property but am

worried that if price goes down the bank might ask

me to top up cash?

Regards,

M

Dear M,

No one can know when the market will crash. Wecan only make an educated guess that based on

the surge in the upcoming supply over the next

few years, the market will be under pressure

unless demand is stronger than expected.

As for Minister Khaws remarks, check out my

article titled If the Minister is worried, should webe too? Since you've already bought no point

worrying about it try and ensure you have

holding power and in the longer term youll be

okay.

As for the bank asking you to top up, unless

property prices drop more than 30%, it is very

unlikely for them to do so. Hope this helps!

To wisdom and beyond,

Mr. Propwise



16/19

If the Minister is Worried, Should We Be Too?In a post titled My Worries on his blog Housing

Matters, Minister Khaw Boon Wan expressed his

concerns about the current euphoric state of thehousing market, and cautioned that sharp property

price increases cannot go on forever. In this article

well take a look at the reasons for his cautious

outlook on the market and consider if it makes sense

for us to be worried as well.

Reason #1 The large supply of units underconstruction and in the pipeline35,000 private units (condos and landed properties)

have already been sold, though still in construction,

with payments in various stages of completion. But

there are 45,000 units in the pipeline, waiting to be

built and sold.

Minister Khaw and many property analysts are

concerned about the large upcoming supply. DTZ

estimates a completion of 32,359 units in 2013-2014



http://mndsingapore.wordpress.com/2011/06/09/my-worries/http://mndsingapore.wordpress.com/2011/06/09/my-worries/http://www.propwise.sg/http://www.propwise.sg/http://mndsingapore.wordpress.com/2011/06/09/my-worries/http://mndsingapore.wordpress.com/2011/06/09/my-worries/


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versus the 17,501 units in 2011-2012. If we

combine that with weak demand from say, poor

economic growth or higher interest rates, that

could be a recipe for disaster.

We know that the upcoming supply is large, but

whether prices will fall depends on a key variable

that is hard to predict: demand. Credit Suisse

thinks that if immigration growth remains at above

70,000 per annum the oversupply can be absorbed

by the market without a significant fall in prices.

However, immigration policy has become

politicized post the recent May election, so it

remains to be seen if the government will continue

to pursue its pro-immigration policy at the same

rate as before.

Reason #2 The government plans to boostsupply even furtherOn June 9 2011 the Ministry of National

Development announced the 2nd Half 2011

Government Land Sales (GLS) program an

estimated total of 8,115 housing units are on the

Confirmed List and 6,080 on the Reserve List, for a

potential additional supply of more than 14,000

units. Even if the sites on the Reserve List are not

triggered by developer bids, as Minister Khaw says:

Together with committed investments, some

53,000 units will be looking for buyers over the

next couple of years or so. That is not a trivial

number.

Not to mention that due to widespread anxiety in

the public from sharp property price increases, the

Government is also planning to increase the

number of units and speed of construction of HDB

flats, which will become a headwind to the mass

market private property segment.



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Reason #3 The volatile global situation

could impact SingaporeMinister Khaw mentioned the following external

situations that worry him:

- The European sovereign debt overhang which will

take time to resolve

- The Middle East crisis which could lead to an oil

price hike and slowing economic growth

Off the top of my head I can think of at least two

more black swans that could cause markets to

plunge:

- The end of QE2 (Quantitative Easing Program) in

the US in end June and current impasse on the

debt ceiling

-Nuclear and tsunami fallout situation in Japan

which could cause hiccups in the global supply

chain

In the most recent quarter foreign buyers made up

16% of all buyers of private property. Many

property investors in Singapore are also looking to

rent out their property to foreigners, as the locals

usually prefer to buy if they can afford it. In the

event of one or more of the above situations

deteriorating into a full blow crisis, foreign demand

for purchase and rental can disappear suddenly.

But for now the fundamental causes of the rise in

the property markets all around Asia low interest

rates and ample liquidity are still present. Rising

inflation makes matters worse as people worry

about the falling value of their bank deposits due

to negative interest rates, and are desperate todeploy their cash in any asset that they believe will

be a hedge against inflation.

Some analysts expect interest rates to start rising

towards the end of 2011. Together with falling

rental yields as rising prices are not matched by

rising rents, this could result in a tenuous situationfor overleveraged investors.



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So should we be worried?So if the Minister is worried about the Singapore

property market, should we be too? I think we

should be more cautious in our property

investment decisions for all the reasons mentioned

above, and Ill add one more to the list: policy risk.

If Minister Khaw is worried about sharply rising

prices, it increases the risk of additional anti-

speculation measures coming out, or of the

Government boosting supply beyond what the

market can absorb. Already last week weve seen

the Hong Kong Government raising the minimum

downpayment requirements for housing.

Property is not only a cyclical sector, but due to its

nature there are significant time lags from when a

policy is implemented to when we see the effects.

These time lags amplify the ups and downs of the

cycle as the increased supply that is being built

today could get completed at a time when demand

has fallen off. It is not easy for anyone to forecast

three or four years into the future.

This is not to say that prices WILL go down

demand for Singapore property could

unexpectedly increase as well, but my advice to all

budding property investors would be to do your

sums carefully and not overstretch yourself. The

time for greed is fading, and the time for fear isascending.

By Mr. Propwise, founder ofwww.Propwise.sg, a

Singapore propertyblog dedicated to helping you

understand the real estate market and make better

decisions.
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