singapore property weekly issue 146

8/12/2019 Singapore Property Weekly Issue 146

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Issue 146Copyright 2011-2013 www.Propwise.sg. All Rights Reserved.
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CONTENTS

p2 7 Singapore Property Market Trends in

2014 and Beyond

p11 Singapore Property News This Week

p16 Resale Property Transactions

(February 19 February 25)

Welcome to the 146th edition of the

Singapore Property Weekly.

Hope you like it!

Mr. Propwise

FROM THE

EDITOR
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SINGAPORE PROPERTY WEEKLY Issue 146

Page | 2Back to Contents

ByPaul Ho (Guest Contributor)

The numerous property cooling regulations

imposed by the MND, URA, MAS and IRAS

have done much to curb the speculative fever

in the property market, but regulations to stopthe latent demand are futile. In short, if there

are 20,000 people needing houses and only

10,000 houses, then prices will surely go up.

Brute force measures to artificially restrict

10,000 people from changing their minds to

stop buying or defer buying will onlymomentarily solve the problem.

7 Singapore Property Market Trends in 2014 and Beyond
http://www.icompareloan.com/resources/tag/paul-ho/http://www.icompareloan.com/resources/tag/paul-ho/http://www.icompareloan.com/resources/tag/paul-ho/http://www.icompareloan.com/resources/tag/paul-ho/


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A brief background to Singapore's

housing woes

Itsnot clear if the Singapore government is

sincere in wanting to solve these problemsgiven the way government land sales are

structured, where the chief valuer lets the bid

price meet an undisclosed minimum before

releasing the land out for tender.

By the time the prices of land parcels rise to

meet the minimum bid price the Singapore

government wants, the pressure of demand

outstripping supply has already been built up.

And given that houses need two to three

years to build, during this phase, the land

prices will continue to shoot up. We believe

that this is also the reason behind Mr. Ku

Swee Yongs observation of a unique

Singaporean phenomenon that when land

supply is released, prices shoot up. Why?

Because when land is released, developers

are already starved of land, and will bid

aggressively for the land. Developers would

also know that this supply is released on the

back of demand outstripping supply. Why elsewould they bid so high?
http://www.icompareloan.com/resources/how-is-singapore-land-supply-managed/http://www.icompareloan.com/resources/how-is-singapore-land-supply-managed/http://www.icompareloan.com/resources/how-is-singapore-land-supply-managed/http://www.icompareloan.com/resources/how-is-singapore-land-supply-managed/http://www.icompareloan.com/resources/how-is-singapore-land-supply-managed/http://www.icompareloan.com/resources/how-is-singapore-land-supply-managed/


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Here is a chart of the sequence of events that

is behind a run up in property prices:

Figure 1: Sequence of events behind a run

up in property prices

So if the government really wants to cool the

market or solve the issue of property prices

running out of control, they would do well to

solve the inherent problems in the system.

Many people have already suggested the

remedies for fixing wild property price swings,

but I doubt anything has been adopted thus

far.

The following are seven trends I see shaping

the Singapore property market in 2014 and

beyond.Trend #1 Pockets of extra HDB supply

from PRs will be an overhang on the

market

Since January 2013 Permanent Residents

have not been allowed to rent out their units

after the expiry of their current lease. This

means that by January 2014 or 2015 many of

these Permanent Residents will be looking to


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sell their HDBs if they continue to be away

from Singapore. This creates a small pocket

of extra supply of HDB flats that will be an

overhang on the market.

Permanent Residents who are away from

Singapore and cannot secure permission to

rent out their HDB flats have no economic

benefit from keeping these units and will be

keen to sell their HDB units. We have come

across several Permanent Residents who

have left Singapore to work overseas and

decided to sell their HDB due to being unable

to obtain a license to rent out their HDB flats.

Trend #2 It may be more difficult to get

financing for an HDB or EC than a condo

The imposition of the Mortgage Servicing

Ratio (MSR) of 30% or less for ExecutiveCondominiums (EC), combined with the

income ceiling of $12,000, means that the

maximum price of an Executive Condominium

is about $880,000 (assuming an 80% loan).

Buying an EC or HDB will be tough as many

will fail the MSR criteria. A couple would have

an easier time to borrow a larger quantum for

Condominiums than for an HDB flat or an EC.


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Many property buyers have chosen to buy

private residential homes instead of ECs or

HDB flats due to financing difficulties. And

since they could not afford a large quantum,

they ended up buying very tiny private

apartments or condos.

Trend #3 Artificially depressed HDB

demand and prices may bounce back from

2016

HDB prices will be artificially depressed due

to the MSR of 30% or less, at least for the

short term. But at the same time, the

government has deliberately slowed down the

supply of HDB flats. This may lead to a

buildup of demand pressure for HDB flats in afewyearstime.

Currently, new PRs are barred from buying

HDB resale flats for three years after

obtaining their PR. By 2016, these new PRs

(numbering in the tens of thousands) would

be eligible to buy HDB, causing a demand

and supply imbalance. As HDB is the base

benchmark for property prices, if HDB prices

rise, every property class will likely follow.

Thus HDB prices may bounce back from

2016, after the elections.

SINGAPORE PROPERTY WEEKLY I 146


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Trend #4The private residential vacancy rate will increase

Figure 2: URA Q4 2013 stock, vacancy and supply in the pipeline

SINGAPORE PROPERTY WEEKLY I 146


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For private property, there are 18,003 vacant

units representing a vacancy rate of 6.2% in

the 4th Quarter of 2013. This is considered a

low rate versus historical comparisons. If you

take a look at the Property Price Index (PPI)from 2002 to 2005, the vacancy rate at which

property price is more or less at equilibrium

(i.e. neither increasing nor dropping) is about

7.5% to 8%. Hence prices for private

properties are still holding up fairly well even

though we hear anecdotal evidence of

softening ahead of the actual supply coming

on-stream.

The supply in the pipeline is 83,702 units,

versus an annual demand of about 11 to 15

thousand units, thus representing roughly 5 to7 years of supply that will be coming on-

stream in the next 5 years. While this might

seem like a lot, there is some room for more

supply to come in before the vacancy rate

reaches 7.5% to 8%.

Trend #5 A larger share of household

incomes will be going into property

purchases and loan repayment servicing

The artificial channeling of buyers into private

residential dwellings may increase the long

term sales trend line, even though the

average household income has been falling.

In other words, more and more people arebuying private residential housing despite

having weaker incomes. And it is not because

they really want the luxurious lifestyles or

high life as the government is prone to

highlight, but because they could not wait for

the HDBs anymore having been repeatedlyrejected by the BTO balloting process, or

were not able to obtain a loan due to the

MSR.



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Hence developers are building ever smaller

private residential units for this substantial

group of people, while charging ever higher

per square foot (PSF) prices.

Trend #6 Developers will be under

pressure, but prices may not crash

There is pressure on developers to launch

uncompleted units for sale to ease their

financing costs. Highly leveraged or weaker

developers may be more hard pressed tolaunch and garner sales faster. As many

developers rush to launch, these

uncompleted units come into the market (as

uncompleted supply), giving rise to the

impression that the market is softening

dramatically or even crashingwith so manyunits for sale.

The stronger developers will have holding

power and not act rashly. Once the weaker

developersstock is absorbed, prices will firm

up again. HDB shortages will set the baseline

prices and all the other classes of properties

will have upward pricing pressure. It's

basically a scarcity game.

Trend #7 The Core Central Region is

becoming more attractive

The Core Central Region (CCR) has become

very attractively priced relative to the Outside

of Central Region (OCR). This is an anomalywhich is not justified. There is currently no

change so material that makes Punggol or

Sengkang more attractive than Orchard

Road.

Historically prime regions in the CCR always

command a premium relative to the other two

regions. The OCR overshooting the CCR may

indicate that many people are buying into the

hype and are overpaying for these



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properties (on a per square foot basis).

Figure 3: Property Price Index

Q3 2013

Non-landed Private Residential Property

If property buyers start to look at the prime

areas, they may realize that these areas are

not too expensive after all. The CCR will have

more good pickings for long term rental

income, capital downside protection as well

as capital gain potential. But the relatively low

per square foot prices could reflect poor totalquantum affordability as many of the units

there are bigger in size and hence could cost

between $3 million to $10 million.

Many of the buyers of OCR properties could

be sitting on stagnant prices for years to

come. If there is no recession or further

regulatory actions, we expect property prices

to soften about 10% based on the current

trend.

By Paul Ho, holder of an MBA from a

reputable university and editor of www.iCompareLoan.com, Singapores first

Cloud-based Home Loan reporting platform

used by Property agents, financial advisors

as well as Mortgage brokers.

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Singapore Property This Week


Residential

R es a l e H DB f l a t C O V h i t s z e r o f o r t h e f i r s t

t i m e i n a l m o s t a d e c ad e

The overall median cash-over-valuation

(COV) for resale HDB flats hit zero in

February, the first time since 2006, as

demand for resale public homes dropped.The overall median COV for January was

$3,000. According to the transaction records

from agencies registered with the Singapore

Real Estate Exchange (SRX), 37.3 percent of

HDB resale deals last month closed below

valuation compared with 29.4 percent inJanuary. HDB resale prices also fell 1.8

percent month-on-month, the hardest since

April 2013. Resale volume stood at 734

deals, down 20 percent from a month ago. 12

out of 26 HDB towns had zero or negative

median COV, compared with 8 HDB townspreviously.

(Source: Business Times)

P r o p e rt y p l a y e r s d i v i d e d o n C O V s f o r H D B

resale f lats

As the latest COV fell to zero from $32,000 ayear ago and might even decrease further,

property analysts and agencies are divided

on having cash over valuation (COV) in HDB

resale transactions. COV is the cash premium

paid by buyers in excess of the valuation of

an HDB flat. ERA Realty key executive officerEugene Lim said that COV figures and cash

under valuation figures should be scrapped

as negative COVs will trigger a downward



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spiral of HDB resale prices, and that only the

market price should be released. Mr. Lim said

when HDB started to publish COVs for

different estates and flat types to educate the

public and deal with the perception of COVsbeing too high, people then used these as a

benchmark to mark up their prices above it,

thus making the next valuation higher.

However, Ong Kah Seng, director of R'ST

Research, said that COVs are relevant as

they are a brake to over-buying duringaverage and thriving market conditions.


Cl un y Par k R es id en c e r ec ei v es s tr o ng

in t e r e st

Although up-market freehold condominium

Cluny Park Residence was not launched for

sale until March 8, 40 percent of its 52 units

had received purchase commitments from

professionals and businessmen at private

previews. 70 percent of the buyers are

Singaporeans. The strong interest was

believed to be due to the condos excellent

location and long-term investment potential,despite the current uncertain residential

property market affected by cooling

measures.


Commercial

M ac p h er so n M al l c o n fi rm s i n cl us io n o f

F a ir Pr ice a n d ib is St yle s

Macpherson Mall (M2) has announced that it

will feature NTUC FairPrice as its anchor

tenant and ibis Styles as its hotel operatorupon its opening in the second half of 2015.

The mall is 53,000 square foot in size and is a

freehold mixed development at the junction of

Aljunied Road and Macpherson Road, where



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the Windsor Hotel previously stood. The mall

has one basement level, three shopping

levels above ground with NTUC Fairprice

supermarket on the second floor, and a nine-

storey economy hotel on top of the shoppinglevels.


B o r n e o Motors Pan d an s i te t o r ec ei ve

m a k e o v e r

Borneo Motors Singapore (BMS) will be

giving its Pandan Crescent property a

makeover which will turn the site into an

eight-storey complex to house motor vehicle

businesses. The makeover is estimated by

property analysts to cost $40 million. BMS is

part of the spreading Inchcape Group (UK)

and is located at 33 Leng Kee Road in

Singapore. It distributes Toyota, Lexus,

Suzuki, and Hino.


M o re b en ef it s f o r p r o p er t y m a rk et f ro m

Reits

According to an independent reportcommissioned by the non-profit Asia Pacific

Real Estate Association (APREA), Reits are

now considered a positive force to help with

the development of property markets. Reits

are thought to offer predictable income, low

cost of exposure to property, and will improvethe operation of real estate market by

attracting capital, in particular foreign capital,

and allowing institutional and retail investors

to invest in commercial real estate. Reits

fundamentally break large pieces of property

into smaller, tradable pieces, guaranteesincome, and improves liquidity.



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S G O O ssue 6


reason behind business rents, and suggested

that it could be due to supply lagging

demand.


G o v e r n m e n t t o t a k e a c t i o n o n u n f a i r R e i t

p r a ct ice s

At the Committee of Supply debate on the

Ministry of Trade and Industry (MTI), Minister

of State for Trade and Industry Teo Ser Luck

said that the government will take action uponseeing collusion or abuse of market

dominance by any landlord including Reits.

This statement came along the louder calls

for help with increasing business costs,

especially that Reits were blamed for shorter

lease renewals and larger increases in

rentals. Some of those Reits were formed

after JTC and HDB divested space to private

owners. Minister Teo said that Reits

accounted for only 13 and 16 percent of retail

and industrial rental spaces respectively, and

they are not the leading players in the rental

market. He also believed that rents for space

will moderate in the medium term after the

government has released a large amount of

land.


3 i n d u s t r i al s i t es u p f o r s a l e

Three industrial sites were up for sale. One of

them is a four-storey property in the JTC

Food Zone and has a corporate office, aresearch laboratory, a factory floor and cold

rooms located in Pandan Loop. It has an

asking price of $17 million, a gross floor area

(GFA) of 90,762.6 sq ft on a 100,070.90 sq ft

site. The site is zoned for Business 2 use with

a plot ratio of 2.5 and has 18 years left on its

tenure, and is marketed by Jones Lang

LaSalle (JLL). An expression-of-interest

exercise is held from now until April 16.




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Non-Landed Residential Resale Property Transactions for the Week of Feb 19 Feb 25

NOTE: This data only covers non-landed residential resale propertytransactions with caveats lodged with the Singapore Land Authority.Typically, caveats are lodged at least 2-3 weeks after a purchasersigns an OTP, hence the lagged nature of the data.

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 THE SAIL @ MARINA BAY 614 1,325,000 2,160 993 LANDMARK TOWER 1,270 1,250,000 984 99

5 DOVER PARKVIEW 936 1,100,000 1,175 99

8 OXFORD SUITES 1,141 1,650,000 1,446 FH

9 THE TRILLIUM 1,798 3,800,000 2,114 FH

9 THE PROMONT 2,013 3,100,000 1,540 FH

9 UE SQUARE 915 1,400,000 1,530 929

10 THE MONTANA 614 1,266,110 2,064 FH

10 BOTANIC GARDENS VIEW 1,259 2,288,800 1 ,817 FH

10 HOLLAND RESIDENCES 1,356 2,400,000 1,770 FH12 BALESTIER PLAZA 1,367 1,468,000 1,074 FH

14 DAKOTA RESIDENCES 1,313 1,828,000 1,392 99

14 THE ALCOVE 1,324 1,200,000 906 99

15 AALTO 1,442 3,180,000 2,205 FH

15 THE ESTA 1,410 2,080,000 1,475 FH

15 THE MAKENA 1,582 2,300,000 1,454 FH

15 ONE AMBER 1,259 1,785,000 1,417 FH

15 AXIS @ SIGLAP 861 1,128,888 1,311 FH

15 VILLA MARINA 1,087 1,100,000 1,012 9915 SUNSHINE RESIDENCE 1,582 1,435,000 907 FH

16 RIVIERA RESIDENCES 786 1,045,000 1,330 FH

16 EAST MEADOWS 1,195 1,200,000 1,004 99

16 EASTWOOD LODGE 786 750,000 954 99

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

16 FAIRMOUNT CONDOMINIUM 904 818,000 905 9918 TROPICAL SPRING 1,378 1,250,000 907 99

18 TAMPINES COURT 1,711 1,010,000 590 101

19 THE SPRINGBLOOM 1,302 1,500,000 1,152 99

21 THE BLOSSOMVALE 840 1,140,000 1,358 999

21 FREESIA WOODS 1,690 2,080,000 1,231 FH

23 CASHEW HEIGHTS CONDOMINIUM 1,227 1,250,000 1,019 999

23 REGENT HEIGHTS 1,023 925,000 905 99

23 REGENT GROVE 1,163 930,000 800 99

25 ROSEWOOD SUITES 678 705,000 1,040 99

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