singapore property weekly issue 168

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CONTENTS

p2 5 Reasons Why REITs are Better than

Physical Property Investments

p5 Singapore Property News This Week

p11 Resale Property Transactions

(July 23 – July 29 )

Welcome to the 168th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

mailto:[email protected]

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SINGAPORE PROPERTY WEEKLY Issue 168

Page | 2Back to Contents

By Calvin Yeo (guest contributor)

Property investing is getting tougher in

Singapore. The cooling measures, especially

the Total Debt Servicing Ratio, Additional

Buyer Stamp Duties as well as the Seller

Stamp Duties have made it much harder for

Singaporeans to invest in physical properties.

REITs as an Alternative to Property

Investments

So what should a property investor do? One

thing you can consider is investing in Real

Estate Investment Trusts (REITs). REITs are

basically trusts which invest in properties.

5 Reasons Why REITs are Better than Physical Property Investments



REITs are traded on stock exchanges and

receive a special tax treatment. Typically, a

REIT needs to pay out at least 90% of the net

income to be eligible for tax treatment.

Here are some advantages of buying REITs

instead of physical properties:

1. Easily Diversify Into Different Types of

Properties and Regions

With REITs, you are not limited to the

standard residential and commercial

properties which most property investors are

used to. You can even buy into hospitals

(First REIT), office buildings (Keppel REIT),

hotels (Fraser Hospitality Trust) as well as

shopping centers (CapitaMall Trust). You can

even buy REITs which own properties in

different countries such as Indonesia

(LippoMall) and even Europe with the

upcoming Germany-based REIT.

2. Easy to Buy and Sell

Since REITs are actively traded on a stock

exchange, they are pretty easy to buy and

sell. As compared to properties which will

take a much longer time to find the right

buyer, agree on the price as well as go

through the legal process which can take

anywhere from 3 to 6 months. For REITs, you

can just buy or sell at the market price and

the transaction is done instantly.

3. Start Investing With Less Money

Property investments generally require a lot

of money upfront, from the 20%

downpayment in addition to the legal fees

involved. With the TDSR and mortgage cap

rules, more money will be required upfront

especially if you already own your house.

http://www.drwealth.com/2014/06/20/first-european-sreit-new-hospitality-trust-upcoming-sgx/









For REITs, you can start investing with as

little as $800, since OUE Commercial REIT is

only about $0.80 per share and the minimum

is 1,000 shares per transaction.

4. REIT Management Takes Care of

Tenants and Maintenance

If you are familiar with property investments,

you will know that investment properties

require a fair bit of work, normally working

with agents, tenants and contractors. REITs

have a management team which takes care

of all this work, making them a relatively

hassle free investment.

5. Collect Steady Stream of Dividends

While property investments generate rental,

there are times when the tenant does not pay

or worse still your property remains empty.

REITs do not have this problem. Due to the

diversified nature of their portfolio, vacancy

rates are usually low and they have to give

out dividends as per their dividend policy.

REITs usually pay out dividends quarterly or

semi-annually, making them an ideal way to

generate income for retirement.

Calvin Yeo, CFA, CFP is the Managing

Director of Doctor Wealth Pte Ltd, which is

revolutionizing the financial advisory industry

by building an online platform to provide high

quality and comprehensive financial advice

for free.

http://www.drwealth.com/








Singapore Property This Week


Residential

H1 private homes rental yield increasing

Data from the Urban Redevelopment

Authority that was compiled by STProperty

showed that the gross rental yields for private

homes has increased in H1 2014, especially

in the suburban area of Singapore. The gross

rental yields are measured based on the

annual median gross rent per square foot and

the median resale price per square foot for

that area. Gross rental yields in the north-east

region have surged from 3.73 per cent last

year to 4.03 per cent in H1 2014. Prime

locations like Orchard had one of the lowest

gross rental yields at 2.7 per cent in H1 this

year. However, all regions across Singapore

experienced an improvement in gross rental

yields. Nonetheless, analysts believe that the

recent spike was merely an anomaly that was

caused by buyers’ anticipation of capital

appreciation, as rental yields have been in a

slump since 2009. Analysts argue that

vacancy rates have increased and the leasing

market remains weak. As such, Ong Kah

Seng from R’ST Research does not expect

the increase in rental yields to affect buying

decisions. He warns that net yields should

take into consideration all costs and taxes

related to the rental. Also it should measure a

basket of transacted units over a period of

time in order to measure the actual net yield.



Yet, Christine Li from OrangeTee believes

that the increase in gross rental yields is a

form of price correction.

(Source: Business Times)

MND: Easing property stamp duty will

force prices up

In parliament, Member of Parliament Foo

Mee Har questioned the need to retain

current property cooling measures, such as

those related to the Additional Buyer’s Stamp

Duty (ABSD). In response to that, Minister for

National Development Khaw Boon Wan said

that said that if cooling measures were eased,

it would create an upwards pressure on

demand and force property prices up.

Nonetheless, there are concessions for

married Singaporean couples and other home

owners who want to upgrade their flats, said

Minister Khaw. Market watchers predict that

there would be 1.5 per cent drop in prices

every quarter for the next two years given

that cooling measures are unlikely to be lifted

soon. Under the ABSD scheme, Singapore

citizens who already own one residential

property will have to pay 7 per cent in stamp

duty if they purchase another home. Also,

Singapore citizens with more than one

property will pay 10 per cent in stamp duty

when on their subsequent purchase. Since

the introduction of such cooling measures,

residential prices have begun easing. Song

Seng Wun, from CIMB, predicts that the

government will not ease cooling measures

as long as global interest rates do not

increase.




HDB resale flat prices at new low

Prices of resale HDB flats have hit a new low

since February 2012. According to data by

the Singapore Real Estate Exchange (SRX),

prices fell by 0.8 per cent in June and 0.9 per

cent in July. Market experts believe that the

mortgage servicing ratio (MSR), the total debt

servicing ratio (TDSR) framework and the

capping of loan tenures at 25 years have

contributed to the fall in HDB resale flat

prices. Market experts expect resale prices to

fall by 8 per cent by the end of 2014.

Currently, prices have decreased by a total of

4 per cent since the start of 2014. Ong Kah

Seng from R’ST Research believes that

resale prices will be stabilised next year. With

the increase in build-to-order flats and

balance flats, the HDB resale market has

shrunk. Yet, in July, 1,341 HDB flats were

sold. This was a 2 per cent increase from

June. Nonetheless, Ong predicts that resale

property volumes will fall again in August as

buyers are less likely to make purchases

during the “hungry ghost month.” On the

other hand, rental property volumes have

improved by 1.7 per cent to 1,600 HDB flats

in July. Eugene Lim from ERA Realty said

that HDB flat’s rental yields are higher than

that of private properties. He said that HDB

rental flats can reap about 6 to 8 per cent in

rental yields, while private home owners

usually reap only about 2 to 4 per cent in

terms of rental yields. Nonetheless Christine

Li from OrangeTee predicts that the HDB

leasing market will remain weak as demand

from foreign workers shrinks.




Increase in H1 transaction volume for

Good Class Bungalows

A Good Class Bungalow located along

Jervois Road and Tanglin Road has been sold

for $18.8 million or $1,247 per square foot.

The two-storey freehold bungalow is about

15,073 square feet and has a total built-up

area of about 7,600 square feet. In the last 11

years, the bungalow has changed hands four

times. According to Urban Redevelopment

Authority, 39 locations have been demarcated

as Good Class Bungalow Areas. Homes

residing in such areas cannot be sub-divided

or built more than two storeys high. They

typically have a minimum land area of 1,400

square metres. According to CBRE, 15 Good

Class Bungalow transactions were made in

H1 this year. This has boosted the total

transaction value to more than $344 million,

which is higher than the $233 million that was

transacted in H2 last year. Despite the

increase in transaction volumes in the first

half of the year, William Wong from RealStar

Premier Group said that the total debt

servicing ratio framework has affected the

sales of Good Class Bungalows. Wong

predicts that by Q4 this year, buyers would

have adjusted to the new prices and there

may be more transactions made.

TDSR affects tender of site at Fernvale

Road

Two residential sites at Fernvale Road

attracted fewer tender bids and lower bidding

prices, compared to two other sites within the

area that were sold last year. Analysts believe

that the total debt servicing ratio (TDSR)

framework has weakened the market. The

99-year Parcel A plot at Fernvale Road

attracted only four bids while its adjacent site,

Parcel B, drew only three bids.



On the other hand, two other sites that

tendered in April and June last year had

attracted eight and nine bids respectively. The

winning bid for Parcel A and B at Fernvale

Road was at $438.17 psf ppr and $448.35 psf

ppr respectively. Yet, last year, the other two

neighbouring site sold for $489 psf ppr and

$533 psf ppr. Those two sites are being

developed into condos with a water-frontage,

said Ong Teck Hui from JLL. Following the

implementation of TDSR framework,

developers are less willing to bid highly for

land plots due to the shrinking property

market said Nicholas Mak from SLP

International.


Commercial

Greater collaboration among property

agents amidst slowing market

JLL Singapore has recently acquired a 20 per

cent stake in PropNex International. This

acquisition comes amidst a slowing property

market. According to Christopher Fossick

from JLL, this move will enable the two

property agencies to share resources, and at

the same time, help JLL to strengthen its

network in Singapore. On the other hand,

PropNex will be able to extend its portfolio

internationally by leveraging on JLL’s

network. PropNex, which closes about 31,000

transactions per year, is a strong contender in

Singapore. It owns at least one third of the

market share.



Steven Tan from OrangeTee predicts that

there will be more partnerships among

property agents in the months to come as the

market size shrinks. According to Tan, since

the start of a partnership between four

agencies, the Project Alliance Group has

been able to sell more properties. Tan added

that other smaller agencies may soon join this

alliance.


http://propertymarketinsights.com/



Non-Landed Residential Resale Property Transactions for the Week of Jul 23 – Jul 29

NOTE: This data only covers non-landed residential resale property

transactions with caveats lodged with the Singapore Land Authority.

Typically, caveats are lodged at least 2-3 weeks after a purchaser

signs an OTP, hence the lagged nature of the data.

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 ONE SHENTON 1,561 3,100,000 1,986 99

3 TIONG BAHRU ESTATE 1,001 1,330,000 1,329 FH

4 THE PEARL @ MOUNT FABER 1,087 1,400,000 1,288 99

4 THE BERTH BY THE COVE 3,046 3,500,000 1,149 99

5 ONE-NORTH RESIDENCES 592 935,000 1,579 99

5 VARSITY PARK CONDOMINIUM 1,302 1,600,000 1,228 99

5 THE SPECTRUM 1,087 1,200,000 1,104 FH

9 ESPADA 355 939,999 2,646 FH

9 RIVERGATE 1,507 3,480,000 2,309 FH

9 THE INSPIRA 1,206 2,100,000 1,742 FH

9 MIRAGE TOWER 1,367 2,200,000 1,609 FH

10 BELMOND GREEN 1,335 2,180,000 1,633 FH

10 THE ELEMENT @ STEVENS 958 1,435,000 1,498 FH

11 THE ANSLEY 1,292 1,800,000 1,394 FH

11 ADAM PARK CONDOMINIUM 1,216 1,580,000 1,299 FH

11 THOMSON 800 3,832 3,958,000 1,033 FH

12 TRELLIS TOWERS 1,141 1,550,000 1,358 FH

12 OLEANDER TOWERS 1,152 1,122,000 974 99

13 PARC MONDRIAN 1,184 1,460,000 1,233 FH

14 DAKOTA RESIDENCES 1,023 1,430,000 1,398 99

14 ASTON MANSIONS 1,141 850,000 745 99

14 SUMMER VIEW 1,292 900,000 697 FH

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

15 NATURALIS 1,335 1,380,000 1,034 FH

16 STRATFORD COURT 1,345 1,200,000 892 99

16 FAIRMOUNT CONDOMINIUM 1,475 1,280,000 868 99

16 TROPICANA CONDOMINIUM 1,658 1,350,000 814 999

18 LIVIA 1,259 1,150,000 913 99

18 CHANGI RISE CONDOMINIUM 1,259 1,053,000 836 99

18 ELIAS GREEN 1,615 970,000 601 99

18 TAMPINES COURT 1,658 885,000 534 101

19 CHILTERN PARK 1,647 1,550,000 941 99

20 LAKEVIEW ESTATE 1,615 1,280,000 793 99

20 SHUNFU VILLE 1,679 1,280,000 762 99

21 SIGNATURE PARK 1,087 1,120,000 1,030 FH

23 THE JADE 1,615 1,722,000 1,067 99

23 THE PETALS 4,402 2,500,000 568 FH

singapore property weekly issue 168

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