singapore property weekly issue 240

8/20/2019 Singapore Property Weekly Issue 240

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Issue 240Copyright © 2011-2014 www.Propwise.sg. All Rights Reserved.

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CONTENTS

p2 Mr. Propwise’s 2016 Singapore Property

Market Outlook

p11 Singapore Property News This Week

p13 Resale Property Transactions

(December 9 – December 15 )

Welcome to the 240th edition of the

Singapore Property Weekly .

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

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SINGAPORE PROPERTY WEEKLY Issue 240

Page | 2Back to Contents

By Mr. Propwise

Is it just me or is the passing of time

accelerating as we get older? I can’t believe

2015 is almost done! It’s that time of the year

where I take a look back at what’s happened

over the past twelve months, then try and saysomething intelligent about the future

direction of the property market over the next

year.

As always, 2015 was an interesting year for

the property market. I’d sum it up as “thecontinuation of death by a thousand cuts.”

After a 4% decline in the URA’s Property

Price Index (PPI) in 2014,

Mr. Propwise’s 2016 Singapore Property Market Outlook


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as of 2015Q3 we’ve seen another 3.2%

decline in 2015 so far. This averages out to

about a 1% decline per quarter over eight

quarters.

Contrast this to the 2008Q3 to 2009Q2 period

where we saw a 24.9% decline over four

quarters. The current period is more

reminiscent of the 2000Q3 to 2004Q1 period

where the market fell by an average of 1.5%

per quarter over 15 quarters. We could be infor a long ride down, folks.

Policy standstill

We know the straw that broke the camel’s

back was the MAS’ Total Debt Servicing Ratio

(TDSR) framework introduced at the end ofJune 2013, which significantly limited the

ability of buyers to lever up and buy property.

Another large deterrent to would-be property

investors is the punitive Additional Buyers

Stamp Duty (ABSD) imposed on second-timeand higher Singaporean buyers and first-time

PR and foreigner buyers.

Personally, I think the TDSR makes more

sense than the ABSD, which is unnecessarily

harsh and penalizes households who have

genuine upgrading and investing demand.Let’s not forget that Singapore is a nation of

homeowners (if I remember correctly around

90% of resident households own the home

they live in), and property is one of the

primary means by which Singaporeans

accumulate wealth.


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Figure 1 – The STI has not gone anywhere

over the last six years (source: YahooFinance)

There are inter-generational equity issues to

sort out if these rules are to be tweaked, but

the current trifecta of stagnating stock prices

(the Straits Times Index has had a flat return

over the past six years), property prices and

real incomes means that a whole generation

of middle income wage earners will find it

difficult to accumulate enough wealth for a

comfortable retirement.

How much further will the property marketfall?

Despite the warning, threatening and finally

pleading of the property developers and

agents, the government is right – the

correction of property prices so far has been

moderate, with only an 8% correction over

eight quarters.


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Figure 2 – Change in URA PPI since 2000

(Source: URA,

PropertyMarketInsights.com)

So the million dollar question is – what does

the government think a “meaningful”

correction is? It’s important because they’ve

indicated the property cooling measures are

here to stay until such a correction has

occurred.

We can get some clues from the previous two

corrections that occurred from 2000 to 2004and then more recently from 2008 to 2009

during the Global Financial Crisis. During

those downturns, the URA PPI corrected by

19.9% and 24.9% respectively. So if I had to

hazard a guess, I’d say we’d have another 10

to 15 percent more downside to go before thegovernment would deem the correction to be

“meaningful” and start easing some of those

measures.

3 reasons why the market will continue to

be weak in 2016

There are three reasons why the current

market weakness is likely to continue into

2016 and beyond.

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First, the HDB Resale Price Index (RPI)

has continued to decline and has been

generally weaker than the URA PPI since

2013Q2, although the rate of decline has

slowed over the last two quarters. A doubling

of HDB prices since 2005 created a “wealth

effect” that supported mass market prices as

HDB flat owners could sell their unit at a high

price and upgrade to a private condominium.

Now that HDB prices are falling, this effectwill shift into reverse gear, where HDB

owners find it difficult to sell their flat at a

good price, thus sapping demand from the

mass segment of the market.

Figure 3 – URA PPI vs HDB RPI (Source:

URA, HDB, PropertyMarketInsights.com)

SINGAPORE PROPERTY WEEKLY I 240

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Second, large upcoming completions are

likely to put pressure on both property

prices and rentals, especially coupled with

slower expected population growth as the

government continues to be tight on the

inflow of foreigners into Singapore.

Based on URA data, there are close to

58,000 units of private residential properties

to be completed in the next few years.

Looking at the breakdown of supply, 2016 willsee completions of over 22,000 units per

year, followed by over 15,000 units in 2017.

This is nearly twice the yearly average of

fewer than 10,000 units per year between

1996 and 2012.

Figure 4 – Upcoming private residential

supply (Source: URA,


SINGAPORE PROPERTY WEEKLY I 240



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Finally, we should keep in mind that the root

cause of the buoyant property prices is the

protracted low interest rate environment after

multiple rounds of Quantitative Easing (QE)

by the US Federal Reserve post the GlobalFinancial Crisis. This has propped up the

prices of most yield-based assets, including

property.

While the Fed (finally) raised its

benchmark federal funds rate in Decemberby a measly quarter of a percent, market

expectations are for continual hikes into

2016, albeit at a gentle pace.

How good can property returns be in an

era of rising interest rates?

Figure 5 – URA PPI vs 3-Month SIBOR

(Source: URA, MAS,





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But even if interest rates do not shoot up right

away, borrowing costs can still rise as banks

charge a higher margin (SIBOR + X%) to give

themselves a buffer against rising interest

rates and greater mortgage defaults.

And when borrowing costs rise, the stress on

heavily leveraged buyers will go up, and the

attractiveness of property itself as an asset

class also decreases as the net cash flow it

provides falls. This will be exacerbated if

rentals are also under pressure at the same

time, which they are. Figure 6 – Rental growth has been

negative for 8 straight quarters (Source:

URA, PropertyMarketInsights.com)

I’ve talked about this before, but I think many

property buyers are still blasé to the impact of


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rising mortgage rates (whether from rising

interest rates or banks raising their lending

spread) on their ability to meet their monthly

payments.

So what should buyers and investors do?

I do not like making forecasts about when or

how much property prices will fall, because I

believe the exact timing and magnitude of

property price movements is dependent on

too many unknowable events. Instead, Iprefer to base my property investment

decisions (there are different considerations if

you are buying for own stay) on my analysis

of where we are in the cycle and what has

historically been the best action to take at

each point.

Members of Property Market Insights will

know that we are currently in the eighth

quarter of the Early Bear stage of the

Property Market Cycle Model. This means

that the best thing to do is to sit tight and wait

for further correction before entering the

market. Patience is a virtue in the current

stage of the market.

The Era of Greed has faded, and the Era of

Fear is upon us (yes I’m a Tolkien fan).

The time to buy will come when we enter the

Late Bear and Early Bull stages of the

market. You might have to wait for years, butwhy rush to lose money?

Here’s wishing everyone a Happy New Year

and a Healthy and Wealthy 2016!

By Mr. Propwise, the founder of Singapore

property blog www.propwise.sg , which aims to help people make better real estate buying,

selling, renting and investing decisions.


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Singapore Property This Week


Residential

Property investments in 2016 expected to

exceed 2015

According to Colliers International, real estate

investment volumes in Asia-Pacific in 2016 is

expected to exceed 2015 as long-term yields

will outweigh short-term macro-economic and

political threats. More than half of the

respondents for a survey by Colliers said they

would increase their real estate allocations in

the coming year. Cities like London, Paris,

New York, San Francisco, Tokyo and Sydney

are among the primary targets for global

cross-border investors in the next year.

(Source: Business Times)

The Verge to make way for serviced

apartments

Located at Little India, The Verge which is a

shopping mall, has been sold for $317 million

to make way for serviced apartments. The

site has 80 years of balance lease and isintended to be redeveloped into serviced

apartments, a mall and a block for offices or

retail. The gross development value of the

project is estimated at $480 million. The site

which is about 66,662 sq ft has been zoned

for white use with a 3.5 plot ratio.Redevelopment works are expected to

commence in 2017.




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Commercial

Retail rental projected to fall by 5% in 2016

Market experts predict that in 2016, retail

rental will fall by as much as 5% due to theoversupply of retail space. As rents fall and

tenant sales decline, landlords are

increasingly trying to lure back bigger tenants

that they were once inclined to shoo away.

According to Alice Tan from Knight Frank, it

will take almost four years for the market toabsorb the upcoming new retail space, base

on current net demand. She believes that in

the Central Region, retail rental will fall

between 3 to 5% in 2016. Donald Han from

Chesterton also predicts that there will be a

fall in rents. He added that competition frome-commerce and lower tourist arrivals will

contribute to the decline in rents.


Rental gap narrows between suburban

and Orchard malls

Due to a larger local catchment and lower

susceptibility to tourist spending, market

experts explained that the rental gap between

suburban and Orchard malls are narrowing.

This was led by the rentals in the Central

Region which recorded a 3% drop. Compared

to the 2.9% fall in rentals of suburban malls,

data from Savills showed that Orchard malls

had suffered a 4% drop in rentals in the last

three quarters. The average prime rent of

Orchard Road malls was 1.09 times of that in

suburban mall since the start of the year,

according to Knight Frank’s computations.

This is lower than the 1.12 times and 1.13times that was computated in 2014 and 2013

respectively.




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Non-Landed Residential Resale Property Transactions for the Week of Dec 9 – Dec 15

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 861 1,638,000 1,902 99

3 THE METROPOLITAN CONDOMINIUM 721 1,050,000 1,456 994 THE INTERLACE 1,539 1,900,000 1,234 99

5 BOTANNIA 1,270 1,465,000 1,153 956

5 BLUE HORIZON 1,227 1,310,000 1,068 99

5 CLEMENTIWOODS CONDOMINIUM 1,625 1,650,000 1,015 99

5 THE INFINITI 1,302 1,225,000 941 FH

9 CAIRNHILL CREST 1,970 3,500,000 1,777 FH

9 ASPEN HEIGHTS 1,130 1,700,000 1,504 999

9 ASPEN HEIGHTS 1,324 1,890,000 1,428 999

10 NATHAN SUITES 1,442 3,070,000 2,128 FH10 SPRING GROVE 1,389 2,000,000 1,440 99

10 CORONATION SHOPPING PLAZA 1,119 1 ,275,000 1,139 FH

12 D'LOTUS 807 880,000 1,090 FH

12 OLEANDER TOWERS 1,152 1,120,000 972 99

14 THE WATERINA 1,356 1,580,000 1,165 FH

14 SIMSVILLE 969 900,000 929 99

14 CASA SARINA 926 820,000 886 FH

14 SIMS RESIDENCES 1,410 1,150,000 816 99

14 SUNNY GROVE 1,227 990,000 807 FH15 ELLIOT AT THE EAST COAST 506 753,800 1,490 FH

15 PARC ELEGANCE 409 600,000 1,467 FH

15 HERITAGE EAST 549 698,000 1,271 FH

15 SEAVIEW POINT 1,389 1,760,000 1,268 FH

15 BUTTERWORTH 8 1,023 1,240,000 1,213 FH

15 CRESCENDO PARK 1,410 1,480,000 1,050 FH

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

15 OCEAN PARK 2,110 2,150,000 1,019 FH

15 THE SUNNIFLORA 1,668 1,250,000 749 FH16 EAST COAST RESIDENCES 1,023 1,300,000 1,271 FH

16 THE BAYSHORE 1,345 1,350,000 1,003 99

16 CASAFINA 1,012 930,000 919 99

16 THE CLEARWATER 1,378 1,200,000 871 99

18 SEASTRAND 570 600,000 1,052 99

18 MELVILLE PARK 1,378 1,000,000 726 99

18 MELVILLE PARK 1,044 704,000 674 99

19 A TREASURE TROVE 1,206 1,230,000 1,020 99

19 THE SPRINGBLOOM 1,539 1,550,000 1,007 9919 PARC VERA 1,109 1,000,000 902 99

19 CHUAN PARK 1,851 1,608,000 869 99

19 CHUAN PARK 1,528 1,300,000 851 99

19 RIVERVALE CREST 936 720,000 769 99

20 BRADDELL VIEW 1,701 1,200,000 706 99

21 SOUTHAVEN I 1,313 1,080,000 822 99

22 THE LAKESHORE 926 965,000 1,042 99

23 THE PETALS 1,259 1,210,000 961 FH

23 CHANTILLY RISE 1,292 1,140,000 883 FH23 PALM GARDENS 1,216 800,000 658 99

28 GRANDE VISTA 1,647 1,380,000 838 999



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