Singapore property weekly issue 1


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Singapore property weekly issue 1

  1. 1. Issue 1 |
  2. 2. SINGAPORE PROPERTY WEEKLY – Issue 1 A very warm welcome to the first edition of the Contribute Singapore Property Weekly. Through this e-magazine we hope to bring interesting and pertinent articles on Do you have articles and insights and articles that the Singapore property market to our members. We’ll you’d like to share with tens of thousands of be adding new sections over time. Let us know what readers interested in the Singapore property else you’d like to see – we welcome all feedback! market? Send them to us at, and if they’re good enough, we’ll publish them To wisdom and beyond, here, on our blog and even on Yahoo! News. Mr. Propwise Advertise Contents Want to get your brand, product, service or Singapore Property This Week Pg 2 property listing out to tens of thousands of Book Review – Real Estate Riches Pg 8 Singapore property investors at a very reasonable Is it a Good Time to Borrow Money Now? Pg 10 cost? Email us at and we will Are We Talking Up the Market? Pg 13 get in touch with you. Copyright © 2011 All Rights Reserved. Page | 1
  3. 3. SINGAPORE PROPERTY WEEKLY – Issue 1 Singapore Property This Week Residential News Developers’ land banks expected to grow thanks to GLS Prices for non-landed luxury houses remain stable Developers have been accumulating unsold Property firm Savills Singapore mentioned that the residential units in their land banks through prices for non-landed luxury houses remain stable. government land sales (GLS) sites. Sim Lian, which The difference in the average price of non-landed topped the chart, has 1,441 private houses, 660 high-end private houses in Q1 2011 and Q4 2010 executive condo units and 680 HDB flats in its remains small; there was only a 0.5% increase from collection. Developers are expected to accumulate $2,258 psf in Q4 2010 to $2,269 psf Q1 2011. The even more in the second half of this year when the current prices, which stand just 5.9% and 7.2% government sells land under its GLS program, below the peak points for high-end and super which happens twice a year. Knight Frank predicted luxury properties respectively, come close to those that some developers might choose to sell off during the peak in Q4 2007. Similarly, the growth what they have before taking in new supply. Knight in the average monthly rent of non-landed luxury Frank also mentioned that developers can sell off houses remained slow at a mere 0.7% quarter-on- their land banks over time if the demand remains quarter. stable. Copyright © 2011 All Rights Reserved. Page | 2
  4. 4. SINGAPORE PROPERTY WEEKLY – Issue 1 Price recovery for 99-year suburban condo leads 2011. The analysis by DTZ, which takes into to increase in demand for EC units consideration new and secondary sales, showed More people are opting for executive that foreigners purchasing houses that cost at least condominium (EC) units as the price gap between $1.5 million increased from 17% in Q4 2010 to 21% ECs and 99-year suburban condos widened Q1 2011. Knight Frank saw an increase from because of a recovery in the latter’s price. The around 20% in previous quarters to 31% in Q1 price for an EC and a 99-year suburban unit at a 2011 in non-Singaporean buyers purchasing their similar location is around $650-700 psf and $900- marketed units in new launches. 950 psf respectively. The increase in demand for ECs, which ranges from $600,000 to $700,000 per KSH Holdings awarded $78.7 million contract for unit, is evident in the sale results of the Belysa project in Ardmore Park project, where 147 out of 315 units launched were The residential development project Ardmore sold on the first day of launch at a price of $670 Three in Ardmore Park, which is expected to psf. commence work next month and be completed by August 2013, will be carried out by KSH Holdings. Increase in non-Singaporean buyers for private The contract for the residential development that houses: DTZ analysis involves the 84 units in Ardmore Park was awarded While the number of Singaporeans purchasing to KSH Holdings by Wheelock Properties’ houses that cost below $500,000 increased from subsidiary Bontanic. KSH’s construction business’ 72% to 80% from Q4 2010 to Q1 2011, the number current order book is said to be around $245 of foreigners purchasing private houses in million with the award of this $78.7 million Singapore increased to 16% from January to March contract. Copyright © 2011 All Rights Reserved. Page | 3
  5. 5. SINGAPORE PROPERTY WEEKLY – Issue 1 New residential and industrial launches in Pasir Commercial/Industrial News Ris and Hougang NTUC Choice Homes and Chip Eng Seng ING Fund Buys Anson House for $148m Corporation unit CEL Development will launch Anson House, 96% occupied with a remaining their 315-unit Executive Condominium (EC) Belysa lease of around 85 years and net lettable area at Pasir Ris Drive 1/ Elias Road. The average price (NLA) of approximately 77,244 sf, has been sold to of $670 psf will only be available for buyers who a property fund under ING Real Estate. In 2009, choose the normal progressive payment scheme. Anson House was purchased for $85 million but The EC will cost from $574,000 for units starting at right now, it has been sold for $148 million. Other 829 sf and $882,000 onwards for units beginning office deals this year include: i) Finlayson Green, a at 1,335 sf. In Hougang Avenue 2/ Yio Chu Kang freehold office block with NLA of approximately Road, MCL will launch its 414-unit Terrasse Condo 89,950 sf, which was sold for $227 million or at an average price estimated at around $950 psf. $2,524 psf of NLA ii) Ergo Insurance Group also At Yishun Industrial Street 1, Soilbuild Group will sold Capital Square to Alpha Investment Partners’ also launch its 454-unit North Spring BizHub with Macro Trends Fund and NTUC Income for $889 an average of $311 psf for its unit with sizes from million or $2,300 psf (the biggest office transaction 1,507 sf to 36,511 sf. this year) iii) Singapore Technologies Building that has NLA of about 98,906 sf was sold for $146 million or $1,476 psf of NLA to Genting Singapore subsidiary Resorts World Properties. Copyright © 2011 All Rights Reserved. Page | 4
  6. 6. SINGAPORE PROPERTY WEEKLY – Issue 1 Tanglin Shopping Center up for sale yet again predicted that the site might be used for retail Tanglin Shopping Center, which is around 68,512 sf, purposes and is likely to generate an average rental is put up for sale again after its previous failed of $15 psf and $6 psf for retail and office space attempt to get a buyer. The sale will be handled by respectively every month. ERA Real Estate this time round. As ERA remains mum about the reserve price, speculation was Ascendas Group, MIT and Soilbuild Group said to made based on the previous reserve price of $1.25 be in the final round of bidding for JTC’s two billion, or around $3,300 per square foot for the tranches of properties existing 380,000 sf strata area. The bid for Tanglin Market watchers speculated that the shortlisted Shopping Center will end on 16 June, 2011. bidders for two tranches of JTC Corporation’s flatted factories and amenity centers are: a unit of CMA, CMT and CapitaLand made top bid of $969 Ascendas group, Mapletree Industrial Trust (MIT) million for site at Boon Lay Way and Soilbuild Group. The 3 groups will be Among the 5 bidders, Capitamalls Asia (CMA), participating in the final 2 rounds of bidding for the CapitaMall Trust (CMT) and CapitaLand have JTC properties that consist of 21 blocks of flatted collaborated to make a top bid of $969 million, factories and amenity centers locating in places which equals to $1,012 psf ppr, for a white site at such as Bedok and Tai Seng. These properties, Boon Lay Way. The site, which has a maximum which total an area of more than 300,000 square permissible gross floor area (GFA) of 957,772 sf, meters, are said to be worth $600 to $650 million. will be split 50:30:20, with CMA holding the The bid price will likely be the driving factor behind largest stake and CapitaLand having the smallest JTC Corporation’s decision in awarding the stake. Executive director of CBRE Research properties. Copyright © 2011 All Rights Reserved. Page | 5
  7. 7. SINGAPORE PROPERTY WEEKLY – Issue 1 Office rental values growing moderately: CBRE and CEL Development launched its 315-unit Belysa According to CB Richard Ellis, there is a rise in EC priced at $670 psf on average, which received office rentals and demand for office space in 520 e-applications. Marketed by Colliers countries like Singapore in Q1 2011. For example, International, 151 out of 454 units launched at the monthly rental value for an average Grade A North Spring Bizhub were sold at $311 psf for a office in Q1 2011 is $10.30 per square foot (psf); 1,539 sf unit. The smaller units (about 1,500 to this is a rise of 4% quarter-on-quarter. CBRE 1,600 sf) cost around $311 while the larger units director Moray Armstrong predicts a slower (about 11,000 to 36,000 sf) cost about $210 psf. growth for rental value for 2011 with only an increase of 16.2% to $11.50 psf as compared to A-Reit won the bid for Fusionopolis site with a bid 22.2% in 2010; this is because supply for office of $110 million space will likely increase in 18 months time when ASCENDAS Real Estate Investment Trust (A-Reit) new and second-hand office space is made had the highest bid for a site at Fusionopolis The available. $110 million bid offered by A-Reit equals to $4,397.89 psm ppr for the 6,253 square meters Good sales results for residential and industrial site. A-Reit, who plans for a gross floor area of launches 25,000 square meters for the site, will allocate 60% In Hougang, MCL Land sold 150 out of 200 units of the site for the development of a business park. launched at its 414-unit Terrasse condo at $950 psf The remaining 40% will be used as office space. A- on average. The cheapest unit costs $580,000. Reit plans to cater the site for the IT and media Also, MCL sold 2 out of 4 launched five-bedroom industry, and R&D in physical science and penthouses (about 2,217 sqaure feet) at $1.85 engineering. million. In Pasir Ris Drive 1, NTUC Choice Homes Copyright © 2011 All Rights Reserved. Page | 6
  8. 8. SINGAPORE PROPERTY WEEKLY – Issue 1 Large Orchard commercial properties sales Elizabeth, majority owners are putting up their coming up freehold units up for collective sale at a price of Marketed by CB Richard Ellis and Jones Lang $630 million, which is $2,496 psf ppr. However, LaSalle, TripleOne Somerset is up for sale for Credo Real Estate sees the possibility of the price around $1.2 billion or $2,132 psf on net lettable being lowered to $2,323 psf ppr, which will lead to area (NLA) by Pacific Star’s Asia Real Estate Income a development cost of approximately $15 million. Fund (AREIF). Analysts believe that the building, with a remaining lease of around 63 years and NLA Increase in rents in countries like Singapore: JLL of about 563,000 sf, will have an asking price of According to a report by Jones Lang LaSalle’s (JLL), $1.2 billion. Also, there have been speculations one can expect to see a rise in rents across most that Lend Lease might put 313@Somerset up for Asia-Pacific markets such as Singapore. The sale or sell about a quarter stake of the mall. increase in rents for conventional and high-tech Judging from its NLA (294,000 sf), 313@Somerset industrial space in the industrial sectors is greatest might fetch near to $1.18 billion according to in Singapore. Commercial real estate investment analysts. volumes in Singapore also increased by 60% in Q1 2011 as compared to Q4 2010. The rise in rents is Office block at 70 Shenton Way and Elizabeth driven by the increase in investment activities, Tower up for sale mentions JLL. A five-member consortium is selling the office block at 70 Shenton Way at approximately $270 million, or $1,583 psf per plot ratio (psf ppr). Over at Elizabeth Tower, which is located in Mount Copyright © 2011 All Rights Reserved. Page | 7
  9. 9. SINGAPORE PROPERTY WEEKLY – Issue 1 Book Review – Real Estate Riches If you’re looking to get a deeper understanding of the Singapore property market, Real Estate Riches – Understanding Singapore’s property market in a volatile economy is a great guide to help you do so. The book is mainly a collection of articles by Ku Swee Yong, CEO and Director of International Property Advisor Pte Ltd, a real estate family office. Most of these articles have previously been published in Today and The Business Times, although there is some new material as well. The book is split into five parts, covering: • Recent events such as the government policy measures • Physical supply • Development of the market including shoebox apartments and en bloc sales • Thoughts on the market including whether to buy from developers or the resale market • Investment tips Copyright © 2011 All Rights Reserved. Page |8
  10. 10. SINGAPORE PROPERTY WEEKLY – Issue 1 What I enjoyed about this book is that it is thoroughly researched and full of interesting facts and figures. Swee Yong is a thoughtful writer and does not make blanket statements without having the necessary data to back it up. I’d recommend the book for anyone interested in the Singapore property market. There are also some good tips in there for property investors. I don’t want to give you a spoiler, but here’s a quick tip from the book – watch out for areas where MRT line construction is going on! Real Estate Riches is available at major bookstores including Times, Kinokuniya, Popular, Page One, NUS, and the airport bookshops (Dufry and Relay). Published by Marshall Cavendish Business, it has 188 pages and retails for $18. Copyright © 2011 All Rights Reserved. Page |9
  11. 11. SINGAPORE PROPERTY WEEKLY – Issue 1 Is it a Good Time to Borrow Money Now? With interest rates in Singapore close to their all- time lows, it may feel like a good time to go out and borrow money. Certainly the buoyant housing market can be at least partially attributed to low mortgage rates which increase the affordability of a property purchase. In this article we’ll take a look at where interest rates are in Singapore relative to their history, what typical interest rates for different types of loans are currently, and consider whether it’s a good idea to go out and take a loan now. The Singapore Interbank Offered Rate (or SIBOR) is based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore interbank market. As many mortgage loans are now pegged to it, it has become a key rate to look at and also gives a rough indication of where deposit and other lending rates are headed. Copyright © 2011 All Rights Reserved. Page | 10
  12. 12. SINGAPORE PROPERTY WEEKLY – Issue 1 For foreign banks that do not have a large deposit 1. Home Loans franchise in Singapore, they have to rely on the These are the cheapest and largest loans that interbank market to fund their lending. When consumers can get, but you will need to use a SIBOR is high, they might offer attractive fixed property as collateral. Floating rate packages based deposit rates to attract Singapore dollar deposits, on SIBOR can go as low as 0.80% for the first year forcing the local banks to also increase their rates currently while fixed rates packages can start from to prevent depositors from switching. around 1.20% for the first year. Currently 3-month SIBOR is at 0.4375%, the lowest level in the past ten years. Interest rates have been 2. Personal Loans low for an extended period of time – the 3-month Covering the gamut from renovation to furnishing SIBOR has been under 1% since the beginning of to consumption loans, they typically have an 2009. In the past ten years, the 3-month SIBOR has effective interest rate of 10% to 15%. Watch out gone as high as 3.5% (in 2006). for low advertised rates that come with a “processing fee” or are flat and not effective rates, Typical interest rates for different loan which will raise your true cost of borrowing. products Doing a quick survey of the various loan products 3. Credit Cards out there, we found that the current low interest Annual interest rates still hover around 20% to rates have mainly benefitted mortgage borrowers 24%, making credit card borrowing the most due to low home loan rates, but rates for expensive form of consumer borrowing out there unsecured personal loans have not come off as (other than going to a loan shark!). much. For example: Copyright © 2011 All Rights Reserved. Page |11
  13. 13. SINGAPORE PROPERTY WEEKLY – Issue 1 If you have outstanding credit card debt, it makes policymakers will decide to continue additional sense to do a balance transfer, or take out some monetary stimulus. If not, interest rates could rise. other form of personal loan to repay it. Meanwhile, many central banks around the world are raising their domestic interest rates to combat Is now the best time to borrow? rising inflation. It is clear that interest rates have been unnaturally low for an extended period of time thanks largely Beyond low rates, before borrowing money you to the Quantitative Easing program (known should examine whether you really need to do so popularly as QE1 and the follow-on QE2) of the and what your current debt servicing ratio is. For United States Federal Reserve, which has pumped a property investors, while the current gap between huge amount of liquidity into the system. Interest rental yields and mortgage rates may be seductive, rates in Singapore are heavily influenced by rates in do not base your calculations on a permanently low the United States as our central bank (the interest rate. For home buyers who are buying for Monetary Authority of Singapore) does not your own stay, you may want to consider a fixed attempt to control rates but instead relies on the rate package to lock in the current low interest exchange rate as its primary monetary policy tool. rates and reduce the future uncertainty of your mortgage payments if interest rates spike. When making any borrowing decision, do not assume that interest rates will stay low forever. The is your guide on how to United States Federal Reserve is scheduled to end make more money, save smarter, invest its program of support for the American economy intelligently, and enjoy your money like a pro. Visit (QE2) in June, and it is not clear whether our site to get our free report on financial freedom. Copyright © 2011 All Rights Reserved. Page | 12
  14. 14. SINGAPORE PROPERTY WEEKLY – Issue 1 Are We Talking Up the Market? This year started off strongly for Government Land Sales (GLS) en-bloc sales. Under the GLS, seven residential sites, including two for executive condominiums, were launched and sold, generating over S$2.5 billion for government coffers. With the residential market hot from robust sales volumes and continued strong interest from developers, I am concerned that some of the estimates for break-even and launch prices quoted in the media or published in financial reports might be adding fuel to the fire. For example, the Bartley Road GLS site was awarded to the top bidder at S$621 psf per plot ratio early this month. One of the media reports estimated that the developer’s “break-even cost could be around S$1,000-1,050 psf”. Copyright © 2011 All Rights Reserved. Page | 13
  15. 15. SINGAPORE PROPERTY WEEKLY – Issue 1 Assuming the developer targets a profit margin of low as 5 to 8 per cent. Marketing fees are usually 2 S$150 psf, it would mean that the 99-year to 4 per cent of the total sales value and, in a large leasehold residences might be launched for sale at project like this, the expenses are usually at the 2 S$1,150-1,200 psf. per cent level: 1 per cent for agents’ fees and 1 per cent for advertising, show flat, brochures and so Taking into consideration that the Bartley Road site on. The interest expenses stated above are a can take a gross floor area of about 660,000 sq ft, conservative estimate given that most developers we can assume good economies of scale and today opt for floating rate packages from below 2 bargaining power for the procurement of per cent per annum all in. Developers also pay materials. down the principal of the land loan when they collect progress payments from buyers of the In a mass market location such as Bartley Road, we units. see from Table 1 that construction costs should be about S$251 psf. Total costs for this project are In the last two years, developers have launched summed up in Table 2. projects within nine to twelve months of securing the GLS sites. Due to the progress payment Going by the example above, the conservative mechanism, developers are not likely to incur break-even cost is S$372 psf above the land price, interest expenses on the construction costs given close to the S$380-430 psf estimate using “rule of that the initial payment of 20 per cent or S$240 psf thumb” that was quoted in the media. (assuming selling price of S$1,200 psf) is enough to take care of almost the full construction costs of However, items 4 to 6 are overestimated. Permits S$251 psf. and professional fees for large projects may be as Copyright © 2011 All Rights Reserved. Page | 14
  16. 16. SINGAPORE PROPERTY WEEKLY – Issue 1 Therefore, if a project was substantially sold prior If the Government’s efforts to maintain price to construction starting, there will not be a need stability are to succeed, we would need media for construction financing and the loan for the land articles and analysts’ published viewpoints to can be paid down as the construction progresses accurately reflect projections of break-even and beyond foundation stage. launch prices. Otherwise, the danger is that we over-estimate break-even prices, we over-state Also, most developers aim for a Return on replacement costs and we exaggerate projected Investment (ROI) of 15 to 20 per cent. In this launch prices, adding to the hype and froth in the Bartley Road example, assuming a 60-per-cent market. loan on the land costs, the invested equity should be about S$240 psf on land. Loading the full costs Originally published in Today, this article has been of items 2, 4, 5 and 6, the investment requires shared with the kind permission of Ku Swee Yong, S$370 psf. An ROI requirement of 20 per cent founder of real estate agency International would merely add S$75 psf to the break-even Property Advisor, which provides services to high price, meaning that the developer can sell out the net worth individuals. He is also author of Real whole project and achieve a 20 per cent profit if Estate Riches: Understanding Singapore’s Property they sold with an average price of S$1,070 psf. This Market In A Volatile Economy, available in is S$130 psf below our assumed average selling bookstores now. price of S$1,200 psf (but our marketing costs have been conservatively loaded up based on this selling price assumption). Copyright © 2011 All Rights Reserved. Page | 15