Gone are the days where size matters for home seekers. Smaller apartments are making their presence. In the public housing sector, 3-room and studio flats have been re-introduced in new Build-to-Order HDB projects, while new private residential offerings seem to be increasingly smaller, yet popular.
Colloquially referred to as "Mickey Mouse" or "shoebox" apartments, there has been an increased demand for such residential units. The year 2007 saw a spike in sales of units smaller than 500 sq ft, from an almost inexistence to 325 units.
The story continued from there, to 883 transactions last year. While it can be argued that last year was a recession year and therefore small apartments found favour among financially cautious buyers, the heightened interest in shoebox units this year seems to confirm the growing penchant for smaller apartments. This year, a total of 1,421 such units have so far been transacted.
Why the popularity?
To examine why shoebox units have become popular, one must look at the private residential sector in the form of sales activity, pricing trends and product offerings in recent times.
The private residential sector has created various market participants who entered and exited at the right time to achieve tidy profits, reflecting success stories from property transactions. This spurred many other aspiring private home buyers to quickly proceed with a purchase.
However, while one recognises the opportunity from property investments, there are often limitations in one's financing capabilities. Gaining entry into the property game is but a dream unless one has accumulated sufficient funds to make a purchase.
Shoebox apartments are hence a feasible option for interested participants who find it increasingly difficult to own a sizeable piece of private property as prices have continued to escalate. For one, the upfront capital and overall cost of shoebox apartments are smaller and more affordable.
For another, the cost of a shoebox apartment will at most be comparable to that of a larger HDB flat. For a private residential property owner, there is more flexibility in home ownership and re-selling his unit.
Developers who saw this trend were quick in pushing out such projects amid the scarcity. The response has been encouraging and the resale demand for such properties has further reflected the overwhelming interest.
Understanding Challenges
Potential buyers of shoebox apartments need to know that the tenant base for such housing is more restricted than ordinary apartments. Prospective tenants are likely to have significant budget constraints and are often either local professionals or junior expatriates on partial housing allowances.
Some of these tenants may also prefer an HDB flat as it is more spacious for a rent that is lower than that of a shoebox apartment. Companies are unlikely to accommodate upper-middle and senior expatriates in shoebox apartments, who have specific housing requirements. A shoebox apartment will not reflect well on the company, which may in turn affect career and relocation decisions.
Also, living in a shoebox apartment may not be entirely cost effective. Some occupiers may find that there are limited activities within the confined space and prefer hanging out, incurring more entertainment expenses. The real costs of living may be higher than expected.
Relevance for shoebox apartments
Although there are challenges in investments, it does not necessarily reduce the appeal of shoebox apartments. As home buyers are becoming cautious and refraining from buying apartments beyond their reach, shoebox apartments can be smaller, realistic purchases that minimise liquidity risks. Buyers are also able to channel the rest of their funds to other areas, such as travel or enrichment programmes.
There is a potential for shoebox apartments to become more popular among homebuyers. Small sized apartments are common in major cities in the world where properties are costly.
With Singaporeans increasingly exposed to overseas city living, many may become more open to living in confined premises so long as there is privacy and an opportunity to host small gatherings.
The success of the new developments can also potentially create a structural shift in housing preferences and living patterns.
Perhaps a key merit of shoebox apartments for investors is that the tenant does not have to share an apartment with others, including strangers and acquaintances. This minimises friction arising from different lifestyles among occupiers.
Shoebox apartments are also effective solutions to singles who may find regular size housing beyond their means. A single can only buy an HDB resale flat if he or she is at least 35 years old.
Shoebox apartments offer privacy for singles who are not only financially independent but are long psychologically ready for independent living.
A shoebox apartment, in this case, will be bought for owner occupation rather than for pure investment.
Consider the option carefully
The fact is that hardly any property can offer the perfect fit. A cost-effective property usually cannot provide the maximum benefit from both investment potential and capital appreciation standpoints. What is essential for a buyer is to be clear about the motivation in the property purchase - is it for investment or owner occupation?
When prudence is exercised in the home-buying decision, a shoebox apartment can be a worthwhile purchase, offering the opportunity to enjoy privacy and a potential for capital appreciation in sync with the sustained economic recovery.
By Ong Kah Seng, Senior Manager, Research at Cushman & Wakefield.
Sunday, December 19, 2010
The economics of investing in shoebox units
The term “shoebox” apartment is generally defined as a studio or a one-bedroom apartment that has less than 500 sq ft of strata area. The area includes, say, about 15 per cent allocated to balconies, planters, bay windows, aircon ledges and, in some cases, even bomb shelters. Therefore a 380-sq-ft one-bedroom unit might have a real usable space of about 330 sq ft in the living/dining room, kitchen and bedroom.
How do the economics stack up?
Per-square-foot prices and rentals generally go up when the sizes of the apartments go down. So in several recent launches, the one-bedroom units fetched, for example, $1,200 psf, while the three-bedroom units transacted at below $1,000 psf – a 20 per cent premium that arises because the smaller unit with a lower selling price quantum has a wider reach.
As for rentals, let’s take a hypothetical example, say, in River Valley. A one-bedroom, 550-sq-ft unit may lease for $3,800 a month, a 900-sq-ft two-bedroom unit for $5,500, while a 1,200-sq-ft three-bedroom unit, $6,500. The rentals per square foot increase as the sizes of the apartments drop (see Table 1). However, up to a point, the equation fails to apply. In this example, a 350 sq ft studio unit in River Valley may, for example, be able to fetch about $2,800 per month of rental. However, that is near the limit of how high rentals can go for shoebox units. This unit is similar in size as the deluxe hotel rooms in River Valley area.
If we tried to push rentals beyond $3,000 per month (ie above $100 per day), it may be more economical for the tenant to take a long-term let with a hotel around River Valley, given the more flexible lease terms that include daily housekeeping, electricity, fully furnished/equipped rooms and probably complimentary laundry. He would also save on rental whenever he travels out of Singapore.
As for costs, if every single apartment in a development were shoebox sized units, their share values would be five for every apartment. The maintenance fees and sinking funds for the common areas and shared services would be equally borne by all the owners of the development.
However, if a project has some shoebox units mixed with larger sized two- to four-bedroom units, then the shoebox units will contribute proportionately higher maintenance fees and sinking funds.
Under current share value allocation rules – apartments of less than 50 sq m are allotted share value of five, larger apartments up to 100 sq m are allotted six and so on, increasing by one share for every additional 50 sq m of strata area.
The yields – net of maintenance fees and sinking funds – become narrower between shoebox units and their larger sized cousins. Should the economy weaken and vacancies run high, and normal two-bedrooms are available for rent at $3,000 to $4,000 per month, how would shoebox units stand up to price competition?
I wonder what new social challenges may prevail in the future for the developments that contain a wide mix of units. In developments where the $600,000 shoebox or one-bedroom units were bought by investors and $2 million four-bedroom units purchased by owner-occupiers, will the low-budget tenants from the shoebox units make good neighbours for the rest?
Will there be poor cousins in a rich compound just like I was a poor student living in a 120-sq-ft bedsit within the posh Kensington neighbourhood? In such a mixed development, will investor-landlords be willing to contribute that little extra to maintenance and sinking funds as compared to house-proud owner-occupiers? We’ll have to observe as such heterogeneous projects, most still under construction today, become mature and fully occupied estates over the next five to 10 years.
From the list of about 130 projects that have shoebox units (see Table 2), it is interesting to note that the most common name used is “suites”. This is merely terminology and not to be confused with hotel suites (which are generally bigger than shoebox units) nor with several luxury projects that do not have shoebox units, such as Marina Bay Suites, Paterson Suites and Nathan Suites.
In land scarce Singapore, space is a real luxury. While trying to improve the quality of life, we also need to maximise the use of every square foot of land. HDB blocks have risen up to 50 storeys. Shrinking apartment sizes is another way to satisfy the demand from more, and smaller, households. The proliferation of shoebox apartments should be an expected consequence of the steadily rising population density. Cramped spaces, anyone?
By Ku Swee Yong, founder of real estate agency International Property Advisor.
How do the economics stack up?
Per-square-foot prices and rentals generally go up when the sizes of the apartments go down. So in several recent launches, the one-bedroom units fetched, for example, $1,200 psf, while the three-bedroom units transacted at below $1,000 psf – a 20 per cent premium that arises because the smaller unit with a lower selling price quantum has a wider reach.
As for rentals, let’s take a hypothetical example, say, in River Valley. A one-bedroom, 550-sq-ft unit may lease for $3,800 a month, a 900-sq-ft two-bedroom unit for $5,500, while a 1,200-sq-ft three-bedroom unit, $6,500. The rentals per square foot increase as the sizes of the apartments drop (see Table 1). However, up to a point, the equation fails to apply. In this example, a 350 sq ft studio unit in River Valley may, for example, be able to fetch about $2,800 per month of rental. However, that is near the limit of how high rentals can go for shoebox units. This unit is similar in size as the deluxe hotel rooms in River Valley area.If we tried to push rentals beyond $3,000 per month (ie above $100 per day), it may be more economical for the tenant to take a long-term let with a hotel around River Valley, given the more flexible lease terms that include daily housekeeping, electricity, fully furnished/equipped rooms and probably complimentary laundry. He would also save on rental whenever he travels out of Singapore.
As for costs, if every single apartment in a development were shoebox sized units, their share values would be five for every apartment. The maintenance fees and sinking funds for the common areas and shared services would be equally borne by all the owners of the development.
However, if a project has some shoebox units mixed with larger sized two- to four-bedroom units, then the shoebox units will contribute proportionately higher maintenance fees and sinking funds.
Under current share value allocation rules – apartments of less than 50 sq m are allotted share value of five, larger apartments up to 100 sq m are allotted six and so on, increasing by one share for every additional 50 sq m of strata area.
The yields – net of maintenance fees and sinking funds – become narrower between shoebox units and their larger sized cousins. Should the economy weaken and vacancies run high, and normal two-bedrooms are available for rent at $3,000 to $4,000 per month, how would shoebox units stand up to price competition?
I wonder what new social challenges may prevail in the future for the developments that contain a wide mix of units. In developments where the $600,000 shoebox or one-bedroom units were bought by investors and $2 million four-bedroom units purchased by owner-occupiers, will the low-budget tenants from the shoebox units make good neighbours for the rest?
From the list of about 130 projects that have shoebox units (see Table 2), it is interesting to note that the most common name used is “suites”. This is merely terminology and not to be confused with hotel suites (which are generally bigger than shoebox units) nor with several luxury projects that do not have shoebox units, such as Marina Bay Suites, Paterson Suites and Nathan Suites.
In land scarce Singapore, space is a real luxury. While trying to improve the quality of life, we also need to maximise the use of every square foot of land. HDB blocks have risen up to 50 storeys. Shrinking apartment sizes is another way to satisfy the demand from more, and smaller, households. The proliferation of shoebox apartments should be an expected consequence of the steadily rising population density. Cramped spaces, anyone?
By Ku Swee Yong, founder of real estate agency International Property Advisor.
Tuesday, December 7, 2010
RIVER PLACE ON HAVELOCK ROAD FETCHES $1,307 PSF
The 509-unit River Place on Havelock Road has recently caught the attention of investors and property agents attribute it to the perception that it could be undervalued relative to other newer projects in the vicinity — for instance, The Pier at Robertson, completed in 2006, where transaction prices in late September/October ranged from $1,696 to $2,032 psf; and Watermark at Robertson Quay, completed two years ago, where the most recent transaction in October was at $1,579 psf.
The proximity of River Place to the CBD and the entertainment/F&B enclave of Boat Quay and Clarke Quay along the Singapore River makes it popular with expatriates.
The condominium saw four transactions in the Nov 9 to 16 period. Prices ranged from $1,143 to $1,307 psf, according to caveats lodged with URA Realis.
Developed by Far East Organization, River Place consists of four towers, with one- to fourbedroom units measuring 678 to 2,100 sq ft. The condominium along the Singapore River also contains 50 penthouses and maisonettes, measuring 1,292 to 3,649 sq ft.
Completed in 2000, the 99-year leasehold River Place was launched in early 1997, just before the Asian financial crisis. It was also when the property market was still toppish, although sentiment had been affected by the tough anti-speculation measures introduced on May 15, 1996. Thus, prices of units sold when the project was launched ranged from $1,100 to $1,200 psf, which is not far from prices today.
“Investors could get a unit at River Place in District 3 in the $1,200 to $1,300 range, which is considered an entry-level price for a condo located so near the CBD, and at the same time, the units offer views of the river,” says Alan Shue of PropNex, who has been marketing resale units at River Place for more than a decade.
In the Tanjong Pagar area, the 351-unit Spottiswoode Residences, located along Spottiswoode Park Road near the Tanjong Pagar railway station, was launched in early November at prices ranging from $1,720 to $2,150 psf. It is a freehold project, however, and located within a short walk to the Outram MRT station.
Even new launches of 99-year leasehold condos in the suburbs of Yio Chu Kang and Ang Mo Kio are priced at $1,100 to $1,200 psf today, notes Shue. As such, he considers River Place “a good buy”.
Prices at River Place may not have moved much, but rental rates certainly have, and investors there are therefore enjoying high rental yields, he notes.
Most recently, the owner of a 1,389 sq ft unit at River Place listed an asking rent of $7,000 a month, says Shue. Monthly rental rates are $4.50 to $5 psf, translating into a rental yield of 5%.
“Most of the buyers are local investors looking to rent out the units,” says Shue.
River Place has a strong take-up rate, especially among singles and young couples who are working in the CBD area such as Raffles Place. One-bedroom units, which make up more than 50% of River Place, are especially popular.
Another key contributing factor to the strong rental growth at the development is the spacious bedroom layout, says Shue, adding that one-bedroom units range from 678 to 925 sq ft, unlike some of the new city apartments, which measure 350 to 400 sq ft.
Situated along the Singapore River at Havelock Road and Clemenceau Avenue, River Place is a 10- to 15-minute walk to both the Clarke Quay and China Town MRT stations, as well as two bus stops away from the Raffles MRT station. Residents could also walk to Mohamed Sultan, Riverside Point, Clarke Quay and Boat Quay.
Most recently, a 1,819 sq ft unit on the first floor was sold for $2.08 million ($1,143 psf). This represents a 43% gain for the seller, who bought the unit in the sub-sale market for $1.45 million ($797 psf) in August 1999. The first owner bought the unit from the developer for $1.59 million ($875 psf) in June 1999.
On the seventh floor of another block, the owner of a 797 sq ft one-bedroom unit made a 33% capital gain when he sold it for $990,000 ($1,243 sq ft) on Nov 15. He had bought the unit from the developer for $742,600 ($932 psf) in August 1999. Meanwhile, a 786 sq ft one-bedroom unit on the eighth floor of the same block was sold for $1.01 million ($1,285 psf) on Nov 12, representing a 5.6% gain for the seller, who bought the unit for $956,232 ($1,217 psf) from the developer at its launch in 1997.
On the same floor, a 818 sq ft one-bedroom unit was sold for $1.07 million ($1,307 psf), representing a 4% gain for the seller, who had bought the unit for $1.03 million ($1,255 psf) from the developer in May 1997.
Not surprisingly, River Place is as sought after as the newer projects on the riverside, which are also popular among investors. For instance, there are City Developments’ The Pier at Robertson, a 201-unit condo located along Mohammad Sultan Road and completed in 2006; and CapitaLand and Hwa Hong Corp’s 545-unit RiverGate, a landmark project located on Martin Road and also fronting the river.
Source : The Edge – 7 Dec 2010
The proximity of River Place to the CBD and the entertainment/F&B enclave of Boat Quay and Clarke Quay along the Singapore River makes it popular with expatriates.
The condominium saw four transactions in the Nov 9 to 16 period. Prices ranged from $1,143 to $1,307 psf, according to caveats lodged with URA Realis.
Developed by Far East Organization, River Place consists of four towers, with one- to fourbedroom units measuring 678 to 2,100 sq ft. The condominium along the Singapore River also contains 50 penthouses and maisonettes, measuring 1,292 to 3,649 sq ft.
Completed in 2000, the 99-year leasehold River Place was launched in early 1997, just before the Asian financial crisis. It was also when the property market was still toppish, although sentiment had been affected by the tough anti-speculation measures introduced on May 15, 1996. Thus, prices of units sold when the project was launched ranged from $1,100 to $1,200 psf, which is not far from prices today.
“Investors could get a unit at River Place in District 3 in the $1,200 to $1,300 range, which is considered an entry-level price for a condo located so near the CBD, and at the same time, the units offer views of the river,” says Alan Shue of PropNex, who has been marketing resale units at River Place for more than a decade.
In the Tanjong Pagar area, the 351-unit Spottiswoode Residences, located along Spottiswoode Park Road near the Tanjong Pagar railway station, was launched in early November at prices ranging from $1,720 to $2,150 psf. It is a freehold project, however, and located within a short walk to the Outram MRT station.
Even new launches of 99-year leasehold condos in the suburbs of Yio Chu Kang and Ang Mo Kio are priced at $1,100 to $1,200 psf today, notes Shue. As such, he considers River Place “a good buy”.
Prices at River Place may not have moved much, but rental rates certainly have, and investors there are therefore enjoying high rental yields, he notes.
Most recently, the owner of a 1,389 sq ft unit at River Place listed an asking rent of $7,000 a month, says Shue. Monthly rental rates are $4.50 to $5 psf, translating into a rental yield of 5%.
“Most of the buyers are local investors looking to rent out the units,” says Shue.
River Place has a strong take-up rate, especially among singles and young couples who are working in the CBD area such as Raffles Place. One-bedroom units, which make up more than 50% of River Place, are especially popular.
Another key contributing factor to the strong rental growth at the development is the spacious bedroom layout, says Shue, adding that one-bedroom units range from 678 to 925 sq ft, unlike some of the new city apartments, which measure 350 to 400 sq ft.
Situated along the Singapore River at Havelock Road and Clemenceau Avenue, River Place is a 10- to 15-minute walk to both the Clarke Quay and China Town MRT stations, as well as two bus stops away from the Raffles MRT station. Residents could also walk to Mohamed Sultan, Riverside Point, Clarke Quay and Boat Quay.
Most recently, a 1,819 sq ft unit on the first floor was sold for $2.08 million ($1,143 psf). This represents a 43% gain for the seller, who bought the unit in the sub-sale market for $1.45 million ($797 psf) in August 1999. The first owner bought the unit from the developer for $1.59 million ($875 psf) in June 1999.
On the seventh floor of another block, the owner of a 797 sq ft one-bedroom unit made a 33% capital gain when he sold it for $990,000 ($1,243 sq ft) on Nov 15. He had bought the unit from the developer for $742,600 ($932 psf) in August 1999. Meanwhile, a 786 sq ft one-bedroom unit on the eighth floor of the same block was sold for $1.01 million ($1,285 psf) on Nov 12, representing a 5.6% gain for the seller, who bought the unit for $956,232 ($1,217 psf) from the developer at its launch in 1997.
On the same floor, a 818 sq ft one-bedroom unit was sold for $1.07 million ($1,307 psf), representing a 4% gain for the seller, who had bought the unit for $1.03 million ($1,255 psf) from the developer in May 1997.
Not surprisingly, River Place is as sought after as the newer projects on the riverside, which are also popular among investors. For instance, there are City Developments’ The Pier at Robertson, a 201-unit condo located along Mohammad Sultan Road and completed in 2006; and CapitaLand and Hwa Hong Corp’s 545-unit RiverGate, a landmark project located on Martin Road and also fronting the river.
Source : The Edge – 7 Dec 2010
Sunday, November 7, 2010
The Interlace hits high of $1,323 psf
Prices of units at The Interlace hit an all time high of $1,323 psf in October, with apartments released in the first two phases almost sold out. So far, more than 90% of the 590 units released have been sold. In the first phase, 360 units were put up for sale in September last year, and in the second phase, 230 units were released in April this year. In the first phase, prices ranged from $850 to $1,150 psf, and in the second phase, prices ranged from $850 to $1,300 psf.
High-profile homebuyers at The Interlace include CapitaLand’s group CEO Liew Mun Leong, who purchased a penthouse on the 23rd floor for $3.7 million ($1,092 psf), and his son and daughter- in-law, who bought a four-bedroom unit on the 16th floor for $2.4 million ($996 psf) this year. The 1,040-unit condominium, which sits on a sprawling site of over 800,000 sq ft, is set to be an iconic development. Designed by star architect Ole Scheeren, a former partner at the Office for Metropolitan Architecture, The Interlace comprises 31 six-storey apartment blocks stacked to form eight courtyards. Jointly developed by CapitaLand and Hotel Properties Ltd (HPL), The Interlace is built on the former Gillman Heights HUDC estate and is expected to be completed in 2015. The 99-year leasehold condo sits next to the Ayer Rajah Expressway on one side and is just a short walk from the 9km green belt, which makes up the Southern Ridges, covering Mount Faber Park, Telok Blangah Hill Park and Kent Ridge Park.
Andrew Choi, a marketing agent with ERA, notes that the project is popular with families, both Singaporeans and expatriates, given that the units are larger than most new projects these days. The development is near popular educational institutions such as International School Singapore (high school campus) and the National University of Singapore and offices at Telok Blangah Industrial Estate. It is also near the upcoming Labrador Park MRT station on the Circle Line.
The project contains a mix of unit types, starting from two-bedroom apartments of 807 sq ft to penthouses of 6,308 sq ft. Penthouses range from 3,154 to 6,308 sq ft. All the two-bedroom units have been snapped up, according to CapitaLand’s spokeswoman. Choi says he is marketing several two-bedroom units in the sub-sale market at prices ranging from $1,200 to $1,300 psf.
There were three transactions in the week of Oct 5 to 12, two of which were sub-sales in the secondary market, while the other was a new sale from the developer. The new sale was for a 1,001 sq ft unit on the 10th floor of one of the blocks, which was sold for $1.197 million ($1,197 psf).
Meanwhile, one of the sub-sales was for a 2,454 sq ft unit on the 11th floor that changed hands for $2.5 million ($1,030 psf), according to a caveat lodged with URA on Oct 7. The seller had purchased the unit for $2.198 million ($896 psf) from the developer in January this year, representing a 15% capital gain in less than a year.
The second sub-sale involved an 807 sq ft, 12th floor two-bedroom unit that changed hands for $1.068 million, or $1,323psf. The first owner had purchased the property for $944,800 ($1,170 psf) just a year ago, hence seeing a 13% gain.
In terms of average price, $1,323 psf is the highest achieved so far for the project. The last time a unit crossed the $1,300 psf level was for the sale of another 807 sq ft, two- bedroom unit on the 11th floor, which was sold by the developer for $1.05 million ($1,305 psf) in April.
Source : The Edge – 1 Nov 2010
High-profile homebuyers at The Interlace include CapitaLand’s group CEO Liew Mun Leong, who purchased a penthouse on the 23rd floor for $3.7 million ($1,092 psf), and his son and daughter- in-law, who bought a four-bedroom unit on the 16th floor for $2.4 million ($996 psf) this year. The 1,040-unit condominium, which sits on a sprawling site of over 800,000 sq ft, is set to be an iconic development. Designed by star architect Ole Scheeren, a former partner at the Office for Metropolitan Architecture, The Interlace comprises 31 six-storey apartment blocks stacked to form eight courtyards. Jointly developed by CapitaLand and Hotel Properties Ltd (HPL), The Interlace is built on the former Gillman Heights HUDC estate and is expected to be completed in 2015. The 99-year leasehold condo sits next to the Ayer Rajah Expressway on one side and is just a short walk from the 9km green belt, which makes up the Southern Ridges, covering Mount Faber Park, Telok Blangah Hill Park and Kent Ridge Park.
Andrew Choi, a marketing agent with ERA, notes that the project is popular with families, both Singaporeans and expatriates, given that the units are larger than most new projects these days. The development is near popular educational institutions such as International School Singapore (high school campus) and the National University of Singapore and offices at Telok Blangah Industrial Estate. It is also near the upcoming Labrador Park MRT station on the Circle Line.
The project contains a mix of unit types, starting from two-bedroom apartments of 807 sq ft to penthouses of 6,308 sq ft. Penthouses range from 3,154 to 6,308 sq ft. All the two-bedroom units have been snapped up, according to CapitaLand’s spokeswoman. Choi says he is marketing several two-bedroom units in the sub-sale market at prices ranging from $1,200 to $1,300 psf.
There were three transactions in the week of Oct 5 to 12, two of which were sub-sales in the secondary market, while the other was a new sale from the developer. The new sale was for a 1,001 sq ft unit on the 10th floor of one of the blocks, which was sold for $1.197 million ($1,197 psf).
Meanwhile, one of the sub-sales was for a 2,454 sq ft unit on the 11th floor that changed hands for $2.5 million ($1,030 psf), according to a caveat lodged with URA on Oct 7. The seller had purchased the unit for $2.198 million ($896 psf) from the developer in January this year, representing a 15% capital gain in less than a year.
The second sub-sale involved an 807 sq ft, 12th floor two-bedroom unit that changed hands for $1.068 million, or $1,323psf. The first owner had purchased the property for $944,800 ($1,170 psf) just a year ago, hence seeing a 13% gain.
In terms of average price, $1,323 psf is the highest achieved so far for the project. The last time a unit crossed the $1,300 psf level was for the sale of another 807 sq ft, two- bedroom unit on the 11th floor, which was sold by the developer for $1.05 million ($1,305 psf) in April.
Source : The Edge – 1 Nov 2010
Saturday, November 6, 2010
Condo rentals rising more slowly
SINGAPORE - Rents for non-landed properties such as condominiums are rising at a slower pace. Latest data from the Urban Redevelopment Authority (URA) showed such rentals rose just 3.6 per cent in the third quarter, compared to 6 per cent in the preceding quarter and 4.8 per cent in the first quarter.
Property analysts said the downward trend indicates that the market has reached a sustainable level and the growth is in tandem with the capital values of property, which have seen slower rates of increase as well.
"If capital values are going up but rentals don't increase, this might mean there's an asset bubble," said Mr Donald Han, managing director of Cushman and Wakefield.
Property prices have stabilised due to the recent cooling measures by the Government. Still, a robust economy that is expected to bring in more foreign workers will likely buoy the rental property market, analysts said.
Already demand for rental properties has been growing. Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said the number of rental contracts increased 5 per cent per month for the first nine months of this year.
Yet the increase in what landlords can expect is slowing - and this could be due in part to the bigger supply of housing offered by owners who had bought the units mainly for investment purposes.
"The proportion of owner-occupier purchases has come down significantly, so the supply of rental units is actually greater. When supply is higher relative to demand, rentals decline or show a slower pace of increase," he said.
For the next year, analysts expect rentals to continue to rise steadily at about 2 to 3 per cent quarterly.
"The bulk of supply that we are seeing in mass and mid-end markets will be completed in 2013. That will be 22,000 units coming on board. The market may soften then but rental recovery will be strong for the next 24 months," said Mr Han.
Source: Jo-ann Huang Weekend Today 6 Nov 2010
Property analysts said the downward trend indicates that the market has reached a sustainable level and the growth is in tandem with the capital values of property, which have seen slower rates of increase as well.
"If capital values are going up but rentals don't increase, this might mean there's an asset bubble," said Mr Donald Han, managing director of Cushman and Wakefield.
Property prices have stabilised due to the recent cooling measures by the Government. Still, a robust economy that is expected to bring in more foreign workers will likely buoy the rental property market, analysts said.
Already demand for rental properties has been growing. Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said the number of rental contracts increased 5 per cent per month for the first nine months of this year.
Yet the increase in what landlords can expect is slowing - and this could be due in part to the bigger supply of housing offered by owners who had bought the units mainly for investment purposes.
"The proportion of owner-occupier purchases has come down significantly, so the supply of rental units is actually greater. When supply is higher relative to demand, rentals decline or show a slower pace of increase," he said.
For the next year, analysts expect rentals to continue to rise steadily at about 2 to 3 per cent quarterly.
"The bulk of supply that we are seeing in mass and mid-end markets will be completed in 2013. That will be 22,000 units coming on board. The market may soften then but rental recovery will be strong for the next 24 months," said Mr Han.
Source: Jo-ann Huang Weekend Today 6 Nov 2010
Friday, November 5, 2010
Is your condo going en bloc?
Collective sale transactions have totalled $975.6 million so far this year and over 90 per cent of this total is made up of residential transactions. Renewed confidence in the Singapore home market and an increasing number of residential transactions over the past months lead us to believe that the "en bloc" trend will continue to gain momentum moving into next year.
Since the phenomenon of collective sales began in the mid-1990s, more than 400 buildings have been sold en bloc. Historically, the focus has always been on the residential sector rather than mixed-use developments as the latter often face challenges that arise when apportioning the sales proceeds to satisfy the owners.
This is further complicated by the allotment of share value, which vests more shares per square metre for shops in comparison to offices or residential units and the location or frontage of the units.
Despite these challenges and among a handful of total mixed-use collective sales, Jones Lang LaSalle successfully brokered most of such sales, including Katong Mall, Kim Seng Plaza and Eng Cheong Tower. It is currently marketing Paramount Hotel and Shopping Centre, the tender of which closes on Nov 23.
The rise in the popularity of collective sales this year could be attributed to improving fundamentals of the Singapore property market and the widening gap between new sale and resale prices for homes.
Median prices for new sales average 48 per cent above those of resale transactions during the first three quarters of this year. These factors seem to have encouraged owners of older properties to band together and attempt a collective sale of their estates.
The collective sale process begins with the formation of a sales committee. The committee appoints solicitors and a real estate consultant to act on its behalf, for the owners' consideration. The appointment of the sales committee, real estate consultants and solicitors, and the terms and conditions of the collective sale agreement, are finalised through extraordinary general meetings.
Most importantly, a reserve price and a method of apportioning the sale proceeds have to be approved by the owners. Following this, the collective sale development has a maximum period of 12 months to secure the mandate from at least 80 per cent of the owners by both share value and strata floor area if the estate is older than 10 years.
Upon achieving this 80 per cent mark and before the next 12 months are up, the site is launched for sale by tender. Upon the award of tender or the final negotiation of the sales and purchase agreement, the owners will apply to the Strata Title Board (STB) for an order for sale. If there is 100 per cent consensus to sell from the owners, the STB application process is not required.
Mediation and the STB order for sale follow. However, if the STB order is not obtained, application to the High Court is required and the time required to obtain the sale order will be subjected to the proceedings of the High Court. Minority owners may contest the sale of the property - often this occurs when there is a difference over the apportionment method. In this case, the STB will be the mediator.
Completion of the sale typically takes three months and is then followed by a four-to-six month period of vacant possession. Generally speaking, the end-to-end collective sale process takes between 18 and 36 months and requires matching a developer or investor to the site for sale.
Apartment owners in a building opting for a collective sale are usually seeking a potential price gap or "premium" from selling their apartment by collective sale as opposed to an individual sale. In the case of owner-occupiers, the cost of a replacement property is a major consideration.
Developers or investors are often seeking potential gains from the pricing gap between new sale and resale transactions, as mentioned earlier. When the forward cycle remains on the uptrend, potential gains will be maintained if not widened.
Developers or investors are also seeking gains from land intensification - or the gap between baseline and maximum permissible gross floor area (GFA) for redevelopment purposes.
The property measures announced in August may have some impact on the prices of new residential launches, especially in the upgraders market. However, developers, especially the small to medium-sized ones, will look to replenish their land supply in a strong and improving economic situation.
In the current market for collective sales, investor interest seems to be focused on the Central, City fringe and East Coast. However, successful collective sales have been recorded mainly in upgraders' locations, including Balestier and Toa Payoh (District 12), Geylang and Eunos (District 14) and Serangoon, and Hougang (District 19).
In particular, District 19 has stood out this year in terms of transactional value. Jones Lang LaSalle recently closed the collective sale of Glenville at Lim Tua Tow Road off Upper Serangoon Road for $39.5 million and set a benchmark price in excess of $700 per square foot per plot ratio (psf ppr) for the Serangoon area.
In line with the increase in the popularity of residential collective sales, we are seeing a bounce back in terms of transactional values. The largest collective sale transacted so far this year was the sale of Meng Garden in the River Valley area, which sold for $137 million or $1,380 psf ppr. This is a significant quantum and still competitive when compared with the latest collective sales in the vicinity that were transacted in 3Q07.
Considering that Jones Lang LaSalle's prime capital values have returned to the 3Q07 level, land values have yet to catch up when compared to Grange Court, which sold for $72.8 million or S$1,710 psf ppr, and Char Yong Garden for $420 million or $1,800 psf ppr. Incidentally, Char Yong Garden was successfully sold by Jones Lang LaSalle.
As long as economic conditions continue to improve, we expect collective sales prices will continue to trend up. Collective sale volumes will be maintained next year, in line with moderate growth in capital values expected off the back of recent government measures, as the price gap between new sale and resale prices remains large.
Source: Weekend Today by Stella Hoh , Head of Investments at Jones Lang LaSalle.
Since the phenomenon of collective sales began in the mid-1990s, more than 400 buildings have been sold en bloc. Historically, the focus has always been on the residential sector rather than mixed-use developments as the latter often face challenges that arise when apportioning the sales proceeds to satisfy the owners.
This is further complicated by the allotment of share value, which vests more shares per square metre for shops in comparison to offices or residential units and the location or frontage of the units.
Despite these challenges and among a handful of total mixed-use collective sales, Jones Lang LaSalle successfully brokered most of such sales, including Katong Mall, Kim Seng Plaza and Eng Cheong Tower. It is currently marketing Paramount Hotel and Shopping Centre, the tender of which closes on Nov 23.
The rise in the popularity of collective sales this year could be attributed to improving fundamentals of the Singapore property market and the widening gap between new sale and resale prices for homes.
Median prices for new sales average 48 per cent above those of resale transactions during the first three quarters of this year. These factors seem to have encouraged owners of older properties to band together and attempt a collective sale of their estates.
The collective sale process begins with the formation of a sales committee. The committee appoints solicitors and a real estate consultant to act on its behalf, for the owners' consideration. The appointment of the sales committee, real estate consultants and solicitors, and the terms and conditions of the collective sale agreement, are finalised through extraordinary general meetings.
Most importantly, a reserve price and a method of apportioning the sale proceeds have to be approved by the owners. Following this, the collective sale development has a maximum period of 12 months to secure the mandate from at least 80 per cent of the owners by both share value and strata floor area if the estate is older than 10 years.
Upon achieving this 80 per cent mark and before the next 12 months are up, the site is launched for sale by tender. Upon the award of tender or the final negotiation of the sales and purchase agreement, the owners will apply to the Strata Title Board (STB) for an order for sale. If there is 100 per cent consensus to sell from the owners, the STB application process is not required.
Mediation and the STB order for sale follow. However, if the STB order is not obtained, application to the High Court is required and the time required to obtain the sale order will be subjected to the proceedings of the High Court. Minority owners may contest the sale of the property - often this occurs when there is a difference over the apportionment method. In this case, the STB will be the mediator.
Completion of the sale typically takes three months and is then followed by a four-to-six month period of vacant possession. Generally speaking, the end-to-end collective sale process takes between 18 and 36 months and requires matching a developer or investor to the site for sale.
Apartment owners in a building opting for a collective sale are usually seeking a potential price gap or "premium" from selling their apartment by collective sale as opposed to an individual sale. In the case of owner-occupiers, the cost of a replacement property is a major consideration.
Developers or investors are often seeking potential gains from the pricing gap between new sale and resale transactions, as mentioned earlier. When the forward cycle remains on the uptrend, potential gains will be maintained if not widened.
Developers or investors are also seeking gains from land intensification - or the gap between baseline and maximum permissible gross floor area (GFA) for redevelopment purposes.
The property measures announced in August may have some impact on the prices of new residential launches, especially in the upgraders market. However, developers, especially the small to medium-sized ones, will look to replenish their land supply in a strong and improving economic situation.
In the current market for collective sales, investor interest seems to be focused on the Central, City fringe and East Coast. However, successful collective sales have been recorded mainly in upgraders' locations, including Balestier and Toa Payoh (District 12), Geylang and Eunos (District 14) and Serangoon, and Hougang (District 19).
In particular, District 19 has stood out this year in terms of transactional value. Jones Lang LaSalle recently closed the collective sale of Glenville at Lim Tua Tow Road off Upper Serangoon Road for $39.5 million and set a benchmark price in excess of $700 per square foot per plot ratio (psf ppr) for the Serangoon area.
In line with the increase in the popularity of residential collective sales, we are seeing a bounce back in terms of transactional values. The largest collective sale transacted so far this year was the sale of Meng Garden in the River Valley area, which sold for $137 million or $1,380 psf ppr. This is a significant quantum and still competitive when compared with the latest collective sales in the vicinity that were transacted in 3Q07.
Considering that Jones Lang LaSalle's prime capital values have returned to the 3Q07 level, land values have yet to catch up when compared to Grange Court, which sold for $72.8 million or S$1,710 psf ppr, and Char Yong Garden for $420 million or $1,800 psf ppr. Incidentally, Char Yong Garden was successfully sold by Jones Lang LaSalle.
As long as economic conditions continue to improve, we expect collective sales prices will continue to trend up. Collective sale volumes will be maintained next year, in line with moderate growth in capital values expected off the back of recent government measures, as the price gap between new sale and resale prices remains large.
Source: Weekend Today by Stella Hoh , Head of Investments at Jones Lang LaSalle.
Wednesday, November 3, 2010
Developers set for new launches before holidays
Some developers are trying to release new projects before the year-end holiday season sets in.
UOL Group is expected to preview the freehold Spottiswoode Residences condo next week, and the price is expected to be about $2,000 per square feet (psf).
The project, a 36-storey tower, is next to Spottiswoode Park, a green lung in the area, and close to Tanjong Pagar, which is slated to be transformed into a new bustling waterfront district after the container terminals in the vicinity eventually move out. 90 per cent of the 351 units comprise of one-bedroom, one-plus-study and two-bedroom apartments.
The Tanjong Pagar Railway Station site is also expected to be redeveloped after Keretapi Tanah Melayu vacates the site under a historic land-swap deal between Singapore and Malaysia announced in September.
Over at Robinson Road, agents are gathering interest for the freehold Robinson Suites at prices ranging from $2,300 psf to $3,300 psf. The 42-storey project on the VTB Building site, comprises 167 apartments and three ground-floor shop units. All the apartments are either one-bedroom-plus-study units or two-bedders. Unit sizes start at 484 sq ft.
The developer – a consortium whose shareholders include Cheong Sim Lam (whose family developed International Plaza), Fission Holdings, Tan Koo Chuan and Saw Pik Kee – is pitching the project as the ‘first-ever freehold apartments in the CBD’.
CapitaLand is getting ready to release the first phase of its 1,715-unit condo on the 99-year-leasehold Farrer Court site. The 36-storey Zaha Hadid-designed project will feature one to four-bedroom apartments, penthouses and six pairs of strata semi-detached houses.
Sim Lian is said to be looking to release Waterview, a 99-year-leasehold condo comprising 696 units at Tampines Ave 1/10 facing Bedok Reservoir, once it gets all the necessary authorities’ approvals.
The project will comprise two, three and four-bedroom apartments and penthouses. The expected price is in the $820-920 psf range.
Far East Organization will be officially launching the 214-unit The Lanai – which consists of two-, three- and four-bedroom units that range from 947 sq ft to 1,615 sq ft – along Hillview Avenue this weekend.
The 999-year leasehold project has already sold 76 units at a preview last month, which included a bulk purchase, with prices starting from $1,290 psf.
UOL Group is expected to preview the freehold Spottiswoode Residences condo next week, and the price is expected to be about $2,000 per square feet (psf).
The project, a 36-storey tower, is next to Spottiswoode Park, a green lung in the area, and close to Tanjong Pagar, which is slated to be transformed into a new bustling waterfront district after the container terminals in the vicinity eventually move out. 90 per cent of the 351 units comprise of one-bedroom, one-plus-study and two-bedroom apartments.
The Tanjong Pagar Railway Station site is also expected to be redeveloped after Keretapi Tanah Melayu vacates the site under a historic land-swap deal between Singapore and Malaysia announced in September.
Over at Robinson Road, agents are gathering interest for the freehold Robinson Suites at prices ranging from $2,300 psf to $3,300 psf. The 42-storey project on the VTB Building site, comprises 167 apartments and three ground-floor shop units. All the apartments are either one-bedroom-plus-study units or two-bedders. Unit sizes start at 484 sq ft.
The developer – a consortium whose shareholders include Cheong Sim Lam (whose family developed International Plaza), Fission Holdings, Tan Koo Chuan and Saw Pik Kee – is pitching the project as the ‘first-ever freehold apartments in the CBD’.
CapitaLand is getting ready to release the first phase of its 1,715-unit condo on the 99-year-leasehold Farrer Court site. The 36-storey Zaha Hadid-designed project will feature one to four-bedroom apartments, penthouses and six pairs of strata semi-detached houses.
Sim Lian is said to be looking to release Waterview, a 99-year-leasehold condo comprising 696 units at Tampines Ave 1/10 facing Bedok Reservoir, once it gets all the necessary authorities’ approvals.
The project will comprise two, three and four-bedroom apartments and penthouses. The expected price is in the $820-920 psf range.
Far East Organization will be officially launching the 214-unit The Lanai – which consists of two-, three- and four-bedroom units that range from 947 sq ft to 1,615 sq ft – along Hillview Avenue this weekend.
The 999-year leasehold project has already sold 76 units at a preview last month, which included a bulk purchase, with prices starting from $1,290 psf.
Monday, November 1, 2010
75% of units at The Glyndebourne snapped up over weekend
The Glyndebourne, a 150-unit freehold condominium, met with good response over the weekend’s private preview.
75 per cent, or 112 units, of the development have been sold over the weekend in a statement released by City Developments (CDL).
The selling price ranged from S$1,900 to S$2,350 per square foot, giving an average price of about S$2,100 per square foot.
The development, which comprises eight towers of 5-storey residential apartments, is situated in District 11 on the site where the Copthorne Orchid Hotel Singapore currently stands on.
The site has an area of 180,000 square feet and is a mere 5-minute drive from the Orchard Road shopping belt, said CDL. It is also within walking distance to the upcoming Botanic Gardens and Stevens Road MRT Stations, which are scheduled for completion in 2015.
CDL’s group general manager, Chia Ngiang Hong, said: “Based on feedback from our buyers, the development’s excellent location and easy access to amenities is a key draw.
“Its freehold status, sizable plot of land and the array of well appointed, quality apartments with various sizes to cater to the differing needs of our clients are also plus points.”
He added that “The Glyndebourne offers exceptional value for a prime property in District 11″.
All 1-bedroom plus study, 2-bedroom and 3-bedroom plus study units have been snapped up. Ten out of the 23 penthouses have also been sold.
CDL said 70 per cent of the buyers are Singaporeans, with the remaining 30 per cent taken up by permanent residents and foreigners from Malaysia, US, Indonesia, China, India, Myanmar, Korea, Thailand, Taiwan and Brunei.
Source : Channel NewsAsia – 1 Nov 2010
75 per cent, or 112 units, of the development have been sold over the weekend in a statement released by City Developments (CDL).
The selling price ranged from S$1,900 to S$2,350 per square foot, giving an average price of about S$2,100 per square foot.
The development, which comprises eight towers of 5-storey residential apartments, is situated in District 11 on the site where the Copthorne Orchid Hotel Singapore currently stands on.
The site has an area of 180,000 square feet and is a mere 5-minute drive from the Orchard Road shopping belt, said CDL. It is also within walking distance to the upcoming Botanic Gardens and Stevens Road MRT Stations, which are scheduled for completion in 2015.
CDL’s group general manager, Chia Ngiang Hong, said: “Based on feedback from our buyers, the development’s excellent location and easy access to amenities is a key draw.
“Its freehold status, sizable plot of land and the array of well appointed, quality apartments with various sizes to cater to the differing needs of our clients are also plus points.”
He added that “The Glyndebourne offers exceptional value for a prime property in District 11″.
All 1-bedroom plus study, 2-bedroom and 3-bedroom plus study units have been snapped up. Ten out of the 23 penthouses have also been sold.
CDL said 70 per cent of the buyers are Singaporeans, with the remaining 30 per cent taken up by permanent residents and foreigners from Malaysia, US, Indonesia, China, India, Myanmar, Korea, Thailand, Taiwan and Brunei.
Source : Channel NewsAsia – 1 Nov 2010
Sunday, October 31, 2010
It all boils down to demand and supply
We need good data and solid reference points to navigate towards investment decisions. A good source of raw data, with solid data integrity and consistency of reporting, layered with reasonable assumptions, deep experience and objectively interpreted and analysed will mean the difference between a mediocre investment versus a wildly profitable one.
With several rounds of policy changes imposed on the residential sector within the last 12 months, more investors are asking "What new policies next?", "Should we divest now?" and "Should we wait a year or two before investing?"
The market is directionless, with indicators pointing in opposing directions: Low holding costs versus low rental yields against a backdrop of prices for mass market residential setting records in Yio Chu Kang, Ang Mo Kio, Pasir Panjang, Pasir Ris, Serangoon, etc, where demand remains strong.
So, what numbers can guide us to a decision?
IPA's work and discussions involve high-net-worth investors (who may be buyers or sellers at any one time), mortgage lenders, developers, construction firms, institutional funds, private equity players, funds who lend for project financing, equities analysts, etc. Our basis of discussions for the residential market relies heavily on data provided by several sources.
In Singapore, the bulk of raw data comes from official sources. Databases we rely on are: URA Realis, SISV-Realink (whose main data source is caveats filed with SLA), HDB's announcements and SingStat for population growth, household formation and income.
In the private residential sector, market watchers are very focused on a few key data points:
1. Number of units sold by developers monthly and quarterly, by project
2. Monthly lowest, highest and median prices of each project sold by developers
3. Number of units sold in the primary, sub-sales and resale markets
4. Number of units launched and sold, number of units launched but unsold
Perhaps this is because the equities analysts require these data sets to gauge the financial health of the listed developers whose stocks they cover - and these analysts are the voices most often heard by financial investors.
The larger listed developers have "investor relations" personnel to liaise with analysts and fund managers. Healthy share-price performances are important for the market's short term confidence in the developers' financial strength and perhaps also allow the developers access to more favourable credit terms.
In fact, the same mentality applies to data for public housing: Analysts are focused on selling prices, COVs, BTOs, DBSSs, launch prices, how many units launched and sold, over-subscribed or not, etc. Few enquire about the net new supply of HDB flats, which is the new supply minus the demolitions due to the Selective En Bloc Redevelopment Scheme (Sers) and other upgrading programmes.
So, which are the data sets that would form a solid basis and reference for a direct real estate investor's decision making?
None of the above data sets matters as much as rentals, vacancies and real physical demand and supply. Forecasting future rentals and vacancies depends on our view of future demand - physical demand from home users, as opposed to demand based on buy-sell transactions.
Projecting future demand is about as easy as reading tea leaves and cloud patterns. However, we have a lot more certainty when it comes to predicting supply. We can be especially confident about supply that is coming in the next three years as many of the "under construction" condominiums can be completed within 36 months.
LESSONS FROM THE RECENT PAST
When vacancies are dropping and rentals are climbing fast, we can safely predict that property prices will move up. This was the case in 2006-2008, when tenants were at the mercy of landlords when it was time to renew their leases.
With hindsight, we see that the population increase over the two years of 2005-2006 was about 235,000 (see table).
Assuming the new population growth is based on households of four, we would require about 59,000 residential units. The net new supply in 2005 and 2006 was 17,000 residential units. Therefore, we can safely assume that a portion of the new population moved in to take up the vacant units (which at that time was about 7-8 per cent) while others moved in with friends and relatives or sought accommodation in hostels and serviced apartments.
The story continued through 2007 into 2008, when the physical demand for residential units skyrocketed due to the inflow of 438,000 into our population in 2007 and 2008. That period also saw many en bloc sales and HDB SERS projects, followed by demolitions such that the net new supply of residential units was only about 13,000 units.
Now, squeezing 438,000 newcomers into 13,000 new private residential and HDB units is not simple. Vacancies have dropped to around 5 per cent (there is a structural persistent vacancy of around 1 per cent which are apartments or houses which are not in usable condition or are intended for demolition).
Therefore, lesson here is: We need to keep a close tab on physical supply completions.
by Ku Swee Yong
The writer is the founder of real estate agency International Property Advisor, which provides services to high-net-worth individuals.
With several rounds of policy changes imposed on the residential sector within the last 12 months, more investors are asking "What new policies next?", "Should we divest now?" and "Should we wait a year or two before investing?"
The market is directionless, with indicators pointing in opposing directions: Low holding costs versus low rental yields against a backdrop of prices for mass market residential setting records in Yio Chu Kang, Ang Mo Kio, Pasir Panjang, Pasir Ris, Serangoon, etc, where demand remains strong.
So, what numbers can guide us to a decision?
IPA's work and discussions involve high-net-worth investors (who may be buyers or sellers at any one time), mortgage lenders, developers, construction firms, institutional funds, private equity players, funds who lend for project financing, equities analysts, etc. Our basis of discussions for the residential market relies heavily on data provided by several sources.
In Singapore, the bulk of raw data comes from official sources. Databases we rely on are: URA Realis, SISV-Realink (whose main data source is caveats filed with SLA), HDB's announcements and SingStat for population growth, household formation and income.
In the private residential sector, market watchers are very focused on a few key data points:
1. Number of units sold by developers monthly and quarterly, by project
2. Monthly lowest, highest and median prices of each project sold by developers
3. Number of units sold in the primary, sub-sales and resale markets
4. Number of units launched and sold, number of units launched but unsold
Perhaps this is because the equities analysts require these data sets to gauge the financial health of the listed developers whose stocks they cover - and these analysts are the voices most often heard by financial investors.
The larger listed developers have "investor relations" personnel to liaise with analysts and fund managers. Healthy share-price performances are important for the market's short term confidence in the developers' financial strength and perhaps also allow the developers access to more favourable credit terms.
In fact, the same mentality applies to data for public housing: Analysts are focused on selling prices, COVs, BTOs, DBSSs, launch prices, how many units launched and sold, over-subscribed or not, etc. Few enquire about the net new supply of HDB flats, which is the new supply minus the demolitions due to the Selective En Bloc Redevelopment Scheme (Sers) and other upgrading programmes.
So, which are the data sets that would form a solid basis and reference for a direct real estate investor's decision making?
None of the above data sets matters as much as rentals, vacancies and real physical demand and supply. Forecasting future rentals and vacancies depends on our view of future demand - physical demand from home users, as opposed to demand based on buy-sell transactions.
Projecting future demand is about as easy as reading tea leaves and cloud patterns. However, we have a lot more certainty when it comes to predicting supply. We can be especially confident about supply that is coming in the next three years as many of the "under construction" condominiums can be completed within 36 months.
LESSONS FROM THE RECENT PAST
When vacancies are dropping and rentals are climbing fast, we can safely predict that property prices will move up. This was the case in 2006-2008, when tenants were at the mercy of landlords when it was time to renew their leases.
With hindsight, we see that the population increase over the two years of 2005-2006 was about 235,000 (see table).
Assuming the new population growth is based on households of four, we would require about 59,000 residential units. The net new supply in 2005 and 2006 was 17,000 residential units. Therefore, we can safely assume that a portion of the new population moved in to take up the vacant units (which at that time was about 7-8 per cent) while others moved in with friends and relatives or sought accommodation in hostels and serviced apartments.
The story continued through 2007 into 2008, when the physical demand for residential units skyrocketed due to the inflow of 438,000 into our population in 2007 and 2008. That period also saw many en bloc sales and HDB SERS projects, followed by demolitions such that the net new supply of residential units was only about 13,000 units.
Now, squeezing 438,000 newcomers into 13,000 new private residential and HDB units is not simple. Vacancies have dropped to around 5 per cent (there is a structural persistent vacancy of around 1 per cent which are apartments or houses which are not in usable condition or are intended for demolition).
Therefore, lesson here is: We need to keep a close tab on physical supply completions.
by Ku Swee Yong
The writer is the founder of real estate agency International Property Advisor, which provides services to high-net-worth individuals.
Friday, October 29, 2010
CEA’s new rules to set standards for estate agency work
The Council for Estate Agencies (CEA) released new rules on Friday that will set standards and regulate the conduct of estate agency work.
From 15 November, salespersons cannot represent both buyers and sellers in a property transaction under the Estate Agents (Estate Agency Work) Regulations.
It will also prohibit estate agents and salespersons from handling cash in certain transactions or referring their clients to any moneylender.
Other provisions will kick in on 1 January.
They include prescribed estate agency agreements that estate agents will use with their clients for the sale, purchase or lease of residential property in Singapore.
Individuals who undertake estate agency work will also be required to take part in continuing professional development programmes for a minimum of 6 hours per year from 2011.
From March next year, the regulations will require salespersons to display their estate agent’s card, when doing estate agency work. This is to allow the industry sufficient time to comply with the estate agent’s card requirement.
Separately, the Estate Agents (Licensing and Registration) Regulations and the Estate Agents (Fees) Regulations will take effect on 1 November.
Application for estate agent’s license and salesperson’s registration will start from that date and those who successfully register with CEA will have their names published on its website from 1 January.
Those who do not meet the licensing or registration criteria will not be granted a license or registration. This includes those with criminal records, especially for fraud and dishonesty.
Also from January next year, it will be an offence for sales persons who are not registered with CEA to handle estate agency work.
They must also have written agreements with estate agents before they can practice.
Source : Channel NewsAsia – 29 Oct 2010
From 15 November, salespersons cannot represent both buyers and sellers in a property transaction under the Estate Agents (Estate Agency Work) Regulations.
It will also prohibit estate agents and salespersons from handling cash in certain transactions or referring their clients to any moneylender.
Other provisions will kick in on 1 January.
They include prescribed estate agency agreements that estate agents will use with their clients for the sale, purchase or lease of residential property in Singapore.
Individuals who undertake estate agency work will also be required to take part in continuing professional development programmes for a minimum of 6 hours per year from 2011.
From March next year, the regulations will require salespersons to display their estate agent’s card, when doing estate agency work. This is to allow the industry sufficient time to comply with the estate agent’s card requirement.
Separately, the Estate Agents (Licensing and Registration) Regulations and the Estate Agents (Fees) Regulations will take effect on 1 November.
Application for estate agent’s license and salesperson’s registration will start from that date and those who successfully register with CEA will have their names published on its website from 1 January.
Those who do not meet the licensing or registration criteria will not be granted a license or registration. This includes those with criminal records, especially for fraud and dishonesty.
Also from January next year, it will be an offence for sales persons who are not registered with CEA to handle estate agency work.
They must also have written agreements with estate agents before they can practice.
Source : Channel NewsAsia – 29 Oct 2010
Thursday, October 28, 2010
Wider gap expected between public and private housing prices in Singapore
Prices of housing and development board properties in Singapore are expected to fall up to 10% in the next six months while those of private real estate will rise up to 7%, according to a new survey.
It will create a two tier real estate system making it harder for people to upgrade in a country where property accounts for almost half of private wealth, according to the poll of property analysts by Bloomberg.
‘Who these rules will hit the most are people who have little savings and who live from day to day. They are mostly those who live in public housing,’ said Mohamed Ismail, chief executive officer of home broker PropNex Singapore.
Four out of six analysts polled by Bloomberg expect prices for HDB flats to drop in the next six months, while four out of seven predict private apartment prices will gain.
In August, the government increased down payments for second mortgages and extended the stamp duty to residential property sold within three years in a bid to calm real estate prices which surged 38% in the second quarter from a year earlier.
‘This is targeted at the HDB and mass market, where we’ve seen continuous price increases which have exceeded previous peaks,’ said Han of Cushman & Wakefield.
The government has been trying to slow the increase in home prices for a year, with earlier measures banning developers from absorbing interest payments for flats under construction and stopping interest only loans for some projects.
‘The previous measures were only scratching the surface. The recent measures are more impactful because they really hurt people’s cash outflow’ said Chua Chor Hoon, of DTZ’s Southeast Asia Research.
HDB resales fell 50% the week after the new rules were introduced, according to Ismail at PropNex, who said people have been shocked into a wait and see attitude. He expects cash premiums paid for HDB flats to drop by half to about S$25,000 by the end of the year.
CapitaLand, Southeast Asia’s biggest developer, expects Singapore’s home prices to fall a little with the cooling measures.
But many investors will not be deterred. Recently a Chinese national paid a record S$36 million for a private bungalow in Sentosa Cove and a Singaporean couple paid S$1.1 million for a Bishan flat, S$200,000 more than the official valuation.
Banks are only allowed to lend up to 80% of the appraised value, so the buyer has to pay the rest in cash or by drawing on pension funds. Any premium over the valuation has to be paid in cash. Since the August announcement, buyers who hold more than one mortgage can now only borrow up to 70% of a property’s appraised value.
Singapore subsidizes new HDB flats to help citizens get a start on the property ladder. When an HDB flat is resold, the price is decided by the seller and buyer.
The government’s action to try to avoid a bubble is a lesson to speculators and buyers not to overspend on real estate, according to Tan Tion Cheng, chairman of property agent Knight Frank.
At the time of the new measures, the government said price levels had exceeded the peak reached in the second quarter of 1996. ‘The rising prices were infringing into public housing. The measures remind investors that if they don’t have money, don’t buy,’ he explained.
Source : Propertywire – 22 Oct 2010
It will create a two tier real estate system making it harder for people to upgrade in a country where property accounts for almost half of private wealth, according to the poll of property analysts by Bloomberg.
‘Who these rules will hit the most are people who have little savings and who live from day to day. They are mostly those who live in public housing,’ said Mohamed Ismail, chief executive officer of home broker PropNex Singapore.
Four out of six analysts polled by Bloomberg expect prices for HDB flats to drop in the next six months, while four out of seven predict private apartment prices will gain.
In August, the government increased down payments for second mortgages and extended the stamp duty to residential property sold within three years in a bid to calm real estate prices which surged 38% in the second quarter from a year earlier.
‘This is targeted at the HDB and mass market, where we’ve seen continuous price increases which have exceeded previous peaks,’ said Han of Cushman & Wakefield.
The government has been trying to slow the increase in home prices for a year, with earlier measures banning developers from absorbing interest payments for flats under construction and stopping interest only loans for some projects.
‘The previous measures were only scratching the surface. The recent measures are more impactful because they really hurt people’s cash outflow’ said Chua Chor Hoon, of DTZ’s Southeast Asia Research.
HDB resales fell 50% the week after the new rules were introduced, according to Ismail at PropNex, who said people have been shocked into a wait and see attitude. He expects cash premiums paid for HDB flats to drop by half to about S$25,000 by the end of the year.
CapitaLand, Southeast Asia’s biggest developer, expects Singapore’s home prices to fall a little with the cooling measures.
But many investors will not be deterred. Recently a Chinese national paid a record S$36 million for a private bungalow in Sentosa Cove and a Singaporean couple paid S$1.1 million for a Bishan flat, S$200,000 more than the official valuation.
Banks are only allowed to lend up to 80% of the appraised value, so the buyer has to pay the rest in cash or by drawing on pension funds. Any premium over the valuation has to be paid in cash. Since the August announcement, buyers who hold more than one mortgage can now only borrow up to 70% of a property’s appraised value.
Singapore subsidizes new HDB flats to help citizens get a start on the property ladder. When an HDB flat is resold, the price is decided by the seller and buyer.
The government’s action to try to avoid a bubble is a lesson to speculators and buyers not to overspend on real estate, according to Tan Tion Cheng, chairman of property agent Knight Frank.
At the time of the new measures, the government said price levels had exceeded the peak reached in the second quarter of 1996. ‘The rising prices were infringing into public housing. The measures remind investors that if they don’t have money, don’t buy,’ he explained.
Source : Propertywire – 22 Oct 2010
Stamford Rd site to get $250m makeover
SINGAPORE - Come 2018, the historic Capitol Building and Stamford House will re-emerge as a luxury five-star hotel.
Alongside it will be a new 15-storey retail and residence building, while the 81-year-old Capitol Theatre will be restored to its former glory to become the Republic's largest single-screen cinema cum performance theatre.
These details of the $250-million winning bid - from Capitol Retail Management, Capitol Hotel Management and Capitol Residential Development - to redevelop the 1.43-hectare land parcel at the junction of Stamford Road and North Bridge Road, were revealed by the Urban Redevelopment Authority (URA) yesterday.
This announcement ends a 26-year stop-start process to breathe new life into this plum spot in the Civic District.
The site was released for sale on the reserve list in December 2008 and drew a total of 14 tenders.
The URA said Capitol's bid won out - from a final pool of three - because its plan "offers a high-quality development befitting of its prominent location within the Civic District and its rich architectural heritage".
The plan will breathe new life into Capitol Theatre, which screened its last movie in 1998.
Theatre groups will be given in-residence status to stage performances at the 800- to 1,000-seat theatre for part of the year, while Golden Village will operate the Republic's largest single-screen cinema for the rest of the year.
The 15-storey building, which will sit on where Capitol Centre is currently, will have four floors of retail and F&B outlets. The rest will be residential apartments, which analysts expect will fetch above $2,000 per square foot.
And on the streets: A sheltered civic plaza and a pedestrainised galleria lined with F&B offerings.
Cushman & Wakefield's managing director Donald Han told MediaCorp: "When the project is completed, it'll complete the entire necklace of activity around the Raffles City, City Hall area. Bottom line, it's going to create more vibrancy in the locality."
CBRE Research executive director Li Hiaw Ho said: "This unique development will would form a synergistic combination along with the current mixed-use development Raffles City as well as the upcoming South Beach, bringing an infusion of new diverse activity to the entire City Hall area."
Source : Today Online 28 Oct 2010
Alongside it will be a new 15-storey retail and residence building, while the 81-year-old Capitol Theatre will be restored to its former glory to become the Republic's largest single-screen cinema cum performance theatre.
These details of the $250-million winning bid - from Capitol Retail Management, Capitol Hotel Management and Capitol Residential Development - to redevelop the 1.43-hectare land parcel at the junction of Stamford Road and North Bridge Road, were revealed by the Urban Redevelopment Authority (URA) yesterday.
This announcement ends a 26-year stop-start process to breathe new life into this plum spot in the Civic District.
The site was released for sale on the reserve list in December 2008 and drew a total of 14 tenders.
The URA said Capitol's bid won out - from a final pool of three - because its plan "offers a high-quality development befitting of its prominent location within the Civic District and its rich architectural heritage".
The plan will breathe new life into Capitol Theatre, which screened its last movie in 1998.
Theatre groups will be given in-residence status to stage performances at the 800- to 1,000-seat theatre for part of the year, while Golden Village will operate the Republic's largest single-screen cinema for the rest of the year.
The 15-storey building, which will sit on where Capitol Centre is currently, will have four floors of retail and F&B outlets. The rest will be residential apartments, which analysts expect will fetch above $2,000 per square foot.
And on the streets: A sheltered civic plaza and a pedestrainised galleria lined with F&B offerings.
Cushman & Wakefield's managing director Donald Han told MediaCorp: "When the project is completed, it'll complete the entire necklace of activity around the Raffles City, City Hall area. Bottom line, it's going to create more vibrancy in the locality."
CBRE Research executive director Li Hiaw Ho said: "This unique development will would form a synergistic combination along with the current mixed-use development Raffles City as well as the upcoming South Beach, bringing an infusion of new diverse activity to the entire City Hall area."
Source : Today Online 28 Oct 2010
Thursday, October 7, 2010
Strong demand for Esparina Executive Condo..
Showflats of the Esparina Residences has been packing in the crowd over the 1st weekend of October.
Amongst the reason for its popularity of the 99 leasehold EC by Frasers Centrepoint Homes is its close proximity to the Buangkok MRT station and the first EC to be launched since the La Casa in Woodlands in 2005.
It consists of 573 units, ranging from 829 sq ft for a two-bedroom unit to 2,583 sq feet for a four-bedroom penthouse.
Prices range from $590,000 to $723,000 for a two-bedroom unit; $697,000 to $981,000 for a three-bedroom unit; and $1.005 million to $1.181 million for a four-bedroom unit. Prices for penthouses range from $864,000 to $1.3 million. The temporary occupancy permit is expected in the first quarter of 2014.
The showflat, located along Compassvale Bow, is open for public viewing from 30th Sept to Oct 5 from 11am to 7pm. During this period, no booking or purchasing is allowed.
On Oct 8, successful applicants will have priority to enter the showflat for balloting and booking.
Check out this great xinmsn Video: Strong demand for Esparina exec condo
Amongst the reason for its popularity of the 99 leasehold EC by Frasers Centrepoint Homes is its close proximity to the Buangkok MRT station and the first EC to be launched since the La Casa in Woodlands in 2005.
It consists of 573 units, ranging from 829 sq ft for a two-bedroom unit to 2,583 sq feet for a four-bedroom penthouse.
Prices range from $590,000 to $723,000 for a two-bedroom unit; $697,000 to $981,000 for a three-bedroom unit; and $1.005 million to $1.181 million for a four-bedroom unit. Prices for penthouses range from $864,000 to $1.3 million. The temporary occupancy permit is expected in the first quarter of 2014.
The showflat, located along Compassvale Bow, is open for public viewing from 30th Sept to Oct 5 from 11am to 7pm. During this period, no booking or purchasing is allowed.
On Oct 8, successful applicants will have priority to enter the showflat for balloting and booking.
Check out this great xinmsn Video: Strong demand for Esparina exec condo
Friday, August 13, 2010
Blueprint for investment
Source : Today – 13 Aug 2010
Question from Bill Tay
I bought a 8,788 sq ft detached house in Pasir Ris Beach Park with a balance of 67 years in the tenure.
Can you advise me on the following:
Is it worthwhile to build a pair of semi-detached houses with a development charge of $150,000 and building cost of $1.5 million?
What do you think is the likelihood that I would be able to top up the lease to 99 years, given that this estate consists of both 99 and 999 leasehold houses.
Do you have any other suggestions besides building a pair of semi-detached houses?
Reply from Mr Colin Tan, head of Research and Consultancy at real estate consultancy Chesterton Suntec International
I am assuming that the information provided by you is accurate; I have not made any checks myself.
If indeed your lease is 99 years with 67 years remaining, the relevant tax for intensifying land use – that is, to redevelop the property with larger floor areas (your suggestion is to build two houses in place of one) – is known as the differential premium.
The corresponding tax for freehold land is called the development charge.
So, for you, the relevant tax is the differential premium. Topping up of the lease involves yet another payment to the Government.
If I remember correctly, the master land owner of the 99-year lease land is the HDB. Please do check with the HDB with respect to the amount of all the taxes.
If I were to put myself in the shoes of the master planner, I would most likely not allow any top-ups until I have firm plans as to what I intend for the entire area. Have a look at the Master Plan for the area in the URA website www.ura.gov.sg.
I would say the chances are slim, mainly because I think the planners are unlikely to have decided on what they intend for the area any time soon.
Most planners prefer to keep their options open for as long as they can if there is no urgency to develop the area. You can check this with the HDB planners.
Also, I see the area as suitable for expanding the recreational space in that part of Singapore. So, the chance of a rejection for top ups is not insignificant.
As a result of the uncertainty – unless you get different feedback from HDB – the properties there are likely to be most suitable for owner-occupiers and renters.
If you can get a better price than what you paid for, you may want to give it serious consideration. Please do engage the services of a property consultant to give you more detailed advice.
Condo comeback
Source : Today – 13 Aug 2010
Government to ramp up flat supply for middle-income home buyers
The executive condominium (EC) market looks set to stir when new projects are launched over the next three to six months. According to property consultancy CB Richard Ellis, ECs are making a comeback after a hiatus of five years as the Government steps in to ramp up flat supply for middle-income home buyers.
Four new EC projects in Compassvale Bow, Punggol Field, Buangkok and Yishun – yielding some 1,400 units – will be launched in the next three to six months.
These sites were awarded in the first half of this year. The Government will also be selling another five EC sites later in the year – at Jurong West, Punggol Drive, Pasir Ris, Tampines and Segar Road – which are expected to yield about another 2,600 units.
The last EC launched was La Casa in Woodlands in 2005, which was completed in early 2008.
CBRE said the comparatively cheaper pricing of ECs is expected to attract a large number of HDB upgraders.
Executive director of CBRE Research Li Hiaw Ho said assuming the historical 30 per cent gap between private suburban homes and new ECs, the median prices of new ECs are likely to stay around $650 to $750 per square foot (psf).
The median price for private suburban homes as of the second quarter stood at $824 psf.
Ms Tay Huey Ying, director for Research and Advisory at Colliers International, expects prices for ECs to rise moderately. “It will still fall below private units in terms of absolute price per square foot simply because there are conditions attached,” she said.
For example, foreigners are not allowed to buy ECs. On top of that, those whose monthly household income exceed $10,000 cannot buy ECs.
Mr Li added that the prices of ECs will match those of comparable private apartments in the same locations after five years, as they will be treated as private properties.
Currently, the non-landed private home market is attracting a lower share of HDB upgraders compared to last year with only 36.1 per cent of them making new home purchases in the second quarter.
At its peak in the first quarter last year, the proportion of HDB upgraders reached 63.6 per cent but it has steadily dipped below the 10-year average of 44 per cent.
Mr Li said with the steep rise in prices of new private homes, more HDB upgraders face a bigger burden of servicing huge mortgage loans.
“The lowering of the housing loan limit from 90 per cent to 80 per cent since March this year also meant that HDB home buyers need to pay more cash upfront,” added Mr Li. “Despite this, HDB upgraders can find a less-costly alternative with the upcoming ECs.”
No bids received for EC site at Jurong West
Despite a buzz generated by a resurgence of the executive condominiums (EC) in the coming months, the Housing and Development Board (HDB) has received no bids at the close of the tender for an EC site at Jurong West Street 42 yesterday.
The land parcel has a land area of over 16,800 square metres and a maximum gross floor area of about 50,445 square metres.
It has a lease period of 99 years.
Launched on July 2, the call for tender closed yesterday at noon.
Analysts said developers are spoilt for choice as the Government has been releasing a lot of land.
Mr Nicholas Mak, a real estate lecturer at Ngee Ann Polytechnic said: “There are also growing concerns that there could be a growing oversupply due to the large amount of land that the Government is offering for sale in the present Government land sales programme.
“In addition, there is also the characteristic of this site, which is that it’s not within comfortable walking distance to the nearest MRT station.”
The second half of this year will see 27 residential sites and four mixed-use sites put up for tender via the Government land sales programme.
The 31 sites are expected to yield nearly 14,000 private residential units. This is the highest potential supply for any half-yearly period since the Confirmed and Reserve Lists system started in 2001.
Dorsett Residences by Tang Suites
Source : Today – 13 Aug 2010
Property developer Tang Suites’ latest project is the six-storey Dorsett Residences, located in Chinatown.
The 68 units have average indicative prices of $1,800 per square foot.
The luxury property is part of a mixed development, which combines commercial retail space with the 285-room Dorsett Regency Hotel.
Buyers can choose from 24 units of one-bedroom homes at 484 to 667 sq ft each, 40 units of 2 bedroom homes at 689 to 1,012 sq ft each, and four units of 2 bedroom-with-study homes at 1,206 to 1,615 sq ft each.
Amenities include a swimming pool and a landscape deck on the third storey, and residents can use the gymnasium and hotel facilities in the adjoining Dorsett Regency Hotel.
All units comprise of quality furnishings and are fitted with good-sized balconies.
The 99-year leasehold property sits atop Outram Park MRT Station and expects its temporary occupancy permit around late 2012 or early 2013.
Speculators – are they making a comeback?
Recent launch prices for condos in outlying areas way above existing properties
The confirmation of the positive numbers for the private residential sector in Singapore for 2Q2010 appears to have unleashed another wave of buying onto the market.
From landed homes to HDB flats, the market is awash with liquidity. My colleagues in the appraisal department tell me that the rising prices for properties not matched by their valuations have not scuttled too many deals.
In the public housing market, higher cash-over-valuation (COVs) on top of higher prices have also not slowed the rise in the HDB resale market.
With so much cash floating around, I have often maintained that the market is always waiting for a good excuse to renew its buying activity.
That excuse was provided within the past two weeks. The Scala, a 99-year leasehold project near Lorong Chuan MRT station attracted hundreds of potential buyers – or over a thousand according to one report – that balloting was needed to sort out who got to enter the showflat first.
Of course, it helped that a private preview held earlier for Hong Leong staff and other buyers meant that about a third of the units had already been sold before the official launch.
The timing of the launch was also spot on as it came after more stations on the Circle Line from Bartley right through to Dhoby Ghaut were opened for public use. This meant that most residents in the area have already had experience using the new line.
Because the Circle Line serves mainly lower population density areas, there is less overcrowding on the trains. This means that most rides are much more pleasant than rides on the older North-South or East-West lines. To be near an MRT station is already a plus, but to be near the Circle Line is a bonus.
In the following week, the preview of The Greenwich condominium caused a rare traffic jam in the quiet Seletar Hills estate. The showflat closed at 2am the following morning in order to cope with the demand.
It has been a while since we saw such frenzied buying activity. Who are these people who stayed up to the wee hours after midnight to book a unit? Are we seeing the return of speculators to the market?
All the signs are there. On a per-square-foot basis, the reported average selling price of about $1,150 psf for The Scala is about 1.5 times the prices of existing apartments in the area.
One buyer was quoted as hoping for a 10- to 20-per-cent increase in prices within two years. This sounds reasonable, until you realise that he is already paying 50-per-cent more than for existing apartments in the area.
The jump in prices are definitely going to flow through into the third quarter private housing statistics.
The launch price for The Greenwich was at $980 psf on average, rising to $1,025 psf over the weekend – a record for a location so far away from the city centre.
One consultant was spot on when he was quoted as saying “the buyers are those who really like this corner of Singapore”.
Yes, it is really in one corner of Singapore. You need to own a car to live there or it can be pretty troublesome. Most residents in the area prefer living in houses rather than apartments. And the reason why they opt to live so far away from the city is because it is the only way houses can be affordable for them.
Why would someone choose to live in an apartment there when there are more than ample choices of apartments closer to the city with a better public transport network.
By any stretch of reasoning, I cannot see how owner occupiers can justify their purchases at these launch prices. It is also a little too much for investors.
That leaves the speculator, someone who plays the odds in the hope that it pays off and pays off really well. By their own reckoning, they need not depend on other Singaporean buyers. After all, the Chinese are coming. And they are known to pay big. Really big.
By Colin Tan, head of research and consultancy at Chesterton Suntec International.
Thursday, August 12, 2010
Exec Condo market set to stir with launch of new projects
Source : Channel NewsAsia – 12 Aug 2010
The Executive Condominium (EC) market looks set to stir when new projects are launched over the next three to six months.
According to property consultancy CB Richard Ellis (CBRE), Executive Condos are making a comeback after a hiatus of five years as the government steps in to ramp up the supply of flats for middle-income home buyers.
Four new EC projects in Compassvale Bow, Punggol Field, Buangkok and Yishun yielding some 1,400 units will be launched in the next three to six months. These sites were awarded in the first half of this year.
The government will also be selling another five EC sites later in the year – at Jurong West, Punggol Drive, Pasir Ris, Tampines and Segar Road – which are expected to launch another 2,600 EC units.
The last new EC launched was La Casa in Woodlands in 2005, which was completed in early 2008.
CBRE said the comparatively less expensive pricing of ECs is expected to attract a large number of HDB upgraders.
Executive Director of CBRE Research, Li Hiaw Ho, said assuming the historical 30 per cent gap between private suburban homes and new ECs, the median prices of new ECs are likely to stay around S$650 to S$750 per square foot.
He added that the prices of ECs will match those of comparable private apartments in the same locations after five years, as they will be treated as private properties.
Currently, the non-landed, private home market is attracting a lower share of HDB upgraders compared to 2009, with only 36.1 per cent of them making new home purchases in the second quarter.
At its peak in Q1 last year, the proportion of HDB upgraders reached 63.6 per cent but it has steadily declined below the 10-year average of 44 per cent.
Mr Li said with the steep rise in prices of new private homes, more HDB upgraders face a bigger burden of servicing huge mortgage loans.
Another factor pushing them towards ECs was the lowering of the housing loan limit from 90 per cent to 80 per cent since March this year, which meant that HDB home buyers need to pay more cash upfront.
Wednesday, August 11, 2010
Quiet month expected for property sales
Source : Straits Times – 11 Aug 2010
Ghost festival and lack of big launches spell lean month ahead, say experts
SUPERSTITION is likely to get the better of some buyers during the rest of this month as the effects of the traditionally quiet Hungry Ghost Festival begin to be felt.
During the festival – which started yesterday and will last until Sept 7 – superstitious individuals shun major commitments such as buying a property or getting married. And experts predict that this year’s festival looks set to spell a lull in sales amid a lack of new major launches.
This time last year, NTUC Choice Homes defied superstition with the successful launch of its 590-unit Trevista in Toa Payoh.
But it is unlikely there will be any similar major launches to buoy sales during this year’s festival, experts said.
City Developments’ 642-unit Pasir Ris project is planned for release in the current quarter, but no firm date has been given. No major launches were staged over the weekend.
Mr Peter Ow, managing director (residential services) at Knight Frank, said: ‘This year’s Hungry Ghost month will be quieter because whatever needs to be launched has already been pushed out.’
There were a few new launches in the run-up to the festival, with many units snapped up.
Yesterday, Far East Organization reported brisk pre-festival interest over the past week in The Greenwich in the Seletar Hills area.
Another 94 units of the 319-unit project were sold following the start of a private preview on Aug 2, when it moved 80 units. It has sold 174 homes in total, with the average price achieved rising to $1,025 per sq ft from $980 psf last Monday.
Nearly half of the units sold have been one-bedroom units of 603 sq ft to 721 sq ft, priced from $657,000 to $850,000.
Far East said it was on course to launch the project early next month.
At the 46-unit Suites@Topaz in Potong Pasir, there are just a few penthouses left after sales started around the middle of last week, said an industry source.
He said there may be some project launches of fewer than 200 units each this month, if developers are able to get all the necessary documents in place.
Meanwhile, the 172-unit Terrene sold its remaining unit last Saturday. And Hong Leong Holdings said it sold 35 units of its 468-unit The Scala over the long weekend, leaving fewer than 15 units left.
Mr Steven Tan, executive director of OrangeTee’s residential division, thinks it is sentiment and a lack of major new launches, rather than superstition, that will underpin the predicted quiet August.
‘Nowadays, people don’t really care about the Hungry Ghost month. It’s all about the sentiment, which is not very strong at the moment,’ he said.
And experts report that sales have generally slowed because developers are holding their prices.
‘If I am pricing a project to sell, I would push it out now. There will be interest. But if I want to hit benchmark pricing, I have to be careful with the timing of the launch,’ said Knight Frank’s Mr Ow.
He pointed out that developers had no need to rush given that they are depleting their land banks.
‘With recent tender prices being so high, there is even more reason for them to hold back their launches to wait for firmer prices,’ Mr Ow said.
Tuesday, August 10, 2010
All 174 units in Phase 1 of The Greenwich fully sold in private preview
Source : Channel NewsAsia – 10 Aug 2010
All 174 units in Phase one of The Greenwich, at Seletar Hills, have been fully sold in a private preview since last Monday.
Private property developer Far East Organization said the 174 fully sold units make up 55 per cent of the 319-unit development.
The Greenwich consists of 12 five-storey residential towers, with one to three-bedroom apartments ranging from 603 square feet to 1,485 square feet.
The prices range between S$657,000 and S$1.4 million.
The average price is S$1,025 per square foot.
Far East Organization said nearly half of the units sold are one-bedroom units.
It added that many buyers are attracted to the SOHO-type home office configurations of these apartments.
With this strong interest, Far East Organization said it will be bringing forward the official launch of this project to early September.
It’s now taking in registrations of interest for Phase two.
The Greenwich will be completed in 2014.
Naung Court in Hougang trying for en bloc sale
Source : Channel NewsAsia – 10 Aug 2010
Naung Court, a freehold residential development in Hougang, is trying for an en bloc sale.
The indicative price for the land is between S$28 million and S$30 million, which works out to about S$650 to S$700 per square foot per plot ratio.
A development charge of some S$2.7 million will be payable.
The site, located along Upper Serangoon Road, is 32,689 square feet in size.
It has a gross plot ratio of up to 1.4 and can be built up to 5 storeys. This will yield a potential gross floor area of 45,764 square feet.
Marketing agent Jones LangLaSalle said the site can potentially yield some 45 apartment units with an average size of 1,000 square feet each.
Naung Court is currently a 4-storey residential block comprising 20 units and within walking distance to Hougang Central.
The tender for the site will close at 3pm on September 14.
Increase in landed home purchases by foreigners
Source : Business Times – 10 Aug 2010
But acquisitions of private apartments and condos slip 7.4% in Q2
Foreigners including permanent residents bought 81 landed homes in Singapore in the second quarter of this year, up from 69 in Q1. And the Q2 figure is the strongest quarterly showing since Q2 2007, according to Knight Frank’s analysis of URA Realis caveats information up to July 30.
District 15, which includes Katong, Telok Kurau and East Coast Road, overtook District 4 – where transactions are predominantly at Sentosa Cove – as the most popular district among foreign buyers of landed property. In Q1, District 4 was most highly sought after by such foreigners.
While foreigners picked up more landed homes in Q2 than Q1, they bought fewer private apartments and condos. The number slipped 7.4 per cent, from 2,261 units in Q1 to 2,093 in Q2, according to Knight Frank.
But Singaporeans bought more non-landed private homes in Q2 – 5,732, versus 5,315 in Q1.
Knight Frank chairman Tan Tiong Cheng said foreigners’ strong interest in landed homes reflects their growing recognition of such assets as a prized commodity in land-scarce Singapore.
‘The increased interest is not surprising as landed housing offers many foreigners a lifestyle closer to what they are used to in their home country,’ he said. ‘The added attraction is that Singapore is a very safe place, so landed housing is as secure as, say, a gated community.’
William Wong, managing director of RealStar Premier Property which specialises in selling landed homes in east and central Singapore, said permanent residents (PRs), after living in Singapore for a few years, tend to realise it’s worthwhile investing in landed property.
‘Bungalow prices (on per square foot of land basis) are still lower than apartment and condo prices on psf of strata area in the same location,’ he said.
‘On top of that, the supply of landed homes is more limited than that of condos and apartments. Landed homes also tend to maintain their value better, as the main component of, say, a bungalow’s value would be the land it sits on, whereas apartment and condo values may depreciate faster as the property ages.’
PRs who choose landed property can easily get access to the facilities they would enjoy in a condo – such as a big swimming pool and gym – by joining a club, he noted.
Mr Wong said landed property transactions started to pick up in June-July, after a slow period in March-May. ‘In District 15, bungalows in the Mountbatten and Meyer road areas can easily sell for about $1,000-1,100 psf of land today, compared with around $900 psf towards the end of 2009,’ he said.
‘In District 10, say in Coronation Road or Namly Avenue, a bungalow may cost about $1,200-$1,300 psf-plus today, up from $1,000-1,100 psf late last year.’
Besides an increase in the number of landed homes bought by foreigners in Q2, Knight Frank’s report shows their share of total landed home purchases here rose from 6.3 per cent in January-March to almost 7 per cent in April-June.
The latter figure is a tad below an 8 per cent share in Q1 2007 and Q2 2008.
The 150 landed properties bought by foreigners in the first half of this year accounted for about 6.6 per cent of landed home deals in the period. On an annual basis, the share has ranged from 3 per cent in 1996 to 9 per cent in 1995 and 1997.
Knight Frank’s analysis also shows PRs acquired 132 of the 150 landed homes bought by foreigners in the first half of this year.
The other 18 were bought by non-PR foreigners. This is not surprising as on mainland Singapore, being a PR is one of the major criteria a foreigner has to fulfil before being allowed to buy a landed home.
Sentosa Cove is the only place in Singapore where non-PR foreigners are allowed to buy landed homes, but this is still subject to approval by the Land Dealings (Approval) Unit, among other conditions.
Sunday, August 8, 2010
Can the little red dot expand?
Source : Sunday Times – 8 Aug 2010
Space for new townships could open up in the north-east and west. But will hometowns still look the same? TessaWong talks to experts to find out
More unique flats with creative details
· Grace Fu, Minister of State for National Development
I think (in the future) the economy will be more differentiated. I think that aspirations are higher and we are looking for uniqueness (in housing design) now.
I think the Government will create that kind of identity through some differentiation in the aesthetics, because I think increasingly that’s going to be important.
For example, in Europe, I’ve seen pictures of (new) photovoltaic cells. You know photo cells, they look quite boring, grey and flat. But I’ve seen what’s being researched now – you have coloured photovoltaic, almost like a film, which you can lay on any facade and make it part of your design feature.
So you can have a very colourful (housing) block full of photovoltaic cells. We have to achieve this kind of distinction in design while containing the costs as much as we can.
Putting underground space to more uses
· Hwang Yu-Ning, group director of physical planning, Urban Redevelopment Authority
To expand our space supply, we will continue to explore greater use of our underground space – beyond the MRT, basement shopping malls and underground pedestrian networks such as those in Orchard Road and Marina Bay.
For example, we could study whether certain industrial, utilities, commercial and other suitable uses could be built underground in basements or caverns. The central and western parts of Singapore are potential areas where more caverns could be built as the geology is favourable.
As for the Southern Islands, they are envisaged more for recreational purposes, so there is not much residential development at this point. The islands are largely undeveloped and have a rustic character, providing a different kind of recreational experience from what is available on the mainland.
Under the Master Plan 2008, we are developing areas like Kallang Riverside and Paya Lebar Central now, over a period of 10 to 15 years.
At Kallang Riverside, we will see waterfront homes with a beachfront setting developed on the west side of the river, while the east side will have quality office space with hotels, entertainment and retail offerings.
Some of the old airport buildings in Kallang will be conserved and developed as a lifestyle spot. By the end of next year, we should have put together its development plans.
At Paya Lebar Central, we will see more offices and educational institutes. A new civic centre will also be developed that could include a community centre and a public square.
Closer, shorter blocks – for sustainable growth
· Vikas Gore, director at architectural firm DP Architects
There’s been a set of objections that’s been around for a long time – that the way we do high-rise housing is not particularly sustainable from an energy and resource-consumption standpoint.
High-rise is extremely expensive to build and maintain. You need lifts and a lot of electricity to keep all the elevators running. Water has to be pumped to the top too.
If we do more low-rise housing, like four or five storeys, where we need lifts mainly for the elderly, we could probably build larger apartments and still have high densities. We would occupy more of the land than we do at present.
The typical HDB estate would have buildings much closer than they are now, yet feel greener – because everyone would have a little green patch in front of their apartment, and would need to walk only two levels down to the ground, or walk up two floors to the roof garden.
Doing housing that is, say, four storeys high instead of 20 doesn’t mean you can get only a fifth of high-rise density. You can get close to 60 per cent to 70 per cent.
Truly green town within reach
· Peter Head, director at engineering firm Arup who leads its global planning business
Singapore is presenting leadership in eco-city development in China and has the skills to showcase this at home. Also, an eco-community could encourage new businesses in green products, with Singapore’s brilliant young product designers.
Our experience from China suggests that a low-carbon, resource-efficient and low ecological-footprint community could be planned and built starting now. There are investors and developers who would be interested in creating this.
There is already good public transport access – MRT stations are within a short walking distance.
But more could be done, such as mixed-use villages catering to about 20,000 people – with social services, and good public transport access within.
An eco-town should be highly accessible with local jobs. It would be best if it were close to the city, instead of being on outlying islands.
Buildings could be designed to capture breezes without unnecessary exposure to traffic noise and pollution. Natural ventilation could predominate building design, with some cooling potential using energy from waste.
Freight deliveries could be made from a consolidation centre using electric vehicles. The community could be the first to be offered use of electric cars on a large scale. Power for this could come from energy produced by waste plants.
Grace Fu on housing: Land use will always be a critical consideration
Source : Sunday Times – 8 Aug 2010
Q: The state does have a major role in deciding how a large percentage of citizens live, given that 80 per cent of us live in HDB flats. Do you think this will change?
I think we can answer that through two perspectives. One is whether the Government will have a big role in deciding our living conditions. The second is whether public housing will still cover such a large proportion.
To the first question, I think the answer is yes, because land use will always be a critical consideration because of the constraints we have. So whether it is planning for private or public housing, how we place them, in terms of the height, the density – I think the Government will continue to have a big influence.
The second issue is whether public housing should really be provided for such a large segment of the population. One group says, perhaps Singaporeans are more qualified now and therefore they should want to decide how to live, where to live, and so on.
On the other end, there are those who say, please raise your income ceiling for subsidies because although I’m earning $8,500 or $9,000, I still want to live in an HDB block as it’s an affordable option.
So we always have to balance between these two groups. And it depends on what the people want ultimately. We have to make the judgment whether that coverage will go up or down over time.
Q: Has there been a shift towards one end of the spectrum?
Yes, it has moved towards allowing more private-sector participation, in the form of the Design, Build and Sell Scheme. We also have this Executive Condominium group, for which we are releasing more sites. So that is something we will continue to do.
We are very mindful that when we cover 80 per cent of the population, the 80 per cent is a very huge group, and the lowest 10 per cent is different from the 70th to 80th percentile. It could be very different in terms of their earning potential, their aspirations, their mobility. So our housing policy will have to, in a way, cater to the different segments.
Q: But there has been discontent on some level about rising housing costs.
Obviously, the market goes through boom and bust. So in a rising market, we get many anxious applicants wanting flats immediately.
Some people have proposed, oh, why don’t you lift that $8,000 income ceiling.
But we decided not to because if we increase the income ceiling, then we are actually allowing a segment with higher income to compete with the ones earning $8,000 and below.
We decided that is not the way to go, but what we should do is really to help people at the lower end of the income segment.
Rising condo maintenance fees
Source : Sunday Times – 8 Aug 2010
Rising labour and utilities costs, shortage of security guards and management pushing rates up
New condominiums offering a wide range of facilities like swimming pools, saunas, manicured gardens, children’s playgrounds and round-the-clock security can attract buyers like bees to honey.
But these facilities do not come free. Owners have to pay maintenance fees to upkeep them, even if they may never use the facilities.
And now that costs have generally risen, owners may have to be prepared for slightly higher fees ahead.
Nevertheless, experts say the fees are put to good use as they go towards maintaining the value of the property.
‘Nothing is free. If you are going to buy a condo unit but are not going to swim, you will still have to pay to help maintain the pool,’ said Mr Jordan Neo, managing director of Knight Frank Estate Management.
Industry experts say that rising labour and utilities costs, coupled with a shortage of licensed security guards and condo management staff, will contribute to rising fees.
This year, costs have already risen by about 5 per cent to 7 per cent, said Mr Chan Kok Hong, managing director of CKH Strata Management.
Mr Derek Soh, Jones Lang LaSalle’s head of property and asset management in South-east Asia, predicts that owners may have to pay about 3 to 5 per cent more in the coming year.
A landlord of a Grange Road apartment, Mr Eugene Goh, is not too happy about it: ‘I pay $1,000 every three months for my two-bedroom unit at Spring Grove. As to whether it is worth it, only my tenant can tell.
‘He comes screaming to me for help each time something is not working, even though he can approach the management office.’
But Mr Chan pointed out that it is important to understand that a property purchase is an investment, whether it is for rental or owner occupation.
‘A poorly maintained property will bring down the value of the property, resulting in a lower resale price or rental value,’ he said.
While many residents may not make use of the condo facilities, they will still want the pool, gardens and other areas to be well maintained, he said.
For those who do not wish to pay high maintenance fees, Mr Chan’s advice is: Buy units in condominiums that do not have so many facilities or elaborate water features and gardens, which can be costly to maintain.
‘These features and huge pools need water treatment, maintenance and frequent replacement of pumps. There’s also the cost of electricity for running the water features,’ he said.
Generally, the cost of maintenance is ‘directly proportional’ to the number of facilities that a condo has.
‘The fees at condos with elaborate clubhouses, air-conditioned karaoke and reading rooms, multi-purpose halls, saunas and bowling alleys are definitely going to cost more,’ Mr Chan said.
Buyers should know that these facilities require not only maintenance, but also the replacement of equipment.
The typical fees for a mass market condo unit with full facilities can be about $250 a month. But the fees for luxury condo units in districts 9 and 10 such as
Ardmore Park, Draycott 8 and The Claymore can be around $1,000 a month or more.
For instance, the monthly fee for the smallest unit at Draycott 8, said an owner, is $1,070. Draycott 8 owners are also paying for a concierge service, Knight Frank said.
Many properties in districts 9, 10 and 11 are kept for investment, and their owners are thus more willing to spend on maintenance, it said.
The fees in mass market condos are usually much lower as these tend to appeal to HDB flat upgraders, who are used to paying a moderate fee, it added. These are generally larger developments with many units, and the fee per unit is therefore lower because of economies of scale. Also, the standard of services provided can be expected to be lower than that in high-end condos.
For instance, a guard at the main entrance can cost $10 a unit for a 200-unit condo, or $20 a unit for a 100-unit condo, Mr Chan said.
Also, the fees are definitely higher in estates that boast private lifts for every unit, for example.
Condos with private lifts and air-conditioned lift lobbies can cost owners at least $150 more a month in fees.
Those buying new condos can get an estimate of the monthly fees from the developer. At the recent launch of The Minton, a large suburban condo in Lorong Ah Soo, maintenance fees have been estimated at $190 to $350 a month, depending on the size of the unit.
The fees in a private development are set by members of its management corporation strata title-owners who have been duly elected by the rest of the owners.
Besides maintenance fees, there is also the contribution to the sinking fund, which goes towards major expenses incurred in repairs and replacements like repainting the external walls, re-roofing and replacement of pumps.
Average Rates
Here is a rough guide to average condo maintenance fees per month:
· Mass market condos with more than 200 units: $200 to $300
· Mid-tier condos with fairly large grounds: $500 to $700
· Luxury-end condos: Around $1,000 or more
CKH Strata Management says there is no typical average sum for sinking fund contributions, though mass market condo owners usually contribute about $250 to $350 a month for maintenance and to the sinking fund.
Saturday, August 7, 2010
Plotting a balance
Letter from Hwang Yu-Ning Group Director (Physical Planning) Urban Redevelopment Authority
IN HIS Property commentary “Time to relook plot ratios” (July 30), Today editor-at-large Conrad Raj commented that the plot ratios in Singapore could be less restrictive and suggested that plot ratios should be raised for popular areas. The writer also queried the need to restrict the height of developments.
The URA agrees with the writer that land is a valuable resource in Singapore. Optimising the use of land is key to our land use planning. We want to assure Mr Raj that our general practice has indeed been to accord higher plot ratios to developments in locations within and near the Central Business District and near MRT stations.
Nonetheless, optimising land use does not necessarily mean that every piece of land should be built up to the maximum height and plot ratio. There are wider considerations when determining the appropriate plot ratios and height for a particular area.
Variation of plot ratio and building height is adopted to provide choices and confer character to an area. This is an important consideration to ensure a quality living environment for Singapore residents. For instance, providing a variety of housing types in terms of density mix gives people the choice to live in a high, medium, low-rise development, or in a landed home.
Together with our partner agencies, the URA takes a holistic perspective to ensure that intensification of land use is in tandem with the growth and the efficient use of our public infrastructure, such as roads and rail lines. We also ensure that development and intensification are not done at the expense of the quality of the living environment. Raising the plot ratios of too many land parcels in a particular area can lead to overcrowding and severe traffic congestion in the area.
The writer also noted that a development charge may be imposed on developers and architects who exceed the plot ratio stipulation in their designs. We would like to clarify that development charge leviable is not based on the plot ratio stipulation, but the enhancement in land value above the approved development.
Beating high COVs
Source : Straits Times – 7 Aug 2010
Targeting older flats and those in less popular areas can mean paying well below the high cash-over-valuation prices
When homebuyer Ng Hui Hui and her husband, Mr Edwin Soon, read newspaper reports of how median cash-over-valuation (COV) prices hit a high of $30,000 recently, they heaved a sigh of relief.
This may seem a surprise, given that having to fork out a higher cash premium to snare that home-sweet-home resale flat is a hot topic among property purchasers.
However, the couple were not being perverse – the pragmatic pair were just glad that they managed to nab a home with a COV that was under $30,000.
COV is the cash amount paid upfront by a buyer over a flat’s valuation by the Housing Board, and is not covered by a bank loan.
The Soons, who have been married for two years, got the keys to their five-room HDB resale flat in Sengkang last month. They paid $448,000, inclusive of $28,000 COV.
Ms Ng, 30, a corporate communications specialist, says that while $28,000 is way above their budget of $20,000 COV, ‘it is a small blessing that we paid less than what is the norm for this area’.
According to HDB resale transactions, the median COV for a five-room flat in Sengkang is $35,000.
The couple have been house-hunting for the past nine months and say they saw more than 100 resale flats.
They did not want new flats – which are sold directly by HDB and do not involve paying COVs – as they did not want to wait about three years to get their keys.
‘When we told agents that our budget was $20,000 COV, they told us it would be impossible to find a flat,’ says Mr Soon, 32, a program manager.
An Hougang maisonette that they viewed came with an asking price of $150,000 COV. A ground-floor unit in Bedok had a low $7,000 COV, ‘but we do not like ground-floor units as they offer little privacy’, says Ms Ng.
In the end, the couple settled for their fourth-floor, seven-year-old flat in Sengkang, which comes with floor-to-ceiling windows, white floor tiles and is opposite a primary school.
‘It will be convenient for our daughter, Charlotte, to enrol there,’ says Ms Ng.
The couple had set aside $40,000 for COV and renovation works. They now have a roof of their own over their heads, but they cannot move in yet.
With the higher COV price that they paid out of their savings, renovations will have to wait. Works they want done include upgrading the kitchen, which can be costly.
‘We will have to renovate our home in stages,’ says Ms Ng. Meanwhile, they will continue to live with Mr Soon’s parents in a terrace house in East Coast Road.
The $30,000 median COV figure was for resale cases registered with HDB in the second quarter of this year. It was a $5,000 increase on the previous quarter.
Typically, the agreed price for a HDB resale flat includes a cash premium on top of the official valuation determined by an HDB panel of independent professional valuers. It is an amount that a seller wants over and above the valuation.
However, there is some small cheer for disheartened home-hunters: Property experts that Life! spoke to say it is possible to find resale flats whose owners are not asking for such large cash amounts upfront. The caveat: Be prepared for the flat to come with less than ideal conditions, such as a less popular location and advanced age.
COV unlikely to top $35,000, say experts
Sales manager Alan Wong, 44, paid $26,000 COV for his three-room flat in Boon Lay. It is not a central location, but he says the COV paid is ‘reasonable, as it is on the 17th floor, a corner unit and nicely upgraded’.
Mr Eric Cheng, chief executive of ECG Property, says it is possible to find a flat for $15,000 COV in Jurong. Four-room flats in areas such as Choa Chu Kang, Pasir Ris, Woodlands and Jurong East come with a COV lower than $30,000 (see table).
Mr Lim Yong Hock, senior vice-president at PropNex, recalls a recent deal where a three-room flat in Ang Mo Kio sold with a $15,000 COV. ‘In today’s market, $15,000 is low,’ he says.
Despite the flat being nearly 30 years old and not on a floor with a lift landing, ‘the buyer bought it because other units in the area were going for $40,000 COV’. On the other hand, some COVs have soared way above the latest median, as much as several times that figure.
Mr Cheng’s firm recently brokered a deal for a rare penthouse maisonette in Bishan. The buyer, who declined to be interviewed, paid $170,000 COV for it. ‘He saw the flat, loved it and was willing to buy it even before he sold his former five-room flat,’ says Mr Cheng.
But before sellers rub their hands in glee at the prospect of seeking sky-high cash premiums, Mr Eugene Lim, ERA Asia-Pacific associate director, says that ‘$100,000 COV is very rare, usually one- off cases and usually for flats on very high floors’.
PropNex’s Mr Lim says that these days, ‘it is natural for the seller to ask for $40,000 to $50,000 COV because buyers are willing to pay’.
Ms Tay Yi Ling, 36, a senior manager, agreed to fork out $38,000 COV for her three-room flat in Bedok North, despite finding the amount on the high side.
‘It is a corner unit, big for a three- room flat, and it is right next to my parents’ flat,’ she says.
The highest median COV record on HDB’s books is $42,000 in 1996, when the property market was at its peak.
Mr Chris Koh, director at Dennis Wee Group, says ‘paying for high COV is becoming a norm now, but it should not keep rising’.
Property experts interviewed all say that median COV prices are unlikely to go higher than $35,000 in the next quarter of this year.
‘Once the threshold is hit, buyers just won’t pay,’ says Mr Koh.
Property agent Vincent Koh, who runs his own firm, MindLink Vincent Koh, says that with more new flats being launched, prices of resale flats and COV amounts will stabilise.
The HDB launched almost 9,000 new build-to-order flats in the first half of the year and will launch another 7,200 in the second half. The total amounts to 80 per cent more than last year’s number.
In addition, there are about 4,700 new flats under the design, build and sell scheme and the executive condominium housing scheme. In the pipeline are four more executive condominium sites in Punggol, Pasir Ris, Bukit Panjang and Tampines, which should yield 1,900 units.
However, despite more new flats on the market, some potential buyers say they will stick to hunting in the resale market.
Among them is tax officer Joanne Chang, 36. She has a flat in Sengkang, but spends most of her time at her mother’s home in Hougang.
She is on the hunt for a four-room flat in Hougang. ‘I want to live near my mum and also be near the school where I hope to enrol my daughter in next year,’ she says. She has viewed three flats since she began her home search a few weeks ago.
‘Most sellers are asking for a COV of $35,000 to $50,000, which I find steep. But I’m willing to fork out that sum if I like the unit,’ she says.
Account director Joseph Yeo and his consultant wife, Ms Hing Ying Ling, are also flat-hunting. They now live with his parents in an executive flat in Jurong East, but want to have a home of their own. Private housing is not an option as the couple find the prices too high and their joint income exceeds the $8,000 ceiling set for new HDB flats.
‘Our budget for COV is $30,000 or less,’ says Mr Yeo, 35.
They have seen more than 20 flats this year, in areas such as Clementi, Jurong East, Delta and Cantonment.
He says there are flats in Jurong East that fit his budget, but ‘it is a real hassle to drive to work in town daily’.
They recently viewed a four-room, 75 sq m flat in Cantonment Close where the seller was asking for $50,000 COV. ‘But it was just too small for our liking,’ says Ms Hing.
One of the more expensive flats they saw was in Clementi, which came with a $100,000 premium. ‘That is way beyond our budget,’ says Mr Yeo, who does not think he is being too picky. ‘A flat is a long-term investment.’
Mr Roy Varghese, foundation adviser and director at Ipac Financial Planning Singapore, advises buyers to do their sums before coughing up any cash.
He suggests dividing the premium over 10 years to see if they can afford it. ‘If not, buyers should be realistic and consider other flats that are cheaper but are in less central locations or are smaller in size, or even give up their cars, as a flat is a long-term asset,’ he says.
‘You must do your maths, and not depend on agents to tell you whether or not to buy.’
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