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CONTENTS
p2 Mr. Propwise’s 2015 Singapore Property
Market Outlook
p9 Singapore Property News This Week
p13 Resale Property Transactions
(December 9 – December 16 )
Welcome to the 188th edition of the Singapore Property Weekly.
Hope you like it!
Mr. Propwise
FROM THE
EDITOR
SINGAPORE PROPERTY WEEKLY Issue 188
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By Mr. Propwise
How quickly yet another year has flown by.
It’s that time of the year where I look back at
what’s happened over the past twelve
months, then try and say something intelligent
about the future direction of the property
market over the next year.
As always, 2014 was an interesting year for
the property market. I’d sum it up as “the year
when policy finally worked.” In 2013, despite
seven rounds of cooling measures and a
property tax hike,
Mr. Propwise’s 2015 Singapore Property Market Outlook
SINGAPORE PROPERTY WEEKLY Issue 188
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the residential property market simply
shrugged it off for the first three quarters,
resulting in the URA Property Price Index
(PPI) clocking a positive 2.0% move.
TDSR – the straw that broke the property
market’s back
But the figurative straw that broke the camel’s
back was the MAS’ Total Debt Servicing Ratio
(TDSR) framework introduced at the end of
June 2013, which significantly limited the
ability of buyers to lever up and buy property
despite the signs pointing to an overheated
and overpriced market. Really, the MAS was
just trying to save buyers from themselves
(sometimes there are benefits to living in a
nanny state).
This final straw then led to four consecutive
quarters of decline of the PPI from 2013Q4 to
2014Q3 for a total decline of 3.9% over this
period. This figure likely understates the
magnitude of the decline as we know that
developers have been offering all kinds of
incentives (e.g. tax rebates, renovation
vouchers etc.) to get buyers to bite without
having to lower the headline price.
How much further will the property market
fall?
Looking at monthly property indices such as
the SRX Property Index (SPI) and the NUS
Singapore Residential Price Index (SRPI)
suggests that the Fourth Quarter of
2014should to continue to be weak, although
the decline is likely to be small.
And despite the warning, threatening and
finally pleading of the property developers
and agents, the government is right – the
correction of property prices so far has been
very mild.
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Figure 1 – Change in URA PPI since 2000
(Source: URA,
PropertyMarketInsights.com)
The million dollar question is – what does the
government think a “meaningful” correction
is? It’s important because they’ve indicated
that the property cooling measures are here
to stay until such a correction has occurred.
We can get some clues from the previous two
corrections that occurred from 2000 to 2004
and then more recently from 2008 to 2009
during the Global Financial Crisis. During
those downturns, the URA PPI corrected by
19.9% and 24.9% respectively. So if I had to
hazard a guess, I’d say we’d have another 10
to 20 percent more downside to go before the
government would deem the correction to be
“meaningful” and start easing some of those
measures.
3 reasons why the market will continue to
be weak in 2015
There are three reasons why the current
market weakness is likely to continue into
2015 and beyond.
First, the HDB Resale Price Index (RPI) has
continued to decline and has been weaker
than the URA PPI since 2013Q2. A doubling
of HDB prices since 2005 created a “wealth
effect” that supported mass market prices as
SINGAPORE PROPERTY WEEKLY Issue 188
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HDB flat owners could sell their unit at a high
price and upgrade to a private condominium.
Now that HDB prices are falling, this effect
will shift into reverse gear, where HDB
owners find it difficult to sell their flat at a
good price, thus sapping demand from the
mass segment of the market, which
incidentally has been the strongest segment.
Figure 2 – URA PPI vs HDB RPI (Source:
URA, HDB, PropertyMarketInsights.com)
Second, record upcoming completions are
likely to put pressure on both property prices
and rentals, especially coupled with slower
expected population growth as the
government continues to tighten the inflow of
foreigners coming into Singapore due to the
locals’ unhappiness. Conspiracy theorists
posit a loosening of the foreign talent spigot
post a surprise 2015 General Election, but
really, who knows?
Based on URA data, there are close to
75,000 units of private residential properties
that will be completed in the next few years.
Looking at the breakdown of supply, 2015
and 2016 will see completions of over 20
thousand units per year. This is nearly twice
the yearly average of fewer than 10 thousand
units per year between 1996 and 2012.
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Figure 3 – Upcoming private residential
supply (Source: URA,
PropertyMarketInsights.com)
And if we add on the completions of public
housing, the upcoming supply tsunami looks
daunting.
Prospects of QE tapering
Finally, we should keep in mind that the root
cause of the buoyant property prices is the
protracted low interest rate environment after
multiple rounds of Quantitative Easing (QE)
by the US Federal Reserve post the Global
Financial Crisis. This has propped up the
prices of most yield-based assets, including
property. While the Fed has indicated a gentle
pace of QE tapering, the market reaction to
any significant tightening of liquidity could be
stronger and more violent than people expect.
Figure 4 – URA PPI vs 3-Month SIBOR
(Source: URA,
MAS,PropertyMarketInsights.com)
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And even if interest rates do not shoot up
right away, borrowing costs can still rise as
banks charge a higher margin (SIBOR + X%)
to give themselves a buffer against rising
interest rates and greater mortgage
defaults.And when borrowing costs rise, the
stress on heavily leveraged buyers will go up,
and the attractiveness of property itself as an
asset class also decreases as the net
cashflow it provides falls. This will be
exacerbated if rentals are also under
pressure at the same time.
I’ve talked about this before, but I think many
property buyers are still blasé to the impact of
rising mortgage rates (whether from rising
interest rates or banks raising their lending
spread) on their ability to meet their monthly
payments, so I hope to make it more concrete
by using an example.
Let’s take the case of the Lees, a young
professional couple who bought their dream
condo for $2 million (before the TDSR rules
came into effect). They took an 80% loan
($1.6 million) with a 30-year tenor. With the
current low floating mortgage rate of 1.2%,
their monthly payment is $5,294, a
manageable 50% of their total household
income.
Fast forward a couple of years, when the Fed
has raised rates and mortgage rates in
Singapore have returned to their long term
average of around 4%. The monthly payment
will get re-priced upwards to $7,639, and now
accounts for a hefty 72% of their household
income (assuming no pay increments). This
represents a 44% increase.
The Lees are starting to sweat, and are
barely making ends meet. And Lord forbid if
either of them were to lose their job. Not to
mention that this rise in rates is coupled with
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weak rentals and record completions, and
property prices falling every quarter.
Have you imagined such a scenario
happening to you?
So what should buyers and investors do?
I do not like making forecasts about when or
how much property prices will fall, because I
believe the exact timing and magnitude of
property price movements is dependent on
too many unknowable events. Instead, I
prefer to base my property investment
decisions (there are different considerations if
you are buying for own stay) on my analysis
of where we are in the cycle and what has
historically been the best actions to take at
each point.
Members of Property Market Insights will
know that we are currently in the Early Bear
stage of the Property Market Cycle Model.
This means that the best thing to do is to sit
tight and wait for further correction before
entering. The time to buy will come when we
enter the Late Bear and Early Bull stages of
the market. You might have to wait for years,
but it’s much better than giving in to the
pressure to buy now at a high price and then
see your life savings get wiped out, don’t you
agree?
Here’s wishing everyone a Happy New Year
and a Healthy and Wealthy 2015!
By Mr. Propwise, the founder of Singapore
property blog www.propwise.sg, which aims
to help people make better real estate buying,
selling, renting and investing decisions.
SINGAPORE PROPERTY WEEKLY Issue 188
Singapore Property This Week
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Residential
More properties sold at auctions in Q4
According to JLL, properties at auctions sold
at a faster rate in Q4 as compared to the
previous quarters. JLL said that as buyers’
and sellers’ expectations converge, property
sales at auctions have picked up in 2014. In
its report, JLL said that to meet buyers’
expectations, sellers have been more willing
to lower their prices. In Q4 this year, the
proportion of properties sold during their first
auction listing has increased to 90 percent
from 80 percent in Q3. As such, $13.7 million
worth of properties were sold at auctions in
Q4 this year. However, this year, the total
sales value of properties sold at auctions fell
by 27 percent from that in 2013 to $72.5
million. Nonetheless, Mok Sze Sze from JLL
is optimistic about property sales at auctions
in the coming year. She believes that there
will be a steady increase in mortgagee sales.
Despite the weak leasing market, buyers’
investment sentiments have not been
affected, added Mok.
(Source: Business Times)
Commercial
Centurion and LianBeng Group
collaborates to build workers’ dorm
In collaboration with Centurion Corporation,
LianBeng Group will build a 7,900-bed
dormitory at JalanPapan.
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This dormitory will be catered to workers from
the process industry, and it will include a
3,000 sq metre training centre for residents of
the dormitory. The dormitory is expected to be
about 1.5 ha and should be completed by
2016. It will be located near Jurong Island so
that workers may commute to work easily.
The tender for the dormitory was awarded by
Association of Process Industry (Aspri), which
aims to increase productivity of workers
through skills upgrades and other training.
(Source: Business Times)
Two tenders awarded for industrial sites
An industrial site at Tuas South Street 9 and
another at Tampines North Drive 1 has been
awarded by JTC Corporation to Prospaq
Group and Goldprime Land respectively. The
former plot was awarded for $6.88 million
while the latter plot of land was awarded for
$64.4 million. The industrial site at Tuas is
zoned for Business 2 use and has a gross
plot ratio of 1.0. It is 8,369 sq metres large
and has a 20-year-and-8-months tenure. On
the other hand, the industrial site at Tampines
is larger at 27,395.2 sq meters. It has a gross
plot ratio of 2.5 and its tenure will last 30
years.
(Source: Business Times)
DTZ expects rental demand for small retail
units to fall
According to DTZ, rental demand for smaller
retail units may fall as competition from e-
retailers heightens. Furthermore, DTZ
predicts the low labour supply and tough
operating environment will affect rental
demands for such retail units. Nonetheless,
capital values of strata retail space increased
by 1.3 percent in 2014 from 2013 in
SINGAPORE PROPERTY WEEKLY Issue 188
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Orchard/Scotts Road and other suburban
areas, said the Business Times. This is
despite the implementation of the total debt
servicing ratio. However market experts
caution that rentals for retail space may fall
further in Q4 this year due to reduced
shopper traffic particularly in the financial
districts. According to DTZ, the gross fixed
monthly rental value for Orchard/Scotts Road
has fallen by 0.3 percent to $30.03 psf in Q4
this year from the previous quarter. Similarly,
the rental value of units in the other city areas
have also fallen by 0.7 percent quarter-on-
quarter to $17.98 psf in Q4 from Q3 this year.
Ong ChoonFah from DTZ said that the limited
supply of new units in the Orchard/ Scotts
Road area may have contributed to the
relatively better retail rents compared to retail
units in the other areas. Not only so, Orchard
Road is a known tourist destination and as
such is expected to command a higher rent
compared to the suburban areas.
(Source: Business Times)
Gross floor area for medical clinics to be
capped at 20%
Medical clinics that are located in commercial
developments will not be allowed to expand
beyond 3,000 sq meters or 20 percent of the
total floor area that has been approved for
commercial use, whichever is lower. This new
guideline has since been effective according
to a circular issued by the Urban
Redevelopment Authority (URA) and the
Ministry of Health (MOH). Nonetheless,
existing medical clinics and formal planning
applications that were submitted before Dec
23 this year will not be affected by the new
guidelines.
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This new guideline aims to prevent
commercial buildings from turning into de
facto medical centres. According to the
circular, medical centres need to be located at
sites that are zoned for that specific use.
Nicholas Mak from SLP International said that
this new guideline will help to regulate the
supply of medical centres in commercial
buildings and will help to optimise the use of
the space.
(Source: Business Times)
Bid for TanjongPenjuru site won by UBTS
A logistic and warehousing company, UBTS
Pte Ltd won the highest bid for a site at
TanjongPenjuru at $9.3 million. The 1.6 ha
site has a 20-year tenure and is zoned for
Business 2 use. It also has a plot ratio of 2.5.
Nicholas Mak from SLP International believes
that UBTS will be relocating its operations to
the new site. Other tenders that have closed
recently include a site at Tuas South Street 9
that was won by Asiaone Logistics and
Warehousing Pte Ltd for $78.13 psfppr; and
another site at Tampines North for $87.34
psfppr.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 188
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Non-Landed Residential Resale Property Transactions for the Week of Dec 9 – Dec 16
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
3 RIVER PLACE 797 1,320,000 1,657 99
4 REFLECTIONS AT KEPPEL BAY 1,798 3,650,000 2,030 99
4 CARIBBEAN AT KEPPEL BAY 1,356 2,000,000 1,475 99
5 BLUE HORIZON 1,216 1,425,000 1,172 99
5 HERITAGE VIEW 1,163 1,360,000 1,170 99
5 DOVER PARKVIEW 936 990,000 1,057 99
8 CITY SQUARE RESIDENCES 1,216 1,820,000 1,496 FH
8 CITY SQUARE RESIDENCES 1,518 2,100,000 1,384 FH
9 ESPADA 344 925,000 2,685 FH
9 THE METZ 3,240 6,000,000 1,852 FH
9 WATERMARK ROBERTSON QUAY 893 1,608,000 1,800 FH
9 ST THOMAS SUITES 4,672 7,250,000 1,552 FH
10 NASSIM PARK RESIDENCES 3,477 13,700,000 3,940 FH
10 NASSIM MANSION 2,852 8,362,500 2,932 FH
10 THE GRANGE 2,293 4,200,000 1,832 FH
10 BELMOND GREEN 1,270 2,300,000 1,811 FH
10 GALLOP GREEN 3,272 5,824,160 1,780 FH
11 TEN @ SUFFOLK 1,087 1,549,000 1,425 FH
11 SHELFORD SUITES 3,584 3,800,000 1,060 FH
11 ADAM PARK CONDOMINIUM 1,765 1,663,000 942 FH
12 VISTA RESIDENCES 646 1,060,000 1,641 FH
13 BELLA VISTA 893 910,000 1,019 FH
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
14 THE WATERINA 893 1,015,000 1,136 FH
15 RIVEREDGE 1,604 2,000,000 1,247 99
15 SANCTUARY GREEN 1,281 1,425,000 1,112 99
15 ESTERINA 2,045 1,630,000 797 FH
16 CASA MERAH 1,259 1,530,000 1,215 99
16 CASAFINA 1,238 1,030,000 832 99
18 WATERVIEW 786 850,000 1,082 99
18 LIVIA 915 900,000 984 99
18 CHANGI RISE CONDOMINIUM 1,130 945,000 836 99
18 CHANGI RISE CONDOMINIUM 1,130 900,000 796 99
18 EASTPOINT GREEN 1,173 900,000 767 99
18 RIS GRANDEUR 3,294 2,120,000 644 FH
19 THE QUARTZ 1,141 1,220,000 1,069 99
19 PALM GROVE CONDOMINIUM 1,399 1,420,000 1,015 999
19 COMPASS HEIGHTS 1,324 1,250,000 944 99
19 RIO VISTA 1,238 996,000 805 99
19 EVERGREEN PARK 1,345 1,050,000 780 99
21 PINE GROVE 1,755 1,580,000 901 99
23 TREE HOUSE 1,249 1,250,000 1,001 99
23 MI CASA 1,098 1,030,000 938 99
23 GLENDALE PARK 1,216 1,058,000 870 FH
23 PALM GARDENS 1,216 890,000 732 99
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NOTE: This data only covers non-landed residential resale property
transactions with caveats lodged with the Singapore Land Authority.
Typically, caveats are lodged at least 2-3 weeks after a purchaser
signs an OTP, hence the lagged nature of the data.
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
25 THE WOODGROVE 1,184 868,000 733 99
27 THE ESTUARY 1,119 1,050,000 938 99
27 ORCHID PARK CONDOMINIUM 1,572 1,150,000 732 99
27 EUPHONY GARDENS 1,076 750,000 697 99
28 SELETAR SPRINGS CONDOMINIUM 1,335 958,000 718 99
28 SELETAR SPRINGS CONDOMINIUM 2,077 1,300,555 626 99