singapore property weekly issue 185
DESCRIPTION
In this issue:- Property Valuation – Valuing Leasehold Property- Singapore Property News This Week- Resale Property Transactions (November 19 – November 25)TRANSCRIPT
Issue 185Copyright © 2011-2014 www.Propwise.sg. All Rights Reserved.
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CONTENTS
p2 Property Valuation – Valuing Leasehold
Property
p8 Singapore Property News This Week
p12 Resale Property Transactions
(November 19 – November 25 )
Welcome to the 185th edition of the Singapore Property Weekly.
Hope you like it!
Mr. Propwise
FROM THE
EDITOR
SINGAPORE PROPERTY WEEKLY Issue 185
Page | 2Back to Contents
By Gerald Tay (guest contributor)
Suppose you intend to buy a leasehold
property with 30 years or less remaining on
its lease – how would you know whether it is
worth the price you are paying? Or put in
another way, what price justifies your making
the purchase?
This is the thrust of this final article on
Property Valuation.
Valuing leasehold properties is more
complex
Previously, we‟ve covered critical financial
ratios to measure the worth of a property.
This is straightforward for freehold properties.
Property Valuation – Valuing Leasehold Property
SINGAPORE PROPERTY WEEKLY Issue 185
Page | 3Back to Contents
But for leasehold properties, the answer is
more complicated due to their limited „shelf-
life‟.
The following is the typical tenures for
different types of leasehold property:
Residential – 99-year
Commercial – 99-year
Industrial – 60- or even 30-year
However, we need to know that the real
tenure does not equal the leasehold period
remaining. Leasehold properties seldom
maximise their entire lease tenures. After 35
to 40 years, the vast majority of leasehold
properties are demolished and rebuilt with
their leases topped up.
Therefore, when valuing property, we need to
be more aware of the „Real‟ or „Practical‟
tenure of the property. For our valuation
purposes, here‟s a general rule for the
„Practical‟ or „Real‟ tenure of different kinds of
properties:
Residential – 40 years
Commercial – 60 years or remaining tenure,
whichever is lesser
Industrial – Remaining tenure
Never bank on ‘en-bloc’ as a profit
strategy
We should remember that there‟s no certainty
a property will be granted an extension on the
lease (top-up) by the Singapore Land
Authority (SLA).
Thus, we should never bank on collective
sales or „en-bloc‟ as a profit strategy. There‟re
many instances where forced „en-bloc‟ sales
are unprofitable for some people.
SINGAPORE PROPERTY WEEKLY Issue 185
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Example: Comparing different leasehold
properties
Mr Lim has short-listed three properties with
different leasehold tenures for consideration,
as illustrated in Table 1 below.
I‟ve simplified and removed the financial
calculations (which need a financial calculator
to be derived) to aid in your understanding.
Table 1: Comparison of three properties
The learning points from Table 1 can be
summarised as follows:
Compared with Properties A and B,
Property C has a lower Net Operating
Income (NOI) and a lower tenure with
only 20 years left on the lease. We can
thus derive that Property C is the best
value for money, with the highest ROE of
251.82%
It‟s important to derive the actual Present
Value/Worth of the property using the
Time Value of Money – money now is
more valuable than money later on.
Property C‟s asking price is closest to the
actual Present Value/Worth – its POV is
the lowest.
SINGAPORE PROPERTY WEEKLY Issue 185
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Based on our calculations in Table 1:
We can negotiate for a lower price. We
don‟t ask for the sake of asking and
neither do we become „cheap‟ in our offer
and lose the deal.
We‟ve a clear target price to work on - if
the asking price is far from our target
price or if we don‟t get it, we simply walk
away from the deal.
Example: Long Term Rental Increments
Let‟s inject more realism into our valuation by
adding some rent increases rather than
keeping it fixed for the entire lease tenure.
Do be prudent and realistic on the rent
increases, even though rents do go up in
general over time. Table 2: Comparison of three properties
including rent increases
SINGAPORE PROPERTY WEEKLY Issue 185
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The learning points from Table 2 can be
summarised as follows:
We use dollar value for rental increments
for simplicity.
A percentage rate increase may suffer
from a compounding/cumulative effect
and cause unrealistic projections 30-40
years into the future.
We‟ve to compare at least 2 or more
properties to effectively make an objective
buying decision.
Property C is still the best value for
money with the highest ROE return, even
with periodic rent increments.
Conclusion
As a conclusion for the entire Property
Valuation series, I would like to emphasize
how using critical financial metrics and ratios
provides clarity for owners, buyers, sellers or
investors in the form of:
Conceptual clarity: A number of different
yield metrics exist on the market – it is
important to be clear about how the
specific terms are defined.
Operational clarity: To have a clear
overview of rental incomes, operating
costs and property values for the ordinary
buyer/seller.
Finally, do remember that:
Reported yields can be “manipulated” by
choosing metrics and massaging
estimates of uncertain factors that are
favourable to the people with vested
interests.
We should be clear about the purpose for
which each yield metric is used.
SINGAPORE PROPERTY WEEKLY Issue 185
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The most important distinction is between
using yields/income/price returns for
ownership purposes and using yields as
benchmarks or bubble indicators for
investors.
Always have a clear view of the property‟s
price-income-yield ratio. For example,
how it relates to the real return on other
investments, inflation levels, risks and
expectations for both buyers and sellers.
By guest contributor Gerald Tay, who is the
founder and coach at CREI Academy Group
Pte Ltd, an organization dedicated to
empowering retail property investors with
smarter investing philosophy and strategies.
He is a full-time investor with over 13 years of
solid experience in building his wealth
through Property Investment and is financially
wealthy today.
SINGAPORE PROPERTY WEEKLY Issue 185
Singapore Property This Week
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Residential
HDB resale prices fell by 0.8%
According to the Singapore Real Estate
Exchange (SRX), resale prices of HDB flats
have fallen by another 0.8 percent in
November, and have fallen by 6.3 percent
year-on-year from November 2013 to
November this year. This is the lowest in the
last 40 months. Market experts believe that
prices will continue to slip due to the
completion of new BTO flats and executive
condominiums. In November, 1,350 units
have changed hands. This is a 13.1 percent
month-on-month fall from the October.
Mohammed Ismail from PropNex said that
demand for HDB flats have been weak hence
threatening resale prices. Eugene Lim from
ERA Realty added that the fall in prices is
due to the implementation of cooling
measures such as the Mortgage Servicing
Ratio.
(Source: Business Times)
Supply for private housing land expected
to shrink
Due to weak market sentiments, market
experts believe that the government will cut
the land supply of private housing on the
confirmed list for the first half of 2015. Alan
Cheong from Savills Singapore said that the
reduction in land sales for private housing will
be in line with the shrinking demand in the
residential market.
SINGAPORE PROPERTY WEEKLY Issue 185
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In H2 this year, 3,915 private homes were
released in comparison to the 4,630 units
released in H1 this year. Market experts
predict that the H1 2015 confirmed list will
consist of 1,900 units to 3,700 private home
units. Nonetheless, market experts believe
that at least one office site will be put up for
tender on the Government Land Sales
Programme for the first half of next year.
Experts predict that that site will likely be
located in the suburbs so as to increase office
space supply. Ong Choon Fah from DTZ
predicts that more mixed-use development
sites will be allocated near MRT stations.
(Source: Business Times)
BTO flats to be launched in Bidadari next
year
According to Minister for National
Development Khaw Boon Wan, 2,200 build-
to-order flats will be released in Bidadari for
the first time next year. Under the Married
Child Priority Scheme, parents or children
living in Toa Payoh will be given priority for
the build-to-order flats in Bidadari. Not only
so, the Ministry of National Development will
be launching another 360 three-generation
flats, including 150 units in Tampines to
support families who want to live with their
parents. Also, another 1,200 new flats will be
released in Tampines North to help those
whose parents or married children are
already living in Tampines.
(Source: Business Times)
GuocoLand will launch a 1,024-unit condo
in Aljunied next year
A 1,024-unit condominium project will be
launched at Aljunied Road early next year.
The 99-year leasehold site,
SINGAPORE PROPERTY WEEKLY Issue 185
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Sims Urban Oasis, will have facilities such as
a childcare centre. The childcare centre,
which is about 300 square metres large, is
able to accommodate about 30 to 50 children.
Cheng Hsing Yao from GuocoLand said that
the condominium project is targeted at a
diverse group of owner-occupiers, ranging
from young couples to multi-generation
families.
(Source: Business Times)
HDB: Resale Price Index will be revised
The HDB Resale Price Index will be reviewed
according to the Minister for National
Development Khaw Boon Wan to accurately
reflect trends in the resale market. According
to Minister Khaw, there is a need to revise the
computation of the Resale Price Index to
include the variety of flat models. Not only so,
the current resale price index does not
account for transactions made in newer towns
such as Punggol and Sengkang. Also,
Minister Khaw believes that the Resale Price
Index needs to be adjusted in order to reflect
the age variance among flat buyers. Eugene
Lim from ERA Realty believes that the
changes in the Resale Price Index will
increase the index‟s sensitivity to price
movements.
(Source: Business Times)
Commercial
Holland Road site will not have strata-
titled shops and offices
A mixed-development site at Holland Road
will be launched on the Government Land
Sales reserve list. Strata-titled shops and
office units will not be allowed at the site. The
site, which has a total of 2.3 hectares will be
sectioned into two zones.
SINGAPORE PROPERTY WEEKLY Issue 185
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Zone 1 is reserved for residential use and can
be developed into a maximum of 570 units.
On the other hand, Zone 2 is slated for
commercial and service apartment use. Zone
2 can also be developed into retail and office
units. The maximum gross floor area for Zone
2 is 21,000 square meters. However, only
13,500 square meters can be developed for
retail use, said a spokesperson from URA.
This is to maintain the quality of the site and
its public spaces. Ong Choon Fah from DTZ
predicts that the site will attract many
developers due to its uniqueness and prime
location. Desmond Sim from CBRE added
that he expects that the site will generate
about 8 to 12 bids. He also predicts that the
winning bid would be at least $1,200 psf ppr.
(Source: Business Times)
Attractiveness of Singapore’s property
market falls to 9th in Asia
According to a report by PwC and Urban
Land Institute, the attractiveness of the
Singaporean property market has fallen from
the 7th position to the 9th in Asia. This comes
as no surprise as the government have been
implementing cooling measures to slow the
increase in property prices. Nonetheless,
Yeow Chee Keong from PwC believes that
the Singaporean market is still going strong.
He expects an increase in demand for
commercial space next year. The report
added that other countries such as Hong
Kong and China have also experienced an
outflow of property investments, into other
markets such as Australia.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 185
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Non-Landed Residential Resale Property Transactions for the Week of Nov 19 – Nov 25
NOTE: This data only covers non-landed residential resale property
transactions with caveats lodged with the Singapore Land Authority.
Typically, caveats are lodged at least 2-3 weeks after a purchaser
signs an OTP, hence the lagged nature of the data.
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
3 QUEENS 1,195 1,450,000 1,214 99
4 SEVEN PALMS SENTOSA COVE 6,910 28,550,000 4,131 99
5 VARSITY PARK CONDOMINIUM 2,271 2,050,000 903 99
5 DOVER PARKVIEW 969 1,010,000 1,043 99
5 MONTEREY PARK CONDOMINIUM 1,625 1,700,000 1,046 999
5 MONTEREY PARK CONDOMINIUM 1,625 1,780,000 1,095 999
8 PARC SOMME 355 600,000 1,689 99
10 DUCHESS CREST 936 1,298,000 1,386 99
10 CITY TOWERS 1,550 2,200,000 1,419 FH
10 BOTANIC GARDENS MANSION 1,755 2,700,000 1,539 FH
10 ONE TREE HILL RESIDENCE 2,454 3,850,000 1,569 FH
10 THE MARBELLA 1,744 2,750,000 1,577 FH
10 GOODWOOD RESIDENCE 1,970 4,880,000 2,477 FH
11 LA SUISSE 2,110 2,300,000 1,090 999
11 AMARYLLIS VILLE 1,238 1,938,000 1,566 99
12 EURO-ASIA APARTMENTS 1,722 1,500,000 871 FH
12 D'LOTUS 807 950,000 1,177 FH
14 ASTORIA PARK 958 898,000 937 99
15 LAGUNA PARK 1,615 1,200,000 743 99
15 VILLA MARINA 1,658 1,250,000 754 99
15 TIERRA VUE 2,067 2,420,000 1,171 FH
15 OCEAN PARK 1,302 1,600,000 1,228 FH
15 WATER PLACE 1,561 1,919,888 1,230 99
15 COTE D'AZUR 840 1,100,000 1,310 99
15 HAIG 162 355 665,000 1,872 FH
16 CHANGI GREEN 1,335 1,200,000 899 FH
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
16 BAYSHORE PARK 2,196 2,300,000 1,047 99
16 COSTA DEL SOL 1,238 1,770,000 1,430 99
17 CARISSA PARK CONDOMINIUM 1,324 1,030,000 778 FH
17 CARISSA PARK CONDOMINIUM 947 915,000 966 FH
17 ESTELLA GARDENS 657 685,000 1,043 FH
19 KOVAN ESQUIRE 1,001 968,000 967 FH
19 KOVAN MELODY 1,292 1,390,000 1,076 99
19 FONTAINE PARRY 1,507 1,740,000 1,155 999
20 BISHAN PARK CONDOMINIUM 1,324 1,000,000 755 99
20 THE GARDENS AT BISHAN 883 955,000 1,082 99
21 PINE GROVE 1,755 1,500,000 855 99
21 THE HILLSIDE 1,776 1,800,000 1,013 FH
21 SIGNATURE PARK 1,055 1,150,000 1,090 FH
21 THE NEXUS 614 1,000,000 1,630 FH
22 LAKEHOLMZ 1,507 1,356,000 900 99
22 THE CENTRIS 1,152 1,150,000 998 99
22 THE CENTRIS 936 1,070,000 1,143 99
22 THE CENTRIS 1,066 1,260,000 1,182 99
23 MI CASA 1,259 1,170,000 929 99
25 PARC ROSEWOOD 969 999,000 1,031 99
27 THE ESTUARY 1,302 1,030,000 791 99