singapore property weekly issue 67

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CONTENTS

p2 How Interest Rates and Yields

Affect Property Prices

p8 Singapore Property News This Week

p13 Resale Property Transactions

(August 15 – August 21)

Welcome to the 67th edition of the Singapore Property Weekly. Hope you like it! Mr. Propwise

FROM THE

EDITOR

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SINGAPORE PROPERTY WEEKLY Issue 67

Page | 2 Back to Contents

How Interest Rates and Yields Affect Property Prices

By Mr. Propwise

Interest rates have a significant effect on the

real estate market as they affect both the cost

of taking a mortgage from the bank to fund the

property purchase, and the relative

attractiveness of the property purchase versus

other investment alternatives.

Since the Global Financial Crisis in 2008, we

have been in a very low interest rate

environment with SIBOR below 1%, as

governments around the world have flooded

the markets with liquidity to prevent a second

Great Depression.



This has also had the effect of boosting

property prices as the cost of borrowing has

decreased and affordability has increased.

Given that we’ve been in a low interest rate

environment for over three years now, it might

feel like interest rates will always remain at

such low levels and that low interest rates are

the norm. But we should remember that not

too long ago interest rates were well above

where they are now. We should thus be

prepared for higher rates than the current

unnaturally low levels.

Looking at SIBOR

SIBOR (Singapore Interbank Offered Rate) is

a daily reference rate based on the interest

rates at which banks offer to lend unsecured

funds to other banks in the Singapore

wholesale money market (or interbank

market). Many mortgages in Singapore are

now priced off SIBOR.

From Figure 1.1.3a, we can see that over the

last 25 years, low interest rates were certainly

not the norm.



The 3-Month and 12-Month SIBORs have

been at or above 7% in 1990 and briefly in

1997. More recently the 3-Month and 12-

Month SIBORs were above the 3% level for a

period from 2005 to 2007.

As of June 2012, the 3-Month SIBOR and 12-

Month SIBOR are at or close to their all-time

lows at 0.38% and 0.56% respectively, much

lower than their historical average of 2.71%

and 3.01% since July 1987 (a 25 year

period). What this means is that if interest

rates were to return to their historical

averages, mortgage rates would be closer to

the 4+% level versus the 1+% level at the

time of this writing.

The impact of higher interest rates on

mortgages

To put the implication of this in more concrete

terms, a buyer who takes a 30-year mortgage

loan of $1,000,000 at a 1% rate will pay

$3,216 for his monthly mortgage payment. If

mortgage rates were to rise to 4% he would

have to pay $4,774 instead, or a 48%

increase. For buyers who have

overleveraged, that increase could be fatal.

Thus conservative investors should factor in a

4% mortgage rate level when planning their

property purchases, to ensure that they will

be able to meet their monthly repayment

obligations.

For investors who are looking to buy

properties for rental income, one useful way

to look at the attractiveness of the investment

would be to compare the rental yield of the

property and the prevailing mortgage rate,

and see if they can make a “spread” between

the two.



As of 2012Q2, average estimated yields were

at 3.28% versus an estimated effective

mortgage rate of 1.58%, resulting in a positive

1.70% yield spread (Figure 1.1.3b).

Will higher interest rates lead to lower

property prices?

In short, the answer to the question of

whether higher interest rates will lead to lower

property prices is “not necessarily”. Figure

1.1.3c plots the URA Property Price Index



versus 3-Month SIBOR, and in general if we

look over the entire 25 year period it looks like

the two are negatively correlated (i.e. periods

of falling interest rates seem to correspond to

periods of rising property prices and vice

versa), but the relationship is not tight. There

are several periods of rising interest rates that

have also corresponded with rising property

prices. Interest rates, while a significant factor

to the property market, are only one of

several factors that affect it.

By Mr. Propwise for

PropertyMarketInsights.com, a Singapore

property market research site that helps

buyers and sellers make profitable investment

decisions – subscribers get updates on where

we are in the Property Market Cycle Model to

help you time your investments.

http://propertymarketinsights.com/













http://www.erc.com.sg/eblastimages/pptylanding/pptylanding.html


Singapore Property This Week


Residential

Foreign buyers active in the property

market again

After the decline in foreign buyers following

the ABSD, there are signs that foreign buyers

are becoming active in the property market

again, with the four largest nationalities in Q2

being Malaysians (6.3%), Indonesians

(4.7%), mainland Chinese (4.4%) and Indian

nationals (3.0%). The largest increase came

from the Indonesians, from 247 in Q1 to 391

in Q2, while transactions by the Malaysians,

Mainland Chinese and Indian nationals

increased from 398 to 521, 311 to 365 and

173 to 252 from Q1 to Q2 respectively. From

July to Aug 23, Malaysians took up 7% of

foreign purchase or 120, with the mainland

Chinese, Indian nationals and Indonesians

taking up 6.2% (107), 4.2% (72) and 3.7%

(63) respectively. There were 8,311 deals

transacted in Q2, a 37.2% increase from the

6,059 deals in Q1. Of these transactions,

foreign buying in Q1 and Q2 took up 22.96%

and 23.58% respectively and increased to

27.06% from July to Aug 23. Though demand

from Chinese buyers is high, this could

change as the twice-reduced interest rates

by the Chinese government may attract

Chinese buyers to buy properties back home.

(Source: Business Times)



Demand for shoebox units to fall if singles

allowed to buy new flats

If singles were allowed to purchase new flats

from HDB, there may be a fall in demand in

shoebox units since such units are catered to

mainly singles. However, whether this would

make a big impact depends on the types of

restrictions singles would likely face when

buying HDB flats. For example, an income

restriction may mean continued demand for

shoebox units from those who are unable to

buy flats. The supply of new flats and

potential restriction on flat types singles can

purchase may also affect the demand for

shoebox units.


Suburban condos remain resilient against

downward price pressure

According to National University of

Singapore's Singapore Residential Price

Index (SRPI) series, the overall SRPI fell by

1.1% in the year-to-date. The subindex for

Non-Central Region (excluding small units)

increased by 1.3% between December last

year and July this year, while the subindex of

shoebox units (up to 506 sq ft) islandwide and

the subindex for Central Region (excluding

small units) fell by 0.1% and 3.9%

respectively in the same period. In July, the

overall index fell by 1.1% from June which

had seen an increase of 0.1% while the

subindex for shoebox units (up to 506 sq ft)

islandwide increased by 1.1% after a 0.9%

fall in June. The subindex for Central Region

also fell by 1% in July while the subindex for

Non-Central Region (excluding small units)

fell by 1.3% in July, compared to the 1%

increase in June.




Prices of property near Thomson MRT

Line to rise

Prices of properties near the upcoming

Thomson MRT Line are likely to rise

immediately, though those in the Springleaf,

Seletar, and Lentor area may be the ones to

gain the most increase with those in the

Springleaf/Springside possibly increasing by

10%. Though prices will start to increase by

3-5% now, they will likely increase more by

20-30% over properties that are further away

from the station when the line is near

completion. There is also a possibility that

prices of properties near the major

construction work sites will fall 5-15%.


99-year leasehold Farrer Rd residential

site attracts 14 bids

The 29,509 sq ft plot within walking distance

of Botanic Gardens MRT Station drew a total

of 14 bids with the top bid of $45.777 million,

or $1,107.80 psf ppr from Far East Soho. The

plot with a 1.4 plot ratio can be developed up

to five storeys and can potentially yield 54 70

sq m (753.47 sq ft) units. Far East plans to

develop the site into a development with one

and two-bedroom apartments with high

ceilings. The estimated break-even cost and

average selling price are $1,500-1,600 psf

and $1,800-2,000 psf respectively.


Commercial

Tampines Industrial Crescent site attracts

four bids

The 30-year leasehold 3.88 ha site at Plot 3

Tampines Industrial Crescent attracted four

bids, with the top bid of $55 million, or $77.47

psf ppr from Oxley Bliss.



The site with a maximum permissible gross

plot ratio of 1.7 and a 709,986.8 sq ft GFA is

zoned B2. Located within a bigger wafer

fabrication park, it is permitted for clean

industrial activities that are compatible with

the surrounding wafer fabrication operations.

The four bids are expected given that the site

cannot be strata subdivided and can only be

rented out. A mixture of unit types could be

built on the site, with a two-storey terrace

fetching rents in the range of $1.50-$1.80 psf

and a 3-5 storey terrace fetching rents in the

range of $1.30-$1.50 psf.


Kranji industrial plot sold for $240m

The freehold 466,540 sq ft Business 2

industrial plot located at Jalan Lam Huat, off

Kranji Road is said to have been sold at $240

million or $205 psf per GFA based on the 2.5

plot ratio and 1.17 million sq ft maximum

GFA. There is no development charge

payable for the site. The site consists of six

land parcels and is likely to be redeveloped

into strata industrial facilities and landed

factories.


Confusion over pricing of industrial space

As the ABSD drives some property investors

to the industrial property sector, there had

been some confusion over pricing of industrial

space especially from inexperienced buyers.

This is especially since developers in

Singapore tend to base the psf breakdown of

an industrial unit on the total floor area as well

as the potential mezzanine level that can be

built within a high ceiling unit but does not

offer the mezzanine level upon TOP.

According to a URA spokesman, there have

not been amendments to the rules to address

this since buyers had tended to be



knowledgeable investors from the business

sector until recently. There also had been

complaints that a number of salespeople at

industrial launches were not equipped with

relevant knowledge to sell such properties.

Given the increase in new investors, the

government would probably introduce new

measures to solve this problem, with a rule

requiring a more detailed and accurate

breakdown of each saleable unit by

developers recommended.




Non-Landed Residential Resale Property Transactions for the Week of Aug 15 – Aug 21

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 THE SAIL @ MARINA BAY 861 2,000,000 2,323 99

2 ICON 581 1,098,000 1,889 99

3 THE METROPOLITAN CONDOMINIUM 1,367 1,828,000 1,337 99

3 THE METROPOLITAN CONDOMINIUM 1,356 1,780,000 1,312 99

3 PEARL BANK APARTMENT 1,830 1,768,000 966 99

4 CARIBBEAN AT KEPPEL BAY 1,636 2,640,000 1,614 99

5 VARSITY PARK CONDOMINIUM 1,313 1,450,000 1,104 99

5 BLUE HORIZON 1,163 1,230,000 1,058 99

5 THE INFINITI 1,087 1,110,000 1,021 FH

5 BAYVILLE CONDOMINIUM 1,023 1,025,000 1,002 FH

5 FABER CREST 1,744 1,500,000 860 99

7 SOUTHBANK 614 1,168,000 1,904 99

8 RANGOON VIEW 1,335 1,580,000 1,184 FH

8 KERRISDALE 1,259 1,400,000 1,112 99

9 ORCHARD SCOTTS 2,099 4,100,000 1,953 99

9 LEONIE STUDIO 936 1,750,000 1,869 99

9 WATERMARK ROBERTSON QUAY 893 1,590,000 1,780 FH

9 WATERMARK ROBERTSON QUAY 2,120 3,600,000 1,698 FH

9 PARC EMILY 990 1,680,000 1,696 FH

9 PACIFIC MANSION 1,356 1,850,000 1,364 FH

10 LATITUDE 1,927 4,260,000 2,211 FH

10 ORANGE GROVE RESIDENCES 2,390 4,800,000 2,009 FH

10 ONE TREE HILL RESIDENCE 1,227 2,460,000 2,005 FH

10 BELLERIVE 1,173 1,930,000 1,645 FH

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

10 ASTRID MEADOWS 3,122 5,100,000 1,634 FH

10 SHANGHAI ONE 883 1,350,000 1,529 FH

10 VALLEY PARK 1,701 2,540,000 1,493 999

10 THE ASTON 1,012 1,470,000 1,453 FH

10 CASABELLA 1,948 2,800,000 1,437 FH

10 THE PRINCETON 1,087 1,554,410 1,430 FH

10 SEVEN HOLT ROAD 1,873 2,525,000 1,348 FH

10 GLENTREES 1,345 1,750,000 1,301 999

11 PARK INFINIA AT WEE NAM 560 1,180,000 2,108 FH

11 RESIDENCES @ EVELYN 1,528 2,660,000 1,740 FH

11 DUNEARN GARDENS 1,647 2,800,000 1,700 FH

11 LION TOWERS 1,862 2,980,000 1,600 FH

11 THOMSON 800 1,421 1,800,000 1,267 FH

11 LA SUISSE 2,110 2,500,000 1,185 999

12 NADIA MANSIONS 4,747 4,200,000 885 FH

12 ST FRANCIS COURT 1,227 898,000 732 99

14 DAKOTA RESIDENCES 1,044 1,428,000 1,368 99

14 DAKOTA RESIDENCES 1,313 1,725,000 1,314 99

14 MILL CREEK 1,119 1,250,000 1,117 FH

14 WING FONG COURT 1,098 822,000 749 FH

15 AALTO 2,024 4,020,000 1,987 FH

15 THE WATERSIDE 2,142 3,138,000 1,465 FH

15 THE MAKENA 1,292 1,750,000 1,355 FH

15 ONE AMBER 1,453 1,868,000 1,285 FH



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


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

15 THE ADARA 915 1,135,000 1,241 FH

15 COTE D'AZUR 1,141 1,400,000 1,227 99

15 HAIG COURT 1,399 1,680,000 1,201 FH

15 COTE D'AZUR 1,109 1,330,000 1,200 99

15 COTE D'AZUR 1,679 1,990,000 1,185 99

15 THE MAKENA 1,582 1,770,000 1,119 FH

15 COSTA RHU 2,056 2,056,000 1,000 99

15 THE ARIEL 1,528 1,515,000 991 FH

15 COSTA RHU 2,056 1,953,200 950 99

15 LAGUNA PARK 1,453 1,355,000 932 99

15 COTE D'AZUR 904 800,000 885 99

16 COSTA DEL SOL 1,238 1,360,000 1,099 99

16 THE BAYSHORE 1,227 1,245,000 1,015 99

16 THE BAYSHORE 969 920,000 950 99

16 EAST MEADOWS 1,238 1,155,000 933 99

16 AQUARIUS BY THE PARK 1,206 1,030,000 854 99

16 STRATFORD COURT 1,098 920,000 838 99

17 LOYANG VALLEY 1,841 1,300,000 706 99

18 SAVANNAH CONDOPARK 1,227 1,048,000 854 99

18 THE TROPICA 1,744 1,277,000 732 99

19 SUNGLADE 1,152 1,300,000 1,129 99

19 SUNGLADE 1,141 1,280,000 1,122 99

19 KENSINGTON PARK CONDOMINIUM 1,658 1,728,000 1,042 999

19 THE SUNNYDALE 1,345 1,300,000 966 99

19 COMPASS HEIGHTS 1,238 1,048,000 847 99

19 RIVERVALE CREST 1,163 965,000 830 99

20 FABER GARDEN CONDOMINIUM 2,120 2,500,000 1,179 FH

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

21 MAPLEWOODS 1,335 1,800,000 1,349 FH

21 MEADOWLODGE 1,335 1,612,130 1,208 99

21 ASTOR GREEN 1,087 1,150,000 1,058 99

21 ASTOR GREEN 1,087 1,125,000 1,035 99

21 GRAND CHATEAU 1,259 1,280,000 1,016 FH

21 PARC PALAIS 1,485 1,438,000 968 FH

21 SIGNATURE PARK 1,044 980,000 939 FH

22 THE LAKESHORE 861 935,000 1,086 99

22 IVORY HEIGHTS 1,701 1,150,000 676 100

23 DAIRY FARM ESTATE 1,281 1,325,000 1,034 FH

23 MERAWOODS 1,345 1,300,000 966 999

23 THE PETALS 1,658 1,595,000 962 FH

23 CASHEW HEIGHTS CONDOMINIUM 1,658 1,530,000 923 999

23 HAZEL PARK CONDOMINIUM 1,367 1,250,000 914 999

23 PALM GARDENS 1,206 875,000 726 99

23 NORTHVALE 1,798 1,150,000 640 99

25 CASABLANCA 893 770,000 862 99

25 ROSEWOOD 1,173 900,000 767 99

25 ROSEWOOD 1,173 866,000 738 99

28 MIMOSA PARK 1,755 1,448,000 825 FH

singapore property weekly issue 67

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