Issue 99

Copyright 2011-2012 www.Propwise.sg. All Rights Reserved.

CONTENTS
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Will the Sea Change in HDB Policy Drag Property Prices Down? Property Renting Tip #3: Rental Approval

FROM THE

EDITOR

Welcome to the 99th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

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Singapore Property News This Week

Resale Property Transactions (March 27 April 2)

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SINGAPORE PROPERTY WEEKLY Issue 99

Will the Sea Change in HDB Policy Drag Property Prices Down?
By Mr. Propwise

Over the weekend Housing Minister Khaw Boon Wan gave an interview to the Straits Times, where he spoke about what I believe to be a radical shift in policy for the pricing of new Housing Development Board (HDB) flats. In this article well look at the potential changes and how they could negatively affect property prices, especially in the mass market segment.
HDB to be price-setter, not follower

Historically, the prices of new HDB flats have been pegged to the movements of resale HDB prices, i.e. they followed market-based pricing. This created a vicious (or virtuous, depending on whether you were a potential buyer or a home owner) cycle where rising private
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SINGAPORE PROPERTY WEEKLY Issue 99 property and resale HDB prices would push up the pricing of new HDB flats, which would then serve to further bolster pricing in the secondary market. Over the past six years, resale HDB prices rose by 80 percent, dragging new flat prices up with it, and making them less affordable to new buyers. Rising new HDB prices then set the floor for resale prices, and increased expectations that prices would only keep going up. But going forward, HDB will no longer be a price follower, but instead act to be a price setter as the chief supplier of homes. As Minister Khaw puts it, HDB will no longer let the tail wag the dog. Instead, new HDB prices will now be based on affordability benchmarks instead of market prices of resale flats. Build to Order (BTO) flats to be priced based on affordability This de-linking of prices seeks to break the cycle of self-reinforcing price increases between the new and resale HDB flat markets. One possible mechanism that Minister Khaw spoke about was to price BTO flats based on a multiple of median income. Specifically, he referred to pricing new flats in non-mature estates at four times the annual median income of applicants, which would imply a 30 percent fall from current pricing. However, the exact implementation will be a sensitive issue, as the government has to do it without affecting the larger existing base of flat owners asset values. To get feedback and buy in, these ideas will be opened up for debate to Singaporeans in a national conversation.
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SINGAPORE PROPERTY WEEKLY Issue 99 It will not be easy to balance the interests of home buyers versus those of home owners. Impact on private property prices While the government cant set private property prices, they can influence them via HDB policy. By flooding the market with lowpriced public housing, this will certainly serve as an overhang on private property prices if the price disparity is too great. Previously, there was some segregation between the public and private housing markets, primarily through the use of the income ceiling as a way to restrict access to public housing. But even this sacred cow may be slaughtered. Minister Khaw has suggested doing away with the income ceiling for BTO flats so that anyone could apply for them (although there are still likely to be other restrictions, such as the concurrent ownership of private property).
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If this really happens, then the private property market will be under threat from public housing as first-time home buyers of all income levels will now be able to make their purchase decision while comparing across the entire spectrum of housing types.Practically speaking, the mass market private property segment will be most affected as high income earners are less likely to consider HDB flats. Of course, for this to have an impact, the government also has to ramp up the supply of HDB flats. Government continues to talk the market down The government clearly wants to send a signal to the market that prices should come down. In the interview, Minister Khaw made several ominous remarks, including saying that judging from the crowded showrooms, it has not sunk in for buyers that the era of large capital gains are at an end, and then
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SINGAPORE PROPERTY WEEKLY Issue 99 what goes up must come down. To further drive in his point, he suggested that there is still scope for prices to fall in some market segments. I believe he is referring to the currently overheated mass market property segment, where per square foot prices of certain developments have almost closed the gap with more centrally located projects. As Ive previously discussed, controlling the property market and even bringing down prices have now become a policy aim for the government. The fact that private home prices have risen 60% since 2Q09 despite seven rounds of property measures has become an embarrassment for the government. Worse, the high level of developer sales in March (from a huge 4,000 plus units newly launched) is likely to accelerate a potential new round of policies to curb investor enthusiasm for property. While the sustained low level of interest rates have continued to
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feed investor hunger for any asset with yield, thus pushing up their prices, dont forget that in the Singapore housing market the government ultimately holds the keys.

Property buyers have shrugged off the previous seven rounds of property control measures, pushing prices and volumes higher.But with the government controlling both the longer term supply of public (through BTO launches) and private (through Government Land Sales) housing, and the means to curb demand (through taxes and financing), I wouldnt bet against the house, especially one that is determined not to lose any more face.
By Mr. Propwise, founder of Propwise.sg, a Chartered Financial Analyst and resident real estate analyst at PropertyMarketInsights.com, a site to help property owners and investors make profitable decisions in uncertain times. Click here to learn more
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SINGAPORE PROPERTY WEEKLY Issue 99

Property Renting Tip #3: Rental Approval

(Reference: www.hdb.gov.sgwww.subcourts.gov.sg) For renting of an HDB flat, you have to apply for rental approval or renewal (this can be done online) before you lease the unit, and after meeting the Minimum Occupation Period (MOP). If the unit is not approved for rental renewal and the Tenants have to move out, the Landlord has to refund the deposit as well as the pro-rated rent already paid by the Tenant. policy for Permanent Residents to rent out their HDB after the MOP. For Singaporeans, the approval is granted for three years per application with no cap on the number of renewals and the total period of subletting.

If there is any dispute during the process, the Tenant or Landlord can lodge the case withthe Small Claims Tribunal. The Tenancy Agreement (TA) would become evidence for such disputes. At the point of this writing, there is a tighter
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For PRs, the approval will be granted for one year per application and the extension will be assessed on a case-by-case basis. It will be granted only if there are extenuating reasons. The total period of subletting during the flat owners entire duration of the flat ownership is capped at five years.
By Eileen Tan and Ui Wei Teck, property investors and authors of Enjoying Mid-Life Without Crisis. This tip and dozens more are from their book.
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SINGAPORE PROPERTY WEEKLY Issue 99

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SINGAPORE PROPERTY WEEKLY Issue 99

Singapore Property This Week

Residential
BTO flats construction not delayed by tighter foreign workers policies so far To ensure that the construction of BTO flats will not delayed by the tighter foreign worker policies, HDB may replace contractors unable to cope. However, the impact of the tighter policies on HDB is likely to be small since 60% to 70% of the super-structure of HDB projects is constructed with precast parts. Another possible impact of the tighter policies is an increase in construction costs. However, the government will increase the subsidy and absorb the additional subsidy if the costs increased. (Source: Business Times)
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Freehold Nassim Road GCB up for sale by tender The bungalow which sits on an 84,839 sq ft freehold site at No 33 Nassim Road with a nearly 100-metre road frontage is asking for $250-300 million or $2,947-3,536 psf. The seller is also willing to sell it in two parcels of 31,647 sq ft and 53,192 sq ft, the first of which can be subdivided into two GCB plots and the second three. It is expected to see much interest given the size of the plot, its rectangular shape, location, and the scarcity of freehold sites over 80,000 sq ft. The tender will close on May 16. (Source: Business Times)

SINGAPORE PROPERTY WEEKLY Issue 99 99-year Twin Fountains EC at Woodlands launched 99-year leasehold Twin Fountains, an EC development located at the junction of Woodlands Avenue 6 and Woodlands Drive 16 has been launched at a price of $660-790 psf. It consists of 418 units housed in eight 14-storey blocks, of which 53% or 221 units are three bed-room units, with the rest being two-bedroom and four-bedroom units, and two penthouses. Prices start from $580,000 for an 828 sq ft two-bedroom unit to $1.26 million for a 1,593 sq ft four-bedroom unit. It is expected to be popular, with draws such as its affordable pricing, proximity to the Woodlands and Admiralty MRT stations and the upcoming Woodlands South MRT station as well as the Seletar and Tampines expressways and the future North South Expressway. Another draw would be the
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authorities plan to develop the town into a regional hub. (Source: Business Times)

Resale prices of non-landed residential properties rose in Q1

private

According to the SRX, resale prices of units in the CCR, RCR and OCR increased from $1,816 psf to $1,837 psf, $1,208 psf to $1,259 psf and $958 psf to $1,010 psf respectively, despite the fall in transactions from 3,271 to 1,982 units. This is a result of the low interest rates, and as well as buyers confidence in high returns from property investment. The fall in transactions can be attributed to the lack of supply as a result of the cooling measures which deter owners from selling. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 99 99-year Sengkang West Way private residential site attracts $262.1m top bid The above site attracted a total of eight bids, with the top bid of $262.1 million or $488.84 psf ppr from UOL Group unit Secure Development. The 179,900 sq ft site has a 3.0 GPR and a 536,000 sq ft GFA. The popularity of the site is attributed to the popularity of sites with water views amongst developers and home owners and the need for developers to replenish their land banks. It also reflects confidence of demand for massmarket homes despite recent cooling measures. A 20-storey development with 600 units in planned for the site near Sungei Punggol, Sengkang Sports and Recreation Centre and Sengkang Riverside Park. The expected breakeven price and average selling price are $900 psf and $1,000-1,100 psf respectively.
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(Source: Business Times) Commercial Park Hotel Group said to be selling Grand Park Orchard Hotel After the sale of 336-room Park Hotel Clarke Quay for $300 million or $893,000 per room, it is said that the Park Hotel Group is intending to sell its two remaining Singapore hotels - Grand Park City Hall in Coleman Street and Grand Park Orchard (along with its retail podium Knightsbridge). It is said to be asking for $1 million per room for the Grand Park City Hall which sits on a site with a remaining lease of about 79 years and over $1 billion or a per-room price in the high-$1 million range for the freehold 308-room Grand Park Orchard. The latter also includes about 74,000 sq ft NLA of retail space.

(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 99 Q1 sees fall in sales of industrial property The sales volume of industrial property fell by 62.3% from847 lodged in Q4 2012 to 319 caveats in Q1 2013, as a result of the cooling measures. Specifically, new sale and subsale transactions slid by 71.3% from 480 to 138 transactions in Q1 while resale transactions of strata-titled factory units fell by 50.7% from 356 to 181 transactions. The fall in prices is not as great, as seen in the 4.2% fall in prices of 30-year leasehold new strata factory units to $345 psf, the 4% fall in prices of units with a 60-year lease to $425 psf, and the 1.6% fall to $876 psf for 99-year leases, and 3.5% to $956 psf for freehold units. For resales, however, prices of strata-titled factory units with 30-year leases saw a 10.7% to $219 psf, and prices of units of 99-year leases fell by 0.6% to $551 psf while prices of units with 60-year leases and freehold units
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increased by 3.8% to $390 and 3.3% to $634 psf respectively. Islandwide industrial gross rents also saw a 5% increase to $2.13 psf in Q1, though this is unlikely to rise by much in 2013 given the upcoming supply of 24.12 million sq ft of new factory spaces. Looking ahead, demand is expected to slow in the near term as a result of the cooling measures and the slowing manufacturing activity. As a result of this, prices are also unlikely slow. (Source: Business Times) Flight to quality trend in business parks

As more tenants shift to new buildings with quality specifications and in better locations with competitive rents, there had been a positive net absorption in Q1 2013, with a fall in vacancy rate from 7.2% in Q4 2012 to 6.4%.
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SINGAPORE PROPERTY WEEKLY Issue 99 Average rents have also stabilised at $3.80 psf per month. Such a trend will also lead to the creation of 800,000 sq ft of secondary space in Q2 and Q3 2013. This, coupled with the upcoming supply of 750,000 sq ft space which are not pre-committed, the expected supply of 1.55 million sq ft and competitive rents in the Grade B office market and light industrial markets, are likely to prevent sharp rental increases. It may even lead to a fall in rents in business parks and force older parks to undergo asset enhancement or redevelopment to compete with newer ones. (Source: Business Times) Sub-letting rule for third-party facility providers relaxed Previously, lessees of JTC property intending to sub-let their GFA must sub-let at least 50% of the building's GFA to one or more JTCBack to Contents

approved anchor tenants, with a minimum GFA 3,000 sq m each. The figure has now been reduced to 1,500 sq m. This is a welcomed move since it would make it easier for landlords in floor planning. Nevertheless, the impact is likely to be small outside of Reits and only felt when there are lease renewals since it is easier to find replacement tenants for smaller spaces. The change would also mean that spaces can also possibly be leased to SMEs, and rents may also rise since smaller anchor tenants have less bargaining power. (Source: Business Times) 30-year Tuas Bay Close industrial plot attracts $37.1m top bid The 30-year leasehold 2.5 ha site located at Tuas Bay Close has attracted four bids, with a top bid of $37.1 million or $81.19 from a
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SINGAPORE PROPERTY WEEKLY Issue 99 joint bid by ZACD Investments and Bohai Investments (Sengkang). Zoned for Business 2 development, it has a plot ratio of 1.7. The lack of active participation in the tender is attributed to the narrow shape of the plot and the requirement that the at least 12 factory units, with 10 contiguous 1,000 sq m units, and two 3,000 sq m factory units be build. Units in any development on the site are expected to be sold at $350-400 psf for ground floor units and $250-300 psf for units on the upper floors. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 99

Non-Landed Residential Resale Property Transactions for the Week of Mar 27 Apr 2
Postal District 3 8 9 9 9 9 10 10 10 10 10 10 10 10 11 11 11 12 12 12 14 14 15 15 Area (sqft) 721 517 2,196 2,594 1,033 829 1,765 1,130 1,410 1,582 1,830 1,119 1,119 1,722 926 710 2,573 334 484 1,227 1,109 1,055 1,345 2,142 Transacted Price ($) 1,150,000 760,000 6,094,500 6,000,000 1,900,000 1,210,000 4,000,000 2,380,000 2,750,000 2,750,000 3,028,000 1,830,000 1,760,000 2,250,000 1,481,600 1,030,000 3,250,000 707,000 695,000 1,360,000 1,146,600 980,000 1,880,000 2,800,000 Price Tenure ($ psf) 1,595 99 1,471 FH 2,775 FH 2,313 FH 1,839 FH 1,460 FH 2,266 FH 2,106 FH 1,950 FH 1,738 FH 1,655 FH 1,635 FH 1,572 FH 1,306 999 1,601 FH 1,450 FH 1,263 FH 2,119 FH 1,435 FH 1,108 FH 1,034 FH 929 FH 1,397 FH 1,307 FH Postal District 15 15 15 15 15 16 16 16 16 17 18 18 18 19 19 19 19 19 19 19 19 19 20 20 Area (sqft) 2,239 1,755 1,528 1,173 1,647 1,658 936 1,442 1,658 657 1,453 1,173 1,550 1,991 1,302 1,066 1,216 1,216 1,227 1,281 1,033 1,152 1,281 2,314 Transacted Price ($) 2,700,000 1,810,000 1,545,000 1,150,000 1,330,000 1,800,000 950,000 1,460,000 1,408,888 705,000 1,350,000 1,080,000 1,023,800 2,250,000 1,450,000 1,180,000 1,300,000 1,280,000 1,275,000 1,288,000 990,000 970,000 1,700,000 1,990,000 Price Tenure ($ psf) 1,206 99 1,032 FH 1,011 99 980 FH 808 99 1,086 FH 1,014 99 1,012 99 850 999 1,074 FH 929 99 920 99 661 99 1,130 999 1,113 99 1,107 99 1,069 99 1,052 99 1,039 99 1,006 99 958 99 842 99 1,327 99 860 99

Project Name RIVER PLACE STUDIOS @ MARNE PATERSON SUITES GRANGE INFINITE TRIBECA LE WILKIE THE GRANGE ONE TREE HILL RESIDENCE BOTANIC GARDENS VIEW AVALON WATERFALL GARDENS PROXIMO PROXIMO RIDGEWOOD SUITES @ SURREY NOVENA HILL IRIDIUM PRESTIGE HEIGHTS CITY REGENCY CALARASI GRANDLINK SQUARE CASA EMERALD THE ATRIA AT MEYER THE WATERSIDE

Project Name COSTA RHU D'ECOSIA MANDARIN GARDEN CONDOMINIUM CASTLE LOFT LAGOON VIEW THE BAYCOURT BAYSHORE PARK CASA MERAH TROPICANA CONDOMINIUM ESTELLA GARDENS SAVANNAH CONDOPARK EASTPOINT GREEN ELIAS GREEN KENSINGTON PARK CONDOMINIUM KOVAN MELODY THE QUARTZ KOVAN MELODY THE QUARTZ KOVAN MELODY SUNGLADE COMPASS HEIGHTS REGENTVILLE CLOVER BY THE PARK GRANDEUR 8

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SINGAPORE PROPERTY WEEKLY Issue 99

Postal District 21 21 21 21 21 21 22 23 23 23 23 25 26 27

Project Name THE CASCADIA GARDENVISTA CAVENDISH PARK ENG KONG GREEN SHERWOOD CONDOMINIUM SIGNATURE PARK THE LAKESHORE HILLVIEW REGENCY THE WARREN NORTHVALE HILLTOP GROVE WOODGROVE CONDOMINIUM SEASONS PARK ORCHID PARK CONDOMINIUM

Area (sqft) 883 861 1,313 1,044 926 1,087 936 1,195 1,572 1,087 1,184 2,626 1,292 1,206

Transacted Price ($) 1,527,000 1,180,000 1,650,000 1,200,000 1,000,000 1,160,000 1,170,000 1,150,000 1,500,000 903,800 960,000 1,680,000 1,100,000 1,020,000

Price Tenure ($ psf) 1,730 FH 1,370 99 1,256 99 1,149 FH 1,080 FH 1,067 FH 1,249 99 963 99 954 99 831 99 811 99 640 99 852 99 846 99

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.

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