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Issue 104

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The Truth About Buying a USA Investment Property Property Renting Tip #8: Late Payment



Welcome to the 104th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

from Your Tenant

Singapore Property News This Week Resale Property Transactions (May 1 May 7) Contribute
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The Truth About Buying a USA Investment Property

By Gerald Tay (guest contributor) The success of my overseas property investments in the last three years is due to coinvesting with trustworthy foreign partners, whom themselves have decades of property investment experience in that particular country both as a local and investor. I have never bought an overseas investment property from property seminars or exhibitions, simply because I dont trust salespeople with hard-sell tactics for investment advice. This article is written to educate you how to invest in overseas property safely, especially for those of you keen to invest but would like an independent third party view. The context is specifically for the USA real estate market which Im familiar,
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SINGAPORE PROPERTY WEEKLY Issue 104 thanks to three years of education and experience from my USA partners, but I believe these basic pointers should serve a useful guide for other similarly mature real estate markets like Australia, Western Europe or Japan. Can I really buy a USA or Overseas Property with No Money Down? You have to understand what no money down really means. It simply means that the property is 100% leveraged. In other words, the purchaser has borrowed the entire amount, including the down payment, to buy the property. The term Seller Financing for example is referred as financing offered by the seller. From experience, seller financing or no money down is not the bed of roses most people think, especially for foreign investors. Just because its possible does not make it probable.
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The type and quality of the property offered by sellers willingly to finance is rarely mentioned. Quality properties in good markets, rarely if ever, have motivated sellers. Unfortunately, many local property gurus and exhibitions have made buying USA or other overseas properties with no money down more important than buying a quality property. A property that will make a sound, long-term investment will be a quality property in a good neighbourhood. Even if its 100% financed, a bad property is a bad property What are the different USA properties and how much do they cost? There are two primary segments favoured by experienced American investors: Residential Single-Family Homes/Duplex/Triplex/4-plexes: These are similar to Singapore landed
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SINGAPORE PROPERTY WEEKLY Issue 104 properties, but the key difference with property valuation lies in the building structure itself and not the land. Good quality SFH investments in good middle-class markets range between USD$100,000 to USD$180,000 based on the current market. Condominiums: Typically range between USD$60,000 to USD$100,000 for two to three bedroom unit. Single-Family Homes are the stuff of which the American Dream is made of. More than any other type of real estate, SFH are always in demand, and are therefore the most liquid. Again, this will depend heavily on the type of property and location of market. Commercial Multi-Family Large Apartments (100 units & above): Depending on market location, the price ranges from as low as USD$500,000 to
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USD$2 million. (And yes, just for the price of a re-sale HDB flat or condo in Singapore, you can boastfully tell your ignorant friends youre also a property guru owning 100 properties in ONE building that is!) Large Commercial Buildings with one or multiple business tenants: The tenants are generally small to large-scale businesses. Prices range from USD$1 million onwards depending on the market. Where should I buy or invest in overseas markets like the USA? Most novice property investors are told to invest only within 30 minutes of the city or train station when buying overseas properties like in Singapore. This advice can be fatal! In high priced markets, this doesnt make sense especially when mortgage payments are higher than your rental income.
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SINGAPORE PROPERTY WEEKLY Issue 104 Unlike Singapore, experienced local investors in the USA or other countries, seldom, if ever, invest a property near the city or train station especially in matured real estate markets. Break the 30 minute rule and buy where it makes sense to buy! The 5 Essential Criteria of a Good Overseas Property Market (Example: USA) The importance of location cant overestimated. What is a good market? 1. Big City Economic diversity ensures investment stability. Source large cities with multiple employment sources to ensure rental profitability. 2. A Good Rental Market Where the Numbers Work be flow. Note the word reasonable, and not over-promised! Any number that seems overly high should be questioned by any savvy investor.

The rule-of-thumb used by USA investors for good quality Single-Family Home is 1% rental income a month versus the purchase price. So, a USD$100,000 home should rent for USD$1,000 a month.
I believe you can safely apply this rule for most other mature overseas property markets. 3. Not a booming Market

A booming market is NOT where you want to invest, especially for overseas property.
Its IMPORTANT to buy in a market where prices are only steadily going up, but not one in which prices are escalating rapidly. I dont just mean that prices are rising rapidly.
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A good rental market in the USA has properties that will yield a reasonable cash
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SINGAPORE PROPERTY WEEKLY Issue 104 Booming also implies a kind of frantic public mind-set, in which buyers feel they must buy right away, before prices rise higher. It also implies inflated prices. 4. Low Median Price High priced markets in USA such as San Francisco, Los Angeles, New York or even London, Tokyo or Manila may not be good places to buy, especially for residential properties. First, the investment numbers dont work: rental prices are too low in comparison with the monthly mortgage payments. And second, expensive properties require jumbo loans, which means the downpayment can be as high as 25% in the USA. A good market in the USA for quality SingleFamily Home investments will have median prices of USD$100,000 to USD$180,000. 5. Sun Belt The Sun Belt is the fastest growing region in the USA. With its warm weather, growing employment and lower housing costs, it is an attractive region for many USA investors. Buying a property in the Sun Belt markets will help ensure that your investment will continue to grow over the long-term.

As foreign investors, AVOID properties that are located in the cold northern regions of USA, namely Michigan, Detroit, Dakota, the Niagara Falls region etc.
Some of the best residential markets in the Sun Belt Region include: Phoenix, Arizona Orlando, Florida Tampa, Florida

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SINGAPORE PROPERTY WEEKLY Issue 104 Jacksonville, Florida San Antonio, Texas Doesnt it stand to reason that if theres really a good deal out there, the savvy locals and professional investors will get to it long before you do as a foreign investor? Of course they will! So whats left over for you, the busy foreign part-time investor? I can tell you whats left over: the junk that no one else wants. Youve to be careful. Its too easy for more experienced business people to manipulate and sway the ordinary guys on the streets. You think you may have gotten a great overseas property deal. You know what the seller thinks? What a sucker! Ive been trying to get this white elephant off my hands for two years! The pros are going to beat you to the best stuff and youll get the leftovers.

The Truth about Buying Cheap Overseas Property Bargain overseas properties such as foreclosures or those with little or no money down, are the classic real estate lure. Go to a couple of local popular property seminars and you will see Own multiple properties with little or no money down fever in action. Instant wealth! Overnight Success! Ordinary people can now realise their dreams to live the life of the rich by simply owning many properties at just a fraction of what it takes to own one in Singapore. You have to think logically. If you dive into this can buy cheap mentality for overseas property, you may find that instead of you plucking, youre the one whos getting plucked!
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Invest in foreign markets with partners, not salesmen Invest in unfamiliar markets with foreign partners who understand the game well and are willing to put their money in the deal with you. Use a little common sense and invest only when it makes sense. Dont simply invest overseas because you think the grass is greener there or you believe you can buy cheap with high returns. From my experiences, its often the I know it all investor who buys on hearsay and takes investment advice from experienced salespeople, and guess whos getting plucked instead? By guest contributor Gerald Tay, CEO of CREI Academy Group, who exposes widely-held property investment myths that have proven highly ineffective in creating wealth, and prevent a comfortable retirement for the ordinary investor.
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Property Renting Tip #8: Late Payment from Your Tenant

It is important to know what you can and cannot do when your Tenant is not able to pay the rental on time. First of all, convince your Tenant to use GIRO (General Interbank Recurring Order) or a Standing Order with the bank to transfer the rental payment to your bank account monthly. You can indicate this requirement in the Tenancy Agreement (TA) and explain to them that this will free them from the hassle of having to do rental payment transactions every month, and they will not forget to pay the rent when they are travelling. Nevertheless, if your Tenant still chooses not to pay on time and is late for more than seven days, you can impose a late interest charge of up to 12% annually and are also entitled to enter the property and terminate the tenancy. This should be indicated in the TA and discussed prior to entering into the contract. 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 This Week

Luxury home markets hit by cooling measures According to JLL, the average capital values for luxury homes fell by 0.6% in Q1 as a result of cooling measures such as a higher ABSD and a tighter LTV ratio. This is compounded by the slower slower population and economic growth. Similarly, a CBRE report stated that despite a 1.8% increase in prices of luxury homes to US$2,297 psf, transaction volumes have fallen as a result of the cooling measures. Looking ahead, demand and prices are expected to remain stable, with capital values falling by up to 5%.

Developer sales of private homes fell by 50% to 1,375 units in April

Developer sales of private homes excluding ECs fell by 50% from 2,793 units in March to 1,375 units in April as a result of the fall in launches from 3,489 units in March to 1,158 units in April. Most of the sales were from earlier launches and it was also noted that developers has lowered their prices in April when compared to March in response to increased competition from increased completions as well as lower demand as a result of the cooling measures. Meanwhile, 172 EC units were sold in April down from 279 units in March. There were no new EC projects were launched in April. The resale market also saw only 539 transactions.
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(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 104 Looking ahead, sales volume is expected to stabilise at 1,500 to 2,000 units (excluding ECs) each month, with a full-year total of 15,000-18,000 private homes, compared to 22,197 units in 2012. (Source: Business Times) Five 99-year plots yielding 2,700 homes released under GLS programme for H1 2013 The first is a plot at Tampines Avenue 10 which is under the confirmed list. The site with a maximum GFA of 515,000 sq ft that can yield 530 units is expected to draw three to six bidders with a top bid of $400-470 psf ppr. It is considered less attractive than the other four sites on the reserve list since it is not near an MRT station, and faces competition from nearby Q Bay Residences and another six other nearby sites which have yet to be launched. The tender will close at
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noon on July 2. The second is the Toa Payoh Lorong 6 site which has a maximum GFA of 458,000 sq ft that can yield about 550 units is expected to draw five to 12 bidders with a top bid of $680920 psf ppr if triggered for sale since it is near Braddell MRT station and schools such as CHIJ Toa Payoh and Pei Chun Primary School in addition to being located in a mature estate. Next, the Siglap Road site which has a maximum GFA of 737,000 sq ft that can yield around 780 units is expected to attract at least seven bids with a top bid of $550-860 psf ppr if triggered for sale given its proximity to East Coast Park and Victoria School. The Geylang Avenue 1 site which has a maximum GFA of 188,000 sq ft that can yield 215 units is expected to attract seven bids with a top bid of $570-690 psf ppr since it is
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SINGAPORE PROPERTY WEEKLY Issue 104 located near Aljunied MRT station and there are few private developments in the area. Lastly, the site at Prince Charles Crescent with a maximum GFA of 564,000 sq ft that can yield 650 homes is expected to attract three to five bidders with a winning bid of $850-1,070 psf ppr since it faces competition from other GLS sites in the region which has been recently sold as well as another Alexandra View site available on the reserve list. (Source: Business Times) Corals at Keppel Bay to be launched at $1,800-3,000 psf The first 100 units at Corals at Keppel Bay condo, a 99-year leasehold 366 unit condominium project, is said to be priced at $1,800-3,000 psf. It will consist of one, two, three and four-bedroom units (600-3,600 sq
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ft) and eight penthouses (4,800-7,800 sq ft) in 11 four-to-ten-storey blocks. The first two unit types constitute 45% of the units in the project. Absolute prices start from $1.31 million for a 624 sq ft one-bedroom unit to $10.7 million for a four-bedroom unit around 3,600 sq ft. (Source: Business Times)

99-year Stratum launched for sale





170 units of the 380 units at the 99-year leasehold Stratum condo project at the corner of Elias Road and Pasir Ris Drive 3 has been launched at $900 psf, with absolute prices starting from $540,000 to $550,000 for a studio unit. The five-storey condo project consists of studio units, one to five-bedroom apartments, penthouses with three to five bedrooms and four-bedroom dual key units in
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SINGAPORE PROPERTY WEEKLY Issue 104 14 blocks. Sizes range from 432 sq ft for a studio unit to 2,446 sq ft for a five-bedroom penthouse. (Source: Business Times) Commercial Reits not the sole reason for increasing retail rents affected by the fall in retail sales by 2.7% in February despite the growth in tourist arrivals by 9.1% in 2012 from 2011, the growth in consumer price index by 3.5% from February 2012 and the growth in population by 2.5% in 2012. This can be seen in how the retail and office property prices increase are not matched by corresponding increase in rents. Other factors that may affect the sector is also an increase in supply of malls, and retail problems of labour given the tighter foreign manpower policies. (Source: Business Times)

While increasing retail rents have often been attributed to Real estate investment trusts (Reits) in the retail sector given their ownership of many prime malls in Singapore, market demand may be another reason for the increasing retail rents. Furthermore, it is not only malls owned by Reits that have seen increased retail rents. Reits can also offer tenants benefits in doing promotions or upgrading facilities. Looking ahead, the retail Reit sector may be
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Marina Bay Financial Centre, the first integrated development in the CBD sees success
Being the first integrated development in the CBD which offers a work-live-play environment, MBFC sees success with its
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SINGAPORE PROPERTY WEEKLY Issue 104 Towers 1 and 2 being 100% pre-let upon completion, and its Tower 3 over 85% leased. 48.9% of Tower 3s total NLA is taken up by financial institutions, 14.9% by legal firms and 7.5% by energy and natural resources firms. Its anchor tenant DBS which occupies 18 of Tower 3s 46 storeys is also a stakeholder in the tower. The residential component is also successful with all 428 units at Marina Bay Residences and 88% of the 221-unit Marina Bay Suites sold. MBFCs success can be attributed to MAS's liberalisation of the banking sector, its waterfront location, the 179,000 sq ft retail component of MBFC as well as its proximity to attractions such as the Singapore Flyer, Esplanade-Theatres on the Bay and the Marina Bay Sands integrated resort. (Source: Business Times) Net allocation of JTC land and facilities falls in Q1 JTCs net allocation of prepared industrial land (PIL) fell by 51% in Q1 2013 to 29.8ha from 61.1 ha from Q4 2012. The fall in net PIL allocation is accompanied a 22% fall in gross allocation to 62.1 ha and a 77% increase in returns to 32.3 ha. The logistic sector makes up the biggest proportion of gross allocation in PIL in Q1, with 30% or 18.9 ha while manufacturing sector make up12.5 ha of land of 39% in returns. Meanwhile, the net allocation of ready-built facilities (RBF) fell from -3.3 ha in Q4 2012 to3.8 ha in Q1, accompanied by a fall in occupancy rates by 0.2% to 95.3%. Gross allocation saw a 65% increase to 16.1 ha in Q1 while returns rose by 52% to 19.8 ha.

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SINGAPORE PROPERTY WEEKLY Issue 104 The net allocation for the flatted factory segment fell to -0.47 ha from 0.4 ha in Q4 2012 while the standard factory segment saw an increase to 0.17 ha from -0.83 ha in Q4 2012. (Source: Business Times) 49-room Berjaya Hotel in Duxton Road sold at $50m cooling measures which targeted the residential and industrial sector. This is likely to continue in Q2 2013, with four shophouses with a 12,000 sq ft GFA sitting at Nos 97, 98, 99 and 100 Duxton Road on a 4,000 sq ft site being sold for $21.6 million and 999-year leasehold three-storey-plus attic 82 Amoy Street with a 8,200 sq ft GFA sitting on a 2,770 sq ft site being sold for $16 million.

The property at Nos 80-87 Duxton Road, which includes the 49-room Berjaya Hotel, an office and a restaurant housed in eight adjoining three-storey-plus-loft conservation shophouses with a total GFA of 32,000 sq ft, has been sold with vacant possession at $50 million. The 9,558 sq ft site has remaining lease tenure of 74 years.
There has been increase in shophouse transactions by 34% from Q4 2012 to $460.1 million in Q1 2013 as a result of the January
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(Source: Business Times)

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Non-Landed Residential Resale Property Transactions for the Week of May 1 May 7
Postal District 1 2 3 4 4 5 5 7 8 9 9 9 9 9 9 9 10 10 10 10 10 10 10 10 Area (sqft) 861 904 1,184 1,335 1,959 1,841 1,163 732 560 721 678 2,368 3,918 1,733 807 1,528 1,561 1,141 990 1,862 1,302 1,345 3,412 1,109 Transacted Price ($) 1,650,000 1,552,000 1,610,000 2,183,000 2,275,000 2,340,000 1,315,000 1,028,000 988,000 1,700,000 1,461,000 4,980,000 7,700,000 3,098,000 1,268,888 2,100,000 3,120,000 2,100,000 1,800,000 3,000,000 1,750,000 1,716,800 4,100,000 1,263,000 Price Tenure ($ psf) 1,916 99 1,716 99 1,360 99 1,636 99 1,161 FH 1,271 FH 1,131 99 1,404 99 1,765 99 2,357 FH 2,154 FH 2,103 FH 1,965 FH 1,788 FH 1,572 FH 1,374 FH 1,999 FH 1,841 FH 1,818 FH 1,611 FH 1,344 FH 1,276 999 1,202 999 1,139 FH Postal District 11 11 11 11 11 13 14 15 15 15 15 15 15 16 16 16 16 17 17 18 18 18 19 19 Area (sqft) 797 1,001 1,841 1,206 5,490 1,249 1,313 1,658 1,055 1,012 1,324 1,690 1,033 1,593 1,216 1,249 1,270 1,324 1,324 1,130 969 1,518 1,292 1,173 Transacted Price ($) 1,550,000 1,830,000 2,775,000 1,750,000 7,850,000 1,140,000 1,400,000 2,400,000 1,480,000 1,300,000 1,670,000 2,080,000 1,000,000 2,000,000 1,350,000 1,380,000 1,238,888 1,100,000 1,030,000 1,060,000 800,000 1,100,000 1,400,000 1,160,000 Price Tenure ($ psf) 1,946 FH 1,828 FH 1,508 99 1,452 FH 1,430 FH 913 FH 1,066 FH 1,448 FH 1,403 FH 1,285 99 1,261 FH 1,231 FH 968 FH 1,255 FH 1,110 FH 1,105 FH 975 99 831 FH 778 999 938 99 826 99 725 99 1,084 99 989 99



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Postal District 19 19 20 21 21 21 21 22 23 23 23 23 23 26 26 28 Area (sqft) 1,518 1,152 2,766 990 1,701 1,539 1,561 1,173 1,023 1,475 1,066 1,033 1,184 1,238 1,152 1,109 Transacted Price ($) 1,450,000 990,000 2,920,000 1,796,000 1,880,000 1,388,888 1,083,000 1,345,000 958,000 1,380,000 958,000 880,000 948,000 1,570,000 1,000,000 1,100,000 Price Tenure ($ psf) 955 99 860 99 1,056 FH 1,814 FH 1,105 FH 902 99 694 99 1,146 99 937 99 936 999 899 99 852 99 801 99 1,268 FH 868 99 992 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.

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