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Welcome to the second issue of the Singapore Property Weekly. Through this e-magazine we hope to bring interesting and pertinent articles on the Singapore property market to our members. Well be adding new sections over time. Let us know what else youd like to see we welcome all feedback! To wisdom and beyond, Mr. Propwise
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Contents
Singapore Property This Week Why Are Investors Still Buying? Where Will the Market Go in the Next Few Months? Pg 2 Pg 9 Pg 14
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BTO projects may not be introduced in all mature estates: Minister Khaw
Due to better amenities and transport networks, flats in mature towns tend to be more popular. For example, there were almost 8,000 applications for the 4,000 new BTO flats that HDB launched recently and according to Minister Khaw, the projects in mature estate Tampines has the highest application rate for 4-room and 5-room flats. By increasing the supply of flats in mature estates, Minister Khaw hopes that this will increase young couples chance to secure their own units in new towns such as Sengkang. But not all mature estates will see the introduction of BTO projects (at least in the short-term) because estates such as Tanjong Pagar are already substantially developed and have limited space for public housing development.
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SINGAPORE PROPERTY WEEKLY Issue 2 MND to prioritize housing needs of young couples, divorcees, and family with low income: Minister Khaw
With the rapid economic recovery, housing prices are rising sharply in Singapore. The new National Development Minister Khaw Boon Wan mentioned that his policies for the near future will focus on the housing need of groups such as young couples, divorcees with kids, and families with low income. HDB for the upcoming increase in demand when the income ceiling of $8,000 on HDB flats is increased. Sale of land sites for 4,000 DBSS flats and 4,000 EC units for 2011 are expected to be scheduled. Apart from the 4,000 new flats rolled out in Punggol, Pasir Ris, Tampiness and Woodlands, HDB will introduce about 12,000 new BTO flats.
HDB to increase housing supply in 2011 from 22,000 units to 25,000 units
Currently under the BTO scheme, HDB will only call a tender for its flats after 70% of orders have been confirmed. With the new policy, a tender will be called when architectural drawings and tender documents are ready. This is expected to increase the supply of residential units under HDB in the whole of 2011 from 22,000 to 25,000 units, when HDB brings forward the projects planned for Q1 2012 by a few months. According to Minister Khaw, this scheme will allow more young couples to buy their houses from HDB directly and prepare
SINGAPORE PROPERTY WEEKLY Issue 2 Austral View sold for $81 million and a site in Hillview sold for $45 million
Brokered by DTZ, Austral View that is situated in Tanjong Rhu on a 30,540 sq ft site has been sold for $81 million through a collective sale. The price worked out to $1,342 psf ppr, including a DC that is slight above $5 million. Also, Mequity (Hillview) Pte Ltd (a Roxy-Pacific groups associated company), bought 7 adjoining factories that are situated on a 49,164 sq ft land area in the Hillview area. The $45 million deal that equates to $662 per sq ft of potential gross area included a DC of approximately $17.5 million to convert the place for residential purpose with a plot ratio of 1.92. ft. It houses 68 units of 123 sq metres each currently and has the potential to be developed to house 112 apartment units with an average of 950 sq ft each. Zoned for residential use, the site has a gross plot ratio of 2.8 and has the potential to be built up to 36 storeys. Even though no DC is to be paid, marketing agent Jones Lang LaSalle mentioned that successful bidder may have to foot a land premium of approximately $1.22 million for the alienation of some 1,167 sq ft of state land.
SINGAPORE PROPERTY WEEKLY Issue 2 The Viridian priced at an average of $1,550 psf and Wing Tai Holdings sold more than 140 units in its Foresque Residences
Global Orion Properties will develop its freehold project The Viridian on an industrial site at Jalan Ampas. The Viridian, which will be 23-storey high and consist of mainly one- and two-bedroom units, is priced at an average of $1,550 psf. The overall price for a single-bedroom unit will begin from $785,000. Apart from that, Global Orion Properties will launch its Hougang project near the end of the year. The Hougang project will have larger units and its main target purchasers will be HDB upgraders. At Upper Bukit Timah, Wing Tai Holdings sold more than 140 apartments in its 496-unit Foresque Residences.
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SINGAPORE PROPERTY WEEKLY Issue 2 Commercial News DTZs report shows that Singapore, ranked top 5 among Asia Pacific cities, is a hot choice for property investment
Similar to the findings in Q4 2010, DTZ revealed that offices, retail and industrial property markets in Singapore still bear great potential for investments. The DTZ FVI score for Q1 2011 for Asia Pacific stood at 65, and the Singapore office market is ranked top five among the Asia Pacific cities covered in DTZs study. DTZ saw a recovery of sales in secondary markets and private houses volumes in Singapore for March and April. However, DTZ also mentioned that the increased supply of residential houses introduced into the market may cause a fall in prices and rentals in the next few years. S$49.20 psf per month. As compared to the average super prime rent of US$473 psf per annum (S$51.80 psf per month) in Q3 2010, Singapore prime retail rents dropped from 15th to 16th on the global stage. Despite the decline, CBRE stressed that Singapore prime rents will remain competitive as around 523,000 sq ft of retail space along Orchard Road is expected to be completed between Q2 2011 and 2013. The rents in Orchard Road will remain stable in the medium to long termif economic growth remains stable.
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Site at Paya Lebar Central to fetch bids of $860-940 psf ppr; most popular out of the 3 sites added to reserve list.
Three new 99-year leasehold sites were being offered under the reserve list: i) 2.07 hectare mixed-use site at Paya Lebar Central, ii) 0.38 ha hotel spot at Little India, and iii) an EC housing parcel at Upper Serangoon View. Analysts mentioned that the site at Paya Lebar Central, which can produce around 935,600 sq ft of GFA, is the most popular and will be able to sell for $860$940 psf ppr.
Capitamalls Asia, CMT and CapitaLand to develop their Jurong site in a $1.5 billion project
After being awarded the plot in Jurong Gateway in a $969 million bid, Capitamalls Asia, CMT and CapitaLand plan to develop the site into a 25storey retail-cum-office project. The total development cost for the site, which has a maximum permissible gross floor area of 957,780 sq ft, is estimated to be approximately $1.5 billion. 60% of the site will be used for retail space which is likely to be of 5 storeys high, while the remaining 40% will consist of offices of 20 storeys. Rents for retail spaces are expected to be around $16-$18 psf while rents for office spaces are $8 psf.
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Although rental returns average about 3 to 4 per cent yield per annum, the interest coverage ratio is high, at 2.5 to 6 times. The interest coverage ratio here refers to the number of times rental returns, net of expenses, can cover interest costs. A rental yield of 4 per cent per annum is double the bond yields of about 2 per cent on securities recently issued by Temasek-linked companies. And those bonds were two to four times oversubscribed by institutional and retail investors.
The Monetary Authority of Singapore (MAS) has stated that it will allow the local dollar to gradually strengthen against a concealed basket of currencies of the countrys major trade partners, a move that will alleviate the pressures of imported inflation.
In addition, global investors, especially high net worth individuals from Europe, are confident about the strength and stability of the Singapore economy, and are driven to sell their home currencies to park their funds here.
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cash-on-cash return of 7.3 per cent. This is 10 times higher than the cash returns of placing S$435,700 into a fixed deposit. The return is also higher than the expected rate of inflation for 2011. The example above is conservative in that I have included the maximum costs such as legal fees (which are usually subsidised by banks that provide the mortgage) and I did not deduct expenses before applying the 10 per cent property tax. Furthermore, as we pay down the principal of the loan, the interest expenses will drop. Therefore, I believe the clients are making a cashon cash return that is higher than 7.3 per cent this year. Property investment come with its own risks: Tenants may move out and the apartment may be empty for a while, costs may rise, etc. Rentals may come down but we have room to absorb that slide.
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On the other hand, we would expect the correlation between the stock and property markets to be low during turning points as stock prices, being more liquid, would diverge from the less responsive property prices. So how is the market like now? Figure 1 shows the AAI for the recent quarter 2011Q1. From the figure, we can tell that the Singapore property market (shown in green colour) is presently in the strong growth stage with both STI and URA PPPI increasing in tandem. However, it is noteworthy that the AAI has dropped from over 90% to under
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