Singapore Property Weekly Issue 185

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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

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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



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.



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.



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



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.



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.

http://www.crei-academy.com/









http://propertymarketinsights.com/


Singapore Property This Week


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.



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.


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.


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,



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.


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.


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.



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.


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.




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

Documents

Singapore Property Weekly Issue 185