Singapore Property Weekly Issue 188

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CONTENTS

p2 Mr. Propwise’s 2015 Singapore Property

Market Outlook

p9 Singapore Property News This Week

p13 Resale Property Transactions

(December 9 – December 16 )

Welcome to the 188th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

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SINGAPORE PROPERTY WEEKLY Issue 188

Page | 2Back to Contents

By Mr. Propwise

How quickly yet another year has flown by.

It’s that time of the year where I look back at

what’s happened over the past twelve

months, then try and say something intelligent

about the future direction of the property

market over the next year.

As always, 2014 was an interesting year for

the property market. I’d sum it up as “the year

when policy finally worked.” In 2013, despite

seven rounds of cooling measures and a

property tax hike,

Mr. Propwise’s 2015 Singapore Property Market Outlook



the residential property market simply

shrugged it off for the first three quarters,

resulting in the URA Property Price Index

(PPI) clocking a positive 2.0% move.

TDSR – the straw that broke the property

market’s back

But the figurative straw that broke the camel’s

back was the MAS’ Total Debt Servicing Ratio

(TDSR) framework introduced at the end of

June 2013, which significantly limited the

ability of buyers to lever up and buy property

despite the signs pointing to an overheated

and overpriced market. Really, the MAS was

just trying to save buyers from themselves

(sometimes there are benefits to living in a

nanny state).

This final straw then led to four consecutive

quarters of decline of the PPI from 2013Q4 to

2014Q3 for a total decline of 3.9% over this

period. This figure likely understates the

magnitude of the decline as we know that

developers have been offering all kinds of

incentives (e.g. tax rebates, renovation

vouchers etc.) to get buyers to bite without

having to lower the headline price.

How much further will the property market

fall?

Looking at monthly property indices such as

the SRX Property Index (SPI) and the NUS

Singapore Residential Price Index (SRPI)

suggests that the Fourth Quarter of

2014should to continue to be weak, although

the decline is likely to be small.

And despite the warning, threatening and

finally pleading of the property developers

and agents, the government is right – the

correction of property prices so far has been

very mild.



Figure 1 – Change in URA PPI since 2000

(Source: URA,

PropertyMarketInsights.com)

The million dollar question is – what does the

government think a “meaningful” correction

is? It’s important because they’ve indicated

that the property cooling measures are here

to stay until such a correction has occurred.

We can get some clues from the previous two

corrections that occurred from 2000 to 2004

and then more recently from 2008 to 2009

during the Global Financial Crisis. During

those downturns, the URA PPI corrected by

19.9% and 24.9% respectively. So if I had to

hazard a guess, I’d say we’d have another 10

to 20 percent more downside to go before the

government would deem the correction to be

“meaningful” and start easing some of those

measures.

3 reasons why the market will continue to

be weak in 2015

There are three reasons why the current

market weakness is likely to continue into

2015 and beyond.

First, the HDB Resale Price Index (RPI) has

continued to decline and has been weaker

than the URA PPI since 2013Q2. A doubling

of HDB prices since 2005 created a “wealth

effect” that supported mass market prices as

http://propertymarketinsights.com/

http://www.propwise.sg/what-is-a-meaningfulcorrection-of-property-prices/



















HDB flat owners could sell their unit at a high

price and upgrade to a private condominium.

Now that HDB prices are falling, this effect

will shift into reverse gear, where HDB

owners find it difficult to sell their flat at a

good price, thus sapping demand from the

mass segment of the market, which

incidentally has been the strongest segment.

Figure 2 – URA PPI vs HDB RPI (Source:

URA, HDB, PropertyMarketInsights.com)

Second, record upcoming completions are

likely to put pressure on both property prices

and rentals, especially coupled with slower

expected population growth as the

government continues to tighten the inflow of

foreigners coming into Singapore due to the

locals’ unhappiness. Conspiracy theorists

posit a loosening of the foreign talent spigot

post a surprise 2015 General Election, but

really, who knows?

Based on URA data, there are close to

75,000 units of private residential properties

that will be completed in the next few years.

Looking at the breakdown of supply, 2015

and 2016 will see completions of over 20

thousand units per year. This is nearly twice

the yearly average of fewer than 10 thousand

units per year between 1996 and 2012.






Figure 3 – Upcoming private residential

supply (Source: URA,

PropertyMarketInsights.com)

And if we add on the completions of public

housing, the upcoming supply tsunami looks

daunting.

Prospects of QE tapering

Finally, we should keep in mind that the root

cause of the buoyant property prices is the

protracted low interest rate environment after

multiple rounds of Quantitative Easing (QE)

by the US Federal Reserve post the Global

Financial Crisis. This has propped up the

prices of most yield-based assets, including

property. While the Fed has indicated a gentle

pace of QE tapering, the market reaction to

any significant tightening of liquidity could be

stronger and more violent than people expect.

Figure 4 – URA PPI vs 3-Month SIBOR

(Source: URA,

MAS,PropertyMarketInsights.com)





And even if interest rates do not shoot up

right away, borrowing costs can still rise as

banks charge a higher margin (SIBOR + X%)

to give themselves a buffer against rising

interest rates and greater mortgage

defaults.And when borrowing costs rise, the

stress on heavily leveraged buyers will go up,

and the attractiveness of property itself as an

asset class also decreases as the net

cashflow it provides falls. This will be

exacerbated if rentals are also under

pressure at the same time.

I’ve talked about this before, but I think many

property buyers are still blasé to the impact of

rising mortgage rates (whether from rising

interest rates or banks raising their lending

spread) on their ability to meet their monthly

payments, so I hope to make it more concrete

by using an example.

Let’s take the case of the Lees, a young

professional couple who bought their dream

condo for $2 million (before the TDSR rules

came into effect). They took an 80% loan

($1.6 million) with a 30-year tenor. With the

current low floating mortgage rate of 1.2%,

their monthly payment is $5,294, a

manageable 50% of their total household

income.

Fast forward a couple of years, when the Fed

has raised rates and mortgage rates in

Singapore have returned to their long term

average of around 4%. The monthly payment

will get re-priced upwards to $7,639, and now

accounts for a hefty 72% of their household

income (assuming no pay increments). This

represents a 44% increase.

The Lees are starting to sweat, and are

barely making ends meet. And Lord forbid if

either of them were to lose their job. Not to

mention that this rise in rates is coupled with



weak rentals and record completions, and

property prices falling every quarter.

Have you imagined such a scenario

happening to you?

So what should buyers and investors do?

I do not like making forecasts about when or

how much property prices will fall, because I

believe the exact timing and magnitude of

property price movements is dependent on

too many unknowable events. Instead, I

prefer to base my property investment

decisions (there are different considerations if

you are buying for own stay) on my analysis

of where we are in the cycle and what has

historically been the best actions to take at

each point.

Members of Property Market Insights will

know that we are currently in the Early Bear

stage of the Property Market Cycle Model.

This means that the best thing to do is to sit

tight and wait for further correction before

entering. The time to buy will come when we

enter the Late Bear and Early Bull stages of

the market. You might have to wait for years,

but it’s much better than giving in to the

pressure to buy now at a high price and then

see your life savings get wiped out, don’t you

agree?

Here’s wishing everyone a Happy New Year

and a Healthy and Wealthy 2015!

By Mr. Propwise, the founder of Singapore

property blog www.propwise.sg, which aims

to help people make better real estate buying,

selling, renting and investing decisions.












Singapore Property This Week


Residential

More properties sold at auctions in Q4

According to JLL, properties at auctions sold

at a faster rate in Q4 as compared to the

previous quarters. JLL said that as buyers’

and sellers’ expectations converge, property

sales at auctions have picked up in 2014. In

its report, JLL said that to meet buyers’

expectations, sellers have been more willing

to lower their prices. In Q4 this year, the

proportion of properties sold during their first

auction listing has increased to 90 percent

from 80 percent in Q3. As such, $13.7 million

worth of properties were sold at auctions in

Q4 this year. However, this year, the total

sales value of properties sold at auctions fell

by 27 percent from that in 2013 to $72.5

million. Nonetheless, Mok Sze Sze from JLL

is optimistic about property sales at auctions

in the coming year. She believes that there

will be a steady increase in mortgagee sales.

Despite the weak leasing market, buyers’

investment sentiments have not been

affected, added Mok.

(Source: Business Times)

Commercial

Centurion and LianBeng Group

collaborates to build workers’ dorm

In collaboration with Centurion Corporation,

LianBeng Group will build a 7,900-bed

dormitory at JalanPapan.



This dormitory will be catered to workers from

the process industry, and it will include a

3,000 sq metre training centre for residents of

the dormitory. The dormitory is expected to be

about 1.5 ha and should be completed by

2016. It will be located near Jurong Island so

that workers may commute to work easily.

The tender for the dormitory was awarded by

Association of Process Industry (Aspri), which

aims to increase productivity of workers

through skills upgrades and other training.


Two tenders awarded for industrial sites

An industrial site at Tuas South Street 9 and

another at Tampines North Drive 1 has been

awarded by JTC Corporation to Prospaq

Group and Goldprime Land respectively. The

former plot was awarded for $6.88 million

while the latter plot of land was awarded for

$64.4 million. The industrial site at Tuas is

zoned for Business 2 use and has a gross

plot ratio of 1.0. It is 8,369 sq metres large

and has a 20-year-and-8-months tenure. On

the other hand, the industrial site at Tampines

is larger at 27,395.2 sq meters. It has a gross

plot ratio of 2.5 and its tenure will last 30

years.


DTZ expects rental demand for small retail

units to fall

According to DTZ, rental demand for smaller

retail units may fall as competition from e-

retailers heightens. Furthermore, DTZ

predicts the low labour supply and tough

operating environment will affect rental

demands for such retail units. Nonetheless,

capital values of strata retail space increased

by 1.3 percent in 2014 from 2013 in



Orchard/Scotts Road and other suburban

areas, said the Business Times. This is

despite the implementation of the total debt

servicing ratio. However market experts

caution that rentals for retail space may fall

further in Q4 this year due to reduced

shopper traffic particularly in the financial

districts. According to DTZ, the gross fixed

monthly rental value for Orchard/Scotts Road

has fallen by 0.3 percent to $30.03 psf in Q4

this year from the previous quarter. Similarly,

the rental value of units in the other city areas

have also fallen by 0.7 percent quarter-on-

quarter to $17.98 psf in Q4 from Q3 this year.

Ong ChoonFah from DTZ said that the limited

supply of new units in the Orchard/ Scotts

Road area may have contributed to the

relatively better retail rents compared to retail

units in the other areas. Not only so, Orchard

Road is a known tourist destination and as

such is expected to command a higher rent

compared to the suburban areas.


Gross floor area for medical clinics to be

capped at 20%

Medical clinics that are located in commercial

developments will not be allowed to expand

beyond 3,000 sq meters or 20 percent of the

total floor area that has been approved for

commercial use, whichever is lower. This new

guideline has since been effective according

to a circular issued by the Urban

Redevelopment Authority (URA) and the

Ministry of Health (MOH). Nonetheless,

existing medical clinics and formal planning

applications that were submitted before Dec

23 this year will not be affected by the new

guidelines.



This new guideline aims to prevent

commercial buildings from turning into de

facto medical centres. According to the

circular, medical centres need to be located at

sites that are zoned for that specific use.

Nicholas Mak from SLP International said that

this new guideline will help to regulate the

supply of medical centres in commercial

buildings and will help to optimise the use of

the space.


Bid for TanjongPenjuru site won by UBTS

A logistic and warehousing company, UBTS

Pte Ltd won the highest bid for a site at

TanjongPenjuru at $9.3 million. The 1.6 ha

site has a 20-year tenure and is zoned for

Business 2 use. It also has a plot ratio of 2.5.

Nicholas Mak from SLP International believes

that UBTS will be relocating its operations to

the new site. Other tenders that have closed

recently include a site at Tuas South Street 9

that was won by Asiaone Logistics and

Warehousing Pte Ltd for $78.13 psfppr; and

another site at Tampines North for $87.34

psfppr.





Non-Landed Residential Resale Property Transactions for the Week of Dec 9 – Dec 16

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

3 RIVER PLACE 797 1,320,000 1,657 99

4 REFLECTIONS AT KEPPEL BAY 1,798 3,650,000 2,030 99

4 CARIBBEAN AT KEPPEL BAY 1,356 2,000,000 1,475 99

5 BLUE HORIZON 1,216 1,425,000 1,172 99

5 HERITAGE VIEW 1,163 1,360,000 1,170 99

5 DOVER PARKVIEW 936 990,000 1,057 99

8 CITY SQUARE RESIDENCES 1,216 1,820,000 1,496 FH

8 CITY SQUARE RESIDENCES 1,518 2,100,000 1,384 FH

9 ESPADA 344 925,000 2,685 FH

9 THE METZ 3,240 6,000,000 1,852 FH

9 WATERMARK ROBERTSON QUAY 893 1,608,000 1,800 FH

9 ST THOMAS SUITES 4,672 7,250,000 1,552 FH

10 NASSIM PARK RESIDENCES 3,477 13,700,000 3,940 FH

10 NASSIM MANSION 2,852 8,362,500 2,932 FH

10 THE GRANGE 2,293 4,200,000 1,832 FH

10 BELMOND GREEN 1,270 2,300,000 1,811 FH

10 GALLOP GREEN 3,272 5,824,160 1,780 FH

11 TEN @ SUFFOLK 1,087 1,549,000 1,425 FH

11 SHELFORD SUITES 3,584 3,800,000 1,060 FH

11 ADAM PARK CONDOMINIUM 1,765 1,663,000 942 FH

12 VISTA RESIDENCES 646 1,060,000 1,641 FH

13 BELLA VISTA 893 910,000 1,019 FH

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

14 THE WATERINA 893 1,015,000 1,136 FH

15 RIVEREDGE 1,604 2,000,000 1,247 99

15 SANCTUARY GREEN 1,281 1,425,000 1,112 99

15 ESTERINA 2,045 1,630,000 797 FH

16 CASA MERAH 1,259 1,530,000 1,215 99

16 CASAFINA 1,238 1,030,000 832 99

18 WATERVIEW 786 850,000 1,082 99

18 LIVIA 915 900,000 984 99

18 CHANGI RISE CONDOMINIUM 1,130 945,000 836 99

18 CHANGI RISE CONDOMINIUM 1,130 900,000 796 99

18 EASTPOINT GREEN 1,173 900,000 767 99

18 RIS GRANDEUR 3,294 2,120,000 644 FH

19 THE QUARTZ 1,141 1,220,000 1,069 99

19 PALM GROVE CONDOMINIUM 1,399 1,420,000 1,015 999

19 COMPASS HEIGHTS 1,324 1,250,000 944 99

19 RIO VISTA 1,238 996,000 805 99

19 EVERGREEN PARK 1,345 1,050,000 780 99

21 PINE GROVE 1,755 1,580,000 901 99

23 TREE HOUSE 1,249 1,250,000 1,001 99

23 MI CASA 1,098 1,030,000 938 99

23 GLENDALE PARK 1,216 1,058,000 870 FH

23 PALM GARDENS 1,216 890,000 732 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.

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

25 THE WOODGROVE 1,184 868,000 733 99

27 THE ESTUARY 1,119 1,050,000 938 99

27 ORCHID PARK CONDOMINIUM 1,572 1,150,000 732 99

27 EUPHONY GARDENS 1,076 750,000 697 99

28 SELETAR SPRINGS CONDOMINIUM 1,335 958,000 718 99

28 SELETAR SPRINGS CONDOMINIUM 2,077 1,300,555 626 99

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Singapore Property Weekly Issue 188