Singapore Property Weekly Issue 32

8/3/2019 Singapore Property Weekly Issue 32

http://slidepdf.com/reader/full/singapore-property-weekly-issue-32 1/18

Issue 32Copyright © 2011 www.Propwise.sg. All Rights Reserved.

http://www.propwise.sg/

http://www.propwise.sg/



ContributeDo you have articles and insights and articles that you’d like to share

with thousands of readers interested in the Singapore property

market? Send them to us at [email protected]

, and if they’re good

enough, we’ll publish them here, on our blog and even on Yahoo!

News.

AdvertiseWant to get your brand, product, service or property listing out to

thousands of Singapore property investors at a very reasonable

cost? Head over to www.propwise.sg/advertise/ to find out more.

CONTENTS

p2 Singapore Property News This Week

p9 Is the REIT Myth Busted?

p16 Resale Property Transactions

(December 10 – December 16)

Welcome to the 32th edition

of the Singapore Property

Weekly .

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

mailto:[email protected]

http://www.propwise.sg/advertise/

http://www.propwise.sg/advertise/

mailto:[email protected]



SINGAPORE PROPERTY WEEKLY Issue 32

Singapore Property This Week

Page | 2Back to Contents

Residential Redas holds meetings with industry

players regarding cooling measures

A series of meetings has been held by the

Real Estate Developers' Association of

Singapore (Redas) with industry players suchas developers, property consultants,

brokerage analysts and lawyers to discuss the

impact of the recently implemented cooling

measures.

They discussed the intended objectives of the

measures, and proposals for changes in thecooling measures, which may eventually be

presented to the authorities. One potential

proposal includes identifying districts popularto foreign investors and applying tiered stamp

duties. Other proposals include giving

incentives such as subsidies to first-time

Singaporeans and Permanent Residents

(PRs) homebuyers instead of penalising

foreigners for buying properties.According to data collated by Redas,

foreigners are not fully responsible for the

increase in mass market home prices since

only 1 out of 33 selected projects launched

recently had more than 50% of its units

bought by foreigners. According to datacollated by Redas, foreigners are not fully

responsible for the increase in mass market





private homes and in turn the price increase

for mass-market private homes.

Analysts disagree over whether the ABSD is

going to be here permanently with some

thinking that Singapore’s status as an open

economy making it impossible and others

thinking that the government’s shift to a

'Singaporeans first' policy will result in the

permanence of the ABSD. Even if thegovernment decides to relax the measures, it

will likely be only for loan-to-value (LTV) ratios

or the seller's stamp duty.

Developers and the government aired

disagreement at Redas dinner

The Real Estate Developers Association of

Singapore's 52nd anniversary dinner was

where the developers and the government

voiced their differing views on the recent

cooling measures.

Mr Tan Chuan-Jin, Minister of State for

National Development and Manpower, was

present at the event as the guest-of-honour.

He stated that while he did not expect

developers to accept the measures, the

measures were implemented to moderate

such investment demand in order to avoid theneed for a major correction in the future.

Redas president Mr Wong Heang Fine,

disagreed, referring to the ABSD as 'Another

Bad Shock for Developers'. He stated that

while there are short-term impacts on sales

volume and prices, there are other longer-term

concerns, such as higher cost structure for

developers due to higher land acquisition cost,





decline in home equity values and

consequently, shrinking wealth and it may

even push the economy into recession by

dampening foreign investments and businessprospects in Singapore.

When he expressed Redas’s wish to engage

the government in close dialogues even on

sensitive matters before they are

implemented, Mr Tan countered that while

there are many areas of mutual interest in

which the government would be 'happy to

engage in closer dialogue', this may not be so

on some issues and the important thing is

about implementing the right policy.

Mr Wong also stated that Redas will assessthe impact of the latest measures once it

takes effect and provide feedback, and that

the policy is likely to be short term.

JLL: Stabilisation of property auctions

market in Q4

The property auctions market achieved a

sales rate of 10% in Q4 2011, with seventransactions out of the 71 properties listed, up

from 6% and higher than expected. Q3’s

auction transactions and percentage of

properties sold was the lowest since Q1 2009.

Q4’s sales rate was a 33 per cent year-on-

year decrease more moderate than last year’s

40% decrease in Q4. According to JLL, Q4

auction transactions in the last two years are

usually slower, with buyers putting off making

decisions until the holidays end.

Residential transactions continued to exceedother transactions but this may change when

the latest cooling measures takes effect next

year as investors turn to alternative property





sectors that offer higher loan-to-value ratios

and yields. The proportion of residential sales

had also decreased by 15 percentage points

from Q4 2010.ABSD – a long-term or short-term

measure?

Many consultants and industry players agreed

with the Real Estate Developers' Association

of Singapore (Redas)’s president’s claims thatthe latest cooling measures were likely to be

short-term in nature.

The director of R'ST Research, Mr Ong Kah

Seng, feels that after some time for the policy

to take effect, the government will likely

review it according to market conditions whileMr Lee Sze Teck, senior manager of research

and consultancy at Dennis Wee Group,

believes that the short-term could be a few

years rather than a few months. He also said

that if it were meant to be a long-term

measure, the government would have

adjusted the buyers stamp duty rate ratherthan imposing an additional stamp duty.

Credo Real Estate executive director Ong

Teck Hui, felt that whether the ABSD will stay

for the long-term depends on the foreign

demand. If foreign demand for local property

remains strong, then the ABSD will be here for

the longer term. If the demand weakens, the

government could review and lift the ABSD

but new measures could be introduced if

foreign demands increase significantly again.

Knight Frank chairman, Tan Tiong Chengstated that a 10% price fall should attract

buyers which would help stabilise the market

and a 30% fall is unlikely unless there is



SINGAPORE PROPERTY WEEKLY I 32





Commercial

Government moves to moderate industrial

land prices

The government has introduced new

measures to prevent investors from driving up

the prices of industrial property so that

genuine end-users will find it more affordable.

It can also prevent a potential influx of

investors turning their attention towards

industrial property due to the cooling

measures in the residential market.

To this end, the Ministry of Trade and Industry

(MTI) has increased land supply for the

Industrial Government Land Sales

Programme from 16 hectares in H2 2011 toalmost 24 hectares (through both confirmed

and reserve lists) in H1 2012. The MTI is also

offering 18 smallish 19-year leasehold sites at

Tuas South Avenue 12 for industrialists

intending to build their own customised

premises.

There are also more conditions attached to

the building and strata subdivision of industrialproperty to prevent speculative buying. These

conditions will apply for GLS parcels from Jan

1, 2012. Strata subdivision is not allowed for

the first 10 years after the project is completed

for selected sites in proximity to MRT stations,

and if there is strata sub-division after that,there is a minimum strata unit size of 150 sqm

gross floor area which is thought to be the

minimum size required by industrialists.

The minimum 150 sq m strata unit size will

also apply to multiple-user industrial

developments on sites that don't have the

initial 10-year bar on strata subdivision, even

if the developer holds the project for rental

income.

SINGAPORE PROPERTY WEEKLY I 32





All multi-storey industrial developments will

also have to meet minimum requirements for

goods lifts and loading bays. Units in the

industrial GLS project will also have to comply

with minimum technical specs for an industrialproject with regard to floor loading, floor-to-

ceiling height and electrical provision.

Industrial property rents and prices to

decrease after increase in land supply

With the upcoming increased supply of

industrial land under the Industrial

Government Land Sales (GLS) Programme,

industrial property prices and rents are

expected to decrease to a level which genuine

end users find affordable.

The Ministry of Trade and Industry (MTI) have

also announced new conditions on strata

subdivision of projects on sites sold through

the MTI's Industrial GLS Programme from

2012. This will prevent discourage speculative

and investment demand of industrial property

which had been driving up prices. Developers

of such projects have also, in turn, pushed up

the price of industrial land at state tenders.

MTI is also offering 18 small 19-year

leasehold plots with a 1.0 plot ratio in Tuas

View Extension, which are likely to be

developed into landed factories. The short

tenure will discourage developers since it is

difficult for them to develop factories on such

sites and sell them for a profit. Loans for such

property will also be hard to get, allowing end

users a chance to build their own premises at

a reasonable cost.

These new measures may also beimplemented to discourage investors from

turning to this sector to escape the ABSD in

the residential market, hence keeping it

affordable for genuine industrialists.






Is the REIT Myth Busted?

By Calvin Yeo (reproduced with permission from his blog

www.investinpassiveincome.com )

There was an article published in Business

Times a while back by The Hooi Ling titled

‘The REIT Myth Busted’. I read the article withgreat interest as I have significant holdings of

REITs. Basically, the article is saying that if

you held most of the Singapore REITs from

day 1, you would have paid more for the

rights issue than what you received from the

dividends from the REIT.

It uses CapitaMall Trust in a hypothetical

situation where the unit holder holds a unit of

the REIT since IPO and subscribes to all the


http://www.investinpassiveincome.com/










rights regardless of the subscription price and

the reason for the rights issue. By the end of

November 2011, the unit holder would have

received $1,264 in dividends and paid $1,549

for rights subscription, a net cash outflow of

$284 per lot. Now, there is nothing factually

wrong with this analysis, however, there are

some assumptions made which a savvy

investor normally wouldn’t have done. Before

we begin, let’s first discuss what rights issues

are and the impact of rights issues.

What Are Rights Issues and the Impact of

Rights Issues

Rights issues are a way for the company or

corporate entity to raise equity by selling

shares. Capital can either be raised by debt or

equity and rights issues are a way for

shareholders to inject additional capital into

the Company. Simplistically, imagine you are

one of the partners of a Company and it

needs funds to grow, so all the partners are

asked to pump more money into the Company

in return for shares.

The impact of rights issues to the Company

are an enlarged shareholder base and

increased assets from the capital injection.

For the shareholder, if he decides to invest

capital by subscribing to the rights, he will

retain his existing ownership percentage ofthe Company. If he chooses not to invest,

somebody else will take over the new shares

and his ownership percentage in the

Company will be reduced.

Example of the Impact of a Rights Issue

The following is a hypothetical Scenario:

Company Alpha has 100 shares outstanding

with an asset base of $100.






Net Asset Value per share = $1.

Shareholder B owns 10 shares in Alpha, so

Shareholder B has 10% of the total Company

and owns $10 in total asset value.

Alpha announces a 1 for 1 rights issue with a

subscription price of $1 each.

Post the transaction, Alpha would have $200

outstanding with an asset base of $200. Net

Asset Value per share remains at $1.

If B subscribes fully to the rights, B will pay

$10 for the rights issue. B will now own 20

shares in Alpha, so ownership remains at 10%

of the total Company and he now owns $20 in

total asset value.

If B does not subscribe, B will now have only

5% ownership left, however, total asset value

remains at $10 (5% * $200).

So we can see that in the hypothetical

situation, B does not really lose out by not

subscribing, neither does B gain anything

extra by subscribing to the rights.Why Are Rights Issued?

Now that we have an understanding of rights

mechanism, we would want to know why

Companies issue rights, especially for REITs.

There are a few reasons, some being good

reasons, some being not so good reasons:

1. Acquisition of Properties – If the properties

to be acquired are at an attractive valuation

and have a return on investment above that of

the capital cost, it would make good sense.

2. Paying Down Debt – the Company might be

paying high interest rates and decides that it is

more efficient to reduce debt by raising equity.






Normally this would reduce returns by

deleveraging, but will put the balance sheet in

a stronger position.

3. Unable to Refinance Debt – During a credit

crunch, many independent REITs get shut out

from the debt capital markets and cannot

refinance maturing loans. It usually happens

at the worst time when stock prices are low

and existing shareholders may get diluted at a

low price.

4. Cash Call Due to Asset Devaluation – This

is the worst reason, where the properties have

dropped in value, causing leverage ratios to

rise to unsustainable levels or hitting leverage

caps, and cash need to be raised to increase

the asset base.

Rights Are an Option Not Obligation to

Invest

The article states that at each rights issue, the

shareholder should subscribe regardless of

the offer price or the reason stated. Now if the

subscription price was overvalued, does it

make sense to subscribe? Probably not,

especially in the article’s example of the

CapitaMall Trust issue in 2004 where the

exercise price was considered high at $1.62.

By not subscribing to the rights, the

shareholder does not necessarily lose out as

shown in the above, i.e. B still holds $10 worth

of share in net asset value. In fact, if the rights

are issued at a high price, the current

shareholder can benefit from the increased


http://www.valueinvestingsummit.com/propwise.html





net asset value of the shares he is holding

without having to pay a single cent.

If the rights were for the purpose of

acquisition, the shareholder should study if

the property purchased is a good performing

asset, whether the purchase price is right, and

whether it fits in the overall strategy of the

REIT. If none of these factors are fulfilled, the

shareholder can choose not to participate in

the rights issue or may even choose to

dispose of the stock in disapproval of the

transaction. For example, the recent Keppel

REIT transaction of Ocean Financial Center is

what I would consider a bad acquisition.

If the acquisition is a good one, the

shareholder can choose to participate bysubscribing to the rights. In the event that the

shareholder has insufficient funds, he can sell

the rights for cash and his existing shares will

still benefit from the increased net asset value

per share and even increased dividends

assuming the income from property outweighs

the cost involved with the acquisition.

If the rights were for reasons number 3 or 4, it

either implies bad capital management on the

part of the REIT management or lousy

acquisitions at high prices after which the

asset values were written down later. As an

astute investor, one would have to determine

the quality of the REIT management, a very

important part of fundamental analysis.

Especially for lousy acquisitions, a savvy

investor would have seen the disaster coming

from miles away. For refinancing, it is

important to study the debt maturity profile of

the REIT, debt rating and available credit

markets to the REIT to ensure it will not be hit

by a credit crunch.






Rights Are an Entitlement

The article also mentions that other REITs

such as Fraser Centerpoint Trust and

CapitaRetail China Trust never had a cash

call. That’s a misrepresentation, just because

these other REITs never issued rights doesn’t

mean they never did other forms of equity

raising. CapitaRetail China Trust issued

shares to the manager for acquisition of the

Mingzhong Le Yuan Mall, while Fraser

Centerpoint Trust did a private placement for

the acquisition of Bedok Point.

Issuance of shares to managers or private

placements have the same effect of diluting

the existing shareholder base. The only

difference is that for Rights, you get to choosewhether you want to participate in the capital

raising and benefit from the transaction while

a private placement is done directly to

institutions and you do not get participate. So

implying that these other REITs never had any

sort of equity capital raising is a gross

misrepresentation.

Personally, I would prefer if Rights were

issued versus Private Placements as I would

definitely be interested in investing more

capital into both Fraser Centerpoint and

CapitaRetail China Trust at a discount.

Conclusion

I believe there is some truth to be derived

from the article regarding the net cash flow.

However, it is skewed in that it does not take

into account the analysis and groundwork an

investor can do to avoid such problems.

It also does not consider the fact that an

investor can choose to subscribe to the rights

or not based on his views of the REIT.






Saying REIT investments are no good in such

a manner is almost the same as saying stock

investments don’t make sense as many

people continually buy high and sell low. It is

the importance of understanding the nature ofREITs, valuation of REITs, the properties

within the REITs, and the mechanics of

capital raising that will make one a successful

investor in REITs.

However, it’s good to know that most REITs

have yielded positive total returns, including

CapitaMall Trust in the example which gave a

total return of 127% on capital. A take away

from this article is to always have sufficient

cash ready if you intend to continue to

participate in the growth of a REIT. That’s

because REITs grow mainly through

acquisitions of high yielding assets and

capital raising through debt and equity are to

be expected.

Calvin Yeo is the founder of the Making

Passive Income blog. He graduated with a

Business Major in Finance and Accounting

and spent a few years working in an

investment bank. The knowledge from his studies and working experience serve as a

good base for him to grasp the ideas for

passive income generation.




http://www.moneymatters.sg/









Non-Landed Residential Resale Property Transactions for the Week of Dec 10 – Dec 16

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 PEOPLE'S PARK COMPLEX 409 530,000 1,296 992 ICON 904 1,740,000 1,924 99

3 THE METROPOLITAN CONDOMINIUM 1,076 1,560,000 1,449 99

3 THE METROPOLITAN CONDOMINIUM 1,033 1,330,000 1,287 99

3 CENTRAL GREEN CONDOMINIUM 1,292 1,515,000 1,173 99

3 EMERALD PARK 926 990,000 1,069 99

4 CARIBBEAN AT KEPPEL BAY 1,636 2,700,000 1,650 99

5 PARC IMPERIAL 398 720,000 1,808 FH

5 ONE-NORTH RESIDENCES 980 1,370,000 1,399 99

5 ONE-NORTH RESIDENCES 1,109 1,525,000 1,375 99

5 DOVER PARKVIEW 936 980,000 1,046 99

5 DOVER PARKVIEW 969 904,500 934 99

8 OXFORD SUITES 678 915,000 1,349 FH

9 CAIRNHILL RESIDENCES 1,173 2,500,000 2,131 FH

9 EMILY RESIDENCE 657 980,000 1,493 FH

10 THE ORANGE GROVE 2,691 6,311,200 2,345 FH

10 GALLOP GREEN 2,992 5,684,800 1,900 FH

10 THREE THREE ROBIN 1,636 2,980,000 1,821 FH

10 TANGLIN REGENCY 850 1,020,000 1,199 99

11 SKY@ELEVEN 2,820 4,794,000 1,700 FH

12 SUNVILLE 1,152 990,000 860 FH

14 ATRIUM RESIDENCES 1,023 950,000 929 FH

14 CENTRAL GROVE 1,173 1,038,000 885 99

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

14 SIMSVILLE 1,528 1,170,000 765 9915 MOUNTBATTEN LODGE 355 536,000 1,509 FH

15 PEBBLE BAY 2,626 3,900,000 1,485 99

15 DE CENTURION 775 1,060,000 1,368 FH

15 PALAZZETTO 818 980,888 1,199 FH

15 11 AMBER ROAD 1,507 1,760,000 1,168 FH

15 11 AMBER ROAD 1,507 1,740,000 1,155 FH

15 HAIG COURT 1,550 1,735,000 1,119 FH

15 MALVERN SPRINGS 990 1,090,000 1,101 FH

15 PARK EAST 2,024 2,000,000 988 FH

15 GALLERY 8 1,378 1,180,000 856 FH

15 VILLA MARINA 1,679 1,370,000 816 99

16 COSTA DEL SOL 1,313 1,600,000 1,218 99

16 THE SUMMIT 840 920,000 1,096 FH

16 LAGUNA GREEN 1,313 1,400,000 1,066 99

16 THE BAYSHORE 1,959 2,068,000 1,056 99

16 THE BAYSHORE 1,012 918,000 907 99

16 STRATFORD COURT 1,163 865,000 744 99

17 BLUWATERS 818 750,000 917 946

17 EDELWEISS PARK CONDOMINIUM 1,335 1,150,000 862 FH

17 ESTELLA GARDENS 1,259 943,000 749 FH

17 AZALEA PARK CONDOMINIUM 1,507 1,050,000 697 999

18 SAVANNAH CONDOPARK 1,238 1,028,000 830 99





NOTE: This data only covers non-landed residential resale propertytransactions with caveats lodged with the Singapore LandAuthority. Typically, caveats are lodged at least 2-3 weeks after apurchaser signs an OTP, hence the lagged nature of the data.

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

18 CHANGI RISE CONDOMINIUM 1,130 917,000 811 99

18 MELVILLE PARK 936 727,000 776 99

19 EVERGREEN PARK 1,238 910,000 735 99

19 EVERGREEN PARK 1,356 938,000 692 99

20 SEASONS VIEW 1,152 1,250,000 1,085 99

20 BRADDELL VIEW 1,453 1,300,000 895 99

21 CASA ESPERANZA 2,002 2,450,000 1,224 FH

21 THE RAINTREE 1,335 1,270,000 951 99

22 THE LAKESHORE 1,163 1,130,000 972 99

23 THE MADEIRA 936 880,000 940 99

23 REGENT HEIGHTS 1,023 790,000 773 99

23 HILLTOP GROVE 1,647 1,220,000 741 99

26 BULLION PARK 807 830,000 1,028 FH

26 CASTLE GREEN 1,130 810,000 717 99

27 ORCHID PARK CONDOMINIUM 1,808 1,180,000 653 99

27 YISHUN SAPPHIRE 1,507 945,000 627 99

http://www.valueinvestingsummit.com/propwise.html

Documents

Singapore Property Weekly Issue 32