Singapore Property Weekly Issue 66

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CONTENTS

p2 The 2 Numbers Smart Property Investors

Must Know: COCR and IRR

p8 Singapore Property News This Week

p12 Resale Property Transactions

(August 8 – August 14)

Welcome to the 66th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

mailto:[email protected]

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

SINGAPORE PROPERTY WEEKLY Issue 66

Page | 2Back to Contents

By guest contributor Gerald Tay

In the first part of this article, we talked about

the importance of looking at numbers instead

of location when buying investment property.

There are two vital numbers that novice

investors and speculators frequently ignore:

the Cash-on-Cash Return and Internal Rate

of Return. Let‟s now take a closer look at

those two vital numbers.

Cash-on-Cash Return (COCR)

Most novice investors and speculators look at

net yield only. This can be highly deceiving as

it does not tell you if your money is safer in

the bank or if you can get higher returns in

other investments.

The 2 Numbers Smart Property Investors Must Know: COCR and IRR



The calculation of net yield is typically based

on the purchase price, rental income and net

of all expenses except mortgage payments.

The difference between net yield and COCR

is that the latter factors in both the principle

payment as well as the interest on the

mortgage loan, including all other expenses

incurred.

Novice investors and speculators only look at

the purchase price or PSF because they buy

on the hope of capital appreciation, which can

be highly dangerous. Professional investors

look at the COCR – that is, if you were to put

in your initial sum of capital (including stamp

duty, downpayment, renovations costs, legal

fees, etc) minus all property-related expenses

(including mortgage and interest), what will

the actual return on capital be in the first

year? Will your money be safer in the bank

instead?

Internal Rate of Return (IRR)

Professional investors use this tool to

measure and compare the profitability of

investments. It can also be defined as the

annualised effective compounded rate of

return. It is quite similar to COCR, except that

it measures a period (years) of different cash-

flows yielded by the investment till the point of

exit. Because it is a rate of return, it is an

indicator of the efficiency, quality and yield of

an investment.

An investment is considered acceptable if its

internal rate of return is higher than the

minimal acceptable rate of return or cost of

capital. Example: If your minimal acceptable

rate of return according to your overall

investment plan is 10%, and the IRR for the

investment deal upon exit after five years

(before inflation and possible interest rate

increases) is 8%,



then it is definitely not worth your while to

enter.

Similarly, if your cost of money (borrowing) is

1% today, your acceptable rate of return is

8% and your investment potentially yields an

IRR of 10% over five years, then it may be

worthwhile to enter as there is a safety

margin and it meets your target requirement.

How professional investors think about

the purchase price

The COCR and IRR measure the actual

performance of your property and take into

account the value you can get out of your

investment property.

When I look at an investment, the purchase

price is the last of my considerations. It is only

used because I need to compute both my

COCR and IRR to determine the value of the

investment.

Novice investors and speculators pay the

seller‟s price or market price. Professional

investors dictate the price to pay to the seller,

not the other way round! If the price does not

reach my targeted benchmark for both the

COCR and IRR in my negotiations, I will walk

away from the deal, no matter how good an

investment others say it is.

The purchase price can be high, but if I can

get value through both the COCR and IRR, I

know I have a winning investment.

Put money in your pocket immediately

Remember, a good property will always put

money in your pocket. A bad property takes

money out of your pocket. Buying a property

in a not-so good or average location but that

puts money in your pocket today is lot better

than buying a property in a good location that

takes money out of your pocket every month.



But please do not rush to buy properties in

areas where (as the Chinese saying goes)

“even the birds don‟t lay eggs” based on this

statement. Do your own due diligence first!

I know someone who bought a three bedroom

condo in Woodlands during the SARS period

in 2003. She bought it at a very low price, in

the region of S$400,000, and paid cash for it.

Today, she is enjoying the rental income

generated every month from her tenants, with

a net yield above 10%.

I am not saying you need to pay full cash

payment for a property to be able to enjoy

such yields. I strongly believe leverage is a

very powerful tool especially in real estate

investment. All my properties are leveraged.

My point is that if those unleveraged numbers

make financial sense, then the property is a

good investment even in an average location

like Woodlands.

Make investment decisions based on

actual numbers

So now you know why professional investors

seldom lose money – because they make key

critical buying decisions based on actual

numbers, not on speculation that a property

has goo growth potential or because it is in a

good location. Professional investors do not

count on “potential” to make money – that is a

bonus. The smart investor will gain both good

cash-flow as well as capital appreciation if

this bonus happens. If the “promised”

potential growth does not happen for

whatever reason, there is still positive cash-

flow from the property.

The next time someone tries to sell you an

investment property (especially the new

launches nowadays), simply ask for these two

numbers from them. If they stare at you with

a blank look (most likely because they have



never heard of COCR and IRR) and say it is a

good investment simply because it has a

really good “potential net yield” and it is in a

“good location”, take that as a red flag!

Any investment will carry a certain amount of

risk – understanding these two key numbers

will help mitigate those risks substantially and

propel you forward in your investment

journey.

By guest contributor Gerald Tay, CEO and

Chief Trainer at CREi Academy Group.

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





http://www.moneymatters.sg/



http://www.smartexpos.com/sg


Singapore Property This Week


Residential

Sims Drive freehold factory sold for $43m

The landed factory near the junction of Sims

Drive and Lorong 17 Geylang which sits on a

34,912.7 sq ft site was sold to a subsidiary of

Fong Tat Group at $43.18 million or $495 psf

ppr based on the 2.5 GPR. No development

charge is payable for the redevelopment of

the site zoned „Business 1‟. Industrial

property prices rose by 7.3% and 8.4% in Q1

and Q2 and this trend is likely to continue

given the demand from companies and

investors turning their interest into this market

sector.

(Source: Business Times)

30-year leasehold Bukit Batok industrial

site draws $32.3m top bid

The 161,578 sq ft site at Bukit Batok Street

23 attracted a total of four bids, with the top

bid at $32.3 million, or $80.03 psf ppr from

Soilbuild Group Holdings. This price is a

reflection of a fair market price, a result of the

cooling measures such as the capping of

leases for all industrial sites at 30 years, and

the restrictions on strata sub-division. The

site zoned Business 1 has a maximum

permissible gross plot ratio of 2.5 and a

maximum building height of 153 metres

above mean sea level.




Commercial

Thomson View condo up for sale again

The 99-year leasehold 540,314 sq ft

residential site at Upper Thomson Road is

asking for $580 million or $685 psf ppr if a

$107 million premium to enhance the

property's use and a $90 million premium to

top up the lease are included. If another $46

million development charge is paid for the

additional 10% GFA for balcony area, it would

increase to $659 psf ppr. It has a 2.1 GPR

and is zoned for residential use. The tender

will close on Sept 4 at 3pm.


Increased sales in luxury property market

Sales in the luxury property market nearly

doubled in Q2, but prices have falling, with

the prices for non-landed new sales falling by

5% to $2,374 psf in Q1 and to $2,230 psf in

Q2, possibly as a result of the large supply of

12,855 units (731 completed units and 12,124

uncompleted).Meanwhile, the sales have

been on the rise, with new sales increasing

by 246%to 235 units in Q2, sub-sales

increasing by 34%to 94 units, and resales

increasing 86% to 585 units.


Busy bungalow market

There had been a number of bungalows

transacted recently, including a few in Good

Class Bungalow Areas (GCBAs). These

bungalows include a 999-year leasehold two-

storey bungalow with a 9,500 sq ft built-up

area at Yarwood Avenue sitting on a 16,278

sq ft site sold for $19.5 million or $1,198 psf,

a freehold two-storey bungalow at Oriole

Crescent sold for $18.2 million - or $1,726 psf

based on a 10,546 sq ft land area, and a six-

bedroom bungalow with a gym and a pool in



Camden Park which was sold for $25 million,

or $1,659 psf on the 15,070 sq ft land area. A

new two-storey, seven-en-suite-bedroom

bungalow with a 17,000 sq ft built up area in

Binjai Park was also sold at $32.9 million or

$1,471 psf based on the 22,360 sq ft site

area while a small freehold five-bedroom

bungalow at Woollerton Drive was sold for

$12.6 million or $1,570 psf based on the land

area of 7,987 sq ft. Deals transacted outside

GCB Areas include a two-storey four-

bedroom bungalow with a roof terrace, home

theatre and pool room at Trevose Crescent,

which was sold for $13.7 million or $1,788 psf

based on a 7,662 sq ft land area. Buyers of

these GCBs are mostly Singaporean buyer-

occupiers, and given the reasonable prices,

there may be more GCBs deals.


Three 99-year residential sites yielding up

to 1,600 units launched for sale

The first site, at New Upper Changi Road, is a

343,170.4 sq ft plot for condominium/flat

development with a 549,077.3 sq ft maximum

GFA that can yield 540 units. The site is

expected to draw much interest with eight to

12 bids, and a top bid of $630-$700 psf

resulting in a $1,050-1,100 breakeven price.

Since it is located near Tanah Merah MRT

and the upcoming Bedok Mall, it could

potentially sell for $1,200-$1,350 psf.

However, there aredownsides to the site,

such as competition from two neighbouring

sites sold earlier.

Next is a 177,658.2 sq ft EC site at

Woodlands Avenue 6/Woodlands Drive 16

witha 497,442.9 sq ft maximum GFA that can

yield 465 units.



The site is expected to be fairly attractive,

drawing three to seven bidders with a top bid

of $300-$350 psf ppr, since it there has been

limited supply of EC sites in the region. Its

expected breakeven price and average

selling price are $600-680 psf and $730-750

psf respectively.

The final site is a 2.38-hectare site reserve

site at Prince Charles Crescent which was

triggered for sale by a $390 million

commitment. It has a maximum permissible

GFA of some 537,656.8 sq ft, and is expected

to attract a $760-850 psf ppr top bid.

Tender for the three sites will close at 12 noon

on Sept 20, Oct 9 and October 16

respectively.


http://propertymarketinsights.com/



Non-Landed Residential Resale Property Transactions for the Week of Aug 8 – Aug 14

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 ONE SHENTON 1,098 2,316,780 2,110 99

1 ONE SHENTON 1,066 1,980,000 1,858 99

2 THE BEACON 1,109 1,560,000 1,407 99

3 QUEENS 915 1,250,000 1,366 99

4 MARINA COLLECTION 2,099 5,877,200 2,800 99

4 THE OCEANFRONT @ SENTOSA COVE 1,216 2,432,000 1,999 99

5 THE MAYLEA 1,023 1,350,000 1,320 FH

5 WEST-N 1,216 1,600,000 1,315 FH

5 LANDRIDGE CONDOMINIUM 1,776 2,150,000 1,211 FH

5 THE PARC CONDOMINIUM 1,292 1,550,000 1,200 FH

5 BOTANNIA 1,249 1,440,000 1,153 956

5 THE ESTIVA 980 1,120,000 1,143 FH

5 BOTANNIA 1,227 1,380,000 1,125 956

5 THE CASSANDRA 1,324 1,444,000 1,091 FH

5 DOVER PARKVIEW 1,249 1,350,000 1,081 99

5 PARK WEST 872 810,000 929 99

8 CITY SQUARE RESIDENCES 872 1,363,800 1,564 FH

9 VIDA 517 1,165,000 2,255 FH

9 KIM SIA COURT 1,421 3,000,000 2,111 FH

9 THE SUITES AT CENTRAL 1,442 3,000,000 2,080 FH

9 THE PIER AT ROBERTSON 1,206 2,468,000 2,047 FH

9 ASPEN HEIGHTS 1,572 2,545,020 1,619 999

9 ASPEN HEIGHTS 1,044 1,633,000 1,564 999

9 ASPEN HEIGHTS 2,691 4,000,000 1,486 999

10 NASSIM MANSION 3,412 9,800,000 2,872 FH

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

10 DRAYCOTT EIGHT 2,895 6,500,000 2,245 99

10 THE LOFT 1,324 2,800,000 2,115 99

10 BALMORAL HILLS 1,841 3,690,000 2,005 FH

10 JEWEL OF BALMORAL 829 1,600,000 1,930 FH

10 ZENITH 743 1,390,000 1,872 999

10 WATERFALL GARDENS 1,830 3,019,000 1,650 FH

10 HOLLAND PEAK 2,551 2,880,000 1,129 FH

11 SKY@ELEVEN 2,271 3,951,540 1,740 FH

11 SHELFORD REGENCY 1,281 1,630,000 1,273 FH

11 NINETEEN SHELFORD ROAD 1,604 2,000,000 1,247 FH

11 HILLCREST ARCADIA 1,098 1,050,000 956 99

14 CITY PLAZA 915 980,000 1,071 FH

14 THE TRUMPS 1,356 1,450,000 1,069 99

14 ASTORIA PARK 1,195 1,160,000 971 99

14 CASA SARINA 1,119 1,050,000 938 FH

14 SIMS GREEN 1,238 1,070,000 864 99

14 WING FONG COURT 1,098 830,000 756 FH

15 THE SEA VIEW 560 1,100,000 1,965 FH

15 THE ESTA 1,130 1,582,000 1,400 FH

15 THE SEA VIEW 2,723 3,800,000 1,395 FH

15 THE MAKENA 1,292 1,780,000 1,378 FH

15 ONE AMBER 1,335 1,838,200 1,377 FH

15 THE ESTA 1,410 1,940,188 1,376 FH

15 ESTIQUE 603 780,000 1,294 FH

15 MANDARIN GARDEN CONDOMINIUM 829 1,058,000 1,277 99



Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

15 COSTA RHU 1,012 1,200,000 1,186 99

15 SIGNATURE CREST 1,496 1,655,000 1,106 FH

15 THE ESPIRA 872 950,000 1,090 FH

15 MANDARIN GARDEN CONDOMINIUM 1,787 1,660,000 929 99

16 COSTA DEL SOL 1,313 1,740,000 1,325 99

16 LANDBAY CONDOMINIUM 1,184 1,300,000 1,098 FH

16 CHANGI COURT 1,367 1,415,000 1,035 FH

16 THE BAYSHORE 1,012 1,022,000 1,010 99

16 CHANGI COURT 1,389 1,300,000 936 FH

16 CASAFINA 1,432 1,280,000 894 99

16 THE TANAMERA 947 838,000 885 99

16 EASTWOOD CENTRE 926 770,000 832 99

16 CASAFINA 1,378 1,080,000 784 99

16 VENEZIO 2,486 1,680,000 676 FH

17 FERRARIA PARK CONDOMINIUM 1,023 1,010,000 988 FH

17 FERRARIA PARK CONDOMINIUM 1,195 1,170,000 979 FH

17 BALLOTA PARK CONDOMINIUM 1,281 980,000 765 FH

17 LOYANG VALLEY 1,055 780,000 739 99

18 OASIS @ ELIAS 1,206 1,055,000 875 99

18 SAVANNAH CONDOPARK 1,453 1,250,000 860 99

18 CHANGI RISE CONDOMINIUM 1,023 870,000 851 99

18 ELIAS GREEN 1,367 875,000 640 99

19 THE YARDLEY 1,302 1,432,200 1,100 FH

20 CLOVER BY THE PARK 1,755 2,250,000 1,282 99

20 BISHAN 8 1,184 1,350,000 1,140 99

20 THE GARDENS AT BISHAN 883 910,000 1,031 99

20 BISHAN POINT 1,184 1,170,000 988 99

20 LAKEVIEW ESTATE 1,615 1,405,000 870 99

Postal


Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

20 LAKEVIEW ESTATE 1,615 1,210,000 749 99

21 MAPLEWOODS 1,033 1,450,000 1,403 FH

21 MAPLEWOODS 1,313 1,800,000 1,371 FH

21 GARDENVISTA 926 1,110,000 1,199 99

21 GRAND REGENCY 818 930,000 1,137 FH

21 CAVENDISH PARK 1,410 1,550,000 1,099 99

21 PANDAN VALLEY 1,755 1,850,000 1,054 FH

21 CLEMENTI PARK 1,345 1,340,000 996 FH

21 GOODLUCK GARDEN 1,701 1,660,000 976 FH

21 PINE GROVE 1,679 1,370,000 816 99

22 THE LAKESHORE 1,184 1,180,000 997 99

23 THE PETALS 1,259 1,250,000 993 FH

23 DAIRY FARM ESTATE 2,207 2,150,000 974 FH

23 GLENDALE PARK 1,249 1,190,000 953 FH

23 THE JADE 1,755 1,550,000 883 99

23 GUILIN VIEW 1,281 1,016,800 794 99

23 REGENT HEIGHTS 1,023 790,000 773 99

23 REGENT GROVE 1,163 895,000 770 99

23 PHOENIX HEIGHTS 1,335 739,000 554 99

26 THE CALROSE 1,238 1,418,000 1,146 FH

27 SELETARIS 1,647 1,258,000 764 FH

27 ORCHID PARK CONDOMINIUM 980 678,000 692 99

27 YISHUN SAPPHIRE 1,206 828,000 687 99

28 SERENITY PARK 1,313 1,230,000 937 FH

28 GRANDE VISTA 1,658 1,420,000 857 999

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.

Documents

Singapore Property Weekly Issue 66