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In this week’s issue: How Interest Rates and Yields Affect Property Prices Singapore Property News This Week Resale Property Transactions (August 15 – August 21)
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Issue 67 Copyright © 2011-2012 www.Propwise.sg. All Rights Reserved.
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CONTENTS
p2 How Interest Rates and Yields
Affect Property Prices
p8 Singapore Property News This Week
p13 Resale Property Transactions
(August 15 – August 21)
Welcome to the 67th edition of the Singapore Property Weekly. Hope you like it! Mr. Propwise
FROM THE
EDITOR
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 2 Back to Contents
How Interest Rates and Yields Affect Property Prices
By Mr. Propwise
Interest rates have a significant effect on the
real estate market as they affect both the cost
of taking a mortgage from the bank to fund the
property purchase, and the relative
attractiveness of the property purchase versus
other investment alternatives.
Since the Global Financial Crisis in 2008, we
have been in a very low interest rate
environment with SIBOR below 1%, as
governments around the world have flooded
the markets with liquidity to prevent a second
Great Depression.
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 3 Back to Contents
This has also had the effect of boosting
property prices as the cost of borrowing has
decreased and affordability has increased.
Given that we’ve been in a low interest rate
environment for over three years now, it might
feel like interest rates will always remain at
such low levels and that low interest rates are
the norm. But we should remember that not
too long ago interest rates were well above
where they are now. We should thus be
prepared for higher rates than the current
unnaturally low levels.
Looking at SIBOR
SIBOR (Singapore Interbank Offered Rate) is
a daily reference rate based on the interest
rates at which banks offer to lend unsecured
funds to other banks in the Singapore
wholesale money market (or interbank
market). Many mortgages in Singapore are
now priced off SIBOR.
From Figure 1.1.3a, we can see that over the
last 25 years, low interest rates were certainly
not the norm.
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 4 Back to Contents
The 3-Month and 12-Month SIBORs have
been at or above 7% in 1990 and briefly in
1997. More recently the 3-Month and 12-
Month SIBORs were above the 3% level for a
period from 2005 to 2007.
As of June 2012, the 3-Month SIBOR and 12-
Month SIBOR are at or close to their all-time
lows at 0.38% and 0.56% respectively, much
lower than their historical average of 2.71%
and 3.01% since July 1987 (a 25 year
period). What this means is that if interest
rates were to return to their historical
averages, mortgage rates would be closer to
the 4+% level versus the 1+% level at the
time of this writing.
The impact of higher interest rates on
mortgages
To put the implication of this in more concrete
terms, a buyer who takes a 30-year mortgage
loan of $1,000,000 at a 1% rate will pay
$3,216 for his monthly mortgage payment. If
mortgage rates were to rise to 4% he would
have to pay $4,774 instead, or a 48%
increase. For buyers who have
overleveraged, that increase could be fatal.
Thus conservative investors should factor in a
4% mortgage rate level when planning their
property purchases, to ensure that they will
be able to meet their monthly repayment
obligations.
For investors who are looking to buy
properties for rental income, one useful way
to look at the attractiveness of the investment
would be to compare the rental yield of the
property and the prevailing mortgage rate,
and see if they can make a “spread” between
the two.
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 5 Back to Contents
As of 2012Q2, average estimated yields were
at 3.28% versus an estimated effective
mortgage rate of 1.58%, resulting in a positive
1.70% yield spread (Figure 1.1.3b).
Will higher interest rates lead to lower
property prices?
In short, the answer to the question of
whether higher interest rates will lead to lower
property prices is “not necessarily”. Figure
1.1.3c plots the URA Property Price Index
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 6 Back to Contents
versus 3-Month SIBOR, and in general if we
look over the entire 25 year period it looks like
the two are negatively correlated (i.e. periods
of falling interest rates seem to correspond to
periods of rising property prices and vice
versa), but the relationship is not tight. There
are several periods of rising interest rates that
have also corresponded with rising property
prices. Interest rates, while a significant factor
to the property market, are only one of
several factors that affect it.
By Mr. Propwise for
PropertyMarketInsights.com, a Singapore
property market research site that helps
buyers and sellers make profitable investment
decisions – subscribers get updates on where
we are in the Property Market Cycle Model to
help you time your investments.
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 7 Back to Contents
SINGAPORE PROPERTY WEEKLY Issue 67
Singapore Property This Week
Page | 8 Back to Contents
Residential
Foreign buyers active in the property
market again
After the decline in foreign buyers following
the ABSD, there are signs that foreign buyers
are becoming active in the property market
again, with the four largest nationalities in Q2
being Malaysians (6.3%), Indonesians
(4.7%), mainland Chinese (4.4%) and Indian
nationals (3.0%). The largest increase came
from the Indonesians, from 247 in Q1 to 391
in Q2, while transactions by the Malaysians,
Mainland Chinese and Indian nationals
increased from 398 to 521, 311 to 365 and
173 to 252 from Q1 to Q2 respectively. From
July to Aug 23, Malaysians took up 7% of
foreign purchase or 120, with the mainland
Chinese, Indian nationals and Indonesians
taking up 6.2% (107), 4.2% (72) and 3.7%
(63) respectively. There were 8,311 deals
transacted in Q2, a 37.2% increase from the
6,059 deals in Q1. Of these transactions,
foreign buying in Q1 and Q2 took up 22.96%
and 23.58% respectively and increased to
27.06% from July to Aug 23. Though demand
from Chinese buyers is high, this could
change as the twice-reduced interest rates
by the Chinese government may attract
Chinese buyers to buy properties back home.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 9 Back to Contents
Demand for shoebox units to fall if singles
allowed to buy new flats
If singles were allowed to purchase new flats
from HDB, there may be a fall in demand in
shoebox units since such units are catered to
mainly singles. However, whether this would
make a big impact depends on the types of
restrictions singles would likely face when
buying HDB flats. For example, an income
restriction may mean continued demand for
shoebox units from those who are unable to
buy flats. The supply of new flats and
potential restriction on flat types singles can
purchase may also affect the demand for
shoebox units.
(Source: Business Times)
Suburban condos remain resilient against
downward price pressure
According to National University of
Singapore's Singapore Residential Price
Index (SRPI) series, the overall SRPI fell by
1.1% in the year-to-date. The subindex for
Non-Central Region (excluding small units)
increased by 1.3% between December last
year and July this year, while the subindex of
shoebox units (up to 506 sq ft) islandwide and
the subindex for Central Region (excluding
small units) fell by 0.1% and 3.9%
respectively in the same period. In July, the
overall index fell by 1.1% from June which
had seen an increase of 0.1% while the
subindex for shoebox units (up to 506 sq ft)
islandwide increased by 1.1% after a 0.9%
fall in June. The subindex for Central Region
also fell by 1% in July while the subindex for
Non-Central Region (excluding small units)
fell by 1.3% in July, compared to the 1%
increase in June.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 10 Back to Contents
Prices of property near Thomson MRT
Line to rise
Prices of properties near the upcoming
Thomson MRT Line are likely to rise
immediately, though those in the Springleaf,
Seletar, and Lentor area may be the ones to
gain the most increase with those in the
Springleaf/Springside possibly increasing by
10%. Though prices will start to increase by
3-5% now, they will likely increase more by
20-30% over properties that are further away
from the station when the line is near
completion. There is also a possibility that
prices of properties near the major
construction work sites will fall 5-15%.
(Source: Business Times)
99-year leasehold Farrer Rd residential
site attracts 14 bids
The 29,509 sq ft plot within walking distance
of Botanic Gardens MRT Station drew a total
of 14 bids with the top bid of $45.777 million,
or $1,107.80 psf ppr from Far East Soho. The
plot with a 1.4 plot ratio can be developed up
to five storeys and can potentially yield 54 70
sq m (753.47 sq ft) units. Far East plans to
develop the site into a development with one
and two-bedroom apartments with high
ceilings. The estimated break-even cost and
average selling price are $1,500-1,600 psf
and $1,800-2,000 psf respectively.
(Source: Business Times)
Commercial
Tampines Industrial Crescent site attracts
four bids
The 30-year leasehold 3.88 ha site at Plot 3
Tampines Industrial Crescent attracted four
bids, with the top bid of $55 million, or $77.47
psf ppr from Oxley Bliss.
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 11 Back to Contents
The site with a maximum permissible gross
plot ratio of 1.7 and a 709,986.8 sq ft GFA is
zoned B2. Located within a bigger wafer
fabrication park, it is permitted for clean
industrial activities that are compatible with
the surrounding wafer fabrication operations.
The four bids are expected given that the site
cannot be strata subdivided and can only be
rented out. A mixture of unit types could be
built on the site, with a two-storey terrace
fetching rents in the range of $1.50-$1.80 psf
and a 3-5 storey terrace fetching rents in the
range of $1.30-$1.50 psf.
(Source: Business Times)
Kranji industrial plot sold for $240m
The freehold 466,540 sq ft Business 2
industrial plot located at Jalan Lam Huat, off
Kranji Road is said to have been sold at $240
million or $205 psf per GFA based on the 2.5
plot ratio and 1.17 million sq ft maximum
GFA. There is no development charge
payable for the site. The site consists of six
land parcels and is likely to be redeveloped
into strata industrial facilities and landed
factories.
(Source: Business Times)
Confusion over pricing of industrial space
As the ABSD drives some property investors
to the industrial property sector, there had
been some confusion over pricing of industrial
space especially from inexperienced buyers.
This is especially since developers in
Singapore tend to base the psf breakdown of
an industrial unit on the total floor area as well
as the potential mezzanine level that can be
built within a high ceiling unit but does not
offer the mezzanine level upon TOP.
According to a URA spokesman, there have
not been amendments to the rules to address
this since buyers had tended to be
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 12 Back to Contents
knowledgeable investors from the business
sector until recently. There also had been
complaints that a number of salespeople at
industrial launches were not equipped with
relevant knowledge to sell such properties.
Given the increase in new investors, the
government would probably introduce new
measures to solve this problem, with a rule
requiring a more detailed and accurate
breakdown of each saleable unit by
developers recommended.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 13 Back to Contents
Non-Landed Residential Resale Property Transactions for the Week of Aug 15 – Aug 21
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
1 THE SAIL @ MARINA BAY 861 2,000,000 2,323 99
2 ICON 581 1,098,000 1,889 99
3 THE METROPOLITAN CONDOMINIUM 1,367 1,828,000 1,337 99
3 THE METROPOLITAN CONDOMINIUM 1,356 1,780,000 1,312 99
3 PEARL BANK APARTMENT 1,830 1,768,000 966 99
4 CARIBBEAN AT KEPPEL BAY 1,636 2,640,000 1,614 99
5 VARSITY PARK CONDOMINIUM 1,313 1,450,000 1,104 99
5 BLUE HORIZON 1,163 1,230,000 1,058 99
5 THE INFINITI 1,087 1,110,000 1,021 FH
5 BAYVILLE CONDOMINIUM 1,023 1,025,000 1,002 FH
5 FABER CREST 1,744 1,500,000 860 99
7 SOUTHBANK 614 1,168,000 1,904 99
8 RANGOON VIEW 1,335 1,580,000 1,184 FH
8 KERRISDALE 1,259 1,400,000 1,112 99
9 ORCHARD SCOTTS 2,099 4,100,000 1,953 99
9 LEONIE STUDIO 936 1,750,000 1,869 99
9 WATERMARK ROBERTSON QUAY 893 1,590,000 1,780 FH
9 WATERMARK ROBERTSON QUAY 2,120 3,600,000 1,698 FH
9 PARC EMILY 990 1,680,000 1,696 FH
9 PACIFIC MANSION 1,356 1,850,000 1,364 FH
10 LATITUDE 1,927 4,260,000 2,211 FH
10 ORANGE GROVE RESIDENCES 2,390 4,800,000 2,009 FH
10 ONE TREE HILL RESIDENCE 1,227 2,460,000 2,005 FH
10 BELLERIVE 1,173 1,930,000 1,645 FH
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
10 ASTRID MEADOWS 3,122 5,100,000 1,634 FH
10 SHANGHAI ONE 883 1,350,000 1,529 FH
10 VALLEY PARK 1,701 2,540,000 1,493 999
10 THE ASTON 1,012 1,470,000 1,453 FH
10 CASABELLA 1,948 2,800,000 1,437 FH
10 THE PRINCETON 1,087 1,554,410 1,430 FH
10 SEVEN HOLT ROAD 1,873 2,525,000 1,348 FH
10 GLENTREES 1,345 1,750,000 1,301 999
11 PARK INFINIA AT WEE NAM 560 1,180,000 2,108 FH
11 RESIDENCES @ EVELYN 1,528 2,660,000 1,740 FH
11 DUNEARN GARDENS 1,647 2,800,000 1,700 FH
11 LION TOWERS 1,862 2,980,000 1,600 FH
11 THOMSON 800 1,421 1,800,000 1,267 FH
11 LA SUISSE 2,110 2,500,000 1,185 999
12 NADIA MANSIONS 4,747 4,200,000 885 FH
12 ST FRANCIS COURT 1,227 898,000 732 99
14 DAKOTA RESIDENCES 1,044 1,428,000 1,368 99
14 DAKOTA RESIDENCES 1,313 1,725,000 1,314 99
14 MILL CREEK 1,119 1,250,000 1,117 FH
14 WING FONG COURT 1,098 822,000 749 FH
15 AALTO 2,024 4,020,000 1,987 FH
15 THE WATERSIDE 2,142 3,138,000 1,465 FH
15 THE MAKENA 1,292 1,750,000 1,355 FH
15 ONE AMBER 1,453 1,868,000 1,285 FH
SINGAPORE PROPERTY WEEKLY Issue 67
Page | 14 Back to Contents
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
15 THE ADARA 915 1,135,000 1,241 FH
15 COTE D'AZUR 1,141 1,400,000 1,227 99
15 HAIG COURT 1,399 1,680,000 1,201 FH
15 COTE D'AZUR 1,109 1,330,000 1,200 99
15 COTE D'AZUR 1,679 1,990,000 1,185 99
15 THE MAKENA 1,582 1,770,000 1,119 FH
15 COSTA RHU 2,056 2,056,000 1,000 99
15 THE ARIEL 1,528 1,515,000 991 FH
15 COSTA RHU 2,056 1,953,200 950 99
15 LAGUNA PARK 1,453 1,355,000 932 99
15 COTE D'AZUR 904 800,000 885 99
16 COSTA DEL SOL 1,238 1,360,000 1,099 99
16 THE BAYSHORE 1,227 1,245,000 1,015 99
16 THE BAYSHORE 969 920,000 950 99
16 EAST MEADOWS 1,238 1,155,000 933 99
16 AQUARIUS BY THE PARK 1,206 1,030,000 854 99
16 STRATFORD COURT 1,098 920,000 838 99
17 LOYANG VALLEY 1,841 1,300,000 706 99
18 SAVANNAH CONDOPARK 1,227 1,048,000 854 99
18 THE TROPICA 1,744 1,277,000 732 99
19 SUNGLADE 1,152 1,300,000 1,129 99
19 SUNGLADE 1,141 1,280,000 1,122 99
19 KENSINGTON PARK CONDOMINIUM 1,658 1,728,000 1,042 999
19 THE SUNNYDALE 1,345 1,300,000 966 99
19 COMPASS HEIGHTS 1,238 1,048,000 847 99
19 RIVERVALE CREST 1,163 965,000 830 99
20 FABER GARDEN CONDOMINIUM 2,120 2,500,000 1,179 FH
Postal
DistrictProject Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)Tenure
21 MAPLEWOODS 1,335 1,800,000 1,349 FH
21 MEADOWLODGE 1,335 1,612,130 1,208 99
21 ASTOR GREEN 1,087 1,150,000 1,058 99
21 ASTOR GREEN 1,087 1,125,000 1,035 99
21 GRAND CHATEAU 1,259 1,280,000 1,016 FH
21 PARC PALAIS 1,485 1,438,000 968 FH
21 SIGNATURE PARK 1,044 980,000 939 FH
22 THE LAKESHORE 861 935,000 1,086 99
22 IVORY HEIGHTS 1,701 1,150,000 676 100
23 DAIRY FARM ESTATE 1,281 1,325,000 1,034 FH
23 MERAWOODS 1,345 1,300,000 966 999
23 THE PETALS 1,658 1,595,000 962 FH
23 CASHEW HEIGHTS CONDOMINIUM 1,658 1,530,000 923 999
23 HAZEL PARK CONDOMINIUM 1,367 1,250,000 914 999
23 PALM GARDENS 1,206 875,000 726 99
23 NORTHVALE 1,798 1,150,000 640 99
25 CASABLANCA 893 770,000 862 99
25 ROSEWOOD 1,173 900,000 767 99
25 ROSEWOOD 1,173 866,000 738 99
28 MIMOSA PARK 1,755 1,448,000 825 FH