Singapore Property Weekly Issue 1 Highlights Residential, Commercial News

SINGAPORE PROPERTY WEEKLY – Issue 1

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Contents
Want to get your brand, product, service or
Singapore Property This Week Pg 2 property listing out to tens of thousands of
Book Review – Real Estate Riches Pg 8 Singapore property investors at a very reasonable
Is it a Good Time to Borrow Money Now? Pg 10 cost? Email us at sales@propwise.sg and we will
Are We Talking Up the Market? Pg 13 get in touch with you.

Copyright © 2011 www.Propwise.sg. All Rights Reserved. Page | 1


Singapore Property This Week
Residential News Developers’ land banks expected to grow thanks
to GLS
Prices for non-landed luxury houses remain stable Developers have been accumulating unsold
Property firm Savills Singapore mentioned that the residential units in their land banks through
prices for non-landed luxury houses remain stable. government land sales (GLS) sites. Sim Lian, which
The difference in the average price of non-landed topped the chart, has 1,441 private houses, 660
high-end private houses in Q1 2011 and Q4 2010 executive condo units and 680 HDB flats in its
remains small; there was only a 0.5% increase from collection. Developers are expected to accumulate
$2,258 psf in Q4 2010 to $2,269 psf Q1 2011. The even more in the second half of this year when the
current prices, which stand just 5.9% and 7.2% government sells land under its GLS program,
below the peak points for high-end and super which happens twice a year. Knight Frank predicted
luxury properties respectively, come close to those that some developers might choose to sell off
during the peak in Q4 2007. Similarly, the growth what they have before taking in new supply. Knight
in the average monthly rent of non-landed luxury Frank also mentioned that developers can sell off
houses remained slow at a mere 0.7% quarter-on- their land banks over time if the demand remains
quarter. stable.



Price recovery for 99-year suburban condo leads 2011. The analysis by DTZ, which takes into
to increase in demand for EC units consideration new and secondary sales, showed
More people are opting for executive that foreigners purchasing houses that cost at least
condominium (EC) units as the price gap between $1.5 million increased from 17% in Q4 2010 to 21%
ECs and 99-year suburban condos widened Q1 2011. Knight Frank saw an increase from
because of a recovery in the latter’s price. The around 20% in previous quarters to 31% in Q1
price for an EC and a 99-year suburban unit at a 2011 in non-Singaporean buyers purchasing their
similar location is around $650-700 psf and $900- marketed units in new launches.
950 psf respectively. The increase in demand for
ECs, which ranges from $600,000 to $700,000 per KSH Holdings awarded $78.7 million contract for
unit, is evident in the sale results of the Belysa project in Ardmore Park
project, where 147 out of 315 units launched were The residential development project Ardmore
sold on the first day of launch at a price of $670 Three in Ardmore Park, which is expected to
psf. commence work next month and be completed by
August 2013, will be carried out by KSH Holdings.
Increase in non-Singaporean buyers for private The contract for the residential development that
houses: DTZ analysis involves the 84 units in Ardmore Park was awarded
While the number of Singaporeans purchasing to KSH Holdings by Wheelock Properties’
houses that cost below $500,000 increased from subsidiary Bontanic. KSH’s construction business’
72% to 80% from Q4 2010 to Q1 2011, the number current order book is said to be around $245
of foreigners purchasing private houses in million with the award of this $78.7 million
Singapore increased to 16% from January to March contract.



New residential and industrial launches in Pasir Commercial/Industrial News
Ris and Hougang
NTUC Choice Homes and Chip Eng Seng ING Fund Buys Anson House for $148m
Corporation unit CEL Development will launch Anson House, 96% occupied with a remaining
their 315-unit Executive Condominium (EC) Belysa lease of around 85 years and net lettable area
at Pasir Ris Drive 1/ Elias Road. The average price (NLA) of approximately 77,244 sf, has been sold to
of $670 psf will only be available for buyers who a property fund under ING Real Estate. In 2009,
choose the normal progressive payment scheme. Anson House was purchased for $85 million but
The EC will cost from $574,000 for units starting at right now, it has been sold for $148 million. Other
829 sf and $882,000 onwards for units beginning office deals this year include: i) Finlayson Green, a
at 1,335 sf. In Hougang Avenue 2/ Yio Chu Kang freehold office block with NLA of approximately
Road, MCL will launch its 414-unit Terrasse Condo 89,950 sf, which was sold for $227 million or
at an average price estimated at around $950 psf. $2,524 psf of NLA ii) Ergo Insurance Group also
At Yishun Industrial Street 1, Soilbuild Group will sold Capital Square to Alpha Investment Partners’
also launch its 454-unit North Spring BizHub with Macro Trends Fund and NTUC Income for $889
an average of $311 psf for its unit with sizes from million or $2,300 psf (the biggest office transaction
1,507 sf to 36,511 sf. this year) iii) Singapore Technologies Building that
has NLA of about 98,906 sf was sold for $146
million or $1,476 psf of NLA to Genting Singapore
subsidiary Resorts World Properties.



Tanglin Shopping Center up for sale yet again predicted that the site might be used for retail
Tanglin Shopping Center, which is around 68,512 sf, purposes and is likely to generate an average rental
is put up for sale again after its previous failed of $15 psf and $6 psf for retail and office space
attempt to get a buyer. The sale will be handled by respectively every month.
ERA Real Estate this time round. As ERA remains
mum about the reserve price, speculation was Ascendas Group, MIT and Soilbuild Group said to
made based on the previous reserve price of $1.25 be in the final round of bidding for JTC’s two
billion, or around $3,300 per square foot for the tranches of properties
existing 380,000 sf strata area. The bid for Tanglin Market watchers speculated that the shortlisted
Shopping Center will end on 16 June, 2011. bidders for two tranches of JTC Corporation’s
flatted factories and amenity centers are: a unit of
CMA, CMT and CapitaLand made top bid of $969 Ascendas group, Mapletree Industrial Trust (MIT)
million for site at Boon Lay Way and Soilbuild Group. The 3 groups will be
Among the 5 bidders, Capitamalls Asia (CMA), participating in the final 2 rounds of bidding for the
CapitaMall Trust (CMT) and CapitaLand have JTC properties that consist of 21 blocks of flatted
collaborated to make a top bid of $969 million, factories and amenity centers locating in places
which equals to $1,012 psf ppr, for a white site at such as Bedok and Tai Seng. These properties,
Boon Lay Way. The site, which has a maximum which total an area of more than 300,000 square
permissible gross floor area (GFA) of 957,772 sf, meters, are said to be worth $600 to $650 million.
will be split 50:30:20, with CMA holding the The bid price will likely be the driving factor behind
largest stake and CapitaLand having the smallest JTC Corporation’s decision in awarding the
stake. Executive director of CBRE Research properties.



Office rental values growing moderately: CBRE and CEL Development launched its 315-unit Belysa
According to CB Richard Ellis, there is a rise in EC priced at $670 psf on average, which received
office rentals and demand for office space in 520 e-applications. Marketed by Colliers
countries like Singapore in Q1 2011. For example, International, 151 out of 454 units launched at
the monthly rental value for an average Grade A North Spring Bizhub were sold at $311 psf for a
office in Q1 2011 is $10.30 per square foot (psf); 1,539 sf unit. The smaller units (about 1,500 to
this is a rise of 4% quarter-on-quarter. CBRE 1,600 sf) cost around $311 while the larger units
director Moray Armstrong predicts a slower (about 11,000 to 36,000 sf) cost about $210 psf.
growth for rental value for 2011 with only an
increase of 16.2% to $11.50 psf as compared to A-Reit won the bid for Fusionopolis site with a bid
22.2% in 2010; this is because supply for office of $110 million
space will likely increase in 18 months time when ASCENDAS Real Estate Investment Trust (A-Reit)
new and second-hand office space is made had the highest bid for a site at Fusionopolis The
available. $110 million bid offered by A-Reit equals to
$4,397.89 psm ppr for the 6,253 square meters
Good sales results for residential and industrial site. A-Reit, who plans for a gross floor area of
launches 25,000 square meters for the site, will allocate 60%
In Hougang, MCL Land sold 150 out of 200 units of the site for the development of a business park.
launched at its 414-unit Terrasse condo at $950 psf The remaining 40% will be used as office space. A-
on average. The cheapest unit costs $580,000. Reit plans to cater the site for the IT and media
Also, MCL sold 2 out of 4 launched five-bedroom industry, and R&D in physical science and
penthouses (about 2,217 sqaure feet) at $1.85 engineering.
million. In Pasir Ris Drive 1, NTUC Choice Homes



Large Orchard commercial properties sales Elizabeth, majority owners are putting up their
coming up freehold units up for collective sale at a price of
Marketed by CB Richard Ellis and Jones Lang $630 million, which is $2,496 psf ppr. However,
LaSalle, TripleOne Somerset is up for sale for Credo Real Estate sees the possibility of the price
around $1.2 billion or $2,132 psf on net lettable being lowered to $2,323 psf ppr, which will lead to
area (NLA) by Pacific Star’s Asia Real Estate Income a development cost of approximately $15 million.
Fund (AREIF). Analysts believe that the building,
with a remaining lease of around 63 years and NLA Increase in rents in countries like Singapore: JLL
of about 563,000 sf, will have an asking price of According to a report by Jones Lang LaSalle’s (JLL),
$1.2 billion. Also, there have been speculations one can expect to see a rise in rents across most
that Lend Lease might put 313@Somerset up for Asia-Pacific markets such as Singapore. The
sale or sell about a quarter stake of the mall. increase in rents for conventional and high-tech
Judging from its NLA (294,000 sf), 313@Somerset industrial space in the industrial sectors is greatest
might fetch near to $1.18 billion according to in Singapore. Commercial real estate investment
analysts. volumes in Singapore also increased by 60% in Q1
2011 as compared to Q4 2010. The rise in rents is
Office block at 70 Shenton Way and Elizabeth driven by the increase in investment activities,
Tower up for sale mentions JLL.
A five-member consortium is selling the office
block at 70 Shenton Way at approximately $270
million, or $1,583 psf per plot ratio (psf ppr). Over
at Elizabeth Tower, which is located in Mount



Book Review – Real Estate Riches
If you’re looking to get a deeper understanding of
the Singapore property market, Real Estate Riches –
Understanding Singapore’s property market in a
volatile economy is a great guide to help you do so.

The book is mainly a collection of articles by Ku
Swee Yong, CEO and Director of International
Property Advisor Pte Ltd, a real estate family office.
Most of these articles have previously been
published in Today and The Business Times, although
there is some new material as well.

The book is split into five parts, covering:
• Recent events such as the government policy
measures
• Physical supply
• Development of the market including shoebox
apartments and en bloc sales
• Thoughts on the market including whether to buy
from developers or the resale market
• Investment tips

Copyright © 2011 www.Propwise.sg. All Rights Reserved. Page |8


What I enjoyed about this book is that it is
thoroughly researched and full of interesting facts
and figures. Swee Yong is a thoughtful writer and
does not make blanket statements without having
the necessary data to back it up. I’d recommend
the book for anyone interested in the Singapore
property market.

There are also some good tips in there for property
investors. I don’t want to give you a spoiler, but
here’s a quick tip from the book – watch out for
areas where MRT line construction is going on!

Real Estate Riches is available at major bookstores
including Times, Kinokuniya, Popular, Page One,
NUS, and the airport bookshops (Dufry and Relay).
Published by Marshall Cavendish Business, it has
188 pages and retails for $18.



Is it a Good Time to Borrow Money Now?
With interest rates in Singapore close to their all-
time lows, it may feel like a good time to go out
and borrow money. Certainly the buoyant housing
market can be at least partially attributed to low
mortgage rates which increase the affordability of
a property purchase. In this article we’ll take a look
at where interest rates are in Singapore relative to
their history, what typical interest rates for
different types of loans are currently, and consider
whether it’s a good idea to go out and take a loan
now.

The Singapore Interbank Offered Rate (or SIBOR) is
based on the interest rates at which banks offer to
lend unsecured funds to other banks in the
Singapore interbank market. As many mortgage
loans are now pegged to it, it has become a key
rate to look at and also gives a rough indication of
where deposit and other lending rates are headed.



For foreign banks that do not have a large deposit 1. Home Loans
franchise in Singapore, they have to rely on the These are the cheapest and largest loans that
interbank market to fund their lending. When consumers can get, but you will need to use a
SIBOR is high, they might offer attractive fixed property as collateral. Floating rate packages based
deposit rates to attract Singapore dollar deposits, on SIBOR can go as low as 0.80% for the first year
forcing the local banks to also increase their rates currently while fixed rates packages can start from
to prevent depositors from switching. around 1.20% for the first year.
Currently 3-month SIBOR is at 0.4375%, the lowest
level in the past ten years. Interest rates have been 2. Personal Loans
low for an extended period of time – the 3-month Covering the gamut from renovation to furnishing
SIBOR has been under 1% since the beginning of to consumption loans, they typically have an
2009. In the past ten years, the 3-month SIBOR has effective interest rate of 10% to 15%. Watch out
gone as high as 3.5% (in 2006). for low advertised rates that come with a
“processing fee” or are flat and not effective rates,
Typical interest rates for different loan which will raise your true cost of borrowing.
products
Doing a quick survey of the various loan products 3. Credit Cards
out there, we found that the current low interest Annual interest rates still hover around 20% to
rates have mainly benefitted mortgage borrowers 24%, making credit card borrowing the most
due to low home loan rates, but rates for expensive form of consumer borrowing out there
unsecured personal loans have not come off as (other than going to a loan shark!).
much. For example:



If you have outstanding credit card debt, it makes policymakers will decide to continue additional
sense to do a balance transfer, or take out some monetary stimulus. If not, interest rates could rise.
other form of personal loan to repay it. Meanwhile, many central banks around the world
are raising their domestic interest rates to combat
Is now the best time to borrow? rising inflation.
It is clear that interest rates have been unnaturally
low for an extended period of time thanks largely Beyond low rates, before borrowing money you
to the Quantitative Easing program (known should examine whether you really need to do so
popularly as QE1 and the follow-on QE2) of the and what your current debt servicing ratio is. For
United States Federal Reserve, which has pumped a property investors, while the current gap between
huge amount of liquidity into the system. Interest rental yields and mortgage rates may be seductive,
rates in Singapore are heavily influenced by rates in do not base your calculations on a permanently low
the United States as our central bank (the interest rate. For home buyers who are buying for
Monetary Authority of Singapore) does not your own stay, you may want to consider a fixed
attempt to control rates but instead relies on the rate package to lock in the current low interest
exchange rate as its primary monetary policy tool. rates and reduce the future uncertainty of your
mortgage payments if interest rates spike.
When making any borrowing decision, do not
assume that interest rates will stay low forever. The www.MoneyMatters.sg is your guide on how to
United States Federal Reserve is scheduled to end make more money, save smarter, invest
its program of support for the American economy intelligently, and enjoy your money like a pro. Visit
(QE2) in June, and it is not clear whether our site to get our free report on financial freedom.



Are We Talking Up the Market?
This year started off strongly for Government Land
Sales (GLS) en-bloc sales. Under the GLS, seven
residential sites, including two for executive
condominiums, were launched and sold,
generating over S$2.5 billion for government
coffers.

With the residential market hot from robust sales
volumes and continued strong interest from
developers, I am concerned that some of the
estimates for break-even and launch prices quoted
in the media or published in financial reports might
be adding fuel to the fire.

For example, the Bartley Road GLS site was
awarded to the top bidder at S$621 psf per plot
ratio early this month. One of the media reports
estimated that the developer’s “break-even cost
could be around S$1,000-1,050 psf”.



Assuming the developer targets a profit margin of low as 5 to 8 per cent. Marketing fees are usually 2
S$150 psf, it would mean that the 99-year to 4 per cent of the total sales value and, in a large
leasehold residences might be launched for sale at project like this, the expenses are usually at the 2
S$1,150-1,200 psf. per cent level: 1 per cent for agents’ fees and 1 per
cent for advertising, show flat, brochures and so
Taking into consideration that the Bartley Road site on. The interest expenses stated above are a
can take a gross floor area of about 660,000 sq ft, conservative estimate given that most developers
we can assume good economies of scale and today opt for floating rate packages from below 2
bargaining power for the procurement of per cent per annum all in. Developers also pay
materials. down the principal of the land loan when they
collect progress payments from buyers of the
In a mass market location such as Bartley Road, we units.
see from Table 1 that construction costs should be
about S$251 psf. Total costs for this project are In the last two years, developers have launched
summed up in Table 2. projects within nine to twelve months of securing
the GLS sites. Due to the progress payment
Going by the example above, the conservative mechanism, developers are not likely to incur
break-even cost is S$372 psf above the land price, interest expenses on the construction costs given
close to the S$380-430 psf estimate using “rule of that the initial payment of 20 per cent or S$240 psf
thumb” that was quoted in the media. (assuming selling price of S$1,200 psf) is enough to
take care of almost the full construction costs of
However, items 4 to 6 are overestimated. Permits S$251 psf.
and professional fees for large projects may be as



Therefore, if a project was substantially sold prior If the Government’s efforts to maintain price
to construction starting, there will not be a need stability are to succeed, we would need media
for construction financing and the loan for the land articles and analysts’ published viewpoints to
can be paid down as the construction progresses accurately reflect projections of break-even and
beyond foundation stage. launch prices. Otherwise, the danger is that we
over-estimate break-even prices, we over-state
Also, most developers aim for a Return on replacement costs and we exaggerate projected
Investment (ROI) of 15 to 20 per cent. In this launch prices, adding to the hype and froth in the
Bartley Road example, assuming a 60-per-cent market.
loan on the land costs, the invested equity should
be about S$240 psf on land. Loading the full costs Originally published in Today, this article has been
of items 2, 4, 5 and 6, the investment requires shared with the kind permission of Ku Swee Yong,
S$370 psf. An ROI requirement of 20 per cent founder of real estate agency International
would merely add S$75 psf to the break-even Property Advisor, which provides services to high
price, meaning that the developer can sell out the net worth individuals. He is also author of Real
whole project and achieve a 20 per cent profit if Estate Riches: Understanding Singapore’s Property
they sold with an average price of S$1,070 psf. This Market In A Volatile Economy, available in
is S$130 psf below our assumed average selling bookstores now.
price of S$1,200 psf (but our marketing costs have
been conservatively loaded up based on this
selling price assumption).


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Singapore Property Weekly Issue 1 Highlights Residential, Commercial News