When the latest property measures were unveiled on Jan 13, it took most market watchers by surprise, mainly because we had been reassured several times that the previous rounds of measures announced on Aug 10 had been effective.

Reaction from the local market has been negative but not too severe, as shown in a survey by property blog propwise.sg (see Page B13).

Were these new measures necessary? Definitely.

At the macro level, Singapore's real estate is far from being overleveraged. According to data from the Monetary Authority of Singapore (MAS), as at the end of October last year, total housing loans amounted to $109 billion and the total number of completed private housing units stood at 256,513 units.

This included private residences, from good-class bungalows down to shoebox apartments. Assuming an average value of each unit at $1.1 million, the total value of completed private homes is $282 billion; that is, the loan-to-value ratio is a relatively low 39 per cent islandwide.

However, at the micro-level, pockets of risks exist. Table 1 shows a sampling of the record high prices achieved last year.

The Vision was launched in the first quarter of last year and its "higher-than-the-neighbourhood's" transacted psf prices helped to lift the general valuations in the West Coast. The highest price achieved of the 199 units that were transacted in Q2 last year was $1,266 per sq ft (psf). The average price for The Vision in Q2 2010 was $1,019 psf versus the neighbouring developments Blue Horizon (sharing a common boundary wall with The Vision) at $856 psf and Westcove Condo across the road at $689 psf. The highest price achieved in The Vision is almost double the average price achieved in Westcove Condo that quarter.

The same story unfolded itself across the outskirts throughout 2010: Serangoon, Pasir Panjang, Bukit Panjang, Pasir Ris, Yio Chu Kang, Ang Mo Kio, Yishun and more.

A most recent example is The Lakefront Residences in Jurong West launched in Q4 2010. Of the 167 units transacted, based on the latest Realis data, the highest price achieved was $1,362 psf and the average was $1,074 psf. Just 100m away, the older condominium Lakeholmz, at $681 psf on average, is half of the peak price at The Lakefront Residences (without considering the sizes of apartments, just comparing psf values for the street block). Even if we topped up the 10-year expired lease tenure for Lakeholmz to 99 years and added a generous construction cost of $250 psf, it would be difficult to place a value for a new apartment in that street at above $1,000 psf.

So it would seem Singaporeans value "newness" with a very high premium? Wrong. When we compare the prices of the still-under-construction Caspian (which shares a boundary wall with The Lakefront Residences), at an average of $793 psf in Q4 2010, we see that the newness value is not sufficient to explain the prices achieved at The Lakefront Residences.

Within two to four years, both projects will be delivered to buyers brand new. So why did The Lakefront Residences achieve an average price that is 35-per-cent higher than Caspian's? I am obliged to add two other factors to justify the premium: The "showflat wow" factor and the "showflat peer pressure" factor.



Pushing up the PPI

With premium prices achieved during property launches at 20- to 50-per-cent higher than neighbouring average psf prices and multiplied by the number of transacted units, it is no wonder that the Private Property Index (PPI) kept rising though 2010.

The PPI rose in Q4 2010 despite August's cooling measures. It's a good thing the URA's overall PPI is weighted so that transactions in a few launch projects do not overly distort the PPI. Otherwise, the rise of the Q4 2010 PPI would not have been a mere 2.7 per cent.

And that led us to the latest round of measures.

Apart from the overall islandwide PPI published by URA, investors can refer to URA's website for transactions in specific projects and compare prices so as to make better decisions. However, of late, most investors do not seem to be doing their homework and have purchased in large numbers at record high prices in the suburbs across Singapore.



Who might be the next target?

Investors make up one of several constituents in a property transaction. The past few rounds of measures have already hit investors hard enough. In the next set of measures, if any, the other parties who may be targeted are the developers, the sales agents, the mortgage lenders and valuers.

Many investors and analysts have pointed their fingers at foreign investors and their "hot money" causing Singapore's real estate to overheat.

Yet the new launches that set record-high prices in the suburbs do not attract foreigners as much as they attract Singaporeans. Table 2 shows why we should not blame hot foreign money for bringing on the latest round of measures.

On average, about 25 per cent of residential units are purchased by foreigners. These projects listed in the table are clearly well below the national average. Perhaps Singaporeans are the ones pouring hot money into property.

I would rule out targeting developers unless there are issues of misrepresentation. Otherwise, developers do what they do - acquire land, build showflats, and sell homes.

The sales agents have come under the new Council of Estate Agents and are already facing tighter operating parameters. Again, unless there is bad practice or misrepresentation, I do not think they will be the next target.

As for the mortgage lenders, when I made enquiries about loans for investors buying at these record high prices, the answer invariably was: "Oh, valuers matched developer's selling prices." Of course, as long as there are valuers who can sign off on a certain value for a property, banks are eager to lend.

How might valuers agree to value a new launch that is priced at 20- to 50-per-cent higher than other transactions in the neighbourhood? One counterargument regularly given to me is: As long as there are transactions in this new launch at this price, the valuers can support valuations at the new highs.

In the example of Caspian above, buyers today would find it difficult to obtain a loan based on $1,000psf valuation. Sellers are also unable to ask for prices above $1,000 psf when prospective buyers are unable to secure loans at that value. However, the same buyer can purchase a smaller unit at the same investment quantum at Lakefront Residences at $1,150 psf with a bank loan attached. I wonder why the discrepancy given that the two properties are side-by-side and both are not completed.

By not taking reference from other similar transactions in the neighbourhood, this means that valuations are justified solely on transacted prices within the new launch itself. Without taking into account the lower values of neighbouring condominiums and the intrinsic land value in the vicinity, this valuation method is a self-fulfilling upward spiral.

Having excluded the foreigners, the developers and the sales agents, we are left with two targets for the next set of cooling measures, if any.

Perhaps one approach would be to require valuers to disclose their assumptions and methods to the MAS and valuations for new launches to take into account values of other properties in the neighbourhood. Banks may be instructed to lend for new launches based on this more comprehensive and inclusive method of valuation.

Furthermore, seeing the strong response to the attractive investment package at Spottiswoode18 this week, I believe tougher measures to restore sanity to the market may not be far away.



Ku Swee Yong is the founder of real estate agency International Property Advisor (IPA), which provides services to high-net-worth individuals.

by Ku Swee Yong
05:55 AM Jan 21, 2011

Source: www.todayonline.com

Published January 18, 2011

Ying Mansions, Villa D'Este public tenders launched by CBRE


CB Richard Ellis (CBRE) yesterday launched the public tender for Ying Mansions on Robin Road and relaunched the public tender for Villa D'Este, which sits along Dalvey Road.


The guide price for the freehold, eight-unit Ying Mansions is $70 million, which excludes a development charge (DC) of $18.1 million. It sits on a 23,975 square foot plot of land in District 10 and has a plot ratio of 2.1 - which translates to a price of $1,750 per square foot per plot ratio (psf ppr).

Villa D'Este's reserve price is $110.6 million - slightly lower than the guide price of $115 million that was quoted when the freehold site was first put up for sale last year. With a gross floor area of 49,071 sq ft, its psf ppr price is $2,253. No DC is payable.

According to CBRE's executive director for investment properties Jeremy Lake, the guide price for Ying Mansions was not modified to reflect the current mood within the property market. Some developers of properties that were launched for sale last weekend lowered their asking prices, following the government's latest cooling measures.

'We will see how the government measures turn out. Some types of properties might be more affected than others. The prime market is more impervious to the measures,' said Mr Lake.

He added that the reserve price for Villa D'Este was lowered because it realised that the pricing last year was 'on the high side, so we have reduced it a little'. The decision to cut the price was made before the government rolled out its latest property curbs, he said.

CBRE expects 3-5 bids to be made for each site.

All the units at Ying Mansions are owned by a single owner and the sale is not subject to approval from the Strata Titles Boards. The site can be developed into a property with a maximum of 24 storeys.

The developer can choose to build 40 apartments, assuming an average size of 1,200 sq ft, said CBRE in a statement. It is minutes away from the proposed downtown-line Stevens MRT Station, and is close to schools such as the Singapore Chinese Girls' School and Anglo-Chinese School (Barker Road).

The Ying Mansions tender closes at 3pm on Feb 23.

The Villa D'Este plot can house 13-14 apartments assuming an average size of 3,500 sq ft, said CBRE. The 12 apartments currently forming Villa D'Este sit in an area approved by the Urban Redevelopment Authority for the most exclusive housing: Good Class Bungalows. Currently, 10 of its 12 owners have signed the collective sale agreement.

The tender for the site - which is in the Nassim Road area and within walking distance of the Singapore Botanic Gardens - closes at 3pm on Feb 15.


Source: www.businesstimes.com.sg

Published December 17, 2010

Good-class bungalows join the party as auctions raise cheer

By KALPANA RASHIWALA

(SINGAPORE) Property auctions went more upmarket this year, with several good class bungalows going under the hammer and a changing breed of buyers bidding to snap up real estate.


In all, the value of properties sold at auctions rose 33 per cent to $223.9 million this year, buoyed by rising property prices and more big ticket sales.

The residential sector accounted for more than half, or 51.3 per cent of the total value of properties sold at auctions this year, according Colliers International. Most sellers were owners themselves as the value of mortgagee sales fell.

The $114.8 million worth of homes that changed hands at auctions in 2010 reflect an increase of 30 per cent from last year. Just 12 landed homes accounted for $79 million, or 70 per cent, of this number.

These included four bungalows in Good Class Bungalow (GCB) Areas - 4 Margoliouth Road, 6 Coronation Road West, 53 Sixth Avenue and 5 Chestnut Close - sold for a total $57.4 million. Last year, 18 landed homes were sold for $37.7 million, none of them in a GCB area, said Colliers.

In the non-landed residential segment, 24 properties were transacted at auctions for $35.88 million, of which nine (totalling $21.7 million) were in prime districts.

The most expensive non-landed residential unit sold at auction this year was a unit at D'Grove Villas in the Orange Grove area which fetched $5.42 million, followed by a unit in Makeway View in the Kampong Java Road location ($3.88 million) and a unit in Oceanfront, Sentosa Cove ($3.15 million).

On the whole, while the value of properties sold at auctions rose 33 per cent this year, the number of properties transacted fell nearly 40 per cent to 71 this year. This year's $223.9 million auction sales was still 45 per cent shy of the decade's high of $407.4 million in 2007.

Colliers said that while the value of properties sold at auction arising from owner sales jumped from $90.8 million last year to $178.6 million in 2010, the value of mortgagee sale properties sold at auction declined from $77.6 million to $45.3 million.

The number of properties put up for auction by mortagees declined from 195 in 2009 to 103 this year, the lowest level in 13 years. Owners put 688 properties on the auction block this year, also down from 732 last year.

Knight Frank executive director Mary Sai said that while auctions were becoming more popular among owners looking to sell, mortgagee sales had lost share as the robust economy meant fewer non-performing loans.

'Also, the appreciation in real estate values reduces the risk of borrowers defaulting on loans,' she said.

Colliers deputy managing director Grace Ng said that the profile of buyers has changed from a crowd seeking distressed assets to one that regards auctions as an avenue to acquire prime properties.

'Increasingly, we see permanent residents and foreign bidders from neighbouring countries - including Malaysia, Indonesia, Hong Kong, India and even China - attending auctions,' she added.

Ms Sai reckons residential properties will continue to hog the limelight at auctions next year as 'their stock is more readily available for auction than non-residential properties'.

In fact, non-residential properties on the auction block were generally muted this year. Owners of shop units, shophouses, office and industrial units enjoyed attractive net rental yields of about 4-5 per cent on them. 'Hence, they're less forthcoming in parting with these cash-cows,' said Ms Sai.

Ms Ng highlighted that there were 11 high-value properties (each over $5 million) sold at auction this year, against just two last year. This year's high-value deals included a shophouse hotel at Desker Road which fetched $10.3 million, five strata office units at The Central ($9.98 million) and a petrol station at Jalan Ahmad Ibrahim ($30.2 million).

The value of office units sold at auctions rose from just $3 million last year to $18.2 million this year as optimism returned to the sector amid rapid recovery in office demand and rents.

Auction sales of retail properties fell from $43.4 million in 2009 to $27.1 million this year, while the figure for industrial properties halved to $10.3 million.

Ms Ng reckons the value of auction sales next year is likely to exceed $200 million. Mortgagee sales are expected to continue their downward trend.


Source: www.businesstimes.com.sg

Published December 9, 2010


Good Class Bungalow deals hit record $1.85b
At least another $100m of GCB deals could be finalised by year-end

THE value of Good Class Bungalow (GCB) transactions so far this year has reached nearly $1.85 billion, a new record and up 7.3 per cent from the $1.72 billion worth of deals done for the whole of 2009, based on CB Richard Ellis's analysis of URA Realis caveats information as at Dec 8.

However, based on information gathered by BT, there could be at least another $100 million of GCB deals where options have yet to be exercised and which could be finalised by year's end.

Among the deals already closed but for which caveats have yet to be lodged is said to be the Japanese government's sale of 18 Astrid Hill for about $28.4 million or about $1,500 per square foot on the land area of 18,939 sq ft.

BT understands the buyer is Hersing Corporation chairman Harry Chua, who is expected to tear down and redevelop the freehold property. The current two-storey bungalow on the site was the former home of the Japanese ambassador in Singapore. The property was sold through a tender conducted by Knight Frank on behalf of the Japanese government.

Interestingly, a neighbouring property in Astrid Hill was sold in November for $25 million or $1,169 psf based on the land area of 21,377 sq ft. Its seller reaped a handsome profit of $6.4 million or about 34 per cent from a holding period of under a year; the property was previously transacted in February this year for $18.6 million.

Another recent profitable GCB transaction was a property at Cluny Hill, which sold last month for $30 million or $1,533 psf, a 63 per cent return measured against the seller's purchase price of $18.38 million in April last year.

A profitable exit was also achieved on a bungalow at Belmont Road that traded in October at $35.76 million or $1,220 psf on land area of 29,310 sq ft; it previously changed hands in October last year for $27.35 million. The latest buyer is said to be Jardine Cycle & Carriage.

The $1.85 billion of GCB deals YTD 2010 involved 101 transactions - slightly shy of the 109 deals in 2009 and 119 deals in 2006. The average price of GCBs sold has doubled from $501 psf on land area in 2006 to $1,056 psf for YTD 2010. The latest figure is also 27.1 per cent higher than the $831 psf average price for last year.

As well, the average GCB transaction size has also grown from $10.3 million in 2006 to $18.3 million so far this year. The latest figure is up 15.8 per cent from last year.

CB Richard Ellis's director, luxury homes, Douglas Wong credits the increase in GCB prices to Singapore's economic growth, its ability to attract ultra high net worth permanent residents and citizens in recent years, the opening of the integrated resorts, and the limited stock of GCBs, numbering about 2,400.

'GCBs have also appealed to ultra high networths seeking a hedge against inflation, especially given Singapore's political stability,' he added.

CBRE forecasts about 100 GCB deals next year at about $2 billion with average price appreciation of about 8-10 per cent.

'The GCB market is set to remain firm based on the interplay of demand and supply factors. Like an evergreen product, GCBs will continue to attract well-heeled local businessmen, bankers, doctors and lawyers as well as permanent residents,' he added.

RealStar Premier Property managing director William Wong too is optimistic about the GCB market next year. 'We'll be seeing more PRs turning to Singapore citizens next year and this will allow them to buy bigger-plot GCBs or more than one GCB. I believe there will be shortage of big-plot GCBs to meet the demand of some of these ultra-rich new citizens. Prices of GCBs in prime locations such as Tanglin will likely hit above $2,000 psf next year from about $1,800 psf currently,' he said.

Typically, one has to be a Singapore citizen before one can own a GCB. However, PRs who have made sufficient economic contribution are known to have been given permission by the Land Dealings (Approval) Unit on a case-by-case basis to buy a small GCB with land area up to 15,000 sq ft for owner occupation.

Some foreign companies, depending on their economic footprint here, have also been given LDAU's nod to buy a GCB, typically for use as their chief executive's residence.

Typically the minimum land area of a GCB is 15,069 sq ft. However, when GCB Areas were gazetted in 1980, there were some existing sites smaller than that in these locations. They are still considered GCBs and bound by the other planning rules.

Source: www.businesstimes.com.sg

Record price set for Sentosa Cove bungalow; GCB in Cluny Hill goes for $1,841 psf but overall volumes dip

Published September 25, 2010
By KALPANA RASHIWALA

THOSE looking to buy the most luxurious bungalows in Singapore may not have turned up in huge numbers this past quarter, but they have signed under impressive figures on their cheque-books.

Another record price has been set on Sentosa Cove. This time a prime seafronting bungalow along Ocean Drive on a 7,690 sq ft plot area has been sold for $2,536 per square foot (psf) on land area. This surpassed the earlier record of $2,403 psf posted just in May this year for a bungalow on Paradise Island; however that property has a bigger land area of about 14,983 sq ft resulting in a much higher absolute price of $36 million.

The latest deal, which took place last month, amounted to $19.5 million. The bungalow is near The Coast at Sentosa Cove condo. Its buyer is understood to be Indian citizen Dalip Kumar Seth, the boss of Sunrise & Co Pte Ltd, a sporting goods wholesaler/distributor which represents the Yonex and Mikasa brands. He is a Singapore permanent resident.

On the mainland too, the Good Class Bungalow (GCB) market saw a near-record price last month.

A house at Cluny Hill was sold for $28 million or $1,841 psf based on its land area of 15,210 psf. On a psf basis, this is believed to be the second highest price ever achieved in the GCB market, surpased only by the $1,899 psf that was recorded in 2007 for 32H Nassim Road. However, that was for a smaller land area of 13,423 sq ft.

GCBs are an exclusive housing form on mainland Singapore governed by stringent planning requirements. There are only about 2,400 such bungalows in Singapore's 39 gazetted GCB Areas. Typically the minimum land area of a GCB is 1,400 sq metres (15,069 sq ft).

However, when GCB Areas were gazetted in 1980, there were some existing sites within these areas smaller than 1,400 sq m. They are still considered GCBs due their surrounding environment and are bound by the other planning requirements for GCBs such as a maximum two-storey height.

Market watchers note that the $1,841 psf for the latest deal at Cluny Hill surpasses the $1,800 psf which a GCB at Nassim Road sold for in April this year. That property is on 24,187 sq ft land area, reflecting an absolute price of $43.53 million.

Among the other major GCB deals in Q3 are a $21 million (about $1,300 psf) deal at Swettenham Green; the buyer is understood to be plastic surgeon Woffles Wu.

There was a also a transaction at Chatsworth Road for $25 million or $1,499 psf. The seller is understood to be Pacific Asset Management's managing director and chief investment officer Ho Tian Yee.

CB Richard Ellis' analysis shows that the average price for GCBs sold so far this year is $1,050 psf, about 26 per cent higher than the $831 psf for GCB transactions for the whole of 2009.

Rising prices have widened the gap in expectations between buyers and sellers and slowed down demand this quarter, say some industry players like CB Richard Ellis director (luxury homes) Douglas Wong.

Based on the property consultancy's analysis of URA Realis caveats captured upto Sept 23, a total 16 GCB deals have been done this quarter for a total $253.4 million - down from 36 transactions for $777.7 million in Q2 and 31 deals at $516.2 million in Q1.

The final number for Q3 may be higher since the quarter is not over and more caveats may be filed over the next few weeks.

Despite the weaker volume this quarter, the 83 deals clinched year-to-date have a total sale value of nearly $1.55 billion - just 10 per cent shy of the record $1.72 billion for the whole of last year, when there were 109 deals. CBRE believes the market is on track to achieving about 100-120 GCB transactions amounting to $1.8 billion for full-year 2010.

'Demand for GCBs has slowed in the third quarter primarily because the price expectations between owners and buyers have widened. On one hand, owners can afford to hold as they're not in a hurry to sell; on the other, buyers can afford to purchase but are not prepared to pay what the owners are asking,' says Mr Wong.

This trend had set in even before the government announced measures to cool the property market on August 30 and had no direct impact on the GCB market, he reckons.

Agreeing, RealStar Premier Property managing director William Wong says: 'Reducing the maximum loan-to-valuation from 80 per cent to 70 per cent (for those already servicing existing mortgages) doesn't affect buyers in this segment as most would borrow around 50-70 per cent - if they borrow at all.'

Another cooling measure - extending the 3 per cent sellers' stamp duty to the sale of properties within three years of purchase - also will only have a marginal impact as most bungalow buyers purchase with a mid- to long-term perspective, he adds. 'Right now we're facing another stand-off phase which usually happens whenever there's a new announcement.

'Some bungalow buyers are waiting and hoping to see a drop in price but most sellers are not reducing. Instead quite a number have actually revised their prices upwards lately in view of the buoyant economy, coupled with a better-than-expected stockmarket performance,' Mr Wong says.

This price gap will probably mean fewer transactions in the next two to three months, he reckons. Giving a similar take, CBRE's Mr Wong predicts relatively slow sales until perhaps early next year, by which time pent-up demand would have built up. 'That's when we're likely to see an increase in GCB transactions again.'


Source: http://www.businesstimes.com.sg