Issue 162

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CONTENTS
p2 Is Paying Just 5 Times Your Annual
Income for a Property Realistic?
p7 Singapore Property News This Week
p12 Resale Property Transactions
(June 11 - June 17 )
Welcome to the 162
th
edition of the
Singapore Property Weekly.
Hope you like it!
Mr. Propwise
FROM THE
EDITOR
SINGAPORE PROPERTY WEEKLY Issue 162
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By Mr. Propwise
In a recent blog post, guest contributor
Property Soul shared her rules on buying a
property you can afford, what she called the
3-3-5 rule. In a nutshell, the 3-3-5 rule
states that:
1. You should have at least 30% of the
propertys price in initial capital to cover
the downpayment and other costs.
2. Your monthly mortgage payment should
not exceed one-third of your monthly
salary.
3. The purchase price of the property should
not exceed five times your annual income
Is Paying Just 5 Times Your Annual Income for a Property Realistic?
SINGAPORE PROPERTY WEEKLY Issue 162
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Propwise.sg reader JC wrote in to comment
that Rule #3 was unrealistic and overly
conservative. Heres what he had to say:
The five times of income to property price
ratio is quite ridiculous. I feel that this ratio is
only applicable during the "mata wear khaki
shorts" days. How can one ever find such a
low ratio of five times in today's context? No
way, even if the property market is to crash,
or rather correct. Nevertheless, I would
definitely wish such a ratio would still hold
today, and I would bet all my money into
property.
Example: a couple earns $15,000 per month,
which annually would be $180,000. At five
times, they can only afford a property that is
$900,000, which can only buy a 2-bedder
condo at an RCR or OCR location in
Singapore. If the couple has kids, then I think
its pretty difficult to live in a smallish 2-bedder
of approximately 75 to 85 square meters with
a maid!
Rather, many couples CAN afford properties
at $1.2 to $1.5 million and above when their
income is approximately $10,000 per month,
which is a 10x rather than 5x ratio. With
savings of $400,000 to $500,000
(approximately 30% of $1.5mil), they can
easily afford the mortgage at $3,000 per
month (2% interest rate over 28 years). A
savings of $400,000 is not difficult to achieve
for a couple (both university grads) who have
worked for 10 years possibly with a little help
from their parents, say $50,000 to $80,000.
In a nutshell, the 3-3-5 rule is skewed towards
an unrealistic scenario which is unlikely to
happen in Singapore (for Rule #3).
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We need to be realistic about the current
pricing, current market, and hopefully,
capitalize or gain from it through long term
investment or enjoyment of the property. If we
stick to this rule, we will NEVER buy a
property (condo, that is) in Singapore, unless
we earn $25,000 per month income combined
for a couple. (i.e. $12,500 each!)
I routed this question to Property Soul, who
had the following response:
This is what I called the boiling frog
phenomenon. When people are in a high-
price environment for too long, they will
gradually think that it is normal and
acceptable to pay high prices. Similarly, when
people are in a prolonged boom of the
property market, they will forget what a
value-for-money home is, or why it is
necessary to calculate the ROI of an
investment property.
When the market prices are climbing rapidly,
salespeople will tell their clients that it is
impossible to go back to the low prices in the
past. But history has proven that they are
wrong every single time.
It is when market prices have corrected
sharply that people begin to realize that
buyers have been overpaying for their
properties during the last peak of the property
market. These buyers pay the price of
holding their overpriced properties for the
long-term to break-even, while missing the
opportunities to buy when prices become
reasonable.
Developers can sell at future prices and
sellers can market at unreasonably high
prices. But as buyers, it doesnt mean that we
have to take whatever they offer in the
market. We all can exercise our individual
judgment to see whether the current
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properties are overpriced before we buy
anything.
Of course, being kaypoh, I have some
thoughts as well on this discussion:
I view the 3-3-5 rule as a conservative
affordability test. When you are making
the biggest purchase in your life (of a
property), you typically want to err on the
side of being conservative. If your
purchase meets Property Souls 3-3-5
rule test, then you know that financially
you are not stretching yourself and can
sleep peacefully in your home. However,
that doesnt mean that you MUST follow
the rule. For example, if you find a home
that you like and meets your
requirements, and it is six times your
income, I dont think theres anything
wrong with buying it as long as you have
prepared for unexpected contingencies
(e.g. have a cushion of savings).
Sure a couple earning $10,000 a month
can potentially buy a $1.5 million condo,
but it is very aggressive. An 80%
mortgage loan (i.e. $1.2 million) at a 2%
rate over 30 years will result in a monthly
mortgage payment of $4,435, or 44% of
their income. They might be able to tide
over if they do not spend too much in
other areas. But we should NOT assume
a 2% rate of interest using a more
conservative 4% mortgage rate (a long
term average), their monthly mortgage
will balloon to $5,729 per month, which
could put significant stress on their
finances, especially if one party loses his
or her job. So yes, if you are aggressive
you can buy an expensive condo (as JC
has pointed out), but you may not survive
the tough times.
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Yes, a couple with kids and a maid will
feel very cramped in a 900 square foot
condo apartment, but it is a choice. They
could have chosen to buy a resale HDB
flat, or can choose to suffer in a
cramped apartment for a few years until
they can comfortably afford to upgrade.
In general we have very short memories.
It wasnt too long ago (certainly not during
the mata wear khaki short days) when
properties were more affordable. In fact, it
was in 2006 when I bought my first
private property and I paid less than 5x
combined income for it.
I dont think that property prices will
necessarily go back to the previous lows
as Property Soul has mentioned. In fact,
looking at the URA Property Price Index
over a long period of time we see that the
general trend is an upward one, with
higher lows and higher highs. Property
prices go up over long periods of time due
to inflation and rising incomes. But the
market has cycles as well thats what I
look at to time my entry and exit into the
market.
Hope you found this discussion interesting! If
you have any opinions or stories youd like to
share, do email me at info@propwise.sg.
SINGAPORE PROPERTY WEEKLY Issue 162
Singapore Property This Week
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Residential
2in 5 Sentosa condos resold at a loss
According to market watchers, cooling down
measures such as loan restrictions may have
driven buyers away from the luxury homes
market. Data from URA Realis that was
gathered by STProperty.sg showed that 31
condominium units at Sentosa have been
resold since May 2013, however, about two in
five units were resold at a loss. According to
HSR Research, between January and May
this year, the average resale price fell 25 per
cent to $1,800 per square foot as compared
to $2,400 per square foot over the same
period last year. Nonetheless, since only five
transactions were made this year, price
movements are expected to be more volatile.
Among others, four units at The Berth, three
units at The Oceanfront, two at the Coast and
one at Azure were resold at a loss. Nicholas
Mak from SLP International believes that
given the weak leasing market, owners may
choose to sell their property at a loss as they
are unable to rent their units out. Other
analysts believe that owners who have
bought their Sentosa units at marked up
prices earlier may be at the losing end now.
(Source: Business Times)
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TDSR may push mortgagee sales to a new
high in Q2
The number of properties that are auctioned
by mortgagees in Q2 this year is the highest
since Q3 2009. According to Colliers
International, the number of properties that
have been put up for auction this quarter
almost doubled from 22 units in Q1 to 42 units
in Q2 this year. This is likely to be due to the
implementation of the total debt servicing ratio
(TDSR) framework. Auctioneers explain that
the TDSR framework has made it difficult for
financially tight borrowers to secure buyers for
their properties. As such, more of such homes
have been put up for auction by financial
institutions. As the supply of non-landed
private homes increases, mortgagors face an
even greater challenge in selling off their
property. This means that mortgagee sales
may increase even further. Besides that,
market analysts believe that the weak leasing
market may also contribute to the raise in
mortgagee sales, as owners may not be able
to find tenants.
(Source: Business Times)
30 out of 80 units released at Trilive condo
in Kondo have been sold
Roxy-Pacific Holdings Trilive condo project at
Kovan area was launched last Friday.
However, sales have been slow at its launch
said Teo Hong Lim, Roxy-Pacifics executive
chairman. The 222-unit freehold project which
is located 650 meters away from Kovan MRT,
has released 80 of its units at a discounted
price of $1,550 per square foot for early birds.
Yet only 30 units have been sold so far.
According to Teo, private home sales have
been slow thus product differentiation may be
the key to closing a deal.
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Unit sizes at the Trilive condo project begin
from 463 square feet for a one-bedroom unit
to 1,195 square feet for a four-bedroom unit.
Of the 222 units, around 80 per cent of the
units are dual key units. Prices start from
$730,000 for a single bedroom unit to
$870,000 for a two-bedroom unit. A two-
bedroom dual key unit will start from
$960,000, a three-bedroom dual key unit is
priced around $1.3 million, and a four-
bedroom unit will cost around $1.65 million.
(Source: Business Times)
Three new residential sites on GLS
confirmed list
Three 99-year leasehold residential sites are
up for tender under the confirmed list of H1
2014 Government Land Sales programme. Of
the three sites, two reside in Sengkang while
the other is an executive condominium (EC)
plot that is located at Choa Chu Kang. The
Sengkang land parcels are both at Fernvale
Roadthe smaller land plot is around 16,604
square meters while the larger plot is around
17,414 square meters. The tenders for both
plots will close on August 7 and the two sites
are expected to yield a total of 1,100 units
when fully developed. Market analysts believe
that each of the Sengkang site will draw bids
from $420 to $480 per square foot per plot
ratio. On the other hand, the EC plot at Choa
Chu Kang which is expected to yield around
535 homes is expected to draw bids between
$310 and $350 per square foot per plot ratio
before its tender closes on September 4.
(Source: Business Times)
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Commercial
More land plots at Gambas and Tuas for
sale
The fourth land parcel at Gambas Crescent
has been launched for sale, along with two
new sites at Tuas South. The Gambas
Crescent site which is 15,665 square meters
large and has a maximum gross plot ratio of
2.5, is zoned for light industrial use for
Business-1 development. The site has a 30-
year lease and is expected to draw bids
between $90 and $120 per square foot per
plot ratio (psf ppr). Nicholas Mak from SLP
International believes that Far East
Organisation, which owns three other sites in
the area, may aggressively bid for the fourth
Gambas Crescent site in order to secure a
stronger presence within the area. However,
Ong Kah Seng, RST Research director
believes that there is no major need for the
property giant to own the fourth parcel as
they already have a strong territorial
presence. On the other hand, the land parcel
at Tuas South Avenue 7, which also has a 30-
year lease, is 25,700 square meters. It has a
maximum gross plot ratio of 2.0 and is zoned
for heavier industrial use for Business-2
development. Analysts believe that site will
draw bids from $75 to $85 psf ppr. Lastly, the
site at Tuas South Avenue 14 has been
launched under the reserve list. It has a
maximum gross plot ratio of 2.0 too, and is
33,300 square meters large.
(Source: Business Times)
Property investment sales slow to a crawl
Investment sales in Singapore property has
slowed to $3.5-$3.6 billion this quarter.
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Such sales cover big-ticket transactions that
are beyond $10 million. In H1 of 2013, the
total amount of investment sales was around
$12 billion. However, the year-to-date tally
this year is only around $8 billion. Both CBRE
and Savills predict that there will be a fall in
investment sales from last years $30 billion.
CBRE expects that there will be $12-$15
billion worth of transactions this year while
Savills predicts that there will be $16-$18
billion worth of transactions. This pullback in
investments is expected to be due to the
governments cooling measures. According to
Desmond Sim from CBRE, the
implementation of the total debt servicing
ratio framework has affected buyers and
sellers interest. Not only so reduced land
supply in the Government Land Sales
programme may also result in a decrease in
investment sales. Furthermore, according to
CBRE, there is increased interest in overseas
property. Nonetheless, according to Savills
Singapore, investment sales in the office
sector have been optimistic as there are
about $680 million of office transactions
recorded this quarter.
(Source: Business Times)
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Non-Landed Residential Resale Property Transactions for the Week of Jun 11 Jun 17
Postal
District
Project Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)
Tenure
1 THE SAIL @ MARINA BAY 614 1,380,000 2,249 99
2 ICON 915 1,530,000 1,672 99
3 THE ANCHORAGE 1,798 2,370,000 1,318 FH
4 THE BERTH BY THE COVE 1,668 2,700,000 1,618 99
4 REFLECTIONS AT KEPPEL BAY 915 1,480,000 1,618 99
4 TERESA VILLE 3,972 4,725,000 1,190 FH
5 BOTANNIA 1,249 1,618,888 1,297 956
8 CITY SQUARE RESIDENCES 570 935,000 1,639 FH
8 CITYLIGHTS 689 1,070,000 1,553 99
8 HERTFORD COLLECTION 1,345 2,050,000 1,524 FH
9 HILLTOPS 2,874 11,285,640 3,927 FH
9 THE ORCHARD RESIDENCES 2,852 10,552,400 3,699 99
9 HELIOS RESIDENCES 1,916 5,100,000 2,662 FH
9 CAIRNHILL CREST 818 1,588,000 1,941 FH
10 DUCHESS RESIDENCES 1,485 2,720,000 1,831 999
10 BELLERIVE 958 1,615,000 1,686 FH
10 THE MARBELLA 1,399 2,338,000 1,671 FH
10 SPANISH VILLAGE 1,173 1,780,000 1,517 FH
11 MULBERRY TREE 441 820,000 1,858 FH
11 MANDALE HEIGHTS 764 980,000 1,282 FH
14 LE CRESCENDO 915 1,085,000 1,186 FH
14 D'HERITAGE CASTLE 1,173 1,035,000 882 FH
14 TORIEVIEW MANSIONS 1,335 1,000,000 749 FH
15 THE AZZURO 646 870,000 1,347 FH
15 WATER PLACE 1,227 1,600,800 1,305 99
15 SANCTUARY GREEN 1,399 1,630,000 1,165 99
Postal
District
Project Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)
Tenure
15 OCEAN PARK 2,110 2,320,000 1,100 FH
15 LAGUNA PARK 1,615 1,340,000 830 99
16 BAYSHORE PARK 1,292 1,360,000 1,053 99
16 PARBURY HILL CONDOMINIUM 2,185 2,300,000 1,053 FH
16 WATERFRONT WAVES 1,668 1,600,000 959 99
17 ESTELLA GARDENS 657 680,000 1,036 FH
18 RIS GRANDEUR 1,066 1,060,000 995 FH
18 LIVIA 1,539 1,430,000 929 99
18 TROPICAL SPRING 1,528 1,400,000 916 99
18 TROPICAL SPRING 1,378 1,240,000 900 99
18 CHANGI RISE CONDOMINIUM 1,023 890,000 870 99
19 THE QUARTZ 1,367 1,270,000 929 99
21 THE CASCADIA 1,141 1,700,000 1,490 FH
21 HIGHGATE 1,109 1,185,000 1,069 FH
22 PARC VISTA 1,249 1,088,000 871 99
22 LAKEHOLMZ 1,249 1,055,000 845 99
23 CASHEW HEIGHTS CONDOMINIUM 1,227 1,220,000 994 999
23 HILLVIEW REGENCY 969 940,000 970 99
23 THE MADEIRA 1,356 1,200,000 885 99
23 PARKVIEW APARTMENTS 980 845,000 863 99
23 MI CASA 1,119 940,000 840 99
23 NORTHVALE 1,518 1,268,000 835 99
23 REGENT HEIGHTS 1,163 920,000 791 99
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.