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Issue 136

Copyright 2011-2013 All Rights Reserved.

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Property Market Outlook in 2014 and Beyond Singapore Property News This Week Resale Property Transactions (December 11 December 17)



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Mr. Propwise

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Property Market Outlook in 2014 and Beyond

By Mr. Propwise
Ah, how quickly the year has flown by. Its that time of the year again, where I dust off my crystal ball and peer into it, then stick my neck out and try to say something intelligent about the future direction of the property market. 2013 was certainly an interesting year, where despite the predictions of lots of analysts and gurus (and Im guilty too), the residential property market managed to shrug off seven rounds of cooling measures, a property tax hike and the MAS Total Debt Servicing Ratio to register positive gains the URA Property Price Index (PPI) is up 2.0% in the first three quarters of 2013.
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SINGAPORE PROPERTY WEEKLY Issue 136 Property market at an inflection point? But looking at monthly property indices suggests that the Fourth Quarter of 2013 could see a reversal into negative price growth, although likely by a small magnitude. There are several reasons why this weakness is likely to continue into 2014 and beyond. First, the HDB Resale Price Index (RPI) has turned negative in 3Q2013 with a 0.9% decrease. The last time the HDB RPI fell was in 1Q2009 during the Global Financial Crisis, and it only fell by 0.8% then. A doubling of HDB prices since 2005 have created a wealth effect that supported mass market prices as HDB flat owners could sell their unit at a high price and upgrade to a private condominium. Now that HDB prices are falling, this effect will shift into reverse gear, where HDB owners will find it difficult to sell their flat at a good price, thus sapping demand from the
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mass market segment of the market, which incidentally has been the strongest segment. Recent reports of falling Cash Over Valuations (COV) for HDB resale flats is further confirmation that this trend is continuing into 4Q2013.

Figure 1 URA PPI vs HDB RPI (Source: URA, HDB,

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SINGAPORE PROPERTY WEEKLY Issue 136 Second, record upcoming completions are likely to put pressure on both property prices and rentals, especially coupled with the slower expected population growth as the government slows the inflow of foreigners due to the locals unhappiness. The recent Little India riot will certainly not help this trend. Based on URA data, there are close to 85,000 units of private residential properties that will be completed in the next few years. Looking at the breakdown of supply, 2014 and 2015 will see completions of around 20 thousand units per year, and this will spike to over 26 thousand units in 2016. This is nearly twice the yearly average of fewer than 10 thousand units between 1996 and 2012.

Figure 2 Upcoming private residential supply (Source: URA, And if we add on the completions of public housing as well, the upcoming supply tsunami looks daunting. The scaling back of the 1H2014 Government Land Sales program is

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SINGAPORE PROPERTY WEEKLY Issue 136 recognition of the large amount of upcoming supply and the uncertainty it creates for the market. While several bullish developers are still bidding up land prices in Singapore, others are increasingly going overseas as they see less upside locally. Developers such as CapitaLand, Hiap Hoe and Oxley Holdings are branching out more to foreign markets such as China, Australia, Malaysia, UK and Cambodia. Even property billionaire Kwek Leng Beng, Chairman of City Developments Limited (CDL), has called buying land in Singapore at current prices suicidal and predicted an up to 5% fall in property prices. Prospects of QE tapering The root cause of the buoyant property prices is the protracted low interest rate environment after multiple rounds of Quantitative Easing (QE) by the US Federal Reserve post the
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Global Financial Crisis. This has propped up the prices of most yield-based assets, including property. While the Fed has indicated a gentle pace of QE tapering, the market reaction to any significant tightening of liquidity could be stronger and more violent than people might expect.

Figure 3 URA PPI vs 3-Month SIBOR (Source: URA, MAS,

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SINGAPORE PROPERTY WEEKLY Issue 136 Also, even if interest rates do not shoot up right away, borrowing costs can still rise as banks charge a higher margin (SIBOR + X%) to give themselves a profit buffer against rising interest rates. Were already seeing this happening. And when borrowing costs rise, the stress on heavily leveraged buyers will go up, and the attractiveness of property itself as an asset class also decreases as the net cashflow it provides falls. This will be exacerbated if rentals are also under pressure at the same time. So what should investors do? Looking at analyst predictions of Singapore property prices, I estimate that the range is somewhere in the range of prices staying flat to falling by 20%. In other words, theres lots of uncertainty but the skew is to the downside. I myself do not like making forecasts,
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because I believe the exact timing and magnitude of property price movements is dependent on too many unknowable events. Instead, I prefer to base my property purchase and investment decisions on my analysis of where we are in the cycle and what has historically been the best actions to take at each point. Members of Property Market Insights will know that we are currently at the Late Bull stage of the Property Market Cycle Model. This means that the best thing to do is to sit tight and wait for a correction. You might have to wait for years, but its much better than giving in to the social pressure to buy now at a high price and see your savings get wiped out later. On that cheery note, heres wishing everyone a Happy New Year and a Healthy and Wealthy 2014!
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Singapore Property This Week

Minister Khaw: public housing policies must match social objectives In a blog post, National Development Minister Khaw Boon Wan said that 10,000 couples would benefit from the Parenthood Priority Scheme in the coming January, and that housing policies must be guided by social objectives including encouraging the young to get married and couples to have children after marriage, and match Singaporeans changing aspirations at the same time. Previously, people get married, rent a home, have a baby and then buy a home. But now, Mr Khaw believes that people prefer to first get a home, then get married and finally start
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a family. So, the strengthening of HDB BuildTo-Order (BTO) flat construction, the Parenthood Priority Scheme and Parenthood Provisional Housing Scheme are meant to help the young meet their aspirations.

(Source: Business Times)

Too early for the government to roll back cooling measures The Ministry of National Development will cut state land sales for private housing development on both confirmed and reserve lists in H1 2014 for fear of an oversupply building up. It will also push not-so-hot sites on the confirmed list to prevent benchmark bids from being set.

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SINGAPORE PROPERTY WEEKLY Issue 136 Since the introduction of the total debt servicing ratio (TDSR) framework in late June, private housing sales have significantly declined and are likely to continue to shrink until next year. Developers have started to trim prices as sales have been down. Hence there have been suggestions that the government may begin to roll back some of the property cooling measures in 2014. However, other opinions express that there is no sign that the price of land is coming down because players have been stoking up land bids at Government Land Sales (GLS) tenders and they are unlikely to underprice their projects. Developers may also have strong financial reserves to hold prices of mass-market and mid-tier projects to develop and sell them. So, it is too early now for the government to roll back the property cooling measures. (Source: Business Times)
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GLS: consultants views As the government is trying to temper land tender prices in Singapore, consultants have expressed their views that this should not come at the expense of Singapores reputation for being open and pro-business. They are concerned of the sustainability of the trend of increasing prices, and of the governments coming down hard on foreign developers. The Urban Redevelopment Authority (URA) has introduced batched tender closings, where bids for some Government Land Sales (GLS) sites end on the same day. This is to encourage a "divideand-conquer" strategy where developers focus on one or the other plot due to the absolute capital needed. (Source: Business Times)

SINGAPORE PROPERTY WEEKLY Issue 136 Singapore developers head overseas As the domestic market weakens with plunging sales, climbing land prices and high foreign rival bets, Singapores mid-tier property developers are heading overseas. In particular, Hiap Hoe Ltd and Oxley Holdings Ltd followed sector leader CapitaLand Ltd this year to go abroad. While in Singapore, the governments slowing the rise of record-high prices has resulted in a 50 percent fall in Q3 private home sales. Official plans for more supply of new homes over the next decade come when land prices are pushed up by foreign developers. According to Teo Ho Beng, Hiap Hoe's chief executive officer, the Singapore property market is now very tough with so much competition. Hiap Hoe is focusing on Australia, while Oxley Holdings is heading to Britain, Cambodia, China and Malaysia. (Source: Business Times)
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Commercial Singapore investment sales fall hard in Q4 Investment sales of Singapore property have fallen to only around $3 billion in Q4 2013 from $13 billion in Q3 2013. Investment sales reflect the confidence of major property players in the mid to long-term prospects of the property market. The latest year-to-date tally is around $29 billion, and the possible final number is $30 billion as more caveats of transactions are lodged, a figure similar to each of the preceding three years. The figures cover items of at least $10 million. Due to a cutback in the Government Land Sales (GLS) Programme among other factors in early 2014, property consultants expect next years investment sales to be lower. Investment sales in 2014 are predicted to be around $20 billion-$25 billion by Savills Singapore,

SINGAPORE PROPERTY WEEKLY Issue 136 and around $20 billion by CBRE. (Source: Business Times) TripleOne Somerset sold for $970m TripleOne Somerset has been sold for $970m or $1,714 psf on a net lettable area (NLA) of around 566,000 sq ft to a consortium led by Perennial Real Estate Holdings, headed by Pua Seck Guan. The 17-storey property has a lease term of about 61 years, and is located opposite Somerset MRT Station. This price is $10 million less than the $980 million amount that Perennial previously did due diligence under a letter of intent granted by the building's owner, a fund managed by Pacific Star. Lend Lease is understood to be another potential buyer that was approached. Lend Lease did due diligence but there was no deal made.

(Source: Business Times)

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Non-Landed Residential Resale Property Transactions for the Week of Dec 11 Dec 17
Postal District 3 3 4 4 5 9 9 9 9 9 10 10 10 10 10 10 10 10 10 11 11 13 13 14 Project Name ASCENTIA SKY YONG SIAK VIEW CARIBBEAN AT KEPPEL BAY THE BERTH BY THE COVE PARK WEST NEWTON EDGE MARTIN PLACE RESIDENCES VISIONCREST ASPEN HEIGHTS LEONIE GARDENS NASSIM PARK RESIDENCES THE TRIZON BELMOND GREEN ALLSWORTH PARK THE TESSARINA HOLLAND COURT HOLLAND SUITES VALLEY PARK TANGLIN REGENCY SOLEIL @ SINARAN NOVENA LODGE EURO-ASIA PARK SERENE VIEW MANSIONS THE SUNNY SPRING Area Transacted Price Tenure (sqft) Price ($) ($ psf) 1,787 2,580,000 1,444 99 990 1,300,000 1,313 FH 1,636 2,680,000 1,638 99 1,668 2,718,840 1,630 99 1,894 1,320,000 697 99 441 935,000 2,119 FH 1,421 2,900,000 2,041 FH 990 1,900,000 1,919 FH 1,593 2,455,100 1,541 999 1,733 2,630,000 1,518 99 3,477 12,000,000 3,451 FH 1,345 2,520,000 1,873 FH 969 1,720,000 1,775 FH 1,959 3,280,000 1,674 999 947 1,475,000 1,557 FH 1,948 3,000,000 1,540 FH 1,044 1,550,000 1,485 FH 861 1,200,000 1,394 999 1,292 1,677,000 1,298 99 495 980,000 1,979 99 990 1,450,000 1,464 FH 2,077 2,075,000 999 FH 1,970 1,600,000 812 FH 1,109 1,145,000 1,033 FH
Postal District 15 15 15 15 15 15 16 16 16 17 18 18 20 20 21 21 21 23 25 27 Project Name PEBBLE BAY PEBBLE BAY HAWAII TOWER BUTTERWORTH 33 TORIE MANSIONS LAGOON VIEW WATERFRONT KEY THE BAYSHORE FAIRMOUNT CONDOMINIUM COASTAL BREEZE RESIDENCES MELVILLE PARK EASTPOINT GREEN THE GARDENS AT BISHAN THE GARDENS AT BISHAN THE CASCADIA SPRINGDALE CONDOMINIUM SIGNATURE PARK PARKVIEW APARTMENTS ROSEWOOD EUPHONY GARDENS Area Transacted Price Tenure (sqft) Price ($) ($ psf) 2,745 4,310,000 1,570 99 1,894 2,627,500 1,387 99 2,239 2,850,000 1,273 FH 1,485 1,600,000 1,077 FH 1,442 1,348,000 935 FH 1,647 1,500,000 911 99 1,518 1,950,000 1,285 99 1,012 1,100,000 1,087 99 1,938 1,300,000 671 99 1,173 1,075,000 916 99 990 868,000 877 99 904 768,000 849 99 883 950,000 1,076 99 1,701 1,710,000 1,005 99 1,184 1,965,000 1,660 FH 926 1,060,000 1,145 999 1,421 1,503,000 1,058 FH 980 860,000 878 99 1,173 1,015,000 865 99 1,216 893,000 734 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.

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