Paying S$1,300 psf for a EC in future? Are you serious?

How much hotter can the Singapore property market get?

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Few days back, CDL put in a top bid of S$583 psf ppr for an Executive Condominium site at Sumang Walk in Punggol.

It was not just CDL’s tender price that set a new record price for an EC land. In fact, all the 17 bids were above the previous record price paid for the Lake Life EC site in 2013.

According to industry experts, breakeven selling price for the Sumang Walk site is likely to be around S$1,000 psf to S$1,100 psf. Hence, CDL is likely to launch this EC at around S$1,300 psf, which would be as much as a what a private condominium in the area fetches today.

The recently launched Parc Botannia was only selling at an average of S$1,280 psf and Sing Holdings acquired the land at only S$517 psf ppr less than 2 years ago. Do bear in mind that Parc Botannia is a private condominium and not EC.

For the upcoming EC launch  – Rivercove Residences, the developer Hoi Hup paid only S$355 psf ppr for the site. With an indicative price of S$800 psf to S$900 psf, Rivercove Residences do look like a good bargain now, if the Sumang Walk EC is going to be launched at S$1,300 psf.

Now, how would the buyers react to this news? Are buyers going to rush in and buy now in anticipation of an expected rise in property prices?

The upcoming new launches will give us the answer.

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Growing Optimism over Singapore Property Market


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What are Singaporeans’ views on the local property market?

Below is an extract of the findings from PropertyGuru Consumer Sentiment Survey:

  • 46% of Singapore’s home buyers anticipate prices to rise further this year
  • Satisfaction levels in the Singapore residential market have gone up (37%) but unsatisfaction levels are still higher (42%). About 21% of respondents are neutral.
  • The record satisfaction level is due to the anticipation of long-term capital appreciation (45%) and the prevailing low mortgage rates (30%). Additionally, 28% said Singapore has a stable and resilient real estate market.
  • About 37% of respondents cited high prices as the top deterrent for not purchasing a property.
  • In the next six months, price hikes for condos are the most anticipated (67%), up from 57% in the previous survey.
  • More respondents (72%) expect condo prices to grow in the next five years.
  • About 26% anticipate price increases of more than 10%.
  • About 44% plan to buy homes in districts 15 (East Coast and Marine Parade) and 11 (Newton and Novena), making them the most popular spots on the island
  • 71% plan to buy at a budget of at least $750,000

Which camp are you in?

More information on the Survey can be found here:

https://www.propertyguru.com.sg/property-management-news/2018/2/169498/buyer-optimism-returning-to-the-singapore-residential-market

Weekly Kopi Talk (17/2/18 – 23/2/18)

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21st Feb 2018 – Implicit message in buyer’s stamp duty hike

SPK: As mentioned in my earlier blog post, this increase in BSD rates is not going to hurt most of us unless you are going for a high-end property. In fact, prior to the Budget, the market was expecting the government to introduce more drastic measures to cool the heated enbloc market. This mild measure seems to be a good news for the market.

20th Feb 2018 – Reit ETFs to enjoy tax transparency

SPK: The transparency for REIT ETFs is definitely a good news for the SREITs and fund management industry. Currently, there are 3 REIT ETFs in Singapore, with a total AUM of S$250 mil and their dividend yield ranges from 4.12% to 4.75%. The tax concession should result in some uplift in their dividend yield and make the ETFs more attractive to investors.

Short-term impact of the tax concession on the SREIT sector may be limited due to the small AUM size of the REIT ETFs in Singapore. It will require some time before the REIT ETF sector grows to a substantial scale that is enough for it to exert greater influence on the SREIT sector. Nonetheless, the tax transparency will be a good start to grow the REIT ETF sector.

20th Feb 2018 – Singapore property stocks fall on higher tax for home purchases

SPK: Singapore property stocks fell unexpectedly the day after the announcement of the hike in buyer’s stamp duty, despite the consensus view that the increase will not derail the housing recovery in Singapore. This was probably a knee-jerk reaction to the news and share price of developers managed to recover most of the losses the following day.

19th Feb 2018 – Singapore property stocks show ‘fatigue’ with surge in en-blocs

SPK: The collective sales market might be entering a cooling-off phase, as seen from the recent spate of collective sales attempt that ended without a sale being concluded during the public tenders. Developers were more aggressive in buying land last year. For most of the tenders, there were multiple bids and the majority of these tenders were concluded at a premium to the reserve prices.

 

Some of the recently sold sites like Brookvale Park and Pearl Bank Apartments did not manage to find a buyer during the public tender process. Nonetheless, they were able to secure a buyer via private treaty. This probably means that developers are still hungry for land. But developers might be more selective and cautious in buying land these days.

 

Buyer’s Stamp Duty has just been raised. What should I do?

Oh no! The government has just raised Buyer’s Stamp Duty for residential properties! What should I do? Should I exercise my option now before the clock strikes 12? More cooling measures coming up? Is the market going to CRASH???

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Fret not. I am here to give you (my) answers!

First of all, let’s not get confused. The additional 1% BSD is applicable for property value in excess of S$1 million. So if you are looking to buy a property below S$1 mil, please go back and have a good rest and not fret over this BSD hike.

What if you are upgrading to S$1.2 mil condo? Sad to say, you will be affected by this new rule if you do not exercise your option by midnight. How much more BSD do you need to pay? That will be S$2,000 payable to our tax man. Is there a need to rush? Please think twice. If you miss the deadline before midnight, at most you pay an additional S$2,000 in BSD. But if you make a rash decision and have to forfeit your option fees (partial), then that will be more than the additional S$2,000 for BSD.

But if you are a multi-millionaire who wants to buy a New Futura? Then maybe you should act now, if not you might end up paying as much as S$20,000 more in BSD. But maybe this S$20,000 is considered ‘peanuts’ to you, maybe?

My personal thought is that this increase in BSD rates is not going to hurt most of us unless you are going for a high-end property. In fact, prior to the Budget, the market was expecting the government to introduce more drastic measures to cool the heated enbloc market. This mild measure seems to be a good news for the market.

So, keep calm and carry on!

So I was wrong

I have to admit that I am wrong this time round.

This morning, property giant Capitaland announced that it has acquired the iconic Pearl Bank Apartments in Outram Park area for S$728 mil, at the reserve price of the sellers. The site has a land area of 82,376 sq ft and plot ratio of 7.45, translating to a permissible GFA of approximately 613,701 sq ft. Capitaland will pay an additional S$201.4 mil to the government to top-up the land lease to a fresh 99-year. The total cost of the site will be S$929.4 mil or S$1,515 psf PPR. Capitaland plans to build around 800 units in the new development.

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When I was writing my earlier post on Pearl Bank , I felt that the high asking price of the owners and the large investment quantum are major hurdles for a collective sale to happen at Pearl Bank and risk-reward is not optimal for the developer. Based on my estimate, such a project would probably breakeven at S$1,900 psf to S$2,000 psf and developer will need to sell at S$2,200 psf for a decent margin. Assuming an average unit size of 750 sq ft at S$2,200 psf, an average unit at the redeveloped site will cost a whopping S$1.65 mil! Mind blowing numbers for a district 3 property! For this amount, you could actually get a prime district property instead.

But it looks like this is turning into reality with CapitaLand’s bid and the aggressive land acquisition strategy by developers seem to have even exceeded my expectations. With this new development possibly setting a new record price in District 3, it is likely that the nearby District 9/10/11 properties will get to enjoy the spillover effect. A rising tide lift all boats!

Probably one thing that I got it right is that Capitaland is finally jumping on the enbloc bandwagon, which I mentioned in an earlier blog post. With CEO Lim Ming Yan expecting property prices to rise up to 10% this year, it is unlikely that Capitaland’s acquisition spree will end here.

Let’s also not forget that some of the big boys have not started playing this enbloc game yet! Wanna make a guess who they are?

 

Weekly Kopi Talk (3/2/18 – 9/2/18)

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8th Feb 2018 – Singapore budget not expected to target property upswing

SPKI agree. As of now, there is already a very stringent set of rules and penalties (Qualifying Certificate extension charge and Additional Buyer Stamp Duty remission clawback) if developers cannot sell all their units within 5 years from the date that they acquire the site. Even though the Singapore government is getting concern on the activities in the collective sale market, it is still too early to take actions as the activities are happening on the supply side of the property market. On the demand side, things are improving but not at a heated level yet.

7th Feb 2018 – For China’s Wealthy, Singapore is the New Hong Kong

SPKThe return of foreign buyers could be a potential wildcard to fuel additional property demand and price increase in the property market. Property purchase by foreigners is recovering but it is still below the long-term average level. Chinese buyers will be an important group to watch out for. Based on 2017 statistics, the three most popular locations with Chinese buyers were districts 19 (Serangoon Garden, Hougang, Punggol), 23 (Hillview, Bukit Panjang, Choa Chu Kang) and 5 (Pasir Panjang, Clementi New Town). Oxley might have a good chance to sell its upcoming developments in District 19 – a 1,450-unit development at former Rio Casa site and 1,050-unit development at former Serangoon Ville site to Chinese buyers!

6th Feb 2018 – Oxley beats over 80 parties to buy Huang Clan Association site

SPKOxley, my favourite developer, is in the news once again! I would say that this is a very shrewd transaction by Oxley. The landowner is carving out a 99-year leasehold of the land and selling it to Oxley in return for a cash consideration of S$13 mil and the 2nd and 3rd floor of the completed development. Oxley will retain 4th to 8th floor of the development for sale. As the upfront cash payment is low, the return on investment for this project should be much higher. I’m impressed by Oxley’s strong business acumen, evident in its ability to beat over 80 parties to buy the site!

6th Feb 2018 – Developers paid S$380m in ABSD, QC extension charges

SPK: What a difference a year makes! Just a year ago, everyone was waiting for developers to give ‘special discounts’ to sell their old inventories in order to avoid paying QC extension and ABSD remission. Sad to say, that didn’t really happen unless you happen to be a member of the Wee family (who bought up all the remaining units at The Nassim from Capitaland) or some big funds who managed to bulk purchase remnant units during Feb/March last year.

Today, there are only around 80 developments (with a total of about 750 unsold units) that could be subjected to these fees and charges in 2018. This has come down significantly if we compare to last year when a total of 4,230 units were affected by the rules last year. With the recovery in the property market, concerns on the penalties due to QC extension and ABSD remission claw-back has since abated. In fact, developers may be more than happy to hold the units if they expect prices to increase further during the year!

4th Feb 2018 – Proposed home-sharing rules to be released for feedback by Q1

SPKYou can read my earlier analysis on this topic here!

Why Frasers Property is raising prices at Seaside Residences

Just two weeks ago, I blogged about why Seaside Residences may sell like hotcakes this year.

Today, I heard that Seaside Residences has just raised its selling prices by 1% on average. Coincidentally, it was also reported today that the nearby Fernwood Towers is close to launching an enbloc sale.

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Is it a coincident or a premeditated move by Frasers Property to raise prices at Seaside Residences?

Firstly, let us try to understand how the Fernwood Towers enbloc will affect the neighbouring projects.

The freehold Fernwood Towers is asking for S$688 million or S$1,572 psf PPR. Assuming that the sale goes through at the reserve price, the estimated breakeven for the new development should be around S$2,100 psf to S$2,200 psf and the eventual selling price may be as high as S$2,500 psf!

No doubt that Fernwood Tower is a freehold development, but it does not have the direct seaview frontage that Seaside Residences offers. So if we compare a S$2,500 psf freehold project with Seaside Residences’ S$1,700 psf average selling price, the price gap looks too wide to be justifiable.

Moreover, Seaside Residences has been selling well since the property market picked up last year. Phase 1 of the launch is close to selling out.

It seems like a well-timed move for Frasers Property to raise its selling price for Seaside Residences to take advantage of the upcoming enbloc at Fernwood Towers, and also to set the stage for its Phase 2 launch, which may be at an even higher price if Fernwood Towers manage to sell at its reserve price!

5 things to expect with the legalization of short-term home sharing in Singapore

The wait is finally over (soon)! Yesterday’s Sunday Times reported that the proposed home-sharing rules will be released before April for feedback.

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Looks like short-term home sharing is here to stay. Despite the recent clampdown by authorities, the number of listings for homes as well as single rooms and shared rooms has risen from 7,781 in May 2017 to 8,601 in December the same year, an 11 per cent increase in eight months. In the same period, a total of 8,046 homes, single rooms and shared rooms were rented out for up to three months (which is technically against the current law). Airbnb’s total available room nights for single and shared rooms in Singapore from January to November 2017 was 1,186,887, a jump of almost 25 per cent compared to the same period in 2016.

Impressive statistics, isn’t it? With the weak residential rental market, property investors had little choice but to take the risk of running afoul of the law and list their properties on Airbnb to seek for an alternative source of income for their vacant properties. But with the impending home-sharing rules, it may be good to have clarity on how homeowners can officially do short-term leases in Singapore.

But wait. Is it really good for Airbnb landlords and the property market? Sunday Times reported that a new category of housing, which allows home sharing on a short-term basis, is believed to be one of the ideas in the consultation paper. Home-sharing platform operators like Airbnb may also be regulated. Mr Lawrence Wong also commented that “Singapore’s situation is complex due to its high density, and the majority of private homeowners live in strata-titled properties.”

So what can we possibly expect when the home-sharing rules come out?

  • A new category of housing? How does this work? Could it be like Private HireCar Driver’s Vocational Licence (PVDL), i.e. homeowners need to apply for a short-term leasing licence and subject to a very stringent set of rules to follow? Quite possible. The hurdle to getting the licence may be high, as the government need to protect the interests of the hoteliers.
  • There is no free lunch. Short term leasing can potentially generate better profits for owners compare to a typical residential lease. For owners who are allowed to lease short term, they might also have to prepare to pay an even higher property tax.
  • It is important to keep the neighbours happy. Government is paying attention to how the short-term leasing will affect neighbours in the development. So it is likely that once this home sharing rule is implemented, any complaint from a neighbour may result in a great deal of trouble for the short term leasing owner. So, be nice to your neighbours.
  • Another round of disruption to the hotel/residential leasing industry? Once the rules are clear, we may see hospitality operators and start-ups entering the short-term leasing market to be an operator for property owners in managing their short-term leases on their behalf. There are already some operators doing this (which is technically illegal).
  • Property market may get a boost from the home-sharing rules. One of the biggest concern of the property market now is the poor rental market at the moment. Whilst leasing outlook is expected to improve, the introduction of the home-sharing rules could provide an additional source of potential rental income and access to a bigger pool of tenants LEGALLY. This should help to improve buying sentiments.

This home sharing rule is probably one of the major change in Singapore property market in recent years. It is definitely an important development to look out for over the next few months. Stay tuned!