Cluster landed homes – The next goldmine?

 

Landed homes have always been known to be one of the most expensive properties in land-scarce Singapore and understandably so. And most would think that properties with individual land titles will always be a step ahead of leasehold properties. But apparently strata landed properties, or more commonly known as cluster landed homes, have seen the fastest price rise over recent years.

The four types of landed properties in Singapore are:

  • Leasehold non-strata landed homes
  • Freehold non-strata landed homes
  • Leasehold strata landed homes
  • Freehold strata landed homes

Casa FidelioAnd the last one on the list above have seen speedy rise in value of 77.3 per cent from 2004 to 2008. And the third on the list have been even more popular since 2009, with the fastest rise in capital value of 20.1 per cent a year. This could be due to the fact that most of these cluster homes have been built in the last decade or so, and have better floor planning and a larger floor area due to the fact that they are often built up to at least two storeys. Some older freehold landed properties may come with a land deed, but often extensive renovation have to be done, which raises the cost for the buyer.

Hillcrest-VillaPhoto credit: MCL Land

Examples of the price rise in freehold cluster housing properties can be seen at the Casa Fidelio in Siglap. In 2004, a terraced house cost only $760,000 and by 2008, it was sold for $1.18 million. In 2007, the launch of the Hillcrest Villa in Bukit Timah also pushed prices of cluster landed homes up by almost $1.5 million. Though landed properties are one of the highest profit-earning tickets out there, the cost of such properties in today’s market will require a healthy bank balance and deep pockets. What options are there out there for buyers who wish to invest in such properties? 

 

New properties on a fresh new ride

 

And hopefully it will be an upwards ride.

May 2014 was a good month for the new private home market. Mostly due to the large number of properties launched, 1,487 units were sold. But after that huge spike, sales have held steady at around 300 to 400 units sold per month, with December’s showing a little lower due to the festive season.

KingsfordWaterbayThe numbers have however increased significantly in March this year, from 390 units sold in February to 613 last month. The results are promising, but there has been a few recent launches of new units at previously launched developments and also a release of pent-up demand after the Chinese New Year festivities, which could account for some of the positive vibes.  Most of the sales came from Kingsford Waterbay with 155 units sold and Sims Urban Oasis with 107 units sold. New launches are pulling out all the stops to get buyers’ attention. Competition will be high as more launches are planned for the year, thus getting first dibs with the buyers’ pool is crucial for developers.

Suburban properties are often priced below city fringe and central district properties; at 22 per cent lower than city fringe and 43 per cent lower than central region homes. Lower quantum prices seems to be the factor helping to close deals, as the property cooling measures do not work in favour of most middle-income buyers. The Skywoods and Symphony Suites projects seemed to stacked up better, but sales at Northpark Residences and Botanique @ Bartley may very well give them a run for their money soon, looking at the response from the public.

The outlook for the market this year seems spotted, with possible glimmers of hope but also tough restrictions which may put a damper on sales volume and prices.

 

Lions, Alligators, Elephants & Locusts – Investment lessons from the wild

The_Petronas_Twin_Towers_in_Kuala_Lumpur_(Malaysia)
 

Here is my take on the Asia Pacific real estate market and why Malaysia is still the place to invest.

Before I go into the details of the market, I want to identify the segment of the market which I believe holds the key to any major real estate boom; the middle and upper middle class. For this article. I will specifically look at the middle classes of Asia Pacific.

According to a report by Ernst and Young released on 25 April 2013 in London

“By 2030, two-thirds of the global middle class will be residents of the Asia-Pacific region, while Europe’s share of this population will have dropped by 14%” – Ernst & Young

From studying the different markets of the world that went from sleepy to scintillating and boring to boom, we can see a certain pattern emerging. It always starts with strong government initiatives for economic transformation and growth that motivate and trigger an influx of savvy investors both big and small to develop various fundamental industries like construction, transportation, utilities, education, health care, corporate services, logistics, recreation etc. which are crucial to building a successful city or region.

Real estate will also have to be developed to anticipate the population growth created by such transformation. As such It baffles me to hear people saying constantly that supply is greater than demand during the transformation period. Doesn’t it make sense to build homes and offices first and than fill them up as you go along? Any government worth its salt will ensure there are homes first before bringing the people in! That means there will always be more homes and offices than people during this phase and the disparity is greatest at the beginning.  Imagine doing the opposite? Where would the people live or the businessmen do their businesses? I can imagine these people would leave as soon as they come to such cities as there are not enough housing or places to run their businesses effectively. My point is if a country is going to grow successfully, there must always be more homes and offices first. Yet In some strange ways, you will hear people saying that there is an oversupply or saying that the place is a ghost town and there are still nothing there and no one is living there! Excuse me, but it is still a construction zone and there are no bars and restaurants and anything else at the moment and supply will always exceed demand at this stage.

It is good to note that most of the savvy investors and institutional investors would have gone in early. They are the lions and alligators and elephants but like lions, alligators and elephants, the big players’ who have gone in will not cause a frenzy. The lions, alligators, and elephants eat and have their fill and will then sleep. No impact on the forest or jungle (real estate market). Eventually,  the market will go into a little slumber. This slumber will persists until visible signs of change appear and more stories of people making money surfaces. This is where the middle class, the locusts (who are, at the moment, still grasshoppers) will come in and devour all in its sight.

China, Hong Kong, Singapore is not palatable for most middle and upper middle class as prices are too high and/or restrictions aplenty.

India is for Indians or NRI and has its restrictions and may not be

Emerging markets like Myanmar, Cambodia, Philipines, Thailand, Vietnam, Jakarta are emerging markets and are not for bulk of the middle & upper middle classes as they are more risk adversed and these markets do not have a mature secondary (resale) market.

Australia & New Zealand, Taiwan are slower markets and may not generate the right rate of returns for those who wants faster returns

One country, Malaysia, where many people speak English, Chinese, Indian etc and where food from India, Hong Kong, China, Singapore, Korea, Japan etc can me found. Where it’s relatively cosmopolitan and many MNC’s are moving to. Where Price WaterhouseCoopers and Ernst and Young report to be the place to set up businesses to penetrate the lucrative South East Asia market. One major reason, Profitability.

Where there are quality workforce, adequate facilities and has all the logistic support equivalent to developed cities but much lower operating costs. PWC and E&Y

The World bank reported it to have better investor protection than Australia, UK and the U.S.

It is strategically located right in the middle of Asia Pacific and a short distance to all the countries mentioned above

Yet prices of its properties are still one of the cheapest in the region.

Fact is the middle & upper middle class will finally realize that there is only a place that suits their profile. Just that they will only move when all the Economic Transformation Program are in place, the people and industries are in place and then the middle class who waited will see all these happening and then it will boom.

It is like Singapore in 2005 period where we were in the transformation transition. The middle class stayed away from District 1,2 and 4 in Singapore and avoided properties like The Sail & Icon until they finally saw the Marina Bay Area truly transformed with the Casino, MBS, Flyer, Esplanade, F1 happening and heard people started making money. By then, the properties which could have turned many middle class into multi-millionaires became out of reach of them. Pity.

In Malaysia, All the Savvy investor and institutional investors have gone in. They are the lions and tigers and elephants but like them, the big players’ who have gone in will not cause a frenzy. The lions, tigers, and elephants eat and have their fill and will then sleep. No impact on the forest or jungle (real estate market). It is the middle class, the locusts (who are now still grasshoppers) that will come in and devour all in its sight.

In short, the middle class will consider these:

  • Proximity
  • Culture
  • Investor protection
  • Resale
  • Increase in population thru transformation
  • A mature local real estate market
  • Lower price and entry level

Singapore had all of these but the one country most similar to Singapore in Culture, language, and social and economic make up. Which country in Asia Pacific is most similar to Singapore in these aspects?

Remember, Singapore boomed and attracted the expatriates and grew our population because of adding one element to work and live, play. Which country is working on the same industries and ingredients that transformed Singapore in the last 20 years?

Your guess is as good as mine. We are just waiting for the grasshoppers from China, Korea, India, Hong Kong, Indonesia, Singapore and even Malaysians themselves to become locusts.

 

By Colin TanColinTan Training & Consultancy

ColinTan Training & Consultancy

The private home gentle wave

 

It’s an up and down ride for the private non-landed property market for more than a year now. Across the board, non-landed resale home prices dropped 6.2 per cent last year. Prices of homes in the central districts dipped an average of 7 per cent last year, though there were good months when some segments managed to bounce back slightly before falling again. That could mean that things were mainly level though there are outliers.

Duchess ResidencesResale private apartment prices fell 0.2 per cent last month, with a 3.9 per cent fall compared to the same month last year. But some city fringe properties bounced back with an average price rise of 0.4 per cent. Part of the yoyo-ing in prices could be due to the Chinese New Year period in February and buyers were just coming back into the fray in March.

The second quarter of this year would be a crucial point in almost determining how the rest of the year will flow, at least up to just before the Hungry Ghost month. Though the ride has been more a gentle wave of price fluctuations rather than a roller coaster ride, property experts are however not expecting a drastic change in prices unless there are major policy changes or a major interest rates hike.

The year could be a relatively quiet one with bright sparks and dull moments along the way, but the basics of good location and lowered total quantum prices will still move units.

Penchant for Penthouses

 

Although the luxury property market seems to be falling behind as property cooling measures take bite, penthouses which are few and far in between are attracting the right customers.

At the exclusive Ardmore Park district, the one-and-only penthouse at Le Nouvel Ardmore recently sold at $51 million, apparently the highest recorded since the global financial crisis. Measuring at 13, 875 sq feet, that translated to about $5,000 psf. Considering news of a recent high-end property resale at a loss of $15.8 million just broke not too long ago, industry players are understandably happy about the recent progress.

Le Nouvel Ardmore in the exclusive Ardmore Park area. Image by Wing Tai Holdings Limited.

Le Nouvel Ardmore in the exclusive Ardmore Park area. Image by Wing Tai Holdings Limited.

Prime district condominiums are all in the millionaire range and penthouses are even higher on the price charts, mostly because of the floor area. One of the largest sale of penthouses in recent years was one at TwentyOne Angullia Park which sold for $42.9 million in 2013. Other high-end apartments include The Marq on Paterson Hill, The Orchard Residences and the Ardmore Park condominium. At The Marq, four-bedders start at $20.5 million ($6, 850 psf) which makes for a higher per square foot price than the $51 million penthouse at Le Nouvel Ardmore, but with a more palatable quantum price.

Are the buyers coming back into the market, slowly but surely? What will entice them back quicker and what are they looking for in a property? Property experts expect properties which are already completed will be a much higher draw for this high-end luxury property customer base as they often prefer to invest in the tangible.

Resale HDB flats – Sales go up as prices do down?

 

2014 saw a record low number of HDB resale flats exchanging hands. It could be due to the effects of the property cooling measures, in particular the TDSR (Total Debt Servicing Ratio) framework set by the Monetary Authority of Singapore,  just starting to kick in. Buyers were more wary and more careful in weighing their options while sellers were still unwilling to lower prices. The tussle was just beginning.

SeaHorizonECBut this year, it seems one side is starting to give, slightly; especially for those who need to sell their current flat within the stipulated time of collecting the keys to their new flat, or face forfeiting their deposit. Prices of resale HDB flats have dropped 0.8 per cent in March this year, and the number of transactions increase from 1,148 to 1,349., As the number of new BTO (Build-to-order) HDB flats which will be launched this year decrease, buyers may also begin turning to resale flats to fulfil their needs. Prices of four- and five-room flats fell the most at 1.1 per cent and prices have been dropping since a year ago.

Property experts continued to stick to their forecast of a 5 to 6 per cent drop in resale flat prices this year, and hope for a higher sales volume than last year. It all depends on how the market fares from now till June, just before the traditional lull period of the Hungry Ghost Month.

Prices of rare HDB flats such as ECs (executive condominiums) remained high however, in fact showing a rise of 1 per cent last month.

More favour fixed home loan rates

 

With the property market still proving a little dicey this year, more buyers are opting for fixed home rates in the wake of possible higher interest rates this year.

Backed by the strengthening US Dollar, and the Sibor (Singapore Interbank Offered Rate) and Swap Offer Rate at their highest in five years; home buyers are understandably iffy about the financial difficulties they might eventually face. The three-month Sibor rate has reached 1 per cent last week, comparable to the boom in 2008.

Tropika East private property in district 14.

Tropika East private property in district 14.

Fixed home loan rates are locked in for a specific period of time (usually two to five years) and banks and brokers alike are reporting up to 80 per cent of their clientele showing interest and taking up fixed rates. Though the rates may be higher, the risk of fluctuating interest rates are reduced. It all takes detailed financial planning and a good understanding of one’s capabilities. How soon do you estimate being able to pay of bulk of your loan? How financially flexible do you need to be?

Location and rental potential seems to have trumped floor area and will properties with a lower total quantum continue to take the front of the race as the market leader?

Encouraging response from recent property launches

 

Over the weekend, show flats at two new condominium launches were packed to the rafters with eager buyers and those shopping for a good deal. Affordability and proximity to transport seemed to be the biggest crowd pleasers at these two developments.

Northpark Residences saw more than 70% of their 430 units sold with most of their buyers being Singapore citizens. Prices averaged at $1,300 psf. A 431 sq ft studio apartment for example, went for $612,000 while five-bedders with an average floor area of 1,432 sq ft sold at approximately $1.89 million.

Botanique @ Bartley2At the Botanique at Bartley, most of their units, about 70%, were all priced below $1 million. Definitely wallet-friendly for the middle-upper class household in Singapore and also more plausible for those who need a home loan. And they boasted the options of turning two- and three-bedders into dual-key apartments. Situated in the midst of quite a few schools such as the Paya Lebar Methodist Girls’ School (PLMGS), Maris Stella High School and the Australian International School, the property was quite the hot target for local and foreign buyers alike. Although only 300 units were put up for sale over the weekend, almost half have been sold. The most popular units were the one- and two-bedroom apartments starting at $598,000 for one-bedders and $798,000 for two-bedders.

If the weekend response and sales were anything to go by, the next few months may not be such dull ones. Is it time the property market picked itself off the floor, dust off and hit the road running? Will the positive effect rub off on older properties in close proximity to these new launches?