Issue 96

Copyright 2011-2012 www.Propwise.sg. All Rights Reserved.

CONTENTS
p2 p8 p9
How to Measure Your Propertys Actual Investment Returns Property Buying Tip #12: Defects

FROM THE

EDITOR

Welcome to the 96th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

Liability Period
Singapore Property News This Week

p14 Resale Property Transactions

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SINGAPORE PROPERTY WEEKLY Issue 96

How to Measure Your Propertys Actual Investment Returns

By Gerald Tay (guest contributor)
I recently came across two investors who made money in property investing in the property boom during the last three years (i.e. from mid-2009 to end 2012), albeit in very different ways. I have taken the liberty to simplify and change some numbers as well as ignore all expenses so that we can compare apples with apples. Also, I used residential properties for this article as its very much a familiar arena to most readers. Calculating your investment returns There are many different ways to calculate a property investment returns but the Internal Rate of Return (I.R.R) is by far one of the
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SINGAPORE PROPERTY WEEKLY Issue 96 most accurate methods of calculating the cumulative property investment returns over a specific holding period. Inexperienced property investors and home owners who only look at capital gains as a measure of investment success are always surprised by the difference between the earnings that they expected to realise from a property investment and the actual investment return. Capital Gains or Growth do not equal investment returns due to many variables like financing, nature of loan amortization and many other costs involved in the entire property transaction process. How IRR Works Because a dollar in hand today is preferable to one a year or five years from now, Internal
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Rate of Return reveals in mathematical terms what a real estate investor's initial cash investment from Day 1 will yield based on today's dollars, not tomorrow's dollars. Here are the details of the example we will be using: Both properties are located within a 5 minute walk to MRT station and are near the city.

Note: A financial calculator or Excel is needed for I.R.R calculations (a basic tool for all true blue investors).
Investor A: Purchased a newly launched 916 square feet condo in a mature estate. Purchase Price (2009): S$930,000 Down-Payment: S$180,000 (20%) Loan Amount: S$744,000
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SINGAPORE PROPERTY WEEKLY Issue 96 Upon completion and T.O.P in 2012, he received offers for S$1.2 million. Equity = S$1,200,000 S$456,000 S$744,000 = Equity = S$384,000 S$800,000 S$416,000 =

Gross Profits = S$800,000 - S$520,000 = S$280,000 I.R.R = 78% per year Here are some questions to ponder: 1. Who is the smarter or luckier investor in this case? 2. If you were presented with both investment options, which would you go for and why? My analysis of the two investments 1. Investor B had similar gross dollar profits with Investor A (S$280 thousand as compared with S$270 thousand) but his actual return on cash invested is two times greater than investor A!

Gross Profits = S$1,200,000 - S$930,000 = S$270,000 I.R.R = 36% per year Investor B: Purchased an old 16 year-old 936 square feet apartment in a growth location. Purchase Price (2009): S$520,000 Down-Payment: S$104,000 (20%) Loan Amount: S$416,000 Rental Income (3 years): S$2,400 per month He received offers for S$800,000 in late 2012.
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SINGAPORE PROPERTY WEEKLY Issue 96 2. Investor B has a lower down-payment (S$104K for B compare to S$180K for A), but Bs actual return on cash invested is two times greater than A. 3. The returns are higher for B, in terms of cash invested now (down-payment), rental yield now, probably higher returns in future than As since Bs property is also located in the growth corridors of Singapore, while As property is already in a matured estate. 4. Similarly, there are higher chances of rental increments due to a growth location and possibly a bigger and more stable tenant base for B, and lower vacancy rates. 5. Investors As property is a new property bought directly from a developer, while Bs property is an older re-sale property from an individual seller. One of the arguments I stand firm on is that the higher profits that A should
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have gotten, have already been discounted into the developers profit margins and expensive marketing costs. 6. Investor As Day 1 initial cash has zero returns for 3 years until property completion. Investor A is waiting for his returns to materialise 3 years later, while Investor Bs cash is already working hard for him through a strong rental cash flow from DAY 1. My recommendations of which investment to choose Choose investment B, if your strategy is to hold for rental as well as property value gain. This property will probably give you a good rental over the years as it appreciates in value. I would highly recommend this low-risk strategy to the average investor with limited cash resources and who seeks safety.

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SINGAPORE PROPERTY WEEKLY Issue 96 Choose investment A if your strategy is to buy and sell. Reinvest the money again in a similar way but good profits will only come during a booming economy. And of course, if you sell high, you buy high too. This strategy is speculative and only suitable for an investor with fun money. My concluding thoughts Why plant a seedling if you can plant a tree today? Investor B is already making money from Day 1. Yes! You can have your cake and eat it too. If I were given 10 such opportunities, I would invest 10 times in the B type of investment scenario. Better rental yield, better capital appreciation, better long term potential, less risk, less dependence on the economy ( good or bad, I still get rental income regardless of property value)
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For A, maybe unless you want to use it for your own use or as a gift for loved ones. Investor A has an easier no-brainer task SELL, pocket the profit and look for more deals like this. He thinks making money in property can be as easy as this and will most likely try to replicate the same strategy again. But tomorrow is not today crazy economies like today dont always happen. Buying an older re-sale property (Investor B) can have much higher actual returns than simply buying an off-the-plan property (Investor A).

Bs property does require a lot more leg work and sweat before the sweetness but thats the whole point of it - FUN! Its fun that makes it all worthwhile for a true blue investor who loves and knows investing!

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SINGAPORE PROPERTY WEEKLY Issue 96 Simply taking Rental Yield alone as a benchmark for analysing investment properties is like taking a bow and arrow to a real gun fight! Understanding and knowing how to calculate Internal Rate of Return (I.R.R) in any of your investments is a crucial skill of an investor. Measuring your property investments actual returns through I.R.R will help you become a more savvy and educated investor in todays more volatile times. By guest contributor Gerald Tay, CEO of CREI Academy Group, who exposes widelyheld property investment myths that have proven highly ineffective in creating wealth, and prevent a comfortable retirement for the ordinary investor.

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SINGAPORE PROPERTY WEEKLY Issue 96

Property Buying Tip #12: Defects Liability Period

(Reference:www.bca.gov.sg) Many buyers have the impression that the one year defects liability period for brand new property starts from the day the Buyer collects the key when the unit hasreceived its TOP (Temporary Occupation Period).This is not correct. It is effective when the propertys TOP is announced, i.e., it is based on the date of the Notice for Vacant Possession. There is a time lag when the buyer receives the letter from the Solicitor, and there is a time lag when the buyer finally collects the keys.However, since the Defects Liability Period is 12 months from the TOP announcement, you do have enough time to
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address the defects. If the developer fails to correct and improve the defects within one monthsnotice in writing, you are entitled to carry out the work and recover the costs from the developer by deducting the rectification costs from the sum held by your conveyancinglawyer.This is provided you have notified the developer on the cost of the repair and given the developer the opportunity to carry out the works within 14 days of notice. By Eileen Tan and Ui Wei Teck, property investors and authors of Enjoying Mid-Life Without Crisis. This tip and dozens more are from their book.
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SINGAPORE PROPERTY WEEKLY Issue 96

Singapore Property This Week

Residential
43% of 99-year Urban Vista sold 250 or 43% of the 99-year leasehold 582-unit Urban Vista condominium project located at the junction of New Upper Changi Road and Tanah Merah Kechil Link has sold been at an average of $1,350 psf after a 7% discount. Units sold were mostly one- to three-bedroom units. There are 135 one-bedroom units, 249 two-bedroom units, 160 three-bedroom units and 37 four-bedroom units. Prices start from $588,000, $768,000, $1.1 million and $1.5 million for one-bedroom units (average area of 450 sq ft), two-bedroom units (average of 600 sq ft); three-bedroom units (average of

900 sq ft) and four-bedroom units (average of 1,050 sq ft), respectively. The take-up rate reflect genuine demand though had there not been the latest round of cooling measures, the developer could have sold even more units at a price of more than $1,400 psf.
(Source: Business Times) 99-year DNest sells 500 of 650 released units 99-year leasehold 912-unit D'Nest at Pasir Ris Grove near Pasir Ris MRT station and White Sands shopping mall has sold 500 of its 650 released units at an average price of $990 psf or $920 psf after discount. It has since increased by 2%.
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SINGAPORE PROPERTY WEEKLY Issue 96 It consists of one-to-four bedroom units, fivebedroom dual key units and 10 dual-key penthouses with five or six bedrooms in 12 blocks of 11- to 13-storey and three clubhouses sitting on a 444,284 sq ft site. Prices start at $498,000, $680,000, $820,000 and $1.15 million for one-bedroom, twobedroom, three-bedroom and four-bedroom units respectively. More units of each type have been progressively released in response to the strong demand. 80% of the buyers are Singaporeans, with remaining being foreigners and PRs largely from Malaysia, China, and Indonesia. (Source: Business Times) HDB launches 3,898 BTO flats in nonmature estates 3,900 BTO flats have been launched in four projects three non-mature towns: Bukit Batok, Punggol and Sengkang.
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SkyPeak @ Bukit Batok located between Bukit Batok Street 21 and Bukit Batok East Avenue 6 offers 1,430 units of two-room to five-room flats with prices starting from $117,000 to $411,000. Matilda Portico bounded by Punggol Field and Punggol Way comprises 470 four-room and five-room flats with prices starting from $294,000.

Compassvale Cape located along Compassvale Crescent near Cheng Lim LRT station offers 1,400 flats including studio apartments as well as three-room to fiveroom flats. Prices start from $88,000 for a studio apartment and $189,000 for a threeroom unit.
Compassvale Helm, located between Compassvale Bow and Buangkok Drive, near Buangkok MRT Station.

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SINGAPORE PROPERTY WEEKLY Issue 96 It has 598 flats comprising studio apartments, as well as four-room and five-room units. Prices start at $88,000 for studio apartments, and $304,000 for a four-room flat. Most projects are expected to have application rates of two to three. Compassvale Helm, however, is expected to have application rates of three to four given its proximity to several schools, the MRT station and other amenities. (Source: Business Times) Commercial A rise in property investment in Singapore expected Property investment in Singapore is expected to rise, given the cooling measures in Hong Kong and China which would divert investment to Singapore and the pent-up
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demand. Singapores strong currency is another factor that will attract foreign investors. This may result in a 5-10% increase in foreign investors. (Source: Business Times) Freehold Lam Soon Industrial Building back on collective sale market The 10-storey building consisting of 154 warehouses and light industrial factories sits on a 230,915 sq ft freehold residential site with a 1.92 GPR. It can be redeveloped into a 10-storey residential building with 403 1,100 sq ft units. It is located near Bukit Timah Hill, the Bukit Timah Reserve, and Dairy Farm Nature Park, and amenities such as The Rail Mall, Bukit Timah Plaza, and Beauty World as well as the Bukit Batok and Bukit Gombak MRT stations and the upcoming Hillview station.
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SINGAPORE PROPERTY WEEKLY Issue 96 The tender will close on April 3 at 2.30 pm. (Source: Business Times) Enterprise Road industrial building up for sale The single-storey factory sitting on a 109,164 sq ft site zoned Business 2 with a 2.5 GPR at 19 Enterprise Road in Jurong is asking for $18.5 million. It comprises of warehouses, offices, and production areas in a 62,500 sq ft built-up area and has a floor loading capacity is 25kN psm. In addition, there is a ninemetre ceiling height and an overhead crane in the production and warehousing area. The site with 25 years remaining in its lease is located within an established industrial estate, and near the Boon Lay and Joo Koon MRT stations, the AYE and the PIE. It is likely to see much demand given a general increase in demand for industrial properties and a lack
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of available large industrial plots in the area. The tender closes on April 30 at 3pm. (Source: Business Times)

Prime Orchard Road space rents increase in Q1

The average rents for prim Orchard Road space saw a 2% increase to $32.20 psf in Q1 2013 and is expected to remain stable for the rest of the year even as supply increases by 328,000 sq ft. This is a result of various asset enhancement initiatives in shopping malls in the area, as well as the limited supply of such prime space. Of the increase in supply, 172,000 sq ft of space will come from from Orchardgateway, with another 156,000 sq ft of space from asset enhancement exercise at The Heeren. Meanwhile, rents for prime suburban space remained unchanged at average of $29.75 psf in Q1.
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SINGAPORE PROPERTY WEEKLY Issue 96 There is an upcoming supply of almost 1.6 million sq ft of space in 2013 from the Bedok Mall, and JEM and Westgate in Jurong. (Source: Business Times) Hotels investment sales fall in 2012 As a result of differential price expectations of buyers and sellers and the bullish outlook for the hotel industry, there were lesser hotel real estate deals in 2012, leading to a fall in investment deals from $1.58 billion in 2011 to $1.45 billion last year. At least $800 million worth of deals is also expected in the next two to three years. Meanwhile, the average room rate rose from $247 in 2011 to $261 in 2012 while the average occupancy rate remained at 86%. Revenue per available room also increased to $226 from $214. Around 5,020 rooms are expected to be completed by 2013, which may lead to a fall in room rates and occupancy rates (slight fall
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but remaining above 80%). The supply is expected to increase to 53,000 by 2015 with another potential 5,000 hotel rooms by 2017. (Source: Business Times) Bright Chambers at Middle Rd up for collective sale Nine-storey eight-unit Bright Chambers, a commercial building located at 108 Middle Road, has been put up for collective sale by tender with an asking price of $45-50 million. It consists of eight units with a total strata area of 34,972 sq ft sitting on a 5,263 sq ft plot zoned for commercial use with a 7.94 GPR. The 99-year leasehold site with a remaining term of 60 years can be accessed via Middle Road, Victoria Street and Manila Street, and is near Bugis MRT station. The tender will close on April 18 at 3pm. (Source: Business Times)
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SINGAPORE PROPERTY WEEKLY Issue 96

Non-Landed Residential Resale Property Transactions for the Week of Mar 6 Mar 12
Postal District 2 3 3 4 4 4 4 5 5 5 5 5 8 9 9 9 10 10 10 10 10 10 11 11 Area (sqft) 1,270 1,098 1,098 2,185 807 1,313 1,485 1,044 1,055 936 1,249 753 420 2,282 1,055 1,044 1,905 1,012 1,475 1,313 980 1,163 797 1,033 Transacted Price ($) 965,000 1,460,000 1,430,000 6,336,500 1,614,000 2,050,000 2,300,000 1,350,000 1,350,000 1,105,000 1,385,000 750,000 638,000 6,500,000 1,800,000 1,750,000 3,520,000 1,765,000 2,430,000 2,100,000 1,520,000 1,800,000 1,660,000 1,920,000 Price Tenure ($ psf) 760 99 1,330 FH 1,302 FH 2,900 99 1,999 99 1,561 99 1,548 99 1,293 FH 1,280 FH 1,180 99 1,109 99 995 99 1,520 FH 2,848 99 1,706 999 1,676 FH 1,848 FH 1,744 999 1,648 FH 1,599 FH 1,552 FH 1,548 FH 2,084 FH 1,858 FH Postal District 11 11 11 11 12 14 14 14 15 15 15 15 15 15 15 16 16 16 16 16 16 17 17 18 Area (sqft) 1,259 1,259 1,087 1,927 1,076 1,012 1,076 1,324 1,690 1,130 2,411 1,550 1,216 1,335 1,173 1,378 1,561 1,238 1,281 872 1,507 1,195 1,292 1,453 Transacted Price ($) 1,970,000 1,890,000 1,500,000 2,347,200 1,120,000 988,000 1,020,000 1,000,000 2,700,000 1,460,000 3,100,000 1,910,000 1,475,000 1,470,000 1,238,500 1,680,000 1,808,000 1,200,000 1,220,000 823,000 1,288,000 1,200,000 1,200,000 1,390,000 Price Tenure ($ psf) 1,564 99 1,501 99 1,380 FH 1,218 999 1,041 FH 976 FH 948 FH 755 FH 1,598 FH 1,292 FH 1,286 FH 1,232 FH 1,213 99 1,101 99 1,056 99 1,219 99 1,158 99 969 99 952 99 944 FH 855 FH 1,004 FH 929 FH 957 99

Project Name SPOTTISWOODE PARK ALESSANDREA ALESSANDREA MARINA COLLECTION REFLECTIONS AT KEPPEL BAY CARIBBEAN AT KEPPEL BAY CARIBBEAN AT KEPPEL BAY PARC IMPERIAL MURANO DOVER PARKVIEW DOVER PARKVIEW VISTA PARK RACE COURSE 138 ORCHARD SCOTTS WATERFORD RESIDENCE URBANA BALMORAL 8 MILL POINT THE MARBELLA THE TESSARINA THE TESSARINA CHATEAU LE FAME NEWTON SUITES RESIDENCES @ EVELYN

Project Name AMARYLLIS VILLE AMARYLLIS VILLE ADAM PARK CONDOMINIUM THE PARK VALE MOONSTONE VIEW SUNFLOWER VIEW GEYLANG HERITAGE DELIGHT COURT THE VIEW @ MEYER VERSILIA ON HAIG EQUATORIAL APARTMENTS HAIG COURT WATER PLACE DUNMAN VIEW CASUARINA COVE CASA MERAH COSTA DEL SOL CASAFINA CASAFINA TANAH MERAH MANSION CASCADALE FERRARIA PARK CONDOMINIUM DAHLIA PARK CONDOMINIUM SAVANNAH CONDOPARK

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SINGAPORE PROPERTY WEEKLY Issue 96

Postal District 18 19 20 21 21 21 21 23 26 26 26 27 27 Area (sqft) 1,130 1,012 2,702 1,044 1,216 829 2,562 980 1,141 1,292 1,249 1,163 1,152 Transacted Price ($) 990,000 1,088,000 3,500,000 1,980,000 2,168,000 1,070,000 2,300,000 988,000 1,460,000 1,130,000 1,088,000 930,000 880,000 Price Tenure ($ psf) 876 99 1,075 FH 1,295 FH 1,896 FH 1,782 FH 1,291 99 898 FH 1,009 FH 1,280 FH 875 99 871 99 800 99 764 99

Project Name CHANGI RISE CONDOMINIUM KOVAN ESQUIRE GOLDENHILL PARK CONDOMINIUM THE CASCADIA THE CASCADIA GARDENVISTA FREESIA WOODS HILLVIEW HEIGHTS THE CALROSE SEASONS PARK SEASONS PARK YISHUN SAPPHIRE YISHUN SAPPHIRE

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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