May 13, 2013
With personal income tax capped at a modest 20% and no capital-gains tax, it’s unsurprising that Singapore has become a magnet for wealth around the region. In a recent survey of 1,000 mobile millionaires, Singapore was deemed the most desirable place to call home in Asia – billionaires Richard Chandler and Eduardo Saverin are amongst the notable individuals who have chosen Singapore as their home-away-from-home.
According to Boston Consulting Group’s 2012 Global Wealth Report, Singapore has the world’s highest density of millionaire households at 17.1% or 188,000 households. At the same time, its popularity as an offshore banking hub is also growing in leaps and bounds, with wealth under management set to overtake Switzerland by 2020. Switzerland currently manages some $2.8trillion in assets, whereas Singapore has seen assets under management grow from just $50billion in 2000, to $550billion by end-2011.
It is somewhat counter-intuitive then that Singapore’s luxury property market has performed dismally in recent years, particularly when the property market as a whole has had a spectacular run. One could blame it all on the whopping 15% additional buyer’s stamp duty payable by foreigners, but ABSD was initially introduced only in December 2011 and raised only recently in January 2013, whereas the luxury market has been slow since the financial crisis of 2008, never recovering its shine unlike the mass-market sector which experienced a rapid rebound beyond previous highs. Sales of non-landed homes above S$5M screeched to a halt between October 2008 to March 2009, and barely hit 400 transactions in the whole of 2012. In 2007, there were more than triple that number of transactions, at a time when there was a lot less money and a lot more exciting alternative investment options competing for a share of the pie.
The Marq by SC Global
The Ritz-Carlton Residences
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Posted in Condo Project Review, Developer sales, Government Policies, Investing in Real Estate, Living in Singapore, Miscellaneous, Resale |
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May 9, 2013
With interest rates staying at all-time lows, mortgage loans have been so affordable that the government has almost been forced to throw measure after measure at the property market to cool demand. However, conventional wisdom tells us that this abnormally protracted period of low interest rates cannot last, and that interest rates should revert to its long-term mean of about 2 – 2.5% pa, or implied mortgage rates of around 3.5% pa vs current mortgage rates of around 1.1% pa. It doesn’t really sound like much until you actually calculate your monthly payments in dollar terms. For every $1 million of loan of 30-year tenure, the monthly payment is going to increase from $3,263 to $4,490, a whopping 38% increase!
Image : Howard McWilliam (The Telegraph)
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April 23, 2013
The Iskandar region, image courtesy of Temasek.
The name “Iskandar” is on the tip of everyone’s tongue these days, and it is impossible to perform one’s duty as a property consultant in Singapore without at least rudimentary knowledge of neighbouring Malaysia’s rapidly developing special economic zone.
Thrice the size of Singapore, Iskandar is set to be a modern metropolis buzzing with economic activity, a conglomeration of various exciting growth sectors, including nine key economic clusters: financial advisory and consulting, creative industries, logistics, leisure and tourism, education, health care, electrical and electronics, petrochemical and oleo-chemical, food and agro-processing. What really piqued my interest was the chief executive of Iskandar, Ismail Ibrahim’s clearly articulated intent to make Iskandar Malaysia “a place to invest, work, live and play.”
The success of Iskandar will ultimately pivot on this – whether they are able to successfully integrate the four vital aspects of a bustling metropolis. They have done exceedingly well on the investment front, with the first development phase attracting a total committed investment of RM56 billion, surpassing its investment target by over 20 percent. Now well into Phase Two, cumulative committed investment in the region stood at around RM106.3 billion in 2012.
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April 13, 2013
Let me start by stating upfront that my agency SLP is one of the joint marketing agents for this project, thus it would be improper for me to voice overly critical views on Stratum. Happily for me, after studying the marketing information provided to agents and conducted my own independent research, I have to say I’m suitably impressed and feel I’m able air my opinions here without fear of offending the developers. As I believe there’s sufficient marketing material available to readers, I shall be sharing my own personal viewpoints here, so excuse the semi-casual tone of this piece.
When assessing a real estate target, my usual practice is to start with rental yields as leading indicators for future price movement. I was heartened to see that based on 2012 Q4 rental data, projects around the area like Livia and Ris Grandeur both enjoyed a healthy 3.9%p.a. gross yield.
Bearing in mind that there are several residential projects underway, one would be concerned about new supplies putting downward pressure on the rental yields. However, my sense is that this is a neighbourhood with relatively high owner-occupancy rates, thus the supply of units available for rent should form a low percentage of the total number of units coming online over the next few years.
The numbers appear to support my hypothesis. Thanks to the good folks at squarefoot.com.sg, I was able to determine that there were a total of 43 rental contracts concluded at Ris Grandeur in the year 2012. Assuming that most units are leased for 2-year periods, and that the average number of rentals concluded each year is fairly stable, I estimate that roughly 86 or so units at the 453-unit Ris Grandeur are likely to be investor units, a low 20% of the total number of homes there. And of course, with the Additional Buyers Stamp Duty introduced since 7 December 2011 and further increased on 11 January 2013, the percentage of investor owners of upcoming projects in the vicinity is likely to remain low. I don’t expect rentals to be too badly affected by the supplies of new units coming online over the next few years, as the bulk are being bought by end-users. read more »
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April 6, 2013
Market naysayers claim that cheap financing has resulted in hot money, which has in turn created an unsustainable property bubble. While I constantly remind young, first-time home buyers not to overstretch their budgets by projecting affordability on the basis on today’s abnormally low interest rates, the continued upward march of property prices here was certainly not due to low interest rates alone. In any case, with the various phases of loan-to-value and loan tenure restrictions introduced since February 2010, the capacity for interest rates to create heat in the property investment market has been brought down to a minimum. (After the latest cooling measures in January 2013, the maximum loan-to-value in certain situations is a mere 20%.)
And so, when a property agent friend recently asked me for my opinion on whether she should advise her home-buyer client to “wait for property prices to drop”, I responded with a question in kind, “how long can she wait?” If you ask me for my honest opinion, today’s market is indeed a challenging one for buyers seeking an investment unit in the residential sector, and it takes a sharp eye to spot a gem worth surmounting the ABSD payable(there ARE such gems out there, I can personally vouch for that!). However, for those without a home to their names hoping to eventually get out of the rental cycle, I silently worry when they confide that they are waiting for prices to drop. (I stay silent in such cases, as my policy is never to give unsolicited advice, the opinions shared on this blog are for you to consider only if you choose to.)
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March 24, 2013
Now that the government has clamped down on buying and selling of property, perhaps it is time to look at other ways you can invest in property. One of these ways is to buy shares of companies that deal with property, whether as developer, contractor or owner-manager. Some such counters are Capitaland (developer), Ho Bee (developer), Wee Hur (developer, contractor), Suntec REIT (owner-manager).
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March 7, 2013
After murmurs on the subject have been rippling through the market for weeks, I believe the move to further restrict Mortgage Servicing Ratios (MSR) on private residential property is on the cards over the coming week, possibly as early as tomorrow.
According to multiple sources, MSRs are likely to be brought down from the current 30-60% to just 30-40%. To illustrate what this means in practical terms, let’s take the example of a $1.5M property:-
A $1.5M home with 30-year, 80% loan-to-value housing loan of $1.2M at an interest rate of 1.5%p.a. ($4,141.44 monthly installment) would previously require a monthly income of $10,353.60 to support a 40% MSR threshold. When MSR is reduced to 30%, a corresponding one-third increment is monthly income is necessary to support the same loan.($13,804.80/month). Alternatively, the buyer with a $10,000/mth income would need to reduce his loan to $900K and either come up with more cash or assuming he maintains his cash/CPF downpayment at $300K, shift his sights toward properties $1.2M or below.
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March 4, 2013
Last week, Finance Minister Tharman Shanmugaratnam gave his Budget Speech for 2013. Amongst the main themes of the speech, the most glaring to me was the re-distribution of costs from the lower-income/lower-wealth group to the higher-income/higher-wealth group. This is a natural progression in a maturing economy and should be expected. Of the items listed as part of this theme, those that pertain to the property market are:
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February 28, 2013
Even in this humble household appliance we have different thermostat/humidity controls for different compartments… should we not expect more of our property cooling measures?
It has been just less than two months since the most recent and extensive round of cooling measures were implemented on 12th January 2013. Despite the initial shock and awe across the island, it appears from January’s transactional activity that the market is increasingly resistant to cooling attempts. We expect this to continue given that residential property vacancies are low at 5-6% islandwide, jobs figures remain healthy, and loan interest rates are set to stay low till at least end-2014.
To be sure, January’s data cannot be taken at face-value. While transactional volumes hit record levels, with new home sales hitting 2,013 units, several market analysts have pointed out that the bulk of these numbers were clocked in prior to the cooling measures taking effect. For instance, star-performer for the month, 810-unit La Fiesta brought forward its launch date and extended sales operating hours the night before the cooling measures kicked in, clocking in 404 units in January, of which an estimated 90% were deals closed prior to the measures. read more »
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February 26, 2013
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