TODAY article: Rentals go up near international schools

Found this article from TODAY newspaper interesting. In the short article, it brings up a few points.

International school students have increased by 25% over the last 4 years. Picture courtesy of Singaporebaby.com

Point 1: Number of international students has increased 25% over the last 4 years.

Significance: Increase in international students = increase in expat families. Singapore remains an attractive location for companies. Additionally, the expats coming over should be relatively high-level for the companies to relocate the entire family. Since companies are unlikely to purchase real estate simply to house their expats, this should continue provide support for the rental market.
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Beyond psf- what’s your property’s bright-&-airy quotient?

In a recent Bloomberg article on Asian Millionaires taking charge of their own wealth, Akbar Shah, Head of Southeast Asia and Australia for Citigroup’s private-banking unit, describes real estate markets as hands-on markets that require a feel. I respectfully agree with her opinion. As I’ve mentioned on several occasions, both verbally and in writing, property analysis is more than just dollar-per-square-foot.

I’m struck by the number of times I’ve heard comments from clients like, “It’s pretty old, kinda rundown even… but somehow I just have a good feel about this place!” or “It’s a pleasant-enough place, but somehow it just doesn’t feel quite right?”

Obviously, when it comes to choosing a place to stay, there’s a wide spectrum of lifestyle needs, tastes and preferences. But one trait that almost all home-seekers unanimously favour in a home is the “bright and airy” factor. I believe this is something that contributes greatly to whether a home conjures up a feeling of spaciousness or not, perhaps even more so than whether a home is 1,200 square foot or 1,400 square foot. In a sense, this also echoes some of the principles of Fengshui – “qi” flows easily in a place that enjoys a good breeze and ample natural light, and in theory makes for a more auspicious home.

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Is the Singapore Property Market in Trouble? Part 3

Since the best trilogies come in threes, I guess this will be the final one of the series. In part 1, I talked about the risk of additional cooling measures. In part 2, I discussed the risk of over-leverage and increase in interest rates. In this part I shall talk about the risk of over-supply in the market.

Risk 4: Risk of over-supply

Another reason why the property market may come down is over-supply of properties, or to be more specific, more supply of properties than demand. Economics 101 tells us that price is determined by the interaction of demand and supply. When there is more demand than supply, prices go up. Conversely, if supply exceeds demand, prices come down. In order to determine the risk of over-supply, we need to split it up into the different categories of housing. Continue reading “Is the Singapore Property Market in Trouble? Part 3”

Psf, psf – are we too obsessed with numbers?

This might seem to be a drastically different stance from my last post on the dangers of being overly emotional when it comes to property investment, however, I come into contact with a broad spectrum of investors, buyers, sellers, and tenants in my line of work. My purpose is to provide a balanced commentary, and to help moderate potentially self-harming behaviours I come across.

As I’ve mentioned in earlier posts, real estate, particularly residential property, is a very unique asset class. Even for brand new units direct from developers, units with exactly the same floor plan will have a slightly different view by virtue of the fact that 2 units cannot possibly occupy the exact same airspace, thus the views, elevation and orientation will be at least marginally if not drastically different.

I believe this is also why real estate contracts are one of the areas where specific performance can be ordered by the courts. I suppose it is recognised that sometimes monetary compensation simply cannot replace the enjoyment one obtains from owning a particular property.

If even homes with exactly the same layout can have nuances of difference, then is not rather artificial to compare homes on a per square foot basis? I can safely vouch by the sheer number of times I have people asking me, “what’s the floor size for this place, ah?”, that the average human being is unable to accurately gauge the floor area of a home. So why do we dwell so much upon this magic ratio of price to floor area?

I suppose it is difficult to quantify how pleasant or livable a space is in a strictly scientific manner. The pleasure one can potentially derive from a well-designed, ideally-located home is in fact priceless! But a good way to gauge the “homeliness” value of a property is how much a potential tenant is willing to pay to live in it. The irony is that transient tenants looking to stay in a home for a 2-3 year time line are, I think, a lot more focused on the value of a good home, whereas home buyers tend to get overly distracted by comparisons of numbers and ratios that may have little effect on the ultimate enjoyment of their homes.

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Are you an emotional property investor?

Ok, it’s confession time! While I regularly profess my love for real estate investment, I have, to-date, never truly fallen head-over-heels in love with any property.

That is to say, I’ve never seen a property that makes me think, “Darn, I must have this! Whatever the price!” Neither have I owned a property that I’ve not been willing to give up for the right price.

When I first started hunting for property, I made the mistake of thinking that I had to fall in love before making the biggest ticket purchase of my life. Thus each viewing went by unfulfilled, and I wasted a precious 2 years without making any investments.

Fortunately for me, my work as a bank relationship manager and subsequently as a real estate lawyer, gave me a lot of exposure to the inner workings of some very wise and brilliant property investors.

I soon discovered that the properties that give the best returns aren’t necessarily the most appealing of homes. The first property I ever owned was a small two-bedroom apartment in district 10. I recall very little about the apartment itself, except that the master bedroom was dark and smelt of unwashed laundry (busy, bachelor tenant!) What I do remember rather more fondly was that it gave us instant 6.7% p.a. rental yield on our initial purchase price, and double-digit annual capital gains for the 3 years that we held it for. Continue reading “Are you an emotional property investor?”

The “Good School” Effect

Singaporean parents are well-known for their singleminded determination to send their children to the best possible school they can – whether it means renting/buying a home within 1 kilometre of the preferred school, joining a clan or church, or performing random menial tasks like directing traffic, washing fish tanks or juggling chainsaws blindfolded.

Any local mother past her first trimester is likely to be able to tell you what the various Phases of the Primary One Registration Criteria involve, and that for schools with oversubscriptions at any particular Phase, priority is determined by the proximity of the child’s home to the school.

For popular schools like Nanyang Primary School and Raffles Girls Primary School, the available slots are usually fully taken up by Phase 2A. And yet even so, I still encounter many a parent looking to buy property “near SCGS/Nanyang/MGS/RGPS/etc” in the hopes that it might enhance their chances of scoring a spot for their child.

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More can “afford” S$1M homes now, but should they really be buying?

Read this on Singapore Business Review this morning. I think it can be highly dangerous to adopt this idea of “affordability” and could land  novice investors in hot soup when markets head south or interest rates begin to climb.

Please don’t ever gauge affordability on current mortgage interest rates. It was not so long ago that lending rates were at 3.5-5% pa. The low rates we enjoy today are more anomaly than the norm, in the long run.

Project how much you can afford to borrow based on a more conservative interest rate of 3.45%pa rather than today’s 1-2%pa.

You need to buffer yourself against interest rates rising (though I expect rates to remain low till at least 2014) and also rental returns dropping in the event of a economic slowdown.

I’ll do up an example to illustrate when I have the time, but meanwhile read below with caution!

http://sbr.com.sg/residential-property/news/number-households-can-afford-s1m-condo-jumped-whopping-86

Transformations: The Jurong Lake District

If you haven’t heard of the Jurong Lake District, you probably don’t know that there are exciting things afoot in this part of the woods. Jurong has been known to be the boondocks of Singapore, an industrial area with not much in the way of lifestyle and entertainment. Even with Jurong Point, one of the biggest heartland malls, that image hasn’t really changed much. Talk about Jurong, and most property investors will switch off, most Easties will give blank looks, and even self-professed Westies may give you dirty looks if you talk to them about Jurong. Yes, it’s really THAT unexciting, BUT all this is poised to change with the development of the new Lake District. In case you’re thinking that this is something new, the Jurong Lake District project has been mooted since the 1991 Concept Plan, but was only fleshed out in the 2008 Master Plan. So to bring you up to speed, here is a comprehensive guide to the transformation of boring old Jurong into the exciting new Jurong Lake District.

Let’s start by going to the official URA website:

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Medical Suites – A Choice Commercial Property Investment

I had the opportunity to view the latest addition to the Novena medical hub yesterday –Novena Specialist Center. Having handled the purchase and mortgage of over 50 medical suites during my time as a real estate lawyer, this class of commercial property will always hold a special place in my heart, but I think there are many more relevant factors that make them a great investment buy.

Artist Impression of Novena Specialist Center

Medical Tourism

According to the Healthcare Services Group of the Economic Review Committee, there could well be one million medical tourists to have visited our shores by the close of 2012. Although the strengthening Singapore dollar has made her somewhat less attractive to neighbouring countries like Malaysia, Indonesia, and Thailand, I believe that those who can afford it would still prefer to have surgical procedures done in Singapore. Health is not something most would want to stint on, particularly higher-end procedures. Thus while the numbers of patients visiting may be lower than some neighbouring countries, the actual revenue generated is comparable.

In the World Health Organisation’s last report on international health systems, Singapore was ranked sixth out of 191, and the only Asian country besides Japan to garner a spot in the Top 10. Supporting infrastructure such our airport, roads, biomedical research facilities, hotels and tourism spots also add to Singapore’s allure as a medical tourist destination.

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How much should you pay? … The sequel…

A friend of mine (let’s call her Rabbita) thinks that the formula from my previous post is too complicated and difficult to implement, and I agree to a certain extent. After all, like I said, it’s really subjective how much value you put into each item on the list. For example, a nearby MRT is usually a plus, but a person who goes everywhere by car might not care if there’s an MRT station near the place, or he might even think that it’s a nuisance.

Rabbita’s suggested method is to set a budget first, and make sure the price plus renovation costs fit your budget. It’s intuitive and makes budgeting sense. Most people will probably do that if they plan to buy for their own stay. After all, buying a home is usually an emotional thing and some things just can’t be quantified. Continue reading “How much should you pay? … The sequel…”