We’ve been expecting the government to trot out another round of cooling measures, as I mused on Facebook just hours before the official announcements came out. Prices have continued to defy gravity despite the 6 earlier rounds of cooling, and the recent ruckus over $2M Executive Condos had also alerted Minister Khaw to the need to bring developers back in line with the original mission statement behind Executive Condos.
Still, the 7th round of cooling measures does stand out amongst its predecessors as the broadest spectrum of cooling measures we have seen, affecting both private and public housing, as well as the industrial property market. The measures have drawn a mixed response, ranging from fiery profanities from property agents concerned about their rice bowl, to mild jubilation from Singaporean first-home buyers (and more cursing and swearing from PR buyers yet to secure a home.)
On the whole, I agree with the government’s decisive move this round. The market, jaded by countless rounds of “cooling” measures, has reached a stage where anything less than draconian simply won’t cut it. However, I question whether the ABSD measures introduced will truly serve the interests of those they are seeking to protect -the Singaporean first-time home buyer. Today’s post shall be focused mostly on the ABSD hike and its repercussions.
Below is the press release from URA regarding the new shock and awe cooling measure, starting 12 Jan 2013.
11 January 2013
Additional Measure to Ensure a Stable and Sustainable Property Market
The Government announced today a comprehensive package of measures to cool the residential property market. It also introduced a Seller’s Stamp Duty on industrial properties for the first time, to discourage speculative activity in the industrial market.
Cooling Measures for the Residential Property Market
The Government has implemented several rounds of measures to cool demand and expand supply, so as to moderate the increase in housing prices. While these measures have dampened speculative buying, the demand for residential property remains firm and prices have continued to rise.
Here’s an update on what has happened since my post on the subject:
1. On 19 Dec, the offer documents were despatched to shareholders
2. On 26 Dec, SC Global’s IFA, PrimePartners Corporate Finance, released a statement to offer their opinion that the offer was fair and reasonable, being 15 – 20% discount to their calculated RNAV
3. On 30 Dec, Simon Cheong released a statement that he has no intention of raising the offer. As such, the Takeover Code forbids him from subsequently changing the offer.
4. In response to an analyst’s speculation that there may be a chance for the privatisation to go through with joint privatisation of Wheelock, the Board of SC Global released a statement affirming that there are no talks with Wheelock and that the Code forbids any such transaction.
Talk about throwing a spanner in the works! Well, now we know 2 things. The first is that $1.80 is the only game in town for now with no chance of increase. The second is that the privatisation will fail, assuming that Wheelock stick to their guns.
Continue reading “SC Global Privatisation Update”
Straying slightly away from straight property market commentary, I’d like to weigh in on Simon Cheong’s bid to take SC Global private. For those who haven’t been paying attention to the news, here are the terms of the offer:
The all-cash General Offer price is $1.80, representing:
49.4% premium to the last transacted price before the announcement; and
39.5% premium to the highest closing prices in the 12 months prior to the announcement.
Reasons given for privatisation were the usual generic few: low liquidity, no requirement for market access, management flexibility and savings on listing costs.
Continue reading “SC Global Privatisation”
After several rounds of cooling measures, Singapore’s residential market has continued to climb in Q2 and Q3 of 2012. Thus MAS has stepped in once again, and as of today, borrowers will no longer be able to take loans of longer than 35 years. Given that the average tenure of residential property loans in Singapore is well below 35 years (29 years, according to MAS’ official press release yesterday), and bearing in mind that this average does not take into account the percentage of homes in Singapore that are fully paid-up, I don’t foresee this measure having a huge impact on the market. Continue reading “MAS Restricts Loan Tenure for Residential Properties – What Does the Future Hold?”
In the mutual funds universe, you have index funds on one end of the spectrum, and “special situation” funds at the other. The former simply track the market index, rising and falling in tandem with the market’s peaks and troughs. The latter, on the other hand, attempt to home in on unique upside opportunities and gain alpha.
As a property investor, you should try as far as possible to emulate the latter rather than the former. I draw inspiration from strategies taken by the fund manager behind a special situations fund I once invested in. He looked for themes that were on the uptrend, then dug beyond the obvious to seek out a more targeted vehicle for harnessing that trend. For instance,when he felt that international trade was set to boom, instead of banking on shipping stocks, he bought into ports, as the latter represented a more finite resource – you can have as many ships as can be built, but ports are strictly limited by geographical and administrative factors, amongst other constraints. Similarly, when he sought a means of investing into Asia’s growing need for infrastructure, he avoided construction companies, and went for the one key player providing the cranes to the many construction companies. This all took place years ago, but I reckon there is timeless wisdom in the investment style adopted.
If I had a dollar for each time I’m asked the golden question “is it the right time to buy?”, I’d have accumulated a tidy sum by now.
Similarly, if I were blessed with such prophetic vision, I’d probably be dictating this blog post to a personal assistant whilst sipping cocktails on some idyllic island resort in the Caribbean.
The thing is, a property bubble will mean very different things to different people, so it’s not so much a question of where the property market is headed (which nobody will be able to tell you will absolute certainty), but where are YOU headed?
The Home Buyer
So much has been said about speculators who flipped properties they could ill-afford for fast profits in the heady days of 2007, but what of the other form of property market speculators that aren’t normally recognised as speculators – those that hold off their home purchases indefinitely in the hopes of a property market crash? Is it wise to hold off getting a permanent roof over ones head in the vague hopes of buying in “cheap”? Continue reading “Property market crash? – what you should be asking”
I have hesitated to cover this topic for some time, as by my own admission, I am no industrial expert. However, given the high frequency with which clients and prospects have been coming to me waving attractive flyers and recounting killer sales spiels from commercial property agents they’ve encountered, I felt it necessary to at least highlight some key issues to consider before one takes the plunge into commercial property.
It’s always a bad idea to go into any investment sector when it seems like half the world including the taxi driver on your last ride into town is buying into it. A telling sign would be when the true industrialists are staying on the sidelines and renewing their leases, while the bulk of buyers appear to be virgin industrial investors. The industrial newbies are drawn by the promise of high rental yield, and seemingly cheaper pricing as compared to alternative real estate sectors, and of course the avoidance of additional buyer and seller stamp duties affecting the residential sector.
They appear to have completely ignored the fact that in the event of a sharp economic downturn, industrial property will be affected even more than the residential sector. According to URA reports, the median rental for multiple-use factory space (ie. B1 & B2) was about $2 psf/mth in Q2 2012. Given that there is currently over 23,000,000 square feet of factory space lying vacant, and another 49,000,000 square feet coming online over the next two years, one can only imagine what rentals will be like come 2014. (As my learned friend and mentor Mr Ku Swee Yong thoughtfully points out, the total lettable floor space at Vivocity Mall is about one million square foot.** So that’s basically more than 23 times Vivo’s total shop space going rent-less, with another 49 Vivos in the pipeline!)
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.