Singapore Property Weekly Issue 162

Issue 162Copyright © 2011-2014 www.Propwise.sg. All Rights Reserved.

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CONTENTS

p2 Is Paying Just 5 Times Your Annual

Income for a Property Realistic?

p7 Singapore Property News This Week

p12 Resale Property Transactions

(June 11 - June 17 )

Welcome to the 162th edition of the Singapore Property Weekly.

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

mailto:[email protected]

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SINGAPORE PROPERTY WEEKLY Issue 162

Page | 2Back to Contents

By Mr. Propwise

In a recent blog post, guest contributor

Property Soul shared her rules on buying a

property you can afford, what she called the

―3-3-5 rule‖. In a nutshell, the ―3-3-5 rule‖

states that:

1. You should have at least 30% of the

property’s price in initial capital to cover

the downpayment and other costs.

2. Your monthly mortgage payment should

not exceed one-third of your monthly

salary.

3. The purchase price of the property should

not exceed five times your annual income

Is Paying Just 5 Times Your Annual Income for a Property Realistic?

http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/





http://propertysoul.com/





Propwise.sg reader JC wrote in to comment

that Rule #3 was unrealistic and overly

conservative. Here’s what he had to say:

The five times of income to property price

ratio is quite ridiculous. I feel that this ratio is

only applicable during the "mata wear khaki

shorts" days. How can one ever find such a

low ratio of five times in today's context? No

way, even if the property market is to crash,

or rather correct. Nevertheless, I would

definitely wish such a ratio would still hold

today, and I would bet all my money into

property.

Example: a couple earns $15,000 per month,

which annually would be $180,000. At five

times, they can only afford a property that is

$900,000, which can only buy a 2-bedder

condo at an RCR or OCR location in

Singapore. If the couple has kids, then I think

it‟s pretty difficult to live in a smallish 2-bedder

of approximately 75 to 85 square meters with

a maid!

Rather, many couples CAN afford properties

at $1.2 to $1.5 million and above when their

income is approximately $10,000 per month,

which is a 10x rather than 5x ratio. With

savings of $400,000 to $500,000

(approximately 30% of $1.5mil), they can

easily afford the mortgage at $3,000 per

month (2% interest rate over 28 years). A

savings of $400,000 is not difficult to achieve

for a couple (both university grads) who have

worked for 10 years possibly with a little help

from their parents, say $50,000 to $80,000.

In a nutshell, the 3-3-5 rule is skewed towards

an unrealistic scenario which is unlikely to

happen in Singapore (for Rule #3).



We need to be realistic about the current

pricing, current market, and hopefully,

capitalize or gain from it through long term

investment or enjoyment of the property. If we

stick to this rule, we will NEVER buy a

property (condo, that is) in Singapore, unless

we earn $25,000 per month income combined

for a couple. (i.e. $12,500 each!)

I routed this question to Property Soul, who

had the following response:

This is what I called the “boiling frog”

phenomenon. When people are in a high-

price environment for too long, they will

gradually think that it is normal and

acceptable to pay high prices. Similarly, when

people are in a prolonged boom of the

property market, they will forget what a

„value-for-money‟ home is, or why it is

necessary to calculate the ROI of an

investment property.

When the market prices are climbing rapidly,

salespeople will tell their clients that it is

impossible to go back to the low prices in the

past. But history has proven that they are

wrong every single time.

It is when market prices have corrected

sharply that people begin to realize that

buyers have been overpaying for their

properties during the last peak of the property

market. These buyers pay the price of

holding their overpriced properties “for the

long-term” to break-even, while missing the

opportunities to buy when prices become

reasonable.

Developers can sell at future prices and

sellers can market at unreasonably high

prices. But as buyers, it doesn‟t mean that we

have to take whatever they offer in the

market. We all can exercise our individual

judgment to see whether the current



properties are overpriced before we buy

anything.

Of course, being ―kaypoh‖, I have some

thoughts as well on this discussion:

I view the ―3-3-5 rule‖ as a conservative

affordability test. When you are making

the biggest purchase in your life (of a

property), you typically want to err on the

side of being conservative. If your

purchase meets Property Soul’s ―3-3-5

rule‖ test, then you know that financially

you are not stretching yourself and can

sleep peacefully in your home. However,

that doesn’t mean that you MUST follow

the rule. For example, if you find a home

that you like and meets your

requirements, and it is six times your

income, I don’t think there’s anything

wrong with buying it as long as you have

prepared for unexpected contingencies

(e.g. have a cushion of savings).

Sure a couple earning $10,000 a month

can potentially buy a $1.5 million condo,

but it is very aggressive. An 80%

mortgage loan (i.e. $1.2 million) at a 2%

rate over 30 years will result in a monthly

mortgage payment of $4,435, or 44% of

their income. They might be able to tide

over if they do not spend too much in

other areas. But we should NOT assume

a 2% rate of interest – using a more

conservative 4% mortgage rate (a long

term average), their monthly mortgage

will balloon to $5,729 per month, which

could put significant stress on their

finances, especially if one party loses his

or her job. So yes, if you are aggressive

you can buy an expensive condo (as JC

has pointed out), but you may not survive

the tough times.



Yes, a couple with kids and a maid will

feel very cramped in a 900 square foot

condo apartment, but it is a choice. They

could have chosen to buy a resale HDB

flat, or can choose to ―suffer‖ in a

cramped apartment for a few years until

they can comfortably afford to upgrade.

In general we have very short memories.

It wasn’t too long ago (certainly not during

the ―mata wear khaki short‖ days) when

properties were more affordable. In fact, it

was in 2006 when I bought my first

private property and I paid less than 5x

combined income for it.

I don’t think that property prices will

necessarily go back to the previous lows

as Property Soul has mentioned. In fact,

looking at the URA Property Price Index

over a long period of time we see that the

general trend is an upward one, with

higher lows and higher highs. Property

prices go up over long periods of time due

to inflation and rising incomes. But the

market has cycles as well – that’s what I

look at to time my entry and exit into the

market.

Hope you found this discussion interesting! If

you have any opinions or stories you’d like to

share, do email me at [email protected].

http://www.propwise.sg/timing-your-investment-in-the-singapore-property-market/



















Singapore Property This Week


Residential

2 in 5 Sentosa condos resold at a loss

According to market watchers, cooling down

measures such as loan restrictions may have

driven buyers away from the luxury homes

market. Data from URA Realis that was

gathered by STProperty.sg showed that 31

condominium units at Sentosa have been

resold since May 2013, however, about two in

five units were resold at a loss. According to

HSR Research, between January and May

this year, the average resale price fell 25 per

cent to $1,800 per square foot as compared

to $2,400 per square foot over the same

period last year. Nonetheless, since only five

transactions were made this year, price

movements are expected to be more volatile.

Among others, four units at The Berth, three

units at The Oceanfront, two at the Coast and

one at Azure were resold at a loss. Nicholas

Mak from SLP International believes that

given the weak leasing market, owners may

choose to sell their property at a loss as they

are unable to rent their units out. Other

analysts believe that owners who have

bought their Sentosa units at marked up

prices earlier may be at the losing end now.

(Source: Business Times)



TDSR may push mortgagee sales to a new

high in Q2

The number of properties that are auctioned

by mortgagees in Q2 this year is the highest

since Q3 2009. According to Colliers

International, the number of properties that

have been put up for auction this quarter

almost doubled from 22 units in Q1 to 42 units

in Q2 this year. This is likely to be due to the

implementation of the total debt servicing ratio

(TDSR) framework. Auctioneers explain that

the TDSR framework has made it difficult for

financially tight borrowers to secure buyers for

their properties. As such, more of such homes

have been put up for auction by financial

institutions. As the supply of non-landed

private homes increases, mortgagors face an

even greater challenge in selling off their

property. This means that mortgagee sales

may increase even further. Besides that,

market analysts believe that the weak leasing

market may also contribute to the raise in

mortgagee sales, as owners may not be able

to find tenants.


30 out of 80 units released at Trilive condo

in Kondo have been sold

Roxy-Pacific Holdings’ Trilive condo project at

Kovan area was launched last Friday.

However, sales have been slow at its launch

said Teo Hong Lim, Roxy-Pacific’s executive

chairman. The 222-unit freehold project which

is located 650 meters away from Kovan MRT,

has released 80 of its units at a discounted

price of $1,550 per square foot for early birds.

Yet only 30 units have been sold so far.

According to Teo, private home sales have

been slow thus product differentiation may be

the key to closing a deal.



Unit sizes at the Trilive condo project begin

from 463 square feet for a one-bedroom unit

to 1,195 square feet for a four-bedroom unit.

Of the 222 units, around 80 per cent of the

units are dual key units. Prices start from

$730,000 for a single bedroom unit to

$870,000 for a two-bedroom unit. A two-

bedroom dual key unit will start from

$960,000, a three-bedroom dual key unit is

priced around $1.3 million, and a four-

bedroom unit will cost around $1.65 million.


Three new residential sites on GLS

confirmed list

Three 99-year leasehold residential sites are

up for tender under the confirmed list of H1

2014 Government Land Sales programme. Of

the three sites, two reside in Sengkang while

the other is an executive condominium (EC)

plot that is located at Choa Chu Kang. The

Sengkang land parcels are both at Fernvale

Road—the smaller land plot is around 16,604

square meters while the larger plot is around

17,414 square meters. The tenders for both

plots will close on August 7 and the two sites

are expected to yield a total of 1,100 units

when fully developed. Market analysts believe

that each of the Sengkang site will draw bids

from $420 to $480 per square foot per plot

ratio. On the other hand, the EC plot at Choa

Chu Kang which is expected to yield around

535 homes is expected to draw bids between

$310 and $350 per square foot per plot ratio

before its tender closes on September 4.




Commercial

More land plots at Gambas and Tuas for

sale

The fourth land parcel at Gambas Crescent

has been launched for sale, along with two

new sites at Tuas South. The Gambas

Crescent site which is 15,665 square meters

large and has a maximum gross plot ratio of

2.5, is zoned for light industrial use for

Business-1 development. The site has a 30-

year lease and is expected to draw bids

between $90 and $120 per square foot per

plot ratio (psf ppr). Nicholas Mak from SLP

International believes that Far East

Organisation, which owns three other sites in

the area, may aggressively bid for the fourth

Gambas Crescent site in order to secure a

stronger presence within the area. However,

Ong Kah Seng, R’ST Research director

believes that there is no major need for the

property giant to own the fourth parcel as

they already have a strong territorial

presence. On the other hand, the land parcel

at Tuas South Avenue 7, which also has a 30-

year lease, is 25,700 square meters. It has a

maximum gross plot ratio of 2.0 and is zoned

for heavier industrial use for Business-2

development. Analysts believe that site will

draw bids from $75 to $85 psf ppr. Lastly, the

site at Tuas South Avenue 14 has been

launched under the reserve list. It has a

maximum gross plot ratio of 2.0 too, and is

33,300 square meters large.


Property investment sales slow to a crawl

Investment sales in Singapore property has

slowed to $3.5-$3.6 billion this quarter.



Such sales cover big-ticket transactions that

are beyond $10 million. In H1 of 2013, the

total amount of investment sales was around

$12 billion. However, the year-to-date tally

this year is only around $8 billion. Both CBRE

and Savills predict that there will be a fall in

investment sales from last year’s $30 billion.

CBRE expects that there will be $12-$15

billion worth of transactions this year while

Savills predicts that there will be $16-$18

billion worth of transactions. This pullback in

investments is expected to be due to the

government’s cooling measures. According to

Desmond Sim from CBRE, the

implementation of the total debt servicing

ratio framework has affected buyers’ and

sellers’ interest. Not only so reduced land

supply in the Government Land Sales

programme may also result in a decrease in

investment sales. Furthermore, according to

CBRE, there is increased interest in overseas

property. Nonetheless, according to Savills

Singapore, investment sales in the office

sector have been optimistic as there are

about $680 million of office transactions

recorded this quarter.


http://propertymarketinsights.com/



Non-Landed Residential Resale Property Transactions for the Week of Jun 11 – Jun 17

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

1 THE SAIL @ MARINA BAY 614 1,380,000 2,249 99

2 ICON 915 1,530,000 1,672 99

3 THE ANCHORAGE 1,798 2,370,000 1,318 FH

4 THE BERTH BY THE COVE 1,668 2,700,000 1,618 99

4 REFLECTIONS AT KEPPEL BAY 915 1,480,000 1,618 99

4 TERESA VILLE 3,972 4,725,000 1,190 FH

5 BOTANNIA 1,249 1,618,888 1,297 956

8 CITY SQUARE RESIDENCES 570 935,000 1,639 FH

8 CITYLIGHTS 689 1,070,000 1,553 99

8 HERTFORD COLLECTION 1,345 2,050,000 1,524 FH

9 HILLTOPS 2,874 11,285,640 3,927 FH

9 THE ORCHARD RESIDENCES 2,852 10,552,400 3,699 99

9 HELIOS RESIDENCES 1,916 5,100,000 2,662 FH

9 CAIRNHILL CREST 818 1,588,000 1,941 FH

10 DUCHESS RESIDENCES 1,485 2,720,000 1,831 999

10 BELLERIVE 958 1,615,000 1,686 FH

10 THE MARBELLA 1,399 2,338,000 1,671 FH

10 SPANISH VILLAGE 1,173 1,780,000 1,517 FH

11 MULBERRY TREE 441 820,000 1,858 FH

11 MANDALE HEIGHTS 764 980,000 1,282 FH

14 LE CRESCENDO 915 1,085,000 1,186 FH

14 D'HERITAGE CASTLE 1,173 1,035,000 882 FH

14 TORIEVIEW MANSIONS 1,335 1,000,000 749 FH

15 THE AZZURO 646 870,000 1,347 FH

15 WATER PLACE 1,227 1,600,800 1,305 99

15 SANCTUARY GREEN 1,399 1,630,000 1,165 99

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

15 OCEAN PARK 2,110 2,320,000 1,100 FH

15 LAGUNA PARK 1,615 1,340,000 830 99

16 BAYSHORE PARK 1,292 1,360,000 1,053 99

16 PARBURY HILL CONDOMINIUM 2,185 2,300,000 1,053 FH

16 WATERFRONT WAVES 1,668 1,600,000 959 99

17 ESTELLA GARDENS 657 680,000 1,036 FH

18 RIS GRANDEUR 1,066 1,060,000 995 FH

18 LIVIA 1,539 1,430,000 929 99

18 TROPICAL SPRING 1,528 1,400,000 916 99

18 TROPICAL SPRING 1,378 1,240,000 900 99

18 CHANGI RISE CONDOMINIUM 1,023 890,000 870 99

19 THE QUARTZ 1,367 1,270,000 929 99

21 THE CASCADIA 1,141 1,700,000 1,490 FH

21 HIGHGATE 1,109 1,185,000 1,069 FH

22 PARC VISTA 1,249 1,088,000 871 99

22 LAKEHOLMZ 1,249 1,055,000 845 99

23 CASHEW HEIGHTS CONDOMINIUM 1,227 1,220,000 994 999

23 HILLVIEW REGENCY 969 940,000 970 99

23 THE MADEIRA 1,356 1,200,000 885 99

23 PARKVIEW APARTMENTS 980 845,000 863 99

23 MI CASA 1,119 940,000 840 99

23 NORTHVALE 1,518 1,268,000 835 99

23 REGENT HEIGHTS 1,163 920,000 791 99

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.

Documents

Singapore Property Weekly Issue 162