Singapore Property Weekly Issue 198

8/9/2019 Singapore Property Weekly Issue 198

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Issue 198Copyright © 2011-2014 www.Propwise.sg . All Rights Reserved.

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CONTENTS

p2 When Property Hotspots Become

Ghost Towns

p8 Singapore Property News This Week

p13 Resale Property Transactions

(February 18 – February 24 )

Welcome to the 198 th edition of theSingapore Property Weekly .

Hope you like it!

Mr. Propwise

FROM THE

EDITOR

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SINGAPORE PROPERTY WEEKLY Issue 198

Page | 2Back to Contents

By Property Soul (Guest Contributor)

The original meaning of ghost town refers to avillage or a city that had once been populatedbut is abandoned due to a bad economy, high

unemployment, or natural or human-causeddisasters. In recent years, the media havegiven ghost towns a new definition: a new citythat has been built and ready for occupationbut where no one moves in.

Beibu Gulf Economic Zone the nexthotspot?

The following story is from a newdocumentary about urbanization in China. Inthe northern part of Guangxi province, thereis a new economic zone known as Beibu Gulf ( ) which has three major cities:Fangchenggang ( ), Qinzhou ( ) andBeihai ( ).

When Property Hotspots Become Ghost Towns


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In 2013, Premier Li Keqiang inspected thezone and announced that it will be developedinto third-tier cities. This sparked the rapidbuilding of residential projects, industrialparks and commercial districts at rocketspeed.

The story of Fangchenggang

Fangchenggang was originally a negligibletown with a population of less than 500,000

and an annual growth of less than 5,000. Butafter the announcement of the developmentplan, it was looked upon as the next hotspot.More than 110,000 new residential units werebuilt in a short period of time.

An investor from Jilin bought ten units in oneproject there. He didn’t want to miss the lasttrain like he did after the development of thefirst and second-tier cities. Property prices inFangchenggang has since increased from

RMB200 psf to almost double in three years’time.

One by one the new projects have been

completed. But the place still looks empty. Atthe development the Jilin investor had boughtat, only one percent of the units have lightson at night. The new hotel is no better. Somerooms are rented out for commercial use.

Nonetheless, for projects under construction,

tour groups with investors from other provinces are still coming in droves to visit thesales galleries every day. Developers marketFangchenggang as the nearest city to the

ASEAN-China Free Trade Area. But in reality,there are mainly heavy industries in the city.

Situated along the coast, the main industriesare nuclear power, non-ferrous metal, andiron and steel industries. Because of theoverproduction of iron and steel in


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China, the production profit had dropped from1,000 dollars to 43 cents per ton.Consequently, a large empty factory site hasbeen left behind.

The story of Qinzhou

Part of the sea in Qinzhou has beenreclaimed for a big piece of land. There aretax incentives, an industrial park, the tallesthotel, a golf course, a hospital, and even a

university to attract non-locals from other provinces to work and live there.

In the last five years, the population hasincreased by less than 10,000. Butdevelopers have already sold over 90,000residential units. A foreigner who has beenworking in the city for three years mentionedthat he is usually the only one using the lift inthe entire block because there is no neighbor.He can’t even catch a taxi because taxi

drivers think there is no one living there.

The locals are mainly staying in the low-riseapartments in the old part of town. Most are

making less than RMB2,000 per month.There is no way that they can afford thosenew projects going for RMB300 psf. Theresidential blocks are growing higher, but thepeople’s earning power are not getting anyhigher.


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Since the opening of the country, localgovernments in different provinces arecompeting with each other for a higher GDP.They believe that GDP can be increased by

the building of new cities and residentialprojects. This results in a proliferation of both,but no one cares to do any town planning.There is a lack of industries to support thenew cities makes it difficult to attract residentsfrom nearby areas to move there.

The story of Beihai

Beihai has been transformed from a fishingvillage to a tourist spot. The property crazethere started since the early 1990s whendevelopers rushed to build new projects.

Many developers, buyers and speculatorsbelieved in the future of Beihai. Thepopulation of non-locals had grown to twotimes that of the locals. Property prices alsoshot up to RMB500 to 600 psf.

Then the Chinese government decided tointervene by imposing restrictions on bankfinancing. After the property bubble burst, oneby one the foreign companies left. With the

waning of the Beihai story, property pricesslumped 95 percent to RMB20 to 30 psf.Many projects were abandoned half-way.Some projects were even destroyed by beingblown up.

The same bungalow in default could be put incourt by the developer, the bank and theowner. The same property could be seized byorder by more than fifty courts at the sametime. Construction work could not take placebecause ownership rights were not granted.

Many bungalows have been left behind since1993 and 1994. Till today they are stilluncompleted with windows but no doors. Thelocals are now using the abandoned housesto rear chickens.


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The completed ones are being converted intomotels with a 30 to 40 percent occupancyrate.

Twenty years later, Beihai is now identified asa new city for development again. Developershave lined up to build new projects there.Prices have since risen to RMB400 to 500psf. However, transaction volumes have beenfalling since last year. It is expected that the

leftover units need at least five years to bedigested.

Ghost Town Top 50

In China, the media have devised an indicator known as Ghost Town Index which iscalculated based on area size and vacancyrate. There is also a chart with a list of top fiftyghost towns in the country.

Ordos in Inner Mongolia tops the list with aGhost Town Index of 0.07. A normal city

should have 10,000 residents living in everysquare kilometer. But in Ordos, there are only700 residents per square kilometer. The threemajor cities in Beibu Gulf are also in the list.

Qinzhou is currently number two with anindex of 0.26. Fangchenggang is 17th with anindex of 0.44. Beihai is not that far behindwith an index of 0.52 at position 39.

Deserted properties are plentiful in third and

fourth-tier cities in China. Perhaps one daydevelopers will package and market them toSingaporeans.

Lessons learned from China's ghosttowns

Whenever a government announces anyinfrastructure development – be it atransportation node, a new hub, an up-and-coming town, or the next big thing – andwhen developers all jump on the bandwagon

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to push new projects, ask yourself threequestions before you buy into that propertyhotspot:

1. What are the industries there and how canthey support the growth of the localeconomy?

2. How does the salary growth of the existingpopulation compare with the hike in propertyprices?

3. Where is the new population coming fromand how fast can it grow?

If you can’t find satisfactory answers to thesequestions, you may be buying into the nextghost town.

The lessons from China’s ghost towns arerelevant to those looking to invest closer tohome as well.

By guest contributor Property Soul, asuccessful property investor, blogger , and author of the No B.S. Guide to PropertyInvestment .

S GA O O 198

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Singapore Property This Week


Residential

Jan’s p r i ce i ndex fo r shoebox apar tmen ts

fal ls by 0.6% month-on-month

In January this year, the index for privateshoebox apartments that are less than 506 sqft have fallen by 0.6 percent month-on-month,

according to the Singapore Residential PriceIndex. This fall is smaller than the 1.9 percentdrop in the Central region. According to theBusiness Times, the overall price index inJanuary has fallen by 1.6 percent. Ong KahSeng from R’ST Research believes that theprices of completed non-landed privatehomes will fall by up to 7 percent this year.This is because of a surge in supply of residential homes. Not only so, Ong believes

that the market for shoebox apartments willbe affected by the weak leasing market. Ongsaid that owners who are cash tight maychoose to sell off their apartments at a lower price if they are unable to find tenants tolease the apartment.

(Source: Business Times)Redas : pr ice of luxu ry ho mes las t year has

fal len b y 20% sin ce 2013

According to the Real Estate Developers’ Association of Singapore (Redas), the price

of luxury homes last year was 20 percentlower than in 2013. The average price of newluxury apartments above $5 million in thecore central region has fallen by 17 percent

SINGAPORE PROPERTY WEEKLY I 198


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from $2,950 psf in 2013 to $2,450 psf in2014, said CBRE. Also, the resale market for luxury homes shrank by 6.2 percent to anaverage of $2,650 psf. Yet, Alice Tan from

Knight Frank predicts that there will be aslower fall in luxury home prices this year.Lee Nai Jia from DTZ added that wheninterest rates increases, there may be moremortgagee sales. The average price of goodclass bungalows that are about 15,000 sq ft is

around $22 million, according to DesmondSim from CBRE.

(Source: Business Times)

52% m o r e p r o p e rt ies u p f o r au c t io n t h is

year

In the first two months of this year, 114properties have been put up for auction. Thisis 52 percent more than the number of

properties that were up for auction during thesame period of time last year. According tothe Business Times, this increase was due toan increase in mortgagee sales. Data from

JLL showed that a total of $30.78 million wasreaped from eight auction transactions inJanuary and February this year. Out of theeight transactions, seven were propertiesfrom mortgagee sales. Mok Sze Sze from JLLbelieves that the number of mortgagee sales

will increase by at least 20 percent this year as credit is expected to be tightened. Not onlyso, the proportion of residential properties atsuch auctions has also increased in the last1.5 years. This was due to a reduction ininvestor interest in commercial and industrialproperties, said Grace Ng from ColliersInternational.


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Feb’s HDB resale pr ices fa l l by 0 .6% from

January

Data from SRX showed that HDB resaleprices have dropped by 0.6 percent inFebruary from the previous month. Not onlyso, it is 5.7 percent lower than in Februarylast year. Resale volumes in February alsofell by 8.5 percent to 1,148 flats from the1,255 that were transacted in the previousmonth. Nonetheless, the year-on-year resalevolume has increased by 20.7 percent thisFebruary. Resale prices fell 0.6 percent and0.7 percent in mature and non-matureestates. Market experts believe that HDBresale prices will continue to fall by a total of 5

to 8 percent at the end of 2015.(Source: Business Times)

A p ar tm e nt s at M ar in a B ay Res id en c es

sold for more than $3,000 psf

Three four-bedroom apartments at MarinaBay Residences have been sold for at least$3,000 psf. In particular, one of the units onthe 38 th floor sold for $3,450 psf while the unitdirectly above it sold for $3,150 psf. Marketexperts believe that the high prices are notindicative of the market and they believe thatthis is likely a one-off incident. Market expertsalso added that the large size and theBayfront view may have justified the higher price. The Marina Bay Residences has abalance lease of 89 years. It has 55 floors,418 apartments and 10 penthouses.

Previously, in 2006, developers had sold theapartments at the building at about $1,850psf, and penthouses were sold at about$3,000 psf.




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Commercial

SG’s o ff ic e r en ts i nc reas in g b u t s ti ll

among lowest in Asia-Pacific

Despite the rise in office rents in the centralbusiness district (CBD), Singapore is still oneof the countries that offer the mostcompetitive office rents in Asia-Pacific. Lastyear, the overall occupancy cost for offices inthe CBD area had increased by 9.8 percent

to US$93 psf, per year from 2013. Yet, datafrom Cushman & Wakefield showed that thecost of renting an office space is still 49percent lower than in Hong Kong, where thetotal occupancy cost is about US$184 psf per year in 2014. Cushman predicts that rents in

Singapore may stabilise in the coming year as the supply of office space increases.Nonetheless, office rents may still increase

by another 5 to 6 percent this year, saidCushman.


Indust r ia l bu i ld ing a t Bendemeer so ld fo r $88m

A seven-storey industrial building neatBendemeer MRT Station has been sold for $88 million or $500 psf. The site is about79,818 sqf and has a net lettable land of 175,000 sqf. It has a 2.5 plot ratio and has abalance lease of 50 years. Since the buildingis nearly fully let, the buyer will be able toenjoy an immediate rental income stream.Beyond that, market observers believe thatits prime location and its ample parkingfacilities are have increased the appeal of thebuilding. The building has been zoned for Business 1 use.



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This means that it can be used for clean andlight industrial and also warehouse uses.


Tw o f reeh o ld r et ai l p r o per ti es at P ay a Lebar and Al junied launched for s a le

A retail space at Paya Lebar MRT station andanother at Aljunied has been launched for sale by expression of interest. The former is abasement space at Grandlink Square which is

a commercial-and-residential developmentnear Paya Lebar Central. The space, whichhas a floor area of 26,533 sq ft, is expected tobe sold for $1,508 psf or $40 million. Theother retail space at Aljunied has a total areaof 8,805 sq ft. It comprises of eight adjoiningstrata shops and is expected to be completedby mid-2016. The space has been priced at$3,407 psf or $30 million.


http://www.moneymatters.sg/


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Documents

Singapore Property Weekly Issue 198