Tighter controls on "blank cheques" wef June 1st

From 1 June 2013, the practice of collecting "blank" cheques from property buyers will come with tighter safeguards.

The practice is often used to book private properties before they are launched.

Property agents will no longer be allowed to collect cheques unless there is a request in writing from the developer directly to the agent.

Any issued cheques must be crossed and made out in the name of a payee, like the developer or the project account. It should also come with an authorisation letter setting out clear terms to safeguard the buyer's interests.

Many industry players say the practice of collecting cheques, including "blank" ones, in the private property market have many grey areas and differing perceptions.

With tighter controls kicking in, many say it will reduce impulse buying.

Lim Yong Hock, senior vice president at PropNex Realty, said: "It will help consumers make more informed decisions, rather than writing cheques impulsively without knowing the price of the property. It's a positive change for buyers."

Steven Tan, managing director of property firm OrangeTee, said buyers who give blank cheques to agents often do not have full understanding of the development.

"It's often an impulse purchase," he said.

With the new guidelines, he believes developers will provide more information to buyers, like the concept, floor plans and even the price range, before buyers have to make any decision.

The tighter controls are part of a slew of new rules for the industry.

Issued by the Council for Estate Agencies (CEA) in a professional service manual, the guidelines also require property agents to be extra careful when working with vulnerable consumers, like those who are financially unstable or illiterate.

CEA said it is the first time property agents have a manual that guides them in detail from the start to finish of a transaction.

Chan Mun Kit, director of regulatory control at CEA, said: "Even for those already in the industry, it helps to highlight to them certain practices perhaps they can do more professionally, and certain things they should not be doing anymore."

If the guidelines are flouted, property agents can be fined up to $75,000, and have their licenses suspended or revoked.

Speaking at a consumer seminar on Saturday, Acting Minister for Manpower Tan Chuan-Jin said the real estate service is not just about closing the deal.

He said: "I think it's important for us, those of us who're in the real estate business, to think about not just closing the deal, but I think to remember that the people we're servicing and helping, are making a very big step. For many of them who are homeowners, it's not just buying a physical property; it's buying a place where they're trying to build a home.

"The onus is on those who are in the industry, who understand the landscape better, to advise individuals to understand what it means, to invest, how much loan to take and so on, rather than think about how much commission you might get with a bigger deal done. That's values in action. That's something we appeal to everyone who's involved in the industry to spare a thought, not only from a professional standpoint but from a values standpoint to think about their responsibility to the people around them."

The consumer seminar is part of an effort to educate the public on their responsibilities as well. Those in the industry say there is often a mismatch of expectations between the consumer and the property agent on what their respective duties are.

In tandem, authorities have also launched a brochure to help consumers out.

Lim Biow Chuan, president of Consumers Association of Singapore, said: "Reading this consumer guide gives you some background knowledge, some basic knowledge so that if you transact with someone else you don't go in blind."

With regulation only able to go so far, authorities are also urging consumers to do their part.

Source: Channel News Asia

The wife and I had participated in the "blank cheque" exercise before and from what we can recall, it was nothing overly scary. The cheque was not exactly "blank" as the marketing agents will insert the developer's name (in your presence) once you hand it to them. And if you decide not to proceed with the purchase during the stipulated period of time (which is usually over the next day or two), you can always ask for your cheque back.

Having said that, the last time we went "blank" was quite some years back so the practice may be substantially different these days.

While the wife and I are no proponents of tightening control measures ALL the time, this is one that we can certainly agree with.

Akan datang: Lower subsidies for ECs..?

National Development Minister Khaw Boon Wan has said the government loses "hundreds of millions" of dollars when constructing public flats.

He made the point on Thursday night at a dialogue session on housing issues.

This comes amid calls from some quarters for land costs to be taken out from the pricing of public flats to make them more affordable.

Mr Khaw also hinted at several other changes to come, such as subsidies for executive condominiums.

During the national conversation session on housing issues, many were concerned about the affordability of home prices.

Evalyn Khoo, a mother of two, said: “I'm concerned about the home asset value. I'm also concerned about how the younger generation can actually afford a house for themselves in the future."
Participant Philip Lee said: “I think in the past three years or so, there has been more anxiety in the market because even Singaporeans couldn't get properties through the Build-To-Order (scheme) and they have to resort to the resale market and I think if there is sufficient supply channeled to BTO, we may see more happy Singaporeans and possibly less demand in the resale market and hopefully the prices will be within range."

With regard to calls for price of new Build-To-Order (BTO) flats to be de-linked from land costs, Mr Khaw said it may be politically easy to say land is free because it belongs to everybody, but that is not the case.

He said the price of land is tied to acquisition costs, reclamation and the building of infrastructure around it.

Mr Khaw said: "You need to acquire a piece of land; you need to reclaim a piece of land. All those costs money to taxpayers and we are just trustees of taxpayers and those costs are to be accounted for. And even when you have got that land prepared, land is only valuable when we invest in infrastructure, roads, MRT... And all those costs billions of dollars. So to say that land cost is a pittance and therefore should be excluded from total construction costs… I myself think it is not quite an appropriate argument.”

He also revealed that the Housing and Development Board, which is the developer for public housing, is losing money for every flat it sells.

He said: “Every year, hundreds of millions of dollars of losses were incurred by the HDB and that's why MOF (Ministry of Finance) has to give the HDB an annual grant, otherwise the HDB will be in the red. It cannot be forever in the red, because there's no way it can make money. Because every unit that we sell, we lose money, HDB loses money. The accounting for the HDB is deficit accounting. So if you incur a $300-million loss, there is a grant of $300 million that covers it. That is how we operate the HDB.

“Let us not perpetuate this talk about HDB is making money out of building houses because if it was so simple, life would be straightforward, but that's not the case.”

The HDB pays market rate for its land and construction costs. When it prices flats below market rate, it incurs a housing deficit.

A recent report said the deficit is now in the region of about $1 billion a year, including other costs such as upgrading.

The National Development Ministry told Channel NewsAsia: "The cost of building HDB flats includes the cost of land, design, construction, financing and other project-related costs. It varies from project to project and year to year. Averaging over the past three years, the Home Ownership Programme costs HDB S$874 million per year."

Mr Khaw added that the government has to offer more subsidies with its ramped-up flat supply.

One area where subsidies are being reviewed is that for executive condominiums (ECs), which cater to Singaporeans who can afford more than an HDB flat, but find private property out of their reach.

The current household income ceiling for executive condominiums is $12,000.

Mr Khaw said: “There is this sense of inequity here that the lower-income group is getting lower subsidies than somebody who is earning $12,000, so something is wrong somewhere and therefore I think we cannot carry on the EC in this current mode."

Mr Khaw also said he is confident that he can bring down the price of new flats in non-mature estates to four times the annual median salary of a buyer - down 30% from the current 5.5 times. He is wary of some "transitional problems".

He said there needs to be "distinct differentiation" between the cheaper new flats and those built earlier.

Mr Khaw said both the MND and HDB will need to sort out this issue over the next few months.
He said: "I am fairly confident of being able to do it but some groups already anticipate transitional problems, which is what I got to sort out. If yesterday you bought (a flat) at five and half years' salary and tomorrow HDB announces a new pricing package, which is only (priced at) four years’ salary, you are going to cry 'blue murder' right?

“Therefore, I think we should not be prevented from offering a new pricing model but obviously there must be a distinct differentiation between the two products to explain why one is five and a half years and the one is four years."

The national conversation session is the second in a series of about 10 dialogue sessions on housing issues. Participants were first broken up in small groups of six and then came together in a larger group where the conversation continued. The aim is to gather feedback from Singaporeans to shape future housing policies.

The topic of affordability will be further discussed at a future Our Singapore Conversation discussion.
Details can be found on www.mnd.gov.sg/HomeSweetHome

Source: Channel News Asia

The wife and I were discussing the latest comment by our Minister Khaw about EC subsidies with a friend over dinner earlier: So will we now see more people at or around the $12K monthly income claiming to be "poor"..?

Enbloc news: Versailles

A 55-unit residential development at Guillemard Road has been put up for collective sale by tender.

Versailles has an indicative price tag of between $105 million and $110 million, which translates to some $1,088psf to $1,133psf.

The site has a land area of around 53,073sqft.

Exclusive agent for the deal Jones Lang LaSalle said the development has a potential gross floor area (GFA) of about 122,598sqft and could yield some 148 units of varying sizes.

The building is located near the Paya Lebar MRT station and the Dakota MRT station.

The global property consultant said the new project will attract owner-occupiers and investors due to the upcoming Paya Lebar Central, and the lack of supply of new residential projects in the vicinity.
It added that the site is near popular schools like Tanjong Katong Primary School and Chung Cheng High School.

National Director of Investments at Jones Lang LaSalle, Yong Choon Fah, said: "This is a rare freehold condominium redevelopment site that is located within walking distance to the up-and-coming Paya Lebar Central.

"According to the Urban Redevelopment Authority, 12 hectares of land around Sims Avenue have been set aside for this commercial hub at the city fringe. It will comprise a mix of offices, hotels, retail and public spaces, some with riverfront."
The tender will close at 2.30pm on 30 May 2013.

Source: Channel News Asia

Spottiswoode Residences: Thorn amongst the roses or other way around?

The wife and I were passing through Spottiswoode Park Road and took this photo of the "under construction" Spottiswoode Residences.

The 36-storey apartment block does look a tad outta place alongside the rows of pre-war terrace houses that lined Spottiswoode Park Road. Then again, one cannot stands in the way of progress, no?

ABSD Relief: A case of "Animal Farm" revisited?

This may be old news to some but the wife and I just realised that SINGLE person who buys a home to live in will be hit with the additional buyer's stamp duty (ABSD) if he does not dispose of his existing residence first.

That means a single person might have to find accommodation in between selling the old home and completing the purchase of the new one.

The clarification apparently came from the Ministry of Finance (MOF) on March 28th (not an excuse here but we were on vacation that week so that might explain the oversight), following uncertainty over whether stamp duty concessions for married people would also apply to singles ("No stamp duty relief for singles switching homes"; ST Forum, March 30)

Some married couples will get a refund of the ABSD if they dispose of their first property within six months of buying a resale home or the completion of an uncompleted one.

This relief is provided for joint purchases by married couples with at least one Singaporean spouse. Both parties must also not own any other property at the time of purchase to qualify.

But these do not extend to singles. This means singles will have to sell their existing home first before buying another - even if the new unit is meant for occupation and not investment. And if they do not comply with this rule, they will be hit with a hefty additional tax in the form of the ABSD.

The rule could mean much inconvenience, with single people having to find a rented place for the short term, bunk in with a family member temporarily or secure an extension of stay with the buyer between the transactions.

The new levy was part of the seventh and most extensive set of property cooling measures that were unveiled in January.

These slapped a 7% ABSD on Singaporeans buying their second home.

A spokesman from the MOF said that the Government raised the ABSD rates to moderate demand for properties and help cool the market. It limited ABSD concessions to a narrow group of buyers, namely Singaporean married couples, to help them acquire and upgrade their matrimonial homes. So if more groups, such as singles, were able to qualify for ABSD concessions, it would defeat the purpose of the cooling measures.

But some experts disagreed with the policy, noting that all Singaporeans should be treated equally, regardless of their marital status. They felt that singles should not be penalised as long as they will own just one house eventually. The ABSD relief offered to married couples should be extended to them as well, as long as they commit to selling their current home within six months of the purchase.

The Government's measure has prompted Ms Karen Yip to raise the question of whether there is a proven correlation between one's marital status and the runaway prices in the property market, or has the original cooling objective of the ABSD bifurcated into one that attempts to address demographic anomalies as well. She felt that such measure, as it stands, is not only unfair but also diminishes the value of Singapore citizenship for singles. After all, they also contribute to nation building and pay as much tax as married citizens, if not more. ("Stamp duty refund: Shed light on singles' exclusion"; ST Forum, April 19).

Maybe it's time for MOF to step onto the plate (again) and better explain the rationale for denying singles the ABSD remission?

Singapore Property Update (16-04-2013)

Not quite The Real Deals, but this is the latest update by Maybank Kim Eng on the Singapore property market. It provides a summary on the March new private home sales and tries to make sense of the figures.

Click on link below to access the report:
http://www.scribd.com/doc/136407008/Singapore-Property-16-04-2013#fullscreen

March private home sales quadrupled vis-a-vis February!

Sales of new private homes jumped by more than four times in March, compared to February.

Latest figures released by the Urban Redevelopment Authority (URA) showed that developers sold 2,793 new units (excluding executive condominiums) in March.

This is in sharp contrast to the 712 new private homes moved by private developers in February.

The government announced its latest round of cooling measures in January this year in a bid to cool the Singapore’s property market.

Meanwhile, URA data showed that 1,814 units of new private homes located in the suburbs were sold in March, while developers moved 822 units in the fringes.

But the number of new private homes sold in the city dipped slightly to 157 units.

Source: Channel News Asia

Bubble or not bubble: that is the question!

Below is an interesting article featured in today's copy of the TODAY newspaper. The writer has provided some detailed insight into the factors that's been driving our property market skywards for the past 7 or so years. But more significantly, he has raised warning bells about the party coming to an end with the bursting of the property "bubble".

Despite the wife and I making the same cautions over the past year or two, the property market has not only held its grounds but has seemingly grown from strength to strength. This has resulted in certain quarters calling us "party poopers" or "wet blankets". The same quarters have also maintained that it is impossible for property prices to spiral down to the levels seen in 2009.

While this is one aspect that we rather continue to be proven wrong, the toxic combination of high supply/low demand, rebounding interest rates and that one big external economic shock are not so far-fetched afterall.

So when (notice we said "when" and not "if") the bubble bursts, will the same quarters be running to the Government and crying for help like a helpless baby or will they simply acknowledge to being "avaricious or imprudent"? We think the answer is quite clear.

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From boom, to blowing bubbles
by Devadas Krisnadas 

Singapore’s property market has been framed as a success story. Prices have moved inexorably up since 2005 despite several rounds of cooling measures.

The intervention of cooling measures is indicative that the Government has concerns that the market may be overheating, but also reflects political considerations from Singaporeans who feel they are being priced out of the “Singapore Dream”.

Property forms the largest asset within each household balance sheet. Judging by news reports of packed showrooms, it would seem that most Singaporeans feel positive about the future of the property market. Is the optimism justified or are they headed for a fall?

WHAT DROVE THE BOOM
Following the 1997 Asian Dollar Crisis, the domestic property market went into decline and remained subdued by the effects of successive economic shocks until 2005. From that point, with the exception of a dip due to the 2009 global financial crisis, the property market as marked to price moved ever higher.

There are several drivers which explain this pick-up. First, there was under-supply in the public housing market after years of slow building due to cautious government policy, following the surplus scare in the wake of the 1997 Asian Dollar Crisis.

Second, there was pent up domestic demand, after almost a decade of neglect as an asset class due to a combination of market wariness and lagging supply.

Third, the population has grown at a fast clip through population augmentation. The majority of new citizens and permanent residents are adults with purchasing power. Population growth has also meant good rental demand which translates into mortgage cover for investors.

Fourth, segments of the Singapore property market have become internationalised. Local property is being marketed in far-flung destinations to attract High Net-worth Individuals (HNI) to invest here. While this is mostly concentrated on the high end it has a positive psychology effect on the entire market, creating a buzz which property developers and real estate agents can be expected to opportunistically exploit.

Fifth, there has been a sustained and significant fall in interest rates over the past decade, but especially since 2005. This has lowered the cost of debt and disincentivised savings. Singaporeans seeking yield have moved savings into equity and property.

Sixth, in property cycles, after a certain point in the upswing, the herd effect makes itself known. The longer the good run lasts, the more it is sustained just a bit longer by new market entrants who want to get in on the action.

Seventh, Singapore experienced a sharp but very short recession as a consequence of the global financial crisis. Our economic numbers have been positive, though just shaving past experiencing a technical recession each year. This positive momentum and a tight labour market have to date translated into an absence of natural economic checks on buying behaviour.

WHAT’S NEXT: HIGHER SUPPLY, LOWER DEMAND
Now let us look at the current and anticipated state of these demand drivers.

First, accelerated and intensified building by the Housing and Development Board (HDB) will remedy the demand and supply mismatch in the public housing market by 2016. The URA has released many land parcels over the past three years which will continue to translate into new housing units in the private market, especially in the mass market condominium segment. In all, nearly 200,000 new units are due to be completed by 2016.

Second, the pent-up demand from the first half of the last decade has been soaked up by now.

Third, notwithstanding the adoption of the White Paper on population, Prime Minister Lee Hsien Loong has pledged to moderate the rate of population growth and look at a total population ceiling of 6 million, rather than 6.9 million, by 2030.

This addition of less than a million means the annualised pace of growth would be less than half that we have experienced over the past five years. Hence, demand from population augmentation should be far less over time.

Further, the higher the price index goes, the higher rentals must be to provide mortgage cover for investors. At a certain point rental levels cannot be supported by wage levels, which will then catch out investors reliant on a certain level of rent to meet their payments.

Fourth, expect the high-end segment of the market to continue attracting foreign investment.
However the buyer in the mass market – public resale or private – should screen out high end price behaviour when determining what is fair value. This is because the foreign (or local) HNI is not influenced by domestic factors nor by the same practical considerations, such as the need for income security or rental cover, as faces the layman investor or buyer.

INTEREST RATES: ONLY WAY IS UP
Fifth, interest rates cannot be expected to say so low for ever. As the macro economy slowly recovers, we should expect that quantitative easing by major economies will wind down and that eventually, interest rates will creep back up.

There is something pernicious about a low interest rate environment which is worth noting. A 100 basis (1 percentage point) move upwards when the initial interest is 5 per cent – the rate circa 2000 – would represent a 20 per cent higher weight of capital, which is a hit most will likely be able to afford.

However a similar-sized move when the initial interest rate is 2 per cent – the rate circa 2012 – would represent a 50 per cent higher weight of capital. Hence those who have borrowed to the limit of their debt serviceability would be extremely vulnerable to future rate shifts, which can only be upwards given how low they have been in recent years.

Sixth, so the only strong driver we can count on for the foreseeable future is the herd effect. The problem with the herd effect is that it does not reflect real fundamental demand, since a significant proportion would be speculative. It also may not reflect real effective demand, given that some caught in the herd effect may be over-exposing themselves.

Seventh, while we have done comparatively well economically over the past four years we should not expect unrealistically for this to continue without some eventual interruption. Singapore’s economic health is contingent on what happens in the larger global economy. Shocks should be expected – the only questions are when, with how much warning and how seriously.

RISKS AND EXPOSURE
Contrary to the rosy inference that higher property prices suggest a healthy economy, I would argue that we are now facing systemic risks in the medium and long-term, as well as at the household and financial system levels.

A large number of Singaporeans have exposure to the property market which may make them financially vulnerable when there is another economic shock. Most households have been able to weather previous crises due to a strong cash reserve in the form of savings. However, the larger down payment and stamp duty requirements introduced in successive cooling measures imply an erosion of that cash reserve. This increases the depth of their vulnerability.

At the financial system level, our local banks have a significant loan book exposure to the property sector of 30 per cent. While this still meets the conditions of Section 35 of the Banking Act, it represents a non-trivial risk factor. There is a systemic risk to the financial system if we experience a significant economic shock that inverts the property market, as happened in 1997-98.

Finally, for Singaporean households to lock up so much liquidity in the illiquid property market represents two distinct risks. The first, that in future years there may be unintentionally coordinated disinvestment through sales, as retirement or other life adjustment effects make themselves felt. This would create supply-and-demand distortions which can be difficult to contain.

Second, taking on large debt in the property sector reduces the incentive to take risks in other areas – this can have a suppressant effect on the entrepreneurial impulse of young people by limiting them to ‘safe’ salaried employment.

A MORAL HAZARD
In the event that we have an inversion of the property market – due to economic shock or supply overrun/ demand undershoot – we would do well to avoid a moral hazard situation where the Government comes to the rescue of households or the financial system.

It is important that the lessons of risk management be learnt, and that those who were avaricious or imprudent do not get to have their cake and eat it too with the aid of tax dollars. But if an inversion occurs in the period approaching 2016, it is not unnatural to expect considerable political temptation for the Government to intervene.

The nature of “bubble calling” is that bubbles are easy enough to see in hindsight, but just about everyone will find them invisible to fathom with foresight – either out of self-interest or because of the ‘’noisiness’ of all the varied indicators. However, the systemic risks are such that if “this time is different”, as people like to assume, it is only so in the most negative of ways.
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The Mews - E&O's upcoming development within KLCC!

The wife and I were invited to an informal session by E&O Property Division last week. Other than providing information about private property investment opportunities around the Kuala Lumpur City Centre (KLCC) vicinity, the good folks at E&O also showcased their upcoming development - The Mews Serviced Residences.

The Mews is located in one of the lanes off Jalan Yap Kwan Seng. The wife and I must admit that we do not know the area personally, but this is supposedly a stretch of road that is less than 1-km long, and lined with old bungalows that have been converted into commercial establishments (e.g. F&B outlets, lifestyle businesses and even car park lots).

The development is also just across from The Australian Embassy and a short 10-minutes walk to KLCC.

For the uninitiated (such as ourselves), "Mews" is a British term commonly associated with a row of stables that have been converted into houses or a country lane.

The Mews is a RM400 million freehold project comprising two 38-storey blocks of 256 units of serviced residences. The apartments on offer range from one to three-bedroom and penthouse units, with built-up areas ranging from 922sqft (one-bedders) to 2,623sqft (penthouses). Given the notoriety of shoeboxes and micro/compact units in Singapore these days, 922sqft for a one-bedroom unit is really quite a refreshing change. About 75% of units will be one- and two-bedroom units and the development is expected to be completed in 2017.

E&O pride themselves as a niche lifestyle developer, and have teamed up with Mitsui Fudosan Residential Co Ltd, a unit of Mitsui Fudosan Co Ltd, to develop the 1.3 acres where The Mews will reside. Mitsui Fudosan is one of Japan's largest property developer. The partnership started a few years ago to market E&O's developments. As a result of that relationship, Japanese buyers form the second largest segment of E&O's foreign buyers today.

The wife and I understand that The Mews is marketed somewhat differently from the other new developments around the KLCC vicinity - it is targeted primarily at women buyers. Other than the marketing materials, which has a distinctive feminine touch, The Mews also come with the following "women friendly" features:

 

• The development will have CCTV surveillance around its parameters and concierge services
• Wider than normal parking spaces in the multi-storey car park - we were told that this is not a dig at parking skills of women, but because female these days are driving bigger cars (right...)
• The apartment units are column-free and will be fully fitted and equipped with appliances
• The apartments will come with generous walk-in wardrobes and full-length shoe cabinets
• Shuttle bus services will be available to places around KLCC (better for shopping, dining out etc)

The wife and I generally liked what we have learned about The Mews. But since we do not know Jalan Yap Kwan Seng at all, we cannot comment on the location (except for the fact that there seemed to be a lot of old, low-rise buildings around the area, which we were told will be preserved). The only "negative" thing, if we can call it that, about the development is the orientation - the two towers are shaped like a "V" and units on one side of each tower are direct west facing. So unless you are a real fan of saunas, residents in these west-facing apartments will be feeling the heat for quite a bit during the day.

So why should you consider The Mews, other than the supposed good location and more than decent-sized apartments? Besides the excellent quality and maintenance program normally associated with E&O projects, the developer will absorb all interest payments during the 4-year construction period of The Mews. Buyers can also take advantage of the E&O rental program, whereby the developer will help "match make" owners with intention to rent out their apartments with prospective tenants.

The expected launch price for The Mews is around RM1,500psf. However, "early-bird" buyers can expect some very attractive discounts, And compared to other upcoming developments nearby, such as W Residences and Four Season's Place, which will likely be launched at RM2,000psf or above, the pricing of The Mews does sound like a fairly reasonable deal. Having said that, we believe that the other two developments have better locations and come with international brand names, so we may not be comparing "apple to apple"  here.

Rental wise, the wife and I were told that investors can expect about 6% of gross rental return for The Mews. The monthly maintenance is fixed at 55 cents psf.

E&O has already launched The Mews in Hong Kong last month. The Singapore preview (for units in Block A) was scheduled to be held on April 10 for existing clients and business associates of E&O. This will be followed by a soft launch in June/July, while the sales gallery in K.L. is scheduled to open its doors during the September/October period.

For those who are interested, we understand that the current booking fee is S$4,000 with the balance of the 10% down-payment payable upon signing of the SPA. So drop us a note if you wish to be put through to the marketing people at E&O (no, we are not on commissions).

 

Click on link below to view the marketing brochures and floor plans of The Mews:
http://www.scribd.com/doc/135812309/The-Mews-Brochure#fullscreen

 

Case of the 缩水 (shrinking) condo

Developers are downsizing their apartments in order to keep prices within the reach of buyers.

 

After the widespread proliferation of shoebox apartments, some as tiny as 258sqft - equivalent of just 2.5 carpark spaces - the shrinking of two- and three-bedroom apartments are gaining prominence too.

A three-bedder at 193-unit Natura at Hillview Terrace, for instance, measures just 635sqft. The home - smaller than a squash court and slightly bigger that five HDB carpark spaces - caused an uproar when it was launched last year.

The 32-unit Treescape in Telok Kuarau also has micro three-bedders starting from 603sqft.

Go back a few years and a three-bedroom unit would more likely be 1,500sqft in size, while most are now around 1,000sqft to 1,200sqft.

But sizes are changing fast as developers grapple with the opposing pulls of higher land costs and demand for affordable homes to fit buyers' tight budgets. The easiest solution is to build more compact homes, it seems.

A Knight Frank analysis of 40 private suburban condominium projects with at least 200 units launched since 2008 found average sizes shrinking by as much as 34% for certain types of apartments.

For example, one-bedroom units in developments launched in 2008 averaged 678 to 947sqft, or 21 to 28% bigger on average than the 538 to 678sqft units launched in 2010.

The squeeze intensified only in the past year with recently launched one-bedders averaging just 492 to 624sqft, about 27 to 34% smaller than in 2008.

Two-bedroom units launched in 2008 averaged 851 to 1,208sqft but those hitting the market in the past year measure 734 to 1,069sqft.

Similarly, average sizes of three-bedroom units are down by about 20% - from 1,208 to 1,620sqft in 2008 to 963 to 1,338sqft in the 2012 - 2013 period, Knight Frank noted.

Those flats look large compared with the offerings at Urban Vista, next to Tanah Merah MRT station. The launch last month featured two-bedroom units of 549sqft and three-bedders of 850sqft.

Developers are downsizing amid price pressure from buyers.

Experts say overall prices of up to $1.5 million are the most popular among first-time buyers and second-time investors in the light of property cooling measures that have tightened loan limits. While the Government has clamped down on developers building shoebox units, the more worrying trend could be the size crunch in the two- and three-bedroom apartment types instead.

"It's actually reasonable for one person to live in a shoebox unit. There should be more concern over three-bedroom units shrinking to as small as 600 to 700sqft instead," said an industry player.

Mr Teo Hong Lim, executive chairman of Roxy-Pacific, pointed out that homes in the past were probably larger as they included bay windows, planter boxes and household shelters in the total strata area, yet the actual livable area could have been less.

"Our homes are modular and flexible. The household shelter is now centralized at the fire escape staircase, so there is a more efficient use of space in the apartments," he added.

"Buyers are not shortchanged with compact units. they are given better value instead, with the option of having a three-bedroom unit or two-bedroom unit instead if they opt to remove the partition wall between the rooms."

Source: Our de facto English newspaper

Maybe homeowners should just remove all the partition walls between the rooms and convert their micro 2- or 3-bedders into a huge studio apartment instead? Having said that, if the wife and I really want a 2-bedroom apartment, we will be out there looking for a 2-bedder unit that's of adequate size for our needs, rather than having to pay for a 3-bedder and then sacrificing a room for more space. However, we belong to the old school and are probably too pampered by our 1600+sqft 3-bedroom apartment with no bay windows, planter boxes and household shelter.

And to Mr Teo, who claimed that buyers of compact units are given better value instead of being shortchanged, we have this to say: Are you serious..?

 

 

 

Resale prices in March fell 2%

Prices in the resale private property market fell just two per cent in March compared to February, according to data from major property agencies compiled by the Singapore Real Estate Exchange (SRX).
But resale volumes in March jumped 87% from February.
The drop in resale private home prices was led by those in the suburbs, where resale prices fetched $1,071psf, 3% lower than in February. Non-landed private homes in the city area were resold at an average of $1,788psf or two per cent lower than the previous month. Prices of those in the city fringes remained unchanged at $1,301psf.

Analysts Channel NewsAsia spoke to said the marginal movements in property prices are the intentions of the latest cooling measures, where the additional buyers' stamp duty was raised by between five and seven percentage points across the board from January 12.
  
ERA's key executive officer, Eugene Lim, said: "What is holding back buying decision is perhaps a mismatch of expectations, especially in the resale market. There is not much compelling reason for sellers to drop prices. Why? Because we are still having economic growth, full employment; holding cost is cheap. But on the other hand we have buyers who are expecting a big cut in prices because of the cooling measures. It is a normal market response."

In March, 609 resale private home transactions were recorded - some 87% higher than in February. This was due to fewer resale transactions in February over the Lunar New Year holidays.
But the number of resale transactions in March is just half that of the same period last year. OrangeTee's CEO, Steven Tan, said: "If this trend continues and coupled with the large supply of completed projects in the next few months, the resale prices will face more pressure. The performance of the resale market will depend on the primary market in the next few months. If prices continue to go up, it will make some buyers change their minds to switch over to resale market."
On a quarterly basis, 1,982 resale units were transacted in the first quarter of 2013, compared to the 2,074 units moved in the first quarter of last year. But volumes in the first quarter were down 39% from the fourth quarter last year.

Meanwhile, overall rental prices for non-landed private homes in March remained largely unchanged from February.

Experts say they will be keeping a close watch on the market in the second quarter, when sales are typically more brisk as launches pick up.

Over in the market for new private home launches, incentives offered by developers to offset the impact of the cooling measures appeared to have met with some success.
DWG estimates that developers moved some 5,000 homes in the first quarter of this year. That's some 12.5% more new homes compared with the fourth quarter of 2012.

Source: Channel News Asia

And speaking of rental, the wife and I have heard from various sources (both investors and agents) that the market is definitely softening. Apartments in the city area that were commanding $15k a month in rental just last year are now asking for between $10 - 12k, while those in D21 are now asking for $4 - 4.5k, down from the previous $5k. With the slew of new developments coming on stream this and next year and the tightening of foreign labor coming into Singapore, we foresee continual black clouds hovering over the rental market.

 

Singapore: Most expensive place in the world to install air-con..?

Mr Philip Toh has written in to the Forum page of our de facto English newspaper about the disproportionately large cost that one has to pay for air-con ledges in new developments these days. Below is what he said:

$200,000 for air-con space?
The Government has introduced several rounds of measures to rein in the continued rise in property prices. There is some effect, yet property prices are holding their own.

Recently, I visited a couple of property launches.

The showflats attracted quite a crowd and the boards indicated that many units were sold - clear evidence that there was no shortage of buyers.

I was told that, at the offer price of about $1,300 psf before any stamp duty, the apartments should be a worthwhile investment for my own stay or rental income.

When looking at the price list, I noticed that there was a sizeable area set aside for holding the air-conditioning equipment.

A unit with a total saleable area of 61 sq m had 14 sq m provided for air-con space.

A quick back of the envelope calculation suggested that the buyer will be paying about $200,000 for the space to house the air-con.

Considering that a multi-split air-con system costs about $3,000, I find this situation incomprehensible.

To be sure that I was not mistaken, I sought confirmation from the agent, who assured me that the 14 sq m of "air-con" area is indeed chargeable, and that the cost is to be borne by the buyer.

This must make Singapore one of the most expensive places in the world to install an air-con system.

To have living space costing in excess of $1,000 psf for suburban localities already makes Singapore property prices one of the highest in the world.

To have air-con space costing $200,000 should be a wake-up call for Singapore to seriously re-examine its land valuation model.
 
The wife and I are not at all surprised by the above "complaint". But we are surprised by the fact that it took so long for someone to highlight the issue in the Forum page.

Those of you who have followed our new project reviews (we haven't done any in recent times, we know) would have read about our concerns with the huge air-con ledges found in most of these developments.

And as long as developers continue to get such space free of charge from the Government, they will persist in building disproportionately large air-con ledges as these are literally "free money".

The wife and I feel that one (effective) solution to the problem is for our Government to make air-con ledges part of the Gross Floor Area (GFA). The URA has already revised its guidelines for Private Enclosed Spaces (PES), Balconies and Roof Terraces back in January 2013 to make all these part of the GFA. So we do not see why air-con ledges cannot/should not be included as well...

Our first "event appearance": Informal session with E&O Property Development

The wife and I were invited by E&O Property Development (property division of the E&O Group) to attend a talk last week on property investment opportunities within the Kuala Lumpur (K.L.) City Centre.

The talk was held at the E&O Singapore Property Gallery down at Beach Road, located next to Raffles Hotel.

It was an intimate gathering of eight bloggers (ranging from property to lifestyle) and several staff from both the E&O Singapore and Malaysia offices. Given our long standing desire to remain anonymous, this is the first time we have decided to "show face" at an invited event.

The wife and I do know of the Eastern & Oriental (E&O) Group, but primarily as a hospitality and lifestyle company. They have a substantial presence in Penang, whereby their historic Eastern & Oriental Hotel located in Georgetown is the iconic equivalent of our Raffles Hotel. But we are rather surprised to learn that E&O is actually headquartered in K.L. (instead of Penang) and is a major private property developer in both Penang (where they are the largest land banker) and K.L. as well.

Some of the recent private residential developments by E&O include

• Andaman Quayside Condo in Penang
• Seafront Resort Condominiums at Quayside in Penang
• St. Mary Residences in K.L. City Centre
• The upcoming project, The Mews, also in K.L. City Centre

St. Mary Residences, a luxury private residential development located just off Jalan Sultan Ismail within the heart of K.L. City, has just received its occupation permit and is currently 98% sold. This is one development that the wife and I had considered buying into during its launch in 2009. The launch price back then was around RM900psf - the current asking price has increased to upwards of RM1,500psf! *shucks* Current rental at St. Mary can supposedly fetch around RM7psf per month, which translates to a yield of 5.6% even for units bought at the current (RM1,500psf) price.

We were given a short presentation on K.L. City's rejuvenation efforts and upcoming developments. Below are our takeaways:

• K.L. is in the process of urban renewal as part of the Greater Kuala Lumpur rejuvenation initiative, as it seeks to be listed as one of the top 20 most livable cities of the world. (http://etp.pemandu.gov.my/upload/etp_handbook_chapter_5_greater_klkv_20120625.pdf)
• The city was declared as the second-best shopping destination in Asia Pacific by the Globe Shopper Index in October 2012. (http://thestar.com.my/news/story.asp?file=/2012/10/28/nation/12237412&sec=nation)
• Upcoming developments such as the Kuala Lumpur International Financial District (KLIFD) and Bandar Malaysia is expected to attract more foreign direct investments and influx of expatriates coming to work in the city.
•  Malaysia was ranked by World Bank in 2012 as the 12th most competitive economy in the world for doing business. It also ranked the country 4th in the world in the category of "protecting investors" and #1 POSITION in the category of "ease of getting credit".   
• According to the Global Property Guide 2012, the average gross rental yield for residential properties in Malaysia is 6.21% (as compared to 2.95% for Singapore). This places it fourth highest in the Asia Pacific region.
• Property prices in Malaysia have grown 20% over the past 5 years. Only China, Hong Kong and India within the region have seen higher growth rates.
• Capital gain tax is applicable for private home resale in Malaysia. The rate is 15% for resale of homes with less than 2 years of ownership, 10% for ownership of between 2 to 5 years and zero tax for those who have owned their properties for 5 years or more. However, do note that "ownership" starts once the Sales &Purchase Agreement (SPA) is signed. Given that typical project construction period takes about 4 years, one will only have to hold his property for about 1 year before he can resell without incurring any tax.
• The proposed 300km high-speed rail link between Singapore and K.L., which is targeted to commence operation by 2020 and will cut the journey time to 90 minutes, could allow expats to live and work in either city. The rail link is touted as a "game changer"  and will likely result in further appreciation of private residential home prices in K.L.
• The E&O Group have been a major developer of private residential projects in K.L. over the past years. Their signature projects include the high-end Dua Residency Condominium in the K.L. City Centre and Idamansara and Seventy Damansara exclusive landed homes in upscale Damansara Heights.
• E&O's latest completed development is St. Mary Residences, located in the heart of K.L.'s Central Business District (CBD) area. The development is styled after Manhattan's iconic loft apartments and represents the latest in urbane and elegant city living.
• Other than quality workmanship and furnishing that are supposedly synonymous with E&O's developments, buyers can also expect the following additional "inducements" when purchasing a E&O home:
• Interest absorption during the period of construction  - E&O will foot the interest payment on your home loan during the construction period, which typically last about 4 years.
• Legal fee absorption - E&O will take care of your  conveyance fee.
• Rental Assistance Program - This is an unique service whereby E&O will connect homeowners looking to rent their units to property agents and their potential tenants. The service is totally free of charge and will be undertaken for a period of one year from the date upon handing over of your apartment keys. This service is especially helpful to foreign investors, who may not have the necessary knowledge and resources to look for tenants by themselves.
• E&O will be launching their upcoming residential project, The Mews, in June of this year. This is a 256-unit  freehold condominium project with two 38-storey towers. It is sited on Jalan Yap Kwan Seng in the K.L. City Centre, and within 10 minutes' walk to Kuala Lumpur Convention Centre (KLCC) - the wife and I will provide more details on The Mews in our next post.

During the Q&A session, the wife and I raised the question about security in K.L. (amidst reports of kidnapping and robbery)  and whether this has been a concern amongst potential home buyers especially foreign investors. The response from the E&O representatives seemed to suggest that K.L. is as safe as any other major cities around the world so one need not be overly concerned about the security aspects. However, this run contrary to what we have read in our local newspapers (which are not supposed to be biased, right?).

Overall speaking, the wife and I found the talk very informative. We must admit that we were rather ignorant about property investments across the Causeway, so the E&O session has provided us with some really useful insights. With the existing property cooling measures in Singapore and the recent announcement of the high-speed rail link, the concept of buying a home in Kuala Lumpur, be it for investment or as a holiday home, may seem even more attainable to Singaporeans. And one must not forget about the attractive exchange rate as well!

Finally, the wife and I will like to express our appreciation to the good folks at E&O Property Development (Fionna, Aileen & Jasmina) and Dubar-Jones & Associates (Janice & Atiqah) for the kind invite (and the sumptuous lunch, of course). Thank you!

And more about The Mews in our next post!

Thinking about buying into a mixed-use property? More launches soon!

It was reported in our de facto English newspaper today that several upcoming property launches will feature mixed developments rather than being purely residential - a sign of changing lifestyles.

Younger people now want homes near shops, and developers are responding, say real estate agents.

This could mark a shift from the first three months of the year, when purely residential projects drew a strong response when they were launched.

Analysts say nearly 2,000 private homes could have been sold last month alone, with healthy sales chalked up at projects in suburban areas such as D'Nest in Pasir Ris.

In recent weeks, agents have been busy garnering interest for the next round of projects.

One upcoming mix-use project, The Midtown and Midtown Residences in Hougang, is expected to launch tomorrow.

Sitting on a 57,000sqft site where Hougang Plaza used to be, the 99-year leasehold development has 160 residential units and 107 commercial units.

The commercial units include duplex restaurants, shops and a supermarket. It is expected to be completed by 2017.

Another mixed-use project expected to launch in the middle of this month is NeWest on West Coast Drive, where Hong Leong Garden Shopping Centre used to be.

The 12-storey residential and commercial development is on a 999-year lease. An Oxley Holding-led consortium bought the site for $171.1 million in September 2011.

Freehold mixed development Novena Regency, on the old Novena Ville site, is also expected to launch before the end of June. The project has 55 residential units and 45 commercial units.

Being in the Novena area, which is fast becoming a medical hub, Novena Regency prices are expected to be in the $2,000psf range.

According to the chief executive of PropNex, there is a greater demand for mixed-use developments among younger home buyers seeking the convenience of nearby shops. Such developments have become more popular compared with 20 years ago, when they were considered less exclusive and more congested.

Another mixed-use site on Yishun Ave 9 could be launched within the next few months as well.

The hotly contested 99-year leasehold site attracted 13 bids from developers before its tender closed in January. It was won by Chip Eng Seng's CEL Property with a top bid of $212.1 million.

These mix-development launches come on the heels of the successful launch of The Hillier, a 528-unit small office, home office development on Hillview Avenue, which comes with a two-storey mall called HillV2.

It launched in January last year, and all the residential units were sold by the end of January this year.

Our "2 Cents":   For those who are thinking about buying into a mix-use project and expecting the convenience of shops and amenities within the development, you may want to review the project carefully before splashing out the cash. While developments such as The Hillier may turn out to be a winner, other mix-use projects in suburban areas with strata-titled shops may end up very wrong. Just ask the folks who are living at Thomson V, for example.

http://news.asiaone.com/News/AsiaOne%2BNews/Business/Story/A1Story20130404-413491.html