Feng shui Boosting property sales amid challenging times PG4 SMALL UNITS, big challenges Mass-market shoebox rents dip 3.

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1 THE WEEK OF OCTOBER 19, A PULLOUT WITH MCI (P) 046/03/2015 PPS 1519/09/2012 (022805) Visit TheEdgeProperty.com to find properties, research market trends and read the latest news MAKE BETTER DECISIONS Risk and opportunity Outlook for the prime residential market PG2 Feng shui Boosting property sales amid challenging times PG4 Deal watch Ardmore II unit sold below $2,500 psf PG8 SMALL UNITS, big challenges Mass-market shoebox rents dip 3.5% in 3Q2015 BY LIN ZHIQIN Preliminary estimates indicate that rents for shoebox units dipped 1.9% quarter-on-quarter in 3Q2015. Mass- market shoebox units led the decline as monthly rents fell 3.5% or $73 from $2,089 in 2Q2015, to $2,016 in 3Q2015. On a brighter note, shoebox rents in the city fringe stayed unchanged from the last quarter at $2,380 per month. In the high-end segment, monthly shoebox rents fell 2.1% or $59 from $2,815 in 2Q2015, to $2,756 in 3Q2015 (see Table 1). Shoebox units in the mass market continue to face strong competition from HDB flats for tenants. For the same rents, tenants could get a three-room HDB unit with two bedrooms and share their rental expenses with a flatmate. Based on HDB subletting contracts, the island-wide monthly rents for HDB flats averaged $1,958 for three-room units and $2,297 for fourroom ones in 3Q2015. On the other hand, shoebox units in the high-end and cityfringe segments are more attractive, particularly to tenants who work in the CBD as they can save on commuting costs and time. At the same time, they offer value alternatives to bigger units. Table 1 Mass-market shoebox units lead rental decline MONTHLY RENT ($ PSF) DECLINE SEGMENT 3Q2013 2Q2015 3Q2015 3Q2013 TO 2Q2015 TO URA RENTAL INDEX 2Q2015 (%) 3Q2015 (%) (LAST PEAK TO 2Q2015) (%) High end 3,445 2,815 2, City fringe 2,767 2,387 2, Mass market 2,552 2,089 2, The analysis was based on a basket of properties tracked by The Edge Property. The figures differ slightly from those in our previous article owing to changes in the basket. Shoebox units are defined as private non-landed homes that are up to 550 sq ft in size in this article. High-end segment refers to the Core Central Region (CCR), while the city fringe and mass market refer to the Rest of Central Region (RCR) and Outside Central Region (OCR), respectively. Between 3Q2013 s peak and today, shoebox rents have fallen around 18% or $500 from $2,905 to $2,371 per month. Segment- wise, monthly rents for shoebox units have fallen 20% in the high-end submarket, 14% in the city fringe and 22% in the mass market. In comparison, rents for non-shoebox units have been more resilient. The URA rental index for private non-landed homes fell 7.2% in the high-end segment, 3.1% in the city fringe and 6.7% in the mass market between the last peak and 2Q2015. The soft rental market continues to dent the profitability of shoebox transactions. Based on URA caveat data, 8% of CONTINUES ON PAGE EP4

2 EP2 THEEDGE SINGAPORE OCTOBER 19, 2015 THEEDGE PROPERTY PROPERTY TAKE If you wish to contribute columns, please write in to EDITORIAL EDITOR Ben Paul CITY & COUNTRY SECTION EDITOR Cecilia Chow DEPUTY SECTION EDITOR Michael Lim THE EDGE PROPERTY HEAD OF RESEARCH Feily Sofi an ANALYSTS Esther Hoon, Lin Zhiqin, Tan Chee Yuen Are there prospects for the prime residential market? COPY-EDITING DESK Elaine Lim, Evelyn Tung, Chew Ru Ju, Tan Gim Ean, Choy Wai Fong PHOTO EDITOR Samuel Isaac Chua PHOTOJOURNALIST Bryan Tay EDITORIAL COORDINATOR Rahayu Mohamad DESIGN DESK Tan Siew Ching, Christine Ong, Monica Lim, Nik Edra, Mohd Yusry, Henry Lee ADVERTISING + MARKETING HEAD Edward Stanislaus GROUP SALES MANAGER Cecilia Kay SENIOR MANAGER Windy Tan MANAGERS Mabel Wong, Danna Pusta, Elaine Tan THE EDGE PROPERTY GROUP SALES MANAGER Cowie Tan SENIOR MANAGERS Diana Lim, Cheryann Yeo, Ken Tan EVENTS MARKETING SENIOR MANAGER Sivam Kumar DIGITAL MARKETING ASSISTANT Tim Jacobs COORDINATOR Nor Aisah Bte Asmain CIRCULATION MARKETING MANAGER Coleman Lim OPERATIONS MANAGER Cesar Banzuela De Jesus, Jr EXECUTIVES Gerald Aw, Hannah Wong, Malliga Muthusamy CORPORATE CHIEF EXECUTIVE OFFICER Ben Paul MANAGING DIRECTOR Edward Stanislaus CORPORATE AFFAIRS DIRECTOR Ng Say Guan PUBLISHER The Edge Publishing Pte Ltd 150 Cecil Street #08-01 Singapore Tel: (65) Fax: (65) PRINTER KHL Printing Co Pte Ltd 57 Loyang Drive Singapore Tel: (65) Fax: (65) We welcome your comments and criticism: propertyeditor.sg@ bizedge.com Pseudonyms are allowed but please state your full name, address and contact number for us to verify. FUN FACT The maximum building height allowed in Singapore is 280m. Tanjong Pagar Centre has obtained special permission to be built up to 290m. Districts 9, 10 and 11 in Singapore are considered home to the most prime residential properties on the island. Over the past few years, high-end properties have been hit hard by a series of government cooling measures. The capital value of luxury prime residential property has dropped some 20% since its peak in 2011, while developer sales in prime districts fell 68%, from 1,302 units in 2011 to 422 in 2014 (see Chart 1). Foreigners accounted for a significant portion of private housing buyers in prime districts, but the introduction of the additional buyer s stamp duty (ABSD) in December 2011 and its upward revision in January 2013 has slowed demand from them. In 2011, 31% of transactions of non-landed homes in prime districts were by foreigners, but they accounted for only 16% of the non-landed sales volume in 2014, having been deterred by the 15% ABSD imposed. Over the last three years, these measures, as well as the total debt servicing ratio (TDSR), have also reduced purchases by Singaporeans and permanent residents in the prime districts, with volume falling 50% to 55%. Both local and foreign investors have been significantly affected by the cooling measures, resulting in a considerable fall in prices and transaction volume in the prime districts. Chart 1 Developer sales volume in prime districts Number of units Number of units 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Unsold stock significant, but expected to ease gradually The slow demand and low transaction volume arising from the cooling measures have led to an oversupply of residential units in the prime districts. Slow developer sales have meant that many new projects are completed with unsold stock. This has led to the number of completed but unsold units almost doubling from 715 units in 2Q2012 to 1,420 units in 2Q2015 (see Chart 2). However, the moderation in new launches has kept the 1,221 launched but unsold units in 2Q2015 quite similar to the 1,194 units in 2Q2012. The lack of collective sales since 2012 and the focus of government residential land sales on non-prime locations have reduced the number of potential new developments in prime districts. Consequently, the number of units with sale prerequisites that are yet to be launched has almost halved, from 4,047 units in 2Q2012 to 2,044 units in 2Q2015. The current unsold supply, comprising completed and unsold units, units launched but unsold and units with sale prerequisites yet to be launched, amounts to 4,685 units. It is a considerable quantum compared with the takeup of 422 units in 2014, but appears manageable if the market eventually normalises at the 10-year average take-up of 2,196 units per annum. A soft rental market deters investors In the past few years, there was a trend towards a higher number of new completions in the prime districts. The number of units completed between Chart 2 Chart 3 Unsold units* in prime districts 7,000 6,000 5,000 4,000 3,000 2,000 1,000 URA, JLL RESEARCH URA, JLL RESEARCH BY ONG TECK HUI 2011 and 2014 was 22% higher than that in the preceding four years. This widened the supply for leasing significantly, while rental demand from expatriates has been stagnating. For example, the number of employment passes issued by the Ministry of Manpower increased only marginally by 2% from 175,400 in 2011 to 178,900 in 2014, owing to policy tightening on the intake of foreign workers. The consequence is a decline in rents during this period, with prime-market monthly rents dropping about 25%, from $5.23 psf in 2Q2011 to $3.93 psf in 2Q2015. The challenging leasing market and reduced rental returns would be another deterrent to investors looking at the prime residential market. Prime residential prices in Singapore have become more attractive relative to other global cities As Singapore globalised, many investors were attracted to its prime residential market, taking into account sound economic fundamentals, political stability, a reliable legal framework and market transparency. This has led to the city-state being compared with London, New York, Hong Kong, Tokyo and other global cities as potential destinations for real estate investment. We compared high-end residential prices in these four cities with those in Singapore from 2007 to 2015, in US dollar terms (see Chart 3). In 2007, prices in Hong Kong were 41% higher than those in Singapore, but the gap in 2015 has jumped to 165%. In 2007, before the global financial crisis, the price gap between prime central London and Singapore properties was 70%, but it narrowed to 34% in 2010, as the British pound weakened during that period. However, in the past few years, the prime central London market strengthened, while Singapore s prime market weakened, leading to prices in the city-state lagging those in London by 92%. In New York, prime residential prices were 48% higher than those in Singapore in 2008, but with the downturn in the US, they dropped to slightly below prime prices in Singapore in However, a recovery in the New York market in the past few years led to its prices leading Singapore s by 82%. On the back of a stronger Japanese yen previously, Tokyo prime residential prices were on average about 30% higher than Singapore s between 2009 and A weakening of the Japanese yen in the recent few years narrowed the price gap to 14% in Outlook Demand in the prime residential market will continue to be impeded by the cooling measures, while the economic slowdown and the rise in interest rates could be additional dampeners. The soft rental market is another negative factor, as investors will be deterred by challenging leasing conditions and weak rental returns. Prices are expected to soften into 2016, although they could stabilise when the cooling measures are relaxed. While the oversupply in the prime segment is significant, owing to the recent low level of transactions, it appears manageable when the market recovers and take-up normalises. A comparison with other global cities shows the price gap between the prime residential market of Singapore and those of Hong Kong, London and New York has widened significantly. Prime residential prices in Singapore have become relatively more attractive, but investors remain wary, as the ABSD raises the cost of entry and there is limited scope for price appreciation while the cooling measures remain in place. However, should positive outcomes arise from policy changes, a recovery in the prime residential market could yield good investment returns, considering the extent that it has been suppressed. E Ong Teck Hui is national director, research & consultancy, JLL Singapore. He can be reached at teckhui.ong@ ap.jll.com. Prime residential price gap between Singapore and other major cities in US dollar terms Price gap % Hong Kong, 165% London, 92% New York, 82% JLL RESEARCH, THE CORCORAN REPORT 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Not launched but with prerequisites for sale Launched but unsold Completed and unsold *Excludes potential projects without prerequisites for sale Tokyo, 14% H2015

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4 EP4 THEEDGE SINGAPORE OCTOBER 19, 2015 THEEDGE PROPERTY FENG SHUI Three ways feng shui can boost property sales BY ANTHONY LEE The slew of cooling measures has dampened sales activities in recent years. With leads becoming scarce and valuable, here are three ways realtors can use feng shui to boost sales in a challenging market. Choose a good day for viewing Ethnic Chinese often consult the Tong Sheng to pick an auspicious date and time for special occasions, such as weddings, moving to a new house or opening a business. Realtors and businessmen can similarly make use of the Tong Sheng to set a favourable appointment date and time to boost their chances of closing a deal. The simplest way would be to identify the unfavour able day and time that would be incompatible with the realtor s and his client s zodiac (see calendar). There is a more advanced way of identifying the most auspicious appointment date and time, but we will not discuss that here. Declutter the property Clutter interferes with the flow of qi or energy around a property. A home with a balanced qi brings peace and tranquillity to those who step into its space. Leaving footwear around the doorstep will hinder the flow of positive qi into the property. Shoes and slippers should be properly stored in a shoe rack to enhance the flow of qi and wealth into the house. Avoid having the kitchen door facing the main door This layout may lead to loss of wealth. However, the problem can be easily countered by installing a curtain over the kitchen door. E Timings for business appointments OTHER ZODIACS OCTOBER 2015 DAY CONFLICTING* 9AM TO 11AM TO 1PM TO 3PM TO 5PM TO 7PM TO ZODIAC 10.59AM 12.59PM 2.59PM 4.59PM 6.59PM 8.59PM 15 Thur Horse 16 Fri Goat 17 Sat Monkey 18 Sun Rooster 19 Mon Dog 20 Tues Pig 21 Wed Rat 22 Thur Ox 23 Fri Tiger 24 Sat Rabbit 25 Sun Dragon 26 Mon Snake 27 Tues Horse 28 Wed Goat 29 Thur Monkey 30 Fri Rooster 31 Sat Dog NOVEMBER 2015 CONFLICTING* 9AM TO 11AM TO 1PM TO 3PM TO 5PM TO 7PM TO ZODIAC 10.59AM 12.59PM 2.59PM 4.59PM 6.59PM 8.59PM 1 Sun Pig 2 Mon Rat 3 Tues Ox 4 Wed Tiger 5 Thur Rabbit 6 Fri Dragon 7 Sat Snake 8 Sun Horse 9 Mon Goat 10 Tues Monkey 11 Wed Rooster 12 Thur Dog 13 Fri Pig 14 Sat Rat Auspicious date/time for business appointments Inauspicious date/time for business appointments * Conflicting zodiac avoid making business appointments LEE METAPHYSICS LEE METAPHYSICS ILLUSTRATION BY SHAY YEONG Anthony Lee is a feng shui consultant at Lee Metaphy sics Consulting, with more than 10 years experience. He can be reached at leemeta physics@gmail.com. Avoid having the kitchen door facing the main door Install curtain over kitchen door if it faces the main door COVER STORY Shoebox landlords have holding power as units affordable Table 2 FROM PAGE EP1 residential shoebox units (15 of 185 transactions) were sold at a loss in the secondary market. In comparison, only 3% (eight of 307 transactions) of shoebox units were sold at a loss in 2013 and 7% (14 of 215 transactions) in 2014 (see chart). In the city fringe, the average loss for unprofitable shoebox transactions has risen from $31,080 (5%) in 2014 to $60,395 (10%) year to date. Similarly, those in the mass market rose from $25,509 (4%) to $79,112 (13%) over the same period. Bucking the trend was the high-end segment. The average loss for its unprofitable transactions pared down to 6% (see Table 2). The trend echoes the relative rental resi lience in the various market segments. But the average gain per profitable trans action has generally diminished from last year s. Bigger losses and smaller profits MARKET SEGMENT PERIOD LOSS ($/%) GAIN ($/%) CCR ,079/18 130,409/ to date 59,053/6 119,126/15 RCR ,080/5 133,908/ to date 60,395/10 109,253/19 OCR ,509/4 108,556/ to date 79,112/13 104,228/20 Nonetheless, shoebox landlords have strong holding power owing to the affordability of the units. According to JLL, only six shoebox units were listed for auction in 3Q2015, down from nine in the same period last year. We do not expect [a] significant increase in such units put up in 2016 and perhaps one to two more units in 4Q2015, says JLL head of auction Mok Sze Sze. E Chart No of unprofitable shoebox transactions on the rise

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8 EP8 THEEDGE SINGAPORE OCTOBER 19, 2015 THEEDGE PROPERTY DEAL WATCH Third unit at Ardmore II sold below $2,500 psf this year Prices of high-end non-landed homes softened by another 1.3% q-o-q in 3Q2015, says URA BY TAN CHEE YUEN A 2,024 sq ft high-floor unit in Ardmore II was sold for $5.05 million ($2,496 psf) in September, based on caveats listed by the Urban Redevelopment Authority (URA). The price was slightly below The Edge Fair Value of $2,530 psf. The sale represented the third value deal in the project this year. In September, a mid-floor unit changed hands for the same price as the subject property. Another mid-floor unit was sold for $4.7 million ($2,323 psf) in March. Based on URA caveats, prices last touched the $2,500 psf level in December 2011 and March 2012 when comparable units were sold at $2,574 psf and $2,570 psf respectively. Ardmore II is a luxury freehold development in District 10 that was completed in Prices in the 118-unit project hovered between $2,800 psf and $3,000 psf in 2013 (see Table 1). No caveat was lodged in According to flash estimates by the URA, prices of non-landed homes in the high-end segment, or Core Central Region, softened by another 1.3% q-o-q in 3Q2015, putting it at 9% below their peak in 1Q2013. A location scan of properties within 500m of Ardmore II shows potential value deals at below $2,000 psf, or just over $2,000 psf. Gross rental yields were generally between 2.2% and 2.6% (see Table 2). E Scan the QR code for value deals in Ardmore II and nearby projects Table 1 Table 2 Transaction volume and prices in Ardmore II (2011 to 2015) YEAR SALES VOLUME PRICE RANGE (UNITS) ($ PSF) ,574 to 2, ,520 to 2, ,841 to 2, ,323 to 2,866 Location scan of properties within 500m of Ardmore II PROJECT NAME TENURE COMPLETION AVERAGE SALES AVERAGE RENTAL RENTAL PRICE VOLUME RENT VOLUME YIELD ($ PSF) ($ PSF PM) (%) The Draycott Freehold , Draycott Freehold ,900 1 The Arc at Draycott Freehold , St Regis Residences Singapore 999 years , Orion Freehold , The Claymore Freehold , Ardmore II Freehold , Ardmore Park Freehold , As we are not party to the contract between the client and agent, we are not able to verify information provided by the agent Edge Fair Value is a tool on TheEdgeProperty. com to determine the fair value of a property Location scan tool is a search engine for property data around a specific landmark. It is available on TheEdgeProperty.com for registered users. Please write in to propertyeditor. sg@bizedge.com to request for access. FACTS + FIGURES New caveats uploaded on Oct 2 and 6 Most profitable deals NON-LANDED PROJECT DISTRICT AREA (SQ FT) SOLD ON SALES PRICE ($) BOUGHT ON PURCHASE PRICE ($) PROFIT ($) PROFIT (%) HOLDING PERIOD (YEARS) 1 Park Infinia At Wee Nam 11 2, Sep-15 3,500, Oct-05 1,862,190 1,637, Amber Point 15 1, Sep-15 2,250, Jan-02 1,050,000 1,200, The Trillium 9 2, Sep-15 4,700, Apr-07 3,528,000 1,172, Country Esquire 20 1, Sep-15 1,900, Feb ,000 1,150, Twin Regency 3 1,776 6-Aug-15 2,550, Nov-06 1,400,000 1,150, Tanglin Park 10 1, Sep-15 2,350, Jan-00 1,515, , Trevose Park 11 2, Sep-15 3,323, Feb-10 2,525, , Kovan Melody 19 1, Sep-15 1,670, Mar , , Urbana 9 1, Sep-15 2,350, May-09 1,680, , Westmere 22 1, Sep-15 1,170, Sep , , LANDED 1 Detached/Belmont Road 10 31,129 5-Jun-15 44,188, Jul-09 30,500,000 13,688, Terrace/Jalan Kemaman 12 1, Sep-15 3,228,000 2-Oct ,000 2,688, Terrace/Duku Road 15 1, Sep-15 2,600, Apr-97 1,080,000 1,520, Semi-Detached/Blandford Drive 19 2, Sep-15 4,020, Aug-12 3,100, , Terrace/Jalan Gembira Jul-15 1,770,000 6-Jan , , TABLES: Non-profitable deals PROJECT DISTRICT AREA (SQ FT) SOLD ON SALES PRICE ($) BOUGHT ON PURCHASE PRICE ($) LOSS ($) LOSS (%) HOLDING PERIOD (YEARS) 1 The Cairnhill 9 2, Sep-15 3,700,000 5-Oct-10 5,400,000 1,700, Ardmore II 10 2, Sep-15 5,050, Aug-07 6,100,000 1,050, One Shenton 1 1, Sep-15 2,360, Oct-07 3,386,880 1,026, The Sixth Avenue Residences 10 1, Sep-15 1,500, Jan-10 1,871, , Terrace/Waringin Park 14 1, Aug-15 2,000, Dec-14 2,200, , The Marina Bay Sep-15 1,445, Dec-07 1,635, , Lagoon View 15 1, Sep-15 1,280, Jul-07 1,400, , Prestige Heights Aug , Nov ,000 75, The Tropica 18 1, Sep , May-12 1,025,000 75, Palm Spring Sep-15 1,458, Sep-11 1,500,000 42, Terrace/Jalan Kampong Chantek 21 3,778* 17-Sep-15 2,180, Dec-10 2,188,000 8, Tables compiled by Tan Chee Yuen *Refers to strata area. Otherwise, area stated for shophouses and landed properties refer to land area.