CONSUMER GUIDE ON SINGAPORE PROPERTIES

Transcription

1 Singapore s Largest Homegrown Real Estate Agency CONSUMER GUIDE ON SINGAPORE PROPERTIES HDB EXEC CONDO PRIVATE CONDO All You Need To Know About Singapore Properties Artist s Impression ENGAGE ENRICH EMPOWER

2 Dear Consumer, PropNex Realty is Singapore s largest real estate company with over 5,000 sales professionals and has achieved phenomenal growth over the last 14 years. Positioned as a market leader in the industry with a market share of over 30% in the HDB resale and private secondary residential markets, we champion empowering homebuyers and investors through a 4-part series of Consumer Empowerment Seminars in Aimed at equipping the public with the most current trends, knowledge and strategies to navigate the changing real estate landscape, all of the seminars were fully-attended. Over 10,000 of these participants emerged with a wealth of valuable tips for their next investment decision. As the keynote speaker of these seminars, I am heartened by the resounding success of these events and thus continuing our weekly and quarterly Consumer Empowerment Seminars in 2017 in reaching out to more consumers. We anticipate that homebuyers, property owners and investors are now uncertain of the next move in preserving the value of their assets, given the dynamism of numerous policies and measures that were introduced. Thus, we developed this comprehensive series of Consumer Guides for the different market segments to enrich your knowledge. We know that many of you will appreciate the ready information here that you can read at your leisure. Owning and investing in a property is a major decision for all of us, thus our company places a strong emphasis on equipping you with the facts and data to help you in your asset value preservation and in growing your wealth. Wishing you a fulfilling investment journey with PropNex. Ismail Gafoor CEO, PropNex Realty All Rights Reserved. No part of this publication may be reproduced or copied in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping or information retrieval systems without written permission to PropNex Realty. Disclaimer While every reasonable cause is taken to ensure the accuracy of information printed, no responsibility can be accepted for any loss or inconvenience caused by any error or omission. The ideas, suggestions, general principles, examples and other information presented here are for reference and educational purposes only. This book is not in anyway intended to give investment advice or recommendations to buy, sell, or lease properties or for any form of property investment. PropNex shall have no liability for any loss or expense whatsoever, relating to investment decisions made by the reader. Printed as at Dec All copyrights reserved.

3 Overview of Public Housing in Singapore By many measures, Singapore s public housing program has been an astounding success. Despite so, concerns over HDB price increases outstripping income growth have been festering for several years. Undoubtedly, HDB has played, and will continue to play an important role in the building of an inclusive society by making housing available and homeownership affordable, and in the process, reducing the barriers across income and racial groups. Many early homeowners have indeed benefited handsomely from rising property prices over the past decades. Changes in domestic and external environments suggest that the run up is unsustainable and a fundamental relook at the existing public housing policies is warranted. Since 2006, the rapid population growth far exceeded supply and HDB resale prices continued to rise. Both BTO and resale prices became hot issues with Singaporeans. In fact, resale prices rose over 79.9% in just a few years (see table below). Year 4Q Q Q Q Q Q Q Q Q Q 2015 Resale Price Index % Change +79.9% in 10 years Source: HDB With HDB resale prices growing at a phenomenal rate, many measures have since been introduced. The key questions to ask yourself are: Is your HDB property still an asset or a liability? Will your HDB property value continue to grow, or decline? Should you upgrade now or wait longer? 01

4 HDB Resale Prices dipped for the first time in 4 years The new cooling measures have been effective in slowing the annual price growth of HDB resale properties as evidenced in the table below: Year Resale Price Index Y-on-Y change +14.1% +10.7% +6.5% -0.6% -6% -1.6% Source: HDB After lasting more than four years, the extended bull run of HDB resale prices has finally come to an end. Period 2Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2016 Resale Price Index Q-on-Q change +0.5% -0.9% -1.5% -1.6% -1.4% -1.7% -1.5% -1.0% - 0.4% - 0.3% - 0.1% - 0.1% + 0% + 0% Source: HDB The decline in HDB resale prices and resale transactions are direct consequences of demand and supply 02

5 Understanding why HDB Resale Prices shot up so rapidly 4 main reasons for the skyrocketing HDB resale prices: Policies not keeping pace with voracious demand Before 2011, new HDB flat owners had to wait on average 2 to 3 years before they could even get to select their BTO flat. For example, HDB overbuilt in the earlier part of the decade and ended with surplus flats and subsequently, they became cautious by building insufficient flats. Supply-demand mismatch due to population increase Increase in population and immigration policy led to an astronomical demand which outstripped supply. This in turn pushed up prices of HDB flats. Economic and local factors, along with sound macroeconomic management Stable government, capital inflows, an appreciating Singapore currency, land scarcity, careful long term land use planning, and expectations that the government will deliver on its commitments have all contributed towards the attractiveness of buying a HDB flat. Attractiveness of homeownership Homes are also tangible assets and its value can be unlocked for retirement, if needed. Or it can be used as a platform to enhance your lifestyle by upgrading. 03

6 Flat prices may have hit the ceiling There was a genuine cause for concern as public housing prices were increasing faster than the economic growth. Concerns about affordability have arisen especially among newly married couples and young aspiring home owners wanting to set up home. Amidst rising home prices, the authorities have since 2009; introduced a few major rounds of property measures to keep price growth sustainable and prevent speculation. Cooling measures implemented by the authorities 1) Ramping up new supply of BTO flats Close to 100,000 BTO flats have been injected into the market in the last 4 years. The larger launch quantity is aimed at keeping public housing prices affordable and it will also help to stabilise resale price increases. Over time, this should ease resale demand and rein in price increases. 2) 30% Mortgage Servicing Ratio (MSR) cap By capping the MSR at 30% for HDB or bank loans, policymakers have limited the size of loans to what buyers can comfortably afford to service, and this should have the longer term impact of putting a lid on runaway resale price increases as prices will have to match what the buyers can afford to pay. Those who are affected will have to consider BTO flats instead of the resale market. PRs are the worst hit by the latest measures. Firstly, they will have to pay the ABSD of 5% even on their first purchase of an HDB resale flat. Also, they will have to sell their HDB flat within 6 months of buying a private residence. While slowing demand from PRs, the revised policy may result in a far greater supply of HDB resale flats. 04

7 3) Difficulty in securing a full loan due to the Total Debt Servicing Ratio (TDSR) framework With the new TDSR framework in place, a potential buyers ability to secure a maximum 80% loan will be impacted as all his/her existing financial obligations will be taken into consideration when applying for a loan. This may prompt potential homebuyers to take a more discretionary view of home buying with the reduced affordability levels, which in turn will further reduce demand for resale flats. 4) Other HDB schemes (Increased quota for 2nd time buyers, Parenthood schemes and Joint Singles Scheme) The Parenthood Priority Scheme (PPS) was introduced with the aim of meeting the housing needs of married couples with children. PPS gives priority allocation of HDB flats to first-timer married couples with children and 50% of Sale of Balance Flats (SBF). Likewise, the Joint Singles Scheme (JSS) allocates a 30% quota to eligible singles and simultaneously, HDB is allocating 2nd timers a higher chance of balloting for a BTO flat. 5) PRs to wait 3 years before they are able to buy a resale flat All PRs have to wait for a period of 3 years before being eligible to buy a HDB resale flat from the resale market. The above measures and policies have worked in tandem with the large oncoming supply to create a balancing effect on the resale market. In addition, when second timers get the keys to their new BTO flats (estimated total of 18,000 in the next three years), they will also have to sell their existing HDB properties within 6 months. This will increase the supply of resale flats, thereby increasing the downward pressure on prices. By reducing demand for resale flats, prices will start to moderate 05

8 Volume of Transactions Lowest Compared to Recent Years Year Resale Applications 37,205 32,257 24,633 25,094 18,100 17,318 19,306 Source: HDB How You Can Protect The Value Of Your Asset Gone are the days of high capital appreciation from your HDB flats. The new TDSR and MSR caps and various HDB schemes have had the intended effect of softening resale prices. Increasing the supply of BTO flats will further weaken the demand for resale flats, setting the stage for a possible price correction within the next 2 years. PropNex was awarded the prestigious People-Centric Award at the inaugural Asia Responsible Corporate Awards 2013 (ARCA), in recognition of its excellence in customer service and for constantly evolving to bring customers' engagement to a new level. The company actively promotes prudence and sustainability in the property industry to the community. DID YOU KNOW? 06

9 Here are 3 options that you can consider: Option 1: Hold on to your HDB property for the next 10 to 15 years. However, no double digit annual growth is expected. You may even experience a negative growth in your HDB property in the next few years Option 2: Sell your HDB property and upgrade to an Executive Condominium (EC), which has a greater upside in capital appreciation and an enhanced lifestyle ECs are generally affordable due to the restrictions on ownership [Minimum Occupation Period, (MOP)] and the income ceiling of $12,000 (Refer to the EC booklet for more information on how you can upgrade) Option 3: Sell your HDB property and upgrade to a mass market condominium in the resale market or new launches Mass market condos are usually priced between $900 to $1,400psf and you can rent it out for rental income immediately upon its TOP, with no restrictions on MOP (Refer to the mass market condo booklet for more information on how you can upgrade) NOTE: The above options are made on the assumption that you currently own your HDB property and have already fulfilled the MOP Millionaires become millionaires NOT by saving pennies, BUT BY INVESTING IN REAL ESTATE 07

10 Why you should consider Upgrading In the last 2 years, HDB resale prices were flat and attained a negative growth, contributed by the dropping prices of all HDB flats. Moving forward, HDB price growth will be muted, only keeping pace with inflation. Other reasons why you should consider upgrading: Low interest rate environment of between 1 and 2% Attractive launch prices of ECs and mass market condos by developers A buyers market in the EC and private property market Upgrade to a higher standard of living while you are still young and with lesser commitments Ensure greater capital appreciation of your property in the long term to unlock it during your golden years One of the Singapore dream is to start from a HDB flat, stay in it for 5 or more years, and sell it for a profit to upgrade to an EC or a condominium to live your golden years. DID YOU KNOW? PropNex empowers consumers with quarterly seminars, attended by more than 10,000 homebuyers and investors. PropNex is continuing such seminars in 2017 to help consumer understand the current market situation. 08

11 What is an Executive Condominium (EC)? ECs are a hybrid of public and private housing and have grown popular in recent years. The scheme was introduced in 1996 when private home prices were at their peak, to cater to the needs of the sandwiched class. This group of buyers cannot afford private properties, and also do not qualify for BTO flats, as their incomes have exceeded the previous $8,000 income ceiling. Like any other condominiums, ECs are designed and built by private developers but come with restrictions. EC buyers have to form a family nucleus comprising at least 2 Singapore citizens (SC), or 1 SC and 1 permanent resident (PR). A Minimum Occupation Period (MOP) of 5 years is applicable before it can be sold in the open market. ECs can only be sold to foreigners after 10 years. Due to voracious demand for ECs, HDB has introduced 3 new measures on 9 Dec 2013, they are: 30% Mortgage Servicing Ratio (MSR) Cap A buyer can only use a maximum of 30% of his/her monthly gross income to service the EC loan Resale Levy for Second-Timer Applicants All second-timer applicants who buy an EC directly from a developer will have to pay a resale levy depending on the type of flat previously owned (Note: This is only applicable to EC projects whereby the land sites were purchased on or after 9 Dec 2013) Reduced EC Cancellation Fees Cancellation fees for ECs has been reduced from 20% to 5% of the purchase price This could well be the last opportunity for you to upgrade without having to pay a resale levy if you buy an existing EC listed in the next page this can save you up to $50,000 09

12 Why do Condominiums appeal to Buyers? The following are just some reasons why condominium living appeal to buyers: A status of achievement Owners often feel that they have attained a certain level of affluence to be able to own a condominium. Necessities within arms reach Most condominiums are developed near amenities that are essential to everyday lives such as schools, MRT stations, hospitals and malls etc. Luxurious amenities to enjoy within the development Amenities ranging from swimming pool, playground, gymnasium, tennis court, picnic area etc. that enables life to become more enjoyable. Greater upside for capital appreciation Particularly for ECs, there is a greater potential for capital appreciation due to the lower entry price and after the 10 years Minimum Occupation Period when it attains its fully-privatized status. This is also the time when foreigners can buy an EC from the resale market, thus increasing the demand. Take-up Rates for ECs healthy ECs are for the privileged few and in recent times, most ECs are oversubscribed at the initial launches. With private property prices going beyond $1,000psf mark, ECs have a stronger appeal and with the income ceiling revised at $14,000, many upgraders could qualify to buy the attractive ECs instead of the mass market condominiums. 10

13 Number of EC units launched and sold Year Launched 2,535 4,963 3,337 2,505 3,750 Sold 2,883 4,499 3,585 1,576 2,534 Take-up rate 114% 91% 107% 63% 68% Source: URA, PropNex Research ECs more budget-friendly compared to Private Condominiums Based on PropNex research, new EC launches are usually priced 20 to 25% lower than private condominiums. The hybrid public-private ECs thus prove largely popular among middle income couples or upgraders from public housing, who find prices of some private condominiums prohibitive (Tables 1 & 2). Table 1: Westwood Residences enjoys a 38% lower $psf compared to Lakeville Project Name Area Launch date Type Avg. price (PSF) Lakeville Westwood residences Jurong May-15 EC $803 Apr-14 Condo $1,309 Table 2: The Vales enjoys a 25% lower $psf compared to High Park Residences Project Name Area Launch date Type Avg. price (PSF) Source: URA, PropNex Research 11 The Vales High Park Residences Sengkang July-15 EC $790 July-15 Condo $989

14 Why are ECs cheaper than other Mass Market Condominiums? There are variours / multiple reasons: 1) Only Singapore Citizens are eligible to buy ECs. 2) Foreigners are not allowed to buy ECs directly from developers. 3) Income ceiling set at $14,000 and MSR of 30% set by the government. As such, EC developers are mindful of the affordability of the buyers who are eligible to purchase an EC. 4) Lower land costs (compared to mass market land sites). Prices for EC sites seem rather unaffected by the upward spiral of other private residential sites and have risen by a smaller margin. Over the past 2 years, bids have largely been range-bound between $300 and $350psf per plot ratio on average, which translates to an average selling price of between $730 to $800 psf (compared to $950 to 1,200psf for mass market condominiums). 5) EC lands are mostly bidded by construction firms who are also developers. As such, there is no double layer profit between a developer and a construction firm. Given these restrictions, ECs are typically priced at a discount compared to nearby private condos. In recent months, the demand of new ECs has, however, reached new highs, with units oversubscribed at launch. DID YOU KNOW? Consumers who are PropNex Privilege Members get free property-related news regularly about the latest property market trends, priorities to Consumer Empowerment Seminars and first to hear of new project launches. 12

15 Will price growth for ECs remain strong? Let s compare the prices of a recently transacted EC from their respective launch prices (as at Q2 2016): 1) Westmere (Jurong East, Completed in 1999) Launch Price ($psf) Price gain $ % 2) Bishan Loft (Bishan, Completed in 2003) Launch Price ($psf) Price gain $ % 3) Nuovo (Ang Mo Kio, Completed in 2004) Launch Price ($psf) Price gain $ % Source: URA, PropNex Research Even though the abovementioned ECs are launched during different parts of the economic cycle, one thing is certain that price growth for ECs will remain strong in the near future as seen by the recent EC transactions. The price growth of an EC after the MOP (of 5 or 10 years) as seen in the examples above are also significant as ECs would have attained its fully-privatized status and would be no different from any other mass market condo. 13

16 Why are ECs Popular? A More In-depth Analysis Let us take a quick look at the various benefits of an EC: 1) Additional Buyer s Stamp Duty (ABSD) is NOT APPLICABLE. 2) Seller s Stamp Duty (SSD) is NOT APPLICABLE for EC as owners have to fulfill 5 years minimum occupation period (MOP). 3) Deferred payment is available. 20% down payment, 65% upon TOP and final 15% upon legal completion. 4) There is no restriction to invest in commercial/industrial property as long as there is no residential accommodation component in the commercial unit. 5) Improved design and features. EC developers are now offering more to attract buyers wishing to upgrade to a subsidised private residential lifestyle living. Heron Bay, for instance, lures buyers with a private pool and a jacuzzi. 6) Great lifestyle (Enjoy the same lifestyle and facilities as other condominiums). 7) 8) Possible Grant (CPF Housing Grant $20,000/$30,000 for 1st timers). 9) Comparable, or better potential future capital appreciation to condominiums (more likely to be sold at a good profit after MOP). 10) Can be sold under private property status after MOP of 5 years to Singapore Citizens and PRs, and to foreigners after 10 years hence a larger pool of potential buyers. 11) Good potential rental yield as design and facilities are similar to any private condominiums. Budget-friendly entry price (Lower quantum compared to mass market condominums. For example, comparing an EC to a similar sized condominium in Punggol: Project Name Size Price ($psf) Total Quantum CPF Housing Grant (up to $30,000) Nett Purchase Price Difference % Watertown Condominium Waterbay EC 3 bedrooms, 1100 sq ft $1,169 $750 $1,285, $825, Eligible Not eligible (For first timers only) $1,285, $795, $490, About 38% 14

17 How can I Buy an EC? The combination of the curbs on loans and TDSR on private properties has aligned the winds favourably for ECs to be the most compelling residential category for HDB upgraders and middle-income new home buyers. Let us now discuss the various scenarios in which you can own an EC unit: Option 1: You can keep your HDB flat and buy an EC provided that you have the ability to finance the 20% down payment and stamp duties. You can also use the Deferred Payment Scheme if necessary. If you buy a new EC, you will have to sell your HDB property within 6 months from the TOP of your new EC unit. If you buy a resale EC, you can keep your HDB flat (but you are liable to pay ABSD as it is your second residential property. For PRs, ABSD is payable on your first property). Option 2: For those who have challenges in raising the 20% down payment (as your CPF money are locked up in your current HDB flat), you can sell your HDB flat and rent a flat while waiting for your EC to be completed. The rental amount for 30 months (the average time required to complete an EC project) may be about $2,000/mth (or $60,000 in total). On the other hand, the current weak growth of the HDB resale market could mean that your current HDB property value may drop by the same amount. But by upgrading to an EC, you can preserve your property s asset value which could have a greater potential upside in capital appreciation as the price of the EC will grow positively once the property reaches its 10th year outstripping the potential growth of your HDB property by far. Option 3: For those with an extended family, you can sell your HDB flat and move into a dual key unit with your parents. The unique characteristic of a dual key unit is a shared foyer (the common area that is accessed through the main entrance). There are two doors one leading to the studio apartment (SA) and the other leads to the adjoining unit. 15

18 ECs are Value Buys But Should You Buy? Our analysis shows that: It makes economic sense to buy a new EC when the price is lower than a new suburban condominium of comparable location and quality as the price gap will close over time. The MOP restrictions should not be a discouraging factor for those who intend to stay for at least five years and not purchase another residential property. First-timers are eligible for housing grants which slightly increases the initial price difference with a private condominium. Once ECs are fully privatized (after 10 years), the price gap between mass market homes and ECs narrows to less than 10% thereby increasing the attractiveness of ECs, as there is potentially higher capital appreciation due to the lower entry price. With the new policy on HDB upgraders to EC, this could well be the last opportunity for you to upgrade without having to pay a resale levy, possibly saving you up to $50,000. In summary, the EC market will not be short of buyers. The widening price gap between mass market homes and ECs, the partial exemption from the new TDSR framework, as well as the availability of the housing grants make ECs even more affordable than before. The average take-up rate for ECs has been healthy and we expect the demand to sustain in the near to mid-term. Barring external shocks in the market, ECs are the safest bet for developers and buyers alike. DID YOU KNOW? PropNex was the first real estate agency to introduce the compulsory professional indemnity insurance for its salespersons since Today, all salespersons are individually covered with $200,000 for consumer protection. 16

19 The TDSR Framework Before the TDSR framework was applied, joint loan applicants were given loan terms according to the age of the youngest applicant. If a father, aged 50, and son, aged 25, are applying for a housing loan together, the previous framework means that they would receive a loan tenure of (65 30 = 35) 35 years, based on the maximum age of 65. Today, the framework requires all banks to apply an income-weighted average. Step Equation Take (a) + (b) = (c) (c) is the income-weighted average age of the applicants years (c) = the maximum loan tenure, which must be rounded down. Let s say the father, 55, earns a monthly salary of $8,000. His son, 23, earns $3,000. Their combined salary is $11,000. Step Equation 1 The father: $8000 $11,000 x 55 = The son: $3000 $11,000 x 23 = 6.27 The income-weighted average age of the applicants: = The maximum loan tenure, which must be rounded down: = ~ ~ 18 years In the above example, you can say that the applicant is years old, and he would only get a loan tenure rounded down to 18 years. 3 4 Impact The age of the applicant earning the most money will weigh more heavily on the average age than the age of the other applicants. So if the son earns less, say $2,000, then the income-weighted average age will be even higher, following the father, and the resultant loan tenure shorter. Section contributed by Mr Alfred Chia from SingCapital Pte Ltd to enquiry@singcapital.com.sg for a FREE Income-weighted average calculator or call for more information. 17 SingCapital Pte Ltd is an MAS licensed Financial Adviser providing wide range of financial services. Please visit for more information.

20 Schedule of Payment ORDER OF PROGRESS OF WORK PAYMENT 1st a) On obtaining Option to Purchase (Booking Fee). b) Document to submit to HDB for approval. (time frame may vary) c) On signing of Agreement for Sale & Purchase or within 9 weeks from the date of Option, whichever is later. PERCENTAGE OF PURCHASE PRICE 5% 15% 2nd On completion of foundation work of the building unit. (Estimated time : 6 9 months)* 10% 3rd On completion of reinforced concrete framework of the building unit. (Estimated time : 6 9 months)* 10% 4th On completion of brick walls of the building unit. (Estimated time : 3 4 months)* 5% 5th On completion of ceiling of the building unit. (Estimated time : 3 4 months)* 5% 6th The doors & window frames are in position, and that the electrical wiring (without light fittings}, the plumbing & internal plastering to the building unit have been completed. (Estimated time : 3 4 months)* 5% 7th The car park, roads and drains serving the housing project have been completed (Estimated time : 3 4 months)* 5% 8th On production of the Temporary Occupation Permit and Architect's Certificate of Completion. (Estimated time : 6 9 months)* 25% Either:1) Where completion of the Sale & Purchase takes place before the issuance of Certificate of Statutory Completion (CSC): 15% a) 2% to be paid to the Vendor on completion of Sale & Purchase b) 13% to be paid to the Singapore Academy of Law as stakeholders to be dealt with as follows: 9th OR i. 8% to be released within 7 days of production of CSC ii. 5% to be released to the Vendor on expiry of 12 months from date of notice to take vacant possession 2) Where CSC is issued before completion of the Sale & Purchase: a) 13% to be paid in the following manner upon issuance of CSC i. 8% to be paid to the vendor ii. 5% to be paid to the Singapore Academy of Law as stakeholders which shall be released to the vendor on expiry of 12 months from date of notice to take vacant possession. b) 2% to be paid to the vendor on completion of Sale & Purchase *The above time line given is on estimation, depending on the completion on each individual phase. The development completion for temporary occupation permit is based on the date stated in the brochure whichever is earlier. Estimated date of T.O.P. is 3-4 years from the date of obtaining the land possession. 18

21 A Foothold in Private Property Before you commit to a home purchase, you need to define your reason for purchasing a home in the first place. There are only two reasons for owning residential property in Singapore: It s either so you could live in it, or so you could invest. There is a difference between buying a property to live in, and buying one for investment: If you intend to live in it yourself, your main considerations are the location, your budget and size. For instance, if you re single, it makes sense to get a small studio flat. But when you re a newlywed, you and your spouse might opt for a modest-sized apartment that you can afford with your combined salaries. If you plan to have more children and are making enough money, you may want a spacious home with more bedrooms. If you re buying a property as an investment, your main concern is the rental yield that the property can generate for you. You don t really need to worry about whether you will be comfortable staying in your purchase; instead, you will need to find interested tenants or buyers willing to meet your price. Today, It s a Buyer s Market We expect mass market condominiums projects in the Outside Central Region (OCR), to remain popular. This trend is fuelled by the continued availability of credit in a low interest rate environment, along with developer s cautious pricing strategies. A buyers market is a period in a property cycle where a buyer is in an advantageous position to buy a property at a discount or at a fair market price, commented Mr Ismail 19

22 Developer s cautious pricing strategy Given the possibility of slower sales as homebuyers are more price-sensitive amid the tighter loan requirements, property developers will be more cautious in their acquisition plans especially in the private residential segment. Developer s pricing strategy has to be re-examined in light of the cooling measures and the TDSR framework. Positive outlook by developers The recent land bids (table below) will lead to a selling price of above $1,000psf, reflecting the positive outlook for continued strong demand for private homes to continue for the rest of the year. Tender Data 30 May Sept 2016 Location Bukit Batok West Ave 6 Fernvale Road Land Size (sqsf) Developer 474, QingJian Realty 555, Sing Development Pte Ltd Wee Hur Development Pte Ltd Tender Price $301,160,000 $287,100,000 Tender Price ($psf) $ $ Source: URA, PropNex research Interest rates are extraordinarily low in Singapore The current interest rate of below 2% is unusual; especially when you consider that just across the causeway; it is already at 4.5%. Due to the recent debt impasse in the US, we foresee that the rate will continue to be low for the near to mid-term. For example, a buyer who takes a $600k loan at 1.8% interest means that the interest component is only $900/month the savings on interest can be substantial over the years. 20

23 Understanding the Different Regions in Singapore Singapore is classified into three broad regions: Core Central Region (CCR) Postal districts 9, 10, 11, Downtown Core and Sentosa. Rest of Central Region (RCR) The area within the Central Region that is outside postal districts 9, 10, 11, Downtown Core Planning Area and Sentosa. The Outer Core Region (OCR) The remaining 16 districts in the 4 regions such as the West, East, North, and North-East Regions. LEGEND DOWNTOWN CORE SENTOSA Source: URA POSTAL DISTRICT 9, 10 & 11 CENTRAL REGION BOUNDARY MAP OF CENTRAL REGION SHOWING AREAS IN CORE CENTRAL REGION 21

24 Mass Market Condominiums The Most Affordable of all Private Properties Regardless of your background, if you are thinking of investing in property in Singapore, your only question should be, What is the right price per square foot (psf) that I should buy this property at? The table below contains the hierarchy of the properties in Singapore, with BTO at the base and luxury properties at the top. Region / Property Type Price psf ($) Core Central Region (CCR) 2,000-5,000 Rest of Core Central Region (RCR) 1,500-2,000 Outside Central Region (OCR) 1,000-1,500 Executive Condominiums (EC) Design, Build and Sell Scheme (DBSS) HDB resale flats Build-To-Order (BTO) flats Source: HDB, URA, PropNex Research Prices of mass market condos generally hover between $1,000 to $1,500psf; but to find a mass market condo that is selling at $1,000psf is tough today. It is only possible if the developers purchased the land at around $400psf. 22

25 Prices of Mass Market Condominiums may not Fall Below Current Levels Imagine this scenario if prices of mass market condominiums fall by 20% (i.e. from $1,000 to $800psf), then prices of ECs must fall to create that 25% gap between mass market condominiums versus ECs, ECs will then have to be at $600psf (from $800). And this will create a domino effect such that lower tiered properties (HDB flats) will fall further. Lowest price ($psf) Highest price ($psf) Core Central Region (CCR) 2,000 5,000 Rest of Central Region (RCR) 1,500 2,000 Mass Market Condos (OCR) 1,000 1,500 Executive Condos (EC) Design, Build & Sell Scheme (DBSS) HDB Resale (4-room) BTO (4-room) Region/Property Type Source: HDB, URA, PropNex Research If there is a decrease in price due to demand and supply, it will only be a marginal correction of 5 to 10%. The cost of building these properties have been on a rise due to the tight labour market and foreign worker quotas and the inflation of raw materials such as steel and bricks. In the same way, properties in the yellow category will be resilient as the cost of material, labour and inflation will not allow for these prices to fall sharply. What then, can fall? Prices in the higher range, highlighted in orange. 23

26 Strong Demand for Competitively Priced Projects Developers are only selling mass market condominiums at $1,500psf because of high land cost (i.e. when they bid $600 to $700psf for the land), it is not possible for them to sell the property at $1,000psf after including construction costs or that will translate into a loss for them. If demand for these properties is not strong, developers will not dare to bid high prices for the land. In the OCR, prices of mass market condominiums are usually closer to $1,000psf. However, those located within 400m of an MRT station will still command a higher price due to the good location and strong demand at about $1,400psf. In the RCR, the baseline of $1,500psf will remain resilient as there is strong demand from locals, investors and foreigners. In the CCR, while the baseline of $2,000psf will not drop much, those in the $5,000psf range can suffer a sharper drop in price. Foreign investors have boosted the prices of properties in the CCR to a greater extent than other properties in other regions. Regardless of regions, competitively priced new launches will still see strong demand as witnessed in recent 2015 new launches: Project Name GEM Residences Lake Grande Locality RCR OCR Units Sold Median Price ($psf) $1,431 $1,368 Source: URA, PropNex research 24

27 Essential Points to Consider if You Want to Succeed in Real Estate Investment Some people say that making it rich is a matter of luck, but based on past market data, and the experience of countless other individuals who have made it, there are certain essential key points that you have to consider if you want to succeed in real estate investment. Key #1: Start Early For A Longer Investment Time Horizon There are many benefits to starting early as you would be able to take advantage of the longer time horizon to invest in properties. This is especially so since most buyers would take a loan to finance the purchase of the property. The younger you are, the longer the loan tenure you can secure, thereby leading to a lower monthly instalment. In addition, your commitments and obligations are lower. Potential homebuyers should start now and consider the following factors: Your ability to afford the house; The bank s willingness to extend a loan to you; and, Your long-term view on holding on to the property Key #2: Don t Wait To Save Enough For Your Dream Home That Never Really Happens Many of us conveniently and erroneously postpone the decision to invest in a property because we want to save enough to buy the dream property, which usually comes with a huge initial capital outlay That never really happens. When you own a property, your property will keep pace with the market (regardless of whether it is going up or down), and if you have (and you should make sure you have) the capacity to hold out during the down market and increasing interest rates, you will likely be able to make a capital gain and accumulate wealth that can be re-invested in better properties that come with even greater potential in the long run. 25

28 Therefore, it really pays to invest early and NOT wait till you have saved enough for your dream home, which may NEVER happen in the first place. Key #3: Plan Ahead, Prioritise Your Lifestyle Determines How Rich You Will Get Lifestyle is a CHOICE! It is up to you to decide what you want. Nobody should, or can, force you to invest in real estate if you are not ready. Unfortunately, when we are young, not many of us will realise the benefits of investing in properties. We often fail to plan ahead and more often than not, we squander away our precious earnings in partying and other luxuries. Millionaires become millionaires NOT by saving pennies, BUT BY INVESTING IN REAL ESTATE DID YOU KNOW? One of PropNex core beliefs is contributing back to the society. Over the years, the company has been involved in numerous charity events and championed many meaningful causes including building in Cambodia - Kampal and Trayong Pong. With our commitment in empowering future generations through education, we donated to Singapore Children s Society, Children s Cancer Foundation, The Straits Times School Pocket Money Fund and $100,000 to Community Chest in

29 Consumer Empowerment Seminars Held every quarter, these well-attended seminars introduced since 2013 are tailored to equip homeowners and investors with the latest property trends, insights and outlook of the real estate market. Keynote speaker - Mr Ismail Gafoor, CEO of PropNex, shares valuable tips, market sentiments, risks and investment opportunities in current property market. Invited guest speakers also impart knowledge on other property-related know-hows. Log on to and book your seats in May, August and November. Alternatively, do enquire at Join us as a PropNex Privilege Member for property updates and news. Not only that, we are also offering exclusive benefits such as invitations and priority bookings to our Consumer Empowerment Seminars, invitations to new project launches and even movie tickets! Registration is free. Scan the QR code to sign up today! Have all your queries answered at the Ultimate Property answers towards creating Workshops (UPW). You will IMMENSE WEALTH, enhance your knowledge with REGISTER NOW! topics such as Investment Principles and Priorities, Identifying Golden Opportunities and Mortgage Planning, conducted by an esteemed panel of speakers. Attend the free preview for more in-depth knowledge on growing your wealth. If you want to have all the at upw@lifemasteryacademy or call / or visit 480, Lorong 6 Toa Payoh, #10-01 HDB Hub East Wing, Singapore Tel: Visit: or join our Facebook Agency Licence No: L J