Analysts should be more upfront about their forecast

Transcription

1 THE WEEK OF DECEMBER 28, 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 Rewind 2015 Who sinks or swims in a tumultuous market PG3 Off the rail Impact of MRT on residential rents PG4 Iskandar Malaysia What s hot and what s not PG6 Dear Santa Christmas wishes for a healthier property market BY LIN ZHIQIN Tis the season to be jolly, but the property market is in the doldrums. For our Christmas special, The Edge Property polled stakeholders for their wishes that will, in their opinion, help improve the health of the property market. The open-ended poll invited participants to submit up to three wishes that are actionable and can be adopted as genuine feedback by the following groups: the government, developers, analysts, property agents and consumers. The participants could choose to have their responses aggregated and kept anonymous or grant permission to be quoted. The wishes have been collated, with the key themes presented below. Dear government, please review cooling measures I wish the government would be more in tune to the impact that some of the measures have on the livelihood of those in the real estate and related service industries, and recalibrate some of the measures to improve transaction volumes. The service industry has been hit hard because of the measures and transaction volume is as important to the market as the price component, said Alan Cheong, head of research and consultancy at Savills Singapore. Amid the clamour, an industry stakeholder, who opted to remain anonymous, wished for the cooling measures to remain and continue to rein in home prices, stating that household debts have not come down to meaningful levels and interest rates have not risen to levels that will influence buyers decisions. According to the Department of Statistics household sector balance sheet data, the liabilities-to-assets ratio has been on an uptrend in recent years, rising from 15.1% in 1Q2011 to 16.7% in 3Q2015. This respondent also wished that the government would reduce the upcoming government land sales supply to avoid a waste of resources on building units that would remain empty, as occupancy rates are expected to fall to a decade low. Paul Ho, chief mortgage consultant at icompareloan, wished for the government to coordinate a bureau where information such as car loan and credit card statements can be shared in a better manner. Buyers currently need to undergo onerous paperwork submission to check for total debt servicing ratio compliance. Alternatively, it could be made mandatory for financial service providers to provide monthly statements for bank financing purposes within three days of a client s request. TDSR could be relaxed for people with high income or business owners to allow them greater flexibility in leveraging and access to funds to create employment, he added. Ryan Khoo, co-founder and director of Alpha Marketing, also wished for the government to work with the Malaysian government to explore out-of-the-box solutions that would address Singapore s overly high property prices with Malaysia s abundant land and benefit the citizens of both countries. He noted that affordable hous- CONTINUES NEXT PAGE

2 EP2 THEEDGE SINGAPORE DECEMBER 28, 2015 THEEDGE PROPERTY COVER STORY EDITORIAL EDITOR Ben Paul THE EDGE PROPERTY HEAD OF RESEARCH Feily Sofi an ANALYSTS Esther Hoon, Lin Zhiqin, Tan Chee Yuen 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 ACCOUNT MANAGER Ken Tan EVENTS MARKETING SENIOR MANAGER Sivam Kumar EXECUTIVE Gerald Aw DIGITAL MARKETING ASSISTANT Tim Jacobs COORDINATOR Nor Aisah Bte Asmain CIRCULATION MARKETING MANAGER Coleman Lim OPERATIONS MANAGER Cesar Banzuela De Jesus, Jr EXECUTIVES Keith Lee, Malliga Muthusamy, Sandrine Gerber 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 annual Christmas Light-Up on Orchard Road was initiated in 1984 by the Singapore Tourism Board. Since 1988, the Light- Up has become a platform to raise funds through corporate donations. Analysts should be more upfront about their forecast FROM PREVIOUS PAGE ing is a large untapped segment in Malaysia and Iskandar is close enough for Singapore developers to operate in. This would be beneficial to Johor and Singapore in the long term, as it encourages more of the Malaysian workforce to live [in Iskandar] and commute to Singapore for work. Adrian Seow, investment director of Savills Singapore, wished that the government would consider more favourably change-of-use proposals on select sites within strategic localities, such as the civic district and Tanjong Pagar, away from office use. This will make them more diverse and vibrant as places for work-live-play. Dear developers, please adjust prices Several respondents wished for developers to adjust their prices to stimulate demand and clear the unsold inventory. According to an academic, who wished to remain anonymous, this would also prevent an upward price spiral and lower homeownership costs that have grown too high, too fast. The same respondent also wished that developers would build developments that are more liveable, sustainable and environmentally friendly. [This is] to show that we can have developers that look at the greater good of society while making sufficient profit. The wish was echoed by an analyst who hoped that developers would start building homes that are meant for staying and not just for investment, which would help minimise a future mismatch of expectations between investors who are selling and buyers. With regard to the retail segment, the analyst hoped that the developers would spare a thought for the retailers who are struggling with high rental costs, as we do not need another boring mall with the same old tenant mix that can cope with the high costs simply because they are big. We need to reinvent our retail malls to stay ahead of the competition among regional players or we are going to fall behind, and this would eventually hurt our economy. The analyst s third wish for the developers was for them to take more calculated risks overseas because Singapore should never be a safe haven where the government will always step in to help businesses if they don t thrive. We need more home-grown companies to venture out and away from the comfort zone. Tan Kok Keong, CEO of REMS Advisors, expressed a wish for developers to explore alternative means of fundraising to manage the market downturn, which would also open up investment options in alternative instruments and help investors diversify their portfolios. Savills Cheong indicated his wish that developers would appoint marketing agencies not just based on agent headcount, as a large headcount does not necessarily translate into better sales than other strategies, such as diversifying with more agencies. He also hoped for developers to motivate agents in the current sluggish market by considering more generous commissions. Seow of Savills Singapore wished the government would consider more favourably change-of-use proposals on select sites within strategic localities, away from office use Dear analysts, please shed more light I wish that analysts would provide novel research that opens up further insights into the real estate market. Current research is just based on analysis, such as demand and supply, which has not changed for decades, said Cheong. Analysts should engage in more intellectual evaluation of the market to enrich the experience of readers and investors. They should also be more upfront about their forecast for the property market, much like equity analysts do for stocks, so that investors are able to gather a consensus view to guide their strategy, said Tan of REMS Advisors. A respondent, who opted to remain anonymous, wished analysts would shed more light on the affordability of our homes from the finance perspective. This would benefit the market because we often think that a $1 million private home is affordable, but what about our quality of life after the 30-year mortgage? How much goes into that and interest payment, and what will be left for long-term investment, retirement, children s education and other essential spending? The respondent also wished for analysts to highlight the oversupply situation in all segments of the market, as the government has not come to terms with the supply situation and developers are still taking risks by bidding up land prices and selling homes at unsustainable price levels. Separately, two respondents from academia expressed a wish for analysts to make reports and proprietary data and information more readily available to the masses, so that everyone can have access to the same information and the market will become more efficient. One academic wished for more analyst coverage on the impact of foreign exchange on the property market, to grow awareness of the global dynamics on property as an investment class. Getty Goh, CEO of Ascendant Assets and CoAssets, hoped that analysts would research on alternate forms of real estate investments, including real estate syndication and crowdfunding, as more people are investing in such alternative instruments and there is a growing demand for such research and analysis. I wish that the analysts would assist buyers with tools for them to find their own bargain deals, so that eventually, buyers would be able to make their own decisions more independently of the market consensus and developers or agents marketing, said Alpha Marketing s Khoo. Dear property agents, please continue to upgrade and maintain professionalism I wish that property agents would become better equipped with market knowledge because people rely on them to get their homes, said REMS Advisors Tan. Billy Ong, senior associate district director of OrangeTee, also opined that agents should fully adopt and embrace technology to increase productivity. An industry stakeholder, who chose to remain anonymous, wished that agents would stop hopping to another agency just because it pays a little more of the licence or course fees, as they can really develop their careers by staying loyal to the firm that suits them best. The biggest might not always be the best. Additionally, agents should stay in the business if they are passionate about real estate because high turnovers during downturns do not help to grow professionalism. Some agencies should consider having paid agents for certain market segments to retain the best in the industry. Another respondent from academia emphasised the importance for agents to be knowledgeable to be able to provide sound advice and explain all the pros and cons to their clients, instead of just rushing in for transactions. Maybe agents can offer goodwill discounts when transactions turn out to be simple and easy to build a better reputation. Goh of Ascendant Assets and CoAssets hoped that agents would be able to give more holistic investment advice, so that consumers would be able to make more informed property investment decisions. Alpha Marketing s Khoo wished that agents would be more like analysts, rather than just doing sales, as buyers will become more discerning and real estate agency is one industry where a significant portion can be automated or outsourced. This would also grow the skills of agents to help them value-add to clients. Savills Seow submitted a wish for property agents to be recognised for outstanding professionalism, so that the market would know who to look for for their real estate needs. Dear consumers, please be wiser I wish that consumers would be less susceptible to marketing gimmicks and focus on basic investment principles, and also realise that there are no guaranteed investments. This will reduce the chances of them getting into failed investments. They should also subscribe to the principle of invest a little, diversify a lot to help mitigate the risks of a total loss and enjoy more sustainable returns on investment, said REMS Advisors Tan. His wishes were shared by an analyst respondent, who wished that consumers would read credible reports and be informed about the market before making significant investments. Although property investment seems to have paid off for the early entrants, market dynamics can change and consumers should not be complacent and put all their eggs in one basket, thinking that property prices always rise. They should not become fixated on property investment and end up with more debts than they should have. Ultimately, high property prices will take a toll on future generations and only benefit the rich and landlords. For the sake of the future generations, property should not be the only investment option on most Singaporeans wish list, which seems to be the case now. A respondent from academia hoped that consumers would look at other factors affecting the liveability, sustainability, environment and safety of a development, instead of focusing purely on prices, to encourage developers and the government to focus on these areas. Savills Cheong wished that consumers would stop blindly talking about real estate prices coming off without checking the situation on the ground. Negative talk is infectious and sends a wrong message because people will return in strength and cause prices to escalate again, once they realise that prices are not falling sharply. I wish that consumers would stay focused on monitoring the market for local and overseas opportunities. Bad times can be a good time to buy. Consumers should not shut off just because the market is weak, added Khoo of Alpha Marketing. E SAMUEL ISAAC CHUA/THE EDGE SINGAPORE

3 THEEDGE SINGAPORE DECEMBER 28, 2015 EP3 YEAR IN REVIEW THEEDGE P R O P E R T Y CHERN JIANG LEM Who sinks or swims in a tumultuous residential market? BY FEILY SOFIAN T Good class bungalows have historically proven to be a bulletproof seg- Large units accounted for the bulk of unprofitable deals in 2015 <500 sq ft, 3% 500 to <700 sq ft, 9% 700 to <900 sq ft, 9% Resale prices of four-room HDB flats in five towns increased in 2015 AVERAGE PRICE ($) Bishan Clementi Geylang Kallang/Whampoa Queenstown 4Q2015 GAIN (%) 4Q2014 3Q2015* GAIN (%) 526, , , , , , , , , , , , , , , , , , , , *Latest official data such transactions in 2014 with a total value of $567.8 million. Five HDB towns bucked market trends In the public housing sector, five HDB towns bucked the downtrend in prices owing to their prime location and a dearth of new supply. While the HDB resale price index had fallen by 1.8% in the first three quarters of this year, four-room flats in Bishan, Clementi, Geylang, Kallang/Whampoa and Queenstown saw their ave- Eleven non-landed homes put up for mortgagee sale in December 2015 with an average size of 1,589 sq ft PROJECT NAME euhabitat, #03 Goodlink Park, #02 Hillsta, #19 Montebleu, #13 Park Green, #10 People s Park Complex, #16 Seletar Park Residence, #01 1,100 to <1,300 sq ft, 18% year. Separately, their median resale price rose 2% from $497,500 in 4Q2014 to $507,500 in 3Q2015. The biggest price appreciation accrued to four-room flats in Geylang, amounting to 14% in terms of average price and 15% in terms of median price. Kallang/Whampoa took the second spot with a price appreciation of 7% in terms of average price and 13% in terms of median price (see Table 1). rage and median prices increasing. The average resale prices for fourroom flats in Bishan, for example, inched up 1% from $526,032 in 4Q2014 to $531,342 in 4Q2015. Their median resale price, meanwhile, climbed 2% from $525,000 in 4Q2014 to $537,500 in 3Q2015. HDB has yet to release the 4Q2015 resale statistics as at the date of this study. In Clementi, resale prices for fourroom flats averaged $551,000 in 4Q2015 compared with $509,750 in 4Q2014, reflecting an 8% gain this The biggest loser Table 2 Orchard Scotts, # to <1,100 sq ft, 12% MEDIAN PRICE ($) 4Q2014 Orange Grove Residences, #01 1,300 sq ft, 49% HDB, THE EDGE PROPERTY Table 1 ment. Although that market has been rather sleepy, prices have remained buoyant. Excluding land plots that are less than 1,400 sq m, the minimum area stipulated by the Urban Redevelopment Authority for GCBs, the average transacted price held firm at $1,392 psf from January to November 2015, on par with 2014 prices, which averaged $1,399 psf. Despite market doldrums, a bungalow at 35 Ridout Road was sold at a historical high price of $91.7 million in May this year, which works out to $1,251 psf over a land area of 73,281 sq ft. This year also saw one transaction above $40 million for a bungalow at 45 Belmont Road, or $1,420 psf over its land area. The latest big-ticket transaction was for a bungalow at 16 Cable Road that changed hands for $22 million in November, or $1,293 psf of its land area. Including land plots which are less than 1,400 sq m, 28 bungalows in GCB designated areas have changed hands between January and November this year, leading to a total transaction value of $618.5 million. In comparison, there were 25 St Thomas Suites, #19 Tan Tong Meng Tower, #13 ADDRESS AREA (SQ FT) Jalan Eunos 527 Sembawang Road 2,120 Phoenix Road 635 Minbu Road 807 Orange Grove Road 2,422 Anthony Road 2,174 Rivervale Link 1,346 Park Road 1,119 Seletar Road 1,077 St Thomas Walk 2,013 Thomson Road 3,240 COLLIERS, DTZ, JLL, KNIGHT FRANK Bulletproof segment 2015 had its bright moments. The high-end segment, for example, led the rebound in secondary market transactions, clocking in 17% more caveats to date than in URA, THE EDGE PROPERTY he residential market in 2015 will likely be remembered for its low transaction volume, soft rental market and rising mortgagee sales. However, 2015 had its bright moments and may be better summed up as a year of divergence, where prices headed in different directions to seek a new equilibrium. Developers sold 7,144 private homes between January and November this year. With no new project being launched in December, the full-year tally will likely be similar to last year s 7,316 units. In comparison, developers sold almost 15,000 units in Notwithstanding this, several launches such as High Park Residences and North Park Residences witnessed brisk sales. In November, meanwhile, MCC Land sold 277 of the 350 units launched at The Poiz Residences at a median price of $1,440 psf. Another positive highlight in 2015 was the pickup in secondary market transactions with 5,967 private homes changing hands between January and November, compared with 5,515 in The high-end segment led the rebound, clocking in 17% more caveats to date than in With a median resale price of $1,667 psf, prices of high-end non-landed homes are at attractive levels, comparable to prices of new projects in the city fringe and at a narrow premium to new mass-market projects. Goodwood Residence chalked up the most number of resale transactions in 2015, with 31 units changing hands at an average price of $2,371 psf. Other actively transacted projects were The Marina Bay (26 transactions at $1,889 psf), d Leedon (18 transactions at $1,670 psf), Urban Resort Condominium (17 transactions at $2,274 psf) and Aspen Heights (16 transactions at $1,484 psf). Here s more of what s hot and what s not in 2015: Although the proportion of unprofitable deals have been trending up, they are still a minority, accounting for 8.5% of secondary market transactions in In fact, the market malaise in 2015 involved mostly large units and properties with large price quantum in general as they bear the brunt of a tighter credit environment and interest rate hikes. Units of 1,300 sq ft or bigger accounted for 49% of unprofitable deals in 2015, followed by those in the 1,100 to less than 1,300 sq ft size range (see chart). On TheEdgeProperty.com, resale listings for non-landed homes that were classified as undervalued have an average asking price of above $2 million. Separately, the 11 non-landed properties put up for mortgagee sales in December averaged 1,589 sq ft in E size (see Table 2).

4 EP4 THEEDGE SINGAPORE DECEMBER 28, 2015 THEEDGE PROPERTY PROPERTY TAKE Does the MRT network affect private non-landed residential rents? Common sense would have it that the more accessible a private residential estate is, the higher its value would be. Research on the impact of accessibility on housing prices has used the Mass Rapid Transit (MRT) network as a proxy measure. From what we have sourced from the Internet, academic and commercial research published thus far has focused on two issues. One is how MRT lines affect property values spatially that is, how private resi dential values change in relation to their distance from an MRT station. The other is how property prices change in the period straddling the pre- and post-mrt station announcement. Other academic research has used the MRT network as partial inputs to develop hedonic price indices or conduct town planning studies. Many of these studies rely heavily on regression-based techniques. For this piece, we shall take a different approach and analyse the accessibility measures of major interchanges and end stations in our MRT networks. The study shall lean on the tools for basic network analysis used by sociologists. For this analysis, we will go further and correlate the various degrees of accessibility via MRT networks to rents and then see which measures of accessibility are stronger in expressing a relationship to rents (and, implicitly, capital values). In this analysis, we will focus on two stages of accessibility existing (excluding the Downtown Line 2) and future (the final state, when all the current and future MRT stations that have been publicly announced are completed). For rents, we are using non-landed properties located within a 500m radius of the MRT node. The terms station and node will be used interchangeably. Before we begin, we will need to understand the importance of nodes: Not all nodes are equally important Centrality analysis: This is to find out the most important nodes in a network. The three commonly-used measures are degree centrality, closeness centrality and betweenness centrality Degree centrality This is a measure of the degree of importance of a node and is determined by the number of nodes adjacent to it. Therefore, the more the number of adjacent nodes is to a particular node, the greater the degree of centrality. For this analysis, a node is taken as either an MRT Chart 1a Correlation between rents and degree centrality for existing MRT network Buona Vista BY ALAN CHEONG interchange or the stations at the end of each line. For example, the Jurong East, Dhoby Ghaut and Tanah Merah stations are considered nodes because at these points, other lines are joined to them. Punggol and Pasir Ris are examples of end stations. For the existing MRT network, in decreasing order of centrality, the stations and rents of non-landed private residential units are plotted in Chart 1a. It shows Serangoon as the node with the greatest degree of centra lity, followed by Bishan and Dhoby Ghaut. Intuitively, this is true because in our existing network, these are the MRT stations with the greatest number of adjacent nodes. However, when we correlate the degree of centrality with the gross rents compiled in 3Q2015, visually, we find that although the relation between the two does not contradict the logic behind this construct, the fit is rather poor. Also, from a statistical standpoint, the relationship between rents and degree centrality is not significant. This could be owing to the fact that the logic behind measure of centrality penalises nodes such as City Hall/ Raffles Place, which lose out to Serangoon in terms of the number of adjacent nodes (interchanges and end stations). Also, the Orchard MRT node is absent because under the present MRT network, this is not an interchange. Now let us look at the second state, where all the publicly announced MRT stations that are either currently in operation or planned for the future are functioning. The picture changes quite dramatically, with Dhoby Ghaut having the greatest degree of centrality, followed by Outram Park and Paya Lebar. Serangoon is relegated to eighth position. The interesting observation is that in both states, Jurong East, the much-touted regional Chart 1b Correlation between rents and degree centrality for final MRT network Chart 2a Buona Vista Correlation between rents and closeness centrality for existing MRT network Buona Vista centre with excellent links to public transport, does not quite rank high in this measure (see Chart 1b). By plotting the monthly rents against the ranked nodes, although we still get a poor fit, the correlation has improved. Nevertheless, it is still not significant to support the hypothesis that the greater the degree of centrality, the higher the rent. This suggests that this measure of centrality with regard to rents may not be applicable to our MRT network. Closeness centrality Central nodes are also important because they can reach the whole network more quickly than non-central nodes. It is a measure of how close a node is to other nodes. It is computed by taking the total number of nodes minus one and dividing that by the total number of shortest paths to each and every node in the network. To get the shortest path, we use the least number of interchanges transversed to get from the node in question to the destination node, and we do that for all nodes. The greater the number, the more central a node is. Visually, the correlation of the closeness centrality with rents looks better than that for degree centrality. For the existing MRT network, the fit is better than that of the previous measure, namely degree centrality. Nevertheless, the statistical test for correlation between rents and closeness centrality is still not significant. When we expand the MRT network to its final state, we have a slightly different picture. Bishan is no longer the node with the highest closeness centrality. Instead, the honour goes to Outram Park, followed by Orchard and Marina Bay. Unfortunately, the fit has dete riorated and even without the need to conduct any statistical test on the significance of the correlation, one can clearly see that it is almost non-existent. Therefore, as with the degree centrality case, the closeness centrality as a determinant for rents may not be applicable to our MRT network (see Chart 2b). Direct routing If we reorganise the analysis from that of nodes to the number of direct routes between major employment and shopping centres and also end stations, the ranking changes. To provide an illustration of what we mean by direct routes, say we arbitrarily start at the Pasir Ris MRT station and go from there to the City Hall/ Raffles Place (a major employment centre) station using the minimum number of routes. In this case, because the Pasir Ris MRT station is linked directly to the destination by the East- West line, the number of routes is one. If we want to get to Orchard Road from Pasir Ris CHARTS: SAVILLS RESEARCH & CONSULTANCY

5 THEEDGE SINGAPORE DECEMBER 28, 2015 EP5 If you wish to contribute columns, please write in to instead, the number of routes is two, as we have to change lines at City Hall. Using the closeness centrality measure, the fit is much better than our previous two measures. Nevertheless, on the correlation front, the link between rents and the direct routes between major centres is still weak for three-bedroom units. For two-bedroom units, the relationship becomes significant only if one relaxes the level of significance from 5% to 10% (see Chart 3). Ignoring statistics for the moment, if we are to use direct routing to determine rental to MRT connectivity ranking, we find the City Hall/ Raffles Place node come out on top of the pecking order. Again, Jurong East does not quite rank high; in fact, it is behind Woodlands. Number of stations Thus far, all the above measures do not appear to show any convincing correlation between rents and MRT nodes or direct routes between major activity centres. As a final push (which, we must highlight, runs the risk of data-mining for the sake of discovering a pattern), we did get a significant correlation between rents and the number of stations between major activity centres. The fit is also the best amongst the various measures that we have thus far used. We have used the closeness centrality measure as the basis of computation. As for the number of stations between the major activity centres, taking the Orchard MRT station as an example, we counted the total number of stations to get there from end points such as Pasir Ris, Woodlands, the Tuas Link and other activity centres such as City Hall/Raffles Place (see Chart 4). As this measure gives the best results, it appears to suggest that tenants place more emphasis on choosing an abode that has the least number of stations between them and major interchanges or end stations. This also means the least number of start-stops, which directly translates into minimal travel time. As there is logic behind this correlation, the risk that this outcome is the result of pure datamining is lessened. What is of interest is that a node like Paya Lebar is currently underperforming. This could be so because rents there are reflective of 3Q2015 conditions and as this hub is still in the process of development and gentrification, rents should pick up once developments such as Paya Lebar Central come to fruition. Betweenness centrality The betweenness centrality counts the number of shortest paths that passes through one node from other nodes. Nodes with high betweenness are important in communication and information diffusion. The betweenness centrality is computed as follows: We start of by counting the number of shortest paths from one node to another, then count the number of shortest paths between one node and another that passes through the subject node. For this measure, we compare two nodes, namely City Hall/Raffles Place and Jurong East. To illustrate how the betweenness centrality is computed for Jurong East, we assume a commuter at Woodlands wants to get to Tuas Link. The total number of shortest paths between the two nodes is one (here, there are no two routes with the same number of paths). The total number of shortest paths that pass through Jurong East is also one. The division of the latter to the former gives one as the answer. By summing up all the ratios for every node pertaining to any pass through at Jurong East, we get the betweenness centrality for it. The higher the betweeness centrality, the more important the node is in terms of communication and information diffusion. Computing the betweenness centrality manually is a very tedious process, so for this exer cise, we restricted ourselves to two nodes for comparison purposes. As previously mentioned, these are City Hall/Raffles City (downtown) and Jurong East. These nodes were also chosen because of the hype surrounding how Jurong East would develop as an important regional centre. We wanted to use this measure to extract information on how Jurong East measures up to the downtown node in terms of it being able to fulfil its function of information infusion and dissemination. For the City Hall/Raffles Place node, the betweenness centrality measure is 29, while that for Jurong East is 13, clearly showing that the former is far much more important than the latter. This finding is relevant because it appears to throw cold water on the enthusiastic belief that Jurong East, as a regional centre, can carry its own weight as a disseminator of information. Owing to its much lower level of connectivity, this regional centre is going to find it difficult to come close to our traditional City Hall/Raffles Place node. Therefore, for Jurong East to rise up the ranks, much more has to be done to improve the direct paths between it and other major nodes and to make these paths the shortest ones that pass through the regional centre. It does not mean that Jurong East cannot become an even more vibrant regional centre. But to turn that into reality may be a very expensive exercise as the capital expenditure needed to have additional MRT networks to improve accessibility to this centre will be gargantuan something that can only be justified if massive pump-priming works are needed to boost the economy. Conclusion This brief analysis of centrality using our MRT network and social network analysis can be applied to quantify the various accessibility measures. However, once we correlate the nodes with the rents of non-landed properties located within a 500m radius of MRT stations, most of the relationships turn out weak or insignificant. Using rents from apartments that are located near stations that are currently operational, the only significant relationship is that of rents with the number of MRT stations between major interchanges and end stations. In the analysis of movement from major nodes to major nodes, we find that the lower the number of MRT stations from one to the other, the higher the rents. This implies that tenants place emphasis on the minimal number of stop-go interruptions in their travel and not how well connected their MRT station is. This stop-go interruption can also be inter preted as travelling time. This is enlightening because we have constantly been bombarded by a barrage of talk that if an MRT station is planned near a particular development, prices/rents will go up. It may, or it may not, but if every major housing estate is ultimately going to be served by an MRT station located within 400m of it, then the location factor becomes trivial. It may not help boost rents much if a property is located at a node from which to get to other major nodes, one has to traverse many stations. A property with comparable physical attributes located further from other nodes (distance wise), but from where the traveller needs to traverse fewer stations to get to the other nodes should command higher rents. For example, two properties are located 8km from Orchard Road. If you need to make stops at 20 MRT stations to get from one property to Orchard Road, but just five stops to reach the same destination from the second property, the latter property will command higher rents. Given that the traditional North-South and East-West MRT lines have less frequent startstops, drawing from what we have discovered, could it be that properties located near stations Chart 2b Correlation between rents and closeness centrality for final MRT network Chart 3 Correlation between rents and closeness centrality for final MRT network Chart 4 Buona Vista City Hall Correlation between rents and closeness centrality in terms of total number of stations (final MRT network) along these lines will continue to command higher rents than those located near the upcoming MRT lines (which are populated with more stations per line)? If the answer is yes, then Orchard Road and City Hall/ Raffles Place nodes can still be expected to fetch the highest rents in future. Also, properties located along the first MRT networks are also likely to command higher rents than comparable ones located along new stations. It is also interesting to note that the node with upside rental potential is Paya Lebar. Rents around this node are presently underperforming, probably because the area is still in the early stages of development and gentrification. However, with the makeover of the district and improved accessibility when the final MRT lines join up, the probability of rents improving from the current baseline is high. E Alan Cheong is head of research and consultancy at Savills Singapore. He can be reached at alan.cheong@savills. com.sg.

6 EP6 THEEDGE SINGAPORE DECEMBER 28, 2015 THEEDGE PROPERTY PROPERTY TAKE Property prices in Iskandar Malaysia hold steady in a mixed market Property prices in Iskandar Malaysia are holding steady, according to data from KGV International Property Consultants, a property valuation firm based in Johor Baru. This is in line with data from the Malaysian National Property Information Centre and Valuation and Property Services Department, where the housing price index for Johor has remained flattish for the past year. For residential property, it is currently operating in a two-tier market. The luxury high-rise segment is struggling and this is the segment that primarily targets Singaporeans and Malaysians working in Singapore. On the other hand, the mass market segment is seeing robust transaction activity with price increases seen in some areas. Young Malaysians are seeking to get onto the property ladder and with a young median age in Malaysia, the demand for mass market homes is strong. Affordability, however, means that many locals can only afford to purchase homes in the RM500,000 ($163,321) to RM600,000 price range. This does not overlap the luxury high-rise segment, which is now suffering and with which the Singapore public and media tend to be more familiar. Transaction data in 1H2014 shows that only 17% of property RYAN KHOO & SAMUEL TAN transactions in Johor were at values above RM500,000, which is significant but not representative of the entire market. Moving forward, the property market will be encouraged by population growth, driven by continued business investments and job creation. Iskandar Malaysia s population has grown to an estimated 1.6 million to 1.8 million in 2015 from 1.3 million in Recently, Johor has seen an influx of multinationals expanding or relocating here, owing to the ease of doing business, weaker ringgit and proximity to Singapore. Many Singapore-based MNCs, unable to expand because of the high cost and lack of options in the city state, are looking at the next best thing, which is an expansion of operations in nearby Iskandar Malaysia. Examples include Microsoft announcing that it will develop a data centre in Sedenak, Coca-Cola relocating from Tuas to Iskandar Malaysia and China s Alibaba reportedly looking to start a logistics hub in Johor. Fuji Oil Asia announced in September that it will build a food products plant in Iskandar Malaysia to support its long-time client, chocolate maker Hershey s. The plant will be operational in Eternal Materials Co, a Taiwanese synthetic polymers manufacturer, will be setting up a new manufacturing facility to be operational by Italy s Unigra announced in October that it will open a food oils and fats production facility in Johor. There have also been various announcements by Korean, Chinese, Russian, US and Japanese MNCs to set up their facilities in Johor. We expect 1Q2016 to be a busy period as Ascendas Nusajaya Tech Park opens its doors and some 20 manufacturers start their operations there. It is a buyer s market The slowdown in property prices in 2015 compared with the boom year of 2013 (transactions in 1H2015 fell 14.6% in volume and 31.5% in value compared with 1H2014) is attributed to the plethora of choices that have now come onto market. Buyers today are spoilt for choice, whether in the primary or secondary market. Property developers have become more creative in their Prices of residential houses in selected schemes in Johor Baru (RM 000) Note: Prices shown are based on both transacted and listed prices on a sample size of mentioned location/project Malaysian property price index (1Q2000 to 2Q2015) 0 1Q2000 3Q2000 1Q2001 3Q2001 Johor Selangor 1Q2002 3Q2002 1Q2003 3Q2003 1Q2004 3Q2004 1Q2005 3Q2005 Kuala Lumpur Penang marketing activities and more discounts are on offer. Various activities and events are happening every weekend across Johor Baru, enticing buyers to come over and see what is on offer. Despite the slowdown, it is important to remember that many developers are still flush with cash from the earlier boom years and the risk of non-completion is low, considering that many developers in Malaysia today are in a much better financial position, with relatively low gearing and foreign debt, unlike during the 1997 Asian financial crisis. With high employment rates in Malaysia and Singapore, large-scale fire sales are not expected at this point. Even in the higher-end segment, many AREA 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q STANDARD TWO-STOREY TERRACED HOUSES IN SELECTED SCHEMES Taman Bukit Indah East Ledang ,100 1,200 1,300 1,300 1,350 1,350 1,350 Horizon Hills Taman Molek Bandar Seri Alam (Type Sapphire) Taman Ponderosa STANDARD TWO-STOREY SEMI-DETACHED HOUSES IN SELECTED SCHEMES Taman Bukit Indah East Ledang 1,700 1,800 1,900 2,000 2,100 2,200 2,200 2,300 2,400 2,400 2,400 Horizon Hills 1,480 1,500 1,500 1,550 1,580 1,580 1,600 1,600 1,650 1,650 1,650 Austin Heights 1,000 1,100 1,100 1,200 1,200 1,200 1,250 1,300 1,400 1,400 1,400 Taman Molek ,000 1,000 Bandar Seri Alam (Type Sapphire) ,000 1,000 Taman Ponderosa ,000 1,000 1,200 1,300 1,300 1,400 1,500 1,500 Senibong Cove 1,100 1,100 1,200 1,200 1,300 1,400 1,500 1,500 1,500 1,600 1,600 TWO-STOREY CLUSTER HOUSES IN SELECTED SCHEMES Taman Bukit Indah 1,000 1,100 1,200 1,250 1,280 1,280 1,300 1,300 1,200 1,200 1,200 Horizon Hills ,000 1,100 1,200 1,250 1,280 1,300 1,300 1,300 1,300 Austin Height Senibong Cove SELECTED APARTMENTS/CONDOMINIUMS Sky Executive (750 sq ft) Ujana (1148 sq ft) Straits View (1600 sq ft) Tropez Danga Bay (958 sq ft) Danga View (1038 sq ft) Molek Pine 2 (1469 sq ft) Q2006 3Q2006 1Q2007 3Q2007 1Q2008 3Q2008 1Q2009 KGV-INTERNATIONAL PROPERTY CONSULTANTS RESEARCH 3Q2009 1Q2010 3Q2010 1Q2011 3Q2011 1Q2012 3Q2012 1Q2013 3Q2013 1Q2014 3Q2014 1Q2015 property owners are Singa pore dollar earners and have holding power. But with high household debt in Malaysia and Singapore, consumers ability to take on more property deals as investments is doubtful. Only demand from genuine homeowners will be constant and that is where you will see the mass market home segment perform in Malaysia. The residential property market will likely remain in this stagnant two-tier environment until there is a significant change in market conditions. Looking for catalysts in 2016 Optimists are looking forward to the upcoming high-speed rail and rapid transit system announcements in 2016 to drive up market sentiment. The sites for HSR in Singapore and Iskandar Malaysia have been identified, with Singapore s Land Transport Authority and Malaysia s Land Public Transport Commission showing progress in the construction planning. The start of the physical works by end-2016 will give the Iskandar Malaysia property market a big confidence boost. Pessimists point to the weak global economy and political uncertainty in Malaysia as reasons to hold back. The high incoming residential supply (until 2018) in Singapore and Iskandar Malaysia also weigh upon any possibility of a quick recovery. Savvy investors may, however, consider the bad environment as the start of a bargain-hunting phase and prepare themselves to take positions. E Ryan Khoo is co-founder of Singapore-based Alpha Marketing, a real estate investment consultancy that focuses on the Malaysian market, especially Iskandar Malaysia. The views expressed here are his own. He can be contacted at ryan.khoo@ alphamarketingsg.com. Samuel Tan is executive director of KGV International Property Consultants, a property consultancy firm based in Johor Baru, with offices in Kuala Lumpur and Penang. He can be contacted at samuel.kgvlsh@gmail.com. NAPIC

7 THEEDGE SINGAPORE DECEMBER 28, 2015 EP7 THEEDGE PROPERTY DEAL WATCH Unit at Concourse Skyline selling at 2012 prices SAMUEL ISAAC CHUA/THE EDGE SINGAPORE BY TAN CHEE YUEN Prospective buyers looking for waterside living in the city might be keen on this listing. A 786 sq ft mid-floor unit at Concourse Skyline is listed on TheEdgeProperty.com at $1.25 million, or $1,590 psf. Concourse Skyline is a 99-year leasehold apartment on Beach Road comprising 360 units. The asking price is on a par with a comparable past transaction in December 2012, when another 786 sq ft unit on the seventh floor changed hands for $1.25 million, or $1,591 psf. Completed in 2014, Concourse Skyline s immediate vicinity comprises Marina Promenade and Marina Reservoir, Pan Pacific Serviced Suites Beach Road and historic shophouses in Kampong Glam housing ethnic shops, eateries and pubs. The nearest MRT station is Nicoll Highway of the Circle Line, which is 200m from the development. Concourse Skyline is also within walking distance from the Bugis MRT station and Bugis Junction shopping mall. Schools within 1km of the apartment include St Margaret s Primary School and Farrer Park Primary School. There were two rental contracts involving 700 to 800 sq ft units in the development this year. Rents for the two units averaged $3,750, or $5 psf a month. Based on the listing price of $1,590 psf, the average rent translates into a potential gross rental yield of 3.6%. E Scan the QR code for value deals at Concourse Skyline and nearby projects As we are not party to the contract between the client and agent, we are not able to verify information provided by the agent Table 1 Table 2 Historical transactions for 786 sq ft units at Concourse Skyline CONTRACT DATE FLOOR PRICE ($) PRICE ($ PSF) Dec 14, 2012 Low 1,250,000 1,591 Dec 8, 2010 Mid 1,020,500 1,299 Feb 24, 2010 High 1,523,795 1,939 Feb 2, 2010 Mid 1,405,000 1,788 *Low floors: L1 to L7; mid floors: L8 to L15; high floors: L16 and above URA, THEEDGEPROPERTY.COM Rental transactions for 700 to 800 sq ft units at Concourse Skyline in 2015 LEASE DATE MONTHLY RENT ($) ($ psf) Sept , June , URA, THE EDGE PROPERTY A 786 sq ft mid-floor unit at Concourse Skyline is listed on TheEdge- Property.com at $1.25 million, or $1,590 psf

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