Singapore Property Weekly Issue 164

8/12/2019 Singapore Property Weekly Issue 164

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Issue 164Copyright 2011-2014 www.Propwise.sg. All Rights Reserved.
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CONTENTS

p2 The 3-3-5 Rule and Financial Freedom

p9 Singapore Property News This Week

p15 Resale Property Transactions

(June 25 July 1 )

Welcome to the 164th edition of the

Singapore Property Weekly.

Hope you like it!

Mr. Propwise

FROM THE

EDITOR
mailto:[email protected]://www.propwise.sg/advertise/http://www.propwise.sg/advertise/mailto:[email protected]


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SINGAPORE PROPERTY WEEKLY Issue 164

Page | 2Back to Contents

By Gerald Tay (guest contributor)

In a recent blog post, fellow contributor

Property Soulshared her rules on buying a

property you can afford,what she called the

3-3-5rule. APropwise.sg reader JC wrote in

to commentthat Rule #3 (the purchase price

of the property should not exceed five times

your annual income) was unrealistic and

overly conservative. In this article Id like to

share my views on some of his comments

(whichIveextracted in italics below).

The views in this article are entirely of myown. They do not represent the views of

either Property Soul or Propwise.sg. Any

feedback should be directed to me

[email protected].

The 3-3-5 Rule and Financial Freedom
http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/is-paying-just-5-times-your-annual-income-for-a-property-realistic/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/http://www.propwise.sg/can-you-afford-your-home-a-simple-affordability-test/


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Is the 3-3-5 rule unrealistic?

JC: In a nutshell, the 3-3-5 rule is skewed

towards an unrealistic scenario which is

unlikely to happen in Singapore (for Rule#3). We need to be realistic about the current

pricing, current market, and hopefully,

capitalize or gain from it through long term

investment or enjoyment of the property.

The context of 3-3-5 rule (except Rule #1) is

meant for personal consumption, not as aninvestment metric. I believe Property Soul is

primarily referring Rule #3 as a guide to

buying a property purely as a home, and

therefore prudence and affordability are

important ratios to look at, hence the prudent

5x annual income ratio.

If its purely for investment purposes (i.e. a

rental property), one would use more

important metrics (i.e. ROI after debt service)

and not a 5x annual income ratio (or Rule #2)

to measure its investment worth or value.

Thus, I think itsvery realistic to use Rule #3ifone is buying an HDB flat for example. If a

couplescombined income is $30,000 a year,

5x income ratio means a $150,000 HDB flat.

The couple will still have affordable choices

coming from the many HDB BTO sales

recently. BTO flats are very affordable tomany young Singaporeans (please dontget

political with me on this) if these young

couples are prudent from the very start.

Ive seen young couples whose combined

incomes are less than $36,000 a year, yet

purchase a new large 5-bedroom HDB flat

costing $500,000. Thats almost 14x the

annual income!


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Some of these young income earners can

choose to buy a cheaper 3-bedroom or 4-

bedroom BTO HDB flat in a non-matured

estate, but they rather choose a more

expensive home for face-saving. And yet,

they complain that HDB flats are expensive

and unaffordable!

Why spend on an expensive private

home?

JC: Example: a couple earns $15,000 pemonth, which annually would be $180,000. At

five times, they can only afford a property that

is $900,000, which can only buy a 2-bedde

condo at an RCR or OCR location in

Singapore.

Exactly. If a couple can only afford a

maximum $900,000 home on a prudent 5x

annual income ratio, then why the need to

spend conspicuously on an expensive private

home?

Surely a couple with that kind of earning

power can easily affordwithout the need to

slog at their jobs a cheaper re-sale HDB

instead?

Or is the purchase for reasons of peer

pressure and societys expectations which

dictate a $15,000 monthly income earner

cannot live in an HDB flat (re-sale) because

itsconsidered below theirstandards?

Surely, this couple can easily find and afford alarge 5-room re-sale flat which will meet their

future needs, in a matured estate with

excellent location with a price budget of

$900,000 or even lesser?

The more we earn, the richer we are?

JC: Rather, many couples CAN afford

properties at $1.2 to $1.5 million and above

when their income is approximately $10,000

per month, which is a 10x rather than 5x ratio.


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With savings of $400,000 to $500,000

(approximately 30% of $1.5mil), they can

easily afford the mortgage at $3,000 pe

month (2% interest rate over 28 years).

Many people have terrible misconceptions on

Wealth. Many think Wealth is the more we

earn, the richer we are.How wrong this is.

Financial wealth is not defined by how much

we earn. It is defined by what expenses we

have. Wealth is thus defined by how long wecan survive if we choose not to work, and still

afford paying our expenses at the same time.

A couple earning $15,000 a month combined

employment income is middle-class.

Another earning $30,000 a month inemployment income could still be middle-

class.

An individual earning $2,000 in passive

income from investments to cover $2,000 of

monthly expenses with no bad debt could be

richer than the two examples above.

Dont misunderstand my words on middle-

class earners. I highly respect people who

lead hardworking but humble lives, people

who may lead middle-class lives but

contribute tremendously back to help society

as a whole.

Whom I detest most - lazy people whocomplain more than contribute and yet

demand more from society, e.g. asking for

more pay without justifying ones skills and

contributions.

Why do the 99% always complain that

theyveno money or no money to invest?

One of the habits that is common among all

wealthy people is that they live below their

means.


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This means that they buy a small car when

then can afford a medium sized car, then buy

a medium sized car when they can afford a

big car, they buy a big car when they can

afford a small helicopter and they buy the

helicopter when they can afford the private

et. Theyrenot eager to own expensive toys

to boast to the world that theyvearrived.

When the 1% makes money, they plough the

profits back to buy more investments that willput more passivemoney into their pockets.

The 99% after making their profits will first

think what bigger car to drive and which

bigger house to live in.

When yourerich, you can have a lot of stuff

and still be rich enough to afford more stuff.When youre middle class or working class,

you cannot. If you live within your means,

youd be surprised how much you can

ultimately have to invest when opportunity

comes and be financially free.

Amassing your savings to invest

JC: A savings of $400,000 is not difficult to

achieve for a couple (both university grads)who have worked for 10 years possibly with a

little help from their parents, say $50,000 to

$80,000.

Itsdefinitely not difficult for high earners like

university graduates to amass huge savings if

they spend prudently. And this powergives

them an added advantage to gain financial

wealth or freedom much earlier than lower

income earners. They should not squander

away such an invaluable opportunity on

conspicuous purchases like an expensive

private property or a new car.

If ever my children come to me for a $50,000

to $80,000 loan, saying they lack sufficient

funds for the down payment on a nice condo

SINGAPORE PROPERTY WEEKLY I 164


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theyve been eyeing as a home, Ill slap

myself hard on my own face TWICE! The

first slap is for failing my obligations as a

parent to impart proper monetary values. The

second slap is a punishment for raising mykids into spoilt brats!

JC: If we stick to this rule, we will NEVER buy

a property (condo, that is) in Singapore,

unless we earn $25,000 per month income

combined for a couple. (i.e. $12,500 each!)

Thendont. Why is it a necessity for everyone

to own a private property for own stay? Is it a

Singaporean dream created by marketing

propaganda over the years?

Dont get me wrong. Im not saying one

cannot spend to live in a nice and beautiful

cage in the sky. What Im saying is if you

really have the means, go ahead and buy one

for your own stay. The government will be

more than happy that you contributed more to

GDP growth and taxes from your purchase.

But if youre living a slave life in your own

castle and your only means of paying off

that huge 30 year mortgage loan comes from

a 15-hour day job, you might want to

reconsider.

I do own a private property myself as a home

currently but Im financially wealthy. My

home mortgage loan is paid down by mytenants (rental income) from my other

properties. I have a choice between working

and not working every single day.

So why am I telling you this?

Well, I suppose I want to let you know it ispossible for you to focus your limited

monetary resources to build and increase

your financial wealth through sensible

investments, rather than spend unnecessarily

SINGAPORE PROPERTY WEEKLY I 164


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on material riches (middle-class wants) that

decrease your wealth.

Im a regular family guy who wants pretty

much the same things as anyone else. I want

to be in control of my life and I want to have a

good life. I want to be rich with my time and

build positive relationships with the people

around me.

But I want you to know this: I do not possess

any special characteristics compared toanyone else and neither do I consider myself

lucky. All I did was apply myself to do

something that I wanted to do. This was to

become financially free from an employer.

I believe anyone can do this with the right

attitude and choice.

By guest contributor Gerald Tay, CEO o

CREI Academy Group, and a professiona

real estate investor whose real estate

portfolio is now worth over $8 million and

generates a 6-figure sum in rental income

annually. He exposes widely-held property

investment myths that are highly ineffective increating wealth and prevent a comfortable

retirement for the ordinary investor.

http://www.crei-academy.com/http://propertymarketinsights.com/http://www.crei-academy.com/http://www.crei-academy.com/http://www.crei-academy.com/http://www.crei-academy.com/http://www.crei-academy.com/


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Singapore Property This Week


Residential

H D B r e s a le p r ic e s lo w e s t in t w o y e a r s

In June this year, HDB resale prices have

fallen 6.1 per cent year-on-yearthe lowest it

has been since April 2012. According to the

Singapore Real Estate Exchange (SRX),

there was a 0.6 per cent month-on-month fall

in June. Not only so, data from SRX showed

that 1,315 HDB flats changed hands in June

this year, compared to the 1,320 resale flats

that were transacted in May. For five months

straight, HDB resale prices have been falling.

While resale prices of HDB executive flats

have increased by 1.3 per cent month-on-

month in June this year, resale prices of

three, four and five-room flats have dipped.

According to Eugene Lim from ERA Realty,

prices are expected to fall further as cooling

measures take effect. Ong Kah Seng from

RST Research agrees that prices may

continue to stabilise in the upcoming months

as resale flats become more affordable.

Market analysts believe the increased

restrictions on mortgage loans, together with

the surge in built-to-order flats have lowered

demand for resale flats. Also, more home

owners may look to selling their flats since the

rental market has been weak. This may have

pushed supply in excess of the demand.

(Source: Business Times)



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U n s o l d B a l m o r a l c o n d o u n i t s u p f o r b u l k

sale

Under the governmentsQualifying Certificate

rules, developers who wish to extend their

sales period have to pay extension fees two

years after the completion of a project. To

avoid having to pay extension charges, Hiap

Hoe Group has put up 48 units in its District

10 project, Treasure on Balmoral for bulk

sale. The units are going for a guided price of

$1,850 per square foot or $191.4 million in

total. The project is due for an extension in

November this year as it was issued its

temporary occupation permit in November

2012. Market analysts believe that discounted

bulk sales will be popular among high-endprojects due to the weak market demands.

According to Nicholas Mak from SLP

International, high-end project developers

may not recover their losses in the short term

if the cooling measures are not lifted.

Nonetheless, Steven Ming from Savills

Singapore which is the sole marketing agent

for Treasure on Balmoral expects the high-

end property market to pick up soon.


M a rk e t f o r e x e c u t i v e c o n d o s s h r i n k i n g

The market for executive condominium units

may be shrinking. A state tender for an

executive condominium site in Sembawang

Avenue has only received four bids. The site

is expected to yield 660 units. The tender was

won with a $320.11 per square foot per plot

ratio bid. This is lower than the winning bid of

$350 per square foot per plot ratio for a

separate executive condominium site in

Sembawang that was sold in January. The

site that was sold in January received six bids

despite its less ideal location.



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It was located further away from Sembawang

MRT Station, along Canberra Drive.

According to Ong Teck Hui from JLL, the

$320.11 per square foot per plot ratio bid is

the lowest winning bid for executivecondominium sites since November 2012.

Not only so, there was also fewer bids made,

compared to the average of 8.6 bids made for

each executive condominium tender that

closed in 2013. This may reflect developers

weakened interest in the market as demandfor executive condominium falls. According to

market analysts, the fall in demand comes as

no surprise as the governments cooling

measures take effect.


Commercial

D em a n d f o r s h o p h o u ses f al l an d f o rc es

p r i c e s d o w n

According to a report by Knight Frank,demand for shophouses is slipping, and this

may force prices of shophouses down as the

gap between sellersasking price and buyers

willingness to pay widens. The average price

of freehold shophouses have fallen by 10.8

per cent from $3,626 per square foot in H22013 to $3,235 per square foot in H1 this

year. Not only so, prices of shophouses are

pushed down further as their demand from

food and beverage (F&B), and retail

businesses have weakened. In the H1 this

year, 40 shophouses were sold, compared tothe 49 transactions that were made in H2 in

2013.



13/16



Mary Sai from Knight Frank said that sellers

may be unwilling to lower prices because

conserved shophouses in central locations

are scarce and thus are not typically available

for sale. Furthermore, current shophouseowners may be receiving sufficient rental

yields and thus may be less willing to sell off

their units at a lower price.


St r a t a- t it le d s h o p s in T o a Pa y o h f o r s a le

A strata-titled shop located at Block 190 Toa

Payoh Central is on sale by tender for $65

million or $11,245 per square foot. The 5,780

square feet shop is subdivided for lease to

four tenants, including Watsons. The shop still

has a lease of 57 years and its tender will

close on August 12. According to Savills,

which is the marketing agent for the shop, the

HDB hub is the only retail centre which

serves the 109,000 Toa Payoh residents.

Eugene Lim from ERA Realty believes that

the shops along Toa Payoh Central enjoy a

high human traffic due to their prime location

at the HDB hub. Hence the shop at Block 190is expected to fetch a high price. According to

PropNex, the premium price can be justified if

its rental yields are about 3 per cent.


Ti gh ter s u b let ti ng r u les f o r i nd u st ri al

p r o p e r t ie s

JTC has revised its policies to promote

productive use of scarce industrial land.

According to the new subletting rules,

industrialist can only lease out 30 per cent of

their total gross floor area instead of 50 per

cent of it. According to JTC, this new ruling

will be implemented to ensure that tenants

continue to occupy the majority of the space



14/16



for their own productive use. JTC believes

that the 30 per cent gross floor area space

will be sufficient for a company to use as

buffer to cater to fluctuating business

volumes. Also, tenants who rent industrialspace directly from JTC are no longer allowed

to sublet any of the space. JTC said that

tenants who no longer require the space can

renew their tenancy for a lower quantum

when their current term ends. This new policy

will take effect from October 1 this year,however, tenants and lessees have till 2017

to make the necessary adjustment. Nicholas

Mak from SLP International believes that

following the policy change, current sub-

tenants may move to new spaces such as

strata unit factories.


R ei t s a c q u i s it i o n m a y b e s l o w e d b y JTCs

r e v is e d s u b l e tt i n g p o l i c y

Real Estate Investment Trusts (Reits) may be

affected by JTCsrevised policy. The revised

policy states that an anchor tenant must

occupy at least 70 per cent of the gross floor

area. This policy is expected to affect sale

and leaseback transactions. Derek Tan from

DBS Group equity research believes that the

revised policy will temper Reits acquisition

and portfolio expansion. On the other hand,

JTC has justified its policy move by stating

that it hopes to ensure that the bulk of its

space will be rented out to industrialists so as

to maximise the land for industrial use. JTC

also said that it may allow multiple anchor

sub-tenants if a Reit is unable to find a major



15/16



anchor tenant to occupy 70 per cent of the

space. However, each of the sub-tenants still

has to occupy at least 1,500 square meters

and has to meet its productivity criteria.

Desmond Sim from CBRE research believes

that this policy change will lead to the

formation of an anchor tenantsmarket, and

Derek Tan from DBS notes that the policy

may attract better quality tenants that are

longer-lasting.


http://www.moneymatters.sg/


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S G O O ssue 6


Non-Landed Residential Resale Property Transactions for the Week of Jun 25 Jul 1

NOTE: This data only covers non-landed residential resale propertytransactions with caveats lodged with the Singapore Land Authority.Typically, caveats are lodged at least 2-3 weeks after a purchasersigns an OTP, hence the lagged nature of the data.

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

3 TWIN REGENCY 980 1,790,000 1,827 FH5 THE SPECTRUM 2,056 1,820,000 885 FH

5 ONE-NORTH RESIDENCES 1,076 1,345,000 1,250 99

5 FABER CREST 1,302 1,285,000 987 99

5 DOVER PARKVIEW 936 1,100,000 1,175 99

9 GRANGE INFINITE 2,680 6,432,000 2,400 FH

9 ST THOMAS SUITES 2,013 3,680,000 1,828 FH

9 URBANA 1,012 1,830,000 1,809 FH

9 8 RODYK 721 1,480,000 2,052 FH

10 SOMMERVILLE PARK 1,959 3,088,000 1 ,576 FH10 SOMMERVILLE GRANDEUR 1,938 2,960,000 1,528 FH

10 HOLLAND TOWER 1,873 2,150,000 1,148 FH

10 HOLLAND MEWS 904 1,448,800 1,602 FH

11 NINETEEN SHELFORD ROAD 829 1,310,000 1,581 FH

12 SUNVILLE 1,141 1,270,000 1,113 FH

12 KEMAMAN POINT 861 960,000 1,115 FH

14 STARVILLE 1,216 1,180,000 970 FH

14 LE CRESCENDO 915 1,038,000 1,135 FH

14 MERA EAST 883 1,020,000 1,156 FH

14 SIMS RESIDENCES 1,216 1,000,000 822 99

15 AALTO 1,528 2,960,000 1,937 FH

15 AMBER RESIDENCES 1,798 2,450,000 1,363 FH

15 CASUARINA COVE 1,464 1,800,000 1,230 99

15 EVERITT GREEN 1,389 1,250,000 900 FH

15 LE CONNEY PARK 1,109 1,155,000 1,042 FH

Postal

DistrictProject Name

Area

(sqft)

Transacted

Price ($)

Price

($ psf)Tenure

15 LE CONNEY PARK 1,195 1,111,000 930 FH15 PALM GALLERIA 1,001 1,000,000 999 FH

15 ASPEN LOFT 829 870,000 1,050 FH

15 PARC ELEGANCE 409 622,000 1,521 FH

16 COSTA DEL SOL 1,561 2,050,000 1,313 99

16 BAYSHORE PARK 1,292 1,398,000 1,082 99

16 VENEZIO 1,227 1,110,000 905 FH

16 TANAH MERAH MANSION 969 910,000 939 FH

18 SAVANNAH CONDOPARK 1,227 1,060,000 864 99

19 NOUVELLE PARK 1,851 1,600,000 864 FH19 KOVAN MELODY 1,216 1,390,000 1,143 99

19 THE OLD HOUSE 1,184 1,090,000 921 FH

19 EVERGREEN PARK 1,044 901,800 864 99

20 TRESALVEO 592 920,000 1,554 FH

21 ASTOR GREEN 1,528 1,500,000 981 99

21 HIGH OAK CONDOMINIUM 990 880,000 889 99

22 CASPIAN 893 1,060,000 1,186 99

23 MI CASA 1,367 1,330,000 973 99

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