Singapore Property Market Direction - April 2012 by Gian Sam

Table of Contents Market Update [1] HOME GROUND ADVANTAGE [Page 4 – 20 ]

Editor Sam Gian www.update.sg Mr O (Optimist) said to his friends: ‘see, the statistics show the market potential to stage a rebound soon’; while Mr P (Pessimist) said: ‘the data is pointing towards a likely collapse’. Whereas, Mr R (Realist as in a pragmatic investor) said: ‘oh, it can go either way; let’s wait and see which way the market goes before we plan our next move.’ Whatever it is, all the players have a good one-third chance of correctly guessing how the metaphorical elephant looks like. And a one-third chance looks like a high probability. Or is it? I want to be as candid as it’s socially acceptable in offering my perspective in the forecast of the property market in the near term (of say 3 to 6 months) by looking at what had already happened in the past months and years through official statistics from URA. I’m operating on the premise that recent market occurences will provide clues to the emerging trend. As every real estate salesperson needs a Geographical Target Area (GTA) or GTAs to operate in, such foresight will enable them to stay ahead of the competitive curve. This has always been the true objective of this free magazine - to share insights into inherent RISKS in real estate investment. Those risks do not manifest themselves presently does not mean that they are not lurking around the corners or they don’t exist anymore like the Plague. Therein lies another level of danger because very few people are actually discussing, let alone debating, the different interpretations of the official statisitcs when they ought to be – hence the analogy of Mr O, P and R above. I have no issue with real estate salespersons giving lay opinions when plying their trade. It is easy and also socially acceptable for salesperson to give commence on market potential and then follow by some standard sales pitches. But other than such innocuous remarks, one has to come up with deeper technical analyses to back themselves up if what they are saying is going to lead to some innocent listeners bearing the full consequence of a long-term financial commitment. At the very least, these people should be told from the onset the meaning of caveat emptor, i.e. you buy at your own RISKS. – which means I only have a one-third chance of getting the predication right.

Akan Datang ! Q3 2012

Sam Gian’s FREE Seminar

‘WHERE IS THE MARKET HEADING’

[2] TRAIL BLAZER OR MIDDLE-CLASS FOLLY? [page 20 – 33] [3] A RUDE AWAKENING OF THE MIDDLE-CLASS DREAM? [page 34 – 50 ] [4] TUG-OF-WAR BETWEEN LANDLORD & TENANT? [Page 51 – 64 ] continue… … … Mr O may find the statistics rather prickly; Mr P may be further depressed; while Mr R may decide to go on an extended holiday. But this is not my point, which is about adopting one’s own perspective towards the property market and in processing the official statisitcs. We must realise that the market is the metaphorical elephant and no matter how smart we are, the elephant is larger than us and we will always be blind-sided by it. But then again, there isn’t a ‘bad time’ to buy either. If one has already studied and understood the RISKS and decide that they have the appetite and the muscle to take that much of calculated RISKS, then go ahead and do it. But, if one had followed the crowd blissfully and eventually found out that they couldn’t exit the market so easily or rent out the property at their expected rate – a situation which we call the ‘liquidity RISK’ – it would be a real tragedy.

PRIME TIME SEMINAR ‘WHERE IS THE MARKET HEADING’ FREE Seminar by Sam Gian on 17 August 2011 – two back-to-back FULL HOUSE attendances – morning & afternoon – on the same day

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

A blind man said to his friend: “I have not seen colours before; can you tell me how BLUE look like?” His friend couldn’t answer the question as there was no basis to begin any description. What is the MORAL of the story? “You can’t describe COLOUR to someone who has not seen it before, and vice versa.”

And now, I am about to describe to you the TRUE COLOUR of the real estate market.

OVERVIEW I have said on many occasions to a wide audience that we are witnessing the onset of a ‘downward trend’ in Singapore’s property market. In fact, at my last half-yearly ‘WHERE IS THE MARKET HEADING’ seminar held on 17 August 2011 (the next one coming in 3rd quarter of 2012), I concluded that foreign buyers had contributed to the surge in private home sale volume and private home prices, despite the host of calibrated measures that were aimed at the generic direction of property speculators. And probably to address the inadequacy of the earlier measures, the Additional Buyer’s Stamp Duty (ABSD) was imposed and it was to take effect from 8 December 2011 onwards. And that seems to have stamped the tide of foreign buying, at least for now. In this issue of the Property Market Direction, while much expected emphasis will be placed on ascertaining the effects and effectiveness of ABSD, I will also show a series of sales figures gleaned from URA Realis system to support my earlier ‘downward trend’ statement which might have rattled some cages. But not to be rattled myself and to support my belief that the private home market may soon be reaching its ‘tipping point’ where some of the inherent RISKS will manifest themselves, I will offer the analysis on a number of leading indicators, including:

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

AN OVERVIEW OF THE REAL ESTATE MARKET Comparative approach to ascertain if we are getting smarter in home choices … … … continue from Page 2

(1) comparison of yearly private home sale figures (in transaction volume, transaction value and total floor areas sold) between 2011 and 2007* which is arguably the ‘benchmark year’ for measurement of property market peak; (References: Tables [2.1-A] to [2.2-C]) (2) comparison of transaction volume and values of nonlanded private property transactions in various market segments differentiated by price range, i.e. (i) LOW-END and MASS MARKET segment (characterised by home prices of “<$500,000 to $1 million”), (ii) MID-MARKET segment (characterised by home prices of “>$1 million to $2 million”, (iii) HIGH-END MARKET segment (characterised by home prices of “>$2 million to “$5 million”, and (iv) the LUXURY market Segment (characterised by home prices of “more than $5 million” by residential status (i.e. citizens, permanent residents, non-resident foreigners, and non-individuals) to ascertain the impact of the ABSD on foreigner’s market share; (References: Tables [2.3-A] to [2.5-D]) (3) comparison of foreigner’s market share for the 15-month period from January 2011 to March 2012; (References: Tables [2.3-A] to [2.5-D]) (4) comparison of transaction volume and value of landed homes to ascertain the strengths of unit land costs, and followed by an analysis of the affordability factor; (References: Tables [4.1-A] to [4.3-C]) and last but not least, (5) comparison of private home rents from the 3rd quarter of 2011 (Q3 2011) to the 1st quarter of 2012 (Q1 2012). There will also be a short discussion on whether at today’s capital appreciation, investors will get the rude awakening when they realise that the current private home rents amount are still lagging behind those achieved in the last bull-run year of 2007. *2007 was a dramatic year by any yardstick as construction of the two Integrated Resorts (IR)

(with casino inside) went underway. More foreigners and along with their massive funds rushed into Singapore, spiking the number of applications under the Financial Investor Scheme (FIS) (which is to be scrapped soon by MAS) and fuelling the rapid growth of the private banking and private wealth management businesses in Singapore before the financial tsunami in the US the following year brought everything back to earth. Back then, foreign investment banks and property funds snapped up en bloc sale projects and large commercial buildings at the drop of the hat (e.g. Lehman Brothers bought Crosby House, Morgan Stanley and Wachovia Development; Goldman Sachs which bought DBS building, Hitachi Tower and Chevron House; and CLSA Capital Partners bought/sold SIA Building at Robinson Road – just to name a few high profile deals). On the residential front, fund managers searched

frantically for luxury and high-end private residential properties – called the ‘uber’ apartments, both for rent and for purchase. And by the way, the record prices set in the luxury home segment in 2007 have yet to be breached until today, with all the cheap money flowing into Singapore following two rounds of Quantitative Easing (QE) measures in the US.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

A RUDE AWAKENING OF THE MIDDLE CLASS DREAM A theoretical explanation may be inadequate for the super-sized bull-run in conventional landed home segment In theory, residential landed properties or landed homes are less susceptible to property speculation due to a number of distinct factors as follows: 

Firstly, a landed home is also known as ‘restricted property’ that is not meant for investment by foreign owners (including permanent residents), which is to say that if any foreigners were to have obtained the special approval to own one, they must live in it. The foreign person must also not own more than one such restricted property. Applying for the approval has become tougher after the recent amendments made to the Residential Property Act and the Minister for Law has made the promise to Singaporeans that ‘he would be very surprised if there are more than 50 restricted properties being sold to foreigners per year from now on’. In short, as a rule, foreign competition does not feature in this property segment.



Secondly, due to the huge price tag, only the top 10% income earners in Singapore can afford this particular asset class. This is why there are much fewer instances of speculative buying in this property segment as compared with condominiums and private apartments, as few common folks can afford the huge initial outlay.



Thirdly, landed housing units are rare in land scarce Singapore. There are only about 72,000 such properties in Singapore. So, the constraint in demand and supply is more acute in this market segment.



Related to the above point is the unique phenomenon of increasing premium associated with larger land size, that is, there is often no ‘bulk discount’ for larger houses or larger land plots. The bigger the land, the larger is the premium that the buyer will have to pay. For example, between 2007 and 2011, bigger houses enjoyed bigger gains in prices compared to smaller properties, such as, detached houses in general enjoyed an average annual percentage gain of 14.7% per annum, or in absolute term, a consolidated 5-year gains of 73.6% in median sale price. (Refer to Table [4.1-D])

Likewise, prices for semi-detached houses during the same 5-year period enjoy an average annual percentage gain of 15% per annum, or in absolute term, a consolidated 5-year gains of 75.0% in median sale price. (Refer to Table [4.2-B]) However, for the smaller conventional landed housing type, i.e. terrace houses, the average annual percentage gain in prices was 7.33% per annum, or in absolute term, a consolidated 5-year gains of 36.7% in median sale price. (Refer to Table [4.3-B])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

 ECONOMIC UNDERPINNING OF LARGER LANDED PROPERTIES As such, property analysts tend to agree with the economic underpinning of the larger landed home units, e.g. detached houses where the market movements follow a certain economic fundamentals. For example, when prices of detached houses rose sharply in 2010 by 30.68% year-on-year in unit psf prices from an average of $741 psf in 2009 to $968.4 psf in 2010 (See Table [4.1-A] below), the demand for this particular property class went down 39.7%, from 459 transactions in 2010 to 277 transactions in 2011. (See Table [4.1-A] below) Having said that, however, the effect of QUANTITATIVE EASING (QE) measure by the US Federal Reserve (i.e. the central bank) would subvert everything we knew about demand and supply. Altogether, two rounds of QE from December 2008 to mid-2011 seems to have thrown all conventional economic theories out of the window; and things are a little unpredictable nowadays where the real estate market seems to mirror the volatility of the stock market.  THE EFFECT OF QUANTITATIVE EASING (QE) MEASURE BY U.S. FEDERAL RESERVE To many others countries, especially in Asia, the QUANTITATIVE EASING (QE) measures have more dire consequences than what it originally intended, that is to help the ease cash-flow to sooth the unemployment problems at home. Both QE 1 and QE 2 created a combined US$2.3 trillion for the US Federal Reserve to buy back US government debts with the hope of injecting liquidity into the market. Besides that, interest rate is deliberately kept to near zero to prevent the US economy from going into depression. This is what we call the ‘hot money’ which is believed to be the main culprit of the on-going massive inflation. These measures caused investors to dump US dollars and switch to holding (and hoarding) tangible assets and commodities, and in so doing causing asset prices all over the Asian markets to soar as material costs skyrocketed. This can be seen in the price appreciation in Singapore real estate, as investors take up position to hedge against inflation. The first round of QE started in December 2008 and ended in August 2010. And it is believed that the effect filtered through to Singapore property market as can be seen from the sudden increase in property buying activities. And the second round of QE commenced from November 2010 to June 2011.  THE DREAM TO BE A MIDDLE CLASS REMAINS ELUSIVE In light of the massive inflation resulting from the loose monetary measures in the developed economies, sellers in general would continue to ask for a higher premium in 2012, and as the same logic would dictate, this would continue to put a lid on the demand for larger houses among

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

Singaporean wage earners as the ‘affordability factor’ now weighs heavier on prospective buyers than ever before. And the ‘waiting game’ is on as the gap between asking prices and buyer’s real purchasing power widens. At the end of the day, provided there are no major mishaps from this point on, transactions for detached houses should stay subdued at well below 200 units for the whole of 2012. Let’s now look at the performance of the individual landed housing types within this market segment, in terms of comparison with the benchmark performance in 2007.

MARKET PERFORMANCE IN THE DETACHED HOUSE SEGMENT

BUNGALOWS IN SENTOSA COVE AND DETACHED HOUSES IN MAIN ISLAND The bungalow transactions on Sentosa Cove were not included in the comparative study of the recent market trend of larger houses because of the ‘volatility’ of this particular seafront luxury landed home segment. For illustration, in between two years of moderate performance with 37 and 35 transactions done in 2007 and 2009 respectively, there was only one bungalow sold on Sentosa Cove in 2008 – the other 5 landed house deals were terrace houses. A year later, the quiet island witnessed 54 bungalow deals. And again, there wasn’t a single transaction of any type of landed home units on Sentosa Cove in January 2012. (See Table [4.1-C])

 VOLATILE TRANSACTIONS IN SENTOSA COVE BUNGALOWS The ‘volatility’ factor could be due to the fact that the houses in the resort island are touted as ‘celebrity plaything’ for the ‘rich and famous’ who are more vulnerable to global events such as the collapse of banks in the U.S. during the 2008 financial tsunami, the on-going tension between Iran and the developed economies, and the list goes on. Due to the disparity in prices between the detached houses on the main island and bungalows in Sentosa Cove, the inclusion of the extremely high prices of Sentosa bungalows in the analysis would distort the presentation of the big picture and mislead the readers.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

 COMPARISON OF AVERAGE UNIT LAND PRICE OF BUNGALOWS IN SENTOSA AND IN MAIN ISLAND Look at all column [C] in Table [4.1-A], Table [4.1-B] and Table [4.1-C], one would see that there is a ‘more-than $1,000’ difference in average per-square-foot (psf) price of the two types of landed housing types. And the gap may get wider due to the fact that the ‘hot money’ is making its round in Asia in search of safe haven; and Sentosa Cove being nickname the ‘Monaco of the East’ may continue to attract high net worth individuals. TABLE [4.1-A] – DETACHED HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD IN THE WHOLE OF SINGAPORE INCLUDING SENTOSA COVE

DETACHED HOUSE TRANSACTIONS YEAR

[A] TRANSACTION VOLUME

[B] TRANSACTION VALUE (BY $10 Million)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

MAIN ISLAND

SENTOSA COVE

TOTAL

MAIN ISLAND

SENTOSA COVE

TOTAL

MAIN ISLAND

SENTOSA COVE

2007

705

742

451.19

35.6

486.79

683.3

1,153.8

2008

222

223

148.56

1.228

149.79

722. 2

1,939

2009

432

467

309.82

47.19

357.01

741

1,519. 3

2010

459

513

443.16

92.1

535.26

968.4

1,927.3

2011

277

301

267.40

43.97

311.38

1,073

2,097.1

Q1 2012

31.71

5.66

37.37

1,103.4

2,134.5

Statistics gleaned from URA Realis and compiled by Sam Gian



THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES

As for detached houses in main island Singapore, the effect of QE1 and QE2 was evident in the transaction volume and the price rise. For example, before the QE measure was introduced in the US in December 2008, both transaction volume and prices for detached lost massive grounds in the entire 2008 and the sliding momentum lasted through to Q1 2009. But once the effect was felt in Singapore in Q2 2009, the average psf price for detached houses jumped 20.1% and transaction volume soared by 4.75 times. When QE1 officially ended in August 2010, detached house transactions slide from 127 deals in Q2 2010 to 112 in Q3 3010 and 97 in Q4 2010. Gains in unit land price for detached houses over this period was 1.1% in Q3 2010 over the preceding quarter and 5.3% in Q4 2010 over Q3 3010. QE2 started in November 2010, and by the end of December 2010, the average unit land price for detached houses was already up by a whopping 30.68%. By the time the effect of QE2 made its round in the high-end detached house segment, many Singaporean buyers would have been ‘priced out’ of the market; and this can be seen in the weaker increase in transaction volume from 97 bungalow deals in Q4 2010 to 90 deals in Q1 2011 and 80 deals in Q2 2011. Whereas, the gain in unit land price was 2.2% in Q1 2011 over the final quarter of 2010, and

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

4.3% in Q2 2011 over the first quarter of the year. But the gain was at the expense of falling transaction volume. So, the mini ‘bull run’ effect in 2010 was caused by investors’ reaction to the loose monetary policy of the U.S. rather by genuine and sustainable improvement in productivity or any tangible well being. But once the wealth effect started to wear out a little, the percentage rise in psf price in detached houses becomes more subdued and more in tandem with the economic reality. (See column [D] of Table [4.1B] below) TABLE [4.1-B] – DETACHED HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD ON MAIN ISLAND SINGAPORE (EXCLUDING SENTOSA COVE)

DETACHED HOUSE TRANSACTIONS ON MAIN ISLAND SINGAPORE (EXCLUDING SENTOSA COVE) YEAR

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD (m2)

[B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

Q1 2007

170

142,092

92.865

616

Q2 2007

278

247,667

183.060

654

6.2%

Q3 2007

168

150,678

122.915

761

16.4%

Q4 2007

63,769

52.348

754

-0.9%

TOTAL

705

604,206

451.19

683.3

Q1 2008

59,219

46.254

713

-5.4%

Q2 2008

60,186

50.981

758

6.3%

Q3 2008

47,556

36.168

697

-8.0%

Q4 2008

20,726

15.161

713

2.3% (QE 1 started in Nov)

TOTAL

222

187,687

148.56

722. 2

5.69%

Q1 2009

17,377

10.867

598

-16.1%

Q2 2009

133

112,383

86.515

718

20.1%

Q3 2009

163

157,096

125.016

739

2.9%

Q4 2009

108

96,351

87.423

807

9.2%

TOTAL

432

383,207

309.82

741

+2.6%

Q1 2010

123

104,009

99.220

873

8.1%

Q2 2010

127

134,529

144.080

981

12.3% (QE 1 ended in Aug)

Q3 2010

112

84,325

92.153

992

1.1%

Q4 2010

91,474

107.712

1,044

5.3% (QE 2 started in Nov)

TOTAL

459

414,337

443.16

968.4

+30.7%

Q1 2011

69,465

82.542

1,067

2.2%

Q2 2011

73,700

87.155

1,113

4.3% (QE 2 ended in June)

Q3 2011

45,996

50.664

1,015

-8.8%

Q4 2011

36,979

47.042

1,098

8.1%

TOTAL

277

226,140

267.40

1,073

+10.8%

Q1 2012

27,417

31.71

1,103.4

0.5%

Statistics gleaned from URA Realis and compiled by Sam Gian

Due to the volatility in the transactions of Sentosa Cove bungalows, the percentage rise and fall in psf price is more erratic in Sentosa Cove. (See column [D] of Table [4.1-C] below)

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.1-C] – DETACHED HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD ON SENTOSA COVE

DETACHED HOUSE TRANSACTIONS ON SENTOSA COVE [A] TOTAL TRANSACTIONS

[A-1] TOTAL LAND AREA SOLD (m2)

[B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

2007

28,740

35.6

1153.8

2008

588

1.228

1,939

68.05%

2009

28,946

47.19

1,519. 3

-21.6%

2010

44,788

92.1

1,927.3

26.8%

2011

19,332

43.97

2,097.1

8.81%

Q1 2012

2,382

5.66

2,134.5

1.78%

YEAR

Statistics gleaned from URA Realis and compiled by Sam Gian



RUMOUR OF QE 3 CAUSED UPSWING IN MARCH 2012

In March 2012, there was another revival in the landed home market and this could be due to the rumors that the third round of QE might be implemented. The rumors were sufficient to send the total transaction volume flying past December 2011’s. (Table [4.1-D], [4.1-D1] & Graph [4.1-A] & [4.1-B]) Even when transaction volume and value are excluded in the data for analysis, the market performance is still considered impressive. (Table [4.1-E], [4.1-E1] & Graph [4.1-C]) However, the Federal Reserve had since early April 2012 denied it. (See conclusion story – “YOUR GUESS IS AS GOOD AS MINE”) TABLE [4.1-D] – DETACHED HOUSE TRANSACTION VOLUME AND TOTAL VALUE IN 2011 (INCLUDING SENTOSA COVE)

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

VOLUME 31 29 36 25 30 28 29 21 19 20 26 7 301

DETACHED HOUSES (INCLUDING SENTOSA) VALUE ($) AVE PSF ($) 299,135,000 1,153.4 265,153,847 1,113.8 388,425,000 1,116 312,393,246 1,081 280,763,958 1,186.9 328,406,000 1,144.7 207,697,776 1,053 172,943,777 1,083 193,564,888 1,119 204,266,888 1,309 371,297,376 1,277 89,800,000 1,267.6 3,113,847,756

1,158.7

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.1-D1] – DETACHED HOUSE TRANSACTION VOLUME & VALUE IN Q1 2012 (INCLUDING SENTOSA COVE)

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

DETACHED HOUSES (INCLUDING SENTOSA) VOLUME

VALUE ($)

AVE PSF ($)

4 8 25

23,770,000 120,684,175

1,109 1,258 1,135.50

229,327,000 373,781,175

1,168

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.1-E] – DETACHED HOUSE TRANSACTION VOLUME AND TOTAL VALUE IN 2011 (EXCLUDING SENTOSA COVE)

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

DETACHED HOUSES (EXCLUDING SENTOSA) VOLUME VALUE ($) AVE PSF ($) 29 242,147,000 1,057.8 28 246,653,847 1,074.9 33 336,625,000 1,069.9 25 312,393,246 1,081 28 247,253,958 1,134.9 27 311,906,000 1,119.8 28 193,897,776 1,023.8 20 156,863,777 1,041.9 18 175,664,888 1,036 14 109,228,000 1,028 23 300,397,376 1,144 5 60,800,000 1,077.6 278

2,693,830,868

1,074.13

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.1-E1] – DETACHED HOUSE TRANSACTION VOLUME & TOTAL VALUE IN Q1 2012 (EXCLUDING SENTOSA COVE)

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

DETACHED HOUSES (EXCLUDING SENTOSA) VOLUME VALUE ($) AVE PSF ($) 4 23,770,000 1,109 7 81,684,175 1,088 24 211,647,000 1,107 35

317,101,175

1,101

Statistics gleaned from URA Realis and compiled by Sam Gian GRAPH [4.1-A] – TOTAL TRANSACTION VALUE ($) OF ALL LANDED HOUSE TYPES IN 2011 – Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian GRAPH [4.1-B] – TOTAL TRANSACTION VOLUME (UNITS ) OF ALL LANDED HOUSE TYPES IN 2011 – Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 GRAPH [4.1-C] – TOTAL TRANSACTION VOLUME (UNITS ) OF DETACHED HOUSES (EXCLUDE SENTOSA COVE)

IN 2011 – Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian

COMPARISON OF DETACHED HOUSE PERFORMANCE BETWEEN 2007 AND 2011 When the price for a certain product increases, the demand for that product will decrease. This is the most fundamental of all economic theories; and the economic principle can clearly be seen in the high-end landed home segment. For example, the demand for detached houses fell almost 60% from the benchmark 2007 to 2011 after both the psf land price and absolute sale price of the premier property soared by more than 70% over the 5-year period. (Reference: Table [4.1-F] below) TABLE [4.1-F] – COMPARING DETACHED HOUSE TRANSACTION VOLUME AND VALUE BETWEEN 2007 AND 2011

TRANSACTION VOLUME

MEDIAN SALE PRICE ($ MILLION) 2007 2011 % DIFF

MEDIAN PSF PRICE ($ PSF) 2007 2011 % DIFF

2007

2011

% DIFF

-40%

8.97

17.8

98.4%

1,090

2,120

94.5%

-57%

2.86

6.28

119%

471

958

103.4%

D10

186

-73.7%

8.3

14.2

71%

816

1,417

73.6%

D11

-64.3%

6.86

11.11

62%

887

1,361

53.4%

D13

-63.4%

4.6

7.4

61%

586

1,076

83.6%

D14

-83.9%

2.45

5.3

116%

460

1,132

146%

D15

109

-53.2%

4.65

7.3

57%

664

1,091

64.3%

D16

-48%

3.05

4.38

43.6%

570

793

39%

D17

-42%

2.65

4.7

77.4%

404

746

84.6%

D19

-56.5%

2.65

4.838

82.6%

445

855

92.1%

D20

-90.3%

3.16

153%

550

1,110

101.8%

D21

-41.7%

8.22

37%

738

1,158

56.9%

D23

-11.8%

3.65

4.6

26%

426

740

73.7%

D25

-10%

2.33

3.78

62%

412

549

33.2%

D27

-55.6%

2.51

3.65

45%

326

796.5

144%

D28

-33.3%

7.7

92.5%

495

834

68.5%

TOTAL

725

292

-59.7%

4.29

7.45

73.6%

584

1,046

79.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

The same economic fundamental can be seen in the semi-detached house segment.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

SEMI-DETACHED HOUSES As mentioned earlier the economic underpinning of real estate is more luminously clearer in landed residential properties than, say, condominiums which are often subject to speculation. As such, the following quarter-by-quarter layout of the transaction figures of semi-detached houses over the 5-year period of between 2007 and 2011 clearly illustrate the ebb and flow of the property market in relation to the larger economy factors.  UNIT LAND PRICE BREACHING $700 PSF AND $800 PSF IN A MATTER OF 6 MONTHS In the aftermath of the financial tsunami in 2008, average unit land price showed negative growth from Q3 2008 to Q1 2009, and transaction volume tumbled 44% from 135 deals in Q3 to 75 in Q4 2008. But miraculously, home prices started to pick up momentum from Q2 2009 onwards, barely 9 months after the infamous crash in Wall Street. Unit land prices started to cross the $700 psf barrier in Q3 3009; $800 psf in Q1 2010; $900 psf in Q2 2011; and $1,000 psf in Q4 2011. As they always say: “and the rest is history”. 

THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES

Regardless of whether any part of the ‘hot money’ did filter through into the restricted property segment in Singapore, the sudden wealth effect (which was caused by ultra-low mortgage interest rate by local banks which took the cue from the US) helped to propel landed home prices to much greater height, in deviant of the lack of progress in the global economy in the aftermath of the financial tsunami. Once the effect of QE1 was felt in Singapore in Q2 2009, the average psf price for semi-detached houses jumped more than 11% and transaction volume soared by 3.13 times when compared with Q1 2009. However, unlike in the detached house segment, after QE1 officially ended in August 2010, unit price gain of semi-detached houses continued probably due to the quantum leap in prices of detached houses in the same time period, pushing prospective bungalow buyers out of the range to seek substitute housing. For the whole of 2010, unit price gain of semi-detached houses in Singapore was 22%. (See Column D of Table [4.2-A] below)

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.2-A] – SEMI-DETACHED HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD FROM 2007 TO Q1 2012

SEMI-DETACHED HOUSE TRANSACTIONS [B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

YEAR

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD (m2)

Q1 2007

322

112,841

62.480

533

Q2 2007

559

188,759

118.308

606

13.6%

Q3 2007

304

102,150

72.780

680

12.3%

Q4 2007

245

83,194

58.765

669

-1.7%

TOTAL

1,430

486,944

312.334

616

Q1 2008

154

53,124

38.474

684

2.2%

Q2 2008

172

55,691

40.246

685

0.10%

Q3 2008

135

42,703

28.580

645

-5.8%

Q4 2008

24,419

15.655

623

-3.4% (QE 1 started in Nov)

TOTAL

536

175,937

122.956

666

8.1%

Q1 2009

103

32,717

20.795

620

-0.50%

Q2 2009

293

93,914

62.377

637

2.7%

Q3 2009

323

106,013

78.786

707

11%

Q4 2009

253

86,287

66.756

742

5.0%

TOTAL

972

318,931

228.715

677

1.65%

Q1 2010

268

86,911

72.290

806

8.6%

Q2 2010

292

98,451

85.881

828

2.7% (QE 1 ended in Aug)

Q3 2010

248

84,460

74.133

833

0.6%

Q4 2010

221

70,398

65.376

890

6.8% (QE 2 started in Nov)

TOTAL

1,029

340,220

297.68

837

22.0%

Q1 2011

185

60,284

64.017

1,009

13.4%

Q2 2011

227

74,335

78.125

994

-1.5% (QE 2 ended in June)

Q3 2011

147

47,931

51.009

999

0.5%

Q4 2011

120

39,310

42.214

1,026

2.7%

TOTAL

679

221,860

235.36

1,005

20.1%

Q1 2012

113

37,291

42.34

1,066.7

6.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

COMPARISON OF SEMI-DETACHED HOUSE PERFORMANCE BETWEEN 2007 AND 2011 However, the capital gain achieved in the conventional landed home segment did not come about due to higher transaction volume; but quite the contrary, it was achieved at the back of decline in transaction volume most of the time when the volume of 2011 was compared to the same period of the benchmark year of 2007. In other words, the real economic performance does have an impact on market buoyancy. (Table [4.2-B])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.2-B] – COMPARING SEMI-DETACHED HOUSE TRANSACTION VOLUME AND VALUE BETWEEN 2007 AND 2011 (BY POSTAL DISTRICT)

2007 25

2011 15

% DIFF -40%

MEDIAN SALE PRICE ($ MILLION) 2007 2011 % DIFF 2.228 3.30 52.2%

D10

173

-59.5%

3.30

5.20

62.1%

937

1,519

57.6%

D11

-50%

3.50

5.15

77.3%

902

1,599

47.1%

D13

-56.4%

1.70

3.23

67.2%

545

911

90%

D14

-45.3%

1.85

2.97

83.8%

462

849

60.5%

D15

191

-68.6%

2.50

3.78

54.9%

697

1,080

51.2%

D16

151

-35.8%

1.70

2.83

63.4%

497

812

66.5%

D17

-61.5%

1.52

2.3

63.6%

503

823

51.3%

D18

-45.5%

1.388

2.18

85.6%

424

787

57.1%

D19

213

110

-48.4%

1.70

3.13

95.4%

461

901

84.1%

D20

-70.3%

1.72

3.3

88.7%

495

934

91.9%

D21

-54.9%

2.2

3.65

68.7%

661

1,115

65.9%

D22

-40%

910K

1.5

71.5%

403

691

64.8%

D23

-74.2%

1.65

3.1

60.4%

548

879

87.9%

D25

1.20

2.1

106.3%

269

555

75%

D26

-20%

1.55

2.8

92.9%

425

820

80.6%

D27

-51.1%

1.25

2.28

114.0%

384

822

82.4%

D28

139

-38.1%

1.55

2.95

106.1%

407

839

90.3%

TOTAL

1,423

677

-52.4%

537.5

940.7

75.0%

33.41

55.7

66.8%

TRANSACTION VOLUME

MEDIAN PSF PRICE ($ PSF) 2007 2011 % DIFF 655 997 48.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

In an alternative layout on transaction volume and value of semi-detached house transactions between January 2011 and March 2012, the same conclusion can be drawn as above, i.e. the extraordinary performance in March 2012 could be attributed to the QE measures. The sudden jolt of the March 2012 transactions of semi-detached houses actually propelled the sales performance past June 2011, the month QE2 officially ended. (Table [4.2-C] & [4.2-C1]) TABLE [4.2-C] – SEMI-DETACHED HOUSE TRANSACTION IN 2011

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

VOLUME 77 34 74 86 81 60 59 45 43 35 44 39 677

SEMI-D HOUSES VALUE ($) 252,330,980 124,393,080 263,453,270 291,234,295 275,698,890 214,323,276 216,811,776 150,609,888 142,675,008 129,093,000 150,046,000 136,950,888 2,347,620,351

AVE PSF ($) 970.7 1,073 1,020 981 991.7 1,017.9 982 1,007 1,013.7 1,039.7 991.6 1,059 1,012

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.2-C1] – SEMI-DETACHED HOUSE TRANSACTION BETWEEN IN Q1 2012

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

SEMI-D HOUSES VALUE ($) 89,347,555 99,784,887 234,357,000

VOLUME 25 28 60 113

AVE PSF ($) 973.2 1,099.6 1,090.4

423,489,442

1054.4

Statistics gleaned from URA Realis and compiled by Sam Gian

TERRACE HOUSES Likewise, the performance of the terrace house segment was also influenced by the advent of liquidity where buyers took up position during the QE1 and QE2 periods which can be seen from Q2 2009 to second half of 2010. 

THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES

Once the effect of QE1 was felt in the terrace house segment in Q3 2009, the average psf price for terrace houses jumped 22.2% and transaction volume soared by 4.5 times over the first quarter (Q1) of the year. When QE1 officially ended in August 2010, terrace house transactions slide from 644 deals in Q2 2010 to 531 in Q3 3010 and 498 in Q4 2010 or -22.6%. By then, rise in unit land price for terrace houses over this period was pared down to 3.7% in Q3 2010 over the preceding quarter. A month after QE2 started in November 2010, the average unit land price for terrace houses was already up by 23.9% for the whole year. After QE2 ended in June 2011, terrace house transactions began a gradual slide in the following quarters, i.e. from 523 deals in Q2 2012 to 366 deals (or 30.0%) in Q3 2012 and 327 deals in Q4 2011; while unit psf price likewise slipped from 5.1% in Q2 2011 to 4.4% in Q3 2011 and 3.2% in Q4 2011. TABLE [4.3-A] – TERRACE HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD THROUGHOUT SINGAPORE

TERRACE HOUSE TRANSACTIONS YEAR

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD (m2)

[B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

Q1 2007

527

108,127

61.052

549

Q2 2007

984

203,635

130.664

615

12.0%

Q3 2007

608

125,017

90.454

700

13.8%

Q4 2007

460

93,279

70.740

739

5.6%

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

TOTAL

2,579

530,058

352.91

643.6

Q1 2008

338

65565

50.778

747

1.0%

Q2 2008

326

63329

45.145

692

-7.3%

Q3 2008

291

58894

40.276

661

-4.5%

Q4 2008

148

28579

18.500

625

-5.6% (QE 1 started in Nov)

TOTAL

1,103

216,367

154.7

691.8

7.5%

Q1 2009

164

33,096

20.249

603

-3.5%

Q2 2009

477

94,571

61.291

635

5.2%

Q3 2009

741

144,174

110.016

737

16.1%

Q4 2009

529

103,849

83.934

788

7.0%

TOTAL

1,911

375,690

275.49

714

3.2%

Q1 2010

542

109,792

92.544

825

4.7%

Q2 2010

644

126,112

113.685

868

5.2% (QE 1 ended in Aug)

Q3 2010

531

104,329

98.123

900

3.7%

Q4 2010

498

97,900

97.268

953

5.9% (QE 2 started in Nov)

TOTAL

2,215

438,133

401.62

884.5

23.9%

Q1 2011

421

81,146

84.678

1,009

5.9%

Q2 2011

523

104,037

114.188

1,060

5.1%

Q3 2011

366

68,842

79.176

1,107

4.4% (QE 2 ended in June)

Q4 2011

327

63,099

74.550

1,142

3.2%

TOTAL

1,637

317,124

352.59

1,074

21.4%

Q1 2012

237

46,583

55.91

1,152.7

7.3%

Statistics gleaned from URA Realis and compiled by Sam Gian

MARKET PERFORMANCE IN THE TERRACE HOUSE SEGMENT TABLE [4.3-B] – COMPARING TERRACE HOUSE TRANSACTION VOLUME AND VALUE BETWEEN 2007 AND 2011 (BY POSTAL DISTRICT)

MEDIAN SALE PRICE ($ Mil)

TRANSACTION VOLUME

MEDIAN PSF PRICE ($ PSF)

2007

2011

% DIFF

2007

2011

% DIFF

2007

2011

% DIFF

-58.3%

3.0

5.148

71.6%

1,793

2,752

53.5%

4.8

1,661

-55.6%

1.4

2.4

71.4%

679

1,055

55.4%

-43.8%

1.39

2.2

58.3%

723

1,154

59.6%

-32.5%

4.0

3.8

-5%

1,848

2,625

42.0%

D10

-43.8%

2.3

3.45

50%

966

1,493

54.6%

D11

-32.5%

2.218

3.5

57.8%

1,001

1,702

70.0%

D12

-80.7%

1.05

1.66

58.1%

952

1,042

9.5%

D13

121

-43.0%

1.0

1.82

82%

610

1,073

75.9%

D14

127

-35.4%

1.22

2.06

68.9%

522

942

80.5%

D15

395

233

-41.0%

1.29

2.15

66.7%

613

1,125

83.5%

D16

206

-57.3%

1.25

1.95

56%

570

1,012

77.5%

D17

3.1%

0.91

1.35

48.4%

469

767

63.5%

D18

-22.6%

0.96

1.547

61.1%

488

695

42.4%

D19

517

344

-33.5%

1.15

2.0

73.9%

501

940

87.6%

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

D20

240

130

-45.9%

1.01

1.93

91.1%

536

1,018

89.9%

D21

-47.5%

1.43

2.38

66.4%

662

1,094

65.3%

D22

10.4%

0.808

1.358

68.1%

416

772

85.6%

D23

135

118

-12.6%

1.11

2.148

93.5%

551

1,020

85.1%

D25

27.3%

1.08

1.53

41.7%

539

859

59.3%

D26

146

-55.5%

1.32

2.11

59.8%

705

997

41.4%

D27

117.3%

1.05

1.95

85.7%

435

1,113

155.9%

D28

178

136

-23.6%

1.225

2.08

69.8%

560

1,061

89.5%

TOTAL

2,579

1,637

-36.5%

36.971

50.521

36.7%

774

1,144

47.8%

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.3-C] – TERRACE HOUSE TRANSACTION VOLUME AND VALUE IN 2011

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

VOLUME 160 92 169 195 161 167 135 125 106 101 143 82 1,636

TERRACE HOUSES VALUE ($) 325,193,584 190,821,447 330,767,700 402,665,148 340,365,968 398,856,018 295,459,855 262,871,764 233,433,064 224,506,776 333,511,422 185,682,790 3,524,135,536

AVE PSF ($) 981 1,085.7 994 1,034 1,021.9 1,127 1,083.9 1,117 1,125.8 1,084.7 1,184 1,142. 7 1,076

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.3-C1] – TERRACE HOUSE TRANSACTION VOLUME AND VALUE IN Q1 2012

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

VOLUME 41 64 132 237

TERRACE HOUSES VALUE ($) 100,792,888 149,983,346 308,350,011 559,126,245

AVE PSF ($) 1,258 1,129.6 1,131 1,173

Statistics gleaned from URA Realis and compiled by Sam Gian

FINDING (1) SELLER’S MARKET IN THE LANDED HOUSE SEGMENT There can be two distinctly different interpretations to the above data: the first is the conventional interpretation of ‘demand outpacing supply’ and thereby causing prices to soar; while the second interpretation could be ‘high prices deterring demand’ which is taking ‘prices’ as causing the muted buying behaviour. However, both are true in this bizarre market as mere rumour of another round of QUANTITATIVE EASING (QE) was sufficient to cause the March 2012 figure to surge. Before that, a strong sense of cautiousness prevailed in this high-end market segment.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

Whatever the interpretation, one factor stands out like the Statue of Liberty with the torch, that is, the impact of inflation on this rare asset class. Whether such a market can be considered as the ‘seller’s market’ will depend on very much on the prevailing risk appetite of the lender banks. Consider the implications of the following 2-part question: (a) ‘would the lenders find it riskier in today’s environment to lend $10 million to an individual to invest a detached house; or, (b) would it be safer for the lender bank to split up its $10 million into several smaller sub- $1 million loan packages and lend them to HDB flat dwellers who are upgrading to the massmarket private housing segment?’ If the answer to part (a) is affirmative, we have a ‘seller’s market’. But if the answer to part (b) is favourable, then the larger house types, i.e. detached house and semidetached house segments may be stuck in a stalemate with the gap between seller’s and buyer’s price getting wider. The opportunity for upward mobility for some middle-class Singaporeans appears to have been curtailed. For some middle-class Singaporeans, the ‘upper class’ dream of owning a bungalow in land scarce Singapore is all but dashed. (2) THE AFFORDABILITY FACTOR Consequence to the inflation effect, all landed house prices in general have soared when compared with the last bull-run in 2007. The rate of acceleration is breathtaking and prices may have shot past the affordability level, which could be extrapolated from the over-50% plunge in transaction volume over the past 5 years. (See Tables [4.1-F], [4.2-B], & [4.3-B])

The current prices of detached houses may have already slipped out of reach of many of this country’s top 10% wage earners. Such high prices are unsustainable due to two critical factors: 

Firstly, the staggering rise in private home prices did not result from an exponential rise in productivity growth or GDP growth in the economy; and,



Secondly, the great global uncertainties lying ahead; if the global situation does not improve quickly, activities in the landed home segment will slow down significantly for the remaining part of the year as Singaporeans’ wages will stall in the want for productivity.

(3) THE INFLATION EFFECT – THE RICH GETS RICHER Such a cruel reality is to be expected after one round of ferocious inflation where asset price skyrocketed beyond the affordability level of ordinary wage earners. Barring any severe recession, detached and semi-detached houses may now already be out of reach for many Singaporeans, not to mention the uncertain times ahead.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

Perhaps, the only comfort remaining is that we know it is not due to foreigners snatching away our opportunities because of the ownership control imposed in this particular housing segment. (4) THE TWO QUANTITATIVE EASING (i.e. QE 1 & QE 2) MEASURES BY U.S. THE MAIN CULPRIT Perhaps, other than attributing to the two rounds of QUANTITATIVE EASING (QE) measures, there are no other plausible explanations to the two sudden jolts in the unit land price in the landed home segment in Q2 2009 and the whole year 30.7% jump in the unit land price in 2010. 

HOW THE TRILLIONS OF NEWLY PRINTED U.S. DOLLARS STACK UP

Before the financial tsunami, the U.S. Federal Reserve held around US$700 billion to US$800 billion in Treasury Notes (or for ease of calculation, US$0.7-US$0.8 trillion). By the time QE 1 started in November 2008, the Fed aimed to buy back US$600 billion (or US$0.6 trillion) of debts including Treasury Notes, bank debts and Mortgage-backed securities (MBS) from private holders. But by the 4th month, i.e. March 2009, the Fed had purchased an additional US$450 billion in debts from the private holders; which means a total of US$1.05 trillion in debts were purchased by the Fed. By the time QE 1 officially ended in June 2010 (after 20 months), the Fed bought another US$350 billion of additional debts, making the grand total of US$1.4 trillion of debts being purchased from private investors by the Federal Reserve. At that point in time, the Fed had on its balance sheet US$2.1 trillion of debts. The second round of purchase of US government debts, dubbed QE 2, went on for only 7 months, from November 2010 to June 2011. The Federal Reserve purchased an additional US$600 billion worth of debts from private investors. 

THE IMPACT OF QE 1 WAS GREATER THAN QE 2

By the time QE 1 was halted in June 2010, the average unit land price of landed home units looked as follows: o

detached houses (excluding those on Sentosa Cove) rose by $383 psf (or 64.0%) to hit an average of $981 psf; (Table [4.1-B]) semi-detached houses went up by $205 psf (or 32.9%) to reach an average of $828 psf; (Table [4.2-A]) terrace houses climbed by $243 psf (or 38.9%) to reach an average of $868 psf by the end of Q1 2012. (Table [4.3-A])

When QE 2 started in November 2010, the average unit land price for landed home units in Singapore had already gone up to a level beyond income growth of even the top income earners; and as such, the increase in the unit land price was less intense. Between Q4 2010 and Q2 2011, the average unit land price of landed home units looked as follows: By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012



detached houses (excluding those on Sentosa Cove) rose by $69 psf (or 6.6%) to reached an average of $1,113 psf; (Table [4.1-B]) semi-detached houses went up by $104 psf (or 11.7%) to reach an average of $994 psf; (Table [4.2-A]) terrace houses climbed by $107 psf (or 11.2%) to reach an average of $1,060 psf by the end of Q2 2010. (Table [4.3-A])

MERE SPECULATION OF QE 3 SENT PRICES SOARING IN Q1 2012

The sudden and unexpected rise in March 2012 transaction of landed home units can also be attributed to the market rumour of another round of such measures. Between Q3 2011 and the end of March 2012, the average unit land price of landed home units looked as follows: o

detached houses (excluding those on Sentosa Cove) rose by $88 psf (or 8.7%) to reached an average of $1,103 psf; (Table [4.1-B]) semi-detached houses went up by $67 psf (or 6.7%) to reach an average of $1,066 psf; (Table [4.2-A]) terrace houses climbed by $45 psf (or 4.1%) to reach an average of $1,152 psf by the end of Q2 2010. (Table [4.3-A])

The average unit land price for detached houses transacted in Q1 2012 is comparatively lower than the historical height of $1,113 psf in Q2 2011. However, for semi-detached houses transacted in Q1 2012, the average unit land price of $1,066 psf is the new historical height. Likewise for terrace houses, $1,152 psf is also the new historical height in average unit land price.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012



By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

 ECONOMIC UNDERPINNING OF LARGER LANDED PROPERTIES As such, property analysts tend to agree with the economic underpinning of the larger landed home units, e.g. detached houses where the market movements follow a certain economic fundamentals. For example, when prices of detached houses rose sharply in 2010 by 30.68% year-on-year in unit psf prices from an average of $741 psf in 2009 to $968.4 psf in 2010 (See Table [4.1-A] below), the demand for this particular property class went down 39.7%, from 459 transactions in 2010 to 277 transactions in 2011. (See Table [4.1-A] below) Having said that, however, the effect of QUANTITATIVE EASING (QE) measure by the US Federal Reserve (i.e. the central bank) would subvert everything we knew about demand and supply. Altogether, two rounds of QE from December 2008 to mid-2011 seems to have thrown all conventional economic theories out of the window; and things are a little unpredictable nowadays where the real estate market seems to mirror the volatility of the stock market.  THE EFFECT OF QUANTITATIVE EASING (QE) MEASURE BY U.S. FEDERAL RESERVE To many others countries, especially in Asia, the QUANTITATIVE EASING (QE) measures have more dire consequences than what it originally intended, that is to help the ease cash-flow to sooth the unemployment problems at home. Both QE 1 and QE 2 created a combined US$2.3 trillion for the US Federal Reserve to buy back US government debts with the hope of injecting liquidity into the market. Besides that, interest rate is deliberate kept to near zero to prevent the US economy from going into depression. This is what we call the ‘hot money’ which is believed to be the main culprit of the on-going massive inflation. These measures caused investors to dump US dollars and switch to holding (and hoarding) tangible assets and commodities, and in so doing causing asset prices all over the Asian markets to soar as material costs skyrocketed. This can be seen in the price appreciation in Singapore real estate, as investors take up position to hedge against inflation. The first round of QE started in December 2008 and ended in August 2010. And it is believed that the effect filtered through to Singapore property market as can be seen from the sudden increase in property buying activities. And the second round of QE commenced from November 2010 to June 2011.  THE DREAM TO BE A MIDDLE CLASS REMAINS ELUSIVE In light of the massive inflation resulting from the loose monetary measures in the developed economies, sellers in general would continue to ask for a higher premium in 2012, and as the same logic would dictate, this would continue to put a lid on the demand for larger houses among

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

MARKET PERFORMANCE IN THE DETACHED HOUSE SEGMENT

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

DETACHED HOUSE TRANSACTIONS YEAR

[A] TRANSACTION VOLUME

[B] TRANSACTION VALUE (BY $10 Million)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

MAIN ISLAND

SENTOSA COVE

TOTAL

MAIN ISLAND

SENTOSA COVE

TOTAL

MAIN ISLAND

SENTOSA COVE

2007

705

742

451.19

35.6

486.79

683.3

1,153.8

2008

222

223

148.56

1.228

149.79

722. 2

1,939

2009

432

467

309.82

47.19

357.01

741

1,519. 3

2010

459

513

443.16

92.1

535.26

968.4

1,927.3

2011

277

301

267.40

43.97

311.38

1,073

2,097.1

Q1 2012

31.71

5.66

37.37

1,103.4

2,134.5

Statistics gleaned from URA Realis and compiled by Sam Gian



THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

DETACHED HOUSE TRANSACTIONS ON MAIN ISLAND SINGAPORE (EXCLUDING SENTOSA COVE) YEAR

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD (m2)

[B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

Q1 2007

170

142,092

92.865

616

Q2 2007

278

247,667

183.060

654

6.2%

Q3 2007

168

150,678

122.915

761

16.4%

Q4 2007

63,769

52.348

754

-0.9%

TOTAL

705

604,206

451.19

683.3

Q1 2008

59,219

46.254

713

-5.4%

Q2 2008

60,186

50.981

758

6.3%

Q3 2008

47,556

36.168

697

-8.0%

Q4 2008

20,726

15.161

713

2.3% (QE 1 started in Nov)

TOTAL

222

187,687

148.56

722. 2

5.69%

Q1 2009

17,377

10.867

598

-16.1%

Q2 2009

133

112,383

86.515

718

20.1%

Q3 2009

163

157,096

125.016

739

2.9%

Q4 2009

108

96,351

87.423

807

9.2%

TOTAL

432

383,207

309.82

741

+2.6%

Q1 2010

123

104,009

99.220

873

8.1%

Q2 2010

127

134,529

144.080

981

12.3% (QE 1 ended in Aug)

Q3 2010

112

84,325

92.153

992

1.1%

Q4 2010

91,474

107.712

1,044

5.3% (QE 2 started in Nov)

TOTAL

459

414,337

443.16

968.4

+30.7%

Q1 2011

69,465

82.542

1,067

2.2%

Q2 2011

73,700

87.155

1,113

4.3% (QE 2 ended in June)

Q3 2011

45,996

50.664

1,015

-8.8%

Q4 2011

36,979

47.042

1,098

8.1%

TOTAL

277

226,140

267.40

1,073

+10.8%

Q1 2012

27,417

31.71

1,103.4

0.5%

Statistics gleaned from URA Realis and compiled by Sam Gian

Due to the volatility in the transactions of Sentosa Cove bungalows, the percentage rise and fall in psf price is more erratic in Sentosa Cove. (See column [D] of Table [4.1-C] below)

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.1-C] – DETACHED HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD ON SENTOSA COVE

DETACHED HOUSE TRANSACTIONS ON SENTOSA COVE [A] TOTAL TRANSACTIONS

[A-1] TOTAL LAND AREA SOLD (m2)

[B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

2007

28,740

35.6

1153.8

2008

588

1.228

1,939

68.05%

2009

28,946

47.19

1,519. 3

-21.6%

2010

44,788

92.1

1,927.3

26.8%

2011

19,332

43.97

2,097.1

8.81%

Q1 2012

2,382

5.66

2,134.5

1.78%

YEAR

Statistics gleaned from URA Realis and compiled by Sam Gian



RUMOUR OF QE 3 CAUSED UPSWING IN MARCH 2012

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

VOLUME 31 29 36 25 30 28 29 21 19 20 26 7 301

1,158.7

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.1-D1] – DETACHED HOUSE TRANSACTION VOLUME & VALUE IN Q1 2012 (INCLUDING SENTOSA COVE)

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

DETACHED HOUSES (INCLUDING SENTOSA) VOLUME

VALUE ($)

AVE PSF ($)

4 8 25

23,770,000 120,684,175

1,109 1,258 1,135.50

229,327,000 373,781,175

1,168

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.1-E] – DETACHED HOUSE TRANSACTION VOLUME AND TOTAL VALUE IN 2011 (EXCLUDING SENTOSA COVE)

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

2,693,830,868

1,074.13

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.1-E1] – DETACHED HOUSE TRANSACTION VOLUME & TOTAL VALUE IN Q1 2012 (EXCLUDING SENTOSA COVE)

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

DETACHED HOUSES (EXCLUDING SENTOSA) VOLUME VALUE ($) AVE PSF ($) 4 23,770,000 1,109 7 81,684,175 1,088 24 211,647,000 1,107 35

317,101,175

1,101

Statistics gleaned from URA Realis and compiled by Sam Gian GRAPH [4.1-A] – TOTAL TRANSACTION VALUE ($) OF ALL LANDED HOUSE TYPES IN 2011 – Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian GRAPH [4.1-B] – TOTAL TRANSACTION VOLUME (UNITS ) OF ALL LANDED HOUSE TYPES IN 2011 – Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 GRAPH [4.1-C] – TOTAL TRANSACTION VOLUME (UNITS ) OF DETACHED HOUSES (EXCLUDE SENTOSA COVE)

IN 2011 – Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian

TRANSACTION VOLUME

MEDIAN SALE PRICE ($ MILLION) 2007 2011 % DIFF

MEDIAN PSF PRICE ($ PSF) 2007 2011 % DIFF

2007

2011

% DIFF

-40%

8.97

17.8

98.4%

1,090

2,120

94.5%

-57%

2.86

6.28

119%

471

958

103.4%

D10

186

-73.7%

8.3

14.2

71%

816

1,417

73.6%

D11

-64.3%

6.86

11.11

62%

887

1,361

53.4%

D13

-63.4%

4.6

7.4

61%

586

1,076

83.6%

D14

-83.9%

2.45

5.3

116%

460

1,132

146%

D15

109

-53.2%

4.65

7.3

57%

664

1,091

64.3%

D16

-48%

3.05

4.38

43.6%

570

793

39%

D17

-42%

2.65

4.7

77.4%

404

746

84.6%

D19

-56.5%

2.65

4.838

82.6%

445

855

92.1%

D20

-90.3%

3.16

153%

550

1,110

101.8%

D21

-41.7%

8.22

37%

738

1,158

56.9%

D23

-11.8%

3.65

4.6

26%

426

740

73.7%

D25

-10%

2.33

3.78

62%

412

549

33.2%

D27

-55.6%

2.51

3.65

45%

326

796.5

144%

D28

-33.3%

7.7

92.5%

495

834

68.5%

TOTAL

725

292

-59.7%

4.29

7.45

73.6%

584

1,046

79.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

The same economic fundamental can be seen in the semi-detached house segment.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.2-A] – SEMI-DETACHED HOUSE TRANSACTION OVER THE PAST 5-YEAR PERIOD FROM 2007 TO Q1 2012

SEMI-DETACHED HOUSE TRANSACTIONS [B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

YEAR

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD (m2)

Q1 2007

322

112,841

62.480

533

Q2 2007

559

188,759

118.308

606

13.6%

Q3 2007

304

102,150

72.780

680

12.3%

Q4 2007

245

83,194

58.765

669

-1.7%

TOTAL

1,430

486,944

312.334

616

Q1 2008

154

53,124

38.474

684

2.2%

Q2 2008

172

55,691

40.246

685

0.10%

Q3 2008

135

42,703

28.580

645

-5.8%

Q4 2008

24,419

15.655

623

-3.4% (QE 1 started in Nov)

TOTAL

536

175,937

122.956

666

8.1%

Q1 2009

103

32,717

20.795

620

-0.50%

Q2 2009

293

93,914

62.377

637

2.7%

Q3 2009

323

106,013

78.786

707

11%

Q4 2009

253

86,287

66.756

742

5.0%

TOTAL

972

318,931

228.715

677

1.65%

Q1 2010

268

86,911

72.290

806

8.6%

Q2 2010

292

98,451

85.881

828

2.7% (QE 1 ended in Aug)

Q3 2010

248

84,460

74.133

833

0.6%

Q4 2010

221

70,398

65.376

890

6.8% (QE 2 started in Nov)

TOTAL

1,029

340,220

297.68

837

22.0%

Q1 2011

185

60,284

64.017

1,009

13.4%

Q2 2011

227

74,335

78.125

994

-1.5% (QE 2 ended in June)

Q3 2011

147

47,931

51.009

999

0.5%

Q4 2011

120

39,310

42.214

1,026

2.7%

TOTAL

679

221,860

235.36

1,005

20.1%

Q1 2012

113

37,291

42.34

1,066.7

6.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.2-B] – COMPARING SEMI-DETACHED HOUSE TRANSACTION VOLUME AND VALUE BETWEEN 2007 AND 2011 (BY POSTAL DISTRICT)

2007 25

2011 15

% DIFF -40%

MEDIAN SALE PRICE ($ MILLION) 2007 2011 % DIFF 2.228 3.30 52.2%

D10

173

-59.5%

3.30

5.20

62.1%

937

1,519

57.6%

D11

-50%

3.50

5.15

77.3%

902

1,599

47.1%

D13

-56.4%

1.70

3.23

67.2%

545

911

90%

D14

-45.3%

1.85

2.97

83.8%

462

849

60.5%

D15

191

-68.6%

2.50

3.78

54.9%

697

1,080

51.2%

D16

151

-35.8%

1.70

2.83

63.4%

497

812

66.5%

D17

-61.5%

1.52

2.3

63.6%

503

823

51.3%

D18

-45.5%

1.388

2.18

85.6%

424

787

57.1%

D19

213

110

-48.4%

1.70

3.13

95.4%

461

901

84.1%

D20

-70.3%

1.72

3.3

88.7%

495

934

91.9%

D21

-54.9%

2.2

3.65

68.7%

661

1,115

65.9%

D22

-40%

910K

1.5

71.5%

403

691

64.8%

D23

-74.2%

1.65

3.1

60.4%

548

879

87.9%

D25

1.20

2.1

106.3%

269

555

75%

D26

-20%

1.55

2.8

92.9%

425

820

80.6%

D27

-51.1%

1.25

2.28

114.0%

384

822

82.4%

D28

139

-38.1%

1.55

2.95

106.1%

407

839

90.3%

TOTAL

1,423

677

-52.4%

537.5

940.7

75.0%

33.41

55.7

66.8%

TRANSACTION VOLUME

MEDIAN PSF PRICE ($ PSF) 2007 2011 % DIFF 655 997 48.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

VOLUME 77 34 74 86 81 60 59 45 43 35 44 39 677

SEMI-D HOUSES VALUE ($) 252,330,980 124,393,080 263,453,270 291,234,295 275,698,890 214,323,276 216,811,776 150,609,888 142,675,008 129,093,000 150,046,000 136,950,888 2,347,620,351

AVE PSF ($) 970.7 1,073 1,020 981 991.7 1,017.9 982 1,007 1,013.7 1,039.7 991.6 1,059 1,012

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [4.2-C1] – SEMI-DETACHED HOUSE TRANSACTION BETWEEN IN Q1 2012

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

SEMI-D HOUSES VALUE ($) 89,347,555 99,784,887 234,357,000

VOLUME 25 28 60 113

AVE PSF ($) 973.2 1,099.6 1,090.4

423,489,442

1054.4

Statistics gleaned from URA Realis and compiled by Sam Gian

THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES

TERRACE HOUSE TRANSACTIONS YEAR

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD (m2)

[B] TRANSACTION VALUE (BY $10 MILLION)

[C] AVERAGE UNIT LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER PRECEDING YEAR

Q1 2007

527

108,127

61.052

549

Q2 2007

984

203,635

130.664

615

12.0%

Q3 2007

608

125,017

90.454

700

13.8%

Q4 2007

460

93,279

70.740

739

5.6%

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

TOTAL

2,579

530,058

352.91

643.6

Q1 2008

338

65565

50.778

747

1.0%

Q2 2008

326

63329

45.145

692

-7.3%

Q3 2008

291

58894

40.276

661

-4.5%

Q4 2008

148

28579

18.500

625

-5.6% (QE 1 started in Nov)

TOTAL

1,103

216,367

154.7

691.8

7.5%

Q1 2009

164

33,096

20.249

603

-3.5%

Q2 2009

477

94,571

61.291

635

5.2%

Q3 2009

741

144,174

110.016

737

16.1%

Q4 2009

529

103,849

83.934

788

7.0%

TOTAL

1,911

375,690

275.49

714

3.2%

Q1 2010

542

109,792

92.544

825

4.7%

Q2 2010

644

126,112

113.685

868

5.2% (QE 1 ended in Aug)

Q3 2010

531

104,329

98.123

900

3.7%

Q4 2010

498

97,900

97.268

953

5.9% (QE 2 started in Nov)

TOTAL

2,215

438,133

401.62

884.5

23.9%

Q1 2011

421

81,146

84.678

1,009

5.9%

Q2 2011

523

104,037

114.188

1,060

5.1%

Q3 2011

366

68,842

79.176

1,107

4.4% (QE 2 ended in June)

Q4 2011

327

63,099

74.550

1,142

3.2%

TOTAL

1,637

317,124

352.59

1,074

21.4%

Q1 2012

237

46,583

55.91

1,152.7

7.3%

Statistics gleaned from URA Realis and compiled by Sam Gian

MARKET PERFORMANCE IN THE TERRACE HOUSE SEGMENT TABLE [4.3-B] – COMPARING TERRACE HOUSE TRANSACTION VOLUME AND VALUE BETWEEN 2007 AND 2011 (BY POSTAL DISTRICT)

MEDIAN SALE PRICE ($ Mil)

TRANSACTION VOLUME

MEDIAN PSF PRICE ($ PSF)

2007

2011

% DIFF

2007

2011

% DIFF

2007

2011

% DIFF

-58.3%

3.0

5.148

71.6%

1,793

2,752

53.5%

4.8

1,661

-55.6%

1.4

2.4

71.4%

679

1,055

55.4%

-43.8%

1.39

2.2

58.3%

723

1,154

59.6%

-32.5%

4.0

3.8

-5%

1,848

2,625

42.0%

D10

-43.8%

2.3

3.45

50%

966

1,493

54.6%

D11

-32.5%

2.218

3.5

57.8%

1,001

1,702

70.0%

D12

-80.7%

1.05

1.66

58.1%

952

1,042

9.5%

D13

121

-43.0%

1.0

1.82

82%

610

1,073

75.9%

D14

127

-35.4%

1.22

2.06

68.9%

522

942

80.5%

D15

395

233

-41.0%

1.29

2.15

66.7%

613

1,125

83.5%

D16

206

-57.3%

1.25

1.95

56%

570

1,012

77.5%

D17

3.1%

0.91

1.35

48.4%

469

767

63.5%

D18

-22.6%

0.96

1.547

61.1%

488

695

42.4%

D19

517

344

-33.5%

1.15

2.0

73.9%

501

940

87.6%

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

D20

240

130

-45.9%

1.01

1.93

91.1%

536

1,018

89.9%

D21

-47.5%

1.43

2.38

66.4%

662

1,094

65.3%

D22

10.4%

0.808

1.358

68.1%

416

772

85.6%

D23

135

118

-12.6%

1.11

2.148

93.5%

551

1,020

85.1%

D25

27.3%

1.08

1.53

41.7%

539

859

59.3%

D26

146

-55.5%

1.32

2.11

59.8%

705

997

41.4%

D27

117.3%

1.05

1.95

85.7%

435

1,113

155.9%

D28

178

136

-23.6%

1.225

2.08

69.8%

560

1,061

89.5%

TOTAL

2,579

1,637

-36.5%

36.971

50.521

36.7%

774

1,144

47.8%

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.3-C] – TERRACE HOUSE TRANSACTION VOLUME AND VALUE IN 2011

2011 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL

VOLUME 160 92 169 195 161 167 135 125 106 101 143 82 1,636

TERRACE HOUSES VALUE ($) 325,193,584 190,821,447 330,767,700 402,665,148 340,365,968 398,856,018 295,459,855 262,871,764 233,433,064 224,506,776 333,511,422 185,682,790 3,524,135,536

AVE PSF ($) 981 1,085.7 994 1,034 1,021.9 1,127 1,083.9 1,117 1,125.8 1,084.7 1,184 1,142. 7 1,076

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [4.3-C1] – TERRACE HOUSE TRANSACTION VOLUME AND VALUE IN Q1 2012

Q1 2012 JAN 12 FEB 12 MAR 12 TOTAL

VOLUME 41 64 132 237

TERRACE HOUSES VALUE ($) 100,792,888 149,983,346 308,350,011 559,126,245

AVE PSF ($) 1,258 1,129.6 1,131 1,173

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

The current prices of detached houses may have already slipped out of reach of many of this country’s top 10% wage earners. Such high prices are unsustainable due to two critical factors: 

Firstly, the staggering rise in private home prices did not result from an exponential rise in productivity growth or GDP growth in the economy; and,



By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

HOW THE TRILLIONS OF NEWLY PRINTED U.S. DOLLARS STACK UP

THE IMPACT OF QE 1 WAS GREATER THAN QE 2

By the time QE 1 was halted in June 2010, the average unit land price of landed home units looked as follows: o

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012



MERE SPECULATION OF QE 3 SENT PRICES SOARING IN Q1 2012

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

‘TUG-OF-WAR’ BETWEEN LANDLORDS & TENANTS Q1 2012 Private Home Rents rebounded but future is uncertain

The once vigorous take-up rate in the middle of 2011 was slowed to a stroll in the final 3 months (Q4) of the year, with prospective tenants having no real urgency to ink the tenancy agreements (TAs). Such wry patience could have resulted in the 19.4% drop in the official Q4 2011 rental data compiled by the Urban Redevelopment Authority (URA) on the number of residential projects with at least 10 tenancy agreements (TAs) signed in one quarter. (See Tables [5.1-C] & [5.4-D] which is captioned ‘PROJECTS WITH FEWER THAN 10 RENTAL CONTRACTS IN Q4 2011’) Apparently, this means a widening gap between landlords’ asking rents and tenant’s willingness which is invariably tied to perceived value. If the psychological status quo remains and the supply of new home units remain on track (which means more choices for prospective tenants), the competitive landscape of the private rental market will trend towards a more ‘demanding’ phase for the landlords in the next 6 months to a year.

SPIKE IN RENTAL DEMAND IN JANUARY 2012 – BUT UPSWING RECEDED IN MARCH 2012 But out of the blue, after 5 consecutive months’ of decline in the private rental market there was a moderate upswing in rental transactions in January 2012. The reversal is significant on two fronts, i.e. it ended the protracted downward trend in rental demand, and, it defies the shorter month due to the disruption caused by the Chinese New Year break. But then again, besides bringing back some measures of delight to some landlords for the time being, the market revival in the first quarter (i.e. Q1 2012) may not be sustainable as it had not resulted from any changes in the economic fundamentals either globally or domestically. From a statistical perspective, January’s figures are always preceded by lower December numbers. (See Table [5.2-C]) Domestically, economic achievements aside, the ongoing piling up of newly completed condo units will certainly offer prospective tenants wider choices but it does nothing to alleviate landlord’s current woes (despite the January’s reprieve); and such steady supply across all market segments over the next 2 to 3 years will make competitions among landlords keener. (Tables [5.1-A], [5.1-B]) Similarly, the ‘landlord versus tenant’ tug of war is expected to go on for some months.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [5.1-A] – A TOTAL OF 37,117 PRIVATE HOME UNITS THAT HAVE BEEN SOLD BUT HAVE YET TO BE COMPLETED

UNITS IN PROJECT

TOP UNIT

COMPLETED & SOLD

COMPLETED & UNSOLD

42,530 37,117 SOLD 5,413 UNSOLD

11,300

10,153

1,147

TOTAL NEW HOME UNITS LAUNCHED AS OF Q4 2011

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [5.1-B] – 20 SELECTED NEWLY COMPLETED RESIDENTIAL PROJECTS WITH AT LEAST 10 UNSOLD UNITS IN Q4 2011

STATISTICS AS OF END OF Q4 2011 SR

PROJECT NAME

TOTAL UNITS IN PROJECT

TOP UNITS

COMPLETED & COMPLETED & SOLD UNSOLD

REFLECTIONS AT KEPPEL BAY

1,129

836

293

HILLTOPS

241

208

SCOTTS SQUARE

338

263

THE CLIFF

312

249

THE RITZ-CARLTON RESIDENCES

NEWTON IMPERIAL

58 36

19 0

39 36

The MARQ ON PATERSON HILL

THE LUMOS

111 EMERALD HILL

RESIDENCES AT EMERALD HILL

THE LINCOLN RESIDENCES

FARRER PARK SUITES

MARTIN No 38

The VERV @ RV

CLIVEDEN AT GRANGE

110

ONE SHENTON

341

320

THE CASCADIA

536

516

8 NAPIER

THE ORCHARD RESIDENCES

175

160

RIVERSIDE 48 SUB-TOTAL

3,826

2,765

1,061

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [5.1-C] – COMPARISON OF NUMBERS OF PROJECTS WITH MIN. 10 TAs SIGNED IN ONE QUARTER

2011

PROJECTS WITH MIN. 10 TENANCY AGREEMENTS (TA) SIGNED IN ONE QUARTER

224 267 283 228 (-19.4%)

Q1 Q2 Q3 Q4

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [5.1-D] – THE PRIVATE HOME RENT MARKET PEAKED IN JULY 2011 AND THEN WENT ALL THE WAY DOWNWARD TO DECEMBER 2011

QUARTER

MONTHS

Q1 2011

JAN 2011 FEB 2011

Q2 2011

NO OF RENTAL TRANSACTIONS 3,333 2,493

TOTAL TRANSACTION VALUE ($) 14,197,052 10,908,346

MAR 2011

3,263

14,399,175

APR 2011

3,712

16,016,489

MAY 2011

3,226

14,155,099

JUN 2011

3,513

15,560,291

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

Q3 2011

Q4 2011

Q1 2012

JUL 2011

4,218

19,549,278

AUG 2011

3,956

18,814,224

SEPT 2011

3,369

15,804,278

OCT 2011

3,100

13,806,853

NOV 2011

3,051

13,365,263

DEC 2011

2,988

13,278,128

JAN 2012

3,646

18,322,667

FEB 2012

3,446

16,827,156

MAR 2012

3,847

18,148,645

Statistics gleaned from URA Realis and compiled by Sam Gian

MONTHLY RENTS COLLECTED AT RESPECTIVE RESIDENTIAL DISTRICTS (Q3 2011 – Q1 2012) From the Q4 2011 and Q1 2012 rental data, it is now beyond any reasonable doubts that Districts 10 and 9 host the most opulent addresses with the most number of affluent tenants, with District 4 gradually catching up in the coveted status. TABLE [5.2-A] – COMPARISON OF MONTHLY TOTAL IN RENTAL VALUE FROM JULY 2011 TO MARCH 2012

Q1 2012

DIST

MONTHLY RENTAL VALUE ($) IN *2H 2011 & Q1 -FEB 2012 Q4 2011

Q3 2011

MAR 12

FEB 12

JAN 12

DEC

NOV

OCT

SEPT

AUG

JULY

508,538

494,900

501,000

449,822

514,638

630,230

633,590

504,890

524,650

218,867

241,580

214,750

234,356

264,480

267,050

209,250

189,960

318,876

525,024

525,077

533,641

553,460

511,614

586,450

547,133

834,989

667,869

1,039,417

597,488

592,325

596,900

474,800

542,651

548,000

667,800

655,480

758,375

753,793

1,001,406

655,269

775,229

726,378

770,212

899,303

940,458

7,000

3,700

3,300

6,271

5,950

8,100

146,850

146,900

143,670

151,070

169,763

150,400

133,700

145,340

186,420

413,685

318,170

338,700

297,655

290,615

302,450

305,600

459,630

527,513

2,503,584 2,303,361

2,642,695

1,963,061

1,881,144

1,897,936

2,769,345 3,322,038 3,289,153

D10

3,035,457 3,084,626

3,839,010

2,427,525

2,443,433

2,449,906

3,253,322 4,010,682 3,952,259

D11

1,526,827 1,470,639

1,391,691

711,745

829,856

878,050

921,986

1,059,685

1,080,779

D12

569,060

543,300

431,177

292,105

309,630

315,600

2,57,450

285,350

383,218

D13

198,400

211,150

187,500

91,600

30,200

53,900

88617

93,200

88,900

D14

598,096

451,930

547,328

499,850

524,970

509,230

613,890

635,365

654,200

1,873,337

1,147,787

1,266,026

1,534,102

D15

1,802,760 1,542,579

1,752,798 1,919,166 2,141,597

D16

719,960

727,230

638,834

567,580

589,267

619,085

632,340

696,767

746,348

D17

216,880

153,950

169950

165,450

162,900

122,024

175,750

158,050

214,080

D18

312,960

264,050

190,843

233,503

192,500

152,325

175,450

191,365

212,975

D19

669,535

499,800

702,073

376,200

424,700

347,900

320,380

463,670

496,680

D20

352,000

374,898

389,030

274,750

196,920

180,100

186,450

165,469

235,148

D21

741,181

824,630

746,950

698,780

519,455

609,925

670,510

955,185

899,165

D22

338,150

251,800

348,278

286,230

331,730

303,480

266,000

377330

393,530

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 D23

499,985

576,956

502,690

412,130

463,695

398,550

378,140

535,090

609,080

D25

81,650

146,550

102,300

22,300

47,400

54,975

38,700

61,600

76,000

D26

117,953

76,538

110,034

67,550

68,438

50,760

55,550

72,400

96,750

D27

117,130

83,600

97,980

68,950

54,160

77,875

73,365

68,300

90,100

D28

136,321

154,661

85,475

28,800

24,400

39,250

26,750

35,650

59,950

TOTAL 18,148,645 16,827,156 18,322,667 13,278,128 13,365,263 13,806,853 15,804,278 18,814,224 19,549,278 Statistics gleaned from URA Realis and compiled by Sam Gian

[*2H stands for Second half]

Note: After 5 consecutive months of decline in rental value, the rental market staged a decisive rebound in January 2012 to end the month with $18,322,667 total monthly rent collection. This is $5,044,539 (or 38%) higher than the December 2011 figure. Following that, the total rental value dipped in February 2012 but clawed back some ground in March 2012, bringing the total rental value for Q1 2012 to $53,298,468, which is $12,848,224 (or 31.7%) higher than the $40,450,244 dismal performance of Q4 2011, but 1.6% shy of the Q3 total rent of $54,167,780. (See Table [5.2-A] & Graph 5.2-A) GRAPH 5.2-A – MONTHLY TOTAL IN RENTAL VALUE FROM JULY 2011 TO MARCH 2012

Statistics gleaned from URA Realis and compiled by Sam Gian

ABSOLUTE NUMBER OF PRIVATE APARTMENTS BEING RENTED MONTHLY As always, districts 9, 10 and 15 occupy the top 3 spots in terms of absolute number of rental transactions from Q3 through to the first month of the new year. It seems that in terms of ranking of popularity and tenant’s preference, little has changed except the market has been a little quieter than the landlords would have wanted it to be. The same residential districts still exude the same attractiveness and dominate the market positions. (See Table [5.2-B])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

TABLE [5.2-B] – COMPARISON OF RENTAL TRANSACTION VOLUME (BY MON TH ) FROM JULY 2011 TO MARCH 2012

MONTHLY RENTAL TRANSACTION VOLUME IN *2H 2011 & Q1 2012 Q1 2012 Q4 2011 Q3 2011

DIST

MAR 12

FEB 12

JAN 12

DEC

NOV

OCT

SEPT

AUG

JULY

104

123

129

100

113

115

124

122

113

129

127

176

151

154

184

178

236

162

191

184

182

229

255

113

118

149

425

386

419

321

330

339

440

521

504

D10

428

434

483

382

394

370

467

544

525

D11

256

225

226

151

165

175

186

222

226

D12

155

146

124

115

D13

D14

192

135

163

153

164

158

190

196

197

D15

425

353

414

272

318

367

415

437

519

D16

191

189

163

161

166

174

173

195

203

D17

D18

D19

176

126

164

112

126

102

100

139

146

D20

D21

191

197

176

205

152

169

185

264

260

D22

100

101

113

D23

148

172

155

137

154

135

125

180

202

D25

D26

D27

D28

TOTAL

3,847

3,446

3,646

2,988

3,051

3,100

3,369

3,956

4,218

Statistics gleaned from URA Realis and compiled by Sam Gian [*2H

stands for Second half]

Note: By examining Graph 5.2-B, no one will bet against rental volume rising in April 2012 as the historical trend has clearly pointed to that. [See the similarity in the rental market in the previous three years in Table [5.2-C] below. However, whether such a pattern will repeat itself in 2012 remain to be seen.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 GRAPH [5.2-B] – 3 YEARS’ RENTAL TREND WHERE THE HIGHEST NUMBER OF TENANCY AGREEMENTS SIGNED WAS IN JULY

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [5.2-C] – THREE YEARS OF MONTHLY ’HIGH’ AND ‘LOW’ FOR COMPARISON – JANUARY’S RENTAL VOLUME IS ALWAYS PRECEDED BY A MUCH LOWER DECEMBER’S RETURNS

RANK

2011

2010

2009

MONTH

TENANCIES SIGNED

MONTH

TENANCIES SIGNED

MONTH

TENANCIES SIGNED

JUL

4,218

JUL

3,638

JUL

3,737

AUG

3,956

JUN

3,510

AUG

3,455

APR

3,712

APR

3,437

APR

3,214

JUN

3,513

SEP

3,423

MAR

3,073

SEPT

3,369

MAY

3,380

JUN

3,045

JAN

3,333

OCT

3,240

MAY

2,896

MAR

3,263

MAR

3,034

SEPT

2,824

MAY

3,226

NOV

2,895

JAN

2,791

OCT

3,100

DEC

2,864

DEC

2,644

NOV

3,051

JAN

2,810

FEB

2,578

DEC

2,988

FEB

2,377

NOV

2,490

FEB

2,493

AUG

2,295

OCT

2,315

Statistics gleaned from URA Realis and compiled by Sam Gian

18 RESIDENTIAL DISTRICTS SAW FALLING MEDIAN PSF MONTHLY RENT IN MARCH 2012 In the final month of 2011, out of the 28 residential districts in Singapore, 11 residential districts (or 39.3%) saw slight dip in median psf monthly rent of between one per cent and 15.6% (in D22), 13 of them (or 46.4%) experienced marginally better median psf monthly rent of between half a per cent to around 5%, 1 districts (or 3.57%) had no rental transactions at all; while 3 residential district (or 10.7%) stagnated with the same median psf monthly rent. (See Table [5.3-A])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

However, the rental market staged a comprehensive rebound in Q1 2012 with 1,800 more tenancies signed or 19.7% increase in transaction volume. The total rental dollars collected rose by $12,848,224 (or 31.7%) higher than Q4 2011. However, by March 2012 the much improved median psf monthly rents in 19 out of the 28 residential districts (or 67.9%) in Singapore achieved in January 2012 were reversed in March 2012 with the majority of 18 residential districts (or 64.3%) experiencing dip in median psf monthly rent.

ONLY 7 RESIDENTIAL DISTRICTS ENJOYED BETTER MEDIAN PSF MONTHLY RENT IN MARCH 2012 Only 7 out of the 28 residential districts, or 25% of the 28 residential districts in Singapore enjoyed higher median psf monthly rent in March 2012. Districts 6 and 24 had no rental transactions at all; and only 1 district (or 3.57%) stagnated with the same median psf monthly rent as the final month of last year. (See Table [5.3-A]) TABLE [5.3-A] – ASCERTAIN THE MOVEMENTS OF MEDIAN PSF MONTHLY RENTAL OVER THE PAST 8 MONTHS (FROM JULY 2011 TO FEB 2012)

DIST

Median PSF MONTHLY RENT IN 2H* of 2011 & Q1 2012 MAR 12

FEB 12

JAN 12

DEC

NOV

OCT

SEPT

AUG

JULY

▲5.85

5.66

5.93▲

5.79

5.81

5.66

5.52

5.62

5.39

5.43

5.82

6.53▲

5.97

5.73

6.14

6.01

6.12

5.82

3.99

4.11▲

3.84

4.05

4.08

4.01

3.91

4.08

4.03

4.63

5.16▲

4.96▲

4.64

4.61

4.78

4.61

4.95

3.31

3.43

3.52▲

3.51

3.49

3.5

3.49

3.39

3.31

5.41

5.46

5.9

12.14

10.43

7.24

4.08

4.42▲

4.35▲

4.34

4.54

4.62

4.31

4.2

4.33

4.12

4.28

4.31▲

3.78

3.85

4.46

4.36

3.97

3.85

▲5.11

4.93

5.06▲

4.78

4.54

4.89

4.73

4.82

4.78

D10

3.86

3.98

4.18▲

3.95

4.07

4.06

4.15

4.07

D11

4.08

4.13▲

3.64

3.9

3.84

4.28

4.25

3.93

3.89

D12

3.54

3.54▲

3.06

2.98

3.04

3.22

3.15

3.01

D13

2.52

2.98

3.03▲

2.91

2.81

3.35

3.21

3.26

2.84

D14

▲2.93

2.86

3.01▲

2.95

2.96

2.98

2.92

2.96

D15

3.18

3.3▲

3.22▲

3.19

3.32

3.3

3.26

3.27

3.17

D16

3.05

3.17

3.25▲

3.23

3.19

3.15

3.22

3.13

3.14

D17

2.47

2.61

2.82

2.84

2.71

2.59

2.6

2.62

2.57

D18

▲2.98

2.91▲

2.88

3.02

2.99

2.87

2.94

2.93

2.91

D19

2.84

2.89

3.07▲

3.06

3.02

2.98

2.78

2.93

2.97

D20

▲3.06

2.89

3.14

3.26

3.18

2.87

3.06

2.84

3.07

D21

2.63

2.74▲

2.67

2.7

2.71

2.76

2.71

2.65

3.15▲

3.01

3.57

3.35

3.09

3.16

3.19

2.58

2.62

2.61

2.54

2.59

2.49

D22

2.97

D23

▲2.69

2.64▲

D24

D25

▲3.01

2.89▲

2.81▲

2.72

2.77

2.87

2.76

2.73

D26

2.53

2.68

2.91▲

2.82

2.8

2.84

2.79

2.86

2.66

D27

2.31

2.4

2.56▲

2.32

2.42

2.38

2.4

2.34

2.44

D28

2.07

2.32

2.64▲

2.3

2.41

2.54

2.45

2.13

Statistics gleaned from URA Realis and compiled by Sam Gian

[*2H stands for Second half]

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

DID THE NEWLY COMPLETED RESIDENTIAL PROJECT FARE ANY BETTER IN INVESTMENT INCOME? TABLE [5.3-D] – ASCERTAINING THE RENTAL INCOME IN NEW T.O.P. PROJECTS – COMPARISON FROM Q1 TO Q4 2011

PROJECTS RECEIVING TOP RECENTLY

MEDIAN PSF MONTHLY RENT ($) Q3 2011

Q2 2011

Q1 2011

MARINA BAY RESIDENCES

Q4 2011 5.92

5.84

5.35

5.54

THE OCEANFRONT @ SENTOSA COVE

4.46

4.36

4.09

4.30

ONE-NORTH RESIDENCES

4.51

4.44

4.59

5.02

CITY SQUARE RESIDENCES

4.62

4.17

4.53

ONE AMBER

4.09

3.83

3.80

3.27

THE SAIL @ MARINA BAY

5.99

6.06

5.99

5.66

THE METROPOLITAN CONDO

4.11

4.24

4.26

3.90

ONE SHENTON

5.01

5.25

THE PARC

3.29

3.80

3.27

3.10

THE COSMOPOLITAN

5.18

5.30

5.24

5.06

DAKOTA RESIDENCES

3.72

3.83

3.68

3.64

CASA MERAH

3.42

3.46

3.26

3.30

THE AZURE TRIBECA THE TRILLIUM ARDMORE II ST REGIS RESIDENCES SINGAPORE SKY@ELEVEN THE ARTE AALTO THE ESTA THE SEAFRONT ON MEYER

4.32 <10 5.15 4.84 5.10 <10 3.16 4.58 3.57 3.99

4.09 <10 4.84 4.45 5.13 <10 3.27 3.93 3.42 3.74

4.54 <10 4.93 4.78 5.84 <10 3.06 3.83 3.40 3.60

14 15 16 17 18 19 20 21 22

<10 <10 <10 <10 <10 <10 <10 <10 <10 <10

Statistics gleaned from URA Realis and compiled by Sam Gian *<10 denotes less than 10 rental transactions in the quarter

FINDING – Out of the 22 newly T.O.P projects selected for this case study (as well as in the case study done in Nov 2011), 5 projects (or 23.8%) enjoyed higher median psf monthly rents [it dropped from 14 projects (or 66.67%) in the last case study]; while 7 projects (31.8%) (or two more projects than in the Nov 2011 case study) saw their median psf monthly rent falling, albeit marginally. 10 projects (45.5%) attracted less than 10 rental deals in the final quarter of 2011. In the last case study in Nov 2011, only 2 projects were unable to attract less than 10 tenancies.

COMPARISON OF Q1 TO Q4 2011 MEDIAN PSF MONTHLY RENT AT POPULAR CONDO PROJECTS A total of 187 condo projects are selected for this case study to ascertain if median psf monthly rents in the different residential districts in Singapore have gone up, down or sideway.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

 CONDO PROJECTS WITH HIGHER MEDIAN PSF MONTHLY RENTS IN Q4 2011 The first set of 121 projects (or 64.7%) shown in Table [5.4-A] has experienced higher median psf monthly rents in the final quarter of 2011 when compared with the preceding Q3 2011. TABLE [5.4-A] – COMPARISON OF QUARTERLY MEDIAN RENTS (B Y PROJECTS ) IN 2011 – PROJECTS WITH HIGHER MEDIAN RENTS IN Q4 2011

DIS

PROJECT NAME

EMERALD GARDEN

MEDIAN RENT Q4 11

Q3 11

Q2 11

Q1 11

4.26

4.1

3.95

3.96

MARINA BAY RESIDENCES

5.92

5.84

5.35

5.54

PEOPLE'S PARK COMPLEX

4.27

3.43

3.96

2.94

ICON.

6.65

6.48

6.56

6.74

INTERNATIONAL PLAZA

3.76

3.71

3.12

3.53

QUEENS

4.30

4.21

3.53

3.75

THE BERTH BY THE COVE

4.85

4.79

4.75

4.54

THE OCEANFRONT @ SENTOSA COVE

4.46

4.36

4.09

4.3

ONE-NORTH RESIDENCES

4.51

4.44

4.59

5.02

PARC IMPERIAL

6.64

6.24

6.28

5.8

REGENT PARK

3.51

3.27

3.36

3.22

WESTCOVE

2.92

2.86

2.91

2.89

BURLINGTON SQUARE

4.62

4.51

4.36

4.19

THE PLAZA

4.65

4.05

4.04

4.4

CITY SQUARE RES.

4.62

4.17

4.53

KERRISDALE

3.78

3.75

3.67

3.55

BELLE VUE RESIDENCES

5.90

5.16

4.72

5.02

MIRAGE TOWER

4.44

4.18

4.21

4.01

RIVERGATE

5.71

5.16

5.18

5.26

ROBERTSON 100

5.87

5.7

5.87

5.49

THE PIER AT ROBERTSON

7.13

6.87

6.76

6.9

TIARA

4.19

3.97

3.98

4.24

UE SQUARE

3.97

3.87

3.72

3.75

VISIONCREST

6.86

6.36

6.47

6.7

YONG AN PARK

4.16

3.97

4.15

4.19

D10

ARDMORE PARK

6.15

5.78

6.16

D10

ASTRID MEADOWS

4.16

4.11

4.37

4.4

D10

DUCHESS CREST

4.05

4.01

3.75

3.99

D10

FOUR SEASONS PARK

4.97

4.87

4.84

4.87

D10

TANGLIN REGENCY

4.26

4.06

4.35

D10

THE MERASAGA

4.54

4.07

3.88

4.3

D10

THE TESSARINA

3.92

3.63

3.78

3.71

D10

VALLEY PARK

3.74

3.69

3.7

3.6

D11

RESIDENCES @ EVELYN

5.08

5.05

5.18

5.37

D12

TRELLIS TOWERS

4.47

3.51

3.35

3.39

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

D14

ASTORIA PARK

3.50

3.22

3.15

3.18

D14

CENTRAL GROVE

3.16

3.1

2.93

D14

SIMSVILLE

2.97

2.93

2.86

2.99

D14

THE SUNNY SPRING

3.01

2.88

2.71

D14

THE WATERINA

3.36

3.23

3.15

3.07

D15

COSTA RHU

3.36

3.16

3.39

3.13

D15

EASTERN LAGOON

3.49

3.31

3.22

2.9

D15

MANDARIN GARDEN

3.26

3.22

3.27

2.87

D15

ONE AMBER

4.09

3.83

3.8

3.27

D15

PEBBLE BAY

3.75

3.57

3.56

3.54

D15

THE MAKENA

3.10

3.01

2.94

2.82

D15

THE SEA VIEW

4.30

4.23

3.76

4.01

D15

THE WATERSIDE

3.09

3.06

3.09

3.01

D15

WATER PLACE

3.97

3.75

3.6

3.52

D16

BAYSHORE PARK

3.50

3.28

3.26

3.2

D16

CHANGI GREEN

2.70

2.68

2.6

2.58

D16

COSTA DEL SOL

3.70

3.69

3.7

3.69

D16

THE BAYSHORE

3.21

3.14

3.06

3.01

D17

BALLOTA PARK

2.22

2.21

2.11

2.08

D17

CARISSA PARK

2.77

2.58

2.71

2.49

D17

EDELWEISS PARK

3.03

2.92

2.71

2.9

D18

CHANGI RISE

2.83

2.8

2.85

2.8

D18

MELVILLE PARK

2.78

2.76

2.65

2.51

D18

SAVANNAH CONDOPARK

3.37

3.13

3.14

3.04

D19

CHUAN PARK

2.45

2.36

2.44

2.38

D19

COMPASS HEIGHTS

3.21

3.15

3.05

3.08

D19

KOVAN MELODY

3.72

3.65

3.54

3.53

D19

REGENTVILLE

2.79

2.75

2.6

2.55

D20

GRANDEUR 8

3.27

3.22

3.1

3.18

D20

THE GARDENS AT BISHAN

3.53

3.36

3.42

3.1

D21

GARDENVISTA

3.72

3.68

3.54

3.77

D21

HUME PARK 2

2.36

2.34

2.21

2.13

D21

MAPLEWOODS

3.15

3.14

3.09

3.02

D21

SPRINGDALE

2.80

2.71

2.6

2.61

D21

SUMMERHILL

2.72

2.64

2.66

2.68

D21

THE HILLSIDE

2.76

2.56

2.68

2.63

D22

PARC OASIS

2.95

2.88

2.79

2.75

D22

THE CENTRIS

3.81

3.66

3.79

3.5

D23

GLENDALE PARK

2.46

2.45

2.41

2.25

D23

GUILIN VIEW

3.08

2.79

2.76

2.7

D23

HAZEL PARK

2.48

2.26

2.23

2.1

D23

HILLVIEW REGENCY

3.33

2.99

3.1

2.88

D23

PALM GARDENS

2.51

2.41

2.39

2.22

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

D23

PARKVIEW APARTMENTS

2.62

2.45

2.58

2.51

D23

REGENT GROVE

2.63

2.58

2.49

2.55

D23

THE DAIRY FARM

2.35

2.32

2.18

2.16

D23

THE WARREN

3.07

2.95

2.89

2.9

D25

CASABLANCA

3.07

2.96

2.84

2.87

D25

ROSEWOOD

2.81

2.64

2.75

2.71

D26

CASTLE GREEN

2.92

2.8

2.83

2.82

D27

ORCHID PARK

2.54

2.51

2.55

2.48

Statistics gleaned from URA Realis and compiled by Sam Gian [Note:

means higher median rent]

Note: In the previous quarter, out of the same 187 residential projects selected for the case study, 121 (64.7%) of them enjoyed higher median psf monthly rent. In Q4, with the same basket of private housing projects, only 86 (46%) of them had higher median psf monthly rents.

 CONDO PROJECTS WITH LOWER MEDIAN PSF MONTHLY RENTS IN Q4 2011 61 out of the 187 selected condo projects (32.6%) experienced lower median psf monthly rents in Q4 2011. In the previous quarter, this figure was lower at 28.9%. TABLE [5.4-B] – COMPARISON OF QUARTERLY MEDIAN RENTS (B Y PROJECTS ) IN 2011 – PROJECTS WITH LOWER MEDIAN RENTS IN Q4 2011

DIS

PROJECT NAME

THE SAIL @ MARINA BAY

MEDIAN RENT Q4 11

Q3 11

Q2 11

Q1 11

5.99

6.06

5.99

5.66

CENTRAL GREEN

3.64

3.68

3.72

3.48

EMERALD PARK

3.85

4.03

3.53

3.75

MERAPRIME

5.07

5.15

3.72

3.48

TANGLIN VIEW

4.37

4.42

4.95

4.82

THE METROPOLITAN

4.11

4.24

4.37

4.31

CARIBBEAN AT KEPPEL BAY

5.60

5.88

5.61

5.4

THE COAST AT SENTOSA COVE

3.87

3.95

4.2

4.21

BLUE HORIZON

3.81

3.84

3.75

3.74

BOTANNIA

3.36

3.49

3.37

2.95

THE PARC

3.29

3.8

3.27

3.1

VISTA PARK

3.27

3.35

2.92

3.09

WEST BAY

2.99

3.05

2.97

3.23

THE BENCOOLEN

4.70

4.73

4.82

4.76

CITYLIGHTS

5.37

5.38

5.37

5.55

ASPEN HEIGHTS

3.93

4.03

3.9

CAIRNHILL CREST

4.92

4.9

4.88

4.49

KIM SIA COURT

3.11

3.18

3.07

3.22

PACIFIC MANSION

2.71

2.74

2.64

2.54

PARC EMILY

5.05

5.13

5.31

4.77

THE COSMOPOLITAN

5.18

5.3

5.24

5.06

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

THE IMPERIAL

5.70

5.84

5.4

5.67

WATERMARK ROBERTSON Q.

5.43

5.57

4.76

4.93

D10

BELMOND GREEN

4.10

4.5

4.28

4.21

D10

CUSCADEN RESIDENCES

5.00

5.39

5.06

4.97

D10

ONE JERVOIS

4.59

4.83

4.85

4.71

D10

REGENCY PARK

3.87

4.43

3.86

3.95

D10

RIDGEWOOD

2.78

2.85

2.82

2.88

D10

SPRING GROVE

3.95

4.19

4.27

4.22

D10

TANGLIN PARK

4.47

4.72

4.57

4.68

D11

AMARYLLIS VILLE

4.89

5.02

5.19

4.92

D11

PARK INFINIA @ WEE NAM

5.25

5.14

5.04

5.16

D11

THOMSON 800

3.04

3.07

3.02

3.08

D12

OLEANDER TOWERS

3.25

3.47

3.28

3.39

D14

DAKOTA RESIDENCES

3.72

3.83

3.68

3.64

D14

WING FONG MANS.

2.48

2.57

2.39

2.28

D15

COTE D'AZUR

3.89

3.97

3.83

3.82

D15

FERNWOOD TERRACE

2.35

2.42

2.52

2.25

D15

NEPTUNE COURT

2.33

2.42

2.34

2.25

D15

SANCTUARY GREEN

3.84

3.69

3.91

D15

VILLA MARINA

3.12

3.17

3.15

2.91

D16

AQUARIUS BY THE PARK

3.15

3.26

3.1

2.99

D16

CASA MERAH

3.42

3.46

3.26

3.3

D16

EAST MEADOWS

3.22

3.29

3.15

3.02

D16

SUNHAVEN

2.76

2.83

2.67

2.63

D17

FERRARIA PARK

3.15

3.2

2.9

2.85

D18

EASTPOINT GREEN

3.07

3.03

2.98

2.92

D19

CHILTERN PARK

2.73

2.78

2.6

2.56

D21

HILLVIEW GREEN

2.28

2.44

2.34

2.16

D21

HUME PARK I

2.15

2.23

2.25

2.35

D21

PANDAN VALLEY

2.39

2.46

2.4

2.44

D21

PINE GROVE

2.34

2.73

2.41

2.26

D21

SIGNATURE PARK

2.37

2.43

2.3

2.29

D21

SOUTHAVEN II

2.38

2.46

2.34

2.48

D21

SYMPHONY HEIGHTS

2.57

2.58

2.45

2.48

D22

PARC VISTA

2.85

2.88

2.8

2.73

D22

THE MAYFAIR

3.10

3.13

2.94

3.24

D23

HILLINGTON GREEN

2.60

2.63

2.48

2.53

D23

MAYSPRINGS

2.61

2.85

2.63

2.69

D23

NORTHVALE

2.55

2.68

2.4

2.42

D26

BULLION PARK

2.91

3.18

2.75

2.85

Statistics gleaned from URA Realis and compiled by Sam Gian [Note:

means lower median rent]

Note: In the previous quarter, out of the same 187 residential projects selected for the case study, 54 (28.9%) of them had lower median psf monthly rent. In Q4, with

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

the same basket of private housing projects, 61 (32.6%) of them were deficient in median psf monthly rents compared with the previous quarter.

 CONDO PROJECTS WHERE MEDIAN PSF MONTHLY RENTS WENT SIDEWAY IN Q4 2011 7 out of the 187 selected condo projects (3.74%) experienced stagnant median psf monthly rents in Q4 2011. TABLE [5.4-C] – COMPARISON OF QUARTERLY MEDIAN RENTS (BY PROJEC TS ) IN 2011 – PROJECTS WITH STAGNANT MEDIAN RENTS IN Q4 2011

DIS

PROJECT NAME

MEDIAN RENT Q4 11

Q3 11

Q2 11

Q1 11

THE ANCHORAGE

3.20

3.2

4.21

4.12

8 @ MOUNT SOPHIA

5.80

5.62

5.66

D10

SOMMERVILLE PARK

3.65

3.49

3.54

D16

CHANGI COURT

2.89

2.79

2.73

2.65

2.43

2.63

3.87

3.75

3.57

2.73

2.57

2.54

D21

CLEMENTI PARK

2.65

D22

THE LAKESHORE

3.87

D23

REGENT HEIGHTS

2.73

Statistics gleaned from URA Realis and compiled by Sam Gian [Note:



means unchanged median rent]

CONDO PROJECTS WITH FEWER THAN 10 RENTAL DEALS IN Q4 2011

A total of 28 out of the 187 selected condo projects (or 15%) had fewer than 10 transactions in Q4 2011. The figure was much higher than the 6.42% in the preceding quarter in 2011. TABLE [5.4-D] – COMPARISON OF QUARTERLY MEDIAN RENTS (BY PROJECTS ) IN 2011 – PROJECTS WITH FEWER THAN 10 RENTAL CONTRACTS IN Q4 2011

DIS

PROJECT NAME

MEDIAN RENT Q4 11

Q3 11

Q2 11

Q1 11

RIVERWALK APARTMENT

<10

3.69

3.52

4.02

THE BEACON

<10

4.44

4.06

HARBOURLIGHTS

<10

4.00

3.66

3.95

THE AZURE

<10

4.32

4.09

4.54

THE PEARL @ MOUNT FABER

<10

4.53

4.05

THE INFINITI

<10

2.74

2.8

2.66

VARSITY PARK

<10

3.68

3.58

3.5

SUNSHINE PLAZA

<10

4.62

4.94

4.58

LEONIE CONDOTEL

<10

4.19

4.26

4.39

THE TRILLIUM

<10

5.15

4.84

4.93

D10

ARDMORE II

<10

4.84

4.45

4.78

D10

MELROSE PARK

<10

4.46

4.52

D10

ST REGIS RESIDENCES

<10

5.10

5.13

5.84

D11

THOMSON EURO-ASIA

<10

4.37

4.61

4.4

D11

ZEDGE

<10

5.22

5.17

D12

THE ARTE

<10

3.16

3.27

3.06

D14

ATRIUM RESIDENCES

<10

2.77

2.76

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

D15

AALTO

<10

4.58

3.93

3.83

D15

TANJONG RIA

<10

3.12

2.86

3.01

D15

THE ESTA

<10

3.57

3.42

3.4

D15

THE SEAFRONT ON MEYER

<10

3.99

3.74

3.6

D17

AVILA GARDENS

<10

2.57

2.21

2.25

D17

AZALEA PARK

<10

2.29

2.14

2.13

D20

FAR HORIZON GDNS

<10

2.69

2.42

D21

THE BLOSSOMVALE

<10

2.88

2.73

2.87

D23

CASHEW HEIGHTS

<10

1.98

2.08

1.97

D23

THE JADE

<10

3.83

3.51

D26

SEASONS PARK

<10

2.55

2.54

2.55

Statistics gleaned from URA Realis and compiled by Sam Gian

This simply means that more landlords are frustrated by the prospect of not being able to land themselves the desired affluent tenants as easily as before.

ON HINDSIGHT – JUST IN CASE At the end of the day, the common objective of these exercises is to drive home the importance of doing one’s homework before putting the deposit for a host of new calculated financial RISKS lying ahead. It cannot be emphasised enough that when investing in real estate, one must be able and willing to undertake those RISKS for at least 3 to 5 years, if not longer – just in case the market stumbles upon a downward cycle when one least expects it. This could mean that if an investor is unable to dispose of his property due to the effect of the host of the recent cooling-off measures, there is a high chance that he might not be able to enjoy the level of cash flow that he was led to believe that he could. And if the status quo remains, without the impetus from both foreign buyers and foreigner tenants to reinvigorate the market, the property market is likely to go into an induced slumber. Nobody will know ‘how long’ we will have to wait to see another bull-run.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

YOUR GUESS IS AS GOOD AS MINE When the market is fearless, don’t try to talk sense into it

The latest cooling measure, i.e. the Additional Buyer’s Stamp Duty (ABSD) which took effect from 8 December 2011 aims to keep out the influx of ‘hot money’ created by the loose monetary policy in the United States and Europe and to check the prevalent ‘herd mentality’ especially in the primary home market. Yet, by March 2012, there was market murmur that there might soon be another round of coolingoff measures to stamp the tide of relentless buying of ‘very small apartments’ with suspected functionality. If this comes to fruition, the resulting implosion will suck the air out of the property market and leave many ‘high and dry’. This would count as one of the ‘bad case scenarios’ that could probably occur from the present market anomalies, which include the spirited buying of mass market homes in the primary sale market amidst great global uncertainties. However, the limited success of the ABSD measure has been in keeping the top-end of the luxury home markets, in both new home and resale segments, quiet.

EXTERNAL ENVIRONMENT Externally, the same factors that weighed down rental growth for individual landlords in recent months are still lurking with intent. Just to recapitulate, these include the ever increasing probabilities of financial bailouts for some member states of the European Union (EU); the urgency by foreign banks to repatriate funds back home to comply with the minimum capital ratio (known as Basel III); the anaemic economic recovery in the United States (US); widespread corporate cost-cutting; and, the pervasive sense of cautiousness, e.g. the low daily trading volume of between $1 billion-$1.2 billion in the Singapore stock market [Source: The Business Times 16 April 2012 – LOW MARKET VOLUME HAS TO BE A WORRY]. But amidst a picture of general gloom, the real estate market is an exception where buyers of all creeds and persuasions are still paying between $1,000 and $1,700 persquare-foot (psf) for mass market condo units outside prime areas. Whether this is wise or unwise, only time will tell; but being a small and open economy, Singapore’s property market remains vulnerable to external variables which have refused to go away since last August. Let’s now look at how the global situation has evolved. EUROPE – DOUBLE DIP RECESSION Though having recently averted a Lehman Brother’s-lookalike meltdown, Europe is presently being hit with a double whammy By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

of an austerity drive in the middle of a widespread recession (except Germany). EU member states including Greece, Spain, Portugal as well as Ireland are in a much deeper recession than they care to admit. Outside the Euro zone, the United Kingdom (UK) economy suffers a ‘double dip’ recession for the first time since the 1970s. Its GDP in Q1 2012 fell 0.2% from the final quarter (Q4) of 2011 where it declined 0.3%. [Source: Bloomberg news 25 April 2012 – U.K. SUCCUMBS TO FIRST DOUBLE-DIP RECESSION SINCE 1970s: ECONOMY] First of all, what is the meaning of ‘austerity’? It means ‘belt tightening’, lower spending, cost cutting etc. While such stringent measures may help to stop further budgetary deficit, they do not create more jobs which are what the European economy badly needs at the moment. This means that the vast majority of the western banks will have to deleverage, reduce head counts (globally), increase deposit (e.g. time deposit), hold ‘easy-to-sell’ liquid assets (real estate is out of the question), and hold more low-risk securities such as government bonds which are deemed risk-free in theory. However, as of March 2012, these banks have a combined deficiency of Є485.6 billion and these cash is urgently needed to meet the target as the two deadlines (in 2015 and another in 2019) loom in the background. 

IMPLICATIONS TO PROPERTY MARKET IN SINGAPORE

This means that the kind of market exuberance we saw in 2007 (described at Page 2 – OVERVIEW) where the ‘trigger happy’ investment banks from the US and Europe snapped up SIA Building, DBS Building and Farrer Court ‘while eating breakfast’ is now history.

THE UNITED STATES (U.S.) – CHALLENGES AHEAD The only shimmer of hope actually comes from the encouraging statistics from the United States (US) in the March-April 2012 period. Ironically, the US was where the entire problems started with the collapse of the housing market (i.e. sub-prime crisis in 2008) which later led to the financial crisis where hundreds of banks in the US and Europe were decimated through winding-up or mergers & acquisitions. Those banks which are ‘too big to fail’ and were propped up by taxpayer’s monies are not considered insolvent and some of them include those that were active in snapping up commercial buildings and en bloc sale projects in Singapore in 2007. 

QUANTITATIVE EASING (QE) MEASURES & THEIR IMPLICATIONS

Statistically, the U.S. is in recovery mode. Whether the policy tools the US government had used are effective or not is another issue but one particular monetary measure that it employed appeared to have prevented it from going into deeper recession

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

but it had a dire consequence to others more than it helped its own people. It was the QUANTITATIVE EASING (QE) measure that created a total of US$2.3 trillion for the US Federal Reserve to purchase U.S. government bonds, mortgage-backed securities, and bank debts directly from private investors (mostly banks) and in so doing, increased money supply and injected the newly created liquidity into the market to avoid deflation and to boost economic activities through spending. On top of that, interest rate has been deliberately kept to near zero to keep the money tap flowing in the banking system to prevent the US economy from going into contraction. The low interest policy will only be reviewed upward in 2014. 

QE 1 AND QE 2

The first round of bond buying actions by the Federal Reserve from private bond holders – dubbed QE 1 – lasted 20 months from December 2008 to August 2010. The second round of purchase of US government debts, dubbed QE 2, which went on for only 7 months, started in November 2010 and ended in June 2011. These measures practically mean that the U.S. government printed the money and put it in the hand of the banks so that the money could be circulated in the market and in so doing sustain consumer spending and prevent the economy from going into depression. But such a move caused investors all over the world to dump US dollars frantically and switch to holding (and hoarding) tangible assets and commodities, and in doing so causing asset prices all over Asian markets to soar as material costs skyrocketed. This can be seen in the price appreciation in Singapore real estate discussed earlier in related story: “A RUDE AWAKENING OF THE MIDDLE-CLASS DREAM”. 

IMPLICATIONS OF QE MEASURES

But the recovery process is still considered fragile because, from a neutral perspective, the recent talk of a third round of QUANTITATIVE EASING (QE) is indeed worrying as it suggested that more is needed to be done to sustain the momentum of the recovery process. But, the bad news was treated as a buying signal by speculators and sent the stock markets across the globe into frenzy. Fortunately or otherwise, at the time this magazine went for printing, the Fed had come out in the open to quash any lingering hope for the need of another QE exercise. According to an online Reuters report, only two of the Federal Open Market Committee’s 10 voting members agreed with the additional monetary stimulus. 

U.S. HOUSING MARKET IS STILL FAR FROM RECOVERY

Though home sale in the U.S. has generally improved in February 2012 due to low inventory, building permits and a better demand (which rose 4.8% in February 2012, the highest since 2008), sales of repossessed properties by lenders may rise 25% in 2012 compared with the 1,000,000 last year. A surge in supply in foreclosed property will dampen prices, and real estate experts in the U.S. have estimated that home prices would drop by 10% this year. [Source: Business Times 4 April 2012]

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

In a nutshell, the Federal Reserve maintained its cautious assessment of the economy for 2012 due to the high jobless rate and the nagging pains in Europe. PEOPLE’S REPUBLIC OF CHINA (PRC) Economic ‘soft-landing’ is highly probable in the world’s second largest economy, which already announced the official forecast of only 7.5% in this year’s GDP growth – the lowest in 10 years. In fact, in the first three months (Q1) of 2012, China’s economy grew only 8.1% yearon-year (y-o-y) and this is the slowest growth in almost 3 years. The latest official data stated that China’s March home prices fell in 37 of 70 cities surveyed, consistent with private sector data which said home prices fell for the seventh month in March 2012 from a month ago. In the capital city Beijing, existing home prices fell 3.4% y-o-y in March 2012, and in the meantime, in China’s financial centre, Shanghai, there was a 1% drop in home prices y-o-y.  THE FACTORY OF THE WORLD At the political front, the undisputed largest factory in the world treads cautiously into uncharted waters as it braces itself for the highly politicised change of guard in the top echelon of the Chinese Politburo. With the exception of 2002, such a top level change-over is often preceded with violence and bloodshed. Already the Chinese as well as Hong Kong stock markets had experienced wild swings resulting from news relating to the intrigues of power struggles within the ranked politicians. With fingers crossed, one can only pray that none of the troubles would end up undoing the new found prosperity and the increasing spending powers of the Chinese middle-class.

PROBABLE OIL SHOCK IN 2012 – LEADING INDUSTRY INDICATORS IN SINGAPORE The escalating tension between Iran and the developed world could result in a probable oil shock that would bring everybody back to square one. Related developments have already sent shivers to many businesses that heavily rely on this particular energy source, for example, 

NEPTUNE ORIENTAL LINE (NOL) on 22 February 2012 announced that it had suffered a net loss of US$320.43 million, due to high costs. The national shipping symbol of Singapore experienced a wild swing in fortune posting a net loss of US$478.18 million for the full fiscal year ended on 31 December 2011 after

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

gaining a full year profit of US$460.94 million in 2010. [Source: Straits Times 22 February 2012] 

SINGAPORE AIRLINES LTD (SIA) on 9 March 2012 announced that due to weak

demand from business-class and corporate travellers and the soaring energy prices it had allowed its pilots to go on no-pay leave for up to two years. In the statement which was published in The Business Times, SIA attributed the cause of its business slowdown to the cost-cutting measures adopted by financial firms. In the same report, the International Air Transport Association painted the worst case scenario of the airline industry losing US$8.3-billion in 2012 if Europe's debt problems trigger another banking crisis. [Source: The Business Times 9 March 2012] 

IMPLICATIONS OF HIGHER OIL PRICES TO REAL ESTATE

Ironically, such grim messages coming out from Singapore’s leading industry icons might have contributed to the surprising surge in the private home market in March 2012 where resale volume jolted past the last 3 months’ tepid figures to register 925 resale deals which are only 93 deals shy of the monthly figure of 1,018 resale transactions in November 2011 before the knee-jerk effect after the latest cooling measure (i.e. ABSD) was announced in early December 2011. This could be due to the opportunistic interpretation of the conflict between Iran and the western world where the threat of imminent military confrontation in the Middle East would lead to shortage of oil supply which will in turn cause massive inflation globally. And in today’s context, any telltale sign of impending inflation will lead to speculative buying of properties and commodities.

A BLADE THAT CUTS BOTH WAYS The goals of any investment are to raise personal wealth and to enhance personal spending power. The first objective can be achieved either through accumulation of surplus over a period of time or through capital gain from disposal of the property, or through both. But, like all other investments, real estate investments have a blade that cuts both ways. It could help the aspiring individuals to deepen the pocket and also to hurt their bottom line. And the only way to make sure that the former and not the latter scenario will prevail at the end of the day, one ought to have planned the investment with care, due diligence, detailed calculations and the know-how in interpreting the occurrences in the property market which is genetically tied to the larger economy. 

FIRST LINE OF DEFENCE – AFFORDABILITY

Sometimes, things which belie and defy economic fundamentals happen in the property market, but they tend to be short-lived, such as the present fad of shoebox

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

apartments. This is because such small apartments are attractive to HDB upgraders due to the lower price quantum and perceived ‘affordability’. However, ‘affordability’ is not just about being able to put down the initial deposit and qualify for a mortgage loan. The investment holding must be able to produce sufficient cash-flow from regular income to enhance the owner’s spending power or at least to mitigate opportunity costs over a long period of time. This is because regardless of the physical size of real estate, they are illiquid and tough to dispose of, especially during bad times. Except during good times, the illiquidity attribute of real estate does not appear to be as menacing as a ‘fresh eating’ monster – which it actually is. 

LAST LINE OF DEFENCE – RENTAL INCOME

If rental income is not the immediate goal of the investor’s, it must be their last line of defence, because besides the property’s LOCATION which is the number one yardstick of market value, another huge part of the property’s value is derived from its functionality or ‘liveability’ factor within, including fixtures and the number of rooms etc. And of course, a property’s location is often regarded as the yardstick of the owner’s affluence. The functionality of a home unit is inseparable from space sufficiency which is in turn expressed in physical size. In this regard, the concept of ‘functionality of space’ is fundamental. If the property is meant for receiving rental income, ‘small space’ equates ‘limited functionalities’ and thus lower desire by the end-users (i.e. tenants) until the incentives becomes apparent (e.g. lower rents, or the apartment is in a *popular district, etc) [*Popular Districts refers to locations with higher number of rental transactions and higher rents collected in a year.] (See Table [5.2-A] and Table [5.2-B]) In this regard, whether prospective tenants will be excited about shoebox apartments remains to be seen. 

PRIDE OF OWNERSHIP

Pride of ownership is considered as one of the benefits of real estate investment. And the size of the property determines the size of ownership pride. By the same measure, reduction in every square metre of space in a property will correspondingly reduce the level of pride of the home owners and the occupiers. Why does the Housing & Development Board (HDB) classify public flats into 1-room flat, 2-room flat, 3-room flat and so on; and social subsidies are always tied to room types of a public flat? Moreover, related to the pride factor is a host of other possible setbacks over the long term, including the lure of ‘wrong tenants’, high repair costs, or functional obsolescence in older private housing projects. In sum, costs of property ownership tend to be enlarged over time, and they are not limited to financial costs but also opportunity costs and other legal implications.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012



THE BIGGER THE BETTER – START-GAME, MID-GAME & END-GAME

Do not forget an ageless maxim in real estate investment, i.e. “the bigger the better”. In the start-game, if an investor has sufficient funds for a large apartment (of say, 2,000 sq ft), do not split the funds to buy two smaller apartments (of say, 800 sq ft). This is because in the mid-game where the investor collects rents, larger apartment tend to be in better demand from a more affluent clientele due to the privacy provided by the living space, and as such, the upside is always better over a long period of time. In the end-game, the residual value (i.e. en bloc sale value) of a residential project comes from the larger units and not the smaller units. And the law stipulates that the calculation of majority consent must comprise share value and total floor area of all the residential lots in the residential project. This will give the owners of larger apartment units a better bargaining power over others in the en bloc sale project.

‘TO BUY’ AND ‘NOT TO BUY’ CARRY EQUAL RISK In conclusion, let’s revisit the story of Mr O (Optimist), Mr P (Pessimist) and Mr R (Realist). The three of them represent three different market perspectives and three courses of actions, i.e. buy, sell and hold (or wait). And each of the actions carries with it a certain amount of risks. For example, if Mr O buys now he will face the ‘liquidity risk’ if the market goes the other way; while if Mr P sells now he may face the ‘inflation risk’ or the ‘purchasing power risk’ if prices continue to go up. Mr R faces a 50/50 chance of either of the risks if the property market declines or rises. But what if the property market goes flat for a couple of years? Then the odds will stack against Mr O if he chooses to buy now, because he will be holding a high price property at a flat rent.

In the final analysis, as long as the global economy does not truly recover and there exists a likelihood of another round of QUANTITATIVE EASING (QE) by the U.S. Federal Reserve, the property market will remain speculative, and even volatile, as more buyers use properties as the hedge against the resulting inflation. But being a realistic person, I will go with Mr R’s lower risk option and just ‘wait and see’ which way the market will go.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

CONCLUSION Last but not least … … … Since I have started this magazine with the story of a blind man asking his friend to describe colours to him, let me end with another story. The F1 formula grand prix has a few similarities with the present market condition, and of course, with life. Firstly, whether in business or in life, we are always running in circles, chasing our dream.

Last but not least

Secondly, it is always the same few fellows who keep going after the same thing as us. And the best part of the F1 race is the ‘crash’ which often produces the surprised winner. And the moral of the story is: “In F1 as in life, if those in front don’t ‘crash’, those behind will not be able to catch up.” Let me now summarise the contents of this magazine in Chinese:

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By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]