Issue 121

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CONTENTS
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3 Reasons Why Developers Can Sell
At High Prices Singapore Property News This Week Resale Property Transactions (August 28 September 3)

FROM THE

EDITOR

Welcome to the 121st edition of the Singapore Property Weekly. Hope you like it!

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SINGAPORE PROPERTY WEEKLY Issue 121

3 Reasons Why Developers Can Sell At High Prices

By Property Soul (guest contributor) Have you ever wondered why new projects from developers are able to command a large premium in asking price, sometimes up to fifty percent higher than recently completed nearby projects? An interview with a VIP property buyer Below is an abstract from my interview with a VIP property buyer (as compared to the usual retail buyers). Me: How do you manage to buy before everyone else does? VIP: After developers set the prices, easily twenty to forty percent higher than nearby projects,
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SINGAPORE PROPERTY WEEKLY Issue 121 they need to test the water. They will invite us to a project preview where we can pick our preferred units. Whatever price we are willing to pay, the developers can use it to convince the market that it is a reasonable market price. Me: How do you make a profit? VIP: Say, if we buy at $1,000 per square foot, developers can sell at $1,100 during actual launch. Phase two comes a few weeks later with prices increased to $1,200, and so on and so forth. Since we've chosen the best units, we can offload with at least twenty percent profit. Me: And the developer has just successfully set a new high for property prices in the district! There are three major factors that set the stage for developers to market uncompleted
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projects at high future prices (i.e. prices that already account for future price appreciation expectations): 1. The advantages of market domination The property developer industry is an oligopoly. It is dominated by a few big players which are often large conglomerates. The entry barrier for new players in this industry is exceptionally high. With limited supply and high cost of land, it is not easy for small developers to raise sufficient funds or obtain financing from the bank. They also cannot compete with the big guys in terms of branding and their track record in past projects. Bigger players have stronger financial muscle to build their own land bank. They can drive construction of projects in time to capture a booming market.
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SINGAPORE PROPERTY WEEKLY Issue 121 They enjoy the benefits of economies of scale or cost leadership from a large number of ongoing projects. They have a handsome budget for marketing and for leverage to hire a good marketing agent. They have enough cash reserves to hedge against poor sales during bad times. It is therefore not surprising to see a high percentage of private housing projects all supplied by the top few developers. The advantages of market domination allow them to set their list prices at the highest possible level and to reap a huge profit. 2. Collaboration among big players The big players have good connections amongst themselves to make the most of a mutually beneficial partnership. They can collaborate with each other by forming joint ventures to bid for land parcels, to secure
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borrowings from banks, or to diversify their investment. Among the top property developers, they can seek consensus and alignment on many decisions, for instance: When to launch or re-launch in a quiet or recovering market; Which type of projects to launch in different locations; and What projects to hold back to avoid unnecessary competitions for similar projects. When they are setting prices for a new launch, they don't have to make reference to the average transacted prices of existing developments in the same district. They can benchmark against each others list prices in other districts in order to set their prices at a new high in a hot market.
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SINGAPORE PROPERTY WEEKLY Issue 121 Of course, no developer can move new properties off the shelves without the support of local banks to provide buyers the necessary financing. It is not uncommon to see developers tying up with a few banks to offer housing mortgage packages to buyers at the sales galleries. In order to secure business from home buyers, banks work with their valuers to ensure that the valuation of the uncompleted property matches with the selling price, so that they can disburse the exact amount of housing loan required by the buyers. 3. Willing sellers, willing buyers In the past few years, property developers have paid a high price for land parcels sold by the government or from en bloc sales. Likewise, the tight supply and spiraling costs of construction manpower and building
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materials have taken a toll on the bottom line of developers. It is arguable that developers have no choice but to markup considerably to ensure their profitability, although how big a safety margin is reasonable is entirely up to their discretion. After all, if they don't make hay while the sun shines, who can tell what will happen when market direction changes? In the end, the matter boils down to market response and customer acceptance. Developers can't sell new flats at future prices if buyers are unwillingly to pay a premium price. It doesn't matter whether the selling price is twenty or fifty percent higher than the most recent transacted price of a resale flat in the same area, so long as everyone believes that the market price will be even higher by the
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SINGAPORE PROPERTY WEEKLY Issue 121 time the new flats are ready for occupation. Believing in the future that is the magic pill of getting buyers to pay future prices in a

booming property market!

By Property Soul, a successful property investor and enthusiast who shares her experiences and knowledge on her blog.

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SINGAPORE PROPERTY WEEKLY Issue 121

Singapore Property This Week

Residential
TDSR weakens new private home sales It is reported that the new loans curb curb in the form of the Total Debt Servicing Ratio (TDSR) has severely affected recent private home launches of the Glades in Tanah Merah and The Skywoods in the Dairy Farm area, which saw weak and stalled sales since the first day of booking. Keppel Land sold around 80 units at 99-year-leasehold The Glades next to Tanah Merah MRT Station, with the majority of the sales done on the first day. The average price for the 200 units released in this 726-unit development ranged from $1,450 to 1,500 psf. However, the nearby
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Urban Vista condo, when released back in March, saw 220 units being sold by Fragrance and World Class Land with the average price of $1,500 psf. The 99-year and 420-unit project Skywoods only sold 35 units last Friday, then 10 units on both Saturday and Sunday with the average price for the first 150 units being $1,250 psf. Skywoods CEO Neo Tiam Boon admitted that they had not sold as much as they wanted due to the TDSR, with many visitors not familiar with the increased number of documents needed for loans from banks. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 121 Homeowners sue developer of luxury Sentosa Cove condo More than 100 homeowners of oceanfront residential enclave, The Coast at Sentosa Cove, have filed a lawsuit against its developer and three contractors due to the latters failure to fix defects in the common areas of the 249-unit luxury residential development. The defects include termite infestation, flooded staircases, a rotting timber pool deck, incorrect installation of electrical fittings, faulty light fixtures, leakages at walls and through electrical conduits, poor finishes to walls at apartment entrances. The developer is revealed to be Ho Bee Cove. The Management Corporation Strata Title (MCST) council, which filed suit on behalf of 108 owners, said that although more than $93,000 was spent to fix minor defects, rectification costs are estimated to be a few
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million dollars. In its official statement, Ho Bee Group said it is a responsible developer and is willing to fix any genuine defects, and that the alleged defects were, in fact, caused by the MCSTs negligence. (Source: Business Times) Belmont Road GCB up for sale at $50m A good class bungalow (GCB) at 74 Belmont Road is up for sale at about $50 million, or $1,890 psf. The property is located on a land area of 26,455 sq ft and is regular in shape, with a 16,200 sq ft built-up area of a main house and a self-contained guest house. The main house includes formal dining and entertainment areas, a family room, a master bedroom and four well-sized bedrooms. The guest house is linked to the main house by a sheltered walkway. There is also a 20-metre mineral water swimming pool.
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SINGAPORE PROPERTY WEEKLY Issue 121 The marketing agent for the property is Savills Singapore, whose deputy managing director Steven Mind said that the GCB market remained the buying interest of the ultra rich with limited supply, strong holding power of GCB owners and steady GCB prices. The average unit price based on land area for GCBs transacted so far this year increased by 1.1 percent to $1,387 psf compared with the average unit price for the whole of 2012, according to Savills. (Source: Business Times) Ho Bee criticizes defect claims by home owners at Sentosa Cove The developer of the oceanfront luxury Coast at Sentosa Cove, Ho Bee Investment, has criticized construction defect claims by more than 100 home owners as frivolous and that their estimates of repair cost have been grossly inflated. The MCST lawyers previously sent Ho Bee Cove a letter on Feb 20 to demand defects in the common areas be rectified, which was estimated by the MCSTs building expert to cost more than $2 million. However, according to Ho Bee, its own building expert, Robinson Jones Associates (RJA) assessed the alleged defects to cost no more than $200,000 to be repaired. Ms. Monica Neo, secretary of the MCST responded that the costs to repair defects in the entire estate could now be as high as $5 million. Ho Bee argued that its consultants including RJA found many of these alleged defects not genuine but only due to fair wear and tear or the lack of adequate and proper maintenance. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 121 CapitaLands new Bishan condo to be priced lower than neighbor Sky Habitat CapitaLands new 694-unit condo project in Bishan, whose name has not been known, will be priced lower than its next-door Sky Habitat. The project has a higher proportion of smaller units to keep lump sum prices within the reach of more buyers. The first phase of units is to be priced from $1,380 to $1,550 psf. However, CapitaLand declined to reveal how many or what types of units there will be or their psf average price until the starting of the sales bookings. The project had its showflat open this week. Sales bookings are available two to three weeks later. Sales at Sky Habitat took place in April last year, with 131 units sold at a median price of $1,583 psf, and at prices ranging from $1,435 psf to $1,893 psf in that month. Commercial Shophouse deals slow, but with steady prices Since the TDSR framework introduced in late June, the volume of shophouse transactions has slowed but their prices apparently are holding up. According to Savills Singapores analysis of URA Realis caveats data on Sept 9, the number of caveats lodged for shophouses decreased from 34 in May to 22 in June to 11 in July and only 10 in August, although more caveats for Augusts transactions are expected in the next few weeks. The 21 caveats for July and August added up to $122.4 million. In Q2 of 2013, there were 74 caveats lodged totaling $449.5 million. For the first eight months of 2013, transactions reached $1.04 billion, while it was $1.38 billion for 2012 and $1.15 billion for 2011.
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(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 121 Between January 2011 and August 2013, the most active buyers of shophouses are companies and Singaporeans, followed by individual buyers from Malaysia. 72 percent of shophouses acquired by companies were priced at more than $3 million per transaction, while about half of Singaporeans' purchases were in the $1 million to $3 million range. (Source: Business Times) Centurion Corporation Woodlands site wins bid for manufacturing industries when completed in 2015. Along with other developments, the total bed count for the company is expected to be 54,000 by the completion of the Woodlands project, up from around 29,000. The company had been awarded the tender by JTC Corporation for the plot at Woodlands Avenue 10. Centurions winning bid was $80.8 million through an indirectly whollyowned subsidiary, beating 12 other bidders. The acquisition will be funded through internal resources and bank loans, and no material impact on the net tangible assets and earnings per share of the company is expected for the financial year ending Dec 31. Shares in Centurion closed one percent higher at 49 cents on Sept 12. (Source: Business Times)

Mainboard-listed Centurion Corporation, whose main businesses are in dormitories and optical discs, has won the bid for a 103,000 sq ft site in Woodlands which will be developed into a workers dormitory. The dormitory is planned to have 4,100 beds for workers in the marine, process and

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SINGAPORE PROPERTY WEEKLY Issue 121 Redas head sees opportunities for the property sector Speaking at the Real Estate Developers' Association of Singapore's (Redas) midautumn celebration, its president, Chia Boon Kuah said the future shines bright with exciting possibilities for the property sector even when the market takes its course through the cycle of business. In spite of the policy measures affecting the property market introduced this year, interest from foreign players, including both developers and private equity players, in buying development land in Singapore remains unabated as they believe in the future of Singapore. Given this, Redas would increase its public engagement in areas such as offering ideas to the authorities on new plans for Tanjong Pagar and Paya Lebar. (Source: Business Times)
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SINGAPORE PROPERTY WEEKLY Issue 121

Non-Landed Residential Resale Property Transactions for the Week of Aug 28 Sep 3
Postal District 1 5 5 5 8 9 9 9 9 9 9 9 10 11 12 12 14 15 15 15 15 16 16 17 Area (sqft) 506 980 1,744 1,302 581 1,668 915 3,466 872 904 1,432 1,432 980 1,711 1,281 1,959 1,109 1,528 1,066 1,270 1,636 915 1,227 958 Transacted Price ($) 1,190,000 1,530,000 2,337,000 1,620,000 860,000 5,280,000 2,100,000 6,800,000 1,500,000 1,545,000 2,330,000 2,320,000 1,870,000 2,220,000 1,166,000 1,480,000 1,120,000 2,550,000 1,510,000 1,150,000 1,450,000 1,235,000 1,280,000 950,000 Price Tenure ($ psf) 2,352 99 1,562 99 1,340 956 1,244 956 1,480 99 3,165 FH 2,295 FH 1,962 FH 1,720 FH 1,709 FH 1,628 FH 1,621 FH 1,909 FH 1,297 FH 910 FH 755 FH 1,010 FH 1,668 FH 1,417 99 905 99 886 99 1,350 99 1,043 99 992 FH

Project Name THE CLIFT ONE-NORTH RESIDENCES CARABELLE CARABELLE PARC SOMME HELIOS RESIDENCES VISIONCREST SCOTTS HIGHPARK THE BAYRON THE BAYRON THE BAYRON THE BAYRON HOLLAND RESIDENCES BIRMINGHAM MANSIONS AVA TOWERS PUBLIC MANSION GRANDLINK SQUARE AALTO RIVEREDGE NEPTUNE COURT NEPTUNE COURT WATERFRONT KEY THE BAYSHORE FERRARIA PARK CONDOMINIUM

Postal District 17 18 18 19 19 21 21 21 21 22 22 23 23 23 23 26 27 27

Area (sqft) BALLOTA PARK CONDOMINIUM 1,281 LIVIA 915 LIVIA 1,259 FONTAINE PARRY 2,120 CHUAN PARK 1,173 THE CASCADIA 1,098 FREESIA WOODS 1,432 SIGNATURE PARK 1,055 ROYAL COURT 1,270 THE LAKESHORE 926 THE CENTRIS 1,313 CASHEW HEIGHTS CONDOMINIUM 1,658 HILLVIEW REGENCY 1,119 REGENT HEIGHTS 1,023 REGENT GROVE 1,173 CASTLE GREEN 1,173 ORCHID PARK CONDOMINIUM 1,206 YISHUN SAPPHIRE 1,378 Project Name

Transacted Price ($) 960,000 950,000 1,260,000 2,238,000 1,148,000 1,725,000 1,965,000 1,145,000 1,298,000 1,158,000 1,480,000 1,700,000 1,120,000 935,000 900,000 1,030,000 950,000 1,020,000

Price Tenure ($ psf) 749 FH 1,038 99 1,000 99 1,055 999 978 99 1,571 FH 1,373 FH 1,085 FH 1,022 FH 1,251 99 1,127 99 1,026 999 1,000 99 914 99 767 99 878 99 788 99 740 99

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

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