Supply, More Supply, Surprised?

The Government just released the statistics on the property market today. The numbers confirmed what analysts have been saying since June 2013 when a tighter TDSR was imposed.

1. Private property prices continued to appreciate albeit at a slower rate because developers adjusted their price expectations after the tighter TDSR rules kicked in.
2. HDB resale flat prices have started to ease as a result of HDB easing more rules to allow people to buy direct from HDB.

I am not going to harp on that issue. Let the newspapers tomorrow report on that.

Minister Khaw posted an interesting statistic (see picture below). He did not elaborate since the numbers are self explanatory.

Laymen who read the picture below will think that 2016 will see the most number of homes completed. Unfortunately that might not be the true picture.

Let me shed some light.

For every development, we know there is a estimated completion date ie. when the developer must complete the project and apply for temporary occupation permit (TOP). There is also a date for statutory completion. Do you ever wonder how the developer set those dates?

If the developer buys the land parcels from the Government to build executive condominiums (ECs) or private housing, there is a stipulated project completion period. This is the latest date the developer must complete the project and gets the TOP otherwise the Government will take back the land.

• For private housing, the project completion period is 60 months or five years from the date of acceptance of the tender bid by the Government
• For ECs, it is 48 months or four years

Then the developer has to obtain the certificate of statutory completion (CSC) within three years. This three years period is set by the Government too.

How about HDB flats you may ask?

HDB operates differently from the private sector. HDB will give you an estimated completion date and an estimated delivery possession date which is something like one year after the estimated completion date. The delivery possession date is the latest HDB must hand over the unit to the buyer. 

If the HDB flats are under the Design, Build and Sell Scheme (DBSS), the flats will be completed much earlier than the estimated completion date as it is being built by private developers. Just look at Trivelis and the BTO project beside it. The time difference between the launch of these two projects is a few months. Yet Trivelis is already 50-60% completed while the BTO has just started foundation works.

So the numbers below are based on TOP dates for ECs and private housing and estimated completion date for HDB flats. How accurate are these dates? Not very.

As this is the latest latest date the developer must complete the project, you can bet your last penny that the project will be completed much earlier than that. Whereas for HDB flats, there can be delay up to one year. If it is DBSS, it will be completed earlier.

A rough estimation is that around 20-30% of projects will be earlier than expected. So the peak in completion is likely to be in 2015 instead.

So those who have committed to a property must be prepared to take possession early. For HDB upgraders, be prepared to sell your HDB flat if you need to. As it is now, resale HDB flat prices are moderating. Coupled with mortgage interest rates that is estimated to creep up in late 2014 (if the US Federal Reserve starts to taper its Quantitative Easing), HDB upgraders must brace themselves for higher mortgage repayments by then.

Source: MND

Private Lift Lobby - Do you need it?

Been wanting to write on private lift lobby for some time but it slipped my mind till this particular Executive Condominium (EC), Waterwoods boasted of the feature as a first in an EC development.

Well, the developer is not wrong. It is the first in an EC development.

But am I excited about it? Hardly. Why?

First, the buyer is going to pay for it. Nothing new. If you don't mind, well go ahead. The developer says it will be an extra 2 sq m or 21.5 sq ft. If the average price is around $830 psf, it will cost you an extra $17,845. Extra means more downpayment, more loan, more interest to be paid, more stamp duty etc etc.

We know that developers will want to sell every bit of space in the development to maximise his profits. That is why it is usually a short distance from the lift to each unit. But now by providing a private lift lobby, it means that this corridor space becomes part of the saleable area of the unit. It will most likely or 100% become an addition to the balcony in the unit. The second picture below gives you an idea of the private lift lobby opening into a balcony.

So you are going to pay for that "fenced up" corridor space called a private lift lobby, something that is hardly necessary.

Secondly is it really private? For those who have visited condominiums with private lift lobbies will know that it is not. It is not possible to have one lift to serve one unit. Hence this lift will be equipped with card access system and two doors. To gain access to your unit, you have to scan your card. If you have nosy neighbours, they will look at your unit (assuming your private lift lobby does not come with a door to your unit) when the lift door opens. It will really be private if you live on the top floor.

What will it cost the developer? Not a lot, just an extra lift door on every level. That lift door will definitely be cheaper than the amount you are going to pay for that "private lift lobby".

Lastly are you going to get a door to your unit? Not every private lift lobby has a door for enhanced security. See below for two examples.

Private Lift Lobby with Door

Private Lift Lobby with no Door

Will Singaporeans bite? Of course, nowadays people just want something different from the rest.



For those interested to read about private lift lobbies in Waterwoods, you can click on the link below.
http://www.channelnewsasia.com/news/business/singapore/upcoming-waterwoods-ec-to/819438.html

Private Property Owners who Buys HDB Flats are Speculators?

Going by the statistics by HDB, they are saying that private property owners who buy HDB resale flats are speculators. This is an one-sided view and to me smacks of trying to placate Singaporeans.

Source: The Straits Times

Who is a speculator and how do one term a property buyer as a speculator? According to thefreedictionary.com, a speculator is someone who buys and resells for a profit. It can even be someone who risks losses for the possibility of considerable gains. If this is the definition used, then every property buyer/investor would be a speculator.

Source: thefreedictionary

Let's look at the bigger context of property investing in Singapore. In Singapore, there is no capital gains tax. This means that all the gains made from property investment(s) are not taxable unless you register a company to invest in properties. But if the frequency of buying and selling property by an individual is so-called "frequent", then the Inland Revenue Tax Authority will consider the individual as trading in properties and subject his gains to tax.

This to me is a fairer depiction of a speculator. In fact, in the property market, people who buy and sell within a short period of time are deemed as a speculator or flipper. For example, those who buy uncompleted properties and sell them before the development obtains its Certificate of Statutory Completion ie. subsales are known as flippers or speculators.

What the article by HDB fails to point out is the holding period of the HDB resale flats by these private property owners. If the HDB can show that these private property owners buy the resale HDB flats and sell them within a short period of time, say one to two years, then I would agree with the HDB that these people are speculators.

Please call a spade, a spade and nothing else.

New 3Gen HDB Flat - Rehash of Dual Key Concept

The HDB is going to launch a "new" concept flat in the September 2013 BTO exercise. Is this really new?

Lets look at the floor plan below. There will be four bedrooms - a studio for the grandparents, a room for the parents and two rooms for the children.

Source: HDB

Lets look at a dual key floorplan from Flamingo Valley. The differences between the 3Gen flat and a dual key concept are that in a dual key, the studio has a separate door and there is a dry kitchen.

Source: Flamingo Valley Floor Plans

So what's new about this flat? Nothing in fact. It is a rehash of the popular dual key concept in the private housing segment of the market.

It is just that the HDB do not want to build multi-generation flats or jumbo flats or even executive apartments or executive maisonettes.

The intention is good in that it encourages 3 generations to stay together. But hey, don't we already have the Multi-Generation Priority Scheme (MGPS)? In the MGPS, the parents and the married child will stay in the same neighbourhood but not together. It is the idea of "so near, yet so far". But this 3Gen flat will be "in your face" kind of living.

Will this be popular?

My guess is lukewarm. Why? It is tough to get two parties to apply together and not all parents and child+partner want to live together. MGPS has not seen much success because of the first reason.

Let me give you some illustrations. The list is not exhaustive.

Scenario 1 - Parents with only child. Parents own HDB flat.
This case is simpler as there is only one child. The parents will sell off the HDB flat and move over with the child. But there will be complication if the parents' current HDB flat is bought direct from the HDB. If they choose to buy a 2-bedroom, they have to pay a resale levy to HDB. The solution is to buy a studio but the parents have to cope with a smaller living space.

Scenario 2 - Parents with only child. Parents own private housing(s).
This will be very hard as HDB requires the parents to sell off the private housing if they were to buy a HDB.

Scenario 3 - Parents with more than one child. Parents own HDB flat.
This will depend on whether this is the youngest child to get married. If yes, the parents have an easier choice to make. Otherwise they cannot apply.

The key thing is the parents have to sell off the existing HDB flat when they apply under MGPS. It is not an easy task. Some parents want to leave behind a legacy.

Another thing to note - buyers of these 3Gen flats have to sell them to another 3Gen family in the future. Will there be more 3Gen families in the future? No one can tell. So buyers have to consider this when they apply.

The same policies and restrictions under MGPS will most likely apply to the 3Gen flats otherwise there will be loopholes to be exploited. So applicants for 3Gen flats will have to sell of their existing HDB flats or private housing.


The dual key concept in the private housing segment is very popular because people can rent out the studio and use the rental to pay for the installment yet retain their privacy. It means that not many people will "invite" their parents to stay with them.

So it may not be successful in the HDB market.


I hope this new 3Gen flat will not replace the MGPS .

Payment to Ecohouse Casa Nova CNC Phase Delayed

I heard news from one of the property investment groups recommending Ecohouse that payment to buyers of Ecohouse Casa Nova CNC phase is delayed by around two months. 

Payments to the other phases are as normal.


Is this the start of the crack? Stay tuned to find out more.

Further Tightening of the HDB Market - MSR and Loan Tenure

Apparently someone up there thinks that the screws are not tight enough and they have to tighten it more to screw HDB owners up.

After achieving some initial success with the Mortgage Service Ratio (MSR) and shorter loan tenure which resulted in HDB resale transactions and cash-over-valuation (COV) falling, the Ministry for National Development (MND) decided to cut the MSR (35% to 30%) and loan tenure (30 years to 25 years).

What will happen next? Your guess is as good as mine.

Resale transactions and COV will continue to ease thereby making it more affordable for first time home buyers. The latest median transacted COV is $20,000.

With a shorter loan tenure and MSR, buyers have to fork out more cash if they buy a more expensive or big HDB flat. There will be lower demand for 5-room and bigger flats.

Sellers will curse their luck. As it is, I have seen advertisements for the same HDB flats for more than a month without success. The seller was only asking $20,000 COV. Two weeks ago, the advertisement changed to View To Offer (VTO) with no mention of COV. It is going to get more chilly for HDB resale flat sellers. There are going to be more transactions where COV is zero or even negative depending on how desperate the seller is.

Those borderline HDB upgraders who committed to a private condominium or executive condominium in 2010 will be the first to get hit HARD, real hard! When I say borderline, I mean those who need to sell off the HDB flat as they do not want to rent out their HDB flat and have no ability to service two loans. Their condominium or EC is going to obtain its TOP in 2014.

But as it is, our Government always try to balance out the market. To maintain a steady rental market for those wanting to hold on to their HDB flats, the Government has directed that the new Permanent Residents (PR) ie. those who get PR status for less than three years rent them. If I am a PR, I will be mad.

Already with the Additional Buyer's Stamp Duty (ABSD), a PR have to pay additional 5% for their first property purchase. Many are putting off the purchase of a property. Now they have to wait even longer. Who knows if the ABSD rate might go up?

Despite the Government trying to keep the HDB rental market steady, we doubt it will help much. First, approvals for PR status have been falling year after year since the Government tightened the criteria. We don't see it easing soon. Second the number of HDB upgraders who are holding on to their flats and renting them out is increasing. The 2Q 2013 subletting cases rose 6% from 1Q 2013. While HDB flat rentals have been holding steady, it is near the tipping point.

The mass market condominium will experience a knee jerk reaction but the fall in transactions will not be glaring. MND chose a nice month to announce new measures. It is the Lunar Seventh Month afterall and transaction volumes are expected to be low anyway.

Hopefully investors will be more sane after absorbing the new cooling measures and not pay ridiculous prices for a mass market condominium unit.

First EC Site at Jurong Breaks Price Record

Land prices for Executive Condominium (EC) sites went through the roof in July 2013 when the tender for the first EC site in Jurong closed.

The site saw enthusiastic participation from developers and attracted a top bid of $418.53 psf ppr. The breakeven price is estimated to be between $700 and $750 psf. This means that to maintain their profit margin, the developer has to launch the project at around $840 psf.

This estimated selling price is another record for EC. No EC launches has ever crossed the $800 psf mark. Sea Horizon at Pasir Ris will test that when it opens for e-apps in August 2013.

At this selling price, is EC still affordable to the first timer families earning up to $12,000 a month?

Assuming an average unit size of a 3-bedder to be 1,100 sq ft and a unit price of $850 psf, the price will be $935,000. The couple will need cash and CPF amounting to $187,000 for the 20% downpayment. This is not a small amount.

We further assume that the loan amount is 80% of $935,000, an interest rate of 1.5% and a loan tenure of 30 years. The monthly mortgage payment works out to be $2,582.

If the couple earns a combined income of $12,000 a month, they will contribute $2,100 to their CPF Ordinary Account (OA). This means they have to come up with cash of $482 every month. If the interest rate goes up, they have to cough up more cash monthly.

Another point of concern is the CPF monies for retirement. As all their CPF monies have been used to service the loan, their OA is likely to stay near zero until they repay their loan or they cash out and buy another property.