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Issue 170

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CONTENTS
p2 Understanding, Measuring and Comparing
Rates of Return in Property Investing
p9 Singapore Property News This Week
p14 Resale Property Transactions
(August 6 August 12 )
Welcome to the 170
th
edition of the
Singapore Property Weekly.
Hope you like it!
Mr. Propwise
FROM THE
EDITOR
SINGAPORE PROPERTY WEEKLY Issue 170
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Understanding Measuring and Comparing Rates of Return in
Property Investing
By Gerald Tay (guest contributor)
Ive received feedback, both positive as well
as negative, on my previous article Property
Valuation Money Not Math. In that article I
explained how many investors are playing
guess work with their investments because
they fail to understand how to get their yields
right. I heavily criticised the current models of
property valuation, which are what experts
sell as wisdom to average investors these
models are outdated, highly controversial and
inaccurate.
SINGAPORE PROPERTY WEEKLY Issue 170
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Putting my Net Worth on the Line
I dare put my money where my mouth is my
net worth backs my investment strategy. For
13 years, Ive never lost money in any real
estate investments and am financially wealthy
because of it. Heres the difference between
Successful Investors and the Gurus:
Authentic Successful Investors (a.k.a The
Master Investor): Investments contribute a
major part of our net worth - We put our
money where our mouth is and its what we
love to do.
Self-styled Gurus/Experts/Millionaires
(a.k.a The Losing Investor): Investments
contribute little to his net worth his
investment activities are often hazardous to
his wealth (playing guessing games in
Investment Guru Land). He funds his
investments and makes up for his losses
using other sources such as business profits
(running investment seminars), salary (real
estate professionals), company bonus plans,
etc.
In view of the above, it is in fact possible for
you to build your financial wealth through
investments investments that are
sustainable, smart and logical. I do not
possess any special forecasting skills and
neither do I consider myself lucky. All I did
was to value my investments using science,
logic and common sense, rather than play
guessing games in Investment Guru Land.
If you agree with what Im saying, read on.
What do rates of returns measure? Why
are they important?
Shares, bonds and real estate are the main
asset types available in the capital market.
Volatility exists with all three asset types.
SINGAPORE PROPERTY WEEKLY Issue 170
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One difference between these asset types is
that property is unique and the data on
transactions is not computed on a daily basis.
Shares and bonds have constantly updated
prices, therefore making it easy for investors
to accurately assess their performance.
In the real estate market, the situation is not
so simple. Investors are never sure of the
value of a certain property until the point at
which they are about to sell or rent it.
Property valuation methods are needed for
estimating the most probable value of a
property on the market.
Yields are important in a number of contexts:
Property valuations can be made by
analysing price and yields
The returns from property should be
compared with other forms of investment,
and with other properties
To evaluate whether property is
overvalued and if a price bubble might be
forming
Return on investment or property yield is one
of the most critical components of the entire
property investment process, and thankfully,
working it out involves a fairly straightforward
calculation.
Armed with these, your chances of success
are significantly improved.
There is, however, one key principle
associated with the process of investing in
property that needs to be thoroughly
understood, namely property yield, or return
on investment (ROI) / Rate of Return.
SINGAPORE PROPERTY WEEKLY Issue 170
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Tip: We dont predict the future, but we do
know that the next five years will not look like
the last five years. That just doesnt happen.
Markets change. And our results over the
next five will not replicate the last five. They
never do. Gerald Tay
'Rate of Return' - This is the metric most
used to compare different investments. It is
expressed as a percentage because
investment opportunities come in all sizes.
Absolute dollars of profit do not allow for
comparison, but a percentage is 'relative'.
The period of time measured is presumed to
be one year.
The profits from an investment can come
from income received during the holding
period, and also capital gains from the
eventual sale. Together, these are called the
"Total Return".
Always use the Total Return to compare
investments. For example:
Property buyers too often look only at the Net
Rental Yield (NRY) and ignore the
potential for capital loss/gain, Net Cash
Flow after mortgage payments and
interest, as well as the Time Value of
Money.
Total Return is based on initial cash outlay or
total capital invested, not purchase price.
A 4% Net Rental Yield (NRY) property is not
equal to 4% Total Return on Investment.
What do these terms mean?
The 'true' Rate of Return is what most
people's understanding of it would be. People
refer to it as the Compound Annual Growth
rate (CAGR), Return on Investment (ROI),
Return on Equity (ROE),
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Effective Annual rate, Internal Rate of Return
(IRR), discount rate, or Annualized
Compound rate. Essentially, these refer to
the same concept. Different terms are used in
different contexts.
Tip: ROI Different people use different
words to refer to the same thing, and use the
same words to mean different things. Always
clarify in your mind what is being meant,
without preconceptions.
There are many different words used to
describe the type of yield measurement being
used in different situations.
Tip: When evaluating Property Value,
Location is Mantra, and ROI is Key.
Critical Financial Ratios that Matter
It is risky to invest in stocks without having
any prior knowledge of the financial health of
the companies the same applies for real
estate. Knowing the financial health and
profitability of your target is essential before
you start on any property investment.
Financials such as profitability ratios,
leverage ratios and the cash flow statements
can be used to gauge the financial
performance of a property. With the analysis
of these ratios, you will be able to make
informed and correct decisions for your
investments.
Understanding how to read these ratios is the
key difference between success and failure.
Tip: Remember that the ratios are not
mutually exclusive.
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Critical Financial Ratios to Value Property (Intrinsic Value)
By considering all of the above ratios, we derive the Intrinsic Value of the Property.
SINGAPORE PROPERTY WEEKLY Issue 170
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The Business of Real Estate
Tip: Property investing is a business and
should be run like a business And if
business is war, war is a business. Gerald
Tay
All successful entrepreneurs understand the
importance of managing their business by
metrics. Metrics is simply a measurement of
the day-to-day results of the business. The
measurements are in the form of cash flow
(raw numbers) and ratios. They are often
used as comparisons, either to a previous
period, to targets, industry averages or other
investment asset classes.
For example,
Net Rental Yield (NRY) is used to compare
the performance of property A versus
property B versus property C.
Return on Investment (ROI) is used to
compare the performance of Stock A versus
Property B versus Bond B versus Gold.
Internal Rate of Return (IRR) is used to
compare the Risk/Rewards of different types
of investment classes versus targeted
returns.
We shall cover these in greater detail in the
subsequent articles.
By guest contributor Gerald Tay, who is the
founder and coach at CREI Academy Group
Pte Ltd, an organization dedicated to
empowering retail property investors with
smarter investing philosophy and strategies.
He is a full-time investor with over 13 years of
solid experience in building his wealth
through Property Investment and is financially
wealthy today.
SINGAPORE PROPERTY WEEKLY Issue 170
Singapore Property This Week
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Residential
Revised URA guidelines limits cluster
housing development
In recent years, residents have raised
concerns about overcrowding in areas such
as Toh Estate and Telok Kurau Estate. With
more developers building homes in these
areas, problems such as traffic and parking
congestions were brought up. To ease
overcrowding concerns in some of these
landed estates, the Urban Redevelopment
Authority (URA) has revised its guidelines for
cluster housing. Under the new ruling, fewer
strata-landed houses will be developed in
upcoming projects as the maximum number
of units for cluster housing has been lowered.
Besides that, developers have to use at least
45 per cent of the land space for the
development of greenery and communal
facilities. This was 15 per cent higher than the
current 30 per cent that developers currently
have set aside for such development.
According to URA, these new guidelines have
taken effect since August 23. Nicholas Mak
from SLP International expects the new
guidelines to impact strata-landed housing
developments. However, he believes that only
a small number of good class bungalows will
be affected. Lee Lay Keng from DTZ also
said that developers interest in strata-landed
housing development will be reduced, and
housing prices may be pushed downwards.
Also, under the new rule, only 15 terrace units
may be built per developer said Galven Tan
from CBRE.
SINGAPORE PROPERTY WEEKLY Issue 170
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However, Tan believes that as the problem of
overcrowding is eased, the living quality of
the private home units may improve and thus
benefit sales.
(Source: Business Times)
Sin Ming and Sebawang residential sites
released for tender
A residential site at Lorong Puntong, near Sin
Ming Avenue and another at Sembawang
Road were released for tender. Both sites are
on the confirmed list for Government Land
Sale. The site at Sin Ming Avenue has a land
area of 10,503 square metres and has a
maximum gross floor area of 22,056 square
meters. This could yield about 280 homes.
The Sembawang site for Executive
Condominiums has a maximum gross floor
area of 60,366 square meters and can yield
about 605 homes. Nicholas Mak from SLP
International predicts that there will be 12 to
18 bids for the site at Sin Ming Avenue due to
a limited supply of private residential-zoned
land in Sin Ming. However, Ong Kah Seng
from RST Research predicts that there will
only be 5 bids for that site following low
interest and low winning margins in previous
land tenders that are in the estate. For the
Sembawang site, market analyst predict that
it will attract three to seven bids with a
winning offer of about $300 to $330 per
square feet per plot ratio. Experts believe that
the Sembawang site will face competition
from the many unsold new private homes and
ECs nearby. Hence developers may be less
willing to take this risk and will bid lower.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 170
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Commercial
Developers interest in J urong grows
Developers interest in Jurong Lake area is
growing as the government is expected to
develop more leisure elements in the area.
Not only so, market experts believe that the
area will attract more interest if the Kuala
Lumpur-Singapore high-speed rail terminus is
developed in Jurong Gateway. Christine Li
from OrangeTee believes that the
governments plans to realign Ayer Rajah
Expressway and to develop the old industrial
estate to waterfront housing will boost the
image of the area and increase its appeal.
Desmond Sim from CBRE said that he
believes with this image overhaul, the stigma
that Jurong is merely just an industrial
township will be removed. Jurong Lake
Gardens which is over 70 hectares large will
include a park by 2017. The existing Chinese
and Japanese Gardens will be revitalised.
Also, the new Science Centre which is
located next to Chinese Garden MRT Station
will be completed by 2020. Besides that,
interest in the upcoming sale of residential
sites at Jurong Lake is expected to be high.
However, Sim believes that current cooling
measures may still push bid prices down.
(Source: Business Times)
Majority of Farrer Square project will be
occupied
At least 85 per cent of Farrer Squares
medical tower has been committed in two
bulk deals. Located at Little India and
developed by RB Capital, the tower has
27,500 square feet and will consist of eight
levels of medical suites, which comprises of
42 strata units. According to Business Times,
Level 5 to 7 was bought over by HSC
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Healthcare for over $44 million, or $3,800 per
square foot of the total strata area of 11,674
square feet. Mary Sai from Knight Frank said
that this price reflects current market value.
Sai said that bulk transactions are preferred
for such medical suites because selling to
individual investors may results in pockets of
vacancies if those investors are unable to
lease out all units. Furthermore, developers
will have less control over the mix of tenants if
units were sold to individual investors. JLL,
the marketing consultant for Farrer Square
said that it will launch the remaining six strata
medical suites on the top floors soon.
(Source: Business Times)
Zouks tenancy extended
Zouk will continue to occupy its current
premise at Jiak Kim Street, after it was
granted a final tenancy extension. The
duration of the extension depends on Zouks
ability to secure alternative premises. To
provide the popular nightspot sufficient time
to relocate, it will have till December 31, 2017
to move out if it is able to find a location by
June 30, 2015. However, if Zouk does not
secure a new location by then, its lease will
expire on Dec 31, 2015. According to a joint
statement by Singapore Land Authority and
Urban Redevelopment Authority, this decision
was made to allow Zouk ample time to
relocate and to provide residents certainty on
the plans for the area. Zouk said it will
continue to look for central locations for its
relocation. Previously, Zouk had turned down
an offer to relocate to Old Kallang Airport as it
was considered to be an inaccessible
location.
(Source: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 170
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En bloc market at a standstill
Despite the current standstill in the en block
market, Colliers International believes that
property owners and developers should still
participate in collective sales. According to
Chia Siew Chuin from Colliers, property
owners should be more realistic about en bloc
sales as the market for it has been shrinking.
Chia said that developers were more willing
to offer high prices for en bloc sales in the
past because of higher development potential
and because of the change in land use
zoning for many sites. However, current
cooling measures have dampened
developers interest and hence year-to-date,
there have been no successful en bloc deals.
Nonetheless, according to Business Times,
Tanglin Shopping Centre is in the midst of
getting a requisite consent level to launch a
collective sale. Chia also added that owners
can still consider engaging in an en bloc sale
to dispose of older assets, as they are more
likely to reap a decent profit margin through
such en bloc sales.
(Souce: Business Times)
SINGAPORE PROPERTY WEEKLY Issue 170
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Non-Landed Residential Resale Property Transactions for the Week of Aug 6 Aug 12
Postal
District
Project Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)
Tenure
1 MARINA BAY RESIDENCES 732 1,450,000 1,981 99
1 MARINA BAY RESIDENCES 1,130 2,200,000 1,947 99
3 LANDMARK TOWER 1,033 980,000 948 99
4 THE COAST AT SENTOSA COVE 2,024 3,845,600 1,900 99
4 THE OCEANFRONT @ SENTOSA COVE 1,711 2,700,000 1,578 99
4 REFLECTIONS AT KEPPEL BAY 840 1,230,000 1,465 99
5 THE PARC CONDOMINIUM 1,421 1,880,000 1,323 FH
5 THE PARC CONDOMINIUM 980 1,270,000 1,297 FH
5 BOTANNIA 2,637 2,400,000 910 956
5 CLEMENTIWOODS CONDOMINIUM 1,658 1,500,000 905 99
8 OXFORD SUITES 893 1,200,000 1,343 FH
9 ESPADA 689 1,606,000 2,331 FH
9 MARTIN PLACE RESIDENCES 1,044 2,300,000 2,203 FH
9 VIDA 861 1,700,000 1,974 FH
9 RIVERSHIRE 1,227 2,030,000 1,654 FH
10 ONE TREE HILL RESIDENCE 1,001 1,900,000 1,898 FH
10 VERDURE 1,421 2,680,000 1,886 FH
10 DUCHESS CREST 1,711 2,200,000 1,285 99
11 PARK INFINIA AT WEE NAM 850 1,700,000 1,999 FH
11 NEWTON ONE 1,808 3,250,000 1,797 FH
12 AIRSTREAM 409 615,000 1,504 FH
12 DE PARADISO 904 1,150,000 1,272 FH
Postal
District
Project Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)
Tenure
12 THE RICHMOND 1,238 1,355,000 1,095 FH
12 SUNVILLE 1,163 1,215,000 1,045 FH
12 THE MORNINGTON 1,216 1,250,000 1,028 FH
14 CENTRAL GROVE 1,023 1,050,000 1,027 99
15 THE SEA VIEW 1,410 2,200,000 1,560 FH
15 WATER PLACE 1,453 1,800,000 1,239 99
15 THE MAKENA 1,636 1,910,000 1,167 FH
15 HOMEY GARDENS 1,033 1,120,000 1,084 FH
15 CRESCENDO PARK 1,345 1,450,000 1,078 FH
15 EAST VIEW 18 1,173 1,080,000 920 FH
15 EAST BAY GARDENS 1,711 1,400,000 818 99
16 EAST MEADOWS 1,195 1,180,000 988 99
16 EASTWOOD GREEN 1,302 1,030,000 791 99
18 NV RESIDENCES 904 970,000 1,073 99
18 CHANGI RISE CONDOMINIUM 1,130 965,000 854 99
18 MELVILLE PARK 958 780,000 814 99
18 MELVILLE PARK 1,044 758,000 726 99
19 KOVAN RESIDENCES 947 1,260,000 1,330 99
19 GRAND REGALIA 1,206 1,000,000 829 FH
19 SIMON PLAZA 1,679 1,371,000 816 FH
19 RIO VISTA 1,604 1,250,000 779 99
20 GRANDEUR 8 1,453 1,394,880 960 99
SINGAPORE PROPERTY WEEKLY Issue 170
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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.
Postal
District
Project Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)
Tenure
23 PARK NATURA 1,378 1,510,000 1,096 FH
23 MI CASA 1,324 1,280,000 967 99
23 HAZEL PARK CONDOMINIUM 1,378 1,328,000 964 999
23 HILLVIEW PARK 904 830,000 918 FH
23 MAYSPRINGS 915 748,000 818 99
26 MEADOWS @ PEIRCE 2,583 2,460,000 952 FH
27 YISHUN SAPPHIRE 1,539 1,070,000 695 99
28 SELETAR SPRINGS CONDOMINIUM 1,335 950,000 712 99

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