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SINGAPORE PROPERTY WEEKLY Issue 363
Are we aware of the unwritten rules? shocking price of $1,310 psf compared with
the average transacted prices of nearby
Do we know whether winning is determined
projects – The Tropica at $807 psf, Arc at
by chance, skills, strategy or position in the
Tampines at $856 psf and Waterview at $946
game?
psf.
How many of us are sophisticated players
The 21,717.7 square metre URA site at
who can see the full picture, visualize the
Tampines Avenue 10 was awarded last May
possible scenarios, and anticipate the moves
to Bellevue Properties, a wholly-owned
of other players?
subsidiary of City Developments Limited
Can we stay calm when surrounded by (CDL), at a top bid of S$370.1 million. With a
noises of speculators who constantly stir our plot ratio of 2.8, it translates to be $565.42
emotions, make us restless, create doubts psf. Assuming $350 psf construction cost and
and cause confusion? $274.63 psf ($350+$565.42 x 30%) for other
Developers are the new property flippers expenses, the total cost of the project works
out to be $1,190 psf ($565.42 + $350 +
Over the launch weekend, 315 of the 861 $276.63). With a launch price of $1,310 psf,
units at The Tapestry were snapped up by CDL is making a profit margin of above 10
buyers. percent.
The units are not cheap. They come with a
This is a far cry from the average profit psf and has to be sold at a minimum price of
margin of 35.7 per in 2009, or 22 to 25 $1,333.8 psf to make a reasonable profit.
percent between 2010 and 2012. Koh Wee
Mind you, the “reasonable profit” is
Meng of Fragrance Group lamented that “the
achievable based on the condition that Sim
Singapore property market has not offered
Lian can clear all units in five years after
good value for developers” and “developers
obtaining planning approval. Failing to do so
here are chasing after land (and) hoping for
means paying Additional Buyer’s Stamp Duty
future price (appreciation)”.
(ABSD) for all the unsold units. On top of that,
No wonder some bigger players are missing any remaining unit after two years’ of
in action when the rest (China developers, obtaining TOP are subjected to extension
boutique developers, etc.) are riding on the charges.
en bloc bandwagon.
For the last 12 months, bidding and
Barely 4 km away, Tampines Court was sold acquisition prices have gone higher and
collectively to Sim Lian Group at $970 million higher. Developers have to mark up and
last August. A premium of $359 million on top resell new projects at even higher prices. But
of the sale price was paid to the government how high can it go?
to maximize the plot ratio to 2.8 and to top up
There is a long queue of projects waiting to
the leftover of 69 years to 99 years. The
be launched.
702,164 sq ft site costs the developer $676
Just in the east area, the newly “en- bloced” And the overall big winner is …
sites include Eunosville, Amber Park and
Isn’t that obvious?
Eunos Mansion in the queue. There is no lack
of newly-TOPed projects and new projects Besides property taxes, government revenue
with unsold units in the same area too. from properties mainly comes from two main
streams: land sales and stamp duty.
It’s a matter of time before buyers realize the
oversupply and shun the sky-high prices. 1. Land Sales
To win the game, developers are competing Last year, developers spent close to $16
with time to “launch first” and “change hands billion on government land tenders ($7.65
fast”: Projects that launch first can tap the billion) and collective sales or private land
pent-up demand from eager buyers. Units deals ($8.2 billion). Another $5.56 billion was
sold now will minimize the ABSD to be paid spent the same ways as of mid-March this
after five years. Whoever can quickly flip the year.
uncompleted units from Government Land Besides GLS, developers are paying the
Sales (GLS) or collective sales to buyers can government top-up premiums on tenure and
win the game of musical chairs. plot ratio, development charges (DC), Buyer’s
Stamp Duty (BSD), ABSD and QC extension
charges.
And don’t think that you can do anything to competition of what we possess, while our
get away with it. In 2015, stamp duty on pool of customers (tenants or buyers) are not
share transfer has jumped to $93 million. growing.
Between 2013 and 2016, IRAS recovered
To buy any investment property in this
about $21 million in taxes and penalties from
market, we are already facing Loan-to-Value
437 stamp duty audits. Nine percent of the
and TDSR restrictions. With 4 percent BSD, 7
cases involved non-compliance of ABSD.
to 15 percent ABSD, and 4 to 12 percent
Investors and landlords are losers in every Seller Stamp Duty (SSD), it is almost
way impossible to come up with any ROI number
that makes sense without using a faulty
As investors, we all want the markets that we
calculator or setting a wrong formula in Excel.
invest in to be lucrative and the assets we
own to be in demand. To investors and landlords, property is an
investment measured by yield (annual rental
The fastest way to devalue a currency is to
income over property value). With interest
keep printing money in that currency.
rates and the cost of borrowing going up,
Similarly, the quickest way to depreciate an
either rental rates have to go up or property
asset is to oversupply it to the market.
prices have to go down in order to enjoy the
What investors and landlords are facing now same yield. When can we expect to see it
are uncontrolled supply and increased happen in this market?
A game is fun when everyone can take turns Thinking I’d be strong there
to play; when all the players have equal But I was a fool
chances of winning; when it is a fair battle for Playing by the rules
all the opponents.
The gods may throw the dice
If this is not the case, is the game still fun to Their minds as cold as ice
play? Or is it only fun to play for the obvious And someone way down here
winner? Loses someone dear
The winner takes it all
It is a game, after all. Whether you choose to
The loser has to fall
play or not, it is up to you.
It’s simple and it’s plain
Let me end this post with lyrics from ABBA’s Why should I complain?
“The Winner Takes It All”:
By guest contributor Property Soul, a
I was in your arms successful property investor, blogger, and
Thinking I belonged there author of the No B.S. Guide to Property
I figured it made sense Investment.
Building me a fence
Building me a home
Non-Landed Residential Resale Property Transactions for the Week of Jun 15 – Jun 22