Issue 164

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CONTENTS
p2 The 3-3-5 Rule and Financial Freedom
p9 Singapore Property News This Week
p15 Resale Property Transactions
(June 25 July 1 )
Welcome to the 164
th
edition of the
Singapore Property Weekly.
Hope you like it!
Mr. Propwise
FROM THE
EDITOR
SINGAPORE PROPERTY WEEKLY Issue 164
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By Gerald Tay (guest contributor)
In a recent blog post, fellow contributor
Property Soul shared her rules on buying a
property you can afford, what she called the
3-3-5 rule. A Propwise.sg reader JC wrote in
to comment that Rule #3 (the purchase price
of the property should not exceed five times
your annual income) was unrealistic and
overly conservative. In this article Id like to
share my views on some of his comments
(which Ive extracted in italics below).
The views in this article are entirely of my
own. They do not represent the views of
either Property Soul or Propwise.sg. Any
feedback should be directed to me
gerald@crei-academy.com.
The 3-3-5 Rule and Financial Freedom
SINGAPORE PROPERTY WEEKLY Issue 164
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Is the 3-3-5 rule unrealistic?
JC: In a nutshell, the 3-3-5 rule is skewed
towards an unrealistic scenario which is
unlikely to happen in Singapore (for Rule
#3). We need to be realistic about the current
pricing, current market, and hopefully,
capitalize or gain from it through long term
investment or enjoyment of the property.
The context of 3-3-5 rule (except Rule #1) is
meant for personal consumption, not as an
investment metric. I believe Property Soul is
primarily referring Rule #3 as a guide to
buying a property purely as a home, and
therefore prudence and affordability are
important ratios to look at, hence the prudent
5x annual income ratio.
If its purely for investment purposes (i.e. a
rental property), one would use more
important metrics (i.e. ROI after debt service)
and not a 5x annual income ratio (or Rule #2)
to measure its investment worth or value.
Thus, I think its very realistic to use Rule #3 if
one is buying an HDB flat for example. If a
couples combined income is $30,000 a year,
5x income ratio means a $150,000 HDB flat.
The couple will still have affordable choices
coming from the many HDB BTO sales
recently. BTO flats are very affordable to
many young Singaporeans (please dont get
political with me on this) if these young
couples are prudent from the very start.
Ive seen young couples whose combined
incomes are less than $36,000 a year, yet
purchase a new large 5-bedroom HDB flat
costing $500,000. Thats almost 14x the
annual income!
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Some of these young income earners can
choose to buy a cheaper 3-bedroom or 4-
bedroom BTO HDB flat in a non-matured
estate, but they rather choose a more
expensive home for face-saving. And yet,
they complain that HDB flats are expensive
and unaffordable!
Why spend on an expensive private
home?
JC: Example: a couple earns $15,000 per
month, which annually would be $180,000. At
five times, they can only afford a property that
is $900,000, which can only buy a 2-bedder
condo at an RCR or OCR location in
Singapore.
Exactly. If a couple can only afford a
maximum $900,000 home on a prudent 5x
annual income ratio, then why the need to
spend conspicuously on an expensive private
home?
Surely a couple with that kind of earning
power can easily afford without the need to
slog at their jobs a cheaper re-sale HDB
instead?
Or is the purchase for reasons of peer
pressure and societys expectations which
dictate a $15,000 monthly income earner
cannot live in an HDB flat (re-sale) because
its considered below their standards?
Surely, this couple can easily find and afford a
large 5-room re-sale flat which will meet their
future needs, in a matured estate with
excellent location with a price budget of
$900,000 or even lesser?
The more we earn, the richer we are?
JC: Rather, many couples CAN afford
properties at $1.2 to $1.5 million and above
when their income is approximately $10,000
per month, which is a 10x rather than 5x ratio.
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With savings of $400,000 to $500,000
(approximately 30% of $1.5mil), they can
easily afford the mortgage at $3,000 per
month (2% interest rate over 28 years).
Many people have terrible misconceptions on
Wealth. Many think Wealth is the more we
earn, the richer we are. How wrong this is.
Financial wealth is not defined by how much
we earn. It is defined by what expenses we
have. Wealth is thus defined by how long we
can survive if we choose not to work, and still
afford paying our expenses at the same time.
A couple earning $15,000 a month combined
employment income is middle-class.
Another earning $30,000 a month in
employment income could still be middle-
class.
An individual earning $2,000 in passive
income from investments to cover $2,000 of
monthly expenses with no bad debt could be
richer than the two examples above.
Dont misunderstand my words on middle-
class earners. I highly respect people who
lead hardworking but humble lives, people
who may lead middle-class lives but
contribute tremendously back to help society
as a whole.
Whom I detest most - lazy people who
complain more than contribute and yet
demand more from society, e.g. asking for
more pay without justifying ones skills and
contributions.
Why do the 99% always complain that
theyve no money or no money to invest?
One of the habits that is common among all
wealthy people is that they live below their
means.
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This means that they buy a small car when
then can afford a medium sized car, then buy
a medium sized car when they can afford a
big car, they buy a big car when they can
afford a small helicopter and they buy the
helicopter when they can afford the private
jet. Theyre not eager to own expensive toys
to boast to the world that theyve arrived.
When the 1% makes money, they plough the
profits back to buy more investments that will
put more passive money into their pockets.
The 99% after making their profits will first
think what bigger car to drive and which
bigger house to live in.
When youre rich, you can have a lot of stuff
and still be rich enough to afford more stuff.
When youre middle class or working class,
you cannot. If you live within your means,
youd be surprised how much you can
ultimately have to invest when opportunity
comes and be financially free.
Amassing your savings to invest
JC: A savings of $400,000 is not difficult to
achieve for a couple (both university grads)
who have worked for 10 years possibly with a
little help from their parents, say $50,000 to
$80,000.
Its definitely not difficult for high earners like
university graduates to amass huge savings if
they spend prudently. And this power gives
them an added advantage to gain financial
wealth or freedom much earlier than lower
income earners. They should not squander
away such an invaluable opportunity on
conspicuous purchases like an expensive
private property or a new car.
If ever my children come to me for a $50,000
to $80,000 loan, saying they lack sufficient
funds for the down payment on a nice condo
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theyve been eyeing as a home, Ill slap
myself hard on my own face TWICE! The
first slap is for failing my obligations as a
parent to impart proper monetary values. The
second slap is a punishment for raising my
kids into spoilt brats!
JC: If we stick to this rule, we will NEVER buy
a property (condo, that is) in Singapore,
unless we earn $25,000 per month income
combined for a couple. (i.e. $12,500 each!)
Then dont. Why is it a necessity for everyone
to own a private property for own stay? Is it a
Singaporean dream created by marketing
propaganda over the years?
Dont get me wrong. Im not saying one
cannot spend to live in a nice and beautiful
cage in the sky. What Im saying is if you
really have the means, go ahead and buy one
for your own stay. The government will be
more than happy that you contributed more to
GDP growth and taxes from your purchase.
But if youre living a slave life in your own
castle and your only means of paying off
that huge 30 year mortgage loan comes from
a 15-hour day job, you might want to
reconsider.
I do own a private property myself as a home
currently but Im financially wealthy. My
home mortgage loan is paid down by my
tenants (rental income) from my other
properties. I have a choice between working
and not working every single day.
So why am I telling you this?
Well, I suppose I want to let you know it is
possible for you to focus your limited
monetary resources to build and increase
your financial wealth through sensible
investments, rather than spend unnecessarily
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on material riches (middle-class wants) that
decrease your wealth.
Im a regular family guy who wants pretty
much the same things as anyone else. I want
to be in control of my life and I want to have a
good life. I want to be rich with my time and
build positive relationships with the people
around me.
But I want you to know this: I do not possess
any special characteristics compared to
anyone else and neither do I consider myself
lucky. All I did was apply myself to do
something that I wanted to do. This was to
become financially free from an employer.
I believe anyone can do this with the right
attitude and choice.
By guest contributor Gerald Tay, CEO of
CREI Academy Group, and a professional
real estate investor whose real estate
portfolio is now worth over $8 million and
generates a 6-figure sum in rental income
annually. He exposes widely-held property
investment myths that are highly ineffective in
creating wealth and prevent a comfortable
retirement for the ordinary investor.
SINGAPORE PROPERTY WEEKLY Issue 164
Singapore Property This Week
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Residential
HDB resale prices lowest in two years
In June this year, HDB resale prices have
fallen 6.1 per cent year-on-yearthe lowest it
has been since April 2012. According to the
Singapore Real Estate Exchange (SRX),
there was a 0.6 per cent month-on-month fall
in June. Not only so, data from SRX showed
that 1,315 HDB flats changed hands in June
this year, compared to the 1,320 resale flats
that were transacted in May. For five months
straight, HDB resale prices have been falling.
While resale prices of HDB executive flats
have increased by 1.3 per cent month-on-
month in June this year, resale prices of
three, four and five-room flats have dipped.
According to Eugene Lim from ERA Realty,
prices are expected to fall further as cooling
measures take effect. Ong Kah Seng from
RST Research agrees that prices may
continue to stabilise in the upcoming months
as resale flats become more affordable.
Market analysts believe the increased
restrictions on mortgage loans, together with
the surge in built-to-order flats have lowered
demand for resale flats. Also, more home
owners may look to selling their flats since the
rental market has been weak. This may have
pushed supply in excess of the demand.
(Source: Business Times)
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Unsold Balmoral condo units up for bulk
sale
Under the governments Qualifying Certificate
rules, developers who wish to extend their
sales period have to pay extension fees two
years after the completion of a project. To
avoid having to pay extension charges, Hiap
Hoe Group has put up 48 units in its District
10 project, Treasure on Balmoral for bulk
sale. The units are going for a guided price of
$1,850 per square foot or $191.4 million in
total. The project is due for an extension in
November this year as it was issued its
temporary occupation permit in November
2012. Market analysts believe that discounted
bulk sales will be popular among high-end
projects due to the weak market demands.
According to Nicholas Mak from SLP
International, high-end project developers
may not recover their losses in the short term
if the cooling measures are not lifted.
Nonetheless, Steven Ming from Savills
Singapore which is the sole marketing agent
for Treasure on Balmoral expects the high-
end property market to pick up soon.
(Source: Business Times)
Market for executive condos shrinking
The market for executive condominium units
may be shrinking. A state tender for an
executive condominium site in Sembawang
Avenue has only received four bids. The site
is expected to yield 660 units. The tender was
won with a $320.11 per square foot per plot
ratio bid. This is lower than the winning bid of
$350 per square foot per plot ratio for a
separate executive condominium site in
Sembawang that was sold in January. The
site that was sold in January received six bids
despite its less ideal location.
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It was located further away from Sembawang
MRT Station, along Canberra Drive.
According to Ong Teck Hui from JLL, the
$320.11 per square foot per plot ratio bid is
the lowest winning bid for executive
condominium sites since November 2012.
Not only so, there was also fewer bids made,
compared to the average of 8.6 bids made for
each executive condominium tender that
closed in 2013. This may reflect developers
weakened interest in the market as demand
for executive condominium falls. According to
market analysts, the fall in demand comes as
no surprise as the governments cooling
measures take effect.
(Source: Business Times)
Commercial
Demand for shophouses fall and forces
prices down
According to a report by Knight Frank,
demand for shophouses is slipping, and this
may force prices of shophouses down as the
gap between sellers asking price and buyers
willingness to pay widens. The average price
of freehold shophouses have fallen by 10.8
per cent from $3,626 per square foot in H2
2013 to $3,235 per square foot in H1 this
year. Not only so, prices of shophouses are
pushed down further as their demand from
food and beverage (F&B), and retail
businesses have weakened. In the H1 this
year, 40 shophouses were sold, compared to
the 49 transactions that were made in H2 in
2013.
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Mary Sai from Knight Frank said that sellers
may be unwilling to lower prices because
conserved shophouses in central locations
are scarce and thus are not typically available
for sale. Furthermore, current shophouse
owners may be receiving sufficient rental
yields and thus may be less willing to sell off
their units at a lower price.
(Source: Business Times)
Strata-titled shops in Toa Payoh for sale
A strata-titled shop located at Block 190 Toa
Payoh Central is on sale by tender for $65
million or $11,245 per square foot. The 5,780
square feet shop is subdivided for lease to
four tenants, including Watsons. The shop still
has a lease of 57 years and its tender will
close on August 12. According to Savills,
which is the marketing agent for the shop, the
HDB hub is the only retail centre which
serves the 109,000 Toa Payoh residents.
Eugene Lim from ERA Realty believes that
the shops along Toa Payoh Central enjoy a
high human traffic due to their prime location
at the HDB hub. Hence the shop at Block 190
is expected to fetch a high price. According to
PropNex, the premium price can be justified if
its rental yields are about 3 per cent.
(Source: Business Times)
Tighter subletting rules for industrial
properties
JTC has revised its policies to promote
productive use of scarce industrial land.
According to the new subletting rules,
industrialist can only lease out 30 per cent of
their total gross floor area instead of 50 per
cent of it. According to JTC, this new ruling
will be implemented to ensure that tenants
continue to occupy the majority of the space
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for their own productive use. JTC believes
that the 30 per cent gross floor area space
will be sufficient for a company to use as
buffer to cater to fluctuating business
volumes. Also, tenants who rent industrial
space directly from JTC are no longer allowed
to sublet any of the space. JTC said that
tenants who no longer require the space can
renew their tenancy for a lower quantum
when their current term ends. This new policy
will take effect from October 1 this year,
however, tenants and lessees have till 2017
to make the necessary adjustment. Nicholas
Mak from SLP International believes that
following the policy change, current sub-
tenants may move to new spaces such as
strata unit factories.
(Source: Business Times)
Reits acquisition may be slowed by JTCs
revised subletting policy
Real Estate Investment Trusts (Reits) may be
affected by JTCs revised policy. The revised
policy states that an anchor tenant must
occupy at least 70 per cent of the gross floor
area. This policy is expected to affect sale
and leaseback transactions. Derek Tan from
DBS Group equity research believes that the
revised policy will temper Reits acquisition
and portfolio expansion. On the other hand,
JTC has justified its policy move by stating
that it hopes to ensure that the bulk of its
space will be rented out to industrialists so as
to maximise the land for industrial use. JTC
also said that it may allow multiple anchor
sub-tenants if a Reit is unable to find a major
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anchor tenant to occupy 70 per cent of the
space. However, each of the sub-tenants still
has to occupy at least 1,500 square meters
and has to meet its productivity criteria.
Desmond Sim from CBRE research believes
that this policy change will lead to the
formation of an anchor tenants market, and
Derek Tan from DBS notes that the policy
may attract better quality tenants that are
longer-lasting.
(Source: Business Times)
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Non-Landed Residential Resale Property Transactions for the Week of Jun 25 Jul 1
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
3 TWIN REGENCY 980 1,790,000 1,827 FH
5 THE SPECTRUM 2,056 1,820,000 885 FH
5 ONE-NORTH RESIDENCES 1,076 1,345,000 1,250 99
5 FABER CREST 1,302 1,285,000 987 99
5 DOVER PARKVIEW 936 1,100,000 1,175 99
9 GRANGE INFINITE 2,680 6,432,000 2,400 FH
9 ST THOMAS SUITES 2,013 3,680,000 1,828 FH
9 URBANA 1,012 1,830,000 1,809 FH
9 8 RODYK 721 1,480,000 2,052 FH
10 SOMMERVILLE PARK 1,959 3,088,000 1,576 FH
10 SOMMERVILLE GRANDEUR 1,938 2,960,000 1,528 FH
10 HOLLAND TOWER 1,873 2,150,000 1,148 FH
10 HOLLAND MEWS 904 1,448,800 1,602 FH
11 NINETEEN SHELFORD ROAD 829 1,310,000 1,581 FH
12 SUNVILLE 1,141 1,270,000 1,113 FH
12 KEMAMAN POINT 861 960,000 1,115 FH
14 STARVILLE 1,216 1,180,000 970 FH
14 LE CRESCENDO 915 1,038,000 1,135 FH
14 MERA EAST 883 1,020,000 1,156 FH
14 SIMS RESIDENCES 1,216 1,000,000 822 99
15 AALTO 1,528 2,960,000 1,937 FH
15 AMBER RESIDENCES 1,798 2,450,000 1,363 FH
15 CASUARINA COVE 1,464 1,800,000 1,230 99
15 EVERITT GREEN 1,389 1,250,000 900 FH
15 LE CONNEY PARK 1,109 1,155,000 1,042 FH
Postal
District
Project Name
Area
(sqft)
Transacted
Price ($)
Price
($ psf)
Tenure
15 LE CONNEY PARK 1,195 1,111,000 930 FH
15 PALM GALLERIA 1,001 1,000,000 999 FH
15 ASPEN LOFT 829 870,000 1,050 FH
15 PARC ELEGANCE 409 622,000 1,521 FH
16 COSTA DEL SOL 1,561 2,050,000 1,313 99
16 BAYSHORE PARK 1,292 1,398,000 1,082 99
16 VENEZIO 1,227 1,110,000 905 FH
16 TANAH MERAH MANSION 969 910,000 939 FH
18 SAVANNAH CONDOPARK 1,227 1,060,000 864 99
19 NOUVELLE PARK 1,851 1,600,000 864 FH
19 KOVAN MELODY 1,216 1,390,000 1,143 99
19 THE OLD HOUSE 1,184 1,090,000 921 FH
19 EVERGREEN PARK 1,044 901,800 864 99
20 TRESALVEO 592 920,000 1,554 FH
21 ASTOR GREEN 1,528 1,500,000 981 99
21 HIGH OAK CONDOMINIUM 990 880,000 889 99
22 CASPIAN 893 1,060,000 1,186 99
23 MI CASA 1,367 1,330,000 973 99